Congress Should Stop Giving GM Funds

[Design1stCode2nd]

The credit crisis and economy merely accelerated by a couple of years what would have eventually happened. GM hasn’t made money in over 4 years. This crash happened last year. GM has shed market share for years, abandoning tried and true segments like the small and mid size cars for high profit SUV’s and Trucks. This allowed the imports to slowly improve their products in these segments and gain market share. The glory days also lead to unsustainable contracts with labor and excess.

When the Japanese cars first came over they were crap, same to with Korean cars. But they kept at it and improved. The average car buyer wants an appliance that always starts, doesn’t cost them anything to run and gets them from point A to B as if they were in their living room on a comfy couch. It’s why a loathe the entire Toyota line-up except the FJ (which they are discontinuing).

Boards like this are for the niche car buyer, the enthusiast who cares about how a car drives and enjoys the part between the A and B.

We may see more loans to GM (remember they ran through their worst case scenario for all of 2009 in 3 months) but if they come back a 3rd time they’ll be forced into chap.11.

They should have voluntarily done it back in 2006 when they still had the cash reserves to restructure. But then we don’t do anything until it’s a crisis, from one crisis to the next and we forget about it all when times are good. We learned nothing during the oil embargo and already people are forgetting $4/gal gas of just 8 months ago.

If you are buying a GM or especially a Chrysler product I’d just make sure you put away a little extra to cover any repairs out of pocket.

[Angrybird 12]

The gubment shud send us all a gift certifikate fer $25,000, good only for use towards purchase a GM, or Chrysler product (Ford would be inelligble because they did not take any bailout money). That way it is up to us if we use the money, or not. It is only good for this year. after that it is invalid.
One certificate per household. you must have a valid address per last years tax return to collect.

[Mr. Wyndham]

Originally Posted by Design1stCode2nd

They should have voluntarily done it back in 2006 when they still had the cash reserves to restructure.

Care to elaborate on this? Because if you're saying GM waited to restructure until after 2006...I think you're pretty wrong. The restructuring, albeit at a baby-step pace, started way back in 2000 when Wagoner was hired. It started with product. As it progressed, they were even able to sign an agreement in 2007 (the last good year before the recession) that reworked their entire labor relationship. Go figure, when they're about to overhaul the business side of things, the economy tanks.

Originally Posted by Design1stCode2nd

But then we don’t do anything until it’s a crisis, from one crisis to the next and we forget about it all when times are good. We learned nothing during the oil embargo and already people are forgetting $4/gal gas of just 8 months ago.

I was just disussing this with someone. It's the American way and it makes me sick to my stomach. Nothing's worth evaluating/repairing until it's a life-or-death crisis. And when the crisis is over...we do it all over again! What. The. Heck?!

Originally Posted by Design1stCode2nd

If you are buying a GM or especially a Chrysler product I’d just make sure you put away a little extra to cover any repairs out of pocket.

Why? You expecting them to go somewhere?
GM and Chrysler will be around for some decades to come. The difference is how they get over this rough spot. A successful, but insanely risky bankruptcy filing? Or self-help via loans.

A word on loans, and your first point about delaying the inevitable. I disagree completely -- I don't think they would have eventually failed. And here's why:

Underlining all of this is one single point: GM already was in the process of a ~decade-long restructuring effort. It was always due to be 'finished' by 2012-ish. Though they may not have announced it to the world. Now,

If it weren't for the credit crisis,
#1; people could buy cars, and with GM's current portfolio, they'd be selling like mad. This means they make money, which has everything to do with their restructuring costs and income. Lets face it, all the restructuring in the world won't help if they aren't selling cars. This is one of those things that's not in their control.

#2; Banks would still be loaning. Which they aren't right now.


----------------
Because of the above points, supposing a credit crisis never occured; it would still be evident that General Motors would STILL NEED further restructuring -- but they wouldn't be in their current state. That means they wouldn't need as much money to finalize the BULK of their restructuring already scheduled through 2010. Since they wouldn't have needed as much money (if at all), they could have gone to banks instead of the US treasury.

