Students (student?) of Sunday TV magazine shows will know that the Republican Party is beginning to realize the political advantages of throwing Detroit to the lions—I mean, upholding their responsibilities as guardians of the public trust (and purse). “The best thing that could probably happen to General Motors, in my view, is they go into Chapter 11,” Senator John McCain said on Fox News Sunday. Which would help GM reboot (not that John would ever say anything so hip), reorganize (not that John knows what that would entail) and renegotiate its labor contracts (ah-ha!) and emerge “stronger, better, leaner.”
Bloomberg reports that Senator Richard Shelby, the top ranking Republican on the Banking Committee, told ABC’s “This Week” program that, “The automobile business—those companies, Chrysler, Ford and General Motors—they’re in deep shit.” Just kidding; he said trouble. “I’ve suggested they go into Chapter 11. That’s where they belong. And they could reorganize.” Yes, but did he raise his hand first?
Meanwhile, Republican House Minority Leader, John Boehner, continues to promote the same old weasel words.
Boehner said on Face the Nation that the feds shouldn’t give GM any more money “until General Motors shows that they can be a viable company for the long term. Anything short of that is just throwing good money after bad.” May I suggest mime? Now THAT I’d watch.
I honestly think it will be more of a relief than a quagmire when GM and Chrysler finally file Chapter 11.
In the former case, new management and a thorough restructuring will make a fantastic difference. I have zero doubt that GM’s employees can make the best products in the world IF they have the right structures and partnerships in place.
Chrysler though is too far behind the 8 ball when it comes to product development. First with Daimler and now with Cerberus, the cheapening of product and minimal amount of R&D have made Chrysler the de facto choice for a Chapter 7 liquidation. It’s a shame given the shape they were in a decade ago.
Wasn’t it their brainiac leader Bush who gave GM/Chrysler the first money in order to push the problem to the next president? Now they pretend they’d would want to end the waste of tax money and destruction of the free market?
And the Republicans probably still want to give them DIP financing.
@Kaleun
Yeah, Bush gave it at the urging of Obama and the Democrats. If you paid any attention at all, you’d also know that the rescue for GM and Chrysler was torpedoed in Congress BECAUSE of the Republicans.
Your last point is a no-go as well; it is clearly understood by anyone with half a brain cell that the government would have to give them DIP, because no one else has enough cash (or would be willing to risk it) to support a GM bankruptcy. The scenario being lined up right now is that private financing would account for close to have of it, while the government would provide the other half.
Wow. I thought Grandpa failed cause he is poor in economics. Didn’t know he’d go to class and learn that fast.
Shelby is a POS hypocrite. His state has given foreign automakers in his state hundreds of millions in state incenvtives. He has an inherent conflict of interest since the automakers in his state would gain marketshare with the failure of GM/Chrysler.
And where were these cries for fiscal resonsibility while we were pissing away tens of BILLIONS a MONTH in the desert?
Any one of good intentions to Detroit as of now, all this excluding at the moment Ford, has to see this path, chapter 11, as the sacred one. It’s got to happen in one way or another.
McCain’s sole business experience has been to marry a wealthy heiress.
Shelby has been a lifer in DC politics which suggests to me that he doesn’t have a lot of business ‘perience’ as ol’ DW might say.
Boehner is from Ohio. The same Ohio that has a lot of OEM and Supplier plants…and he just told many of his constituents to go pound sand…Way to go John, see you at the next election…I’m not betting on you to win…
IMHO many of our contributors here on TTAC have a better grasp of business and/or automotive knowledge than these so-called ‘leaders’. Back during the Congressional hearings, with few exceptions (McCotter, Corker) our Congress clearly showed a basic lack of understanding of running a business, let alone a multi-national corporation that makes a very complicated, severely regulated, highly litigious thing such as an automobile.
Here’s a basic tenant of banking these three ‘leaders’ must not be aware of…MOST banks have a rule that says that you cannot borrow money to enter into a commercial enterprise with another business or organization that is bankrupt. Thus, if you let the D2 (or D3?) go C11, the Dealers, Suppliers, Shipping, Raw Materials, Railroads etc. cannot borrow any money to fund their operations, even if the banks are re-capitalized and healthy-so long as the OEM is bankrupt, they could not borrow against their contracts with the OEM as they do now. So within weeks you would see a massive set of C11 and soon, C7 filings by all manner of businesses…not just the D3 OEMs.
For members of Congress to not understand this most basic banking tenant is stupefying…and scary…these bozos are supposed to be the decision makers, our so-called ‘leaders’…we get the leaders we voted for and subsequently, we’re all screwed.
