By on February 4, 2009

In fourteen days, GM and Chrysler will submit realistic plans for viability to Congress. See what I did there? With January’s sales slaughter revealed, it’s obvious neither automaker can survive without a huge and ongoing injection of working capital from the nation’s working capitol. Even if Uncle Sam provides this staggering amount of money (more than enough to start a car company from scratch), GM and Chrysler wouldn’t make enough profit to pay the interest and the principal during the loan’s term. The plans the automakers are about to present to your elected representatives are a fictional moon shot—with a make-believe launch vehicle that couldn’t propel a chimpanzee ten feet.  

Chrysler will point to its deal with FIAT as their lifesaver. In truth, it’s nothing more than a “free look” for the Italians to figure out what pieces of Chrysler they want to buy when the liquidation sale begins.

Worse, if Congress bails out Chrysler with more of YOUR dollars, the deal gets even sweeter for FIAT. Entry to the US market on the back of the taxpayers, a significant ownership stake and eventual control (for $25m) of Chrysler and the time to try and make it all work. That’s some plan. For FIAT.

But here’s the kicker. Nardelli says Chrysler needs “only” three billion dollars more of your money to get there. Are Bob Corker and Dick Shelby the only two guys in Washington that can see the sheer and utter stupidity of this? It’s as clear as daylight that this dog won’t hunt.

What’s the point of throwing $7b (or more) into a company that has no reason to exist in the US market?  A company that needs import technology for small cars and engines to meet the new standards from the Green Party? Heck, save our money and let FIAT come in on their own.

In GM’s case, the plan will look like everything else Wagoner and his team have presented in the past. Goals and actions that have no hope of realization. So far, the UAW hasn’t made the accommodations required—and never will—to the terms of wage/benefit/work rule parity with the transplants.

The unsecured bondholders and other financial creditors might take a cramdown BUT . . . one of the most skillful members of this group (PIMCO) has already pulled out of the negotiations. How about restructuring of the brands and dealer network? They’ll reveal their latest “no plan” plan (i.e., “we’re still reviewing all options”).

The facts are self evident. GM alone lost 122k units of sales in January 2009 versus last year. At an average wholesale to GM of say $24k/unit, that’s a loss of nearly $3b in revenues for the month. Or a run rate of $36b/year. Throw in the drop in sales in Europe and elsewhere around the world, and it might be another $1b to $2b dollars a month in lost revenues. Combined, it could be as much as $50b revenue hit (annualized) for the first half of this year. GM simply can’t cut its expenses fast enough.  

As for Chrysler, it’s worth repeating what Jim Press told his dealers. (“Without orders, the company has to liquidate.”) Uh Jim, your dealers have over 350k units on the ground and you sold 62k units in January. Do you really expect them to “stock up” now?

Bottom line: the car market will suck for the next six months, if not longer. It makes no sense for Congress, the President or the Car Czar to try and craft a plan that saves Detroit with taxpayer dollars without a bankruptcy.

GM and Chrysler have no viability plan that can work in the current sales environment (not that they had one during better times). If anything, now IS the time for bankruptcy, not later. Let the bankruptcy court system do what it’s designed to do best: figure out what’s worth saving (GM) and what’s not (Chrysler).

When the market does come back—and it will—a restructured and reorganized GM will be well suited to offer a smart and sensible line of brands, cars, and dealers that will all earn substantial profits. Parts of Chrysler will still exist (Jeep, Mopar, a couple of others). And Ford might be able to survive on its own as it gains share from the pieces shed by its Detroit rivals.

Why go to all this trouble of proving a case that doesn’t meet the sniff test to the most junior financial analyst on Wall Street? Is it pure politics to save union jobs and avoid the shame of bankruptcy? Or has Washington, DC and the Messiah Crew (Obama, Pelosi, Reid, and the Democrats in Congress) simply lost all sense of the common good with your tax dollars?

Forget it. Let’s not spend any more taxpayer dollars on a moon shot from Detroit.

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50 Comments on “Editorial: Bailout Watch 371: The Moon’s a Balloon...”


  • avatar
    Bunter1

    When I looked at the sales results yesterday the phrase “My tax dollars at work” came to mind.

    Bunter

  • avatar
    Verbal

    After yesterday’s sales bloodbath, the endgame is on. Chap.7 for Chrysler, Chap. 11 for GM.

  • avatar
    BDB

    “Are Bob Corker (R-Korea) and Dick Shelby (R-Japan) the only two guys in Washington that can see the sheer and utter stupidity of this? ”

    FTFY.

    Chrysler obviously is going, but GM can be saved.

  • avatar
    Luther

    “Even if Uncle Sam provides this staggering amount of money– more than enough to start a car company from scratch”

    FAR more! Congress should just get a Texas phonebook and throw a dart at it then give Jeep Corp. and a billion taxpayer dollars to that person…Money MUCH better spent.