Therefore -- the government would have never gotten invovled, and this would be a non-issue. Yes, GM made mistakes. No, they weren't in ideal financial position before this happened. BUT, none of their mistakes were large enough to put them in their current position. The whole problem right now is due to the CREDIT market collapse.

[manimsoblack]

Originally Posted by Skyman 08

The gubment shud send us all a gift certifikate fer $25,000, good only for use towards purchase a GM, or Chrysler product (Ford would be inelligble because they did not take any bailout money). That way it is up to us if we use the money, or not. It is only good for this year. after that it is invalid.
One certificate per household. you must have a valid address per last years tax return to collect.

But i think alot of people would try to sell the cars back or trade them in on something cheaper to try to make some cash out of the transaction. In which case we'd have lots full of used cars with low mileage that no one wants. God forbid they take the cash and buy a two Kias.

[garagelogic]

Where is this credit "crisis" we hear so much about? The only people I have seen turned down for a loan are those that are probably a risk to extend credit to. I guess it's a crisis to some because, unlike the decade leading up to this most recent recession, banks and institutions that loan money are subjecting the borrower to much greater scrutiny before extending credit and, as a result, fewer people are qualifying for loans.

IMHO, if the banks would have kept their standards high in the first place we would not have the economic situation we have to day, or at least it would not be as damaging or widespread. Unfortuately, that did not happen and now we all, those with good credit and bad credit, are paying the price for the lack of self-regulation.

If GM had a truly viable recovery/restructuring plan, then private lenders would be lining up to extend loans to them. Instead, since private lenders were unwilling to offer GM and Chrysler the loans it needed just to survive, they had to petition the government. Since the government has no money of it's own, you, I and our successive generations are stuck with the bill.

As for people buying cars, look around on this board, it seems to me the people that are willing/able to buy a new car are having little difficulty getting loans. The fact of the matter is, given the current economy, fewer people are choosing to make a major purchase such as an automobile or house. ALL auto manufacturers have felt this, not just the few that were in financial jeopardy prior to the recession. That a recession did happen just made transparent what GM/Chrysler and other already knew; they were in major trouble and without a complete restructure of their core business they were on the road to bankruptcy.

I agree, in order for the restructuring plan they had alreay embarked on to work, it would call for them to sell a certain amount of cars. When that did not happen, for whatever reason, their plan was no longer viable.

[Silver Streak]

Originally Posted by garagelogic

Where is this credit "crisis" we hear so much about? The only people I have seen turned down for a loan are those that are probably a risk to extend credit to. I guess it's a crisis to some because, unlike the decade leading up to this most recent recession, banks and institutions that loan money are subjecting the borrower to much greater scrutiny before extending credit and, as a result, fewer people are qualifying for loans.

IMHO, if the banks would have kept their standards high in the first place we would not have the economic situation we have to day, or at least it would not be as damaging or widespread. Unfortuately, that did not happen and now we all, those with good credit and bad credit, are paying the price for the lack of self-regulation.

If GM had a truly viable recovery/restructuring plan, then private lenders would be lining up to extend loans to them. Instead, since private lenders were unwilling to offer GM and Chrysler the loans it needed just to survive, they had to petition the government. Since the government has no money of it's own, you, I and our successive generations are stuck with the bill.

As for people buying cars, look around on this board, it seems to me the people that are willing/able to buy a new car are having little difficulty getting loans. The fact of the matter is, given the current economy, fewer people are choosing to make a major purchase such as an automobile or house. ALL auto manufacturers have felt this, not just the few that were in financial jeopardy prior to the recession. That a recession did happen just made transparent what GM/Chrysler and other already knew; they were in major trouble and without a complete restructure of their core business they were on the road to bankruptcy.

I agree, in order for the restructuring plan they had alreay embarked on to work, it would call for them to sell a certain amount of cars. When that did not happen, for whatever reason, their plan was no longer viable.

Some people isn't worth the effort to win them as a customer IMO.

