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 The Death of the American Car Industry - Auto Bail Out Approved

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PostSubject: The Death of the American Car Industry - Auto Bail Out Approved   Fri Nov 21, 2008 12:21 am

http://www.breakingnews.ie/World/mhidqlcwmhmh/

The car bail out in the US has broken down: the bonnet is up, but can they fix it?

The US car industry is not just any old widget factory. The shiny monster with wings and chromium, and a gas tank the size of a small bath tub, was the economic and spiritual centre of the whole post war American capitalist dream. Surely there will be world wide reverberations if the Big Three go down, and America will never be the same again.


Last edited by cactus flower on Sat Dec 06, 2008 6:03 pm; edited 1 time in total
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PostSubject: Re: The Death of the American Car Industry - Auto Bail Out Approved   Fri Nov 21, 2008 12:23 am

They should all admit defeat and surrender. They should be broken up into a number of different divisions and auctioned off to Toyota, Honda, PSA, Renault and Tata. The US car industry is profoundly broken and should simply sell up now. They have no hope on their own, this has been increasingly obvious over the past decade.
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PostSubject: Re: The Death of the American Car Industry - Auto Bail Out Approved   Fri Nov 21, 2008 12:32 am

The birth of the new american mode of personal transport: corporate jet.

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PostSubject: Re: The Death of the American Car Industry - Auto Bail Out Approved   Fri Nov 21, 2008 12:50 am

God when will they ever learn. They should have let the Banks go down but no they decided to risk all and send us all to oblivion. Now this craziness.

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PostSubject: Re: The Death of the American Car Industry - Auto Bail Out Approved   Fri Nov 21, 2008 11:13 am

There seems to be no political unanimity on this and the auto "bailout" seems set to run into January. Still unresolved is the source of funding for the bailout: whether it is a Dept of Energy retooling loan or, as GM are trying to manage by attempting to turn their financing arm into a bank, part of the $700 billion banking bailout.

Whetever happens, the chances of one of them, most likely GM, going into Chapter 11 is growing daily.
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PostSubject: Re: The Death of the American Car Industry - Auto Bail Out Approved   Sun Nov 23, 2008 1:06 pm

They seemed very unprepared appearing in Washington, a bit like Sarah Palin. No big changes, no thinking outside the box, showing a separation from the reality. The dinosaur cartoon above is very appropriate. They should be allowed to fail as they have shown that they are ill-prepared to continue.
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PostSubject: Re: The Death of the American Car Industry - Auto Bail Out Approved   Sun Nov 23, 2008 1:27 pm

It'll be interesting to see what happens. Will a bailout be given only if stringent conditions are met ? Some of those conditions could be reduced wages. There's also potential breaches of WTO rules as far as I understand according to Bloomberg that could see European Car Makers doing something similar - being subsidised by their governments. Opel (GM) is looking for German support now. You'd have to think that Opel must be one of the more successful brands though.

The price of oil is very low now too - this will skew the needs for some reform. The price of petrol in the states has gone from $4 to less than $2 in 3 or 4 months which won't give incentive to change engine sizes immediately. All the more reason for them to continue going for manufacture of fuel/battery hybrids.

Quote :
WASHINGTON -- Democratic leaders in Congress called on Detroit's automakers Friday to submit "credible" financial plans to lawmakers by Dec. 2 for spending up to $25 billion in government money, including vows for "significant sacrifices" by top executives.
Advertisement

A letter from House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., came just hours before the Wall Street Journal reported on its Web site that General Motors Corp.'s board of directors had put an eventual bankruptcy filing into its range of options.

Detroit Free Press
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PostSubject: Re: The Death of the American Car Industry - Auto Bail Out Approved   Sun Nov 30, 2008 1:22 pm

The SBP is reporting that GM is starting to sell off UK sites .. they make Vauxhall cars there - haven't seen a Vauxhall in a while. Isn't it called Opel now ?

Quote :
American car giant General Motors said it could sell some of its British properties, then lease them back, in a bid to raise funds.
..
The company has already delayed the development of new vehicle designs in a bid to save money and earlier this month said it would sell its stake in Suzuki Motor Corporation for $230m (€181m).

GM bosses joined executives from rivals Chrysler and Ford this month to ask the US Congress for an emergency bail-out in the face of the credit crunch.

http://www.thepost.ie/breakingnews/business/mhidideygbau/
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PostSubject: Re: The Death of the American Car Industry - Auto Bail Out Approved   Sat Dec 06, 2008 12:13 pm

American Car Industry about to be Quantitatively Eased ?

http://www.rte.ie/news/2008/1206/useconomy.html

Quote :
Senior congressional aides in the US have said that Democrats in Congress and the White House have reached agreement on emergency aid for US automakers.

