Someone. Make. This. Stop. Now that the MSM has woken up to GM’s impending government-sponsored, C11, they’re beginning to understand that this is the only the end of the beginning, not the beginning of the end. The New York Times headline (and Autoblog) may proclaim a “surgical” bankruptcy for The General, but the bottom line is buried with in the text. “Treasury officials are examining one potential outcome in which the “good G.M.” enters and exits bankruptcy protection in as little as two weeks, using $5 billion to $7 billion in federal financing, a person who had been briefed on the prospect said last week.” Using the top figure, that brings our total “investment” to $25.8 billion, of which $18.8 billion is a total write-off. And, as I’ve pointed out here many times, then there’s the next bit. “The rest of G.M. may require as much as $70 billion in government financing, and possibly more to resolve the health care obligations and the liquidation of the factories, according to legal experts and federal officials.” So call it $100 billion just to get going. Government Motors (a.k.a. American Leyland) is born.
Currently my own personal protest against the bailouts means that there are two companies that I will NOT buy a car from: Chrysler and GM. I guess in the future, there will be three companies I will not purchase from: Chrysler, Bad GM and Good GM.
So America is going to become a second rate power like the UK. Is this where we are being lead?
I’m of mixed emotions on this. The arguments for just letting GM die are nearly overwhelming. And if I thought the bones would be picked by some American concern who then resurrected the worthwhile pieces to make a functional automobile manufacturer, the dissolution would not cause me any concern. Yet investors in the U.S. show little interest in strategic and long term investments, but rather are looking for quick bucks. Any reborn GM will not be a quick-buck investment.
From a taxpayer standpoint, what are the potential costs involved when they must pick up the obligations in government-guaranteed pensions? What is the long term cost to the U.S. of having our formerly largest auto manufacturer be owned by the Chinese? I haven’t seen answers to these questions.
akear, yes that’s what it appears. We as a nation are being sold down a river of blood and oil…for “our own good”, mind you.
Re. TexN…I’m with you. I will NEVER buy a GM or Chrysler product. Was toying with the idea of “hmmm, if Jeep goes bust, just what can I get a good deal on”. That mode of thinking lasted …well, about 3 minutes maximum.
This is how you, as an individual, can fight back. Don’t buy their junk…period. Hell, I made an effort last week to take my money out of Chase. I refuse to deal with such trash. Find a highly rated state bank to put your money in. Ask whether they requested “bailouts”, and/or received any. I did.
Check out bankrate.com for bank ratings…refuse to deal with garbage both in the banking word AND the automotive sector.
http://www.bankrate.com/rates/safe-sound/bank-ratings-search.aspx
Granted, nowadays you can’t even trust the auditors and rating agencies…so be careful. The thieves have taken control of damn near everything in our society…so akear, your question/statement is fully justified.
I have a feeling, a sick feeling actually, that this will be the opening Obama needs to implement a Government health insurance plan. The UAW employees will become the first participants in the government care program. “Freeing” GM, Ford and Chrysler of the burden of these costs while “proving” that a government ran health insurance plan works. A GM bankruptcy will be a bankruptcy in name only. No way will Obama allow a bankruptcy judge to determine the fate of the UAW.
I too will be boycotting their products and unfortunately I’m going to throw Ford into the group as well. I do not intend to support the UAW any longer. I am not condemning the workers but the organization and the amount of money they pour into a political party that I wish not to support. From now on it will be Hondas and Toyotas built at American factories.
And this doesn’t even cover the money the PBGC will dole out for Pension obligations to both GM and the UAW.
Wait a sec, is Red Ink Rick’s pension gonna be funded by our government money?
It’s obvious that a C11 will be extremely costly and it always has been.
Especially the issue of legacy costs. GM was never going to pay them. Even if GM entered bankruptcy in 2005, the taxpayer would have had to pay for it.
But it’s about finally stopping the money drain that is Detroit and it’s better to pay the price once than to keep burning money indefinitely. Or as Friedrich Nietzsche has said: “Better end with terror than terror without end.”
So when the history books are written, GM’s legacy of 100 years in business is a $90 billion bill for the U.S. taxpayer. Thanks, General Motors. What’s good for you is good for America!
Or Amtrak II. Or Amwheels.
Meanwhile, as billions of bucks are passed around and the elite-types rake in their BIG bucks, doing their ever-present ongoing skimming off wealth off the top of the monetary pile, the working-poor performing those wearisome tasks that allow the country and society to function on a day-to-day basis continue to be reamed in so many ways.
