Automotive News [AN, sub] bears the glad tidings that the Presidential Task Force on Automobiles (PTFOA) has decided how much of your hard-earned money they want to plow into “new” GM: $30 billion. For now. Here’s the deal [as laid down in today’s 8-K SEC filing]: “the $30 billion federal loan would be converted to equity, with $8 billion of the total U.S. funds to be repaid by GM, the officials said. Most of the rest would be converted to equity, with the government initially holding a 72.5 percent stake in the new company. That portion could be reduced to 55 percent if a UAW trust fund and bondholders exercise warrants.” So how much is this boondoggle going to cost me, really?
Try this on for size: “The new GM would likely be a private company for about 6 to 18 months before it makes an offering of public shares and reverts to being a publicly traded company,” AN‘s source says. Perhaps we should change the PTFOA to the KBISB (Keep Believing It, Shit for Brains). ’Cause they want us to believe that this is it. The last time. Honestly. Swear to God. “Is it financially equipped to operate in the current environment for a long period of time and operate well if there’s any modest improvement in the car-sale situation?” a senior administration official asked. “Yes, it is.” Is that like “Yes, we can” only a LOT more expensive? Yes, it is.
Wow, how many weeks ago was it that Wagonner was saying bankruptcy was not an option? It was so obvious that was PR slime as usual. I never believed one word from anyone at GM except some of Maximum Bob’s reflections on cars and other similar chatty stuff seemed honest and real. Not always correct to me but well worth listening to (uh.. worth reading).
The money going in is to save a big economic producer and associated jobs and industrial base, its not a market value investment. Giving away the cash to consumers would be a one time flash. This is meant to save some valuable stuff and let it grow back. I’m not opposed. It is a ghastly bill though.
Too bad GM was so resiliently stupid for so long. They should have dominated the world all the way to today. It wasn’t all their fault though.
From CNN Money:
“A trust fund run by the United Auto Workers union would also have a 17.5% stake in the new GM, as well as the right to buy an additional 2.5% stake. UAW President Ron Gettelfinger said earlier this month the company hopes to sell its stake in GM as soon as possible.
But the administration official said that it is unlikely GM’s stock will be publicly traded while the company is in bankruptcy. Even though the “new GM” could emerge from bankruptcy in two to three months, the process for the assets remaining in bankruptcy could last between 6 and 18 months.
That will make it difficult for the government and the union trust fund to quickly sell their shares in GM.”
So if the union goes bankrupt do they get a bailout too?
It is all their fault. And we are paying for it while “they” benefit.
Yes, because the UAW decided to squander the profits made on SUV sales on more SUV’s instead of improving their small and midsize lineup.
Because the UAW is responsible for the rampant badge-engineered clones that gave us four versions of the Chevy Trailblazer, three versions of the Chevy Malibu, two versions of the Chevy Cobalt, and a Saabaru.
Because the UAW is responsible for the Aztek.
Because Ron Gettlefinger was quoted as saying that global warming is, “a crock of shit.”
The UAW had a hand in GM’s woes, but it’s absurd to blame everything that went wrong at GM with them when it’s obvious that many of the things that put GM in this position are the result of their failed leadership. You can only go so far in blaming the UAW for GM’s mess.
I really feel like the government should have crunched the numbers on this before they started pouring money into GM.
Because I feel like we may have reached the point where the nation would have lost less money had we just let GM go bankrupt to begin with.
Does anyone here find it ironic that there’s a movie coming out this weekend called “Drag Me To Hell” while we’re talking about this? Or is it just me?
A) How much would it cost to start a new car company and provide it with 4 or 5 marketable cars and trucks?
B) And how much are we going to spend delaying the inevitable Ch. 7.?
I get the sense that A is cheaper than B.
30 billion, for how long will that last? They now burn 2 billion a month.. how much are they burning once they are bankrupt and no one buys their cars anymore? did anyone see gas prices going up… so much about their (few) remaining truck sales.
Quasimondo,
Your points are well taken. However, keep in mind the following:
1. The UAW contracts, with guaranteed levels of employment, sub pay, etc. made labor a fixed cost. A fixed cost in the most cyclical industry, resulting in plants being run at all costs.
So what do you get? Can’t sell x (Cobalts, Impalas, etc.) at this price? Put some rebates on them. G6 sales in the toilet? Fleet ’em out. Result? Badly degraded brand image and resale. Also, sales were pulled ahead to such an extent that sales have now collapsed to historical lows.
2. Every dollar spent on: Unnecessary plants, unnecessary workers (work rules/featherbedding), gold plated health benefits, and legacy costs was one less dollar spent on vehicles and vehicle development. The result: dime store interiors, longer product cycles, outdated transmissions, ancient pushrod engines, and unending rebadges.
Should GM have taken a stand on correcting these issues earlier? Absolutely. The blame does start and end with the management. However, don’t forget the key role that the UAW played in this decline.
“The new GM would likely be a private company for about 6 to 18 months before it makes an offering of public shares and reverts to being a publicly traded company,” AN’s source says.
What a fantasy; however, any TARP holders at that point had better cinch their pants up tight. The PTFOA would like to meet them….
@mattstairs: GREAT explanation of how the high costs and featherbedding affected the product design – it’s all true – believe me I was there.
As for the UAW going forward,
I believe the plan was to use “card check” to organize all the US transplants and essentially drag them down to the same level as GM/Chryco and greatly expand the ranks of the union.
For whatever reason, this didn’t happen, now the UAW is in a much more vulnerable position.
I doubt that many transplant workers will freely vote to join the UAW now.
And with the Chinese holding a massive amount of US debt, what great leverage in trade negotiations they now have relative to importing their cars to the US.
I appears that even Congress is getting cold feet about “card check”. The UAW will now only have Obama and the Dems to prop them up directly. I agree with indi500fan that few transplant workers, or too many others for that matter would sign up for membership. The simple statement “look what they did to the Detroit automakers” would be enough.
Seven months in and GM has now received $50B from the Feds. We’re well on our way to way over $100B.
How high will it go? Nobody knows.
indi500: For whatever reason, this didn’t happen, now the UAW is in a much more vulnerable position.
I doubt that many transplant workers will freely vote to join the UAW now.
It has been all over the news that the ultimate goal is pay-and-benefits parity between the domestics and the transplants.
The UAW is left with little to offer the transplant workers, except the opportunity to have union dues deducted from their paychecks. That will be a tough sell.