[DGthe3]

To add to what Dragoneye said, the VEBA agreement in 2007 is estimated to save GM ~8 billion/yr starting in 2010, which in and of itself puts them back to profitability under a normal sales year. Then there is the continuing reduction in build/labour cost and increase in quality (more sales, less warranty replacement). Also, know what GM's best sales year was? 2007. In fact, 2005, 2006, and 2007 were 3/4 best sales years in GM's history. They've averaged ~200 billion in revenue each year durring that time. So while a loss of say 5 billion may seem like a lot, its not much relative to the size of the company. A loss of 30B like GM had for 2008 is impossible to ignore, but the difference between 2007 and 2008 for GM is roughly the same as Toyota's (down ~25B). In an odd twist, thats good news for GM since they lost more sales than Toyota did and most of those were on highly profitable trucks and SUV's.

Ford started all this earlier than GM did and they are in a reasonably safe position. Chrysler started later but are much smaller so the turnaround can happen quicker and so they are in roughly the same financial position as GM is.

[GTAHVIT]

I'll have some of what Dragon and DG are serving up!

[Silver Streak]

Originally Posted by gtahvit

I'll have some of what Dragon and DG are serving up!

[dbotsfordtat]

Originally Posted by garagelogic

Where is this credit "crisis" we hear so much about? The only people I have seen turned down for a loan are those that are probably a risk to extend credit to. I guess it's a crisis to some because, unlike the decade leading up to this most recent recession, banks and institutions that loan money are subjecting the borrower to much greater scrutiny before extending credit and, as a result, fewer people are qualifying for loans.

IMHO, if the banks would have kept their standards high in the first place we would not have the economic situation we have to day, or at least it would not be as damaging or widespread. Unfortuately, that did not happen and now we all, those with good credit and bad credit, are paying the price for the lack of self-regulation.

If GM had a truly viable recovery/restructuring plan, then private lenders would be lining up to extend loans to them. Instead, since private lenders were unwilling to offer GM and Chrysler the loans it needed just to survive, they had to petition the government. Since the government has no money of it's own, you, I and our successive generations are stuck with the bill.

As for people buying cars, look around on this board, it seems to me the people that are willing/able to buy a new car are having little difficulty getting loans. The fact of the matter is, given the current economy, fewer people are choosing to make a major purchase such as an automobile or house. ALL auto manufacturers have felt this, not just the few that were in financial jeopardy prior to the recession. That a recession did happen just made transparent what GM/Chrysler and other already knew; they were in major trouble and without a complete restructure of their core business they were on the road to bankruptcy.

I agree, in order for the restructuring plan they had alreay embarked on to work, it would call for them to sell a certain amount of cars. When that did not happen, for whatever reason, their plan was no longer viable.

The credit crisis isn't about quailified buyers. The problem is between financial institutions, and is more accurately described as a liquidity crisis (money has to move thru the economy just like blood has to move thru the body). Many of the institutions are sitting on mountains of bad debt, this has resulted in a fear of lending between institutions ( you wouldn't lend money to someone if you weren't sure they could pay you back.) which has resulted in the current crisis, Think of it as a blocked artery and a resulting Heart attack. Many Banks and Businesses depend on overnight loans to conduct business but because of the lack of transparency amongst the many businesses the loans aren't being made (the blockage). That has now morphed into a crisis for the real economy (the heart attack), better known as a negative feedback loop. Businesses are laying off employees because they can't make payroll/buy supplies without the overnight loans, consumers have reduced spending because they are afraid of being laid off, ect... GM is getting a double whammy because their suppliers want to be paid before delivering nessesary parts and their customers are afraid to buy big ticket items because their afraid they're going to get laid off. I hope that makes sense, it does in my head.

