These are turbulent times. Over the course of the last week, we’ve watched GM PR (a.k.a. “unnamed sources”) pimp a nonsensical merger between The General and Chrysler. Then, at the eleventh hour, the “deal” was retracted without comment (thanks to the U.S. Treasury Department’s refusal to bankroll the pre-bailout orgy). As regular readers will know, Friday afternoon is the witching hour for GM’s bad news, so that the markets can chill-out before dumping yet more GM stock and downgrading GM’s credit [even further] into irrelevance. So now we have an info limbo. Will the deal go ahead anyway? If not, when will Chrysler file the resulting, inevitable Chapter 7 liquidation? Into this void some tipsters step. Deep Throat tells us GM’s putting its research and development facilities on ice– and not just to save a few bob. Nope. It appears that The General is about to kill– as in starve to death HUMMER-style– Saab and GMC. Oh, and commercial trucks. That would leave Chevrolet, Cadillac, Pontiac, Saturn and Buick. (I know: Buick?). Anyway, something’s going down on Monday. The leakage should start tomorrow.
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My guess is on or before Tuesday they announce the merger with Chrysler. Cerberus has already told Renault-Nissan that they are not interested and are going with GM. They roll the dice of a Obama victory and figure they will get the bailout money from his administration when he takes office.
Any administration which used taxpayer money to fund and enable layoffs and factory closures would need it’s political head examined, right before losing it! I doubt that an Obama administration would be more likely to make such a move than the arguably brain dead one we have at present.
Announcement on a Monday?
Oh, it must be good news!
Robert,
I think the American Leyland logo should be more sphincter-like. Sphincteresque?
Obama has already stated that he would be in favor of doubling the already approved $25 Billion auto bailout. He also stated that one of his first things he would do if elected is meet with the Detroit automakers and the UAW to figure out a strategy to save the domestic auto industry. Do I like the bailout? No. But as long as we are playing “Wild Ass Rumor” This would be my guess on how this plays out. It takes Paulson and the Treasury out of the picture.
Etched in the memories of Democratic leadership is the sloppy way that Bill Clinton, fresh from his 1992 presidential victory, proceeded to blow his honeymoon by quickly announcing the hotly controversial, “don’t ask, don’t tell” policy about gays in the military.
The Obama camp has thus far tended to play its cards pretty deliberately. If elected, I can’t imagine Obama being suckered by GM into saving its bacon — at least without some new wrinkle that shows strong support for impacted workers.
In other words, once the election is over it may be possible for new policy options to surface that honestly acknowledge overcapacity in the auto industry while addressing the enormous human toll of Chrysler being largely dismembered.
How does starving the BPG channel of product support Buick as a go-forward brand?
If GM essentially winds down BPG, how does that sell any more Buicks? Legally, GM can’t just shuffle Buick over to Caddy or Chevy.
“The Obama camp has thus far tended to play its cards pretty deliberately. If elected, I can’t imagine Obama being suckered by GM into saving its bacon — at least without some new wrinkle that shows strong support for impacted workers.”
What about the possibility that the negotiating is long complete? What if, to take a purely hypothetical example, GM’s heavy commitment to E85 was a bargaining counter in light of Obama’s perverse and incoherent support of same? And that GM would continue to vocally support the notion of ethanol as an automotive fuel, in support for a pre-negotiated bailout?
I first heard this suggestion, from a very good source, back in July. Having seen how these things work, it seems to me that the bailout is not even a point for debate. Forget the public stalling and pleasantries which are being uttered now, the meaningful discussions happened behind closed doors months ago.
Of course, it may well be that the above info is wrong. It may also be that Obama wins by so much that he reconsiders this position between now and January. Personally, I doubt it. GM’s management get many things wrong, but one thing they’re excellent at is gaining access to Other People’s Money.
Here’s a more sphincteresque suggestion for an AL Logo:
http://img208.imageshack.us/img208/2732/alxh0.jpg
I’ve not seen this addressed.
What happens if Detroit gets all of these billions and the major market slide continues? They can’t continue to build cars nobody buys.
Is the end result everybody is bought out and the last person leaving turns out the lights? Is this not what’s happening already?
Predicting no Earth-shattering news come Monday.
Maybe an announcement of the latest cost-saving move.
Thermostats lowered to, say, 65 degrees in all GM owned buildings.
Well, except for the exective offices, of course.
tom
I like it! Captures that whole spinning down the drain/flushing down the toilet thing.
tom, that’s close… but I think the logo needs to be more direct to the point.
Like this,
http://img388.imageshack.us/img388/3249/thetruthil9.jpg
Dr Lemming:
The Obama camp has thus far tended to play its cards pretty deliberately. If elected, I can’t imagine Obama being suckered by GM into saving its bacon — at least without some new wrinkle that shows strong support for impacted workers.
Good point. While I’m firmly in the McCain camp, I expect him to lose, so I find contemplating an Obama administration an interesting excercize.
