Latest Auto Bailout News

[Chuck S.]

Looks like the Bush administration may be leaning toward "orderly bankruptcy" as the proper approach to the auto bailout, but short term loans out of other bailout money are still on the table.

http://finance.yahoo.com/news/Bush-considering-orderly-auto-apf-13868234.html

Bush has a concern that taxpayer funded loans may simply be "putting good money after bad" to prop up companies that are destined to fail unless other steps are taken. They did say that they do not intend to allow a disorderly collapse of the auto industry because of the effect it may have on financial system. The salient comments are these in my opinion:

"She (White House Press Secretary, Dana Perino) said the White House was close to a decision and emphasized there were still several possible approaches to assisting the automakers, such as short-term loans out of a $700 billion Wall Street rescue fund. Bush has resisted this approach before, and it is adamantly opposed by many Republicans.

"It's in the spectrum of options and there are a lot of options," Perino said.

She said one of the factors delaying an announcement on an auto rescue plan is the continuing discussion between the administration and the various sides that would have to sign on to a managed bankruptcy -- entities such as labor unions and equity holders in addition to the companies themselves.

"In any scenario that comes forward after this decision-making process, all those stakeholders are going to have to make tough decisions," she said.

[Dick W.]

Re: Latest Auto Bailout News

I think that one of the main obstacles to bankruptcy is finding debtor in posession financing. Ford borrowed their money when money was available, where as today it is almost impossible to borrow large sums.

[Chuck S.]

Re: Latest Auto Bailout News

I think that one of the main obstacles to bankruptcy is finding debtor in posession financing. Ford borrowed their money when money was available, where as today it is almost impossible to borrow large sums.

Perhaps the White House is thinking that if the taxpayers are going to have to give the car companies billions in order to prevent a tidal wave through the financial system, they will do so with "strings attached". In other words, the Federal government becomes the "debtor in possession" in exchange for bone paring concessions by all the stakeholders, and "orderly bankruptcy" proceedings by a Federal judge and professional bankruptcy managers.

It makes sense to me. It would likely guarantee that GM will survive long term, no taxpayer billions will get wasted on futility, and ultimately the taxpayers get their money back. The stakeholders, however, are not going to be "happy campers"...because of the strong resistance to "necessary concessions", maybe only the Feds can broker such a deal. It's likely the only way our beloved Corvettes and Chevys will survive (in some form) much further into the 21st century.

[Anthony M.]

Re: Latest Auto Bailout News

I think bankruptcy orderly or not will be a death blow to the manufacturers. Everyone uses the airlines as an example but it is one thing to purchase a $400 airline ticket and be put at risk and quite another to buy a $60,000 automobile.
Lots of questions will come into the buyers mind at the time of purchase. Will they be around to honor the warranty? What will it be worth in 3 years if they go out? Will I be able to get parts in 2 years?

Maybe I am better off buying an import. Look what happened to Daewoo buyers.

The Big 3 are having enough trouble selling cars today without having the public thinking about the future of a bankrupt company. There should be strings attached, shareholders need to feel the pain, but this can be accomplished without bankruptcy. Have we thought about suppliers? How many of them will survive if they become unsecured creditors in a bankruptcy? There are lots of complex issues here and no simple solution I just hope someone gets it right.

[Steven B.]

Re: Latest Auto Bailout News

I think bankruptcy orderly or not will be a death blow to the manufacturers. Everyone uses the airlines as an example but it is one thing to purchase a $400 airline ticket and be put at risk and quite another to buy a $60,000 automobile.
Lots of questions will come into the buyers mind at the time of purchase. Will they be around to honor the warranty? What will it be worth in 3 years if they go out? Will I be able to get parts in 2 years?

Maybe I am better off buying an import. Look what happened to Daewoo buyers.

