If there is one man responsible for GM’s successful semi-suckle on Uncle Sam’s teat, it’s Steve Harris. I reckon GM’s PR mastermind moved the Congressional bailout hearings from the beginning of the week to the end. Tuesday’s catastrophic new vehicle sales numbers highlighted the fact that SOMETHING HAD TO BE DONE. Friday’s unemployment stats added the critical word NOW. Once Congress convinced itself that it could convince the American public that really bad shit was about to go down, the bailout was a done deal. In truth, it’s just the start. Harris knows it, you know it, and the American people know it.
A recent CNNMoney poll revealed an enormous gap between voters who don’t support the Detroit bailout (61 percent) and those who don’t support the Detroit bailout and think it won’t help the U.S. economy anyway (70 percent). In this latter assessment, for once, common sense prevailed. If $700b to the smartest minds on Wall Street didn’t stop the recession, why would handing over less than a tenth of that to a troika of failed companies have a salutatory effect?
I choose my words carefully. Despite The Big 2.8 and our (their?) elected representative’s concerted and sustained effort to make Motown a synonym for domestic automobile manufacture, the average Jorge and Juanita knows the difference between Chrysler, Ford and GM and “the American automobile industry.” They understand that they have alternatives. Hell, they like the alternatives. They bought the alternatives. And no one’s threatening to take those cars away. Which frees them to ask the obvious, inescapable question: “where’s MY bailout?”
Considering the source of Motown’s collective “bridge loan,” this IS their bailout. And if taxpayers aren’t happy about the tens of billions of dollars heading for The Big 2.8’s coffers now, just wait until March, when Detroit’s begging bowl brigade descends on DC for Round Three. The chance of them getting a second bite at the multi-billion dollar proverbial cherry grows dimmer by the day.
In their search for survival at any cost, Motown’s mavens have maneuvered themselves into a lose – lose situation.
For one thing, either the economy will be in a severe recession/depression by March or it won’t. If it is… see? The Detroit bailout didn’t work. Fairly or not, if the industry’s prospects still suck, Congress will have little luck trying to sell the electorate on the idea that the bailout was a “success” that deserves repetition. If Detroit’s prospects suck even more than before– a downgrade that occurred during the two-week bailout-begging interregnum– the pro-bailout position will grow even less tenable.
At that point, by March, bailout fatigue will be terminal. Voters will realize that this Detroit bailout thing was never about “us.” It was always about THEM. And sorry guys, you had your go. Sink or swim. We’re floundering in our own sea of troubles.
If, however, the U.S. economy is NOT any worse than it is now, the argument underpinning the bailout ALSO loses justification. Once again, the feds bailed someone out and… nothing happened. American voters aren’t like OCD sufferers constantly checking to make sure the gas is off. The fact that a cataclysmic event didn’t occur isn’t proof that Uncle Sam was right to devote his time and our money to making sure it didn’t happen. Triple negative aside, what the Hell was THAT all about? I’m not paying for THAT again!
If voters are P.O.ed that Wall Street “squandered” their $700b, how do you think they’ll feel about Chrysler, Ford and GM’s “progress” over the next two months? Let’s face it: The Big 2.8’s sales will continue to fall. Their share of the shrinking U.S. market will continue to erode. Union concessions, debt-for-equity swaps and (God forbid) management changes will do nothing to staunch the flow of red ink, or remove the big fat “L” tattooed on Motown’s collective forehead. No matter what they do or don’t do, this bailout brands them as losers; now and into the future.
To counteract this cancerous concept, GM PR will spend the next couple of months spinning their [same old] turnaround story. Ford will continue to trot-out their entirely disingenuous “What me worry?” insouciance. Chrysler? Fuhgeddaboutit. They’re already dead. Come March, they’ll just be deaderer. Maybe even officially.
There’s your wild card. On one hand, the remaining domestics could point to a Chrysler collapse as a cautionary tale. Fork over more money or stick a fork in us. Your choice. On the other hand, Chrysler’s extinction could provide a compelling argument for a GM (and thus Ford) Chapter 11 reorganization. See what happens when you try to bailout a lost cause? Abandon all hope of a non-C11 turnaround ye who enter these congressional halls.
