As if you really have any say in the matter. Your tax dollars are going towards a $700B bailout of investment banks (which I’m sure you wrote your congressman & senator to vote no on). Your tax dollars went toward purchasing 80-percent of a company that’s even more mismanaged than GM that still doled out bonuses and pay for lavish hunting trips after getting bailed out. And your congressmen didn’t even have a chance to vote on that.

You may cry and stomp your feet and hold your breath until your face turns blue all you want, it’s not going to make a difference. In the end, you’ll be paying for this whether you want to or not.

Just as Henry Ford found out positive sales benefit when he increased his workers wages, Detroit is getting hammered to some extent because cars are no longer affordable to the masses. They escaped for a while by going to five and six year loans and leases. I about crap in my pants when I read rags such as Car and Drive telling me how affordable a $25K Malibu is.

I had to help my permanent student daughter buy a used car when hers was totaled by an uninsured driver. I had to go to Chicago to buy a Suzuki Forenza with 40K miles for $5800, which is what she got from insurance. Most clean used cars are 6K and up now. For people making $10 an hour, there is no such thing as an affordable new car. Now that Suzuki has discontinued their Daewoos, pretty much all that is left are the base Kia and the Chevy Aveo, but even those are now out of reach of masses of Americans.

Wiping out GM debt in Chapter 11 would help, but the broader issue is how to make money in a mass market industry, when maybe only a small percentage of Americans can afford a $25,000 car.
Henry Ford II was worried about affordability of cars with all the new 1970’s regulations. He was right to be worried. Someone wrote a 1970 Dodge Challenger at $3200 would be $16,000 in todays inflation adjusted dollars. OK, I want my Challenger to be $16,000. Could Chrysler make money at this price? No.

GM would need sufficient funds to develop new platforms that would be market-competitive and it would need enough money to keep operating until those products were on the market. Moreover, it would need to be assumed that some of those new products would fail, so that there would need to be investment across the board in various market segments. Part of GM’s current problem is the result of concentrating on one market segment, trucks, and ignoring another, small cars. The future is, by definition, unpredictable, so an investment would need to be rather broad.

If you assume five years and five billion per platform, the costs quickly become staggering. Even shorn of the labor legacy costs, you’re still operating at a loss for five years,

You can, of course, stuff the taxpayer with the legacy costs – they’re on the hook for those, anyway. But, you cannot turn out a competitive product overnight. So, it will be necessary to keep the company running, at a massive loss, for a minimum of half a decade.

There is, of course, no way to avoid this. Cutting costs won’t make the company competitive in the future. Even when shed of it current costs, the company will still require massive amounts of capital to produce anything new and to survive until it can. And when it does, it will be producing in the most competitive possible world market, which means that it will need even more capital to be developing the next generation of everything, even before the first generation can pay off.

The car business is one of the most capital intensive in the world.

As a rough number, $250 billion would do it. $150 billion would be marginal. And that’s assuming the government takes over the pensions and the UAW is eliminated as a worker representative.

Because – never forget – the ability of GM to make it depends, entirely, on eliminating the UAW from the equation.

A nationalized GM? Could it get any worse than that?

Sure. A nationalized GM-Chrysler combo.

GM needs to find a way to increase sales with the brands they have (that is, buying Chysler will increase sales, but that doesn’t count). Hell, they need to stop having sales shrink to start. That is the only solution, and it may be impossible. Bankruptcy, even if managed by the government, is not a way out.

I have said it 100 times the loss of GM does not mean the loss of American made autos, and I don’t mean the transplants. GM has billions of dollars of resources, technology, and brilliant hard working employees, they are just not using it properly and more or less destroying American manufacturing rather than making it fruitful. PCH101 is right GM has tons of value and potential for profit tied up in all that debt and mismanagement, the good parts are still there, well right now. Someone with real vision will be able to take that good stuff after the bad bits have been tossed in the trash and revive the industry and probably within one product cycle due to all the pent up demand. In these rather depressed times it would need to be someone with deep pockets and real vision with an eye on the longterm return, not like Chrysler.

