A Chrysler – GM merger is a mind-boggling prospect on many levels. But the over-arching question is simple enough. Why? Why in the world would General Motors want to combine with Chrysler? Given their respective balance sheets and future prospects, the analogies pretty much suggest themselves. My favorite: the Titanic rescuing the Lusitania. But if you want to understand the logic behind this merger deal, such as it is, we’ve got to explore a different metaphor: “changing horses mid-stream.”
First, it’s important to realize who’s holding the reins at Chrysler. While Cerberus Capital is ChryCo’s listed owner, the private equity group used OPM (Other People’s Money) to bankroll their purchase. Reports at the time of sale indicated that Cerberus owner Steven Feinberg used his [then] bulletproof rep to sweet-talk his “partners” into the deal without due diligence. Be that as it may, JP Morgan-Chase are now in the saddle, to the tune of $6b dollars.
Imagine the Chrysler horse trying to cross a river to get to an equine sale on the other side. The rider thought the river was just a trickle. But it turned into a raging torrent, dragging the horse sideways towards a killer waterfall. And there, right next to the Chrysler horse: a steed named GM. Yes, GM’s also being dragged towards the abyss. But GM’s a bigger beast with more friends ready, willing and, uh, ready to attempt a rescue. So the banks decide to switch horses.
OK, enough with the analogies. Let’s talk turkey. I mean, business.
JP Morgan-Chase reckon Chrysler’s going down, taking their six bil with them. So they’d rather have their money in GM, which will, no doubt, receive a federal bailout (the latest rumors have Uncle Sam purchasing an equity stake, I shit you not). For its part, Cerberus [still] has its eyes on GM’s 49 percent share of lender GMAC. Cerberus is also counting on a federal bailout to save that particular piece of bacon, via the Troubled Asset Relief Program (TARP). So the banks get out of Chrysler, Cerberus gets out of Chrysler AND gets GMAC (which it can then, finally, combine with Chrysler Financial).
Fine. So what the Hell does GM want with Chrysler? Cash. As we’ve reported here many times, General Motors is running on fumes. While the aforementioned bailout is a virtual cert, it all takes time. And time equals money. And GM doesn’t have the money to wait until President Obama gets his team together and cuts a deal to save the United Auto Workers American jobs. Their time horizon is the next six months, they’ve sold all their assets and nobody in their right mind will loan GM a plug nickel.
I know it’s a completely counter-intuitive idea: GM getting the cash in needs for its short-term survival by “absorbing” Chrysler. But there it is. Supposedly, Chrysler has amassed a $11b cash hoard, accumulated through the laborious process of not spending it on future products. And then there’s JP Morgan-Chase, who could do what banks do when they have nothing else to do: throw good money after bad. In other words, they’re good for at least a couple more billion.
So GM merges with Chrysler and lives. Of course, the result is The Mother of All Clusterfucks: a gigantic American automaker with 11 weak brands, well over 100 products (many of which overlap), thousands upon thousands of unnecessary dealers, excess workers and plants and facilities, a completely unworkable bureaucratic structure stuffed with managers (who’ve already proven their abject inability to make money building and selling cars) and incompatible software (for all we know).
On the positive side, GM is headed by a man whose only appreciable professional talent is cutting costs and selling things– and God know there would be a lot of THAT to keep him occupied until the cavalry arrives. Obviously enough, the end result would be the same: a large car company that still doesn’t know how to make a profit. Even worse, if the rumors are right, it would be a large car company that doesn’t know how to make a profit partially owned by the U.S. taxpayer.
Many of our Best and Brightest have labeled this deal “America Leyland,” referring to the disaster that was the combination, nationalization and eventual extinction of Britain’s car industry. Spot on. Should this deal down, that’s EXACTLY where this is heading. But it should be remembered that Leyland took more than a decade to take a dirt nap. GM’s management, as always, is thinking about next week. This is, of course, the reason for their demise.
