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

Shutdown and Breakdown in Detroit

Video Link Courtesy of MSNBC

Visit msnbc.com for Breaking News, World News, and News about the Economy

Uttt OHHHH! The Big Three automakers are shutting down plants and that is not a good thing. Detroit is closing up shop because cars are not moving off the lots in the dealerships all across America. Trust me, this is not going to be an American made auto manufacturer phenomenon. Chrysler is shutting down all of its plants for thirty days and Ford is looking at similar options. GM is planning major shutdowns at plants as well and the ripple effect is not going to be good for the world economy. Over at Market Watch they have this to say and I have my own opinion on it afterward…

Chrysler to shut assembly lines for at least a month

Rival Ford takes similar steps, extending shutdown times at most plants

By Shawn Langlois, MarketWatch
Last update: 6:57 p.m. EST Dec. 17, 2008

SAN FRANCISCO (MarketWatch) -- Chrysler LLC, struggling to keep afloat as it awaits word on a federal lifeline, said Wednesday it will idle all of its 30 plants for at least a month in an effort to bring output closer in line with plunging demand for new cars and trucks.

The privately held carmaker said it will shut its assembly lines at the end of Friday's shift and keep them closed through at least Jan. 19, extending a holiday shutdown that was already put in place. Under the current union contract, idled workers still receive most of their benefits and wages during the production stoppage.

Separately, Ford Motor Co. announced that it will shut down most of its North American assembly plants for an extra week in January, according to the Associated Press.
Automakers typically close their factories for a couple of weeks over the two weeks during holidays and often, as in Ford's case, target specific plants for even longer idle periods to keep a lid on inventory during times of slack demand. Yet Chrysler's move to idle its entire operation for at least a month reflects just how dire the situation is in Detroit.

"This is definitely out of the ordinary," Edmunds.com analyst Jesse Toprak said. "I've never seen this kind of shutdown for this long, and if you read the language Chrysler used in the release, they're leaving the door open for another extension."

Toprak added that the company will probably take a hard look at its December sales results, which he expects to be down 45% from a year ago, and decide whether to keep blue-collar workers from assembly lines even longer. - Market Watch (Link not working?)

It doesn’t matter anymore what side of the issue you stand on when it comes to the bailout for Detroit and its automakers. The Congress has spoken and the auto industry in America was told to go screw itself. That is a double edged sword so to speak.

Granted the UAW contracts will still pay many of the idled workers almost the same pay for a short shutdown but they can’t get paid forever if the companies end up folding. All of the investment capital that the Big Three used as leverage for long term loans was based on the price per share and all of them are in the toilet as far as share price goes. Wall Street can not and will not offer capital to these companies because the collateral in shares is just not there anymore. The Congress and the Republican members made that a reality by not backing the industry simply because they could. Rather than looking at the bigger picture, Republicans in the Congress looked to see who was in their own back yard and all they could see was Toyota, Honda and the list goes on of foreign owned plants here in the United States. Good for them, they covered their own political ass. Or did they?

While those same Republican leaders were looking out the back step they didn’t see their neighbor Joe that drives twenty minutes to a little mom and pop owned machine shop that just makes screws that go to Detroit. Those screws are installed by the thousands every day by Detroit workers in American made cars. All the little screws do is hold one little piece in a pick up or mid size car down so that another piece of the truck or car can be installed over it with those same little screws holding that part down. Those little tiny machined screws have paid all the wages and healthcare benefits for the five or six people running the actual machines that made them for decades. Not to mention mom and pop put a couple of kids through good schools, then good colleges, and then had those kids buy homes in the local area. Those five or six machine operators buy groceries locally, buy homes or renovate existing homes at the local hardware or home improvement center. They pay local and state taxes that pay for schools, roads, police and fire. They spend their hard earned paychecks where they live and other people benefit from their hard earned wages making little tiny screws that ship to Detroit.

Mom and pop have to close up shop for a while because Detroit is shutting down for a spell. Pick an industry and expand the scenario however you like. There is that old saying about a butterfly beating its wings in China and it gives birth to a hurricane thousands of miles away. Bingo!

There was a reason why the government of long ago would never let Chrysler go bankrupt. It reached to far and wide into the capillaries of the American economy. Lee Iacocca rebuilt Chrysler from the ground up because he had the means to do so courtesy of an American government backed loan. He didn’t do it alone and yet they all made it work out in the end. But now it is okay to let ALL THREE automakers fail? This lack of interest by or government is totally on the Republican Party and they are more than welcome to own it. I can literally see the history books thirty years from now on the new generation of Hoover that started the second economic collapse of America and the world.

This is the never ending ripple effect and when the small business manufacturing owners start closing the doors because Detroit is no longer in business then it is in fact a DEPRESSION! Somebody please call your Congressional representative and give them an earful!

Papamoka