Let me toss this one into everyones head. Say GM goes Ch 7 by the end of this year. The good parts get bought up at a discount(powertrain divisions, product development, research, the flexible factories , whole car tooling for good models or ones that have real potential, maybe 2 or 3 brand names), unions GONE. After 6 months of everything being shut down do to the court process(I’m guessing here I don’t really know how long that would take), you start hiring back the good lost employees including assembly but with a complete new management and a business model that works in the world wide global market today not like the dinosaur it is now, set up for maybe 15% of the market. No beaurocracy, no fiefdoms, just everyone working toward an end goal of making the best product for the market at a good profit to continue the cycle and grow. With new marketing and a focus on the product and customer this would make for huge comeback of the American car.

Unfortunately I know it will never happen. The government will just keep wasting our money until we are just like the UK.

If GM were liquidated, the pain would be concentrated in GM areas. But there’d be opportunity for others. Given the likely 20% drop in US annual sales, don’t other firms have the capacity to pick up the slack?

It’s not gonna happen, but it makes more sense than having car making zombie firm(s) hang on for years at taxpayer expense.

Probably little to none of it. The answer could also vary quite a bit based upon how they choose to allocate the costs, so the result could be debatable.

That percentage of market share should be attractive to a buyer, assuming that the buyer can acquire it without too many of the liabilities that the current company carries. A competent operator should be able to make a profit with market share that high and the benefits that come with it.

If the feds were to broker the sale of GM to a third-party, structured so as to hand them the good bits without too many of the bad ones, then GM becomes an attractive buyout target. Even if the new buyer were to lose some market share (which seems likely), the new owner would still have a solid foundation for launching a turnaround built upon a smaller, more rational product line.

A GM that has 20 or so models, several of which are winners, could be brought back to life and eventually be made profitable for a patient, savvy owner. The return on investment for that new owner would be impressive.

In its current form, GM is not very attractive at all, and I would question the judgment of anyone who would want it with the idea of continuing to operate it.

GM’s lack of cash is the byproduct of incompetent management and a culture that disrespects the customers who keep it in business. Giving them more cash without addressing those root causes is only going to cost someone a lot of money. I hope that someone isn’t me.

And the world of big business private enterprise has shown itself to be less corrupt ?????

People often talk about how the US mobilized to win WWII, but seem to forget that part of how that was done was through full federal government control of just about every aspect of society. Young men were conscripted into the military in staggering numbers, household basics like sugar and fuel were rationed by the government, industry was put under the direct control of various national boards of production and so on. Don’t get me wrong, I actually like the idea of free enterprise … but it chaps me when people say government control always equals BAD and private control always equals GOOD. The facts are there and the real answer is that in every situation IT ALL DEPENDS ….

After all is said and done the amount of money to successfully bring them out of bankruptcy(probably $100-120billion) could be used to create a brand new American Electric Autos or something like that , that wouldn’t have all the cancer still left floating around inside it. The money is better spent in so many other ways than to resurrect that dinosuar after that meteor hit.

Having the government manage it is an even worse idea, they can’t even balance a check book. GM would just become a new way for pork to suck even more of our money away.

I vote for taking the economic pain NOW, even if it means a slight depression. We can’t keep acting like children and whining for uncle Sam to fix it when the lumps look like they might hurt. Poorly run companies go out of business and people lose their jobs and the economy goes down, it’s the natural cycle, we just have to learn to deal with it. And if a company gets so big that it hurts the economy in big bad ways just because it fails of it’s own doing, don’t let the economy become so dependent on one company next time. It’s called learning from your mistakes, something American’s really need to learn.

telrbm1 I was going to ask you what your letter looked like, but then I remembered Congress didn’t listen to me or the millions of people who protested the $700B bailout. They don’t represent us they represent their major contributors and own self interests. I’m going to vote almost all my incumbants out come Nov. 4th, the rest of you might want to consider it also. At least send them a message.

I really should not be drinking a cup of coffee. It hurts when it comes out of my nose. Franklin Raines and Jimmy Johnson are available I believe. Look, bureaucracies always expand. MADD is still around even though their original mission, lowering drunk driving levels to near zero, has been accomplished. If you think a bunch of G14s are going to be easier to move out of their positions than the careerists already at GM you are nuts. The government unions would never stand for the stuff the UAW does. A government takeover would be FOREVER.

I’m not paying for another Amtrak and USPS. A bigger dumber more costly burden on my tax dollars, and my childrens and grand childrens. I paid for one of their sh*t products, a 2000 not 1986, and it continues to cost me money and a giant headache(with less than 100K miles). If GM becomes a nationalized blood sucking leach on my taxes I am going to seriously start looking for another country to pay taxes to.