The Big 3 are having enough trouble selling cars today without having the public thinking about the future of a bankrupt company. There should be strings attached, shareholders need to feel the pain, but this can be accomplished without bankruptcy. Have we thought about suppliers? How many of them will survive if they become unsecured creditors in a bankruptcy? There are lots of complex issues here and no simple solution I just hope someone gets it right.

I have a neighbor who buys cars frequently, Fords every couple of years. She is not well versed in business but swears that IF the Big 3 file she will have no place to get her cars serviced (even buys tires from the dealer). When I asked her what happened to all of those Olds owners she was unaware manufacturing had ceased. When I told her there was no more Olds she stated then they can't get their cars serviced or repaired. Sad thing is there are alot of folks either making the decision of what to do, pressuring the decision makers or just talking who don't have the faintest. This being the case I hope by some chance the best decision is made.

'Something I heard a couple of weeks ago; "How can politicians make a good decision on companies who are billions in debt when they (politicians) have helped us to get a trillion in debt?" There is more than enough blame to go around, corporations-management and labor, government-lawmakers and oversight, and the marketplace-buyers and sellers, I just haven't heard anyonne admit to it yet.

[Martin T.]

Re: Latest Auto Bailout News

Just bought 4000 shares of Ford. I think there is passion and smart management. The UAW needs to realize it and work with them or they will bring Ford down after G.M. G.M. is still too top heavy and dragging an anchor (UAW). This is not to say the union needs to go away but realize the difference between insuring their existence and insuring the jobs of the rank and file. Both companies (oh, I meant all three) need to anticipate the future needs of their client base and bring product out quickly in anticipation (this means alternative and renewable fuel cars) of the changing needs within the marketplace.
I paid into the labor union for seven years and because it takes ten to become vested lost all of what was paid. Where does that money go? Well, it doesn't go to me; it doesn't go to the other members; it doesn't go to charity.

[Chuck S.]

Re: Latest Auto Bailout News

Just bought 4000 shares of Ford. I think there is passion and smart management...

I was thinking exactly the same thought as you, Martin. I haven't studied the chart, but the car companies are pretty much in uncharted territory anyway. Based on price, and the factors you mention, I believe Ford is the best play...that assumes they survive.

If you stay light on your feet, and are prepared to bail at the first sign of trouble, I believe that trade is likely to make you some nice change once this bailout mess clears up, the economy turns around, and people start to buy cars again. It may take a year.

My stomach is too weak to try another car company trade near term; of course, the easy money will have been made once the outcome is more certain.

[Loren S.]

Re: Latest Auto Bailout News

Maybe Ford can buy GM and Chrysler from the bankruptcy court, then we would have the big one run by someone who knows what they are doing, sorry to say.

[Grant M.]

Re: Latest Auto Bailout News

There's an interesting story on MSN this morning about Lordstown Ohio and the impact a GM failure will have on that community (40% of the tax base). In the article the local UAW chief is quoted as saying that they (now) recognize that the enemy isn't management, it's the imports....a refreshing perspective, I'd say. The article also refers to Lordstown Assembly's history as a pretty militant work environment where in the past, they'd walk if the ceiling leaked, but no longer.

BTW, our federal and provincial governments here in Ontario are prepared to offer some $3.4B in loans but are waiting to see what Washington's going to do. Like the US, the situation has led to a bi-partisan type of approach, the federal government being a (minority) Conservative government (somewhat like the Republicans), while Ontario is governed by Liberals (somewhat like the Democrats). It's a crucial issue here, where, if memory serves me correctly, Ontario in recent years actually produces more vehicles (of all makes) than Michigan as well as having a fair-sized parts industry.

grant

[Steven B.]

Re: Latest Auto Bailout News

'Just announced on TV, GMA, etc., Bush Admin. will announce later this am that low interest loans will be offered to GM and Chrysler with stipulations to include concessions expected from suppliers, union, etc.

[Terry M.]

Re: Latest Auto Bailout News

Bush W just announced TARP funds to auto companies and they must come up with a turn around plan by March 2009. Lots of strings -- wages (including CEO pay), corporate jets.

