The Guns Of February

Edward Niedermeyer
by Edward Niedermeyer
the guns of february

It is being reported that Bush and Obama worked together on the $17.4b bailout package announced today, to avoid saddling the incoming chief executive with “the demise of a major American industry in his first days in office.” And based on Obama’s statement on the bailout today, it seems that he’s preparing yet more assistance for Detroit. Provided of course that automakers don’t “squander this chance to reform bad management practices and begin the long-term restructuring that is absolutely required to save this critical industry and the millions of American jobs that depend on it.” Ironically though, the bailout’s structure does dump the problem on Obama before even the March 31 date. Dow Jones (via CNN Money) reports that the final $4b of Bush’s bailout (designed to carry the restructuring firms through February) can not be doled out without congressional activation of the second half of the TARP fund. And Bush ain’t gonna even try. “It’s not necessarily true that this administration, in the remaining 31 days, I believe, will go back to Congress,” White House Deputy Chief of Staff Joel Kaplan said. “What is clear is that the Treasury, with these loans (the initial $13.4b), have effectively committed the first $350 billion from the TARP.” Which means Obama will have to request that congress open the final $350b before the March 31 deadline, and only days into his presidency. And if he does free up the $350b (which he is far more likely to accomplish than Bush), well why the hell not give Detroit even more? We sure wouldn’t be surprised.

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  • Qwerty Qwerty on Dec 20, 2008
    The Democrats will hand them at least $100B in the next few years. We'll be getting off lightly then compared to the trillions the Republicans wasted on their wars.
  • DweezilSFV DweezilSFV on Dec 20, 2008

    Akear: The Aura is based on the Pontiac G6. It may be remotely related to an Opel in the same way the Delta platform as used by the ION/Cobalt is related to the Astra [or the Chevette the Opel Kadett: very few parts were interchangable]. 60% of it's design was taken from the G6, so while not the sort of badge engineering of the GM minivan variety, it shares little with the Opel other than the way it looks. And the new Malibu is further based on the Aura, IIRC. GM loses $10,000 on every Solstice/Sky sold. But you are correct about the failed Opels : Catera, L Series, Pontiac LeMans, Opel by Isuzu , Opel by Buick, Saab....

  • Akear Akear on Dec 20, 2008

    The biggest US Opel bomb of them all is the Astra. Saturn probably won't even sell 12,000 of them this year. This makes me very nervous about Ford's upcoming European-sourced cars coming to the US in 2010. I wonder if the German engineers at Opel have gotten over the shame of the ION. It is not entirely their car, but they played a role in its development. The whole global Delta program has been a big flop. Unlike the Saturn L1, the Aura has not broken the 90,000 annual sales mark. The Aura is currently GM's slowest selling mid-sized passeger sedan. I think Saturn's is going to sell about 65,000 this year. Not good.......

  • Wmba Wmba on Dec 20, 2008

    There haven't been any US "world class" cars since before WW2. If there had been, exports would have flourished abroad. Hasn't happened, because American cars work in the US and Canada and pretty much nowhere else. Too big, in the past too flashy, and irrelevant to countries importing oil. Meanwhile on this bailout horesemanure going on, this is what Canada's top pundit and investment manager thinks, from the Globe and Mail a few days ago. Read and heed: "Regardless of which government pocket the auto bailout eventually comes from, it will be just the latest in a series of missteps we have witnessed since the credit crisis began 16 months ago and which soon enveloped the world. That, as it happens, was one of the subjects of a wide-ranging conversation I had the other day with investing legend Stephen Jarislowsky, who has experienced just about every market condition imaginable in his storied career. “I'm of the opinion that whether you bail them out or not, the U.S. is going to buy the same amount of automobiles,” said the 83-year-old founder of Montreal-based Jarislowsky Fraser, which manages around $40-billion. “And you cannot compete in the long run with a plant that pays, say, $75 an hour in the north with one in Mississippi which pays $47 and doesn't have these enormous liabilities for pensions and these enormous debts.” A far better solution would be letting the troubled makers restructure under bankruptcy protection, where they could shed uncompetitive labour contracts and redesign outmoded distribution systems. But surely that would be disastrous for equity holders, who would likely end up with nothing? “The shareholder loses $5. He has already lost $55.” Okay, so a bailout counts as a goof. What else makes his all-star gaffe list? Well, the first might be putting former bosses of Goldman Sachs such as Mr. Paulson in charge of the U.S. Treasury. “I have never ever trusted anybody who works for one of these big underwriting houses,” Mr. Jarislowsky said. “They allowed certain [financial] companies to go bankrupt, which was unnecessary. On the first day, they should have guaranteed all the deposits so there would be no runs on the banks. That would have prevented a lot of the chaos. Then they played little games” with other banks. Then there is the aggressive rate cutting by central banks, which Mr. Jarislowsky regards as not only useless in the current environment but downright harmful, especially to pensioners. “I don't see the point of going to lower interest rates, because that isn't going to help anything,” he said. “Governments have lowered them to a level which I think is stupid. When people are scared of going bankrupt and want to get rid of debts, they're not going to borrow, not even at zero per cent.” Mr. Jarislowsky is firmly in the camp that sees deflation as the biggest threat imaginable right now. Which is why he advocates public stimulus spending on a scale so vast that it will reignite inflation. “I think it is going to be a very lengthy recession. And we don't know yet whether the government is going to do the right things or the wrong things.” But he is not without optimism – about highly rated corporate bonds, good-value stocks (consumer staples, debt-free oils with no exposure to costly oil sands projects) and the lessons that will be learned by the young. “I would think that when the young people of today come out of this, they're going to be better citizens.” Poorer, maybe. But definitely wiser." Bush and Paulson are without merit themselves, IMO.