By on November 9, 2008

As we’ve just reported, Senate majority Leader Harry Reid has pretty much written-off the possibility of passing another bailout economic stimulus package before President-elect Barack Obama moves into the White House. Which leaves Motown SOL, in terms of their planned mega-suckle. And now that GM has publicly admitted that they can’t make it past December without some kind of public funds, Senator Reid and House Majority Leader Nancy Pelosi have changed tack. Automotive News [sub] reports that the dynamic duo have sent a letter to Treasury Secretary Henry Paulson asking for $25b worth of “emergency loans” for GM, Ford and Chrysler. “We must safeguard the interests of American taxpayers [!], protect the hundreds of thousands of automobile workers and retirees, stop the erosion of our manufacturing base, and bolster our economy,” the letter, uh, suggested. As TTAC  predicted, “The letter… recommended ‘strong conditions’ [for the loan] possibly equity stakes and limits on executive compensation, in return for any help. The government is requiring similar steps in its rescue of banks.” Equity stake? Nationalization by any other name would still smell like an old cadaver.

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19 Comments on “Bailout Watch 158: Plan B is Now Plan A. Or Is That Vice-Versa?...”


  • avatar
    Richard Chen

    Honorable Mr. Paulson:

    I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude.

    I am Rick Wagoner, Chairman of General Motors Corporation. My company has had crisis that has caused the need for large transfer of funds in excess of $200 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.

    I am working with Rep. Rahm Emanuel (D-Illinois), who will become President-elect Barack Obama’s Chief of Staff come January. He too advocates urgent transfer of funds to support our cause. This transaction is 100% safe.

    This is a matter of great urgency. We need a huge check. We need the funds as quickly as possible. We cannot directly transfer these funds in the names of our close friends because we are constantly under surveillance. My family lawyer advised me that I should look for a reliable and trustworthy person who will act as a next of kin so the funds can be transferred.

    Please reply with all of your bank account, IRA and college fund account numbers and those of your children and grandchildren to rick.wagoner@gm.com so that we may transfer your commission for this transaction. After I receive that information, I will respond with detailed information about safeguards that will be used to protect the funds.

    Yours Faithfully

    General Motors CEO Rick Wagoner

  • avatar
    br549

    I seem to get almost no engagement when I bring this up (?) but is it not a little disingenuous to treat gov’t aid to automakers in isolation?

    I swear it sometimes seems as if the B&B truly believe that the only other occurrence of bailouts, subsidization, nationalization, what have you, was to Lido and the boys back in the eighties.

    We live in a nation that has literally (and I mean literally) propped-up agribusiness for decades. One year without federal largess, and U.S. agriculture would fall into the abyss. The airline industry, sans extravagant gov’t privilege would essentially be up the same creek, same paddle.

    Could we bring a little context into the conversation? I’m not saying we should necessarily attempt to salvage the U.S. auto industry with taxpayer funds either, but can we not at least admit that this is business as usual in other sectors of the economy, that this kind of thing is not altogether unprecedented?

    All the shock and astonishment at the prospect, I find a little unusual to say the least.

  • avatar
    romanjetfighter

    br549 brings up a good poimt… but why are we giving these people billion dollar loans to guys who make 15 million a year?

    And there’s a big difference:

    People actually consume and buy the goods the agriculture industry produces… no one buys GM anymore. :D

  • avatar

    Sorry to say, but maybe a couple of months “cooling-off period” is in order. It is a huge amount of uncollateralized money, to be spent…how? Firing up plants to make parking lots full of vehicles dealers dont need, customers dont want or couldnt get financing for if they did is just plain wrong.

  • avatar
    ihatetrees

    br549:
    We live in a nation that has literally (and I mean literally) propped-up agribusiness for decades. One year without federal largess, and U.S. agriculture would fall into the abyss.

    “Fall into the abyss” speaks to a world view where all that government does to help agri-business is measured – but regs that hamper trade and business are never counted.

    If agriculture subsidies ended tomorrow, there’d be some harsh adjustments. Some movement away from price support crops to those that don’t. But there’d be price reductions if the feds stopped criminalizing certain practices: the manufacture of milk from powdered milk. Or the importation of foreign sugar.

  • avatar
    ZoomZoom

    To Richard Chen:

    Oh wow. That “letter” sounds eerily similar to the typical 419 scam email!

  • avatar
    ZoomZoom

    br549 :

    I seem to get almost no engagement when I bring this up (?) but is it not a little disingenuous to treat gov’t aid to automakers in isolation?

    I swear it sometimes seems as if the B&B truly believe that the only other occurrence of bailouts, subsidization, nationalization, what have you, was to Lido and the boys back in the eighties.

    We live in a nation that has literally (and I mean literally) propped-up agribusiness for decades.

    Of course, you’re correct. But this is TTAC. It’s about cars first; and everything else afterward. Somehow, TTACAA, “The Truth About Cars and Agriculture” doesn’t quite have the same ring to it.

    TTACAT, or “The Truth about Cars and Tractors” might be a hit with the low speed/high torque crowd, but then Robert would have to change all of his letterheads, mastheads, and business cards.

    On the plus side, we could be reading about the latest John Deere or Mahindra machines in the “Reviews” section; much more exciting than any minivan review!

    Could we bring a little context into the conversation? … All the shock and astonishment at the prospect, I find a little unusual to say the least.