  • avatar
    BDB

    And Chrysler would still be going strong had Diamler not screwed them over. Before the merger, they were the most profitable car company in the world IIRC. And not a single SUV outside of the Jeep lineup, either!

  • avatar

    Just a minor point, somewhat tangential to the issue at hand.
    There’s a lot of talk about taxpayers’ dollars rescuing banks, providing stimulus, salvaging Detroit.

    Wanted to take this opportunity to make it clear that this money doesn’t exist. It’s not been generated as tax revenue – the US is in serious deficit, and whatever money is added to the burning pile has to come out of thin air. Well, that is, it has to come out of whatever income will be generated by your children, grandchildren, their children again. At the rate we’re going, ad infinitum.
    TARP, Le Stimulus and “A Bone to Detroit” all come from an abstract future where everything’s been put right again – the same future that Wagoner and Lutz keep dreaming about, where people are salivating at the sheer prospect of being allowed to pay over the sticker price for a “gotta have it” GM car.

    That’s all.

    (See, if the US was China, which is where US CEOs have been sending US money over the past twenty years, then all Congress would have to do was dip its ladle into the vast bowl of ready cash it would have at hand. And yes, that would be taxpayer contributions – private and business. But the US isn’t China, China is China, the US is bankrupt.)

  • avatar
    no_slushbox

    Letting Chrysler liquidate is the test. If politicians cannot see something as obvious as that Chrysler is not worth saving then we are in a lot of trouble.

  • avatar
    210delray

    @ BDB: didn’t the Dodge Durango come out before the “merger of equals?”

    Back to the main point, I hope more than Corker and Shelby come to their senses. It’s time for bankruptcy court, long past time. No more good money after bad.

  • avatar
    KixStart

    From the article: “Are Bob Corker and Dick Shelby the only two guys in Washington that can see the sheer and utter stupidity of this?”

    No. That is to say, they don’t see the sheer and utter stupidity of it, either, but they see that some key Democrats favor it, so they are opposed.

  • avatar
    BDB

    “@ BDB: didn’t the Dodge Durango come out before the “merger of equals?””

    Good point, but I still don’t see 1990s-era Chrysler doing something really monumentally stupid like the Nitro or the Aspen, or screwing up the Jeep lineup. The merger killed them, period.

    Chrysler was riding high before it.

  • avatar
    HEATHROI

    Chrysler obviously is going, but GM can be saved.

    Put your soul in Jesus’s hands

    just send your money now (or better yet, do nothing. We’ll sort something with your lump in Congress)

  • avatar
    BDB

    “just send your money now”

    If you think a bailout is expensive, try having no domestic auto industry. Welfare, foodstamps, medicade, money for job re-training…and so on.

    Also, the economy of Michigan, Ohio, and Indiana will start to resemble West Virginia and eastern Kentucky in a few short years.

  • avatar
    RickCanadian

    Is it pure politics to save union jobs and avoid the shame of bankruptcy? Or has Washington, DC and the Messiah Crew (Obama, Pelosi, Reid, and the Democrats in Congress) simply lost all sense of the common good with your tax dollars?

    Ken,
    The answer in both counts is “yes”. You should know that by now… I would also add the Republicans and our own Canadian MPs to that last statement.

    Very good editorial as usual.

  • avatar
    cwallace

    Psh, things seem to work okay for Kentucky and West Virginia, and they haven’t cost my kids a dime.

  • avatar
    BDB

    @cwallace–

    Actually, both of those states take in more money than they pay in federal taxes. Michigan takes in less money than it pays in taxes.

    http://www.flickr.com/photos/michaelpinto/2987025203/

    So those states have taken quite a bit of your money!

    PS: Shh! Don’t tell Dick “Senator from Nissan” Shelby that Alabama is #7 in the amount of federal dollars it receives vs. taxes paid!

  • avatar

    Mister President, Congress, call back those ‘loans!’

  • avatar
    geeber

    BDB: If you think a bailout is expensive, try having no domestic auto industry.

    Last time I checked, Honda, Toyota, Nissan and Hyundai are making vehicles here, and will continue to do so. Even Ford would continue to do so – and would benefit from Chrysler going away, as overcapacity is the main problem in the U.S. right now.

    Most people realize that the “domestic auto industry” is no longer limited to GM, Ford and Chrysler.

    If the concern is maintenance of the supplier base, then give the suppliers federal money to help them survive a Chrysler collapse and a GM reorganization.

    Giving money to GM and Chrysler only prolongs the agony, and prevents the changes needed to have a truly viable industry in this country.

    BDB: Actually, both of those states take in more money than they pay in federal taxes. Michigan takes in less money than it pays in taxes.