And if the Democrats under Obama do this 401k theft to make Social Security #2 I’m out of here for sure.
Would Obama, Dems Kill 401(k) Plans?

Here is the proposal if you want to read the madness, Guaranteed Retirement Accounts.

Saw it, lived it.

Easy now. GM still accounts for 18 or so percent of the U.S. market. Although they can’t survive on that, it’s still a big ass chunk of sales.

True, but I remember when I was in high school, GM accounted for roughly 50% of all new vehicle sales. I haven’t seen a market share graph from 1970 forward, but I’m guessing the downward trend line is accelerating.

Already I believe the uncertainty surrounding GM is costing them even more sales. This could easily turn into a catch-22 tailspin.

Disturbing to say the least.

http://www.businessweek.com/lifestyle/content/oct2008/bw20081023_883385.htm?chan=top+news_top+news+index+-+temp_top+story

Easy now. GM still accounts for 18 or so percent of the U.S. market. Although they can’t survive on that, it’s still a big ass chunk of sales.

I think that anyone who thinks that GM can survive a public bankruptcy in an economy this challenging is kidding themselves. There would be the equivalent of a run on the bank, which in this case means zero customers.

You’re implying this isn’t already almost the case.

It stretches back further than the 80s. The perception gap between GM and the competition (read: imports) is impossible to ignore. And a lot of the blame lies not with the American consumer who remembers their horrid GM car and/or GM dealership experience, but with the company itself for allowing those to happen.

I’m sure many people were longtime GM loyalists until they finally became fed up with the company’s product and practices. And people remember when they’ve been burned; they probably will take their bias to the grave. Though the product has improved, they’re not winning back those former buyers (and probably not their children, either).

The rise of import automobile ownership in America (very) loosely parallels the rise of Christianity during the Roman Empire. At first, it was persecuted. Over time, however, it became more and more mainstream until it became the official religion of the land.

davey49, that is simply wrong. The first GM in our family was a 59 Chev. That I don’t remember. The next was a 68 with a 250 inline 6. We got good use out of that. The next one was a 78. The drivetrain was good (350 auto) but the build quality and materials were appalling. When that died, my dad got an 85 with a 305. The build quality and materials were even worse, and the 305 sucked (burned oil). My dad gave up, but friends continued to buy GMs…Pontiac 6000s, Grand Ams, Cavaliers, and a Phoenix. They sucked. All of them. Even now, I look at my boss’s Trailblazer. It is a turd. The only solace for him is that when he goes to sell it he can advertise ‘low miles!’ due to its being in the shop so often.

Photo is worth 1000 (or 800) words. Well done.

GM’s done. Bailout is a misnomer as there is no one actually getting bailed out. It’s the taxpayer getting thrown on board that sinking ship in Ken’s picture.

I wonder how much GM (soon to be known as “Government Managed”) is going to blow at the LA Auto Show this year in hot women wearing sequent dresses, nice displays showcasing their C- efforts in cars and all those fancy brochures that get thrown out in a few days.

Any official TTAC presence planned?

As I’ve written before, at the right price, everything moves, even with no warranty.
Consider my price points:
2009 Silverado 4×4, Nicely Equipped : $8K
2009 Cobalt, Nicely Equipped: $2.5K

Although, that’s not gonna happen. Mr Elias’ first point is probably right: No major changes under government ownership. Keep on muddling…

Fast forward to October 2010:

The GOP runs ads asking the Obama administration to release the (top secret) data on how many ten’s of thousands of UAW members are in the “taxpayer” job banks (at $50K each / year + benefits).

And heck, if talk radio hasn’t been shut down by then, we may actually find out.

If you make a good product, you should be able to sell it. If you can’t, that’s a failure of your marketing department and thusly the leadership of your company.

Case in point for success: Hyundai/Kia.

GM could have offered ten-year warranties and made it easier for customers to get warranty claims honoured. They could have taken the Saturn model and deployed it across the whole line. But they didn’t to any of these things because, both at the executive level and as a collective, GM does not believe they’re at fault.

The WTC didn’t kick up a fuss over Airbus, for instance, or at least didn’t do much to stop it.