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Automotive News & Views Do You Favor A Government Loan To The Detroit 3?
3958 messages, Last post on Oct 02, 2009 at 4:52 PM
You are in the Automotive News & Views Forum. Your Hosts are steve_ & claires
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I would like to see some of the Big Three survive (let's face it, ChryCo is a goner) but IMO there would have to be certain conditions, -The taxpayers would have first claim on any assets in case of material default or insolvency. -Executive officer salaries must be limited to the highest grade Federal GS Salaries (George Will's idea). -Production of products intended for sale in North America must be limited to NAFTA signatories and for every vehicle imported from Canada or Mexico there must be a corresponding export of US made units to other countries. |
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Replying to: nippononly (Sep 10, 2008 6:42 am) And who's to say that the economy would be in a BETTER position to handle it at that time?
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Replying to: kirstie_h (Sep 10, 2008 10:37 am) Considering we are a capitalistic and free market society, i have a hard time agreeing to bail out a company that is in trouble because of their own poor management and lack of vision. At some point someone has to make the hard decision to let one of these giants fall.
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Replying to: dtownfb (Sep 10, 2008 11:15 am) I have the same problem, but I also fear what a massive loss of such jobs would do to the economy. It's a balance - lesser of two evils. I disagreed with bail out plans for certain companies - say, Amtrak - because they weren't really doing what could improve their chances. Apart from up the East Coast, you can't GET anywhere on Amtrak. In St. Louis, I have to go to Chicago or New Orleans on Amtrak before going ANYWHERE else. Expect consumers to start using your service if routes like that don't change? Not a chance. Same with automotive corporations. You have to show substantial and significant change that is LIKELY to result in financial improvement before you get handouts of any kind. Loans are great, but if the company goes under and can't repay, it becomes a gift.
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...the current proposal is that it is much more open-ended than the Chrysler loan guarantees. It also imposes far fewer conditions on the recipients. GM has cut costs and introduced some new models, but it really hasn't done much to revamp the corporate culture that led to this mess. I see no reduction in badge engineering - indeed, after Bob Lutz said that badge engineering was a dumb idea, GM went ahead and introduced the Pontiac G5. It brought over the Pontiac G8 and Saturn Astra with great fanfare, and then has basically abandoned them in the marketplace. When GM introduced the Cobalt, it said that this car was supposed to end the long line of mediocre-to-crappy GM small cars, but it wasn't even as good as a Ford Focus, and now GM is saying that the upcoming Cruze will be the first real quality GM small car, which means that GM was apparently fibbing about the Cobalt. All of which sounds suspiciously like the same old GM. And why does GM need FOUR crossovers - Acadia, Enclave, Outlook and Traverse - that compete with each other as much as Honda, Toyota, Nissan and Ford? The Volt is intriguing, but the idea that a $35,000+ car (which may still lose money at that price) with a new and untested drivetrain is going to "save" GM is a risky proposition. Note that Toyota initially lost money on the Prius, and even today its main sources of sales and income are the thoroughly conventional Corolla, Camry, RAV4 and Sienna. The Prius is more valuable as a testbed of new technology and a PR exercise than as a profit-making venture. And right now, what GM needs are profits. On the operational side, GM's cash burn is getting quite serious, and is worse than Ford's. GM's launched its big guns with the Malibu, GMT-900 and new crossover programs, and it is still losing money and declining in sales. A recent Automotive News article listing new models from each manufacturer showed that GM's cupboard is dangerously bare, which suggests some serious cash problems. Reading the statements of Bob Lutz and Rick Wagoner, I still get this feeling that GM still believes it is "too big to fail," and that buyers are still waiting breathlessly for each new Chevrolet, Buick or Cadillac. I don't think it has sunk in with GM's top management as to how much the passenger-car market has passed GM by, and how its passenger cars, with few exceptions, are regarded as "also rans" by a large portion of the public. Ford, under Mullaly, has done more to revamp its corporate culture than GM has. Ford also has fewer models and divisions than GM, and thus it is more likely to be greatly assisted by a single "hit" than GM is. The Fiesta looks to be the right car at the right time, although I doubt that it will bring in enough money to replace all of those lost F-150, Explorer and Expedition sales. Ford quality has also improved consistently (Ford is better than either GM or Chrysler in this regard), and Ford has done a pretty good job of using Mazda and Volvo technology to improve bread-and-butter Fords. But Ford needs to bring some excitement to the table with its products. The Lincoln MKS, for example, isn't nearly enough to revive the Lincoln brand. Relying on V-8 Mustangs to add excitement to the lineup when gasoline is going for over $3.50 a gallon isn't a smart strategy. The Flex is a great vehicle that debuted about three years too late. And I doubt that the F-series will ever sell 900,000 units in a year again, given the collapse of the housing market and the tightening of credit standards (for both houses and vehicles). Bottom line is that I think Ford is better bet for survival than GM, and would thus likely benefit more from taxpayer largesse. Of course, it only made those changes because of the threat of bankruptcy in the first place. But both have serious challenges ahead, and I wonder if even federal help will really work, or result in the creation of American Leyland. |
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| As always, you gave a good analysis, grbeck. How are we to interpret the fact that you didn't mention Chrysler? | |
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Replying to: hpmctorque (Sep 10, 2008 12:22 pm)
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Replying to: hpmctorque (Sep 10, 2008 12:22 pm) As for the others, someone else posed the question of what the taxpayers could claim as collateral in case of default. Do they have anything left to mortgage? I don't think so. GM is having trouble coming up with the first billion dollars in asset sales this year even as they desperately need them, and last I heard the big news at Ford was that it had mortgaged every last thing including its headquarters to the banks in the LAST big round of borrowing it did. I think the money would be much better spent on programs to mitigate the economic damage that everyone says will occur when the Bifg 2.5 inevitably fail. Retraining programs, new small business incentive programs, what have you. These will need to be in place in the next couple of years for Chrysler fallout and in the next five to ten for Ford fallout. GM, well, we will see if they make it, but they probably won't implode sooner than five years. |
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Replying to: grbeck (Sep 10, 2008 12:40 pm) Jim Press remarks in that squib that Chrysler would benefit from the loan guarantees. Cerberus is still a mystery to me too though.
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Replying to: steve_ (Sep 10, 2008 12:49 pm) Chrysler should be excluded from this loan program. |
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Automotive News & Views Do You Favor A Government Loan To The Detroit 3?