The congress is going to be an interesting bunch of moderate dems and an aging hard-left leadership. He may need to veto early to send a message that he doesn’t want to get too loopy left.
@crackers:
If you believe it or not, that “spinning down the toilet” thing is actually from the original British Leyland logo…fitting I guess…
Personally, I saw sort of a swastika thing going on there, but since that was for the toilet as well, I guess it doesn’t matter…
The congress is going to be an interesting bunch of moderate dems and an aging hard-left leadership. He may need to veto early to send a message that he doesn’t want to get too loopy left.
Obama won’t want to get too loopy left from the get go?
I think you’re giving him too much of credit. Just look at man’s history.
Monday is the day October results are announced. Also, last month’s incentives expire this weekend.
Monday’s announcement will be some half-hearted incentive program.
The reason cars and trucks are sitting on lots is because they cost much more than people can afford. The simple solution to move them is to cut their price. A better solution is to cut the price more.
The new Mazda 6 goes for darn near $30,000. Once the smoke clears, people realize there is no way they can afford it. They never could. It’s just that now they can no longer even afford to service the debt on it.
Simple economics says prices fall or the automakers go away.
Ronin,
you nailed it. The US govt since 1980 has pursued policies driving down inflation adjusted wages of most working Americans. People can no longer afford new cars. 72 month financing guarantees the car is worth less than the loan. Until incomes go up, cars can’t sell.
Check the Saab website. No 2009 Saabs except the soon-to-be dead Saab 7x (born as a Trailblazer – all GMT360s die when the Moraine OH plant closes in December). Saab for sure will be killed in the USA.
The Global VP of HR announced that this week (starting 3rd Nov) would be 3rd quarter results and I quote…”Associated measures to deal with the current difficult market conditions”. So more “one off” losses announced probably in the billions and employees getting shafted because of Hill Billy Rick and Bob Putz and the ackcellant management.
How they can continue to gush red ink for two decades with Saab and Saturn is beyond me. GM has never made a dime from either one. Remakes Saab as Opel Sweden and Saturn as Opel US and still can’t sell any cars. Saab has never cracked 140,000 sales worldwide with GM.Saturn sales keep falling even with all new product.
GM just rebuilt Saturn’s entire line with two cars [Astra & Sky] that lose money every time one is sold.A double loser brand.[Wasn’t the 10,000 per unit loss on the Sky & Solstice reported here on TTAC?]
The Astra was another “stopgap” till a NA version could be built here. That ain’t gonna happen obviously.No money for it. Another of those “We have to have something to offer in the segment till the “real” small car arrives ” things Even if they sell it at who knows how much of a loss.
With the Astra bombing as it has at sales less than half the projected 40-50,000 units [ION did over 100,000 every year For all the slagging it’s gotten it sold better than the VUE], why would GM continue this charade.
Maybe the big announcement will be they’ve finally gotten the juevos to cut the dead weight.
[And start the Christmas “red tag sale” early……]
@ DweezilSFV :
I think its time to start calling it a Christmas “toe tag sale”.
Matt51 : People can no longer afford new cars.
Wildly overstated. People just cannot afford to buy more car than they need as they have been doing (on credit) for a generation. They will be getting out of their large SUVs and into family sedans and compact cars. Out with multiple CD changers, just listen to the AM radio. Sad, but not cataclysmic as you portray.
Dr. Lemming: Etched in the memories of Democratic leadership is the sloppy way that Bill Clinton, fresh from his 1992 presidential victory, proceeded to blow his honeymoon by quickly announcing the hotly controversial, “don’t ask, don’t tell” policy about gays in the military.
If I recall correctly, he blew his honeymoon by attempting to force the military to accept gays. The blowback was so fierce that his administration came up with the “don’t ask, don’t tell” policy as a compromise.
Matt51: The US govt since 1980 has pursued policies driving down inflation adjusted wages of most working Americans. People can no longer afford new cars. 72 month financing guarantees the car is worth less than the loan. Until incomes go up, cars can’t sell.
From after World War II until the mid-1970s, the American economy boomed as the Europeans and Japanese rebuilt themselves. With very little competition, American companies were inclined to accept wage increase demands (after the appropriation amount of huffing-and-puffing for PR purposes), and pass them on to customers.
This is what happened with the domestic auto industry. When four companies control well over 85 percent of the new vehicle market, and one union controls all of the labor used to build those vehicles, there isn’t much incentive to keep labor costs in line.
By the 1ate 1970s, foreign competition was real, and American companies had to watch labor costs. Unions, of course, weren’t happy. We also discovered that the domestic companies had paid out lavish wages and benefits instead of investing in modern plants and production processes. The chickens came home to roost in the 1980s.
The government policy that contributed to this was permitting free trade, although free trade has helped the economy overall while hurting certain sectors. But Americans have continually signaled that they do not want restrictions on imported goods.
And people can still afford new vehicles. They just can’t afford $40,000 vehicles if they have to pay for them out of income (as opposed to using home equity lines of credit).