Another aide said negotiators had agreed in principle to the outline of the $15-17bn rescue package, but that details have to be worked out.

The news comes as data showed that more than 533,000 jobs had been lost in November, the highest monthly job loss in the US in 34 years.
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PostSubject: Re: The Death of the American Car Industry - Auto Bail Out Approved   Sat Dec 06, 2008 6:07 pm

Short term loans have been approved - this may hold
300,000 jobs are in the "big three", but suppliers and spin off brings it up to 2-3 million.
These jobs are very concentrated geographically and it would destroy whole cities if they went.

Some discussion by US economists here:

http://www.cnbc.com/id/15840232?video=952695630

One commentator is saying that depressed wages in the US means that car workers can't afford to buy a car, and what they need is Trade Unionisation and higher wages.
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PostSubject: Re: The Death of the American Car Industry - Auto Bail Out Approved   Sun Dec 07, 2008 2:32 pm

I am so glad to hear this news. It is the first step in enabling Detroit reorganise outside Chapter 11 which is critical to their survival. GM was within 2-3 weeks of having to file for Ch. 11 and that would have been extraordinarily difficult to manage in such circumstances.
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PostSubject: Re: The Death of the American Car Industry - Auto Bail Out Approved   Sun Dec 07, 2008 2:47 pm

Slim Buddha wrote:
I am so glad to hear this news. It is the first step in enabling Detroit reorganise outside Chapter 11 which is critical to their survival. GM was within 2-3 weeks of having to file for Ch. 11 and that would have been extraordinarily difficult to manage in such circumstances.

In this kind of product I'd believe in market forces bringing out the 'best' product so I'm not sure what will happen with this now. America probably needs smaller greener vehicles and this could be the impetus for those kinds of things coming out of the factories. Small and Green isn't something the market tends to do very easily - especially if there's no market for it like in the States where oil is very cheap. Small and/or Green is too long term perhaps so this 'bridging loan' bailout comes with plenty of strings attached.

Will they be back looking for more credit in 6 to 9 months, maybe less do you think ? There is a CSpan 10 minute commitee meeting with the Three CEOs and some senators on the other Vehicles thread. The CEOs detail what's going to be done with the money.
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PostSubject: Re: The Death of the American Car Industry - Auto Bail Out Approved   Sun Dec 07, 2008 3:18 pm

This explains why there is so much pressure for the bail out and how the credit crunch has made bankruptcy such a toxic option.
http://www.tnr.com/politics/story.html?id=a4893b49-36df-4784-9859-2dfa3a3211bf
Quote :
One reason for the casual support for letting GM fail is the assumption that bankruptcy would be no big deal: As USA Today editorialized recently, "Bankruptcy need not mean that the company disappears." But, while it's worked out that way for the airlines, among others, it's unlikely a GM business failure would play out in the same fashion. In order to seek so-called Chapter 11 status, a distressed company must find some way to operate while the bankruptcy court keeps creditors at bay. But GM can't build cars without parts, and it can't get parts without credit. Chapter 11 companies typically get that sort of credit from something called Debtor-in-Possession (DIP) loans. But the same Wall Street meltdown that has dragged down the economy and GM sales has also dried up the DIP money GM would need to operate.

That's why many analysts and scholars believe GM would likely end up in Chapter 7 bankruptcy, which would entail total liquidation. The company would close its doors, immediately throwing more than 100,000 people out of work. And, according to experts, the damage would spread quickly. Automobile parts suppliers in the United States rely disproportionately on GM's business to stay afloat. If GM shut down, many if not all of the suppliers would soon follow. Without parts, Chrysler, Ford, and eventually foreign-owned factories in the United States would have to cease operations. From Toledo to Tuscaloosa, the nation's?assembly lines could go silent, sending a chill through their local economies as the idled workers stopped spending money.

Restaurants, gas stations, hospitals, and then cities, counties, and states--all of them would feel pressure on their bottom lines. A study just published by the Michigan-based Center for Automotive Research (CAR) predicted that three million people would lose their jobs in the first year after such a Big Three meltdown, swelling the ranks of the unemployed by nearly one-third nationally and leading to hundreds of billions of dollars in lost income. The Midwest would feel the effects disproportionately, but the effect would reach into every community with a parts supplier or factory--and, to a lesser extent, into every town and city with a dealership. In short, virtually every community in the country would be touched.
The Americans will be bringing in tax incentives to buy fuel efficient cars too. That is a difficult judgement to make - it looks as if there is a whole new generation of much more fuel efficient cars coming through, and two or three years time might be a better time to buy a car. Any thoughts on that Audi?
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PostSubject: Re: The Death of the American Car Industry - Auto Bail Out Approved   Sun Dec 07, 2008 8:08 pm

