By on November 14, 2008

I can’t remember the last time Automotive News [sub] unleashed an email alert for an editorial. Hell, I can’t remember the first time they did it. As in this is it: the first time. You see how stunned I am? Well, no prizes for guessing which side of the bailout issue Crain’s boys fall. They unleash the argument that’s become the de facto Detroit defense: a bailout sucks, but not bailing out Motown sucks even more. They fucked-up but YOU will suffer. So YOU should pay. NOW. BEFORE IT’S TOO LATE! Hysteria and hyperbole? You don’t know the half of it. Well, not yet anyway…

“If Congress thinks a bailout of General Motors is expensive, it should consider the cost of a GM failure. Let’s be clear. The alternative to government cash for GM is not a dreamy Chapter 11 filing, a reorganization that puts dealers and the UAW in their place, ensuring future success. No, even if GM could get debtor-in-possession [DIP] financing to keep the lights on (which it can’t), Chapter 11 means a collapse of sales and a spiral into a Chapter 7 liquidation.”

Dreamy? Like “Oooh. Danny Zuko is so dreamy?” Find me anyone who argues that a GM Chapter 11 wouldn’t be a painful process for all concerned. And who says GM can’t get DIP financing? Shouldn’t we explore the possibilities of government assistance after a GM Chapter 11? Painting the bailout issue in black and white terms is the worst kind of yellow journalism, and does the automaker’s chances of long-term survival no service.

Especially when there is no plan on the table. No goals. No time lines. No strategic outline. Nothing. In that sense, “this” GM turnaround has about as much chance as the last (existing?) one, which was also bereft of publicly declared targets. As far as AN’s concerned, never mind. Pay no attention to that man behind his $15.5m curtain. It’s time to piss or get off the pot. Do or die.

“GM’s 100,000 American jobs will die. Health care for a million Americans will be lost or at risk. Hundreds of GM’s 1,300 suppliers will die. Their collapse could take down Ford Motor Co. and Chrysler LLC, perhaps even North American transplants. Dealers in every county of America will close. Frogs will fall from the sky. Boils shall fester on the skin of small children. And lo the Earth shall be cleaved in two and swallow the city on the river as the whale swallowed Jonah.”

Only the whale didn’t swallow Jonah. (And I made-up those last three sentences.) GM filing for Chapter 11 isn’t necessarily what professional courtesans call a “hard stop.” Even if GM loses half its market share, that’s still a Hell of a lot of cars and trucks. Someone will build them. Why not a post-C11 GM (i.e. Chevrolet)?

“Criticize Detroit 3 executives all you want. But the issue today is not whether GM should have closed Buick years ago, been tougher with the UAW or supported higher fuel economy standards.”

So what IS the issue? Like the automakers AN seeks to suckle, their unnamed writer just can’t seem to focus.

“The $25 billion in loans that Congress approved to partially fund improvements in fuel economy? Irrelevant. Dead automakers do not invest in technology.”

The switch in logic reflects Detroit’s inability to stay on message (hint: jobs, jobs, jobs). You bastards wanted us to build clean, fuel-efficient cars and liberate American from its oil addiction and save the God damn polar bears? Well we can’t do that if we’re DEAD, can we?

AN is also surprisingly conflicted on who’s in and who’s out on the death-defying bailout.

“Each of the Detroit 3 is in crisis. But Ford, which borrowed big two years ago and thus has more cash today, may skip a bailout and the strings attached. Cerberus, which bought Chrysler last year, doesn’t deserve money. Government cash might help sell Chrysler to a strategic owner.”

Yeah, that’s a thorny one. Does Ford really need the dough? And why stuff government money into Chrysler when its owner is Mr. Moneybags himself? Anyway, AN is looking out for you!

“The taxpayer needs protection and an upside. GM’s top management may need to go. Government-as-shareholder deserves a big voice. Those details can be worked out.”

May? You see that mangled piece of charred rotting flesh hanging off your shoulder? We may have to amputate. “Details?” We don’t need your stinking details! Just give us the money before we die all over you. After all, no matter what you i-dotters and t-crossers say…

“…the stark fact remains: Absent a bailout, GM dies, and with it much of manufacturing in America. Congress needs to do the right thing — now.”

Call me crazy, but handing $25b to the same people who got GM into this mess– without knowing exactly what we’re getting ourselves into– is not the “right thing.”

And now it’s time to send our email alert. Just as we have for the last five years.

