$700 Billion Bailout

[mr_genius]

You know what? I'm not totally sure that the bailouts couldn't have been done correctly, in a well planned, well administered way, if there were good people actually at the top running it. But hey, the guys in Congress keep doing this. George W. wants to invade Iraq to protect us from terra? Who are we to say no. George W.'s guys want an infinite amount of money to save us all? Who are we to say no?

 

If the opposition party, in control of congress, goes along with this merely blaming the evil GW Bush for these bailout disasters is suspsect.

 

 

[Cknolls]

Which secret trillion? There's about two or three of those that I'm aware of.

 

Does anyone understand at all what's really happening here? It's just plain frightful.

 

 

What is happening here is politicians are trying to stay in office and they feel doing something(wrong as it has been) is better than doing nothing. Let the car cos. fail and file bankruptcy. Then and only then will they get the changes from both management and labor.

[kapkomet]

Somehow, I find this to be a very fitting denouement to the last 8 years.

 

 

If the opposition party, in control of congress, goes along with this merely blaming the evil GW Bush for these bailout disasters is suspsect.

Get over your f***ing hatred for once, Balta. Holy s***. It's right in front of your nose. This is George W. Bush's fault?

 

X 100.

 

This is the most catastrophic economic f***up perhaps EVER (time will tell...) that we are witnessing, and one man is responsible for it?

 

There's so much more to this s***... I know I said that about Iraq, and I still believe that, but with even that, this goes WAY beyond the President or anything our government has concocted. This is a global "plot" of epic proportions... oh yes, the tin foil hat is in full effect on this one, and I'm starting to believe it after witnessing what's going on here (I've actually got to read some stuff the last couple of days).

 

 

 

[Balta1701]

Get over your f***ing hatred for once, Balta. Holy s***. It's right in front of your nose. This is George W. Bush's fault?

 

X 100.

 

This is the most catastrophic economic f***up perhaps EVER (time will tell...) that we are witnessing, and one man is responsible for it?

I believe that exact quote there was trying to put some significant blame for the debacle that is the bailouts themselves on the people who are handling it in the executive branch. Not necessarily the entire collapse, that's clearly another matter.

[kapkomet]

I believe that exact quote there was trying to put some significant blame for the debacle that is the bailouts themselves on the people who are handling it in the executive branch. Not necessarily the entire collapse, that's clearly another matter.

Ok, but Congress knows what's going on as well. Probably moreso, actually. But their s*** doesn't stink because the committees are ran by Democrats. Got it.

 

There is enough steaming pile of crap on this one no matter what party or branch of the government you want to talk about. They are ALL in this one together, and they all know where it's leading.

 

[SoxFan562004]

Watched Barney Franks opening remarks today with the Big 3 leaders. I was 3/4 listening to it since I was jamming a Benadryl down my dog's throat and I have a very limited econ background, but I think he basically said the finance committee is going to go forward and work with the big 3 on a bailout because it wouldn't be fair to hold the U.S. hostage to punish those who made the mistake. He cited the new job report (which initially anyways, didn't send the DOW soaring downward, hovering around

-80 at the opening bell) and said the effect of the Big 3 not paying their debt at this time would harm the U.S. too much.

 

Now, hopefully one of you econ guys heard it or can read it and translate it, that's an econ layman's interp of it

[Rex Kickass]

Am I the only one who thinks that if we are looking at the total and final collapse of the US Auto Industry, it makes sense for the US Government to provide some capital to the Big 3 in order to allow the bleed to slow down, rather than a shock of a GM - as its currently held - to just completely collapse?

[SoxFan562004]

Am I the only one who thinks that if we are looking at the total and final collapse of the US Auto Industry, it makes sense for the US Government to provide some capital to the Big 3 in order to allow the bleed to slow down, rather than a shock of a GM - as its currently held - to just completely collapse?

again, I am going to preface this with I have a limited econ background, but I tend to agree knowing what I know. Obviously these are the best case scenarios since they are what Ford and Chrysler said, but they both said they can be profitable in 2 years if they get loans, so who knows.

[southsider2k5]

Am I the only one who thinks that if we are looking at the total and final collapse of the US Auto Industry, it makes sense for the US Government to provide some capital to the Big 3 in order to allow the bleed to slow down, rather than a shock of a GM - as its currently held - to just completely collapse?

 

Unlike the banking industry, the auto industry doesn't have a group that oversees them and shuts them down if they aren't meeting their financial requirements. They would go into bankruptcy just like thousands of companies have done before and will do again. They can and would continue operating during a bankruptcy filing. The rest of it is propaganda. People would still buy cars and trucks, jus tlike they havein the past. The steel industry did it pretty much wholesale, and their steel still got bought. The airline industry is doing it, and people are still flying on the bankrupt airlines. A complete collapse is a gross exageration and misrepresentation of what would happen if they don't get a bailout. Mostly its the unions trying to justify their existence.