Just another day/week/month/decade/century in the ongoing class war within the USA.
There is some satisfaction, however, in observing a growing number of former middle-class folks entering the swelling ranks of the working-poor.
Perhaps our growing numbers will result in festering resentment that leads to political power or, if need be, an alteration in the power balance of the classes engaged in the ongoing class war.
Or Amtrak II. Or Amwheels.
Amcrap
Hey Robert F – I am hoping that as you prepare to wind down the GM DeathWatch you are getting Phase Two ready to go – GM DeathWish: Life of the undead after bankruptcy. Feel free to use that; it’s catchy, I know.
Even if everything goes to plan in Bankruptcy Court the “New GM” will be saddled with billions in debt and an ever receding market share on Day 1. If they can’t establish a positive cash flow real quick then here we go all over again.
We are in decline, but maybe we won’t be as bad as the UK. At least we still have an decent aviation and space industry. Maybe going back to the moon will give America some pride. We certainly aren’t getting it watching our auto industry continue to fail.
So how quickly will our esteemed leaders figure out how to do this and then get approval to go ahead and implement the plan? I give them 4-8 years and $1T dollars before they decide not to do it.
So GM is going to have both a varsity and JV squad.
@ MikeinCanada:
Why beat around the bush?
Just call it, “GM Zombie Watch”.
At this point there is virtually no option that comes without pain.
“GM Zombie Watch” Outstanding.
I too, worry about Zombies throughout the course of a normal day.
“I do not intend to support the UAW any longer. I am not condemning the workers but the organization and the amount of money they pour into a political party that I wish not to support. From now on it will be Hondas and Toyotas built at American factories.”
So would you buy a Toyota Tacoma or Toyota Corolla?
Both are Toyota products made in American factories, but using UAW labour.
Re: Good GM v. Bad GM
What exactly is “Good GM”? I count the ‘bu, the Vette, the CTS, the G8 and 6 sizes of trucks/SUV’s. That’s 4 cars, only 1 of which is fuel efficient.
4 cars out of how many they’re selling now?
Also, does “Good GM” get stuck with all of the losers that drove them into the ground?
“The rest of G.M. may require as much as $70 billion in government financing, and possibly more to resolve the health care obligations and the liquidation of the factories, according to legal experts and federal officials.”
Oh yes — “require.” We have no choice! GM’s empty promises are our obligations.
No wonder it’s been difficult to get stakeholders to agree to a restructuring. Creditors would get worthless stock in a zombie corporation — what’s the appeal in that? They’d be better off in C7. The UAW’s friends (puppets?) in Washington will make sure workers keep their gold-plated retirement and health benefits courtesy of the taxpayers — why should they accept less?
I used to think $70 billion is a lot of money, but now I realize it’s “just numbers.”
When you go to Vegas and exchange those green pieces of paper for casino tokens, that is just what the casino operators want you to think- that “it’s just numbers”…ie, it isn’t real.
But somewhere along the line, someone has to EARN those “dollars”, “thalers”, “tokens” or whatever you wish to call them.
I guess it depends upon which level of the great pyramid/ponzi scheme you operate at. To some, those who have the ability to print those things out of thin air- you are right…it’s just numbers. And you would be right in saying so.
But to the majority of us, I’d also be right in saying that those numbers come from labor and sweat.
Please remember that when a loaf of bread costs $30. Remember, too, that it is your responsibility to chase the non-ending spiral of escalating prices through your non-ending ability to continue earning, right?
The question is: has GM’s existence had a net positive effect on the economy? I suppose suppliers, workers, and taxes did get paid, but according to the data here:
[article from Paul Kedrosky]
the picture for those who bought GM stock doesn’t look so good. (For those who don’t follow the link, as of fall 2008 GM had wiped out all the profit it made since 1980 in the 22 months prior to fall 2008.)
Now, subtract out everything that ALL of us will have to pay to do the Chapter 11 reorg and it looks like a net subsidy from the taxpayers to have had GM exist in the first place…
I would like to know if anyone here has a complete picture of the cash flow over the years (I realize that time value of money makes the profit/loss look better than it does here) to let us know if any of the earnings of past years are real, given this data?
edgett :
April 13th, 2009 at 9:12 am
What is the long term cost to the U.S. of having our formerly largest auto manufacturer be owned by the Chinese?