But basically he just passes the buck so that any auto industry failure goes on the books as belonging to the next administration. I wonder how history -- say 50 years from now -- will look at all this?

[Martin T.]

Re: Latest Auto Bailout News

Terry, I sure hope history looks at the greed of management and the feeling of entitlement that is seems to a character of the union officials. This is one heck of an opportunity to turn things around. The UAW can blame imports all day long but competition is not the fault. It's top heavy and bottom heavy corporations and labor pools that continue to build cars for the past. Just as the space program opened the doors to so much of what we take for granted today (microwave, computers, etc.) moving in a self sufficient, more green, responsible economic and enviromentally responsible direction will open the doors to a more diverse and self substaining economy while allowing us a more secure enviroment to live in.

It's just simple math: Take away or greatly reduce the amount of money outflowing to the OPEC nations and use it here at home to pay off our debt and regain security and opportunites, stop and consider the long term effects for the future generations and move toward renewable resources preserving the enviroment (totally irresponsible to ignore the long term effect of carbon fuels and/or nuclear waste), share that technology with other developed and developing countries so as our country will no be perceived as a nations of self-consumed greedy people.

[Chuck S.]

Re: Latest Auto Bailout News

...But basically he just passes the buck so that any auto industry failure goes on the books as belonging to the next administration. I wonder how history -- say 50 years from now -- will look at all this?

I expect he has a couple of reasons for doing it this way.

First, this is a "no-win" situation for Bush:

(1) If he believes "orderly bankruptcy" is the best course, launching the companies into bankruptcy will deny the next President the chance to make his own decisions on how this problem, which may last through his own administration, is to be handled.

(2) Further, he will have provided the Dems with opportunity to remind the country that they could have done better with each new and painful revelation of hardship. No need for Bush to take on that burden with less than two months in office.

Bush has made the best decision for himself, and possibly the country...maintain the status quo until the new guy takes over. The Dems are the party of the unions...let them deal with the hard reality of telling the unions there has to be REAL sacrifice or nothing. The only other alternative is for them to make their own huge budget deficits bailing out car companies forever. Bush already has his "black eye" from the bailing out financial institutions.

I expect Dubya is marking each passing day off his calender...mentally, he can hardly wait until he's drinking his morning coffee out in his front porch rocking chair in Crawford.

[Dick W.]

Re: Latest Auto Bailout News

Maybe Ford can buy GM and Chrysler from the bankruptcy court, then we would have the big one run by someone who knows what they are doing, sorry to say.

The only reason that Ford does need a loan immediately is that a couple of years ago, when money was not tight, mortaged every thing that they own, plants, real estate, machinery, etc. In order to get the loan the Ford family trust had to divest enough stock so as they would not be in control of the company.

[George C.]

Re: Latest Auto Bailout News

I see that nobody has mentioned or ever commented about that the Japanese are very concern about the bailout. They are so afraid the that US government will finally come to the conclusion that a tax on foreign cars (made here or aboard ) must be put on their cars. The USA is a cash cow for their economy. You can't import a America car anywhere in the world without a tax on it. No one in the UAW ever said that GM was the enemy. American cars are Loved everywhere but here. Seems that some US consumers have a real grudge against them. These people keep blaming the UAW. Did the UAW design (never asked) or decide to start putting generic engines in Oldsmobile's. I wonder how many of you would still buy a Corvette with a generic engine like a corporate V6. Common sense is sometimes nowhere to be found at the top of GM planning. Having 56 percent market share in the late 60's and losing market share down to 28 percent was the begining of the end with the Roger Smith leadership at GM and his boys club still controls GM today. Bad decision after bad decision by GM, not the UAW worker. The importing of foreign cars for free Must change. This and only this will help save the domestic automobile industry. All of you that bought your Toyota trucks and cars don't realize that it's not your single purchase, it's the other 750,000 Americans that caused the real problem.