So those of you who said “see you at Death Watch 567” may well be right. While this prediction may now prove to be accurate, I can hardly imagine a worse scenario for American industry, the American auto industry and all the people who depend on it for their livelihoods.
Robert,
JP and Chase are now one and the same. also they hold a significant share of GM already, giving them the power to make this deal. what I don’t see mentioned are the enormous investment banking fees which are a prime consideration in this potential marriage. this revenue to Wall Street is the driving force behind most mergers and acquisitions and as we have seen, the banks are perfectly capable of leaving thousands jobless, dissecting once successful enterprises in the name of cost savinigs.
Well the incompetence and greed in detroit are a national tragedy for all americans. I don’t see how we can keep kidding ourselves into thinking we are a super power. When one of our main industries like automotive can’t compete and deliver the products most americans want, we are just another country being marched down the road to socialism. And like the british, these federally financed auto companies cannot really compete in a market where their competition is capitalistic. Except for VW, I don’t know of any other successful automotive venture where government funds/ownership were heavily involved. Just think what could have happened if they did a chapter 11 and came back lean and mean. They could then really be a force in the world automotive market.
The Leyland situation, whilst an interesting parallel is in imperfect analogy. The whole demise of BL is far more sordid and intruiging than Chrysler/GM.
Firstly, the Leyland (trucks/buses etc) part of the merger was (and in a sense remains to this day) a very strong and well run enterprise. It was the cars that were causing the headaches.
The BMC/BMH part of the merger in 1968, unlike GM today were developing some of the most innovative and efficient small cars in the world (their legacy continues to reverberate indeed this site currently has a Mini review)- and they were selling them in numbers never seen before or since in the UK. The problem was they weren’t making much money out of them. Indeed some, notably the Mini, a car which could have and should have demanded a considerable premium, were perportedly being sold at a loss leading to a starvation of development funds down the track.
BL, unlike GM had an embarrasment of strong brand names. They were thus spread too thin – and rationalisation wasn’t helped by a partisan customer base demanding endless marque variations of each model in equal volumes and product planners eager to indulge this.
What makes BL far more tragic, is that they (in the guise of their successor The Rover Group) had actually weathered the storm an were looking pretty good just prior to the BMW take-over. The Bavarians never quite had the people-skills of Honda and ultimately screwed the pooch.
Still remanants remain (Jaguar, Land-Rover, LDV etc)…
Yeah, this “America Leyland” may indeed happen. TTAC should look on the bright side: If taxpayers will be major equity holders of GovernmentGeneral Motors, for once we’ll get a public acknowledgment and accounting of all the (currently hidden) workers in the Jobs Bank.
Rday:
I don’t see how we can keep kidding ourselves into thinking we are a super power. When one of our main industries like automotive can’t compete and deliver the products most americans want…
The American automotive industry is fine. A new, state-of-the-art plant just opened in Greensburg, Indiana making cars (Civics) that Americans want.
Wonder how many of those “jobs bankers” have been out registering new voters this fall….
“I don’t know of any other successful automotive venture where government funds/ownership were heavily involved.”
Then you haven’t been paying attention to modern China.
Perhaps GM is buying Chrysler to eliminate some of their competition. I can’t think of an easier, faster way to gain market share. They may even have a side deal to sell Jeep to Nissan later.
Rday wrote:
“…Well the incompetence and greed in Detroit are a national tragedy for all Americans…”
I think your geography is off. You can add Manhattan, Washington D.C., and Orange County, CA (subprime mortgage lending capitol of the world), among many others, to that list.
Americans can BUILD cars just fine, it’s the DESIGNING part that they can’t get right. Throw some bean counters into the mix to keep costs down and things really get screwed up.
“How long should we design this part to last ?”.
“I dunno, how about the day after the warranty runs out ?”.
What happens to the current GM and Chrysler dealer network after this merger? Will the Chrysler dealer and the GM dealer live in harmony side by side or will they be consolidated into one franchise?