The best solution might be private financing for a C11-style of restructuring without the C11 ‘albatross-label’ with a Fed guarantee as insurance for the banks…but Hey what do I know ?!?? I work in R&D, not Finance…nor on Capitol Hill.
We are supposed to take ecomomic advice from John McCain? This is the guy who last summer was telling us that the fundamentals of the economy are strong.
Here’s my crazy idea: Let’s keep doing what we are doing. Give Detroit money but not everything they ask for. They are already in a slow action process of restructuring. They are bleeding employees like crazy. In two years when the economy improves, we throw the auto companies to the wolves. Then we can sit back and enjoy watching the creditors fight over the last bits of meat on the carcass.
Yes it is dumping money down a hole, but the neocons’ war cost us three trillion in direct and indirect costs. A hundred billion or so for Detroit is not the end of capitalism as we know it; it’s a rounding error. Stretching Detroit’s decline over a little longer time period will minimize the damage to those of us who don’t have anything to do with the auto industry.
@Droid800 – Michigan Rep. Thaddeus McCotter, a conservative Republican from a state where Ford, GM and Chrysler are headquartered, said, “With the legislative opportunities now exhausted, I urge the president of the United States to immediately release Wall Street TARP funds to the domestic automakers to avoid their impending bankruptcy and its consequent devastation of working families and the depression of our American economy., MSNBC.
Darn those democr…oh. Hey, at least we get bipartisan screwing.
“And where were these cries for fiscal responsibility while we were pissing away tens of BILLIONS a MONTH in the desert?”
No cost in cash or blood is too high for waging war. Self-styled fiscal conservatives are a strange lot in that regard.
Shelby, Boehner and McCain are all simply singing from the do nothing hymnal. Last week McCain & friends again pushed the idea of a federal spending freeze. Guess what fellas, the last thing you want in the middle of a downturn is for the spender of last resort, the government, to turn off the water tap.
Beginning to realize, ya that’s it. It’s not that they just oppose everything democrats do even when it was originally the GOP’s own idea.
The best thing for every American Tax payer now is to actually go out and buy a D2.0003 vehicle. That way you “get back” some of your tax money in all assorments of rebates.
Just think about it, it’s more like an insurence or medical aid scheme. ONLY those who make use of the “services” get their money’s worth.
@Marcus
35 Republican senators in a lame duck session killed the bill. 170 Republicans voted against it in the house.
You’re living on another planet if you think a congressmen from Michigan would vote against anything Auto related.
@Stu Sidoti
You seem to have missed the part where part of any GM bankruptcy would include the government supporting suppliers. That’s why it would be the most expensive bankruptcy in the history of the planet. (well over $100 billion dollars) And you can bet your ass the government would direct banks to keep the suppliers alive, whether they want to or not.
@john Horner
I’m guessing you don’t really understand the idea of a spending freeze, do you? The government wouldn’t stop spending, they just wouldn’t increase spending at the 12%-18% rate that Obama and Pelosi/Reed want.
…—I mean, upholding their responsibilities as guardians of the public trust (and purse).
Hilarious! The Republicans as guardians of the public trust and purse.
I agree, C11 is the right way to go, but that comment had coffee coming out my nose.
For the Reps, it’s a two-fer. Save some cash (and face) and bust a union that would have some sway in the next elections.
Yes, it seems like throwing money down a rat-hole, but a properly trimmed D3 (whatever) could be an asset once the shit flings off the fan – but the “doctors” need to be realistic; will expensive surgery extend the patient’s useful life or just make for a long, painful death?
A few rules for GM.
1. any government subsidies or bailout investment takes control of the aforementioned company in percentage of the alloted subsidies versus assets of GM.
2. Alotted money can not be used for servicing debt or refinancing it. It can only be used for R&d investment and overhaul of product line.
3. Any model currently built under Gm brand that is not designed at least 70% domestically by a Nasdaq/Dow Jones registered enterprise is subjected to additional taxation.
4. Any Gm built vehicle in a country that has no direct borders with continental US is subject to additional taxation.
5. Allotted money can not be used for investment in non-US registered brands such as Saab.
6. Product quality shall be measured by cars only consisting at least 70% of US made and engineered components. A measurable quality improvement is subject to tax reductions or exemptions.
7. Killing of any of US based brands shall reduce the alloted money by percentage it represents from total GM brands.And not by sales percentage, but count percentage. 1 brand- one seventh part, etc.
Droid 800:
the Republicans in the Senate only torpedoed for PR reasons knowing the president would give them the money….
