Automotive News [sub] reports that General Motors pulled tooling from 50 parts makers during its winter shutdown. The pullout took place after GM was awarded $13.4b in TARP bailout money in December. GM spokesman Dan Flores reveals that one such supplier was metal stamping firm SKD, but refused to reveal other names. “Based on SKD’s financial distress and uncertainty, GM had to take action to protect our business interests,” said Flores. Hello? Pot? Kettle? Anyone? Bueller? But it’s all good in the hood. Remember folks, this is 2009. The worse the news, the bigger the bailout.
Remember when we told you the suppliers would be asking for $10b from Uncle Sugar? Automotive News [sub] now says that the suppliers will actually be requesting a cool $20.5b in direct Treasury loans. And like the GMAC bailout before it, some of that cash will be inexplicably funneled through the Detroit Three. $10.5b of it, to be exact. Why? So that suppliers can be paid in 10 days for parts delivered instead of the traditional 45, a necessary move in an industry where production will be about half what it was last year. Or so reckons the Motor & Equipment Manufacturers Association’s Neil De Koker. And if you’re asking for $10b, why not ask for a little more for your faithful partners in Detroit?
Well let’s see… GM’s production is down ~50%. In 2007 they had revenue of $200B and had net change in cash of negative $6B.
So if Uncle Sugar’s goal is to prevent job losses and keep GM from losing money they should shovel about $100B per year. With an extra $8.5B per month from Uncle Sugar GM can run 2007 production volumes and all is well…
$10B here or there is not nearly enough…
The Economic Fairies are running things now.
It seems harder and harder to be surprised…
A Billion here, A billion there. Soon you’re talking real money
As udders have uttered.
Perhaps bypassing the already-wealthy and just handing bucks to the minor players… line employees, mid-level and below management, etc. a bunch of bucks to tide them over (and also getting money directly into local economies as those folks spend) while the auto firms fold or pare down or hibernate or whatever the “free market” demands would be the best and cheapest method of handling the situation.
Basically, just another form of the long-used corporate welfare but bypassing the elites at the apex of the socio-economic pyramid.
Ahhh… that’s the proverbial rub. That method ignores the privileged class. Sheeeesh. As if those sacred cows haven’t already amassed enough wealth, what with amassing more wealth in mere months than what the typical USA citizen attains in a life-time of labor.
Remember, congress told the automakers they will not let them go under. The suppliers just have to threaten any one of the automakers and the money is theirs. There are enough suppliers to carry out that threat, so the money is a sure thing. And like the automakers, they will be back for more money at a later date due to unforseen circumstances.
So, when do we start being told about the 5-year plans?
And they said they couldn’t go bankrupt because of all the bad press and turmoil it would create. Remember the Washington slogan; “who will buy a car from a bankrupt mfg?” Yes, and who will buy a car from a mfg. you couldn’t begin to understand as to where it will be next year? Can you honestly buy a GM or Chrysler car and say, it will still be made next year? Then what is the difference between a legitimate bankrupcy to end all of the guessing once and for all, and what we have now?
So is this tooling going to end up in China? To help save American jobs?
There’s lots of talk about bad bank / good bank. So how about we designate a bad car company. A major problem I see is a crowd in the front office. Wagoner, Lutz, Nardelli, it’s endless. And I suppose the bad company would need a board of directors. Now we’re talking real mobs. With the pro sports teams jumping from city to city as they con local governments into building them new complexes, maybe they could squeeze into one of these empty domes. As for good car companies; there won’t be so many.
Don’t worry, President Obama is going to fix this. Now with the Democrats also in control of the House and Senate the government will print trillions of dollars of new money and everybody will be rich. No need for people to work hard when you can just print money.