RF, a thoughtful analysis, as usual. However, it seems to be built upon two premises that could benefit from further exploration.
First, you use the term merger instead of acquisition. Second, you seem to assume that GM would absorb all of Chrysler rather than take on strategic parts of it.
Perhaps I haven’t been following the press reports closely enough, but I’m perplexed as to why you assume that a full-fledged merger is the most likely way this will play out.
For example, look at how GM picked off what it wanted from Daewoo and left the rest by the side of the road. Why wouldn’t GM do the same with Chrysler? Or consider the way that GM spun off Delphi and steered it through bankruptcy. Why wouldn’t we expect them to attempt a similar gambit with Chrysler?
Let’s draw an admittedly overly simplistic scenario for the sake of discussion. What if GM bought major parts – but not all – of Chrysler. Instead of integrating it with GM, Chrysler is maintained under a separate corporate structure. Note that this wouldn’t preclude “partnerships” with GM to dispense with redundant functions (e.g., big chunks of Chrysler’s product development is contracted to GM). Then Chrysler is further parted out (Jeep to Nissan?) and files for Chapter 11. Before doing so GM might “swap” with Chrysler some of its more problematic dead weight, e.g., aging truck factories.
Under this scenario GM could get three things. As you have mentioned, GM would gain access to Chrysler’s ATM machine. However, if GM played its public relations cards right it could also be viewed as the hero who valiantly attempted to save Chrysler, which could help politically in obtaining a gold-plated bailout. Most importantly, GM could test out gambits for filing for Chapter 11 (e.g., circumventing state dealer franchise laws) without GM proper being tainted by it.
I’m not arguing that a GM-Chrysler “merger” is a good thing; I’m merely raising the question of whether there are other plausible scenarios than the one you present.
Well, some dealers will have it easier than others, a dealership up the street has Pont/GMC/Buick on one side of his lot and Dodge/Chry on the other half. More to the point, with the Feds owning a good chunk maybe the ICC can just override all those pesky state franchise laws, or maybe just threaten to withhold some federal funds if the states don’t abide with what the feds need (i.e. highway funds and interstate speed limits). Threaten to withhold those National Health Care payments, and you would be amazed how fast legislators would change those laws. In other words since federalism is any idea whose time has past, I don’t understand how some state could get in the way of national interest, specifically the need of the United States Car Company to remain viable especially as the United States Bank will be on the hook for all the dough (remember, $25 bil. is just the DOWN PAYMENT).
I am not a college humanities professor so I don’t know exactly how this whole socialist model actually will work in a country this large and diverse, but I do know (apropos the Stalin apologists of the 1930’s), you can’t make an omelette without breaking a few eggs.
This story is driving me crazy. The fact that otherwise sane people are discussing a merger between GM and Chrysler has me questioning my perception of reality.
Let me get the theory straight. GM will take over Chrysler to raid their cash, which is $11B – Cerberus BS factor – minimun $ to keep Chrysler operating for at least 1 year – Chrysler cash burn = ~ $3B tops. But, once everyone sees that GM is taking Chrysler to raid their cash, the unpaid and soon to file Ch7 suppliers are gonna make a grab for some. Then throw in the banking and lawyer fees and we may already be looking at negative cash. I can’t see how GM gets any appreciable amount of cash from Chrysler even in the short term. Ok, maybe a $2B loan from JP/Chase, which’ll cover the stationary and business card reprinting expenses, maybe.
In the long term they face such a mess there couldn’t be a bailout big enough to fix it. They can’t just close down Chrysler. The shock to the supply base would take GM and Ford down as well. The UAW would also never stand for it. They would certainly strike. How would the government rationalize a bailout that allowed all those union jobs and factories to be cut? No way. Instead, GM would have to keep operating Chrysler with most of its US factories still running for their share of gubment cheese. And how about the dealer network? If Olds cost $2B to shut down, how much would GM owe the dealers of 3 brands? Nope. They couldn’t possibly afford to close one single brand after this merger. So they are left with a cash drained Chrysler and having to run 11 brands.