    A red herring argument, that has been debunked many times before. That has nothing to do with whether GM and Chrysler are worthy of government aid.

    The proper question is whether federal aid will truly make either company viable. The answer has been apparent to everyone but the most ardent fans for several months now.

  • avatar
    BDB

    “Last time I checked, Honda, Toyota, Nissan and Hyundai are making vehicles here, and will continue to do so. ”

    And the profits they make continue to leave this country and go to Japan. Maybe you have no problem with becoming a third world colonial economy for Asia, but I do. The Japanese and Korean govts. would never, ever allow their automakers to go belly up and be dependent on Americans and Europeans for their cars, and for good reason.

    “The proper question is whether federal aid will truly make either company viable.”

    How about federal aid in exchange for new leadership at GM and restructuring?

    I agree, about Chrysler, though. It’s dead, and they don’t even have anything worthwhile anymore except Jeep–and they’ve done their best attempt to ruin that brand too.

  • avatar
    RetardedSparks

    Good editorial, but we knew this already.

    Look, the ongoing billions of bailouts, objectionable as they are, are just a form of triage. Bush & Co left so many ticking time bombs behind that nobody could possible de-fuse them all at once. The Detroit money is just to buy time, and is actually probably warranted.

    Nobody had any idea idea (or, more accurately, too many people thought they knew exactly) what would happen when Paulson threw Lehman under the bus – least of all Paulson, and that was his industry! Now that we see it has unleashed the four horsemen of the apocalypse on the whole freakin’ global economy, DC cannot risk pulling the plug on Chrysler or anyone else, because the truth is that neither they, nor you, nor us, nor any pundit, expert or swami, have any idea what will happen when they do. None. And anyone who says differently is full of it.

    The banking system is trashed. Nobody can get loans to buy any car from anyone. The housing market is trashed. The retail economy is trashed. There are massive layoffs everywhere…. Lots to do before we worry about whether or not GM can actually make a decent car.

    The fact is that a few billion is cheap money to avoid what are certain to be massive unforeseen consequences.

  • avatar
    tom

    “And the profits they make continue to leave this country and go to Japan.”

    What are you talking about? These companies actually took their profits and invested them in the US to build factories and employ Americans. And the more successful they are, the more they invest.

    Also, can’t you see the problem there within your own argument? At least these companies make a profit. How does a car industry help the economy, when it needs a constant money influx from Uncle Sam? Even if the foreign car makers take their profits with them, the Detroit car makers leave their losses in America.

  • avatar
    BDB

    “How does a car industry help the economy, when it needs a constant money influx from Uncle Sam?”

    Do you realize how much in subsidies Toyoandissan has gotten from the Japanese government since WWII? Or how much they benefit from a virtual monopoly in their home market?

    The Japanese subsidize their industry and protect their home market, and we’ve been too stupid to do the same.

  • avatar
    200k-min

    And Chrysler would still be going strong had Diamler not screwed them over. Before the merger, they were the most profitable car company in the world IIRC.

    Most profitable in America…not sure the world.
    At the time they were doing well on the LH cars (another credit to the AMC takeover), the “new” Ram and the ongoing success of the minivan.

    That said the only resounding success of the good times was the minivan. The LH cars never outsold the Taurus, Accord, Camry which they were meant to compete against. The Ram never came close to the F-series of Silverado. Even the Jeep Grand Cherokee never came close to selling in numbers like the Explorer. The new and flashy vehicles did pump up market share slightly but since the product quality didn’t back it up my guess is that repeat sales would’ve been tough without Daimler’s intervention.

    All that said, I do agree dumping the LH sedans for the rear drive “Daimler influenced” LX sedans was an epic failure. Why they couldn’t have refined the Intrepid into a competent competitor for the likes of the Camry is beyond me. Regardless, 10+ years post merger, Chrysler isn’t worth the time I just spent typing this.

  • avatar
    tom

    “Do you realize how much in subsidies Toyoandissan has gotten from the Japanese government since WWII?”

    No I don’t. Please enlighten me. But even so, it doesn’t change anything. The arguments against the bail out remain the same, while the only argument you offer is “they did it as well”. So what? That doesn’t make it right or good.

    And even so, you should be happy when the Japanese government used its taxpayer’s money so that Toyota et al could invest it in America. It’s the US economy that profits from it because it leads to an influx of new capital. The American bail out just redistributes existing capital into companies that could just as well heat their offices by burning the Dollars…

    “Or how much they benefit from a virtual monopoly in their home market?”

    The American auto makers are free to enter the Japanese market, all they have to do is to build cars that the Japanese want. I fail to see a monopoly. Did the Big 3 have a monopoly pre 1980?

    “The Japanese subsidize their industry and protect their home market, and we’ve been too stupid to do the same.”