I don’t think Bush did anything to do Obama a favor. It hasn’t really been his mission to do the Dems favors in the last 8 years. If Bush wanted to do Obama favor he would have let the car makers die.
anyway, when it is about squandering our tax money, Reps and Dems can work very well together.
And why should we give them DIP financing if no one else is? Everyone else analyzes there viability and concludes not to give them money. Our elected officials give them money based on a bogus report written by the car makers.
Never – ever misinterpret W’s economic policies with conservatism. Whether or not the GOP is a fiscally conservative party remains to be seen.
Be thankful though, that seven years on there hasn’t been mass loss of life on these shores.
Yes, had W wanted to do Obama a favor he would have let them both go to C11. Too bad he didn’t and Obama would do himself well in future approval ratings if he would make the right business decision. But listen, a community organizer, Nancy P, Harry R and Bawney Fwank ain’t no business braintrust…Fannie Mae and Freddie Mac as cases in point.
Where’s Geo. P. Schultz when you need him? Mitt?
@jurisb
> 1. any government subsidies or bailout investment
Is against WTO rules against protectionism. Although that seems to be flouted fairly regularly.
2. Bailout funds only for R&D, not debt refinancing
GM doesn’t lose $1-2b / month doing R&D. It loses that much over the entire company. Holden spends about $500m on designing an entire new fleet of vehicles (Commodore, Statesman, Caprice, Ute, SS, etc, etc). I doubt the cost would be vastly different for any of the other brands, even if they don’t get as many models out of the same set of hard points. That spend is spread over about 5 years, so about $100m per vehicle per year.
Chucking $17B at just r&d is then wasteful; it’s way more than GM would be paying even if they had 50 brands instead of 7 + EU (Opel / Vauxhall), AU / EMEA (Holden, Daewoo, etc).
If the patient can’t pay their bills, there’s no point in doing any R&D as they’ll be C7 before you can say “design this …”
3. Protectionism. The last depression was made worse by it. It’s a stupid idea. It’s like taxing Wisconsin cheese if you live in Illinois to “protect” Illinois farmers, when in reality, it hurts both farmers in both states as well as consumers.
Protectionism will one day be dead, along with national borders, as they are an anachronism that is not reflected by the way we trade or move about on this planet. The US is as rich as it is due to trading with others and not due to trading amongst yourselves.
4. Protectionism. Not going to fly buddy.
5. Protectionism. Not going to fly buddy.
6. Defining the new dark, eh? Doesn’t make the consumer any more likely to buy crappy cars if you define crappy the new excellence. Folks consistently buy high quality, high value goods. They’re not dumb. The patient needs more Malibu’s and less Impala / G3 / G5 / G6 / Cobalt / Dodge Nitro (heinous vehicle!), etc.
7. That’s just plain dumb. The market will not return to > 10 m vehicles for at least three years. There’s just no point in continuing many of these brands. They are literally sucking cash out of a very broke parent, which needs to either sell them or put them out of their misery.
I never understood why there were so many badge engineered variants in the US domestic fleets. I for one never cross-shopped any of them, so there’s no way you could win me to buy any one of the three variants found of most models, not as a Chevy, not as a Buick, not as a Pontiac, not as a Saturn.
GM needs to understand that folks who are interested in a particular vehicle will end up buying that vehicle at a brand that means something. For example, if I wanted an old fogey car, I’d go to a Buick dealer. I wouldn’t try to buy a “younger” version of that car anywhere else in the GM empire.
They need:
a) A sports brand. Pontiac
b) A luxury brand. Buick
c) An everyday brand with honest, no haggle pricing, no “invoice” tricks, and no stupid dealer tricks (4 square, etc). Chevy.
All of these should be orderable from GM’s internet site, either made to order or if you’re in a hurry and want it tomorrow, from a pick list from outlet stocks. Once ordered, the car should be picked up from a local GM outlet who makes pretty much all their money from servicing that car like Lexus does.
There’s just no reason for dealer sales people and F&I folks any more. They suck 6 – 30% out of every deal and offer no value over and above a condom vending machine with a very nasty STD and a nasty attitude when swallowing coins.
You stated that protectionism doesn`t work, and people will always buy the best products. Meaning- people will always buy imports stripping Detroit even more. None of us precision manufacturing has survived free market- watches, consumer electronics, industrial robots, motorbikes etc. All of them have given up to imports. The only way to protect local manufacturers, which have the most added value to economy, is to have a controlled protectionism. meaning government doesn`t simply tax imports, government rewards domestic manufacturers with tax deductions if local companies excel in certain areas of goverment demands. By adding tax burden to offshoring , sooner or later the government will realize that engineering skills and expertize at home yelds higher domestic salaries, which results in more construction, baby boom, sales volume and turnover.You don`t have to tax imports, simply reward locals, not imports, even if they match criteria for goverment tax relief.