In exchange Cerberus gets GMAC? Why would they want that? A bankrupt bank no longer tied to GM and with absolutely no prospects for making money, which can’t even borrow or lend money and has no conceivable reason for being.
I guess I should have taken the blue pill.
time for a revolution., could happen if people get stirred past the existent apathy. know you’re ready Robert, you rebel you.
@guyincognito:
GMAC is an attractive asset once the following occurs:
1. TARP acquires existing bad paper
2. TARP injects new capital into lender
3. GMAC bank taps into the Fed window at near-zero rates to further enhance new lending power.
For Cerberus, having multiple government arms bail out GMAC has the potential to be a home run of incredible proportions. I’d be amazed if Feinberg doesn’t make billions personally as well.
If the government handles GMAC as they have others under the Paulson TARP doctrine, then a third-party buyer will be found for the assets of GMAC and the GMAC shareholders will get their positions wiped out.
In this case, that means GM, which would have to take a write down, as well as the Cerberus investors, whoever they were on this particular deal.
The problem with Cerberus hanging onto GMAC is that the federal government would likely expect them to capitalize it with some new cash if they were to intervene. As a private equity firm, Cerberus would have to find new or existing investors to invest hard cash into it. Good luck with that one.
I suspect that Cerberus will have very little to say about the fate of GMAC if they won’t or can’t put up the billions needed to shore up what the government will not. If that’s the case, I would expect the government to broker a sale to one of the majors, such as Goldman Sachs or JPM Chase, and Cerberus is going to have to just deal with it.
I suspect that Cerberus is going down in flames or will at least fizzle out. Between Chrysler, GMAC and Mervyn’s, they have surely lost much confidence with the investment community. Too much egg, not enough face.
If GM gets the cash, Jeep, the minivan business, and maybe a plant or two they want (I heard something about a Mexican truck plant I think), in exchange for their 49% of GMAC, that’s actually a decent deal for GM. The three headed dog then eats all the liabilities, debt, dealers, etc., of the rest of Chrysler.
However, that’s a horrible deal for Cerberus, so I don’t see why they would take it, unless they can Chapter 7 the remaining rusting hulk of Chrysler without it hurting Cerberus itself. They might be able to, in which case it’s actually a win-win for both parties. But I don’t know the legal details there.
Now, having GM buy 100% of Chrysler absolutely creates American Leyland, which will eventually be the end of both companies. But a scenerio as I described, where Jeep lives as part of GM, Chevy gets the Caravan and Buick gets the Town and Country, GM gets the 11 billion, and the rest of Dodge and Chrysler die, with no lawsuit exposure from ex-Dodge or Chrysler dealers or suppliers or whatever to GM, actually makes sense.
Hmmmm.
“In the long term they face such a mess there couldn’t be a bailout big enough to fix it. They can’t just close down Chrysler. The shock to the supply base would take GM and Ford down as well. The UAW would also never stand for it. They would certainly strike.”
And to think I laughed at France when -unemployed- actors, actresses and entertainers went on -strike- for more benefits. That’s right. People without a job went on strike.
Now we have the prospect of people losing their job going on strike.
Leyland? In America there was the dizzingly stupid merger of Studebaker and Packard in the mid 50s. Two financially dilapidated companies that made ugly cars merged and went out of business in 10 years. Take a look sometime at the merged companies offering of the 1958 Packard Hawk. A Studebaker Hawk with the ugliest front end in automotive history.
When the dust clears will I still be able to buy a new Honda for my wife?
That’s all I (oh, and millions of others) really care about.
There’s one category of assets that I haven’t seen discussed: trademarks and copyrights to items sold in service and repair market. I assume that Chrysler still owns the rights to “Mopar” and other trademarks. If so, there’s value even if production of Chrysler vehicles ceases in part (or completely, since many cars and trucks will stay in use for years to come). Selling the right to claim parts are “genuine Mopar” might raise enough cash to keep the doors open a couple of months longer.