And that’s how this will go down. Next week’s bailout billions will be the only pre-C11 money for Chrysler, Ford and GM. Anything after this will be a debtor-in-possession deal. Bankruptcy isn’t just the right thing for these automakers; it’s the only thing. Even Steve Harris knows that. And if he doesn’t, God help Detroit.
Well, they can throw money at GM, might as well throw it in a flash-burner. That money’s gone.
Wow.
I don’t think you’re following reality very well Bob, you’re getting carried away with cheerleading for US Automaker Failure.
The issue that writing like this works hard to keep hidden is highlighted by the job loss numbers. Numbers that haven’t been seen in that kind of magnitude for over 30 years.
It’s a loan, not a $700 billion “we’ll take all the badness off your books”. Pretending it’s the same thing isn’t helping anyone, but perhaps it feels good to stab the voodoo doll?
Imagine the banks, the grocery stores, the restaurants, the paper clip manufacturers, and so on that will not survive the immediacy of millions of jobs lost in short order. It’s probable that the nation’s economy could absorb something like that spread out over years and years; there’d be time to adjust. Not so much when it happens in the span of 6 months. For an example, there’s always the spike in gas prices that stopped so many things cold.
The auto companies didn’t cause the credit problem that made leasing so unattractive and made buying cars that much more difficult; name an industry that can turn on a dime in the face of that kind of upheaval successfully?
Bad decisions have piled on others, across many industries. Let’s try and see through the illusions though, this kind of commentary isn’t accurate or useful.
It’s still not good. At the November 08 sales rate, GM has more than 150 days worth of vehicles parked on dealer an company lots around the country. The great unwinding will take months to shake out.
I could not agree more w/Blindabraxas.
Another point is that half of the $700b has been loaned. That is $350b to be held for other “surprises.”
This economy is too weak to survive the fear that goes with C11. Although it probably makes financial sense, the climate of fear has ratcheted up by yesterday’s unemployment #s.
The Big 3 are showing more signs, along w/UAW, that an overhaul, not a tune-up, is in order. If they voluntarily get within 70% of what a C11 could do for them, I’m in favor of keeping some kind of lid on the fear that could spiral if no bridge loans were forthcoming.
I also think the economy would improve overnight if CNN, CNBC, etc canned the daily dose of FUD for two weeks. The media is contributing to a rotten economy. Psychology is important here and the gloom and doom is making its own impact. But I know negative press sells, but it’s contributing to the problem now.
Excellent article, and I totally agree with everything in it. The economy IS going to be worse by March, so this money does nothing for them, and giving tax payer money away is not going to look popular. The stigma left behind after seeing these three tools pan-handling to congress has to hurt them as a company even more. Who would want to own an American car, when people will be looking at you like a thief. The faster they go C11 the better; This fiasco is over.
The only thing we have to fear is Congressmen like Barney Frank, who have no problem sacrificing the free market principles that made this country great on the altar of expediency, political pandering and personal aggrandizement .
@Robert Farago:
That’s not true. We have to fear Barney Frank a lot. We also have to fear Bob Corker though. Good questions? Yes. Very, very filthy politician though.
And it’s no coincidence that the guy coming out strong against the bailout is from a non-union state that is looking to employ more people in auto production from companies like Nissan and Toyota.
Believe me, he’s just as corrupt as the rest of these scumbags, it just happens that his evil aligns with the public good right now.
If I had to choose I would take Corker over Frank on this since it doesn’t cost me 34 billion dollars to have more Toyotas and Nissans built in Tennessee. I know, profits flow east but mortgages get paid and that works for someone. The 34 billion we all know is going to be stolen and that’s a fact.
GS650G :
If I had to choose I would take Corker over Frank on this since it doesn’t cost me 34 billion dollars to have more Toyotas and Nissans built in Tennessee. I know, profits flow east but mortgages get paid and that works for someone. The 34 billion we all know is going to be stolen and that’s a fact.
Absolutely. My opinion is that Corker would have no problem facilitating a $34b theft if he were presented with the opportunity to do so. But I agree with you – as it stands now, his personal interests (which are in no way driven by ethics, or a sense of civic responsibility) happen to be congruent with free market/smaller government ideas.