[StrangeSox]

I see a distinct difference between the auto companies and steel or airlines, though. Those items don't come with 5-10 year warranties like an automobile does. I think the fear (whether rational or not) that GM won't be around in 6 months will keep most people from choosing them when shopping for a new car.

 

Flight tickets are a much smaller expenditure and, while it may be a huge inconvenience, your airline going bankrupt isn't going to effect you for years to come. With steel, you buy it, and you're done. You couldn't care less if they're around in a week because you have your material.

Edited December 5, 2008 by StrangeSox

[SoxFan562004]

I see a distinct difference between the auto companies and steel or airlines, though. Those items don't come with 5-10 year warranties like an automobile does. I think the fear (whether rational or not) that GM won't be around in 6 months will keep most people from choosing them when shopping for a new car.

 

Flight tickets are a much smaller expenditure and, while it may be a huge inconvenience, your airline going bankrupt isn't going to effect you for years to come. With steel, you buy it, and you're done. You couldn't care less if they're around in a week because you have your material.

I will give Ford some props though, I've had a Fusion for a few years and the car is awesome. I've never had a problem with it, it gets good gas mileage, and I drive ALOT, and it handles extremely well.

[NorthSideSox72]

I will give Ford some props though, I've had a Fusion for a few years and the car is awesome. I've never had a problem with it, it gets good gas mileage, and I drive ALOT, and it handles extremely well.

Ford has done a lot of good things the last few years, and have really improved as a company. They are far better off than the other 2, though they are still struggling a bit. We have a Ford Escape Hybrid, and love it. Ford has catapulted to the top of many quality lists the last few years, right there with Toyota and the like.

 

And I agree with SS2K5's theme - if GM goes bankrupt, they will continue to operate, and very likely come out the other end a stronger company. There is still a significant revenue stream and demand to work from in that marketplace.

 

I will say this though - I think the Big 3 will become the Big 2 sometime in the next few years, with or without the bailout. Chrysler will not survive as it currently does. The core business will reduce, the specialty brands like Jeep will be bought by Japanese or American car companies, and it will either shrink into a small specialty car firm or just die off slowly over time. And the auto industry will probably be better for it.

 

[Balta1701]

Unlike the banking industry, the auto industry doesn't have a group that oversees them and shuts them down if they aren't meeting their financial requirements. They would go into bankruptcy just like thousands of companies have done before and will do again. They can and would continue operating during a bankruptcy filing. The rest of it is propaganda. People would still buy cars and trucks, jus tlike they havein the past. The steel industry did it pretty much wholesale, and their steel still got bought. The airline industry is doing it, and people are still flying on the bankrupt airlines. A complete collapse is a gross exageration and misrepresentation of what would happen if they don't get a bailout. Mostly its the unions trying to justify their existence.

There's a problem with that though, and that's where all of this comes from. If the auto industry went in to bankruptcy at any other time, they'd probably be able to weather it, because a business going through bankruptcy typically is able to take out some fairly large bridge loans using parts of itself as collateral. Right now though, it's virtually impossible for any of the auto companies to get the kind of financing they'd need to make it through bankruptcy because the banks destroyed the credit markets. Thus, they'd try to go in to chapter 13 bankruptcy, but they'd be unable to find the financing to do so, and hence would wind up in chapter 7 where they can do nothing but pretty much shut down and start selling off their remaining assets.

 

I'd be interested in hearing your response to this, because before I did more reading I had the same opinion as you, that unless there was something wrong with our bankruptcy system then the automakers should be going through bankruptcy. But after reading the financing argument, I was forced to change my mind, because of the fact that they couldn't get the credit lines they needed and thus in this case because of the frozen, unattainable credit markets, they wouldn't be able to survive through to the end of a bankruptcy process. So hence, my understanding of this "Bailout" is that they're trying to use the only people still lending money; the government.

[NorthSideSox72]

There's a problem with that though, and that's where all of this comes from. If the auto industry went in to bankruptcy at any other time, they'd probably be able to weather it, because a business going through bankruptcy typically is able to take out some fairly large bridge loans using parts of itself as collateral. Right now though, it's virtually impossible for any of the auto companies to get the kind of financing they'd need to make it through bankruptcy because the banks destroyed the credit markets. Thus, they'd try to go in to chapter 13 bankruptcy, but they'd be unable to find the financing to do so, and hence would wind up in chapter 7 where they can do nothing but pretty much shut down and start selling off their remaining assets.

 

I'd be interested in hearing your response to this, because before I did more reading I had the same opinion as you, that unless there was something wrong with our bankruptcy system then the automakers should be going through bankruptcy. But after reading the financing argument, I was forced to change my mind, because of the fact that they couldn't get the credit lines they needed and thus in this case because of the frozen, unattainable credit markets, they wouldn't be able to survive through to the end of a bankruptcy process. So hence, my understanding of this "Bailout" is that they're trying to use the only people still lending money; the government.