Does anyone know if Delphi got the rights to AC, Delco and such?
Maybe GM wants the slant-6.
Hmmm.
“Take a look sometime at the merged companies offering of the 1958 Packard Hawk. A Studebaker Hawk with the ugliest front end in automotive history.”
Good Lord!
You weren’t exaggerating. Looks like a catfish with wheels.
We’ve got socialism bail-outs for the wealthy (7/10ths of a Trillion dollars + over 6/10ths of a Trillion dollars all in one week) while the worst aspects of capitalism (lay-offs) continue for the working class;
we’ve got a future socialist leader essentially stealing the election with Acorn (actually he’s also fascist*, as are the other side; two sides of the same coin);
* fascism = persecution of others due to their race/religion; socialism = persecution of others due to their social strata/income
we’ve got GM and Chrysler probably merging with $25 billion coming their (and Ford’s) way PLUS the possibility of more government bail-out monies for GMAC etc. AND possibly part-ownership of GMC (GMChrysler);
we’ve got a nearly full scale economic melt-down which is like a house-fire (and the exact same people who caused all of the problems are doing the same things they did to cause the problem as the “solution” – analagous to pouring gasoline on a burning house instead of water);
we’ve got said economic melt-down gone world-wide;
we’ve got a socialist/fascist future prez who plans to do the same thing done in the 1930’s which prolonged the agony of the great depression (look up Smoot-Hawley);
we can see a foretaste of what is to come in the microcosm of watching Iceland self-destruct;
Any other good news?
What I can see coming out of the merger is a solution to what a lot of posts here say is a major problem at GM, badge engineering. They could make Dodge with the hemi’s the new Pontiac. Chrysler’s could be the new Buick’s. Jeep could be merged with Hummer. This would help to make the divisions more unique.
“Does anyone know if Delphi got the rights to AC, Delco and such?”
GM kept the AC-Delco trademarks and still sells aftermarket parts under those brands, but the parts are generally bought from third parties.
Menno, since you brought it up, the ACORN meme is completely bogus. This is a retread from the 2004 election, when the Bush White House pushed the Justice Dept. into investigating ACORN for alleged widespread voter fraud. No effort was spared, yet they came up empty handed. This was even after firing a handful of Bush-appointed, card-carrying Republican US attorneys who saw the highly publicized election-eve investigations in swing states for what they were: A crass politicization of the legal system.
Why does this matter to the auto industry? Because it tends to be good for business when folks can trust the long arm of the law to operate with nonpartisan professionalism.
All GM’s effort seems to be for naught and in vain. All for nothing. You can’t save or stop a sinking ship. It’s doesn’t matter if the government throws the auto industry a few million or a few billion. They don’t have the new product line up that will boost their sales. This is no longer the 1950’s and 1960’s when GM was king of the world.
Can you buy a TV that is made in America? Only because the foreign owned automakers have factories here will the same not exactly be true. But the situation will be the same. The Asians own the electronic industry? The same may well be true of the auto industry.
The Camaro won’t save GM(the price sucks) and the Volt is too far away and will be too expensive to sell at any volume to change anything if it’s ever gets here. Do they have anything else?
The Camaro also is potentially a fun car and an extra. Not a staple commuting vehicle when times are hard and money is tight. When the stock market is in the 5,000 range, I don’t see many splurging on extra vehicles.
eroyce: “Hmmm.
‘Take a look sometime at the merged companies offering of the 1958 Packard Hawk. A Studebaker Hawk with the ugliest front end in automotive history.’
Good Lord! You weren’t exaggerating. Looks like a catfish with wheels.”
Yeah, but it had those zany padded arm rests outside the door windows.