    Well, at least now they don’t. Or can you produce anything that would prove these statements?

  • avatar
    BDB

    “The American auto makers are free to enter the Japanese market, all they have to do is to build cars that the Japanese want.”

    Do you realize how impossible the government there makes it to sell foreign cars? General Motors could build the Jesus Car and Japan would block it through their currency manipulation, their Value Added Taxes, their tariffs, their import quotas, etc. “Cars people want” has very little to do with why the Japanese have their home market locked up for themselves.

    They’ve done the same thing with electronics. The X-box 360 is a fine console, it outsells Sony here. But in Japan? They strangle it through currency manipulation and taxes.

  • avatar
    Verbal

    BDB: And the profits they make continue to leave this country and go to Japan.

    The profits they make go to their shareholders in the form of dividends. Do you own any mutual funds that include international investments? Then maybe you are collecting some of those profits.

  • avatar

    Try your arguing your way around this one around that one because you can’t. The where the profits go argument can never get around this. If Fiat ends up owning Chrysler then wouldn’t that mean the profits go to Italy? Does that mean the Walmart method is the preferred route with everything be made in China but since Walmart is an American company the profits stay here. No I prefer the things to be made here with US workers regardless of the parent company’s origin. Most people realize this its all about getting paychecks to Americans not where the profits go (BTW there are no profits right now)

  • avatar
    geeber

    BDB: And the profits they make continue to leave this country and go to Japan. Maybe you have no problem with becoming a third world colonial economy for Asia, but I do.

    The profits go to shareholders, who live around the world. Those companies pay good WAGES to Americans living and working in Alabama, California, Kentucky, Mississippi, Ohio and Texas.

    And those companies are investing money where they are likely to reap profits. Even with this severe downturn, the U.S. market is still their most lucrative market, and likely to remain so.

    BDB: How about federal aid in exchange for new leadership at GM and restructuring?

    I would agree to that – only problem is that for any restructuring to really work, the UAW, creditors and dealers would all have to make major sacrifices. GM needs lots more than a broom in the executive suite (although that would be a good start).

    So far, none of these parties have shown any inclination to do so, and the Obama Administration has shown no inclination to MAKE them do so. Maybe the president will surprise us in the coming weeks.

    Simply shoveling more taxpayer money at GM and hoping that management finally comes up with a viable restructuring plan is a blatant waste of taxpayer money.

    BDB: Do you realize how impossible the government there makes it to sell foreign cars?

    The German companies sell a fair number of vehicles in Japan – they are considered status symbols there.

    Meanwhile, the U.S. companies couldn’t even be bothered to move the steering wheel to the other side of the vehicle. Imagine how successful Toyota would be in the U.S. if the Camry and Corolla had the steering wheel on the opposite side of the car.

  • avatar
    moedaman

    BDB,
    You are way off base about Xbox 360 sales in Japan. The original Xbox didn’t sell well in Japan because it way too big and didn’t have many games the japanese want. The 360 sells at a lower price in Japan as it does in the USA and once in a while does outsell the PS3 in weekly sales (when a 360 only big name Japanese game comes out). The Wii in Japan is rarely outsold. Considering how unreliable the 360 is, MS is lucky to sell anything over there. And yes, I do own a 360 (my third :( ).

    As far as subsidies to foreign automakers, everyone forgets that US automakers and suppliers get plenty of taxbreaks for expansions here in the US too.

    The real problem about some states getting back more fed money than they put in, is that northern politicians don’t do as good a job protecting their voters as the southern politicians do. Let’s show some anger at Dingell, Levin, etc. for being worthless representatives.

  • avatar
    tom

    “Do you realize how impossible the government there makes it to sell foreign cars? Chevrolet could build the Jesus Car and Japan would block it through their currency manipulation, their Value Added Taxes, their tariffs, their import quotas, etc.”

    I googled for some information on import quotas in Japan, but didn’t find anything. The only thing I found was an article from 1985 which said that the US imposed import quotas on Japanese cars in 1981. And apparently, it was a failure. There’s nothing that indicates that Japan has import quotas on cars. Maybe you can produce some evidence?

    However, I found an article from 2001 that said that Japanese import tariffs on cars are at ZERO! While the US have a 2.5% tariff on cars and a prohibitive 25% tariff on trucks.
    http://www.highbeam.com/doc/1G1-75490206.html
    http://www.freetrade.org/node/532

    VAT is the same for everyone BTW and the Yen is rather overvalued ATM.

    So far, you have produced nothing but false accusations.

