Bailout Watch 49: Ford and GM Shift on the "B" Word
Despite The Big 2.8’s best efforts, the mainstream media never bought into the idea that the $25b – $50b low-interest federal loans for “retooling” (included in last year’s Energy Bill) were anything more than bailout by another name. (Since the loans only apply to Motown, why would they?) As previously mentioned, the automakers’ “it’s a hand up not a handout” approach has created some severe cognitive dissonance– which helps Detroit’s efforts to secure the bucks not a bit. For example, Bill Ford met with DC legislators yesterday and swore up, down and sideways the loans were NOT a bailout. And then this [via Reuters] “Bill Ford said the money, if approved, would help his company accelerate its turnaround plan and meet government mandates for the industry to improve fuel efficiency by 40 percent by 2020.” Accelerate, eh? GM’s CEO has moved even further away from his opening gambit. “Speaking to reporters on Tuesday night after addressing the Washington Economic Club, [Wagoner] said the loan amount that GM might receive… would help with capital spending but also improve the company’s poor finances. ‘It would help us with other funding sources — maybe not in today’s market conditions, but over time.'” In fact, Wagoner’s desperation is increasingly apparent. When asked if GM needs the money before Congress pisses off for the election, Wagoner replied “I’m not sure of the value in waiting.”
I say do the bailout the same way as AIG - kick'em all to the curb for pennies on the dollar. Then sell off the pieces to the highest bidder to pay off the loan. Then, everyone would get what they want: new management, US based manufacturing, no loss of jobs. Perfect!
I think that the sticking point in all this is just how much of a financial "haircut" should Detroit take for its payout from Uncle Sugar. If the stockholder get wiped out, the bondholders get pennies on the dollar and the Board of Directors/Executives get canned then I can kind of, maybe, sort of support this fiasco....
psarhjinian: I bet that Ford takes a loss on every Escape hybrid. I think they license the technology from Toyota, and that probably ain't cheap. Hence, the lack of enthusiasm on Ford's part to sell more of them!
I was shocked to see an Escape Hybrid ad on TV the other day. They're impossible to find, but they're advertising them? It's not building your brand if you hype something you can't sell. Exhibit A: recent negative reaction to the Volt.