In Farago's editorial about the domestic automakers' attempts to get $25b in federal loans, he stated, "it's a prelude to a kiss: the REAL bailout (in for $25b, in for another $25b)." Well, it didn't take long for both sides to pucker up. The International Herald Tribune reports this morning the total has grown to $50b– it turns out the $25b was just for the first year. That would be followed by additional $15b in the second year and $10b more in the third year. Why? The UAW's legislative director, Alan Reuther explains "the amount of concern and urgency from the Detroit companies has increased in the last month and significantly ratcheted up what they're communicating what their funding needs are." But he makes it clear you don't dare call it a bailout: "We don't see it as a bailout. We see it as government assistance to help retooling tied to the production of these advanced technology vehicles." Whatever. It still amounts to billions of the taxpayer's dollars going to fund companies which have been driven to the brink of bankruptcy by inept management who collected obscene salaries for doing so. If they do get these handouts, it should include an oversight committee from outside the industry and from outside congress to make sure the money goes for vehicle design and retooling. Not a cent should be allowed to go to executive salaries or perks, bonuses, lobbyists or any of the other thousands of ways the automakers seem to find to fritter away money. And once that's gone, that's it. No third chances! And furthermore… Huh? … Oh… OK. Here comes the attendant with my Thorazine. I'll go sit quietly in the corner now.
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If they do go with a bailout..er, loan, an extra stipulation should be total replacement of upper management and boards. They need to start fresh, preferably with people from outside the auto industry to survive and thrive.
I agree. The current management needs to go.
“We don’t see it as a bailout. We see it as government assistance to help retooling tied to the production of these advanced technology vehicles.”
What advanced technology vehicles, what they need is a vehicle to compete with a Civic, or a Corolla. I know it is easier to ask for money for pie in the sky, than to go forth and admit they need to build a normal ICE vehicle that has reliability and a little pizzazz. Honda, Toyota, Hyundai are all making as much money as GM is losing on just good old plain reliable transportation with incremental improvements.
They are trying to cover a period of time until the savings they think they made from the last round of contracts kick in and provide the savings that they think will move over to the profit column. The guys at the top just think they can get to that and then they can roll on business as usual.
Things like Volts and Hybrids are novel and keep things interesting, but they are just a distraction away from the real solution which is a solid product at a price that makes money.
In principle, I think it is good policy to subsidize development of technologies which will maintain a high quality manufacturing base of domestically-owned companies (in the same way we publically subsidize the development of advanced weapons systems). However, in the case of GM or Chryslerberus, who seem to have gained zero from the synergy with foreign partners, it appears that the only way this money won’t be flushed down the toilet is to require that the entire management team is sacked as a prerequisite to accepting the loan.
Ford stands alone in having improved their products through a synergy with Mazda, although there is still room to move away from trucks. GM has had a partnership with Toyota for 20 years and has yet to produce a 4-cylinder engine which matches or exceeds those manufactured by Toyota. Chrysler seems not to have benefitted at all from their work with Mitsubishi.
In the 90’s, all three were cash-flush, and put their cash into products which were a short-term fix to their long term problem. In recent history, none of the three have made strategic decisions which sustained their status as full-line automobile companies. Instead, they consistently went for the low-hanging fruit of more bloated SUV’s and pickup trucks.
This is indeed a quandary. What seems like a reasonable investment in home-grown jobs and technology could well be throwing money down the rat-hole of mismanagement.
Personally I’ve stayed away from this debate at TTAC.Sam is not my uncle and its certainly not my place to comment on where Uncle Sam spends American taxpayers money.
I do however 100% agree with Franks thoughts.These guys throw money around like drunken sailors.IF and thats a big if,America and
American taxpayers cough up thier hard earned tax dollars,there has to be some accountability.
Right,so I,m positive before the ink on Uncle Sams signature has dried, GM and the CAW are going
to Ottawa with thier cup out.I can only imagine the American taxpayers reaction to GM giving us a couple of new cars.That in itself applies preasure to Canada to break out thier own checkbook.
Now these two, yet unnamed cars were promised to us in the last agreement.Its not as if GM has not renaged before.Now throw Mexico and NAFTA into this stew.Will protectism rear its ugly head?How is this going to go down at the transplants?What about the imports with zero North American content?
Oh yeah!I see a lot of unanswered questions.
This could get interesting.
My predication they will get the bailout. They will not change management. They will not change the management culture. They will not have government oversight. They will continue tp pay massive executive bonuses and they will continue to lose market share.
