Big Three Bailout?

SCSL

Well-known member
Apr 27, 2005
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noee said:
There appears to be no upside to any of this.

Maybe the gov't should just take over the US auto industry, pass laws to restrict competition, and then force everyone to buy one of their cars. :banghead:

That's roughly what will happen. Remember you read it here first:

1. Congress, through legislation or some form of "car czar" will -through things like CAFE standards and outright fiats- force domestic auto companies to make things like hybrids and plug-ins.

2. People won't buy them if they are over-priced, impractical, or of poor quality.

3. Government will force people to buy them through manipulation of the tax code and import duties.

Using TARP for other than it's intended purpose may be challenged in court by some pissed off constituent. But it won't go anywhere.

Again,,, so much for government by implied consent. Breakdown of representative democracy. Nevermind. Change the channel. It will go away.

Who wants to think about credit default swaps, yen carry trade, and the treasury buy-backs when Dancing with the Stars starts at 8......
 

MarkP

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Apr 23, 2004
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I've yet to see an industry wide analysis of unit/volume requirements post credit bubble. I suspect there is significant excess manufacturing capacity as credit returns to traditional levels, reliability increases and government adds cost with new 'safety' and 'environment'' regulations. Demand is being destroyed and manufacturing capacity is beginning to reflect walking dead.

Thought this was interesting . . .

 

MarkP

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:rofl:


Congressional Motors

. . . All new for 2012, the Pelosi GTxi SS/Rt Sport Edition is the mandatory American car so advanced it took $100 billion and an entire Congress to design it. We started with same reliable 7-way hybrid ethanol-biodeisel-electric-clean coal-wind-solar-pedal power plant behind the base model Pelosi, but packed it with extra oomph and the sassy styling pizazz that tells the world that 1974 Detroit is back again -- with a vengeance.

We've subsidized the features you want and taxed away the rest. With its advanced Al Gore-designed V-3 under the hood pumping out 22.5 thumping, carbon-neutral ponies of Detroit muscle, you'll never be late for the Disco . . .​
 
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SCSL

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Apr 27, 2005
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Disaster... This is an excellent read for those with a few spare minutes. Time well spent.

Fed Destined To Become World's Largest Auto Dealership

Not content with merely throwing money at the automakers, the Fed has new plans to become the world's largest auto dealership. Details of the plan were buried in this announcement: Fed Opens TALF Loans to All Borrowers, Extends Term.

The Federal Reserve revised its $200 billion program aimed at reviving credit to consumers and small businesses, extending the term of loans to three years from one year.

Under the Term Asset-Backed Securities Loan Facility, or TALF, the Fed will also loan to all eligible borrowers rather than through an auction process, the central bank said today in a statement in Washington. The change is designed ?to provide more certain investor access,? the Fed said.

The central bank pledged Dec. 16 to ?employ all available tools? to restore economic growth, including the TALF and other emergency lending. The Fed has already expanded its balance sheet to a record $2.3 trillion to stem the worst credit crisis in seven decades.

The Fed said that it would accept securitized auto credits, including leases and auto dealer floor plan loans.

Hundreds, if not thousands of of auto dealerships will fail. They will fail because they over-expanded in response to fake economic signals coming from the Fed, just as the auto manufacturers did and the housing industry did.

Housing purchases that could have and should have taken place over a period of a couple of decades were crammed into a few short years as lending standards dropped to keep the Ponzi scheme going. Flush with the feeling of fake prosperity from rising home prices, consumers bought cars, trucks, and SUVs with the same reckless abandon as they bought houses.

Dealerships wanting their fair share of the action, rushed into floor plan decisions and made car loans with the same subprime characteristics as did the mortgage brokers. Those dealerships are now flooded with cars that nobody wants, just as housing inventory is stacked a mile high with pent-up selling demand from those praying that prices rise.

The US has far more autos and auto dealerships that it possibly needs. Evidence is crystal clear. Dealerships are flooded with cars to the point they cannot take any more deliveries, and why cars are stacking up at ports. Simply put, no one wants the damn things, at least at a price dealers and manufacturers are willing to offer.

Fed Decides We Do Not Have Too Many Dealerships

In spite of all evidence to the contrary, the Fed has decided that there are not too many car dealerships, and those dealerships don't have too many cars. Instead the Fed has come to the conclusion that dealerships just need financing to get over this "short term" blip.

The meaning of "short term" has been extended from 1 year to 3 years. During that time, the Fed will lend dealerships money based on existing floor plans.


Dealerships facing bankruptcy will come to the conclusion they have nothing to lose by applying for TALF funds. Indeed, faced with a choice of immediate bankruptcy vs. TALF, who would possibly turn down the money? And so weak dealerships that would otherwise quickly go bankrupt, have now been given a new lease on life, even if only for a few years or months.

