Use the bailout to cover retirees and suppliers, post-bankruptcy, rather than throw it down a rathole.

That’s what I’m saying…

In case you haven’t noticed, we’re in a recession. And most people think things are going to get worse before they get better. So most people aren’t going to spend 32K on what a car that may not be their daily driver. Those that want the Camaro as their primary car, i.e. those that are young and probably don’t have a lot of credit, would have trouble finding a bank that would give them a loan, even at cruddy rates. Those old Camaro owners who wanted to get one back when the new Camaro information was released, and thought at the time that they would now be able to easily afford one, today realize they can’t.

In essence, there are two groups of new Camaro buyers now. The young people who don’t care what their monthly payment is, they want one and the middle aged drivers who don’t care what their 401K is worth, they want one.

If GM dies everyone cries that their suppliers will fail too. No doubt this is true as they are mostly small margin businesses.

So my idea is give the loans to the suppliers that must survive to support the other surviving players in the auto industry. Loans to keep them alive until they can adapt to the new market dynamics. This will also mean that the suppliers will still have an employee base when the markets turn around. Who knows they may even pay the loans back on time.

This has to be cheaper and have a higher chance of success than propping up GM and all it not so hidden liabilities.

“They make cars nobody wants to buy,” is just flat wrong. I know there’s some Yogi Berra quote in here somewhere, but in my little corner of Southern Riverside County, California, you can’t swing a dead Vega without hitting a GM product on the road.

I live in the city of Riverside itself, and Toyota has about a 40% market share and Honda has about 30% market share in car sales. Now, trucks and SUVs, there are a lot of domestics around here, but domestic cars, especially newer domestic cars, are rather rare. Nationwide, GM sells fewer cars than Toyota does, although it sells many more vehicles, and a lot of GM car sales are to government agencies, rental car dealers, etc.

Overall, the domestics have a 50% share of the domestic vehicle market. So they have a lot of sales still. But that share is dropping, and a lot of those sales aren’t really individuals who go out and buy domestics of their own free will.

That is, drop the following sales from the equation:

1. Sales to government entities who basically have to buy domestic.
2. Sales to employees and their families of the domestics and their part suppliers who get large discounts off sticker.
3. Sales to rental car agencies who get large discounts off sticker.
4. Sales of products the imports don’t compete in (heavy duty pickups (duallies, F-250s and F-350s, that sort or thing), full size vans, etc.).
5. Sales to members of the general public who get huge discounts during one of Detroit’s periodic clearance sales.

…and the percentage of sales by the domestics is probably 25% or less. That is, regular Joes who buy a vehicle with no special discount, and who have a choice of foreign and domestics, usually pick a foreign vehicle. Especially if they are buying a car (or minivan) instead of an SUV or pickup.

Pontiac = Sports/Performance
Chevy = Family cars/econoboxes + Corvette
GMC = Trucks + SUV’s
Buick = Luxury

That’s not possible right now. Following this plan would be fatal to GM.

Right now, PBG (Pontiac-Buick-GMC) needs to have everything Chevy has, but a little (very little) more upscale. PBG doesn’t have enough sales to give them many exclusive products. But they has too many sales to kill, because most of those sales are clones of products sold as Chevys, and then the plants that make both Chevys and PBG products will be unprofitable due to the lack of sales from PBG. Too small to give unique product to, too big to kill. Those PBG dealers also need a full line up of products in order to survive.

Part of the issue is that there are a lot of people who will buy a Pontiac or GMC who won’t buy an identical product with a Chevy badge on it. Also, a lot of people have a personal relationship with their local PBG dealer. All those sales will not migrate to Chevy if PBG went away. Remember how all the ex-Oldsmobile buyers were all supposed to buy Buicks when Olds went away? That didn’t work out, now did it?

Mercury exists in a similar position over at Ford.

Yeah, not a big group. But even a good amount of the less enlightened are going to decide on the Camaro. Don’t forget that the original Camaro has its devoted followers who want to get one.

Also, it’s dirt-cheap. $32K for the SS? Sign me up.

Enough for you, Happy endings? It should be.

Yeah, and who’s going to buy one? The young kids that want one won’t be able to get a loan (especially since the days of GMAC giving 0% for 72 months to anyone with a pulse are over) and the empty nesters won’t get one because they are worried about their 401K’s and retiring. The only people who are going to get one are those that saved specifically for a Camaro since they first heard about it. I don’t think that group is all that big. In addition, $4 gas is still fresh in people’s minds, no matter what it costs today. And people don’t want to have a V8 sports car in their driveway in case $5 gas comes along in the future, even if the car gets decent gas mileage.

C11 won’t work today given all the choices customers have. Buying a car isn’t like buying an airline ticket. Even obvious things bear repeating.

The economy will recover enough to withstand a bankruptcy of a GM in two years.

I don’t like the choices either. But I am convinced that spending $25b is CHEAP compared to the harm bankruptcy will have on this economy. If Wagoner really cared about GM’s chances, he would resign as part of any funding plan.

Companies don’t have “feelings”. They have greedy CEOs, some more than others. That’s it. If they get paid by taxpayer dollars or profits, it’s all the same to the guy putting in the new pool at the summer house.

We do, however, have historical precedent for what the industry whores at AutoNews are proposing. It is, or to be correct, was called British Leyland. Continually supporting failure ensured that it eventually failed.

British Leyland was a failure long before it was nationalized.”

Ya, just like GM.

GM dies and Ford flurishes. Hell I’ll even say something crazy like Chrysler does well too. Go fuck yourself GM. You’ve been diluting the market too long.

“We would love to see the Big 2.5 with competent management, building competitive vehicles.”