  • avatar
    BDB

    Do you think it was always that way? Hell no. When their industries were vulnerable (that is, until the 1980s) they were heavily protected.

    http://74.125.95.132/search?q=cache:MnyqlDN2mRYJ:blogs.spokenword.ac.uk/ecoe431/files/2007/07/peepessay.doc+japan+import+quotas+%22American+cars%22&hl=en&ct=clnk&cd=3&gl=us

    Now WE are the ones with the weak and vulnerable car industry and should be pursuing the same policies they had post-WWII.

    “The only thing I found was an article from 1985 which said that the US imposed import quotas on Japanese cars in 1981. And apparently, it was a failure.”

    You realize how they got around the quotas, right? They built all those non-union transplant factories in the South. So it really wasn’t a total failure.

  • avatar
    Bunter1

    BDB-You may want to look at the yen vs the buck over the last 30 years. If they have been trying to manipulate the currency then apparently our gov’t whupped ’em at it.

    IIRC when the yen was approx 250Y/$ the head of the UAW said American cars would be competitve if it got below 200Y/$. Hasn’t been that high since…

    Rather than whine about the massive currency shift they had to deal with in the ’80s the Japanese found a way to not just compete but win.

    The Debt 3? Puhleeze. Whiners not winners.

    Bunter

  • avatar
    geeber

    BDB: Now WE are the ones with the weak and vulnerable car industry and should be pursuing the same policies they had post-WWII.

    If the goal is to save GM and Chrysler, considering that the major Japanese and South Korean car companies build products here in facilities that can be easily expanded, I’d say that this horse has already left the barn…

  • avatar
    toadroller

    Opening line:

    “In fourteen days, GM and Chrysler will submit realistic plans for viability to Congress”

    Oh, isn’t that ironic!

  • avatar
    tom

    @BDB:
    So you admit that the Japanese don’t have unfair advantages today. Fine.

    Now all that matters is what’s best for the US economy, regardless of what the Japanese did or did not do in the past.

    Can the tax payers investment in the Big 3 ever turn out a profit?
    Can the US market support 3 major automakers ever again?
    How will the world respond to protectionist measures? Could it lead to more protectionism around the world and hence creating a new great depression?
    Shouldn’t that money be invested in other more promising sectors where viable jobs can actually be created instead of supporting a giant make work program?

    It’s funny how everybody turns into a socialist during this crisis. The bottom line is: A job has to be viable in the long term and not amount of burnt tax payers money can change that.

  • avatar
    BDB

    “Shouldn’t that money be invested in other more promising sectors where viable jobs can actually be created instead of supporting a giant make work program?”

    Like where? Citigroup? Goldman Sachs? Wells Fargo? Condos in Florida? Our economy is already WAY too dependent on financial services. We need American-owned and operated manufacturing in this country if we don’t want to end up with a third world economy. Unless you think anyone who can’t pony up the money for college should be thrilled at the prospect of Wal-Mart employment the rest of their life.

    Funny how people bend over backwards to give $1 trillion to Wall St. paper pushers in Manhattan but folks in the Midwest who actually manufacture things are told to drop dead, isn’t it? The bail-out GM is asking for is chump change next to the Wall St. crooks who got it zero questions asked.

    “It’s funny how everybody turns into a socialist during this crisis.”

    The term “socialist” doesn’t mean what you think it does. Anyone who isn’t an ideologue knows we have, and always have had, a mixed economy.

  • avatar
    GS650G

    Also, the economy of Michigan, Ohio, and Indiana will start to resemble West Virginia and eastern Kentucky in a few short years.

    It might take bankrupting these states to get new leaders in place. I think the entire country needs to get rid of the permanent ruling class.

    Chrysler started this slide with quality problems in the 90s. Everyone screwed by common but major mechanical failures followed by cliff faced depreciation swore off buying their cars again. GM too, Ford as well. Ford is the only one that looks to have it’s act together, own Mazda and Volvo which have standing, and isn’t taking any bailout money.

  • avatar
    tom

    “We need American-owned and operated manufacturing in this country if we don’t want to end up with a third world economy.”

    Why? That’s exactly what brought the Soviet Union down, burning money with non-viable businesses. And even if you’re right, who’s to say that the Big Three are it?
    It’s a false dichotomy to say that it’s either the Big Three or no American owned manufacturing.

    “Funny how people bend over backwards to give $1 trillion to Wall St. paper pushers but people who actually manufacture things are told to drop dead, isn’t it? The bail-out GM is asking for is chump change next to the Wall St. crooks who got it zero questions asked.”

    Maybe so, but it’s a complete non-sequitur.

  • avatar
    BDB

    “Why? That’s exactly what brought the Soviet Union down”

    The Soviet Union was brought down because they spent more on weapons than their economy would allow.

    I’m not saying give them the money without strings attatched, btw. I think the leadership should go and there should be massive restructuring at GM. But you can’t just throw them to the wolves without major consequences. If they are forced to re-structure properly they will be profitable again when this recession ends.