I guess the enemy of my enemy or whatever. I just have no intention of making a hero out of a guy that has demonstrated he has no boundaries when it comes to getting what benefits him personally.
A quick something to think about:
According to Bailout Watch 257, we’re at the end of the Boom Bubble Bust business cycle. True.
What caused the boom? Cheap-to-borrow money.
Where did it come from? The Federal Reserve.
How? It lowered the Federal Funds Rate.
How? By buying bonds from banks.
With what? MONEY IT CREATED FROM THIN AIR.
How did the financial sector bailout happen? Federal reserve bought “troubled assets” from investment banks.
With what? MONEY IT CREATED FROM THIN AIR.
This problem (among myriad others) was created by fiat currency. IT CANNOT BE FIXED BY ITS CAUSE.
As for saving jobs (saving votes), just what will those thousands of UAW employees be doing if the public already isn’t buying the cars they are building?
I guess the depression in used car prices caused by the EXTREME OVERPRODUCTION enabled by the bailout will take some of the sting out of losing 1/3 of my paycheck to the federal wastrels.
There is no wild card in my opinion. Congress will not be able to justify another handout in three months and $17 billion for these companies will only keep the lights on until March. What matrix could they possibly accomplish by March? Doesn’t it take money to restructure and in GM’s case, close divisions?
The one thing I took away from watching the hearings was how clueless Wagoner is. He really doesn’t know what to do. Nardelli is basically there. At least you can see progress from Mulally.
Come March there is no question the automakers and the economy are going to be worse off. What could they possibly do in that period of time to achieve any measurable result? Their only prayer is that low gas prices hike SUV sales, which they will eventually, but not significantly over that short time in this economically uncertain and no credit environment. The holiday season is going to be a disaster for retailers all around a layoffs will immediately follow. The Dow will continue tanking.
But what direction can we reasonably expect our shy president elect to take when he comes into power? Facing a huge economic meltdown and bringing Paulson’s clone deal with it, and promises of kajillions of “investments” into everything and anything, I’m sure we can expect more of the same. Round 3 will only be eclipsed by the money given out at rounds 4 and 5.
I’ve been reading this site for years now and I always thought that the criticism was of the constructive variety. But, I really can’t believe that you really, really think that all of us in Detroit can just up and find jobs somewhere else without blowing a hole right through the south eastern side of Michigan. Do you have a spare room in your house, Robert? If things keep going your way me, my wife, son and two dogs will need a place to stay.
Christopher :
Throughout this saga, I have expressed my sympathy for those people who will be the victims of the D.28’s chronic mismanagement. I have also sounded the alarm to and for these hard-working people, providing advance warning of this epic debacle.
I want American-owned companies to create the world’s best automobiles. I want Detroit to die, so that Detroit can be reborn.
That said, I’m damned if I’m going to subsidize your employment through my taxes– any more than I’d want you to subsidize mine.
Sure, I’m happy to provide a safety net. But I’ve lived in a socialist country, and believe you me, it’s not anywhere near as desirable as The United States.
Robert,
What makes you think Detroit has a Lazarus act in it? C11 will become C7 largely due to the lack of confidence customers will have in buying a vehicle from Detroit. There are simply too many alternatives for customers today. I don’t see a second act here.
Detroit is still a locus for tremendous engineering talent.
I see a add at the bottom of the page here for a Ford Flex. How is this not subsidizing your employment? Do you really think that — if things go as you sooth-say that you’ll be unaffected? You like to harp on the analysts that predict major disaster for the country following Detroit’s demise as being trumped up for shock value, but I think you’re being a little naive if you think this whole thing isn’t going to hit you in the pocket book.
I don’t think I’m just talking to Robert here — everyone who who sees the big three going down — you’re going too.
And just to put it out there — I don’t want to move out of Detroit. My family is here, my life is here. I don’t want to have to move somewhere else. I’m not still here because I have no where else to go. There are those of us staying here because it is the right thing to do. There are those of us who are staying and will go down with the ship if that is what is meant to be. I fight every damn day, working long hours and trying to make things better.
I think this bailout thing is getting out of hand. According to fox news there was another orginazation asking president elect about 200 billion in federal money. I know he is not in office but it is not far away. This has to stop now before the govt owns everything and we live in a socialist environment.
