The fix is in. Even before GM pressed “send” on their viability plan to Congress—justifying their additional call on the public purse—the Obama administration has decided to offer the ailing automaker the second tranche of a Bush-initiated $17.4B federal loan. That’s $4B to you and me. Literally. Reuters reports that “an aide” signaled the pre-approval approval. The Houston Chronicle carries a Bloomberg story that repeats the claim, citing “a person familiar with the plan.” If this story checks out, it’s a slap in the face of accountability; for both GM AND our elected representatives. Yes, the second check was scheduled for payment, but the timing and the disconnect is still startling. Here’s some more money, now let’s have a look at that plan for profitability by 2011. Oh and if we don’t like it, we’ll call the loan and down you go. In truth, no matter which way this goes, we’ll never see that money again. Nor the money after that.
I’m feeling queasy. I’m with you, the fix is in. There was a discussion yesterday about the steps to recovery suggesting the industry had moved to bargaining.
Detroit is still in denial.
The Dems are backing the UAW.
Hundreds of millions of dollars donated to an election campaign has that affect.
Any word on if Chrysler is also getting some “back-door” money?
GM really likes to think it’s special.
“Detroit is still in denial.”
Oh really?
They’re more clued in than anyone here.
They’re actually getting the money.
They can’t let GM go Ch. 11 until they nationalize the banks. If folks were forced to mark to market GM debt, OMG…..
Imagine how much cash it would take to actually run GM thru a Ch. 11 process. Shoveling cash in now is by far the cheapest option.
They really should dispense with the “submit a plan by X date” and “Ch. 11 is a real possibility” stuff, but alas it gives the newsies something to jaw about.
I imagine that GM will be in hock to the Feds for about $50B before this is over. The Federal reserve will just quietly write it off years into the future when we have all forgotten about it.
The General lives in spite of itself. Life isn’t fair… People who are smart get cleaned out, people who are dumb get bailed out…
Move along.. nothing to see here…
Heh, yes they ARE getting the money, so they are fully in touch with reality.
Oh yeah. And a “yeesh” from me, too. But I knew this was going to happen.
So what’s the math on this? What percentage of my 2008 taxes paid went to GM already so far? I know what my taxes were, I’ve already completed my 1040.
They were going to get this money this month anyway, weren’t they? If the viability plan is not up to snuff, the loans get called back at the end of March.
I don’t see what the big deal is with this. But maybe I’m forgetting something.
@ZoomZoom
Percentage wise probably not that much… They will need to run a multi-trillion $ deficit this year.
Expect a summer stimulus that is north of $1T and expect a spring IMF “injection” that is probably at least $500B to cover up the European banks.
Ever watch the movie Brewster’s Millions? Well Bernanke and Gietner have the lead roles.
When milk is $20 a gallon and minimum wage is $50 a hour, we will look back on these days with fondness.
Did anyone expect anything different from the UAW-backing democrat administration?
Glad to see Obama is just like every other politician with a fancier spit shine.
I wonder if the administration has already made the decision to try and broker a work-out of the GM situation whilst leaving Chrysler hung out to dry?
One also must wonder about a story sourced only to “an aid”. Not even “high level sources”, just an “aid”.
@John Horner
Don’t read too much into the aid part. Anyone that works in the white house could be considered an aid, including Rahm Emanuel, Robert Gibbs, and the like.
@lw:
True, a C11 process would be expensive indeed. But you have to look at the big picture. Without C11, GM will never be a viable company. So in the long term, they’ll either go bankrupt anyway, or they’ll be a constant drain on the taxpayers’ money.
Also, if I’m not mistaken, then a C11 with the government as debtor in possession would mean that the taxpayer actually owns the new GM. So once the market has gone back to normal, GM could go public and the government would get back large parts of the money they pumped into it.
Anyway, these $17 billion in “loans” are gone, unless there will be a C7 liquidation. That much is for sure. DC could have just burnt the money.
@lw
“When milk is $20 a gallon and minimum wage is $50 a hour, we will look back on these days with fondness.”
with the way loans of all types are going bad these days and with all the job layoffs too… i think we are firmly in the beginnings of the deflation phase of the greater depression 2.0
its more likely milk will cost 50 cents for a gallon but no one will have that much cash anyway
Mark Zandi’s $125b end-game is starting to look optimistic….
the fix was always in, or they would have been forced to show accountability before getting one cent of free citizen money.
the fix will continue to be in, year after year into the future, for the soon-to-be-unified Glorious Revolution Red October Motorcar Company.
Years ago some defense contractor had to “support” some senators’s campaign, then he got a defense contract, delivered the weapons and charged a ridiculous amount of money. Since this is a bit inefficient (the contractor actually has to deliver some token thing), they became much more efficient, they just hand the company the money without getting anything. The government at least could get a bunch of crappy new cars in return, anything…. oh no the governemnt (state, municipal, fed) in addition purchases tons of their fleet vehicles and gives them money again (this time we at least get the crappy cars).
no matter what you call that system, socialism, capitalism… it sure is not working for working class, neither for middle class with college degrees.. only working for big wigs and UAW. It just sickens me…. our children will curse our names, for destroying the environment, and for burden them with future taxes (the debt has to be paid, guess by who???)
Will the round Obama logo replace the GM logo on the cars?
Sheesh, people cry about accountability from Obama…but where was the cry for accountability from Bush and his gang all eight years of his administration? Oh yeah, we’re not supposed to bring that up are we.