Is Toyota or Honda suddenly going to go away? This will change nothing except buy a few years. Oh and just watch Cerberus will take the money use it for operating expenses and sell off chrysler for a nice profit too.
Unless the people running GM changes they will continue to decline. This is good for Ford though.
Not my idea but worth presenting-
Any member of Congress (or any politician, really who votes for a loan of federal monies to public companies MUST invest a substantial part of their wealth in the same company, whether it be in their debt or equity- something along the lines of 10% of their total net worth. They would also be forbidden from selling their investment for 10 years. It’s really easy for them to spend our money on failed companies- let’s see how eager they would be to “invest” their own.
Mike ‘Right,so I,m positive before the ink on Uncle Sams signature has dried, GM and the CAW are going to Ottawa with thier cup out.’
Absolutely. If the car companies have a Master’s in extracting government funds, they have a PhD in extortion,er, playing jurisdictions off against each other. The Federal and Provincial governments here will have to pony up about a microsecond after the Americans do.
If they do get these handouts, it should include an oversight committee from outside the industry and from outside congress to make sure the money goes for vehicle design and retooling. Not a cent should be allowed to go to executive salaries or perks, bonuses, lobbyists or any of the other thousands of ways the automakers seem to find to fritter away money.
As un-PC as it is to say, I have no problem with executives (ie. management) getting paid well. Any successful business has to have great management to make great decisions and they don’t work for free. Committees are about as pointless as bureaucrats and tend to only get in the way and cause delays.
My wife works in scientific research in corporate America and she can tell you that just throwing money at research does not guarantee a successful outcome. It starts with great management to make the right decisions (just look at Toyota and Honda).
This just reminds me why never again to buy a UAW built vehicle. Unfortunately my tax dollars will probably end up in their pockets anyway. (sigh)
Airhen: I think most of us here have no problem with high levels of executive compensation, but we’re sick of seeing huge salaries and bonuses being paid to executives whose only talent seems to be running companies into ruin.
Europeans have been selling their nationalized companies for decades now. Hugo Chavez is buying back private companies and nationalizing them.
Is the American 3rd way to prop them up with government money but without even owning them? Somehow, something tells me this can’t end well.
I say that before we spend one red cent that there should be a Congressional Committee formed to decide exactly how much money will be needed for these vehicles and where to best to invest that money.
There, that should take at least three years and by then GM and Chrysler won’t exist. Problem solved.
Airhen successfull companies like Toyota and Honda seem to do fine attracting top talent in management. Do you really think its ok to be paying GM executives large bonuses while losing billions and then just give them a bailout without executive pay oversight?
It’s “Inconvenient Truth (in financing)” Time!
$50 Bln? – It’s not enough.
They are asking for as much as the Big 2.8 thinks that it can get – not as much as they really need to reinvent the business model.
Let’s assume they get most, if not all of this amount. 3 years from now when the next handout is rolled out – ’cause this one is all spent – bailout fatigue is going to be the end of them.
All $50 Bln will do is allow business as usual for a few more years.
“We don’t see it as a bailout. We see it as government assistance to help retooling tied to the production of these advanced technology vehicles.”
And, just what would his definition of a bailout be?
I also don’t have problems with succesful executives getting large salaries; I just have a problem with unsuccesful executives getting large salaries. As a stock holder in PG&E (west coast energy producer and supplier) I had a major coniption fit when I saw that the management of the company from mid-level to the top were still getting performance bonuses in a year that the company filed for chapter 11 bankruptcy. One of my brothers-in-law who works for PG&E defended it by saying that the managers who got those bonuses had met performance goals set by the company for them and, therefore, deserved the bonuses (take a guess as to where he fits into the company structure, management or worker bee). It seems to me that some of these company’s really need to raise their performance goals.
A bailout?
I’m sorry but I completely disagree with using taxpayer’s dollars to bail out poorly managed firms. The same argument goes for C11.
I don’t see how its a “bailout” if its a loan
it has to be repayed
at interest
which means its actually earning more $ with our tax $
No they are right it is not a bail out, it is simply welfarism at its worst.
GM, Ford and Chrysler have been utterly dishonest in their dealing. The government of the U.S. is no better.
Anyone with a rational, thinking mind would say-go away.
This is the same method used by defense contractors. They knowingly underbid on projects knowing that later than can bill extra to finish the product/project because they DoD is already in too deep.
If we buy the tools, we should own the tools.
Thank Unions….
Who’s next for the taxpayer handout?