  • avatar
    CommanderFish

    Ah, Chrysler.

    Chrysler is definitely an example of an amazing engineering and design crew lead off of a cliff by it’s incompetent leadership.

    I would argue that they were making the best cars of any domestic company in the 90’s, and had the capability to compete with the likes of Toyota and Honda. ’95 Neon, ’96 Stratus, ’94 Ram, Wrangler, Cherokee, ’93 LH, ’96 minivans. All were vehicles that were well-received upon release but soon found their honey moon to be over. Cost-cutting drove quality into the abyss, hence why the B&B would not speak fondly of these cars.

    The same leadership that lead to the failure of otherwise good cars then sold the company’s soul to Daimler. Without exception, the entire lineup received updates years after they should have and were left to rot as the competition kept improving. To make matters worse, the most recent redesigns have been a disaster for the small cars, and simply not enough for the larger vehicles.

    And now, here we are. An American company utterly destroyed by it’s leadership.

    I want to still believe, but it’s currently 11:59 and counting for Auburn Hills.

  • avatar
    tom

    “I’m not saying give them the money without strings attatched, btw. I think the leadership should go and there should be massive restructuring at GM. But you can’t just throw them to the wolves without major consequences. If they are forced to re-structure properly they will be profitable again when this recession ends.”

    Nobody here is suggesting that the Big Three should just disappear. Filing for Chapter 11 could be a new beginning. The problem with the bail out is that it encourages business as usual in Detroit. And we all know where that lead us.

    Chapter 11 with the government as DIP wouldn’t be cheap either and the government would probably have to pay for the pensions as well. But the result would be a viable company that can earn money in the long term without government help.

  • avatar
    Landcrusher

    What is worse, letting the profits go overseas, or sucking down tax dollars to keep the UAW employed at overly large wages? Let me see, if the profits go overseas, it cost me? Nothing. OTOH, if the 2.8 suck down my taxes, it costs me – whatever it costs me PLUS all the future bailouts I have to help pay for, PLUS the loss of innovations that will by stymied, PLUS the frustration of dealing with companies that act like government bureaucracies rather than service oriented companies.
    I will keep buying foreign cars, thanks.

    I don’t buy this thing about none of them surviving bankruptcy, but even if it’s true, let’s wait until ONE is left, and then I will agree to bail out that one. Whichever one it is will likely be able to survive on truck sales alone.

  • avatar
    Pig_Iron

    CommanderFish: Ah, Chrysler. Chrysler is definitely an example of an amazing engineering and design crew lead off of a cliff by it’s incompetent leadership.

    I will miss them the most. They tried so damned hard, but were shoot down by their own seniors at every turn.

    I wish they could live on as a design, develpment, and prove-out business; I believe they would thrive.

  • avatar
    jpcavanaugh

    BDB:
    If they are forced to re-structure properly they will be profitable again when this recession ends.

    All threads lead back to what a Chapter 11 bankruptcy is and does. Forget about 1980. Here we are in 2009. GM does not have the ability to “properly restructure” without it. What is the problem: Labor costs? High Retiree benefits? Too few decent vehicles? Too many dealers so that none can make it on current volumes? Too many brands? Inept management?

    I happen to believe that it is all of the above, and likely more besides. NONE of these issues can be effectively dealt with without a reorganization in bankruptcy. Without it, labor has no reason to budge, bondholders will not compromise, management won’t quit, brands/dealers cannot be shed without massive litigation and expense.

    Government assistance will be based on political considerations, not business/product/customer considerations. Doesn’t anybody remember the disaster called British Leyland? Sorry, but Chapter 11 is the only solution.

    Let the government provide debtor in possession financing so that the thing doesnt go to liquidation for lack of short term operating capital, then let the process go to work. People who deal with these issues all day every day can hash through the problems, give everybody a haircut, stop the bleeding and bring something good out of this mess.

    Chrysler? It brings a tear to the eye of an old Mopar head, but stick a fork in it – it’s done.

  • avatar
    George B

    In an alternate universe, imagine using the billions of dollars thrown at General Motors and Chrysler to instead encourage a successful foreign car manufacturer to become American. Honda has already threatened to move their headquarters out of Japan.
    https://www.thetruthaboutcars.com/honda-threatens-to-leave-japan/
    Imagine Honda with headquarters in Columbus, OH to go with manufacturing in Marysville and East Liberty. Honda is already the largest car manufacturing employer in Ohio and the US is their largest market. Honda started building cars in the US in 1982 and chose western Ohio to be close to part suppliers. They recently chose eastern Indiana for their latest Civic plant, so they’re not afraid to continue to invest serious dollars in to the midwest.

    http://artsci.wustl.edu/~copeland/honda.html

  • avatar
    John Horner

    Re: Chrysler: “The same leadership that lead to the failure of otherwise good cars then sold the company’s soul to Daimler.”