cactus flower wrote:
This explains why there is so much pressure for the bail out and how the credit crunch has made bankruptcy such a toxic option.
http://www.tnr.com/politics/story.html?id=a4893b49-36df-4784-9859-2dfa3a3211bf
Quote :
One reason for the casual support for letting GM fail is the assumption that bankruptcy would be no big deal: As USA Today editorialized recently, "Bankruptcy need not mean that the company disappears." But, while it's worked out that way for the airlines, among others, it's unlikely a GM business failure would play out in the same fashion. In order to seek so-called Chapter 11 status, a distressed company must find some way to operate while the bankruptcy court keeps creditors at bay. But GM can't build cars without parts, and it can't get parts without credit. Chapter 11 companies typically get that sort of credit from something called Debtor-in-Possession (DIP) loans. But the same Wall Street meltdown that has dragged down the economy and GM sales has also dried up the DIP money GM would need to operate.

That's why many analysts and scholars believe GM would likely end up in Chapter 7 bankruptcy, which would entail total liquidation. The company would close its doors, immediately throwing more than 100,000 people out of work. And, according to experts, the damage would spread quickly. Automobile parts suppliers in the United States rely disproportionately on GM's business to stay afloat. If GM shut down, many if not all of the suppliers would soon follow. Without parts, Chrysler, Ford, and eventually foreign-owned factories in the United States would have to cease operations. From Toledo to Tuscaloosa, the nation's?assembly lines could go silent, sending a chill through their local economies as the idled workers stopped spending money.

Restaurants, gas stations, hospitals, and then cities, counties, and states--all of them would feel pressure on their bottom lines. A study just published by the Michigan-based Center for Automotive Research (CAR) predicted that three million people would lose their jobs in the first year after such a Big Three meltdown, swelling the ranks of the unemployed by nearly one-third nationally and leading to hundreds of billions of dollars in lost income. The Midwest would feel the effects disproportionately, but the effect would reach into every community with a parts supplier or factory--and, to a lesser extent, into every town and city with a dealership. In short, virtually every community in the country would be touched.
The Americans will be bringing in tax incentives to buy fuel efficient cars too. That is a difficult judgement to make - it looks as if there is a whole new generation of much more fuel efficient cars coming through, and two or three years time might be a better time to buy a car. Any thoughts on that Audi?

That's right, cactus. Chapter 11 is a drastic step to take for a company like GM with 330,000 employees and thousands of suppliers. It is a complex piece of legislation whereby the contracts a company has in force with suppliers, for example, come under the jurisdiction of the bankruptcy court. As soon as a company files for Chapter 11, it is deemed insolvent. The bankruptcy court has a number of requirements the most important of which is the reorganisation plan. As soon as Ch. 11 is filed, automatic stay is granted to the debtor (the organisation filing). It should be noted that a company may involuntarily go into Ch. 11 if a creditor filed and the debtor cannot pay (and is therefore deemed insolvent).

On a practical level, a company having filed Ch.11 can avoid paying the bills prior to the filing. It can also offload burdensome contracts while in Ch. 11. After the filing, the company's suppliers, for example, who may not have got paid bills due prior to the filing, cannot terminate the contracts they have after the filing except in the case of a payment default. It is complex stuff and some companies end up in Ch. 11 for years on end. The best result is that a Ch. 11 company comes out leaner and solvent and capable of competing in its market. The worst case is that a company files for Chaprter 7 (liquidatory insolvency) at which point the lights are switched off.
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PostSubject: Re: The Death of the American Car Industry - Auto Bail Out Approved   Mon Dec 08, 2008 12:09 am

That's good detailed stuff on the Chapter 11 thing - and not too heavy on the brain either.

Breaking News !



Quote :
Nobel economics prize winner Paul Krugman today said the troubled US auto industry will "probably disappear" as a result of the geographical forces he described in his award-winning analysis.

Krugman told reporters in Stockholm today that congress support to the auto-industry was not a long-term solution, but the result of a "lack of willingness to accept the failure of a large industry in the midst of an economic crisis."

However, he said government aid was the only possible response to the current financial crisis since the private sector would not be able to support itself.

Krugman was awarded the Nobel prize in economics for his analysis of how economies of scale can affect international trade patterns.
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PostSubject: Re: The Death of the American Car Industry - Auto Bail Out Approved   Mon Dec 08, 2008 12:18 am

Quote :
economies of scale

India and China ?
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PostSubject: Re: The Death of the American Car Industry - Auto Bail Out Approved   Mon Dec 08, 2008 12:22 am

cactus flower wrote:
Quote :
economies of scale

India and China ?

I believe TATA is selling the Nano here next year. It will cost €1500 new, according to the Star the other day. How the hell can GM compete with that ???

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PostSubject: Re: The Death of the American Car Industry - Auto Bail Out Approved   Mon Dec 08, 2008 12:28 am

Auditor #9 wrote:
cactus flower wrote:
Quote :
economies of scale

India and China ?