I know so little about GM’s financial health that I cannot comment on that topic, but as a buyer of vehicles for my family and for my business, which has about 18 cars and trucks, I can say that GM lost me as a customer a long time ago. I cannot imagine buying any GM product, except—it’s a long shot—the forthcoming Cadillac CTS station wagon. GM and its labor unions thrived when the company had little competition by offering its customers shoddy products at high prices. If GM fails, I will feel sorry for its employees, but life goes on. Americans and Canadians will buy motor vehicles from other manufacturers, just as they did when Kaiser-Frazer, Nash, Packard, and Studebaker went out of business in my lifetime. Life is always changing; stasis is an illusion. Change comes whether we like it or not and so far, we have not only survived, we have progressed.
Got a question for you all; one that has not been broached yet. But I’m in an odd mood.
I wonder how many people may actually die because of all this insanity.
No, seriously; could it happen? Massive layoffs. People losing homes. Bad schools generating young adults with little understanding of how their own government works, or how to even think for themselves. Taxes going through the roof. America’s loss of financial standing in the world. Maybe a forthcoming depression, or maybe a new president’s “health care for everybody,” where it takes 12 months to get an MRI, like it already does in some countries?
Could all this result in a war? Increased terrorist attacks? A nuclear strike against a weakened America? Maybe just people going nuts and killing each other over water, gas, or food?
Could people actually die in large numbers, due to our politicians’ greed, school system incompetence (hence voter incompetence), our manufacturing base’s tendencies to make shoddy products and merge themselves whenever they feel like it?
And another question: Assuming that it’s okay for two badly managed companies to merge into one large badly managed company, then why not countries?
Maybe the US should start merger talks with Canada and Mexico after all. And then maybe some South American countries after that, and a couple of European nations just to “spread the wealth” around.
I must be stupid. If Cerebus paid 7 Billion for Chrysler and Chrysler has 11 Billion on hand why not just close down Chrysler and cash out??
If you shut Chrysler down, you’d have to settle with the pension funds, health care, dealer lawsuits, etc… and that will total a hell of a lot more than 11b.
So, the only justification for this move would be to put both Cerebrus and GM in better position for more bailout money?
Its absolutely crazy how people think US Govt Debt is a *safe* investment.
Some time ago I wrote about the possibility that GM wanting Chrysler for the purpose of a “trial balloon” thru the Ch 11 process. As part of the process, perhaps some assets & up-coming products might be x-ferred across brand lines to better position each company for the future.
If Chrysler comes thru Ch 11 & it looks healthy, more products move across brand lines & then GM files.
‘Seems “safer” to move the companies thru one-at-a-time rather than one gigantic filing. ‘Just a thought…
we’ve got a future socialist leader essentially stealing the election with Acorn (actually he’s also fascist*, as are the other side; two sides of the same coin);
* fascism = persecution of others due to their race/religion; socialism = persecution of others due to their social strata/income
ACORN isn’t an instrument through which it’s possible to steal an election. ACORN registers voters and sends the registrations to the Secretary of State, which verifies the registration. Successful ‘voter registration fraud’ would require collusion with the state government, at which point you’re in tinfoil-hatland.
Your definitions of facism and socialism are quaint hyperbole. That aside, why do you think Obama intends to persecute non-Christian religions? That’s not part of his standard stump speech. Does this have something to do with the hard-right-wing fantasy that he’s a closet Muslim and intends to put a mosque on every corner and replace the Pledge of Allegiance with a terrorist fist jab salute to a star and crescent? Heavy-Duty Reynolds Wrap for everybody!
I know about Smoot-Hawley, and it has no relevance to the current situation. Obama has said nothing about imposing import tariffs, and neither have his advisors or surrogates, nor is it consistent with his economic ideas. Hoover’s general plan was to let the market run amok and allow the craziness to subside on it’s own, which bears no interesting relationship to either of the candidate’s current economic worldviews.
I keep hearing what Obama’s plan(s) does or does not do. Here’s the problem. The only one that I’ve heard about that he could actually DO as President are bring home soldiers.