    And good old Bob Lutz was right in the middle of it at Chrysler back then! Man that guy has been on deck during many a disaster.

  • avatar
    mr_min

    Ken
    I agree with the intent of the article but not your maths to back up your point.
    “At an average wholesale to GM of say $24k/unit, that’s a loss of nearly $3b in revenues for the month”

    Simplisticly yes, but if you factor in idling factories, laid off workers, and the big killer interest on goods/inventory already held. eg If those 122k units are parked then they are also paying interest on their value.
    So $3 Billion is probably on the low side.

    And of course if they didn’t produce them, then its a completely different complex mathematical calculation. As you have to deduct the cost of material not ordered and labour not paid for.

    mrmin

  • avatar
    jerry weber

    Fiat has said by 2010 they can have competitive cars in America through chrysler. My question is who keeps chrysler alive until this happens? I know who it isn’t going to be, Fiat.

  • avatar
    RetardedSparks

    @GeorgeB:
    “Imagine Honda with headquarters in Columbus, OH..”

    Interesting idea. But it begs the question “If you take the company out of Japan, do you take the Japan out of the company?”

    It is their culture, after all, that made them successful.

  • avatar
    windswords

    geeber:

    “BDB: If you think a bailout is expensive, try having no domestic auto industry.

    Last time I checked, Honda, Toyota, Nissan and Hyundai are making vehicles here, and will continue to do so.”

    tom:

    “And the profits they make continue to leave this country and go to Japan.”

    “What are you talking about? These companies actually took their profits and invested them in the US to build factories and employ Americans. And the more successful they are, the more they invest.”

    Well let’s look at Honda. Honda started building cars in the US in 1982. They just produced their 20 MILLIONTH car in North America. They have I think 4 assembly plants in the US, One each in Canada and Mexico. So they are really (North) American, right? But they still import 22-23% of the vehicles they sell here. That’s a lot of vehicles folks – build in Japan, paying Japanese workers and suppliers. And some of you complain that the Fusion is made in Mexico? Like the Civic (unless it’s made in Japan)?

    —-
    200k-min:

    “And Chrysler would still be going strong had Daimler not screwed them over. Before the merger, they were the most profitable car company in the world IIRC.”

    Most profitable in America…not sure the world.
    At the time they were doing well on the LH cars (another credit to the AMC takeover), the “new” Ram and the ongoing success of the minivan.

    “That said the only resounding success of the good times was the minivan. The LH cars never outsold the Taurus, Accord, Camry which they were meant to compete against.”
    The LH was a large car not a mid size like those mentioned above and it was very successful, perhaps the best selling large car fwd platform at the time.

    “The Ram never came close to the F-series of Silverado. Even the Jeep Grand Cherokee never came close to selling in numbers like the Explorer.”
    The Ram went from 80k a year in sales to 400k, enough to keep two factories humming. Those are huge numbers for any vehicle. It didn’t have to sell more than Chevy or Ford to be successful. By your logic since the Camry (also 400k in sales) doesn’t outsell the F150 Toyota should just give up.

    “The new and flashy vehicles did pump up market share slightly but since the product quality didn’t back it up my guess is that repeat sales would’ve been tough without Daimler’s intervention.”
    Dumbler didn’t do Chrysler any favors and that mkt share increase was several percentage points. A auto executive would sacrifice his firstborn for numbers like that.

    —–
    geeber:

    “BDB: Do you realize how impossible the government there makes it to sell foreign cars?

    The German companies sell a fair number of vehicles in Japan – they are considered status symbols there.”
    Status symbols? Yes. Fair number? Only if you think a few thousands units out of millions of units a year is a fair number. So no, they don’t sell a lot of German or other European cars there.

    “Meanwhile, the U.S. companies couldn’t even be bothered to move the steering wheel to the other side of the vehicle. Imagine how successful Toyota would be in the U.S. if the Camry and Corolla had the steering wheel on the opposite side of the car.”
    This is an old argument that is not true for the most part. The Neon was available with left hand drive, so was the Grand Cherokee (maybe the regular Cherokee). Left hand drive Saturns were available too. Also the German cars are sold as right hand drive. So that’s not the reason for lack of foreign car sales in Japan.

    ———
    tom:

    “I googled for some information on import quotas in Japan, but didn’t find anything. The only thing I found was an article from 1985 which said that the US imposed import quotas on Japanese cars in 1981. And apparently, it was a failure. There’s nothing that indicates that Japan has import quotas on cars. Maybe you can produce some evidence?”