I believe TATA is selling the Nano here next year. It will cost €1500 new, according to the Star the other day. How the hell can GM compete with that ???



Its tempting. Does it have pedals, like my favourite, the Sinclair?
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PostSubject: Re: The Death of the American Car Industry - Auto Bail Out Approved   Mon Dec 08, 2008 12:37 am

cactus flower wrote:
Auditor #9 wrote:
cactus flower wrote:
Quote :
economies of scale

India and China ?

I believe TATA is selling the Nano here next year. It will cost €1500 new, according to the Star the other day. How the hell can GM compete with that ???



Its tempting. Does it have pedals, like my favourite, the Sinclair?

Yeah but it's double the price.
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PostSubject: Re: The Death of the American Car Industry - Auto Bail Out Approved   Mon Dec 08, 2008 1:03 pm

CAR WARS!

Fight fight fight ! Peter Schiff v. someone else on the American Auto Industry bailouts. Bailouts could blossom to 125Billion ..



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PostSubject: Re: The Death of the American Car Industry - Auto Bail Out Approved   Mon Dec 08, 2008 2:49 pm

I hear inflation coming bounce bounce bounce bounce bounce bounce
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PostSubject: Re: The Death of the American Car Industry - Auto Bail Out Approved   Mon Dec 08, 2008 2:53 pm

Better than deflation.
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PostSubject: Re: The Death of the American Car Industry - Auto Bail Out Approved   Tue Dec 09, 2008 1:48 am

Autobloggreen reporting on this today. Were the Yanks well bitten by the shocking high price of gas during the summer when they were paying up to half of what we pay here for our gazz (see second map below)

There is a graph below of the low tax take by Americans on their fuel. Maybe it's time they started thinking about raising that to pay for the GM bailouts.


Quote :
GM apologizes for "betraying" American consumers, focusing on gas guzzlers

GM's done it. The General has apologized to America in an ad today in Automotive News (and available all over the place, including after the jump). The stated self-flagellations are for:

* Vehicles that were "below industry standards"
* "Lackluster" designs
* Commitments to compensation plans that are now "unsustainable"
* Too many brands and dealers, and
* "We also biased our product mix toward pick-up trucks and SUVs."


That last one is quite an admission from the company that brought us the HUMMER, the Escalade, and the Yukon/Tahoe. GM's death list has got to be filling up fast. This apology wasn't issued to just clear the corporate conscience, but to explain why GM should get the huge bridge loan they're asking for from Congress (the $15 billion is just the start). As for what GM will do with the money - aside from things like actually being around to build the Chevy Volt - the ad says the company will "reduce U.S. dependence on imported oil" and "protect our environment." Read the whole thing after the break.



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PostSubject: Re: The Death of the American Car Industry - Auto Bail Out Approved   Sun Dec 21, 2008 12:46 pm

Bush announcing the approval of the Auto Bailout loans last week
http://www.youtube.com/watch?v=qpboGiPWhfY

-Cspanjunkiedotorg

Peter Schiff rising people's tempers again here on Your Money. The bailout comes with very strict conditions up to the end of March so if there isn't a turnaround by then then the money is paid back and there are no further bailouts. How the success of the bailouts will be gauged is relatively unclear but will probably hinge on those conditions stipulating that workers unions should accept lower pay equivalent to foreign workers, that debts must be paid off to a particular level etc.

What Peter Schiff says is perhaps correct - those businesses should be allowed to fail, letting the free market take its course but there is the point - just not right now. Auto workers will have some hope after Christmas and a good break before they go back. It'll probably be wound down after March but who knows - maybe there will be such a turnaround in such a short space that it will bode well after that and they will be given further boosts until June ...

Plenty of high temper in this one with mention of the Great Depression Part I, WWII and Argentina's currency collapse.
http://www.youtube.com/watch?v=NxJhYDH6g00
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PostSubject: Re: The Death of the American Car Industry - Auto Bail Out Approved   Sun Dec 21, 2008 1:22 pm

The US auto industry has suffered under one significant impediment which it will never shake off. Short-termism. It must deliver above market returns on investment to investors on a quarterly basis. This is why the US auto industry, even given their knowledge of fuel cost trends, has had to rely on high margin sales live SUVs, pick-ups and hummers. This hasn't changed since the 1960's as they've seen their share of the US market erode.

The only answer Republican congress people can come up with is to ensure that US auto worker's wages are lowered to the minimum wage in order to ensure that bond and stock holders can achieve above market returns. It's quickly becoming apparent that the common populations of western democracies will continue to see their living standards detiorate in order to satisfy the will of the wealthy - a relatively tiny minority in any given country. Who says you can't fool a majority of the people most of the time?
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