Ken Elias just emailed me, asking why I’d neglected to blog Peter DeLorenzo’s Wednesday rant. Ken was irked by Sweet Pete’s claim that a 20 percent decline in car-related California sales tax proves that America ought to bail out his pals in Detroit. DeLorenzo writes: “‘This is very bad for states,’ Donald Boyd, senior fellow at the Nelson A. Rockefeller Institute of Government told the Times, who went on to point out that sales taxes are the first or second most-important revenue source in almost every state. And to think there are people still out there who suggest that the collapse of the domestic automobile business somehow ‘won’t affect them.'” I also thought that passage was a pan-Pacific-sized stretch. But its was the self-styled Autoextremist’s “the fat lady done sung” triumphalism that caught my attention. “In just this past week, the true value of the domestic automobile industry is coming to the fore, and people all across this country are starting to take notice.” You bet they are—but not in the way that Pete fervently desires and hysterically promotes. A new CNNMoney poll suggests that 61 percent of Americans are opposed to a federal bailout for the AutoExtremist’s hometown heroes. And that’s not all . . .
“A full 70% of respondents indicated that a bailout is unfair to taxpayers. In addition to being unfair, the poll showed that a majority of those surveyed think a bailout would not help the economy.”
Common sense? Bailout fatigue? Blind, pig-ignorant Detroit hatred? Whatever the reason for those numbers (and you can guess which one Mr. D would choose), that’s a $40 billion bucket of not good for the D2.8’s call on the public purse. Politicians are politicians; there are only so many times their going to vote against an opinion held by 70 percent of the electorate. Especially if they think this thing is going to blow up good. Which it will.
Ken reckons we’re looking at “a [bankruptcy] with an expedited reorganization with a Government trustee to speed things up given that the money is coming from the Feds.” Hell Congress might even tell Chrysler and their private owners to go fuck themselves (although Ken would NEVER let those words escape his lips). Bottom line: this is going to be one Hell of a show. And no matter what happens, someone’s gonna get hurt. And everyone knows it.
They are too late. America is fed up over the bank bailouts and lack of immediate return on them.
In other news, I was a PMD fan for many years. He published a comment (no free/open remarks over on AutoExtremist) I made on the Honda Element way back when. I also believe that a large part of his argument is that Detroit (my hometown area) will be a crater if the bailout passes. But what, PMD is still wrong on this one, sorry. He’s been wrong for many many months now.
Don’t tell Pete, but California is already a majority import/transplant state … and as far as sales taxes go, it matters not.
In fact, if it is true that Toyotas and Hondas sell for higher prices than comparable Chevrolets, then it is to the state’s advantage when people buy the pricier rides.
All one needs to do is read this weeks article over at “AutoExtremist”. …there is NO rhyme or reason to anything he is saying.
Sweet Pete says this: We need to support Ford Mo Co so that Bellflower CA (and other local city governments) can increase their tax revenues by keeping their local Lincoln-Mercury dealership open.
Hey, Pete, if NOBODY wants to buy a Lincoln…NO AMOUNT OF $UPPORT is going to change a thing! If people hate Lincolns, yet still need a new set of wheels…maybe they will buy a Hyundai Sonata. Perhaps they will buy a Nissan Maxima. Are you such a moron to believe that if we dump Billion$ into FoMoCo, that customers will all of a sudden want an MKZ?
REALLY, sir??
And since WHEN is it the taxpayer’s OBLIGATION to keep the coffers of a local city government primed?
This line of Pete’s is something else:
“American automobile companies that are building an impressive array of class-leading vehicles in all segments, with more on the way with each passing quarter.”
Surely he isn’t talking about Chrysler, is he?
Cut Pete some slack. He’s going through the anger phase of grief.
I agree with toxicroach. Pete used to be an excellent commentator on the industry but lately he’s gone from the autoextremist, to the autodenier and now finally he’s become the autoapologist. It’s sad, but then all good things must one day end. Let’s just let him fade away gracefully.