——————————————–
Why the worry? TV was invented in the US, and now all major TV makers are Asian.
If the Chinese would buy GM, great, at least American tax payer would have some money back out of GM.
And you shouldn’t over estimate the value of intellectual properties of GM. In short, they aren’t worth much. Toyota got better IP’s, Honda got better IP’s, Hyundai got better IP’s, almost everyone got better IP’s. By the time the transaction is final, the technologies that the Chinese have bought would be 10 years behind the leaders. And that’s why no one in the US is interested.
What if “Good GM” can’t survive, either?
They ought to call it “Specific Motors”, because the “general” is about to become very narrowed down.
I thought that the American judicial system would use the outcome of prior cases to determine new cases. Am I mistaken?
Why is GM’s pension fund treated differently from Enron’s pension fund?
Do Enron’s former employees have a legitimate case against the federal government for discriminative treatment?
wsn :
April 13th, 2009 at 12:18 pm
I thought that the American judicial system would use the outcome of prior cases to determine new cases. Am I mistaken?
Why is GM’s pension fund treated differently from Enron’s pension fund?
Do Enron’s former employees have a legitimate case against the federal government for discriminative treatment?
It’s the federal governemnt. If they choose not to follow the rules, whose going to stop them? Until or unless, a large number of American’s break out their guns and force the government to obey the rules, they have no reason to do so (and maybe not even then depending on how they play it with the military). That was the point of the 2nd amendment to the constitution, to ensure that the government at any level (federal in particular though) never gets to comfortable with stepping on the people and breaking their own rules.
akear :
April 13th, 2009 at 9:07 am
So America is going to become a second rate power like the UK. Is this where we are being lead?
We are folowing the track of the British empire and others before it. The Spanish empire, the Hapsburgs, the Dutch, the French, etc. They all became large military and economic powers. Then in an effort to protect those economic interests, they became over extended until catastrophic events (wars) broke them economically. How far we fall is yet to be seen. We could even cease to exist as a nation, with other countries dividing up our carcass.
wsn :
Why is GM’s pension fund treated differently from Enron’s pension fund?
GM has an actual pension plan which has government guarantee program (similar to FDIC for bank accounts).
Enron had an employer sponsored 401-K plan that employees could participate in with Enron making matching contributions in Enron stock. 401-K plans are NOT guaranteed (just like your IRA). Enron’s employees got to choose what they were invested in. Unfortunately, greed, laziness, or unfounded hope led many to have all of their 401-K money in company stock which became worthless when the company collapsed.
Lesson for the day… Legal structures are very, very important. This is why few companies still have pensions. With the pensions, investments are the company’s problem (and now the government’s). With 401-Ks, investments are the employees problem.
RF – I have a question for you because I know you must have thought of this, and to anyone else who has this in the back of their mind.
Forget about all the money this is going to cost us, pretent it’s piksey dust, no one has brought up GM’s corperate culture the thing that got them to this place.
How is the Fed or Obama going to divy up GM’s screwed up corp culture into a ‘Good-GM’ bunch and a ‘Bad toss it in the trash’ bunch. GM itself hasn’t been willing or able to fix it’s main problem for decades and now the goverment is going to wave it’s magic bankruptcy wand and in 2 weeks all will be fixed. This is all a farc everyone GM’s problems can’t be solved this easily even if all the debt vanishes. This money pit in only going to get bigger and deeper.
Redbarchetta, regarding the cooperate culture of GM, it’s not going to get any better.
It’s all evolutionary selections here. In a free market, good cooperate cultures flourish, and bad ones go to C7. In the end, all remaining ones are relatively good.
However, with GM, we clearly can see that its cooperate culture is not good. Yet external force makes sure it doesn’t vanish. So, it will go on. Under this kind of “government selection” mechanism, car companies will evolve such that the ones with the best ability asking for bailout will outlast competitors.
wsn that is excatly my point, what the government is doing isn’t going to fix the problem. Gm has 2 future routes, become the next Amtrak or being liquidated and letting someone with a real plan for success decide what the good parts are to keep and move forward with. The government looks intent on have another tax sucking waste of time.
Holy F-ing S-, Batman! Remember four months ago when this all started, and $100B was then estimated to be the high end of a worst-case of a combined Big 3 bailout?! Now it will hardly get GM’s head out of the toilet, and as many have observed, ‘who THEN will buy their cars?’
