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Tuesday, February 17, 2009

Edsel, Yugo, and GM seek more Bailout Cash

It comes as no surprise that GM is coming to the taxpayer trough again but I would have to say that the executives at GM need to learn how to fish. Don’t get me wrong, I’m a huge union worker supporter and as liberal as the day is long but this company along with Chrysler have already come to the taxpayers for a bailout and the billions of dollars went through their pockets like water in a spaghetti strainer. It’s only been three freaking months!

Did they slash executive pays across the board by ten, twenty or even thirty percent to save the company some money? Did they do a damn thing to save the company any money as the billions of taxpayer dollars came into the “General” funds account? Besides taking down clocks and changing light bulbs, lowering the thermostat from 72 to 68 degrees, did they do anything? I think you already know that answer.

Over at the Wall Street Journal they have this to say on the second tapping of the well by Detroit’s automakers…

GM Seeks $16.6 Billion More in U.S. Aid


General Motors Corp. and Chrysler LLC told the federal government they need at least $21.6 billion more combined in bailout loans to put them on the road to recovery, and outlined possible scenarios if either auto maker should have to file for bankruptcy protection.

Both GM and Chrysler, in the recovery plans submitted Tuesday to the U.S. Treasury, argue that bankruptcy would be more costly and drawn out than government-funded restructurings.

General Motors Chairman Rick Wagoner speaks at a press conference at the company's world headquarters Feb. 17, 2009, in Detroit, Mich.

GM said it might need as much as $100 billion in financing from the government if it were to go through the traditional bankruptcy process. Rick Wagoner, GM's chairman and chief executive, said the bankruptcy scenarios are "risky" and "costly" and would only be pursued as a last resort.

Chrysler's plan said the company would likely have to file for Chapter 11 protection if it doesn't get additional loans from the government and concessions from unions, creditors and dealers. It said it would need $24 billion in financing if the company were to file for bankruptcy. But company officials said in a conference call that they believe a Chapter 11 filing is "not necessary" for Chrysler's survival.

The submission of the recovery plans was required under terms of the U.S. loans the auto makers received in early January. The plans, however, described only a relatively few major new restructuring steps they plan to take to cut costs and downsize their operations.
- Wall Street Journal

With this latest grab for taxpayer cash in three months time comes GM with an announcement to layoff 47,000 people and talks about bankruptcy. Did anyone go over the fine print of the original loans from the government to GM if they filed bankruptcy? Does Uncle Sam and all his siblings (you and I) get screwed legally in a money for nothing deal? If the government demanded shares and the company is found insolvent, does that or does that not make the value of those government held shares at zero, null, nada, kaput?

I don’t know what the answer to this whole mess is other than absolute frustration and disgust. If GM and Chrysler were competing mom and pop stores on the corner of Main and Elm Street and they couldn’t sell the products then simple economics dictate what happens next. If both mom and pop stores were given a loan just three months ago to get through difficult times but both stores wasted the time and money then the doors need to be shuttered. I’m liberal, I’m a moderate, but I am not a fool.

The government should demand the CEO’s and Board of Directors of each companies resignation if any more cash is to follow. Insert Mitt Romney at GM at the helm and Jack Welch at Chrysler. People may not like what Mitt Romney or Jack Welch can do but you have to give them credit for knowing business and knowing how to turn situations around under pressure. The alternative choice is that GM and Chrysler go the way of the Edsel or the Yugo.

I think both sides of the political aisle can agree that management at both of these companies is clueless. Can our economy afford to let them just die off? I don’t think so and thus we have a major political dilemma building and boiling.

Tip to self: Buy stock in junkyards that specialize in GM and Chrysler parts.


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Blogger Pink Granite said...

This whole thing scares the heck out of me.
And I have to agree that is one seriously good stock tip!
- Lee

11:24 PM  
Anonymous Frodo, King of the Jungle said...

Frodo is afraid that Papamoka is allowing his emotions to get the better of his reasoning. The US of A, my friend, is spending a whole lot of money, as it needs to do. That money is either being printed now, and is not worth anything, or it has been borrowed from Chinese, Saudis, and other guys who are looking for STABILITY for their money. If you were a Saudi, would you buy oil now? If you were a Chairman Mao devotee, would you buy stock in firecrackers or fake Nikes? No, you would put your money in the one worldwide market that is restoring decorum to the markets. Letting one of our major manufacturers, or three, go down the toilet, flies in the face of good business judgment. We are blamed for this mess. We have to lead the way out, and that will not be helped by being petulant.
Give GM the Chinese money, and watch your investments in American companies begin to move upward, again. Beat GM's meat, and we've got a real mess on our hands.

12:39 PM  
Blogger Papamoka said...

You are absolutely correct Frodo on my emotions getting the best of me my friend. Trust me, I don't want to beat up on GM or Chrysler for incompetence but its pretty relevent that they see an easy LOAN but I worry that the money needed for other services from the Fed will not be available when it is needed. You are right though, if other nations believe in us to get the world out of this mess then it is up to us to up and do.

Quick fixes without understood terms just bug me though.

6:53 PM  

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