I think a lot of Americans simply don’t know that these are loans and not free money. Some dumbass in line at the grocery store the other day mentioned this:
Fat girl: I cant understand why the taxpayers are giving money to these greedy car companies man
Dude: You do realize these will be loans right?
Fat girl: Not from what I hear….no, us taxpayers are giving them free money…you know, like grants.
You do realize that a great number of Americans think that the D3 are getting free money that they never have to repay?
Misinformation at its finest.
Forum group buy on a Nissan Maxima for PMD? Let’s get him leather, very nice and soothing.
Technically the carmakers are indeed seeking loans. But no one in their right mind would give them credit. These companies have such poor balance sheets that the chances of repayment are close to zero.
There are reasons the carmakers are begging the government for money. They have nothing left to offer as collateral and no other lender or investor will give them the time of day.
Like when your no-good brother-in-law says “can you loan me a thousand bucks?” You know it’s not a loan he’s asking for. And if Congress gives the carmakers the money, we’ll never see it again.
People point to Lee Iacocca and Chrysler and think that this situation is the same. It’s not. Chrysler had a decent business at the time that just needed capital. Nothing like the bleeding that is going on now.
derm81:
Ha! Loans. Thats a good one. Maybe the “fat girl” did not understand the way that the big-3 CEOs explained their situation, or maybe she was just smart enough to see through their lies.
Any claim that the big-3 have a future without Chapter 11s is the real misinformation at its finest.
The will of the people has finally reached some Congressmen:
http://blogs.wsj.com/deals/2008/12/03/senators-kyl-corker-warm-to-detroit-bankruptcy-plan/
Why don’t people who are supporting a bailout understand a simple point- the majority (not all) of the products offered by the big three are NOT competitive enough and thats why they don’t sell. For example- name any three cars of Chrysler that are desirable and better than the competition?
Even if a bailout does take place,the big three will not be competitive as their products are way behind the market so first they have to catch the market and then beat the market later.
Its natural progression.
A bailout will delay the obvious but not prevent it.
That argument doesn’t hold water. If GM doesn’t exist tommorow, the approximate number of new car sales will still be the same. From a sales tax standpoint, sales of a hundred $25,000 Tundras bring in the same amount of revenue as sales of a hundred $25,000 Silverados do.
De Lorenzo seems to forgot that Y2K wasn’t the end of the world, white people didn’t riot when Obama was elected, and life will go on without the Little 3.
It’s not a loan, it’s not even really a bailout. It’s $40B worth of coal, that will be shoved into the furnace to keep the train running for a few more months. Everybody might as well just get off now, eventually that train is coming to a stop no matter what.
We’ll never see a dime of that money ever again, you can bet on that.
“Why don’t people who are supporting a bailout understand a simple point- the majority (not all) of the products offered by the big three are NOT competitive enough and thats why they don’t sell.”
They don’t sell? GM outsells every one in the US. The Big3 account for more than 40% of the market. They aren’t competitive? People aren’t buying them out of charity, pal. They buy the products because they appeal to them.
“If GM doesn’t exist tommorow, the approximate number of new car sales will still be the same.”
Wrong. I haven’t heard even the most hard core cynics make that prediction.
First off, 1 in 10 jobs depends on the auto industry, so when those people lose their jobs, they won’t be buying any new cars. These are people that buy new cars in a greater percentage than the general population, because their income is higher.
Second, many suppliers will also be driven into bankrutcy. Where are the parts going to come from?
“If GM doesn’t exist tommorow, the approximate number of new car sales will still be the same.”
This is definitely not true. Other manufacturers aren’t carrying that kind of excess capacity. It would take a while for them to ramp up and produce the number of vehicles GM sells.
micpl30,
That 40% is hardly a success when you take into account that combined market share continues to decline. Or try to factor in the glut of brands that they have. Nevermind GM vs Toyota numbers, just look at the Toyota BRAND vs any single GM brand. It’s abysmal. And things aren’t improving.
They still move the metal because they dump out huge incentives. The number of people that buy Detroit cars out of sheer loyalty dwindle by the day.
And even if you believe that 1 in 10 jobs depend on the auto industry than at least try and remember that the Detroit 3 are not the North American auto industry all by themselves. The transplants employ more Americans than Detroit does.