The last time I checked, a President can only propose ideas such as taxes, socialized medicine, etc. He can’t actually enact any of it. Congress does. The real scary part is that the Dems that control the House & Senate are farther left than anything that Obama proposes. Right now the only thing that has kept them in check is the Bush veto. When that goes away we are going to see the fastest Capitalist-to-Socialist transition in history. Obama won’t veto any of it, you can bet on that. We will have Hillary’s Health Plan passed by the end of February. And that’s just the beginning. There’s a reason she’s been so quiet…
I hope you all like what’s been going on in England recently because America will be nearly identical by the end of Obama’s first term.
Government investment or ownership in the auto industry is quite common historically, at least outside of the United States. Although the US industry was protected by tariffs in the beginning (under the Dingley Act of 1897), these became unimportant as US firms quickly established a superior position in global markets. American progress came out of the inherent productivity advantages of the American system of manufacturing and the large volumes available from a unified national market.
Firms in other countries seeking to get established in high-volume auto manufacturing started later and came up against the problem of American incumbency. They therefore turned to their governments for assistance. Often this went beyond tariff and quota protection. VW was entirely established and owned by the German State, Renault became State-owned after WW2 and Alfa Romeo and Ducati have had long periods of government ownership in the past. Not all state-run plants build Ladas.
The failure of British Leyland had many causes other than government ownership; a failure to rationalise brands and production facilities, a failure to get on top of trade unions and a failure to get to grips with quality.
The US industry will need government support to survive, but if this is provided without an insistence on the needed reforms, taxpayers will be wasting their money.
The problem of government intervention in the Anglo-Saxon economies is that we are not very good at industry policy; European and Asian countries are much better at it than we are.
GM is already a the mother of all Charlie-Foxtrots with the 8 brands that they now have in North America.
Now that we already down a slippery slope of at least a trillion dollars of government and Federal Reserve bailouts since March of 2008, does the government really need to bail JPM Chase to the tune of 6 billion soon to be inflated dollars?
The bottom line is that the American tax payers are already in deep shit.
Either we raise taxes to pay for all this governmental largess or devalue the dollar. I doubt that we’ll raise taxes to pay for the bailouts, so we will get to look forward to another period of skyrocketing inflation.
faster_than_rabbit: I know about Smoot-Hawley, and it has no relevance to the current situation. Obama has said nothing about imposing import tariffs, and neither have his advisors or surrogates, nor is it consistent with his economic ideas.
During the Ohio primary, he criss-crossed the state bashing NAFTA and free trade in general. So, yes, he has, at least, bashed the principle of free trade on the campaign trail.
He hasn’t since that primary, which tells me that he is basically another politician who will tell people what they want to hear just to get elected. Granted, he isn’t the only one guilty of this – certainly not in this campaign – but he initially sold himself as “a different kind of politician” who won’t do that sort of thing.
And just as that different kind of car company morphed into just another GM car, Obama has completed his own transformation, basically becoming the Same Old Stuff in a younger wrapper.
faster_than_rabbit: Hoover’s general plan was to let the market run amok and allow the craziness to subside on it’s own, which bears no interesting relationship to either of the candidate’s current economic worldviews.
That wasn’t Hoover’s approach to an economy that had been slowing even before the Crash of 1929.
Hoover did believe that the stock market would recover without government intervention. Speculation in stocks had been increasing since 1927, and values were definitely inflated on the eve of the Great Crash. The Crash was a necessary correction to the rampant speculation occurring in 1927-29. He was correct in his approach to the stock market.
Regarding the economy, the idea that President Hoover sat back and advocated no government action is false. He pushed public work projects, jawboned businesses into maintaining wage levels, and even started the Reconstruction Finance Corporation to prop up failing companies. None of these actions ameliorated the deepening depression, which was caused by the Federal Reserve Board’s monetary policy and the fallout from the Smoot Hawley Tarrif.
During the 1932 campaign, President Hoover and candidate Roosevelt differed little in what should be done for the economy. The main difference was that Roosevelt favored direct relief to individuals from the governmnent, and Hoover opposed this. If anything, Roosevelt criticized budget deficits and high taxes during the campaign.