Get the latest TTAC e-Newsletter!

65 Comments on “Between The Lines: Automotive News’ “The Cost of GM’s Death”...”


  • avatar
    paradigm_shift

    ““GM’s 100,000 American jobs will die. Health care for a million Americans will be lost or at risk. Hundreds of GM’s 1,300 suppliers will die. Their collapse could take down Ford Motor Co. and Chrysler LLC, perhaps even North American transplants. Dealers in every county of America will close.””

    Oh no! It’s the apocalypse! We must save GM at any cost!

    Damn self serving peckerhead journalists.

  • avatar
    no_slushbox

    I’m am tired of this whiny shit.

    It assumes that the government can intervene only before Bankruptcy, and not after.

    Guess what, if GM goes chapter 11 and can’t get financing or sell cars then the government can step in and provide the financing and guarantee the warranties.

    At least then the government will actually be saving a viable auto industry and the jobs that can be saved (no matter what not all of them can be).

    Stepping in before bankruptcy will simply create slowly dieing zombies, mainly for the benefit of bad management and a sloppy private equity firm.

    We have no historical precedent for an auto manufacturer going through a government overseen Chapter 11 reorganization.

    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.

  • avatar
    Bozoer Rebbe

    Robert,

    Again, how many total US jobs do you think will be lost, at least temporarily, in a collapse of GM?

    You disagree with AN’s analysis. You disagree with David Cole’s numbers. So what’s your own best guess?

  • avatar
    autonut

    Calm down boys, it is fat lady singing.

  • avatar
    Bozoer Rebbe

    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.

  • avatar
    Ken Elias

    Keep in mind that if Detroit goes down in flames, so does AN. Keith Crain likes his rag, and the lifestyle it affords him.

  • avatar
    jkross22

    @ Bozoer Rebbe:

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

    As is GM.

  • avatar
    Bozoer Rebbe

    Ken,

    They have Chinese and European editions as well, plus a family of regional business newspapers.

    Besides, most wealthy families have it set up so that better part of the family’s wealth is protected. The Crains will take a hit but I don’t think their Grosse Pointe manse will be shuttered. I’m sure the corporation owns the publications but the family itself holds some valuable assets like real estate.

    As the big national chains like Best Buy and Circuit City (now in Ch 13) expanded, locally owned chains like Highland Appliance and Fretter Appliance (I miss Ollie and his 5# of coffee deal) folded. While the corporations owned the stores, the Mondry and Fretter families owned the properties or controlled the leases, subletting them to the company. Now that the companies are no longer, they lease the valuable retail locations to the national big box chains. Same thing w/ New York Carpet World, when Marvin Berlin sold out to Shaw Industries for $48 million (only to see Shaw go belly up – good thing the Berlins got cash, not stock), the real estate remained in the hands of the Nussbaum family, who founded NYCW.

    All the old Highland and Fretter stores have new tenants. Just remember, location, location, location, and keep the family money separate from the business.

  • avatar
    Bozoer Rebbe

    # jkross22 :
    November 14th, 2008 at 3:00 pm

    @ Bozoer Rebbe:

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

    As is GM.

    The companies that made up BL had many more structural problems than GM. Obsolete technology, old plants, poor productivity, abysmal quality, even more insane work rules than the UAW, militant unions that make the UAW look like hardnosed capitalists, the list is almost endless.

    GM’s immediate problem is their liquidity and burn rate. Have they made enough changes to the way they structure and run their business so that they’d be viable with enough cash? I don’t know but you can’t say they haven’t done anything. Like they saying goes, impending death has a way of concentrating the mind.

    Obviously, many of the B&B here think Ford has a handle on the crisis and is best situated of the three to survive. Did Ford have any less of a problem than GM with entrenched fiefdoms and bureaucracy? If anything, Ford had a much worse reputation in terms of fractious internal politics than GM.

  • avatar
    jybt

    I know that GM is worth saving, but I’m tempted to let them die because they were too timid to just save themselves.

    GM, you don’t want to go bankrupt, right? But what have you done to stop it?

    You’ve delayed the Cruze. You’ve put the Camaro on hold. The LaCrosse and the CTS coupe are also on hold. The C7 Corvette and the Caddy flagship are on hold. What are you waiting for? The Volt? You won’t last that long, and neither will any of these great automobiles, if you don’t get the Cruze and Camaro out now!