    That’s why we have you here…to remind us!

  • avatar
    Lichtronamo

    Maybe Pelosi and Reid aren’t so dumb. They look at GM, Ford and Chrysler and realize no amount of cash is going to save them or their UAW jobs unless there is a major redo on how each company is structured/sized for the current market. Which of course means, big-time job losses. Rather than try and save them, maybe by trying to get Paulson to include them in the $700 Billion bailout, they can pin the ultimate collapse of one or more on the soon to be departed Bush.

  • avatar

    Can we give it up to Richard Chen and his Nigerian scheme as brilliant?!

  • avatar
    jkross22

    @ Lichtronamo:

    Not sure if you meant to say Bush is to blame or the Dems are simply trying to pin the GM failure on him. No matter how much bile builds up in anyone’s mouth at the thought of GWB, the collapse of GM is the fault of only one party, and GWB ain’t it.

  • avatar
    Adub

    Yes, it’s all Bush’s fault.

    Which is why I am glad McCain lost. Now that Democrats control it all, I’m off the hook. I don’t have to defend the President, I can just say it’s all his fault.

    Such a nice feeling to avoid all blame…

  • avatar
    Bozoer Rebbe

    Equity stake? Nationalization by any other name would still smell like an old cadaver.

    Robert,

    If I’m not mistaken, nationalization involves more than just the government holding an equity stake in a business. It typically means holding a majority stake and exercising managing control. The shareholders of the banks recently propped up by the TARP still own those banks. The people who owned businesses nationalized by Fidel Castro lost their assets.

  • avatar

    Richard Chen,

    Is that REALLY Red Ink Rick’s e-mail address? If so… ::devil horns sprout from head::

  • avatar
    Bozoer Rebbe

    # Adub :
    November 10th, 2008 at 12:50 am

    Yes, it’s all Bush’s fault.

    Which is why I am glad McCain lost. Now that Democrats control it all, I’m off the hook. I don’t have to defend the President, I can just say it’s all his fault.

    Such a nice feeling to avoid all blame…

    Adub, why not? Though Amity Shlaes has made a persuasive argument in The Forgotten Man that FDR’s policies perpetuated rather than shortened the Great Depression, FDR’s failures have been usually been blamed on Herbert Hoover.

  • avatar
    Richard Chen

    @ferrariman355: I just made it up when editing the Paulson 419 parody letter that was making the rounds a couple months back.

  • avatar
    Bozoer Rebbe

    Today, while walking through a nearby apartment complex, I noticed a Maytag washer placed next to a garbage dumpster. From the looks of it, it was probably about 5 years old, certainly less than 10. My guess is that in 2028 they won’t say that they’ll never buy another appliance from Maytag because of the unreliable, unrepairable junk they bought back in ’02.

    Cars, somehow, are different. I’m sure some will say that’s because they are the second largest purchase most folks will make. Well the largest purchase most folks make is a house and while some mechanical aspects of home construction have improved (joist hangers, engineered wood composites, subfloor heating, nail guns, advanced adhesives), the quality of the workmanship, particularly in finish and detail work, has deteriorated. I’ve seen work on mcmansions that wouldn’t have been acceptable in a tract home in the 1960s. Does anyone even notice?

    Nowadays, most mass consumer electronics are not repairable at the component level – with the proliferation of surface mount components and multilayered pc boards the most you can hope for is that the manufacturer has made boards and modules available as replacement parts. And if they are available, except for warranty repairs is anyone going to repair a $100 iPod when minimum bench charges can start at $50?

    Such abysmal customer service has not only become commonplace but it’s become acceptable to most consumers. They don’t complain about having to buy a new MP3 player because the old one stopped working (and rationalize the purchase based on the new model having an improved feature set), but they’ll never buy another Ford/GM/Chrysler because a 1985 model had a bad window motor.

    Management at the domestics has hardly been stellar, but it’s not as though consumers always act rationally either.

  • avatar
    br549

    “Fall into the abyss” speaks to a world view where all that government does to help agri-business is measured – but regs that hamper trade and business are never counted.

    Come now. Subsidies are, in essence, regs that hamper trade and business. They (between the U.S. and Europe) completely reorganize global agribusiness on a grand scale. I had a farmer friend once who cultivated 1500 acres yearly. He told me that his farm income covered expenses only. He lived on that check from the Federal gov’t that arrived in his mailbox from year to year. The taxpayers, quite literally, provided for his livelihood, while he produced thousands and thousands of bushels of corn that the global market simply did not need, hence rock-bottom prices which starved out farmers in other countries who did not enjoy those yearly checks.

    Besides, either gov’t should get involved in aiding struggling businesses (whether they be agribusiness or auto business) or it should not. I am speaking to the doctrinaire small gov’t types who hang around these parts. When we fall back to arguments such as “well, gov’t regs hamper farming,” we open ourselves to legitimate arguments over the substantial regs our automakers labor under as well.

  • avatar
    br549

    On the plus side, we could be reading about the latest John Deere or Mahindra machines in the “Reviews” section; much more exciting than any minivan review!

    I used to have a Massey Ferguson 165 w/Perkins diesel that I could really wax eloquent about if prodded.

  • avatar
    Geotpf

    Well, Mahindra is going to sell pickups in the US starting next year (at least in theory), so maybe there will be some M&M reviews here shortly.


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