John Horner:
“Surely he isn’t talking about Chrysler, is he?”
John,
Please tells us which Chrysler vehicles you have driven since oh, 2005. Please do not include any rentals with upteen thousand miles of customer abuse on them. Just you know, new dealer car test drives, or extended test drives for journalistic purposes. Have you test driven the new Journey? Challenger? Ram? Liberty? How about the “old” 300? Charger? Grand Cherokee? Just curious.
Yep, people are taking notice, notice of how poorly run the American auto industry is and has been for at least the past three decades. It’s no wonder a majority opposes a federal bailout of the Detroit 3 (formerly Big 3).
“Why don’t people who are supporting a bailout understand a simple point- the majority (not all) of the products offered by the big three are NOT competitive enough and thats why they don’t sell.”
Now here we have a case of someone who has come to the conclusion that people who support a bailout don’t understand what he understands: the big 3’s products are not competitive. Define competitive. In most commodities that would probably mean price. But, a look at the facts might reveal that in virtualy all of the different segments of the automotive market the big 3 are price competitive and, often, given incentives, lower than non-big 3.
Yeah, well, I meant quality. But as many could point out, at least by the various indicators that an average car buyer would use to research quality, they are at least in the hunt.
Yeah, well my uncle had a big 3 car and it was a POS! Ah, now we ARE getting somewhere. Word of mouth. Generally speaking it would be hard to argue that when it comes to word of mouth, you buy a Toyota, you don’t buy a GM.
Don’t some of you really tire of comments that sum this whole equation down to a sentence? Or a single experience?
There are a LOT of reasons, some more pertanent than others, as to how we came to this point of a D3 bailout. Whether we do bail them out or not is really up to this: are we a free market or not? Live by the sword, die by the sword? My opinion is we would like to be but we really can’t be. Not all the time. Oil? Water? Food?
We all have our opinions but what it really comes down to is whether or not a GM default would cause catastrophic damage to our already ailing economy. How many variables do you suppose there are to that equation. I don’t have the answer. Do you?
As for Pete, he’s a homer. This is his team. Would we expect him to say anything different? From his perspective he can say anything he wants about his team but don’t YOU trash ’em. I can understand that. But I guess that’s why he doesn’t get to decide this. And neither do we.
Whatthehel said:
“Nevermind GM vs Toyota numbers, just look at the Toyota BRAND vs any single GM brand. It’s abysmal.”
Really? Automotive News data shows CHEVROLET ALONE outsells Toyota, 1.92 million units to 1.81 million units so far this year.
“The transplants employ more Americans than Detroit does.”
I seriously doubt it. Where’d you get your information? Same place as the Toyota sales data, I’d imagine. GM alone has 96,000 direct employees in the US. I’d be surprised if the transplants have even half the employees in the US that the domestics do.
Automotive News data shows CHEVROLET ALONE outsells Toyota, 1.92 million units to 1.81 million units so far this year.
Your numbers don’t match the figures reported by the manufacturers themselves. GM reports Chevrolet sales of 1,663,440; Toyota reports 1,729,209, excluding Scion and Lexus.
But in any case, even that isn’t relevant when GM can only hit those numbers by losing money. They have to give the cars away in order to make those numbers.
That “market share” (if we can call it that) is a curse, not a blessing, because it isn’t a profitable piece of the market. GM was losing money when the economy was booming, and it is losing money now that it isn’t. A good economy provides no assurances that GM can become profitable.
Obviously, the loss of market share shows that they can’t keep their customers. They might benefit from figuring out why they have such problems doing that.
Derm81….
Do you really think that these loans have a snowball’s chance in hell of being paid back? I think it is just money being poured down the toilet that we will never see again.
If you loan someone money knowing that you have almost zero chance of seeing it repaid, then it is a grant.
The fact that no commercial entity will loan them money should convince you that this is not a loan. There are plenty of funds and people looking for investments now… a place to stick money that has a safe chance to grow. Loaning it to GM is not a risk even they are willing to take.