Once he won, Roosevelt instituted his own policies, many of which only served to extend the Depression. By 1938, even members of his own party were revolting against his policies, and most of the New Deal’s attempts to “manage” the economy were already dead by the time the Japanese bombed Pearl Harbor.
From wikipedia:
Fascism is a totalitarian and nationalist ideology. It is primarily concerned with perceived problems associated with cultural, economic, political, and social decline or decadence, and which seeks to solve such problems by achieving a millenarian national rebirth by exalting the nation, protecting the nation from what fascism deems as the excesses of the internationalist ideologies of capitalism and communism by advocating a Third Position, promoting the territorial defense or expansion of a nation through a constant state of military preparedness and promotion of militarism as well as promoting cults of unity, strength and purity.Fascist governments nationalized key industries and made massive state investments. They thought private property was to be regulated to ensure that “benefit to the community precedes benefit to the individual.” They also introduced price controls and other types of economic planning measures. Fascists promoted their ideology as a “third way” between capitalism and communism.
Reason I posted that is the buying out and taking control of a lot of the financial sector by the republican ran government scares the hell out of me, and now we’re hearing that they may take over part of the auto industry too? And the feds want to take over a lot of people’s mortgages? Whoa…just whoa. I’m not saying that the Dems will or won’t reverse course, but it’s already been put in motion and we’re now along for the ride.
And please note that Facism leads to communism – not socialism to communism as many people have been led to believe. Ask East Germany that went from fascism (nazi germany) to communism how well that worked out.
East Germany isn’t a good example. It had communism imposed on it by the Soviet Union.
The East Germans didn’t willingly transition from facism to communism. A communist government was forced on them by a conquering army, and many Germans voted with their feet by fleeing to West Germany until the Berlin Wall was constructed in 1961.
Orian: “Facism leads to communism – not socialism to communism … East Germany … went from fascism (nazi germany) to communism”
Geeber: “The East Germans didn’t willingly transition from facism to communism. A communist government was forced on them by a conquering army”
I’d add that East Germany, like the rest of the Third Reich, was already socialist. Nazi means National Socialist Party; i.e., socialism (which Hitler blended with virulent militarism and genocidal racism). Extensive government involvement in economic affairs (mainly to support welfare state objectives) wasn’t at issue; it was the degree of totalitarian control of citizens by Russian Commies and their East German stooges.
The trouble with an automotive blog tipping its big toe into political discourse is that the expertise level can drop off really quickly. Instead of being an oasis of sophisticated analysis, TTAC can start reading like a well-lubricated bar room debate.
Each to his own, I suppose, but I’m not surprised that some of TTAC’s more thoughtful auto analysts have steered clear of this thread once the Obama is a communist/fascist meme took root.
“If you shut Chrysler down, you’d have to settle with the pension funds, health care, dealer lawsuits, etc… and that will total a hell of a lot more than 11b.”
Someone asked why wouldn’t Cerberus simply raid the cash and shut down, which prompted the above sensible reply. The same question applies to GM. You don’t grab 11B in assets with 30B of liabilities and consider it a good deal.
Here the liabilities drastically outweigh the assets. Better to wait for Chryslers collapse and the fire sale to pluck an actual asset.
Absorbing Chrysler in hopes of insuring a bigger seat at the government trough just strikes me as outright insanity. GM needs to be thinking focused and lean. Absorbing Chrysler would be a meal that would kill them.
“timothy773 :
October 18th, 2008 at 4:14 pm
Leyland? In America there was the dizzingly stupid merger of Studebaker and Packard in the mid 50s. Two financially dilapidated companies that made ugly cars merged and went out of business in 10 years. Take a look sometime at the merged companies offering of the 1958 Packard Hawk. A Studebaker Hawk with the ugliest front end in automotive history.”
Packard was financially sound when it bought Studebaker. It made the mistake of not auditing Studebaker’s finances before the merger.