  • avatar
    Adub

    Who cares how many jobs are lost? Paying for them with taxpayer money is inefficient and wrong. Why should a line worker at Taco Bell with no chance of a golden parachute pay for some UAW worker to get a gold-plated retirement?

    Shit, I should become a mugger. “I need the money, you have more of it, you can afford it.”

  • avatar

    great photos to go with this editorial!

  • avatar
    50merc

    One thing that I haven’t seen mentioned anywhere is that Chapter 11 itself is a bailout. How else can one legally get away with not paying debts and unilaterally rewriting contracts, while staying in business?

    I think the public reaction to filing bankruptcy might be surprisingly mild. Certainly, the best time to file is when failure can be blamed on a bad economic climate. Some people might even become more willing to buy a GM car, having been assured that the post-reorganization GM is a viable enterprise. Perhaps some marketing experts among the B&B can speak to that possibility. Can adversity be turned into a plus (e.g., “We’re back and we’re in fighting trim!”)?

  • avatar
    Steven02

    How exactly is GM supposed to put any of those products out the door with out the $$$ to do it? GM has only delayed these products recently because of its $$$ problem.

    GM wants to get those products out, but with out the $$$ to do it, and trying to conserve money right now, it made sense for them to do it.

    Why would GM purposely want to delay those products if it meant its $$$ problem would be fixed?

  • avatar
    geeber

    Bozoer Rebbe: Did Ford have any less of a problem than GM with entrenched fiefdoms and bureaucracy? If anything, Ford had a much worse reputation in terms of fractious internal politics than GM.

    William Clay Ford, Jr., addressed this problem head-on by bringing in an outsider to run the company, and said outsider has continued to effort to tear down those petty little kingdoms.

    No doubt he is being helped in his efforts by the realization that the wolf isn’t just at the door; it has two paws inside the house.

    Posters thus express more optimism regarding Ford’s future precisely because its leadership HAS made more strides in tackling the toxic corporate culture than GM has.

    Plus, Ford has a viable product plan going forward, and seems to realize that it must address ALL segments of the market if it wishes to remain in business, let alone in business as a major mass-market automobile manufacturer.

  • avatar
    Steven02

    I don’t think people would be happy buying a car from a company that just went bankrupt. People would wonder if the warranty and resale would plummet. I don’t think public reaction would be taken lightly.

    That said, I think if GM went into Chap 11, it would be soon followed by Ford and Chrysler. I think this would also cause supplier problems as money of this would go bankrupt. Hard to say how it would all work.

  • avatar
    Hippo

    The public might be more inclined to buy a Detroit product after BK and torn up union contracts.

    When there is a perception that the auto workers have to compete for a job at the same pay as the rest of the country, then there will be a trend towards helping them.

    “There is nothing more hated by the people then undeserved status”

    As long as unskilled workers in Detroit get multiples of the wages and benefits of otherwise equally skilled people, simply by entitlement decree, then the people should boycott them.

  • avatar
    dean

    The reason people here are more bullish on Ford’s prospects can be summed up in two words: Alan Mullaly. We all know he is no second coming of Jesus, but at least he is a competent executive brought in from outside of Ford’s inbred management ranks.

    Red Ink Rick, on the other hand, is a GM lifer immersed and enveloped in the GM culture of mediocrity, and his heir-apparent is same-shit-different-pile.

  • avatar
    Joe Chiaramonte

    More whining from Daniel Gross in Newsweek, with his own nostalgic taint:

    http://www.newsweek.com/id/168941

    What GM, specifically, must endure is C11 in order to jettison contracts with dealers, brand marketing and yes, the UAW, before it can step in any productive direction. It can happen before we spend billions in taxpayer “loans,” or it can happen later, when there’s no ability to pay them back and GM stock = $0.

    Current management and its compensation should be the first to be restructured. Then, the UAW needs to come to Jesus and partner with new management or cease to earn a spot at the table.

    What these proposed bailouts will do is to eventually help guarantee some golden parachutes which should actually be just as vaporous as any plan to revive the Big Three with a government bailout and no bankruptcy filing.

  • avatar
    jkross22

    @ The Rebbe:

    “GM’s immediate problem is their liquidity and burn rate….”

    All automakers face liquidity problems. GM’s is much worse because of a poorly managed cost structure and the perception of substandard quality of product. That perception is what is killing them, along with all of the internal problems that have been discussed ad nauseum.

    “…you can’t say they haven’t done anything.”

