Dire Times for the Auto Industry
- Thread starter AtomicGT
- Start date
BlackICE
GT Owner
Don't banks have conditions attached to loans? Of course they do and so should the gov. The key thing about any loans are the probability of repayment vs. the interest rate. The free markets has spoken and chances of repayment are small thus the interests rates are too high, making free markets loans impossible. The only way the government should make loans are if somehow they can get the parties to increase the probability of repayment through restructuring and concessions from both sides, but not through telling the auto companies what to build or how to run or restructure their companies. Anything other than this would be either nationalization of the auto industry or a handout.
It is interesting that the government represents the public and uses public money for these bailout, yet none of the public would freely fund these companies in the free market. e.g. if Ford, GM, or AIG tried to float a bond issue instead of getting gov. bailout money, what would the rates have to be to get the bonds sold? So why is it when it is done on the back of the future taxapayers we are all OK with it?
It is interesting that the government represents the public and uses public money for these bailout, yet none of the public would freely fund these companies in the free market. e.g. if Ford, GM, or AIG tried to float a bond issue instead of getting gov. bailout money, what would the rates have to be to get the bonds sold? So why is it when it is done on the back of the future taxapayers we are all OK with it?
Cobrar
GT Owner
A loan, if that is the final instrument, would likely not originate from the fed, but the fed would instead be a guarantor. A consortium of banks (or hedge funds) would probably be the first up lender.
It is the rate of interest and repayment terms that will be interesting. If there is a actually a real negotiation, I expect both the rate and terms to be quite different for each of the potential borrowers ~ reflecting forward risk, not based not on a historical view of the industry. The closer you are to product success, the less money you need, the more favorable the rate and terms.
BlackICE
GT Owner
A guarantor can be viewed as a co-signer of the loan. Would you co-sign any loans to the auto industry backed up by your personal assets? That is essentially what the Feds would be doing with our future tax revenue.
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Cobrar
GT Owner
I would choose my auto company carefully and negotiate to secure the best possible return & timing. And in at least one case, I would ensure that certain management would be retained as a condition of the loan.
Yeah, sure, just depends on what they are. Clearly the U.S government is clueless. They authorized a $250,000,000,000 give away with virtually no oversight and all the taxpayer money they gave away to loosen credit markets ended up either hoarded by banks or being used to buy other banks. It's amazing that suddenly they've decided to take an active interest in what happens to a loan less than 10% the size. I mean really? You just now thought of this?
I see alot of talk that "the money has to be used to retool for more fuel efficient cars!" Seriously? Does nobody have a pair of eyes? At least in Ford's case they've dramatically altered their product lineup in this pursuit already. Ford and GM both offer more hybrid vehicles than their Asian rivals. GM offers more cars that get 30 mpg than any other carmaker. Ford consistently is recognized as having as good or better quality than their Asian rivals.
Alot of people are calling for Rick Wagoner's head too, but that makes zero sense. We've already seen what happened to Chrysler when they let the whiz kids at Cerberus take it over. They absolutely destroyed it. Like, ran it into the ground faster than you can say "hedge fund".
It's all just PR bullshit from people in Washington making sure they get a good soundbite. They suddenly worried about $25 billion in loans when they've already sold us all out to the tune of $350 billion in debt to the Chinese and another $700 billion to the Japanese to pay for gold plated toilets in Birmingham, Alabama and $900,000 stoplights. Please.
It'll be interesting to see what happens.
Any chance unions would be willing to readdress the whole legacy cost burden from retired workers? That, more than current pay/benefits for existing workers(at least the newer hires-don't the big 3 have a tiered pay system for the factory people?) seem to be a major cost disadvantage with regards to the other domestic(though foreign owned) manufacturers. I'm clearly no expert on the subject.
Personally, I want to see our Ford/GM survive, for all the reasons others have already stated. If the current stockholder's get wiped out I could care less frankly. Collectively they did too little too late to get a slate of directors that could effect the change needed. Also, the hypocracy of the UAW, and its "senior/retired" members, of continuing to pull more out of the Companies than they ever earned and doing so on the backs of the current "less entitled/senior" workers who probably work harder and more productively than they ever did just leaves me, well, irked to say the least.
Just my $.02
Personally, I want to see our Ford/GM survive, for all the reasons others have already stated. If the current stockholder's get wiped out I could care less frankly. Collectively they did too little too late to get a slate of directors that could effect the change needed. Also, the hypocracy of the UAW, and its "senior/retired" members, of continuing to pull more out of the Companies than they ever earned and doing so on the backs of the current "less entitled/senior" workers who probably work harder and more productively than they ever did just leaves me, well, irked to say the least.
Just my $.02
Getting retirees to give back is going to be a hard sell. Alot of those people, right or wrong, planned for their retirement based on the income they were promised for 30-35 years. You'd see alot more foreclosures and defaults if those people lost that in a market where houses are already worthless and nobody is buying. Also, some of those jobs are physically debilitating and they'd be screwed without health care.
Obviously, there aren't a whole lot of union fans right now. I think the current administration has always hoped one would go belly up to force the UAW into extinction. The companies have spent billions getting people to go away because you had a ton of highly paid people refusing to retire, booking double and triple time for huge paydays well into their 60's. It wasn't that uncommon for senior employees to book their way to a 6 figure payday.
