TTAC commentator, Buick dealer and GM stockholder activist Jim Dollinger (a.k.a. Buickman) has long argued that Wall Street’s money men have been running GM into the ground accidentally on purpose. While we understand his POV– who could possibly be this stupid?– The Detroit News reveals that Goldman Sachs and JPMorgan Chase are working “back channel negotiations” to protect their asses from a Motown C11 (i.e. get your elected representatives to give American automakers $25b+ in low-interest federal loans that the banks can’t or won’t give). That’s because both of these “august” financial institutions own big chunks of Ford and GM {the exact “vig” in the comment below). Only time is running out, as bailout fatigue grows. Oops, sorry, this isn’t a bailout. Not that you’d know it from JP Morgan’s pleas. “Beyond the need to provide a safety net for workers, we believe the automotive industry is critical to national security. Not only does the automotive sector support the steel infrastructure that is critical to manufacturing defense weaponry, but the automotive sector also provides about 1 out of every 12 jobs in the U.S., is a key factor in getting the U.S. independent from foreign oil and is essential toward cleaning up the environment,” wrote JP credit analyst Eric Selle. All done? No, I didn’t think so.
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From article cited above…
“In December of 2006, Ford took out what CEO Alan Mulally likes to refer to as “the biggest home-improvement loan in history,” putting most of the company’s assets up as collateral to secure a finance package that includes an $11.5 billion revolving loan fund, a $7 billion term loan and a secondary $3 billion term loan. The banks lending Ford this money include Citibank, Goldman Sachs and JPMorgan.
GM’s include a $7 billion revolving credit line and a $1.5 billion term loan. GM’s principal lenders include JPMorgan Chase, Credit Suisse and Bank of America.”
If one of these august banks goes under (widely speculated this week) would the GM and Ford notes be called by the bankruptcy trustee?
I know America is a wealthy nation by many measures but there must be a limit to how much debt it can withstand.
…but the automotive sector also provides about 1 out of every 12 jobs in the U.S…
This is the only reason it deserves a bailout. Not to play catch up because of strategic incompetence, chicken-little defense and security concerns (boy, does it make me sick when companies play this card) or some sort of belated trade protectionism.
One in Twelve Jobs. Eight percent of the workforce. Add even half that number to existing unemployment levels and you’re in recession (or depression) territory. And no, those jobs aren’t going to come back, or at least not at anything that resembles wage parity.
What jobs will be saved in the future? Did Chysler not tell their supplier base in the last month that in order to be competitive they have better source all of their production offshore, so just which jobs are we trying to save, China, Indian, Mexico?
I worked for a supplier to the big 3 until several months ago. The local headlines said 250 jobs lost, but if they took into acount the whole picture over the last 5 years it is over 2500 jobs that went to Mexico, part piece and assembly line at a time. All a cash influx to the big 3 is going to accomplish is allow them more time to move all of the jobs off shore.
For those who want a little education about commodity index funds and how they work (read on into the middle of the article to get past the references to cattle futures):
http://www.cattlenetwork.com/Content.asp?ContentID=252505
The important thing is to understand that a commodity index fund does not work like some Hunt Brothers or George Soros leveraged attempts to influence the market.
Hey at least the companies getting bailed out are having their CEOs fired and their golden parachute contracts canceled by government fiat. When I think of Rick Wagoner, hmm, might just be worth it.
…is a key factor in getting the U.S. independent from foreign oil and is essential toward cleaning up the environment…
Good to see that, in spite of the recent market turmoil, those financial types can still afford to smoke only the best…
The Wall Street barons have already figured out new ways to fleece the little people. Things will be back to normal before you can say Form 1040.
…is a key factor in getting the U.S. independent from foreign oil and is essential toward cleaning up the environment…
Good to see that, in spite of the recent market turmoil, those financial types can still afford to smoke only the best…
Smoking the best what, cigars, weed, crack? I think they are sniffing glue, even stoners have more sense that that.
If you say the automotive sector provides one of twelve jobs in the country, does that include people like car salesmen, independent mechanics, and employees of the factories that the Japanese, Koreans, and Germans have in the US? Of course it does.
In any case, in the short to medium term, only one of the Detroit 3 will go out of business, worst case scenerio. And that one is almost certainly Chrysler, not GM. And when Chrysler goes, GM and Ford will gain significant numbers of additional sales, from customers who would have bought Chrysler products but no longer have that choice. The net number of jobs lost in a Chrysler collapse (when you add in the number of jobs saved, or even added, at Ford and GM) is fairly minimal, from a nationwide unemployment standpoint. I’m sure Michigan and other places that have Chrysler factories will be screwed, but the nationwide net effect will be rather modest.
There was an article in NYT (I can’t find it any more) a few days ago by an economist basically saying that the Chrysler bailout, regarded as glorious success by most people, may have actually been a failure in the long-term because it made Detroit believe that they can keep on doing things the way they have always done. If the bailout was refused chances are the Ford and GM would have woken up and fixed themselves. Now I think it’s too late but I don’t see how a bailout can be denied by Washington after this week.
Red Ink Rick Wagoner never had an accounting degree yet was made CFO, no surprise our financials are in disarray. the man was a failure in purchasing and a disaster as head of NAO. still the banksters put him in as CEO and continue to support him in spite of the biggest losses in corporate history. ask yourself why???? I have theories and they are not pretty…
much of America suffers from the effects of this man’s personal incompetence, or shall I say…bidding of the banksters looking to relocate an industry, subjugate a former middle class, and lead to their conceptual world order of rice eating subservient mindless believers in a collective governance devoid of personal liberties. WAKE UP AMERICA!!!!
Building autos means steel which is used in making cannons and weaponry, building suv’s makes us independent of foreign oil, thus cleaning up the environment. What a suck up. Or maybe for Eric Selle LSD didnt go out with the 70’s. By the way buickman, I know where you are going and you are right. The masses wont figure it out until it has already happened. Oh well, some like the security of slavery…
If the bailout invalidates union contracts, and the feds also enforce a national right to work law, then I will support the bailout.
Ain’t gonna happen.
The reason those jobs won’t come back at wage parity is that the total compensation of the work force is unsustainable.
We should not bailout banks that have books full of investments that can’t be valued, and we should not transfer wealth to people who force terms on their ridiculously incapable management in order to save their “jobs”. Jobs have no value. Only the products and services have value. If the products and services don’t bring enough profit to pay the salaries, the jobs aren’t worth saving.