    If you call selling off business units for quick cash, shutting down elevators, turning off voice mail, etc. doing something. The toughest decision they’ve implemented in the recent past was shuttering Oldsmobile.

    “Did Ford have any less of a problem than GM with entrenched fiefdoms and bureaucracy? If anything, Ford had a much worse reputation in terms of fractious internal politics than GM.”

    That’s likely correct due to the Ford family meddling, but Bill Ford brought in an outsider who wasn’t a captive of the existing structure. Had BF continued at the helm, it’s certainly possible they’d be in a similar predicament to GM. Instead, Ford made the tough call GM has refused to.

  • avatar
    Lee

    What a bunch of whiney bitches.

    Let’s instead look at the positives for saving GM. While the following is not conclusive, it is more just a few ideas that i think should be part of the restructuring that must happen as part of any bailout. Mainly due to me just waking up and not firing on all 8 cylinders just yet.

    There MUST be change at the top. I can not for the life of me see how or why Wagoner should keep his job. All bonuses must be cancelled.

    Currently, GM spends more on health care than it does on steel. Lets see any bailout that happens address that issue. I believe that as of 2010, and the UAW agreement, such costs will be dramatically reduced, and thus the cash burn.

    GM’s product quality has no doubt improved of late, and they are turning out some world beating vehicles, but i think some culling/reorganization in the brand mix still needs to be done.

    Give each brand GMC/Chevy/Buick/Pontiac an individual identity. I think there is already an element of this happening, but lets continue it. Minimize the badge engineering. Something like this perhaps…

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

    Improve the product mix so it is not so reliant on one market segment. Offer a balanced product line up, with the ability to adjust production of each as the market dictates.

    Also, not to mention the millions of jobs at suppliers that will be saved.

    If GM goes into BK, so will the rest of the US Auto industry.

  • avatar
    psarhjinian

    Oh no! It’s the apocalypse! We must save GM at any cost!

    Well, that might be true. We are right on the edge of a recession, and the sudden closure of one of the single largest employers, both directly and indirectly, will hurt. It may take time for the shockwave to reach the coast, but it will get there. You cannot remove that amount of spending power and expect it not to have an impact.

    The key strategies behind any bailout should be:
    * Avoid catastrophic shocks to the economy until we’re well clear of a possible recession
    * Funds must come with provisos that GM et al must successfully demonstrate a turnaround plan and accept real oversight.
    * C11 is effectively a deathblow. Even if it allows a restructuring to occur, their reputation will be sullied beyond repair.

    Four or so years ago I would have said “let them die”, but not now. Bail them out, keep them solvent, but ensure that real, responsible, accountable management is put in place.

  • avatar
    TexN

    A topic that many on this site have mentioned many months ago (but not on this thread) is the fact that GM SHOULD have filed Ch11 8 or 10 months ago when they still had some funds to use as a basis for a reorganization. The culture arrogance of “bankruptcy is not an option” is what lead them down this path where their options are 1) extremely limited and 2) equally unattractive. Again, not a new thought but one that hasn’t been revisited lately.
    Tex

  • avatar
    jkross22

    @ Lee

    Other than the slow selling trucks and SUV’s, what other ‘world beating’ products are you referring to? I’ll grant you the Vette and the G8. What else?

  • avatar
    P71_CrownVic

    “They fucked-up but YOU will suffer. So YOU should pay.”

    I love how backwards our government thinks.

    If people wanted to support Ford, Chrysler and GM, they would have by buying their products.

    The big three are in the shape they are in because of a couple of reasons.

    1. Unions. They sucked a TON of development and quality money from the products.

    2. Forgetting how to build small/mid-sized, DESIRABLE, fuel efficient cars.

    3. Allowing the perception that Asian imports are better than the domestics. Well, in most cases they were…but that is not the case anymore.

    And what I don’t understand is how a bunch of minds at GM cane come together and produce a fantastic product like the Lambdas, CTS, Malibu, Tahoe…and yet, they cannot get ANY of the baboons to come up with a coherent, plausible, plan to save the damn company.

    And Ford is much of the same. The only advantage they have over GM is that they are not as big. Other than that, they have a lackluster line up of re-skins and re-badges…and a stock price that is dropping as fast as gas prices. And they think that what the world needs right now, is a truck that was attacked with a JC Whitney catalog and can travel over some sand at 85mph…brilliant. How about not making a useless truck, and rather spend the money on making the Fiesta diesel capable of meeting us diesel regs…a 55-70 MPG car sounds better than some goofy truck.