[Silver Streak]

Originally Posted by dbotsfordtat

The credit crisis isn't about quailified buyers. The problem is between financial institutions, and is more accurately described as a liquidity crisis (money has to move thru the economy just like blood has to move thru the body). Many of the institutions are sitting on mountains of bad debt, this has resulted in a fear of lending between institutions ( you wouldn't lend money to someone if you weren't sure they could pay you back.) which has resulted in the current crisis, Think of it as a blocked artery and a resulting Heart attack. Many Banks and Businesses depend on overnight loans to conduct business but because of the lack of transparency amongst the many businesses the loans aren't being made (the blockage). That has now morphed into a crisis for the real economy (the heart attack), better known as a negative feedback loop. Businesses are laying off employees because they can't make payroll/buy supplies without the overnight loans, consumers have reduced spending because they are afraid of being laid off, ect... GM is getting a double whammy because their suppliers want to be paid before delivering nessesary parts and their customers are afraid to buy big ticket items because their afraid they're going to get laid off. I hope that makes sense, it does in my head.

Well said. Now you should go to congress and explain that to them, because I don't think they have a clue yet!

[dbotsfordtat]

I figured I better add to the above. This is why the government is concentrating on bailing out the banks. Its not about you and me, they have to get the banks lending to business and each other again. Although I think they should nationalize the banks if this has any hope of working. IMO its the only thing that will work because otherwise the government doesn't know what is on the banks books and its sending good money after bad. This is a perfect example of how much power the financial institutions have over our government and us for that matter. Our representatives fear Wall Street way more than main street. Oh sure, they'll give us the occasional Dog and Pony show, with some unfortunate CEO, but they'll let our whole country fall off a cliff before they take away the Bankers cash cow. 170 Billion into AIG alone with no restructuring plan required, no report on what they have done with it, just disappeared. And they have everyone bitching about GM's 30 billion loan, now thats a good psyop program. This is also a reason why you should take anything you hear from the MSM with a grain of salt, they get there paychecks from the same people that own the financial institutions. If FOX news is fair and balanced, then CNBC is a great place to get your financial advise! Goggle is your friend, look it up.

[rgrizzard]

You guys are right we should give them more money and retain no control over them. I just read a CNN article yesterday where Pelosi is already thinking of a 3rd stimulus package and I've got to say I can't wait to send her my tax dollars! (Note the sarcasm)

Dragoneye you said self-help with loans???? How do you have self-help with a loan from somebody else? You also talk about how they've been restructuring for a while. Well if it's not working why would you continue loans to them without control over them, not very good financing 101.

BTW if you keep postponing Ch. 11, you'll get to the point financially where only Ch. 7 is left. Whats' worse?

Look I want GM to suceed like everyone else, but I'm tired of my tax dollars going away to save all of these corporate houses. Whatever happened to the little guy.

[Mr. Wyndham]

Originally Posted by rgrizzard

Dragoneye you said self-help with loans???? How do you have self-help with a loan from somebody else?

"Self help", the way I meant it, means that they are capable of doing nearly everything that would be done in bankruptcy court by themselves. either way would require some form of loans. By doing it on their own -- they eliminate all the unnecessary risks associated with a Chapter 11 filing, exponentially increased because of GM's sheer size. Read the viability plans. I'm not making this stuff up.

Originally Posted by rgrizzard

You also talk about how they've been restructuring for a while. Well if it's not working why would you continue loans to them without control over them, not very good financing 101.

First of all, I would argue it WAS working. See the new products? See the reduction of waranty recalls in HALF in the past couple years? The reduction of operating costs, number of dealerships, hourly wages, hourly AND salaried benefits? It's all evidence of a sucessful restructuring up until 2007. They should have broke even last year, and made a profit this year...assuming market conditions stayed the same as they were in 2006/2007.

Despite that, you don't fix a company of this size and caliber, nor it's problems, overnight. Especially not when the night keeps getting darker and darker....All the above took half a decade to complete.

As far as 'continuing' loans...the US government didn't give them the money they asked for. The correct amount of money they spent two weeks calculating. Instead, they gave them what they asked for through March. This was part of an agreement that stated if they could prove by March 31st, that they were on the path to good health, then they would get more money. In short, they were MEANT to get more money. This shouldn't be a surprise....