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

By JOHN D. STOLL, SHARON TERLEP and ALEX P. KELLOGG

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.

Papamoka

Washington to Detroit Loan Deal Done

It’s finally going to be a done deal for the Big Three in Detroit to get some bailout money to save millions of Automaker jobs. Believe it or not it was a loan deal worked out by the White House and Speaker of the House Nancy Pelosi! I’m still in shock that President Bush cleared his house shopping schedule to find a compromise deal with the Speaker of the House. Over at CBS News they have this to say on it…

CBS News correspondent Kimberly Dozier reports that significant progress came Friday night, when Democrats from both the House and Senate agreed to bail out the struggling General Motors, Chrysler and Ford with federal funds.

Several officials say the White House and congressional Democrats have agreed on $15 billion in loans, which is less than half of what the car chiefs were seeking.

They say the breakthrough came after House Speaker Nancy Pelosi bowed to a demand by President Bush that any aid come from a fund that had been intended to help Detroit produce more fuel-efficient cars.

Pelosi said the House would consider legislation next week to provide "short-term and limited assistance" to the U.S. auto industry. - CBS News

I have to say that I knew that this deal was going to come sooner or later. Matter of fact anyone that follows the automotive industry knew it too. GM, Ford, and Chrysler were going to get a bailout loan, it was just a question as to how much each would actually get that was an unknown fact. The federal government could not let the big three fail or go into bankruptcy because of the ripple effect it would eventually expose. You know that $700 billion they have in bailout cash for the banking industry, that bailout cash would have been just a drop in the bucket if Ford, GM, and Chrysler filed for bankruptcy.

I propose the following hypothetical scenario. All three automakers file bankruptcy protection. If you are a supplier to any of them then you do not get paid for any outstanding invoices and thus you can not keep paying your suppliers for continuing orders so your company is forced to file bankruptcy. Suppliers feel the pinch hard and can not pay their suppliers for raw materials so they are forced to file bankruptcy. And the cycle continues down the food chain. The layoffs from all of the suppliers to the Big Three would dwarf all of the layoffs from the Big Three. Lastly, not all of the suppliers are in Detroit.

I think it is fair to say that this bailout will save more jobs than the $700 billion in bailout cash that the banks received a free pass on. I believe it was the Steel Workers President that summed this controversy up best; “If you shower before work you get a bailout, if you shower after working all day, you don’t.”

In the long haul objective, steps are being taken in the right direction to put the brakes on the economies collapse. Baby steps, but they are still steps.

Papamoka