    And Chrysler…save the Ram and Jeep. The rest is history,.

    The baboons running Ford, Chrysler and GM need to be removed before they get our money.

  • avatar
    P71_CrownVic

    @ Lee

    Other than the slow selling trucks and SUV’s, what other ‘world beating’ products are you referring to? I’ll grant you the Vette and the G8. What else?

    Malibu, CTS, Lambdas, and to a very small point, the best MPG in it’s class Cobalt (36MPG).

  • avatar
    indi500fan

    Whether bail-out or chap 11, Red-ink Rick and Fastball Fritz need to go. GM needs somebody at the top who can inspire the troops.
    All these guys do is administer a morphine drip.

  • avatar
    Saber54

    Seemingly easy fix. Let EXXON fund the bailout for the big three due to their multi-Billion profit the last quarter. Their gas drives the cars that are in trouble. If the car manufacturers go out Exxon will be next with their hands out.

  • avatar
    Landcrusher

    The beauty of the free market is that we don’t have to know why GM failed. All we need to know is that it can and that it DID. This will alter the behavior of others in the market (everyone), and life will go on – ONLY BETTER. Failure to let it fail changes everything, for the worse.

    This has NOT been a laissez faire radical statement. It’s a simple description of why a free market works. Be humble, accept that we cannot know everything, and move on. There are times to fight the market, but this is obviously not one of them. Just because they are big, doesn’t mean they are necessary.

  • avatar
    Lee

    jkross22 :

    CTS, CTS-V, Cobalt, Malibu, Astra, Aura, Camaro.

    According to GM’s corporate website, that have 89 different vehicles. Stoopid.

  • avatar
    HEATHROI

    to a very small point, the best MPG in it’s class Cobalt

    with premium gas at 2.50, almost a vanishing point.

  • avatar
    autonut

    @ Landcrusher – great post

  • avatar
    8rings

    I am of the camp that says screw Detroit. It’s called Capitalism. However I would say that the bailout isn’t necessarily to bail out the companies but to keep all of those employees from going unemployed and loosing their retirement. Now I understand it is the employees that made the business fail but primarily the white collar types. The guy that installed the headlights didn’t have much to say about it.
    So my proposal is to take the $50 billion and distribute it into the employees 401ks. I’m not sure what that would come to when you include current workers, retirees, etc… But at least they could fail and everyone could move on. When GM is loosing 50B a quarter this bailout is putting a band-aid on arterial spray.

  • avatar
    metric_tool

    I’ll bet the first thing out of Gettelfinger’s mouth when you talk about union concessions is, “We haven’t allowed the current round of concessions to take effect yet!” If I am not mistaken, most of the cost savings from the recent contract changes were supposed to start showing up in 2010 (oh, that magical year again).

    GM is probably hoping to get enough money to stay afloat until June/July 2009 – by then the recession will be over and all of this unpleasantness will be behind us for a while. Just think about the pent up demand that will be unleashed after a year of a paltry 12.5 million US auto sales…

  • avatar
    JeremyR

    50merc: One thing that I haven’t seen mentioned anywhere is that Chapter 11 itself is a bailout. How else can one legally get away with not paying debts and unilaterally rewriting contracts, while staying in business?

    I suppose you can define the term bailout to mean whatever you want. In the context in which it’s been used in this forum, it applies to the use of taxpayer funds to prop up a failing business.

    Yes, bankruptcy is another mechanism that may be used to prop up a failing business. If used properly, it may help correct some of the problems which caused the business to fail. Or (since this is TTAC after all), not.

    The difference is that while a bankruptcy affects those entities that chose to expose themselves to certain risk (by doing business with a company, making loans to that company, buying its stock, etc.), a bailout places at risk the funds of taxpayers who may not wish to expose themselves to such risk.

    Steven02: How exactly is GM supposed to put any of those products out the door with out the $$$ to do it? GM has only delayed these products recently because of its $$$ problem.

    GM had plenty of cash when it was raking in the profits from SUV sales. It’s not the taxpayers’ fault if it chose not to invest it properly.

  • avatar
    MichaelJ

    I’m for the bailout for the same reason I was for the banking industry bailout. I don’t think this country can afford not to.