The big three wants to know what the difference is between the bailout of the banks and them. The public knows why they are going but the bank side was first seen as a complex mess. bad products, toe tags on every model(red tag sale or employee pricing), lack of brand focus, and the uaw (dont get me started) 28 dollars and hour to start, golden health care options, the job bank,etc. all lead to the fall of the big three.
We have two choices if this does go through. one is to make sure that if your congressman votes yes that you vote no for his or her reellection. Second would be to stop bying anything related to gm. If there sales tank then they will run out of money again and i would like to think that as dumb as congress seems to be that they would not do it twice.
Im just really confused i thought the congress was suppose to represent the people. 61 percent say not to a bailout and if this passes i think that we as the people need to find out how to remind them they are suppose to represent the people not the money they get in lobbying. Not the big three but the 305million tax payers. Congress is doing stuff we do not want them to so maybe we should make a small march to congress and demand answers and new congressmen and women.
The government instead should loan those tens of billions to start-up automakers. Fund a new automotive industry in the US that can design and build new cars faster and for less money. Sure, not all the start-ups will succeed, but enough of them will for Uncle Sam to get a return on the investment.
By Robert Farago : Once Congress convinced itself that it could convince the American public that really bad shit was about to go down, the bailout was a done deal. In truth, it’s just the start. Harris knows it, you know it, and the American people know it.
Ain’t it the truth?
It’s one of those stupid ideas that will never die and just go on and on sucking the country dry. Like the Viet Nam war did for too long, or like the wars in Iraq or Afghanistan are doing now. No wonder the U.S. will go bankrupt.
Christopher – Wherever you want to live is fine with me, as long as I don’t have to pay for it with my tax money.
I may very well buy a CTS in 2009 if GM goes through bankruptcy. They will most certainly not go chapter 7 – that’s just scare tactics – and the post C11 bankruptcy warranty will be more trustworthy than a no-bankruptcy warranty. However, if there is a govt bailout and no restructuring, forget it. Too risky.
All that said, perhaps we should give them a few billion now so that the GM employees will have a nice fully paid Christmas vacation while the rest of us work and pay for it.
That said, I’m damned if I’m going to subsidize your employment through my taxes– any more than I’d want you to subsidize mine.
But Robert, for the past 30 years taxpayers in Michigan and the rest of the industrial Midwest have been subsidizing employment at Sen. Corker’s and Sen. Shelby’s beloved Nissan, Mercedes, Hyundai and Honda plants. Sen. Corker’s Tennessee has averaged $1.16 in federal spending per dollar of federal taxes paid 1981-2005 vs Michigan’s $0.81. Federal spending in Tennessee has increased so the return on tax dollars is now ~$1.27. Over the past 30 years, Tennessee’s federal tax windfall has been over $100 billion.
The politicians who have been most outspoken against loans to the domestic automakers all come from states that have been subsidized by taxpayers in other parts of the country. Not coincidentally, many of those states have given huge incentives to foreign automakers for setting up transplant assembly and other operations in those states.
If “christopher” is one of those who bolted together my last GM product, which promptly fell apart again,I have no sympathy whatsoever.
If, however, Christopher got carried along in the UAW philosophy of “that’s good enough, pass it on”, then I sympathize, but must still point out that he should have realized the bad quality couldn’t go on forever and could have started planning accordingly.
I bet “Getthefinger” has got his little stash stowed way!
Christopher,
Sorry man, but that’s life. If your job disappears, find another one or lose everything.
That’s the way it has been for the rest of us Americans for the 42 years that I’ve been on this earth. Worked that way for my father, and my grandfather.
Do you really believe that you are somehow entitled to a job and that said job is where you want it to be?
Few of the people who will be paying for this have that luxury. And it tends to make them rather unsympathetic.
The phenomenal misunderstanding of the entire nation, much less this comment board is the face that I, and many others — am not a UAW employee. I am an IT service supplier worker. I don’t work directly for the big three, but I am damn sure aware that If I don’t deliver the best service that I can that my job won’t be there tomorrow — under ANY circumstance.
I’ve never had an entitlement to my job. I work for an “at will” employer. Most of us here are in the same boat.
