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The cost of GM's death

Rob

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AUTOMOTIVE NEWS EDITORIAL

The cost of GM's death

Automotive News
November 14, 2008 - 12:28 pm ET

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 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.

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.

The government will face greater unemployment, more Americans without health insurance and greater pension liabilities.

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.

In the next two to four months, GM will run out of cash and turn out the lights. Only government money can prevent that. Every other alternative is fantasy.

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

The collapse of the global financial system has crushed the American car market, dried up revenues for the Detroit 3 and highlighted their weaknesses.

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.

Some Detroit critics want their pound of flesh: Throw the bums out and install a government czar. Treasury Secretary Henry Paulson won't use any of his $700 billion bank bailout money to help manufacturers. In any case, he'd need a guarantee that a bailout would make Detroit "viable."

Well, nobody -- not even AIG -- is insuring guarantees for viability.

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.

The Detroit 3 CEOs and UAW President Ron Gettelfinger had better tell two critical congressional hearings next week what sacrifices they are prepared to make.

But 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.
 

standby-V

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True, now the big cheeses at the top can stop taking so much cream off the milk, then maybe they wouldn't be in the trouble they are in.
Have you seen Warren Turners report on the new coin that will replace all the dollars in the near future. I don't even want to post anymore of this on the forum. Ask Floyd (BB) to PM this to you.
 

Deluxe

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There are a lot of assumptions in that article I don't agree with.

First, if jobs just disappear, they probably weren't needed to begin with. They are more likely to just move instead.

I think the worry about warranty and parts could be overcome by price. Their may be a period of fire sale in order to preserve market share... happens all the time.

The tired argument of GM or any of them having to sell off their equipment in a chapter 7 tends to ignore the value of brands, processes and patents. More likely things like Cadillac, Chevy, Buick... GMC, would be sold off as lines to investors or other auto companies who would see some value in something more than real estate.

My assumptions may also be wrong, but probably no more than those in this article. Bottom line; the "protection of the taxpayer" is that same old camel's nose that has gotten the government so far into the tent today that all we can smell is camel crap.

I remain somewhat against a government bailout... auto industry, housing or AIG. Anything that is "too big to fail" is also too big to live with.
 
S

speedway

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What a shame

This is so sad to see that GM may go under. I have a Corvette and I am always browsing the market. Having toured the Corvette/XLR Plant in Bowling Green I noticed one Dealors name that stood out. That Dealor was Kerbeck which is located in Alantic City, New Jersey. I decided to browse there web site often because thay always had good deals. Last night I looked and what I found was Corvette Coupes 3Lt with Gm rebates and discounts up to $25,400.00 off MSRP and Z06 3LT with up to $21,400.00 off MSRP. They also had a notice that because of Congress it appeared this would be the last of the V8's made.:bash: Unfortunately if this is true this will effect all cars made in the USA. That is if there ends up being any cars made in the USA.:(:mad::confused::patriot:

If you have interest; Kerbeck.com

Fred
 

First Robin

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Just now heard Mit Romney spilling off his big mouth about executive dining rooms and so forth in the auto industry wasting money. Well I think the same applies to our government, how about doing away with the executive dining rooms, barber shops and so forth, let them also eat with the little people and maybe we wouldn't have such a bloated government. What is good for the goose is good for the gander. We have way tooooo much government. Will the limosine fleet the Federal Government has be reduced? They sure like having those nice plush Cadillacs to ride around in and how about all the Secret Service for Past Presidents and their families. We as the people need to start insisting that all the perks be cut for our Senators and Representatives. We also need to take back who sets the salaries for these people. They should have to live on Social Security like the rest of the people when they leave office and are retirement age. Include in that their health care package, let them have Medicare and see how soon that would change. First Robin
 

cubby558

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They should have to live on Social Security like the rest of the people when they leave office and are retirement age. Include in that their health care package, let them have Medicare and see how soon that would change. First Robin


That's exactly why health care and Social Security will never change; they are not part of it--doesn't affect them so why change it. I agree with you, put them in with the rest of us when they retire and things will get done. The auto industry is the same, retire after 25-30 years and get 95% of your income with great health benefits for the rest of your life. With people living longer and all the down-sizing there aren't enough people working to pay for the retired people with all these plush benefits.
 

First Robin

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Cubby, do you think you could dig up Ev Dirckson and Paul Douglass and revive them? They were Statesmen, we sure need people like them NOW. They were good family friends and admired on each side of the aisle. They got things done. First Robin:patriot:
 
S

speedway

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What has happen to America

That's exactly why health care and Social Security will never change; they are not part of it--doesn't affect them so why change it. I agree with you, put them in with the rest of us when they retire and things will get done. The auto industry is the same, retire after 25-30 years and get 95% of your income with great health benefits for the rest of your life. With people living longer and all the down-sizing there aren't enough people working to pay for the retired people with all these plush benefits.

What has happen to America? First we had Nafta then an adminstration and congress that went out of there way to assist companies to go to Mexico, Canada, Korea, China, India and lord knows where else. Then they allowed corporations to take there jobs and taxes there american employees and companies were paying with them. Then they allowed mass out sourcing of jobs within the USA. On top of this they allowed and condoned Illegal imigration in the millions that completely destroyed our infastrucure within medical etc etc which cost us Billions of dollars.
Now all of this was done in the name of Global economy personnally I think it was Greed. Its no wonder were in this shape and there is no money for anything. All these countries then manipulated the value of there currency and incorporated trade tariffs to insure they were the only ones prospering from all of this.

Finally, lets throw a 10 BILLION dollar a month war in the total new deal for America and what is left???????? :bash:

I just keep asking myself "how much longer our the American people going to tolorate this nonsense"?

Frd
 

galen

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What to do?

GM and Ford will be a different company after this. They can not continue down the road they made. They must be restructured or they will fail. I fault the "Big Three" for not changing their ways when the writing was on the wall several years ago. I think they just figured they were just to big for the government to let them fail. The CEO's need to go. The big benefit packages need to go for all workers. And congress. These are some of the last good paying jobs for average people with no education. This had to happen. Remember the electronics industry? Zenith plants in home town America? Once we allowed NAFTA. And allowed unfair trade practices to continue, the middle class was doomed, or greatly reduced. The American life style and way is slowly eroding. Big business doesn't care about middle class or the American way. They ONLY care about the bottom line, and if their shareholders are happy. That's how it works. The workers of America, the people of America will see one of the biggest changes in the near future. None of the other so called allies or trade partners feel sorry for us. No other country is going to help us. We have to dig out of this mess our selves. We should not be listening to the talking heads in Washington. They are already bought off by the lobbiest that don't have your best interest in mind. I'll step down off the box now. :patriot:
 

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