Well here’s the chance. For GM, give them capital in return for an equity position, with the condition that the Board and Mangement are replaced.

For Ford, loan guarantees so that they can maintain liquidity while they work their turnaround.

For Chrysler, nothing. Cerebrus has plenty of capital, and theirs has been a liquidation strategy from the beginning.

The ultimate argument against a bailout is that it’s far from clear that they’d survive anyway. There needs to be a viable, equitable plan that all key parties have bought into before doling out the cash.

The money they spend to release the Camaro will more than pay for itself.

It is not important if Britain has adomestic car companies but if the EU has them. You could compare the USA with the EU with the difference that the individual European states have much less leeway in deciding which cars are legal to sell than the American states.

ps. I would consider Ford a domestic British company

“They make cars nobody wants to buy,” is just flat wrong. I know there’s some Yogi Berra quote in here somewhere, but in my little corner of Southern Riverside County, California, you can’t swing a dead Vega without hitting a GM product on the road. Wouldn’t it be more accurate to say, “they make more cars than people are willing to buy” because of idiot production targets to keep a certain number of workers working?

Say what you want about GM’s incentivitis, but there are a lot of faithful buyers down here who love their Chevys and would buy them no matter what. There just aren’t enough of those buyers to snap up all the product the General has been putting out.

I actually feel smarter reading what you good folks have to say about this though. Thank you for that.

- your old pal bob

Just because somebody else figured out how to do something better doesn’t make it magic. Bailing out the Big Three will punish the better competitors.

Maybe we should handicap better football teams while we are at…

That’s a good point. Detroit does not have a history of begging the gov’t for funding. Ford mortgaged everything right down to the cafeteria silverware before it reached this point. And with the exception of Chrysler (whose deal Uncle Sam made money on) I think it’s unprecedented. Go back and read some editorials from that era (or as in my case, scan your personal memories). Absolutely no one believed Chrysler had a snow ball’s chance. It was widely considered a boondoggle. But there’s that pesky history again.

That statement assumes that the bailout plans being suggested will work.

They won’t. The terminology here is misleading. A “bailout” implies that if it is undertaken that the company will be able to stand on its own two feet.

In the case of Ford, I could see this succeeding. For the other two, I don’t. Whatever money is given to them will be squandered and wasted, and within a very short time, they will either be dead or else begging for more greenbacks.

A lot of people who love the Big 2.8 seem to understand little about money or business. The vehement supporters are often clearly in this camp, for they assume that the problem is money, and that the solution therefore must be monetary in nature.

Money is not the problem. Their current lack of money is an indication that the companies are so ineptly managed that they are incapable of creating profits, except during rare exceptional moments that can only be described as luck.

If you give money to people like this, you will lose it. They are either too greedy or else too stupid to use it wisely. In either case, they cannot be trusted.

On its current path, the North American branch of General Motors is a dead enterprise. It does not understand how to make products that customers will buy in sufficient numbers and at high enough prices that they can produce a profit.

Elsewhere, I’ve suggested a variation of the bailout (that has a snowball’s chance of happening) — give the assets of GM away to a firm with expertise in the automotive industry that will invest money in it and will (hopefully) know what to do with it.

The current “bailout” proposals as put forth by Detroit and their friends in DC do nothing except to inject cash into the hands of people who have a track record of paying dimes to get nickels. This won’t be a bailout, it will be a down payment on failure, being made at a time when we are already strapped and when priorities have to be chosen carefully.

Sell GM to the middle east, Russia, or China or exchange GM for oil!!

Oil for food? How about some oil for GM?

Or just shut down GM NA since it’s just a drag and only keep running the profitable units in other countries.

Keep the Corvette plant? Does it turn a profit on it’s own? Can it exist on it’s own? Any other GM plants/vehicles that can exist on their own?

Normally I would agree with you that letting a chronically weak player get replaced by a stronger healthier player is a good thing…I also understand the argument that says a bailout is reinforcing behavior.

There are a number of counterpoints to your first. There is no replacement player here. The other players are the other automakers, and they will immediately be weakened if GM shut down, because a GM shutdown will be followed by suppliers going out of business, which will hurt all the automakers, some of whom wouldn’t be able to recover from production stoppages due to lack of parts. The ones that will be left will have to throw capital at surviving suppliers to retool to replace existing parts, followed by validation costs of the new parts, etc. Then they’ll be faced with a demand that they are not capacitized to fill, so between their higher costs of staying in business, and the lower capacity in the market, the costs of cars will skyrocket…at the same time that the American market is in a depression…again, I have trouble figuring out where the sunshine is in this scenario.

The idea that a bailout is reinforcing behavior…I have trouble with that. I don’t believe any of these companies really want to be out begging for money right now. They’d rather be healthy. I don’t think any company develops a business plan that includes a bailout.

I don’t work for you…I work for myself. The idea of ME going to WORK, putting in an HONEST DAY’S WORK…..for YOU sickens my stomach. Nothing is going to change that world “view”. It is deeply part of who I am. Your mouthing off will not change that one iota.

Now, let’s take it one step further….away from the people. You and “your kind” can lie all you want and say this is about “jobs”…but it is NOT…it is about an abstraction we call a “corporation”.

So…the idea of me working…not for myself, but for the well being of a “corporation” I CHOOSE NOT to work for is a type of slavery.

I don’t OWE GM ANYTHING, NOR HAVE I *EVER*. GM can rot on the vine for all I care. If GM can’t make a decent product, then to Hell with them.

This “abstraction” we call “GM” has NO CLAIM to the fruits of my labor whatsoever!

If you think otherwise, then I would say YOU, sir, are the deluded one.

The day I stoop to the likes of “your kind” is the day I stop work all together.