    I simply believe the arguments for a bailout outweigh the arguments against it. Yep, if we want to put strings attached, replace management or have a lot of oversight, that’s fine. No problem with that.

    To me, looking at what could happen if GM or all three go under in the near term, there’s a lot of possibilities of the impact, ranging from “not good” to disastrous. Suppliers are stretched, so a number of those go down too. That’ll bring the other automakers to a halt as they have to figure out how to find a supplier who’s still in business…for all the talk of Japan’s captured supply base, they buy a lot from other suppliers too, and the bottom line is that if you’re missing a single lugnut you can’t build a car.

    All these people that will be out of work aren’t going to be buying anything, and that’ll drag parts of the retail sector down with it.

    All these people that’re out of jobs won’t be paying taxes, and that’ll add up to a lot less revenue; a lot less than loans (whether they’re paid back or not) are going to cost.

    Other than simply screeching “They don’t deserve it!” like a spoiled 3-year-old, I haven’t heard any convincing opposing arguments to the bailout, an argument that will explain why the country will be better off to allow them to fail. I know we’re in a Capitalist system that is supposed to be survival of the fittest, but capitalism requires intervention at times (like the current banking system bailout), and in considering whether this situation lends itself to such intervention, I would think a pragmatic approach applies, and weighing the upsides and downsides of this one leads me to the conclusion that society will be better off, certainly in the short term, if we prevent the failure of these companies.

    The middle approach of Chapter 11 is the kiss of death – forget it. You either let them collapse or you don’t, and Ch. 11 will just slightly prolong the inevitable, because with choice, nobody will make a long-term commitment to a company that’s in bankruptcy.

    To me, a loan-based bailout with some oversight is not a guarantee, but has the best odds of success in saving a lot of headaches. I believe both GM and Ford will come back if they weather the next 14 months…both have shown they’re moving in the right direction with product, both have cut capacity and costs, and both are set to take advantage of the union concessions and resulting cashflow benefits that await them in ’10. And the scrambling they’re going through right now to cut capacity and costs will add to their competitiveness if they reach that magic year.

    And for those who want to watch them fail just to punish the management…figure out another way to punish the management without punishing the entire economy. These guys have so much in the bank, there’s not much you could do besides hurt their feelings anyway.

    This is like sitting on the sidelines right now watching your favorite car race. For many people, they’re secretly wishing to see an accident just to watch the excitement…after all, we’re in the stands, what could happen?

    But when these companies go down and the ripple effect shoots across the economy and ultimately affects everybody, for years, this’ll turn out like that once-in-a-long-time tragic accident that shoots car parts into the stands and leads to a lot of pain and people wishing they hadn’t gotten what they had secretly wished for.

  • avatar
    JeremyR

    MichaelJ: I haven’t heard any convincing opposing arguments to the bailout, an argument that will explain why the country will be better off to allow them to fail.

    Allowing the chronically weak player(s) to be replaced in the market by stronger, healthier, more stable businesses seems pretty valuable to me. Propping them up only encourages future sloth, since the “too big to fail” mentality is further reinforced. What incentive do they have to succeed if they know they will be bailed out?

  • avatar
    jkross22

    @ Lee and P71:

    The Malibu is a ‘world beating’ car? I guess all those folks that bought Accords, Altimas, Camrys, Sonatas and the Mazda 6 instead just passed on the ‘bu because they were unaware of the greatness of Malibu. Couldn’t have anything to do with the Malibu’s depreciation, long term reliability concerns, poor dealer support, average warranty coverage, etc.

    The CTS is better than a 528 or an A6? Better than the Hyundai Genesis? I too like the CTS, but let’s not get carried away – that car is not best in class.

    Cobalt, Astra, Aura? Best in class? C’mon.

    As Landcrusher noted, the market has spoken. If the cars you list indeed had been ‘world beaters’, they would have sold in much greater numbers.

  • avatar
    Steven02

    JeremyR : GM had plenty of cash when it was raking in the profits from SUV sales. It’s not the taxpayers’ fault if it chose not to invest it properly.

    GM would have been fine had gas prices not gone through the roof, housing market imploded, and then the financial system not crashed. Those 3 combined have made this problem terrible.

    JeremyR: Allowing the chronically weak player(s) to be replaced in the market by stronger, healthier, more stable businesses seems pretty valuable to me. Propping them up only encourages future sloth, since the “too big to fail” mentality is further reinforced. What incentive do they have to succeed if they know they will be bailed out?