    Tom, there’s no import quota on lettuce either. But you can’t buy American lettuce in Japan. You see Japan doesn’t use import quotas. They use “inspections”. You can’t bring anything off the ship to market without it being “inspected”. Got a boatload of lettuce? No problem we will inspect it for you – eventually. What? It rotted while it was waiting for us to get to it? Gee, that’s too bad. I’m afraid we are going to have to reject it for importation. Better luck next time! Korea also uses this tactic. For autos, you just inspect for safety and quality and if it doesn’t pass your stringent requirements, you don’t pass it. These same requirements are not used for importation of Toyodassans to the US (yes they all import here as well as manufacture here). There are other barriers to entry that are used, just do a little research. Hint, googling “import quotas” will not do it for you.

    —–
    CommanderFish:

    “Ah, Chrysler.

    Chrysler is definitely an example of an amazing engineering and design crew lead off of a cliff by it’s incompetent leadership.

    I would argue that they were making the best cars of any domestic company in the 90’s, and had the capability to compete with the likes of Toyota and Honda. ‘95 Neon, ‘96 Stratus, ‘94 Ram, Wrangler, Cherokee, ‘93 LH, ‘96 minivans. All were vehicles that were well-received upon release but soon found their honey moon to be over. Cost-cutting drove quality into the abyss, hence why the B&B would not speak fondly of these cars.”

    Agreed. The ringleader of the cost-cutting at Chrysler in the 90’s was the man they hired to lead them, Bob Eaton, a GM man. He’s also the one that sold them out to Dumbler. Without a doubt one of the worst auto CEO’s of all time, with hardly anytime in the CEO position!

    —–
    John Horner:

    Re: Chrysler: ‘The same leadership that lead to the failure of otherwise good cars then sold the company’s soul to Daimler.’

    “And good old Bob Lutz was right in the middle of it at Chrysler back then! Man that guy has been on deck during many a disaster.”

    That’s not correct. Of all the senior leadership, it was Bob Lutz who understood what the “merger of equals” really meant. He was the only one who spoke fluent German, who was raised in Europe, had worked in Europe, and worked for a German automaker (BMW). He left Chrysler shortly after the deal was approved. Bob always felt that Chrysler could go it alone and resisted Lee’s efforts to merge with FIAT (history does repeat itself!).

  • avatar
    joeaverage

    Can anyone comment on how many American dollars goes to China courtesy of our favorite big box retailers vs how many dollars goes to Japanese car company headquarters???

    Is it possible to own stock in a Chinese goods manufacturer if a person is American?

    My point is that maybe we are barking up the wrong tree.

    While auto profits may go back to Japan, at least there are ALOT of people making a good solid working wage here assembling those cars.

    With big box retailers there are a few people making a good solid wage (managers) and alot of folks just getting buy (everybody else).

    Meanwhile alot of American dollars floats right out of the country to China.

    I’d rather the manufacturing that goes on in China be done here (minus the pollution) and have it sold by a Chinese big box retailer than the way we have it now. At least alot of families could make ends meet and buy durable goods like automobiles and appliances.

    Maybe the trick is not to waste time pointing fingers at each other and instead point fingers at the financial elite of this country – the ones running the gov’t (the poor need not apply), the top level management positions (the poor need not apply) at the car companies, Wal-Street, and retailers.

    These are the folks ruining our economy by using suppliers outside the country because they are so cheap and profit is the number one priority at the expense of everything else.

    The world’s stockholders are priority number one while our towns, workers and moral obligations come much lower on the list.

    We consumers are nickel and diming ourselves to death chasing cheap stuff. The Chinese prices do indeed enable some cheap prices in the big box retail stores but at what price? A big race to the bottom is what it is – not the bottom prices, I mean the bottom wages here in America.

    We want ever more stuff. Too much of this same stuff lasts a very short time before it is broken (non-repairable) or out of date and we are back for another round of buying. Throw it away and buy something else.

    We need to figure out how to have creative products at a reasonable price with reasonable quality MADE IN THE USA.

    I see no reasonable way to legislate this. It’s a question of the folks at the top having enough good taste to limit their income a little. Take a few million out of the paycheck pool for the folks at the top and spread it down to the workers in the middle and bottom in these companies. The $14M CEO makes $40K a DAY. Wow…

    I don’t want to see this happen with taxes – it has to happen because the people at the top see that wages have stagnated for 10-15 years and folks can no longer afford (without credit) to buy houses and cars and stuff.

    The markets are are trying to right themselves now. Too much stuff, not enough REAL cash to buy stuff with (i.e. not credit). Gov’t is working hard to run interference. I don’t know if they can create a soft landing or not.

    I’ll continue to vote against the entrenched rich guys. Not a statement of party preference understand. When those people at the very top (power or income) do stupid stuff I am not inclined to enable them through my consumer spending or my vote.

    I want an American car but Detroit refuses to show signs of intelligence so I’ll keep what I’ve got and save up some more money.

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