Instead of chopping brands because they are rebadges, why not differentiate sheetmetal and stop killing brands? That`s why goverment should invest money in model range overhaul prohibiting GM to rebadge a single model, but if Gm does that ,punish them.
Don`t you still get it? that your country is in deep recession because most of the skilled and technical jobs have been killed and offshored, and most jobs left in USA are meager service jobs for salespeople. And now you wonder why there is a foreclosure? Guess, how many people can afford a 300k condo being downsized to sales assistants for 8 dollars an hour? No customers for a 40k SUV?
Jobs that demand no long term investment ,don`t yyeld high salaries. They just don`t have to! I can hire any Eminem to sell doughnuts for 8 bucks. Can you hire Robert Lazar for this money?
I agree that Shelby is a hypocrite, and he is my senator. The Honda plant they gave hundreds of millions of our tax dollars to is about to lay off 25% of it’s workforce. And it will not be considered a layoff of Honda workers because they are temp workers, some that have been working there for over 2 years. The temp workers are not Honda employees but they do the same job and are paid much less. Honda shuts down for paid vacation and the temps are off but they do not get paid. Of course they can file for unemployment compensation at taxpayer expense.
More importantly, what does Rush think? Clearly his opinion supercedes all others in the Republican party.
@Droid800 “You’re living on another planet if you think a congressmen from Michigan would vote against anything Auto related.” – I’m firmly planted on terra incognita, my man, which means I know neither democrat nor republican is completely to blame or completely faultless.
What I see happening is the Dems keep throwing money at them until the government runs out of money. Possibility number 2 is that they go into bankruptcy and the government pays for the bankruptcy until they run out of money.
Protectionism may not work, but right now something must be done to preserve jobs and industries in our country. In the depression we still had a strong industrial base, and our industries are what got us out of it, with manufacturing jobs provided by the war (WWII, of course). Now alot of that manufacturing is gone. We get everything from textiles, to cars, to the raw materials made to produce them from overseas. While outright protectionism may not work, do you not think that importing everything is any better? How does a country make money with no exports, and no domestic products? We absolutely must do what is necessary to keep and promote what industry we have left in the U.S. or we will be at the mercy of other nations to provide us with all of our goods, and I don’t think that’s where we want to be. I don’t see anything wrong with taxing goods made outside of the U.S., and I don’t see why we don’t tax companies for sending jobs out of the U.S. (call centers) that are meant to service customers here. There should be certain exceptions made to Canada and Mexico, but otherwise I think we need to take measures to protect our industries. It’s what made us one of the strongest countries in the world and we are in danger of losing our last bit of it.
More importantly, what does George Soros think? Clearly his money supercedes all others in the Democrat party.
Hilarious! The Republicans as guardians of the public trust and purse.
Yeah, that comment had me coming close to ruining my keyboard as well.
John McCain of course has no problem with subsidizing the airliners, since air travel is vital to the southwest.
Never – ever misinterpret W’s economic policies with conservatism.
Don’t confuse the Soviet Union with Communism! It wasn’t REALLY Communist! Real Communism is different!
I honestly think it will be more of a relief than a quagmire when GM and Chrysler finally file Chapter 11.
In the former case, new management and a thorough restructuring will make a fantastic difference. I have zero doubt that GM’s employees can make the best products in the world IF they have the right structures and partnerships in place.
I have to agree, although it’ll obviously be hell for those who lose everything. GM’s 900 stuff is absolutely the best IMO. If there’s any hope at all, the Treasury bunch has to be on to Wagoner. Sometimes I’d almost prefer the Chinese method. Take the bastard out and shoot him. The destruction he’s caused is epic.
Boehner is from Ohio. The same Ohio that has a lot of OEM and Supplier plants…and he just told many of his constituents to go pound sand…Way to go John, see you at the next election…I’m not betting on you to win…
Ah the wonders of gerrymandering. Here’s a map of his district. It has none of the Dayton area where 4 or 5 Delphi plants are gone nor the Moraine plant where the TrailBlazer was made nor Batavia where the Ford transmission plant used to be. His constituency is ignorant farmers who suck from a different federal teet, the one labeled “Independent Self-Made Americans Only”.
http://www.govtrack.us/congress/findyourreps.xpd?state=OH&district=8
Any inducements the State of Tennessee made available to Honda, or any other vehicle manufacturer, were to compete with neighboring states. Those new facilities were not going to be located in the Detroit area.