I think best case scenario you use this government loan to get through the aggregate economic meltdown (which is really the issue) because manufacturing labor has already been transformed. Non-core jobs don't get paid $28 an hour anymore. Work rules have been relaxed. Health care has been transferred to a VEBA. Should further progress be made? Of course, but I don't ever see a day that unionized labor in America gets beheaded.
fjpikul
GT Owner
DBK, I don't drive every day. Sunday and Friday nights. I think many people would be surprised just how many physicians do this kind of stuff, especially hospital based (the RAPEs - radiologists, anesthesiologists, pathologists, emergency). Some guys get to come in, do a 48 shift, or maybe 4 12's and then they're off for a week.
My point is that people comparing us to Europe shouldn't do so. I've bought 7 new Fords in the last 8 years and have been happy with them all. Ford is building what I want, the build quality has been great, the out-the door price has been good, and the service at the dealerships I use has been very good. I agree with all your logic, but, personally, would like to see Medicare and Medicaid get a boost like Wall Street and the big 3. Your buddy Frank
My point is that people comparing us to Europe shouldn't do so. I've bought 7 new Fords in the last 8 years and have been happy with them all. Ford is building what I want, the build quality has been great, the out-the door price has been good, and the service at the dealerships I use has been very good. I agree with all your logic, but, personally, would like to see Medicare and Medicaid get a boost like Wall Street and the big 3. Your buddy Frank
Well Dave, there is at least one or two that remain on the forum; and I am guessing pay year not pay day with regards to your 6 figure statement. So what's wrong with that? There are no white collar jobs in the 6 figures? Maybe 7? Or higher? That doesn't bother me a bit. So long as I make enough to live, why should I complain of others making more? Do we really want to crush the working class down to the level of living in slums with no health care? A more elite upper class, no middle, and an overcrowded lower? Without unions, that's what we would have; no child labor laws, no safety in the workplace, and on and on. That's a whole different discussion than what the issues of the day are; the quite small percentage of unionized workes in the U.S. is kind of at the bottom of the list of things that have created the mess our economy is in.
Good ol' Local 689 here.
Pete S.
fjpikul
GT Owner
Wow, this is getting to be one hell of a thread. Better than the half shaft thread.
From: someone who doesn't understand economics
From: someone who doesn't understand economics
Chris A.
GT #32
A total exaggeration....one that is typically heard from that end.:thumbsdow
I run a labor force....pay for 100% of healthcare for my employees....have a full saftey compliance program and on and on.
There was a time and place for the union.......but it's come and gone. Now their greed is perpetuating the issues at hand.
I'm certainly not disputing that some unions and even the UAW have brought reasonable benefit to communities and individuals. The UAW is definitely not the cause of the issue of today, that's the massive economic downturn, but the fact the companies have no cash to tide them through such massive economic downturns is directly correlated to the tens of billions of dollars in labor and legacy costs they've absorbed. Operating at an $1800 per vehicle cost deficit hurts. That's a lot of content and quality you're missing when you sell a few million vehicles a year.
It's hard to be a fan of the UAW. Everyone in Detroit knows someone that watches porn in the breakroom 8 hours a day or smokes pot on the job or routinely doesn't show up for work or actually is paid to not show up to work. White collar employees have been walked out with nothing by the tens of thousands and they resent seeing guys being paid to drink coffee for 8 hours at the Jobs Bank (more a symbolic problem than a killer cost one). This happens everywhere with all kinds of employees, but it rarely happens anywhere where people average $70 per hour in total compensation and have complete and total job security.
It's hard to be a fan of the UAW. Everyone in Detroit knows someone that watches porn in the breakroom 8 hours a day or smokes pot on the job or routinely doesn't show up for work or actually is paid to not show up to work. White collar employees have been walked out with nothing by the tens of thousands and they resent seeing guys being paid to drink coffee for 8 hours at the Jobs Bank (more a symbolic problem than a killer cost one). This happens everywhere with all kinds of employees, but it rarely happens anywhere where people average $70 per hour in total compensation and have complete and total job security.
To be fair, this gap will no longer exist in 2010. At least not nearly as big. That's why it's so important they just get a bridge through 09. When the health care obligations are transferred to the VEBA, the cost savings will be massive. I don't think people understand that. Alot of talking heads on TV and politicians are asking them to do things they've already done, but the massive downturn in the overall economy may prevent them from ever taking effect. You can blame Washington and Wall Street for that.
This is what the Automakers should have been preaching the last few weeks.
Dave is pointing out something no one is talking about. The Big US Three need help to make it to 2010. They have addressed most of there Legacy cost and their high hourly wages.
The press is killing them!!!
It is not a bailout!!! It is a bridge loan so they can make it to 2010.!!!
No one can imagine the loss to the US economy if one of the three go chapter 11 soon.
After chapter 11 it will be chapter 7 and we will be in the middle of the greatest depression ever.
eek:eek
Dave is pointing out something no one is talking about. The Big US Three need help to make it to 2010. They have addressed most of there Legacy cost and their high hourly wages.
The press is killing them!!!
It is not a bailout!!! It is a bridge loan so they can make it to 2010.!!!
No one can imagine the loss to the US economy if one of the three go chapter 11 soon.
After chapter 11 it will be chapter 7 and we will be in the middle of the greatest depression ever.
eek:eek
BlackICE
GT Owner
Why doesn't the UAW accelerate the 2010 contract to 2009. Although the 2010 contract make them much more competitive, it still won't guarantee profits from 2010 onward. The Feds would have to carry at least an entire year of loses during an recession, on the maybe turning profitable in 2010. Has anyone an estimate on how large of a number that would be? Also due to media and Wagner's crying everyone knows that the US autos are in dire straits. So unless the Feds make a statement that they are backing the US auto companies all the way and for the long term, sales will continue to be eroded due to a lack of confidence in service and support. I think we are talking 50+ billion to bailout companies with a combined market cap of less than 10 billion. No easy answers here.