We’re not at the bottom. Not even close. Dow at 6,200 before end of summer (thought it’d hit that at GM’s filing, but perhaps a bit later). Currently, US debt is still selling cheaply on the world market… long term Treasuries are finding buyers at sub-2%. But at this burn rate, that won’t last much longer.
How soon ’til we’re like the PIGS of Europe (Portugal, Italy, Greece and Spain) unable to finance public debt at anything less than 7-9%? We’re toast then.
(Sigh) Waiting for the mid-terms…
At the risk of repeating myself, I shall repeat myself:
Look at Honda, they have the capacity to manufacture 1.6 million vehicles, from 12 plants, which cost almost $11 billion, employing 25,000 workers.
Let’s just take a billion dollars for a 200,000 v/yr plant as a rough baseline. Now in 2007 when everything was coming up roses, the domestics produced about 8 million vehicles. To produce that many units would, at these ratios, require 40 plants costing — tada — $40 Billion. Let us be generous and throw in $2 Billion of development costs for 16 lines of vehicles that will sell at the rate of 500,000 v/yr each. Another $32 Billion.
So for a mere $72 Billion we could have a brand new industry. Now the OEMs would also need working capital, but, OTOH, not all of their 3’s* plants need to be replaced and many of their vehicle lines do not need development — most of the trucks have been completely renewed in the last couple of years and a number of lines are either fairly new (Ford Fusion, Chevy Malibu) or are close to market (Chevy Cruze, Ford Fiesta).
The only conclusion I can reach is that much of the money in the bailout is going to go to legacy claimants, i.e. UAW, dealers, bondholders. But, you knew that.
Soon the GM deathwatch will be America’s deathwatch. The disease is spreading everywhere.
@akear – Soon the GM deathwatch will be America’s deathwatch. The disease is spreading everywhere.
Actually, one might view this as the deathwatch of the American empire; like GM’s empire, it has been refinanced enough times that it may not survive. However, as with the UK, Netherlands, Spain and Rome, America will not necessarily cease to exist as a nation unless we deliberately allow the barbarians to take over. The “disease” is not altogether different from any of our predecessors; greed, magnified by hubris in the face of an economic power we cannot best. In the UK’s position, that economic power was the U.S.; in our case, it is a very hungry China powered by 1.3 billion people.
It is strange but from a development standpoint the Chinese don’t really have an auto industry. Their cars cannot even pass US emission and safety standards. This does not stop GM from outsourcing to China. In this case GM is handing over its American ingenuity to China.
The timeline of despair.
70’s-US loses it consumer electronic industry.
80’s-US loses most of its machines tool industry to Germany and Japan.
90’s-US loses most of its PC manufacturing
2000’s-The end of the US autoindustry as we know it. Only Japan and Germany are left standing.
Hey I designed a small part of the car (ECV3) in the photo. Well, I actually designed a rather larger part but they only kept one bit.
Behind the oval cooling duct there is a large flap that throttle the intake of air, so reducing the cooling drag of the vehicle. They kept my design for the flap but didn’t like the way I activated it.
Incidentally the ECV3 got 80 mpUKgallon 27 years ago, was faster to 60 than a base Ford Sierra, and bigger inside as well.
Thanks for that Katie Pukric,
BUY AMERICAN!!!!!!!!!! Why do you UAW haters begrudge good jobs and good benefits for American workers? Shouldn’t we be rather be working towards creating the same gainful employment opportunities for ALL American workers rather than trying to tear down the few that have them? The UAW has operated within our capitalist system to legally negotiate good things for blue collar workers. The result is that they enjoy the types of benefits that the makers of Benz’s, Volvos, Saabs, and Beamers enjoy as a birthright in socialist Europe. UAW workers in the “richest” nation in the world have used their considerable political power to obtain a normal level of first world bennies. They have done it without subterfuge. Why should the fat cat bankers who don’t employ nearly as many people, who concentrate the wealth more in the top executive levels, and who are the ones who caused this credit crunch be unscathed while the blue collar worker suffers? I think it’s because we consider those fat cat banking executives to be some sort of untouchable royalty who we can’t truly envision suffering, while we see the UAW high school graduate as someone we can envision getting screwed. Just like us. Instead of exulting in the UAW’s loss of good wages we should think hard about we can all create wealth for all Americans, not for our foreign competitors. Take care of your own BUY AMERICAN!!!!!!!!!!!!