If Congress elects not to do an auto bailout, or does only a very small one... then you can bet the long term plan is for them to wait until GM goes bankrupt, and then put guarantees on their exit financing. If GM goes bankrupt, they will get financed.

 

[southsider2k5]

I see a distinct difference between the auto companies and steel or airlines, though. Those items don't come with 5-10 year warranties like an automobile does. I think the fear (whether rational or not) that GM won't be around in 6 months will keep most people from choosing them when shopping for a new car.

 

Flight tickets are a much smaller expenditure and, while it may be a huge inconvenience, your airline going bankrupt isn't going to effect you for years to come. With steel, you buy it, and you're done. You couldn't care less if they're around in a week because you have your material.

 

OK, how about the home builders in bankruptcy that still have people buying houses from them?

[NorthSideSox72]

I see a distinct difference between the auto companies and steel or airlines, though. Those items don't come with 5-10 year warranties like an automobile does. I think the fear (whether rational or not) that GM won't be around in 6 months will keep most people from choosing them when shopping for a new car.

 

Flight tickets are a much smaller expenditure and, while it may be a huge inconvenience, your airline going bankrupt isn't going to effect you for years to come. With steel, you buy it, and you're done. You couldn't care less if they're around in a week because you have your material.

There is a near-zero chance that an auto company will stop honoring warranties for existing owners. That would be suicide. If they plan to keep operating, you can bet they'd honor warranties.

 

[southsider2k5]

If Congress elects not to do an auto bailout, or does only a very small one... then you can bet the long term plan is for them to wait until GM goes bankrupt, and then put guarantees on their exit financing. If GM goes bankrupt, they will get financed.

 

That is how I would envision it. The auto comanies, minus the legacy costs, are still a profitable business, especially if they can get some wage concessions from the unions in a bankruptcy. If we are talking about long term health for the industry, I believe bankruptcy is the best way. I don't have as big of a problem with the bailout now that I know about the unions taking over the pension plans, but it still isn't the way I would prefer to see things go.

[BigSqwert]

There is a near-zero chance that an auto company will stop honoring warranties for existing owners. That would be suicide. If they plan to keep operating, you can bet they'd honor warranties.

 

I think that's why people are hesitating to buy from the Big 3. They're scared their warranty will be useless if the company goes out of business 2 months after they purchase the car.

[NorthSideSox72]

I think that's why people are hesitating to buy from the Big 3. They're scared their warranty will be useless if the company goes out of business 2 months after they purchase the car.

I'm sure some people fear that. I'm also sure that the moment a Big 3 company goes bankrupt (assuming they intend to continue operating), they will immediately announce that all warranties are still honored.

 

[BigSqwert]

I'm sure some people fear that. I'm also sure that the moment a Big 3 company goes bankrupt (assuming they intend to continue operating), they will immediately announce that all warranties are still honored.

 

You may believe that but I'd assume someone in the market for a new vehicle right might not be so optimistic about something like that.

[southsider2k5]

I think that's why people are hesitating to buy from the Big 3. They're scared their warranty will be useless if the company goes out of business 2 months after they purchase the car.

 

Another misnomer. ALL auto sales are down, and remarkably all by about the same percentage. If that were a real fear, the other automakers wouldn't be experiencing the same types of losses.

 

http://www.time.com/time/business/article/...1863685,00.html

 

Overall industry sales dropped 35% in November. Ford actually beat the industry, reporting a sales drop of 30% but GM reported a 41% drop and Chrysler's fell 42%. Nissan's sales dropped 44%, Toyota fell 35% and Honda fell a similar amount. "We cannot continue to operate at these levels or the entire industry is going to go down," said Mike DiGiovanni, GM's director of market analysis, who acknowledged the steep drop in sales in October and November was devastating to the company's finances.

[BigSqwert]

And I wouldn't be so sure that the Big 3 would be able to continue to operate while bankrupt.

[NorthSideSox72]

And I wouldn't be so sure that the Big 3 would be able to continue to operate while bankrupt.

With a government guarantee for financing, which they would get, the Big 3 would probably operate better and more efficiently shortly after going into it.

 

[SoxFan562004]

CNBC had a stat that percentage wise the job loss report was the 41st worst ever, still significant since it's in the top 50 ever, but infotainment won't report that and point to the raw numbers

[lostfan]

That is how I would envision it. The auto comanies, minus the legacy costs, are still a profitable business, especially if they can get some wage concessions from the unions in a bankruptcy. If we are talking about long term health for the industry, I believe bankruptcy is the best way. I don't have as big of a problem with the bailout now that I know about the unions taking over the pension plans, but it still isn't the way I would prefer to see things go.

Hey would you look at that, I sort of almost changed somebody's mind. Without even trying.