The Fed has thus guaranteed that auto overcapacity will continue indefinitely by keeping dealerships that should go bankrupt, in business. This will put pressure on marginally profitable but struggling dealerships that night make it on their own accord if only the free market eliminated some of the competition.

Walking Away TALF Style

Dealerships will accept free money until it until runs out. Money will run out when the Fed accepts entire dealerships as collateral.

Note that the TALF program opens up huge fraud possibilities including but not limited to owners taking the money and paying themselves huge salaries and/or funneling the money into other ventures before handing over the keys of the dealership to the Fed and then walking away.

And walk away they will, as soon as all collateral the Fed is willing to accept has been pledged. And that is how the Fed will become the world's largest auto dealership.

Congressional investigations studying the Fed's balance sheet a year or so down the road will come to the conclusion "No one could possibly have seen this coming".
 

MarkP

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We've reached a point where entering into a business venture must take into account competition that is supported by government action and money. In addition the government will increase regulation in the pursuit of "fairness" and the appearance of control. At the same time the corrupt politicians will craft ways to benefit from 'free money'.

The risk / reward ratio is becoming less favorable to business and as such will increase unemployment and result in even more intrusive government. In the end the public sector debt becomes unpayable, if it isn't already, and default is the only option.
 

MarkP

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Probably not the last request for government help . . .

GM asks for $16.6 billion, to cut 47,000 Jobs

GM seeks up to $16.6 billion more aid, plans to cut 47,000 jobs and close 5 more U.S. plants. Saturn dealers will spin-off from GM into a new corporation. . . .


edit add:

GM proposes an accelerated downsizing that involves cuts deeper than those outlined in December. Steps include shuttering 14 factories by 2012 rather than nine, eliminating 47,000 hourly and salaried jobs this year globally, and closing its Hummer truck brand this year and Saturn in 2011 if no alternatives arise.​
 
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dave_lucas

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..closing Saturn in 2011 if no alternatives arise..

Seems like an odd move, Saturn has a good name with consumers and is one of the only GM products that I would consider buying not to mention the dealers are nice to deal with.

I Just purchased a Toyota from them in December, they were great to deal with, they included an extended warranty, oil changes for 2 years and unlimited car washes. Even after the purchase they have been a pleasure to deal with
 

JohnK

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MarkP said:
Steps include shuttering 14 factories by 2012 rather than nine, eliminating 47,000 hourly and salaried jobs this year globally, and closing its Hummer truck brand this year and Saturn in 2011 if no alternatives arise.
I thought I heard they may close Saab, too.
 

MarkP

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JohnK said:
I thought I heard they may close Saab, too.

From what I have read GM has requested a Saab related bailout from the Swedish government. It that fails its bankruptcy for Saab.

Hummer is also probably gone. Either someone buys the product line or it meets the same fate as Saturn.

Pontiac brand ceases to exist. A "Pontiac" car lives on under Chevrolet.
 

az_max

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Apr 22, 2005
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It's the beginning of the end for GM:

General Motors Corp.'s Swedish-based subsidiary Saab filed for bankruptcy protection Friday so the unit can be spun off or sold by its struggling U.S. parent, officials said.
http://www.azcentral.com/business/articles/2009/02/20/20090220saab20-ON.html


In its own restructuring plan, GM said Tuesday it would need up to $30 billion from the U.S. Treasury Department, up from a previous estimate of $18 billion and including $13.4 billion it has already received. It also said it would need to cut 47,000 jobs worldwide and close five more U.S. factories

GM said it needed about $6 billion in support from the governments of Canada, Germany, Britain, Sweden and Thailand to provide liquidity for its overseas operations in those countries.
 

SCSL

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Apr 27, 2005
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I like how both Reuters and CNBC used the verbiage "filed for protection from creditors" instead of using the term bankruptcy early this morning.

Simply Orwellian...
 

az_max

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Apr 22, 2005
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And Saturn is dead.

Now Saturn could become a launching pad for GM's overseas rivals who are being invited to consider the brand's dealer network as a low-cost way to break into the U.S. market.

GM said on Thursday it was working to spin off Saturn as a distribution company to source cars from other automakers and sell them through the brand's 420 U.S. showrooms.

Lajdziak also said the company has not ruled out the possibility of bringing in vehicles from other manufacturers to sell through Saturn before 2012, the year when the last Saturn-branded vehicles roll off GM's assembly lines.

http://uk.reuters.com/article/burningIssues/idUKTRE51J2C020090220?pageNumber=1&virtualBrandChannel=0
 

Blue

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Mar 26, 2004
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This is an interesting sign of the times.....

http://www.detnews.com/apps/pbcs.dll/article?AID=/20090223/AUTO01/902230327

Auto team drives imports
Fed task force has few new U.S. cars
David Shepardson / Detroit News Washington Bureau

WASHINGTON -- The vehicles owned by the Obama administration's auto team could reflect one reason why Detroit's Big Three automakers are in trouble: The list includes few new American cars.