I happen to think that the smart thing is to stay and fight for my job, my state, and this business that I grew up in.
Christopher,
I don’t think that it’s all that surprising of a misunderstanding. The Big 3 have made it all about themselves.
From a PR standpoint they have made a huge mistake. They have played into the public’s preconceived biases. For just a moment try to forget that your living is tied to these guys and think like the average consumer for a moment.
-average consumer rant on-
The Big 3 are truck companies that occasionally make cars. They used to make cars, even good cars, but with a few notable exceptions the only vehicles that they make that are top of their class anymore are trucks (or based on trucks). They are also the guys who designed and built the worst cars we were ever forced to drive (whether by finance, availability, Hertz or our parents). While we were driving these cars, we had to deal with useless guarantees, design and manufacturing mistakes, and Dealers that lied, cheated and stole whenever possible.
Now the Big 3 are in trouble, trouble they brought on themselves by not diversifying their product lines like their competition, and by not investing their profits for the future but buying various ancillary businesses, running them into the ground, and then selling them for a loss.
They somehow manage to ignore the problems that have been evident for years. They wait till the enormity of the worst financial collapse in at least a generation has finally hit the general public. They then finally break down, admit that their might be a little problem with their business model, and ask for help.
To get help they go to the only body of people who are collectively hated more then themselves, Politicians and in specific the US Congress.
The Big 3 and the UAW have made the face of the bailout:
A) the companies that have screwed the American public for years
B) the “greedy” and “lazy” workers who put the vehicles together (and who get great retirement, great pay and health insurance)
C) the greedy, double dealing, Dealers who are the local face of the corporations that have screwed the consumers for years and frequently gouge the consumer on new and “Pre-Owned” cars, and repairs to the cars they sell.
Those are the people that they constantly bring up as the losers if they go under. The suppliers are an afterthought mentioned in passing, until someone points out they employ a lot of people too. They don’t mention the industries that depend on the salaries of those UAW workers and Automaker execs, and not the contractors like you.
Now the average consumer is looking at his 401k halved, his job is shaky due to the economy, and every morning on the way to work he hears about another 100,000 people being laid off on the Hot 100 Zoo Crew.
Now a bunch of multi-million dollar CEO’S are asking for billions of dollars to bail out companies who have screwed him over for years.
-average consumer rant off-
Who would blame him for saying SCREW YOU.
With the weight of all those biases, fair or unfair, true or untrue, the average consumer and taxpayer is uneasy with giving these guys any money, much less buying one of their vehicles.
Then the CEO’s and UAW show up in DC and confirm all the worst of the biases. Flew in on their private jets (what, CEOs are to good for coach?) They take on no responsibility for the crisis in their own business (Unfair competition! Eleventy bajullion models that get better than 60MPG {when driven by left handed rabbits, on E85 EPA estimate}). The union guy just keeps talking about the same little old lady who got some money out of the last renegotiations (it sounds like a great story the first time, by the fifth, not so much, more like he couldn’t find another quite so pathetic) They can’t even tell the congress how much money they need. Is it too much to ask for a detailed plan?
Then they came back a few weeks later and it was even worse! They asked for more money, and their plans were mostly wishlists, it was almost like they were writing Santa.
Is there a solution? I don’t know. I do know when we were looking for a car a few months ago I wouldn’t touch a Big 3 car with a ten foot pole. Not for quality issues, but because I don’t want to buy a car, no matter how cheep, without a guarantee that can’t be shed in the inevitable bankruptcy.
I cannot be the only one.
As RF and others on this site have frequently (and correctly) pointed out, there is no way out for GM and Chrysler but Chapter 11. Ford could possibly make it without… perhaps… maybe. They all have to shed, brands, dealers, union commitments, and bad products. There is just no really good way to do that without Chapter 11.
Throwing money at them and hoping for the best is the same as burning it.
I too work in a dying industry and I will tell you what I tell everyone that comes to work for us. Don’t plan to retire here. Keep your skills current and saleable. Take care of your own money, put some aside for the lean times, and contribute to your 401k at least for the matching. But when it starts looking really bad, don’t look for me. I will already be gone.
Good luck to you, I hope it works out, but remember what happens to the guys who go down with the ship.