I don’t like that the money was handed to them any more than you guys do, but the finger pointing is way out of control again. People are crying for heads on a platter less than a month into a new administration. And let us not forget Bush was the one that started handing out money to Detroit…shame Obama didn’t put a stop to it.
My point is this ball was rolling and picking up steam before the new administration took over – now they have to figure out what to do with it and no option is attractive.
An article posted on the WSJ site last night (today’s paper) presented a much different picture than the Obama bashers here expect. The car czar is dead; too much heat for any individual to take. Instead, reponsibility will be shared by Summers and Geithner, but the biggest news was about the hiring of Ron Bloom as a key advisor.
“The management of the Big Three are probably not going to like what Ron Bloom has to say; the UAW is not going to like what Ron Bloom has to say; and certainly the stockholders and creditors will not like what he has to say,” said Michael Psaros, a co-founder of private-equity group KPS Capital Partners, who has worked with Mr. Bloom in and out of bankruptcy courts. He adds that Mr. Bloom has “repeatedly shown an ability to transform struggling companies into profitable going concerns.”
“In a 2006 speech at a corporate turnaround conference in Scottsdale, Ariz., he described his approach to restructuring as “dentist-chair bargaining,” in which the patient “grabs the dentist by the b — and says, ‘Now let’s not hurt each other.\'”
The article included quotes praising Bloom from Alan Reuther and Wilbur Ross. This does not sound like Obama is kicking this thing down the road, but rather wants to fix it now.
“When milk is $20 a gallon and minimum wage is $50 a hour, we will look back on these days with fondness.”
Both wrong. It is Jimmy Carter type stagflation that is on the way when the money finally works into the economy.
Orian,
Bush is sooo 2000-2008. It’s now 2009. You don’t like that the Soft Drink is not getting some slack 1 month into his admin? Welcome to the big leagues! George was criticised constantly from day one. I never saw a rule that said we wern’t supposed to “bring it up”. Funny how the press and Dems carped about spending during W’s time. The new admins spending is like a firehose spraying red ink in every direction possible.
“And let us not forget Bush was the one that started handing out money to Detroit…shame Obama didn’t put a stop to it.”
Obama was all for it, even if he said nothing about it. These two were in contact with each other ever since the end of the election. The Senate could’nt get the votes to pass the aid so Bush AND Obama decided to use TARP. Obama never would have stopped it if he even had the power then, because he wanted it.
I don’t get it. The Dem’s dream of spending money like drunken sailors and when they get their chance they try to pawn the blame on Bush. It was a Dem House and Senate running things when all this happened. The new Pres should take full credit for this. Do the Dem’s actually think throwing this money at the problems will really work or are they just in favor of socializing the economy? I believe the latter.
The way to fix this problem is to shrink government and cut taxes and that isn’t going to happen. So Atlas Shrugged.
Look, lets get off the politics already. The GOP and Dems would both completely screw this up, just in opposite ways. The problem is blind faith to an ideology, rather than an effort to solve the problem at hand.
Considering where we are, it is obvious there will be no sticks. The only question left is “how hard can you beat someone with a carrot?”
John Horner “… broker a work-out of the GM situation whilst leaving Chrysler hung out to dry?”
The fact remains that the two companies are completely different situations. Chrysler is privately owned by a company with the funds to rescue it but not the willingness to do so. They have also committed to becoming 55% foreign-owned ASAP. I for one would be encouraged if the govt is thinking differently about them.
Errrr… what the hell is happening with the GM and Ford stock prices?
17% and 7% down 30 minutes into the day’s trade.
Forget the politics, the govt spends more money each and every single year, no matter who is in office. The only thing that changes is revenue, some years it’s up, some years it’s down, once again, does not matter who is in office.
c’mon, this is all completely rational and we should have done this over a hundred years ago with the buggy whip industry (according to wikipedia: a major economic entity ceased to exist with the introduction of the automobile) after all, that whole industry was wiped out vs what is happening today.
everything would have been so much better and prosperous in this country if it had been propped/saved.
PeteMoran :
February 17th, 2009 at 10:12 am
Errrr… what the hell is happening with the GM and Ford stock prices?
17% and 7% down 30 minutes into the day’s trade.
Well, GM should be at zero, since the choices seem to be between Chapter 11 (which later turns in Chapter 7) or nationalization to prevent the former, both of which leave the stockholders with nothing. Maybe the fear is that Ford will get dragged down as well.
I do feel sorry for Ford – they are in a 4-legged race (that’s what I assume you’d call a 3-legged race with 3 people) with 2 dead guys tied to them.
I’m surprised the market and the media are treating the impending “plans” with such skepticism. I’m guessing that the only way to make the reality of the plans any worse would be to have Tim Geithner announce them.
windswords said:
Bush is sooo 2000-2008. It’s now 2009. You don’t like that the Soft Drink is not getting some slack 1 month into his admin? Welcome to the big leagues! George was criticised constantly from day one. I never saw a rule that said we wern’t supposed to “bring it up”.
Oh yeah? Before 911, no one paid much attention to GWB. After 911, those who “brought it up” all ended up in Guantanamo.
RetardedSparks said:
I do feel sorry for Ford – they are in a 4-legged race (that’s what I assume you’d call a 3-legged race with 3 people) with 2 dead guys tied to them.
I agree. In a free market economy, GM and Chrysler will go bankrupt. Ford will have all the conquest sales it can possibly want and won’t worry for the next 30 years.
Now that GM is kept on life support, and Ford is being squeezed into the same fate as GM.
In a free market, all you need is to live one day longer than your rival. In this communist states of America, you need to be invincible to survive. Or, why not just join the soup line?