    The incentive is pride, being successful, and keeping their jobs. Who really wants to have a company fail on their watch? Do you think anyone wanted this to happen? Do you think that potentially having over a million people out of work from this is a good idea? I guess that is valuable.

  • avatar
    br549

    All you Detroit-be-damned types who make up a decided majority around here, just keep holding your copies of “Atlas Shrugged” close to you hearts and please, please whatever else you may do, do not under any circumstances either read a word of economic history or a the business section of a current newspaper. Your precious worldviews could be at risk.

  • avatar
    luscious

    br549,

    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.

  • avatar
    MichaelJ

    @JeremyR

    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.

  • avatar
    rtz

    GM would just spend that 25 billion paying bills and payroll. Operating expenses and material costs. They have no profits. They have no looming sales turnaround. They will just build standard fare 2009 models. Are the 2010 models that much different from the `09’s?

    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?

  • avatar
    cmcmail

    The UK produces more autos now than 10 years ago with no “Domestic” ownership. Will this be true in North America in 10 years? If you ever owned a 20+ year old British car, you would likely hope so.

  • avatar
    Pch101

    I haven’t heard any convincing opposing arguments to the bailout

    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.

  • avatar
    br549

    I don’t believe any of these companies really want to be out begging for money right now.

    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.

  • avatar
    Adub

    Honda and Toyota are already building better mousetraps at every level. They have better management, which has lead to better employees, better employer-employee relationships, better processes (reliability versus pinching pennies), and better product.

    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…

  • avatar
    Your old pal Bob

    I’m a little miffed by a very small part of this discussion…

    “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

  • avatar
    charly

    cmcmail,

    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

  • avatar
    jybt

    But delaying the products “to save money” won’t make them any money either.

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

  • avatar
    seabrjim

    They DONT make products people want to buy. GM is like the Walmart of car manufacturers. I bought my 05 colorado because the tacoma went for sticker at the time and my truck was $4000 off. That makes up for the reliability and depreciation gamble a little bit. Is my interior like a 99 cavalier? yes. Was the tacomas interior more upscale? Oh yeah. GM is like the guy at work who will never get promoted and then whine about it. He does just enough to get by, takes every sick day he is eligible for, and always gets a so-so job review. He never does the extra yard thing because “Hey, it’s 5 oclock!”

  • avatar

    The number they’d sell without the baggage they’ve earned would be higher than the number they do sell, but likely less than the number they need to sell to stay alive without a radical restructuring.

    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.

  • avatar
    AnalogKid

    When people would complain that TTAC had it in for the Big 2.5, RF would respond something like this:

    “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.

  • avatar
    tankd0g

    Hows this for a retarded baseless comment.

    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.

  • avatar
    tankd0g

    “Bozoer Rebbe :
    November 14th, 2008 at 2:48 pm

    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.

  • avatar
    tankd0g

    “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.”

    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.

  • avatar
    Dr. No

    Saying no to GM for a loan adds more slope to an already slippery path to Depression II. This is potentially another Lehman Bros. times 10.

    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.

  • avatar
    Happy_Endings

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

    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.

  • avatar
    jybt

    People who know the Camaro is best-in-class. If people are smart, they’ll buy it.

    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.

  • avatar
    Geotpf

    Lee :
    November 14th, 2008 at 4:04 pm

    Give each brand GMC/Chevy/Buick/Pontiac an individual identity. I think there is already an element of this happening, but lets continue it. Minimize the badge engineering. Something like this perhaps…

    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.

  • avatar
    Geotpf

    Your old pal Bob :
    November 14th, 2008 at 10:49 pm

    I’m a little miffed by a very small part of this discussion…

    “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.

  • avatar
    kilroy01

    Why not save the innocent here?

    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.

  • avatar
    Happy_Endings

    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.

    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.

  • avatar
    jybt

    There’s no sense in sitting down and waiting for your company to go bankrupt…At least try to save yourself.

    That’s what I’m saying…

  • avatar
    fallout11

    Bailing out any of the Detroit 3 at this point IS positive reinforcement for poor historical performance (that got them to this point). The Curly-style “We’re a victim of circumstance” doesn’t hold any water, even more so than it does for the homeless bum begging for your money that you pass on the way to work this morning. And you didn’t bail him out with a $10000 cash infusion, did you? Why not?
    Because, much like GM, you know damn well he’ll squander it and still be under a bridge (by choice) six months from now.

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

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