So bad mouthing Industrial Development subsidies by TN, or any other southern state, has no bearing on the foolishness of US tax payers subsidizing the Detroit 2.5.
While it may please the “Bush Lied” and” Peace is the answer” crowd, no amount of money spent on military activities is taking away from bail outs and “bridge loans” to nowhere for the Detroit 2.5.
Sorry about that but those canards make about as much sense as blaming President Bush for the fall of the Detroit name plates.
Tennessee, Iraq and Bush are not responsible for the many features that make up the current situation in the Detroit area.
That’s not the point, jackc10.
The point is their “free market” shtick is just rhetoric, and when they can use government intervention to the benefit of their constituents, they do. They’re not standing on any principle except what’s good for them.
Where was the Federal Government’s intervention in the demise of the textile industry in thius country?
Plenty of Southeastern US employees lost their jobs and local governments took heavy hits, due to overseas competition.
Product quality was not an issue.
I don’t know about textiles but here in Virginia we had the tobacco buyout.
It’s already too late for C11, GM and Chrysler would already be closed and liquidated if it weren’t for billions in taxpayer dollars they’ve already received. Without $100+ billion more in DIP, it’s C7 time for both, no one in the market will touch either (seen GM’s stock value lately?) with a cattleprod.
@Fallout
It isn’t too late for Ch. 11. If it gets to the point where they’re running solely on government money (which they have not reached yet, but are getting very close to), THEN they’ll have a problem.
DIP isn’t a problem either; the government has been working for weeks to line up the financing, and will finance a large chunk of it itself.
@ jurisb
Protectionism has already hit GM and Ford. They have desirable small cars in EU that they’ve already sunk all the R&D and built.
Last year, when the large car / SUV market tanked due to $4 gas, and GM and Ford sold every sub-compact and compact they could get their hands on. But the protectionism they argued so strongly for in past years to protect their dinosaurs killed them – they didn’t have the right product in the right region. They HAD hundreds of thousands of unsold compact cars they could have easily sold into the USA if they hadn’t been so incredibly stupid in the past.
If the US had not installed protectionist “safety” rules unique to themselves, they could have imported these cars and sold them in the US with no changes. As it is, they have to “invest” (read: pay twice) to meet US safety regulations, some of which make no sense, like red light indicators when everyone else has ambers, and fuel tank location (which is irrelevant when it comes to fuel injected cars – the fuel pump creates a vacuum, removing fuel vapors, which caused the Pinto booms back in the 70’s.
This is one of those times when folks fundamentally shifted jobs, like the agrarian revolution and industrial revolution. This is the post industrial revolution. Just as in the 1800’s when most of us worked tired and miserable lives on the farm, nowadays a single farmer can work hundreds of acres and produce a thousand fold more produce than those bad old days.
Protecting our farm industries – other than appropriate bio controls to protect against pests – doesn’t make sense either. It didn’t protect against the job losses from farms as tractors and harvesters replaced millions of workers.
Protectionism has hurt GM, Chrysler and Ford. They had import tariffs and still have other significant trade barriers to “protect” against imports. What did they do with that benefit? They chose to design and produce crappy cars instead of the world’s best cars that once were rightfully lusted after the world over.
Protectionism is the lazy option and as soon as it stops, folks choose to buy high quality, highly reliable, good value alternatives – and that doesn’t mean cheap, otherwise we’d all be driving small death mobiles.
Protectionism does not work. You think it might, but it really does not work.
Andrew
What I don’t get is, if the government really wanted to help the D2.x, why didn’t they just renew the entire fleet of government vehicles and buy cars and trucks? (What? You mean the American government won’t buy American vehicles?) Car companies are in the business to build and sell cars. Why aren’t they selling cars? Why isn’t GM/Chrysler/Ford building vehicles so good that it would make Americans proud? r-i-g-h-t…fleet sales. Why are they building crappy fleet cars? What’s wrong with good..no…great fleet cars? Unfortunately, Government procurement contracts make the money disappear in the bureaucracy somewhere. GM’s viable plan should have been they will sell a million vehicles to the government. The vehicles will be such great quality that the American people would follow suit and do likewise. Instead, we have this giant multinational begging for Billions of dollars of public money knowing full well, those millions of jobs they are saving are going to be lost no matter what as well as the money they get from the government. Why won’t the government just buy $40B worth of cars?
This was funny for awhile, but it’s getting tiresome.
PS. For those that saw SNL last weekend, I would like to nominate my suggestion for the prize ;)