Among the eight members named Friday to the Presidential Task Force on the Auto Industry and the 10 senior policy aides who will assist them in their work, two own American models. Add the Treasury Department's special adviser to the task force and the total jumps to three.

The Detroit News reviewed public records to discover what many of the task force and staff members drove, but information was not available on all of the officials, and records for some states were not complete.

At least two task force members don't own a car, and there are still two open slots on the 10-member panel that will be filled by the secretaries of labor and commerce, who have not yet been appointed.

The co-chairs of the task force -- Treasury Secretary Timothy F. Geithner and White House National Economic Council Director Lawrence Summers -- both own foreign automobiles.

Geithner owns a 2008 Acura TSX, registered in New York. He once owned a 1999 Honda Accord and a 2002 Acura MDX, according to public records.

Geithner is the president's designee for purposes of enforcing loan agreements with GM and Chrysler and must approve or reject any proposed transactions by either company that would cost $100 million or more.

His maternal grandfather, Charles Moore, was a vice president at Ford Motor Co. from 1952-63, according to Peter Geithner, the secretary's father. But Geithner wasn't very interested in cars growing up -- in part because he graduated from high school in Asia, his father said.

Summers owns a 1995 Mazda Protege that's registered in Massachusetts. He previously owned a 1996 Ford Taurus GL.

What other task force members drive:
? Office of Management and Budget Director Peter Orszag owns a 2008 Honda Odyssey and a 2004 Volvo S60. He previously owned a 1997 Jeep Grand Cherokee and 1982 Datsun.
? Carol Browner, the White House climate czar, said earlier this month at the Washington Auto Show that she doesn't own an automobile. Public records show she once owned a 1999 Saab 9-5 SE.
? Energy Secretary Steven Chu doesn't own a car, his wife, Jean Fetter, said in a telephone interview on Sunday. Cabinet officials are typically transported to and from work by security officials in government vehicles.
? Environmental Protection Agency Administrator Lisa Jackson owns a 2008 Toyota Prius and a Honda Odyssey minivan, she said Sunday. "It's great," she said of her Prius.
? Vehicle information was not available for Transportation Secretary Ray LaHood or Christine Romer, head of the Council of Economic Advisers.
Here's what task force policy aides drive:
? Austan Goolsbee, staff director and chief economist for the White House Economic Recovery Advisory Board, owns a 2004 Toyota Highlander.
? Joan DeBoer, the chief of staff to LaHood, said in an interview Sunday she drives a 2008 Lexus RX 350. She doesn't consider herself "a car buff" and views her car as a way to get around town.
? Heather Zichal, deputy director of the White House Office of Energy and Climate Change, owns a Volvo C30, according to public records and officials.
? Gene Sperling, counsel to the Treasury Secretary, owns a 2003 Lincoln LS, and previously owned a 1993 Saturn SL2.
? Edward B. Montgomery, senior adviser to the Labor Department, owns a 1991 Harley-Davidson and previously owned a 1990 Ford Taurus L station wagon, public records show.
? Lisa Heinzerling, senior climate policy counsel to the head of the EPA, owns a 1998 Subaru Legacy Outback station wagon, according to her husband.
? Diana Farrell, the deputy National Economic Council director, doesn't own a vehicle. Her husband, Scott Pearson, owns a 1985 Peugeot 505 S.
? Dan Utech, senior adviser to the Energy Secretary, owns a 2003 Mini Cooper S two-door hatchback.
? Rick Wade, a senior adviser at the Commerce Department, owns a 1998 Chevrolet Cavalier and previously owned a 1998 Toyota Corolla.
? Jared Bernstein, Vice President Joe Biden's chief economist, owns a 2005 Honda Odyssey.

The White House declined to comment.

President Barack Obama traded in his Chrysler 300C for a more fuel-efficient Ford Escape hybrid during the 2008 presidential campaign.

Joe Biden, the son of a car dealer, owns a 1967 Chevrolet Corvette -- a wedding present from his dad. He primarily commuted from Delaware to the Senate on Amtrak.

Ron Bloom, a special adviser to the Treasury Department who is also advising the task force, owns an aging Ford Taurus.
 

MarkP

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Apr 23, 2004
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Something to consider - Bank of England began monetary easing. Economist predict the British Pound is headed to parity with the US dollar.

Today 1.00 USD = 0.708281 GBP, or roughly a 40% delta. The implications?

Imported Land Rover stuff, to include vehicles, will cost 40% less in dollar terms. That is bargaining power.