Is General Motors worth saving?
Bill Saporito
TIME Magazine
For months, General Motors had been telling everyone who would listen that bankruptcy was not an option. It had a $30 billion cash pile and plans to restructure the company as the economy rebounded and 2007 U.S. auto sales topped 16 million units.
Then came October. Sales plummeted an astounding 45% over the same period last year, a result of a slowing economy and a dearth of financing for would-be car buyers. Total U.S. car and light-truck sales this year could come in at 13.5 million, 2.6 million fewer than last year. "That's in nobody's business plan," says Kimberly Rodriguez, an automotive specialist with Grant Thornton.
"The best planning in the world cannot survive that fluctuation." It's now clear that GM can't survive as an ongoing entity without massive federal assistance. The company is burning through more than $2 billion each month. It has $16 billion left. As if they were aboard a dirigible losing altitude, GM's bosses have been frantically throwing all manner of stuff overboard — retiree health-care benefits, people, assets, new car design — to conserve $5 billion. That will get it through the year.
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Filed under: Bailout Turmoil • Barack Obama • Economy • Finance • Raw Politics |
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Instead of just handing over billions of dollars to GM for a bail out why doesn't the Gov't just hand out $5,000 credits to consumers towards a new vehicle, this way its a win-win situation for the vechicle industry and the consumer whom also is the tax payer and will end up paying for this bail out anyway.
With this $5,000 credit towards a new vehicle, consumers would have to either 'use it or lose it' within a specified time frame. All the details can be ironed out, as who should get this credit and so forth.
If GM wants the US to assist with their problem. I think that GM should help themselves by lowering prices on their products and require that as part of the packet they are asking from congress help the consumer buy and get financing.
THINKING OUTSIDE OF THE WALL STREET BOX
BAIL OUTING the AMERICAN TAXPAYER?
Instead of the Federal Treasury ‘BAILING OUT’ failing Banks and Financial Firms-
WHAT ABOUT SPREADING THE WEALTH?
Instead of giving “All” of our $700 Billion to failing Banks and Financial Firms,
Provide the 305+ million American taxpayers a “Bailout” of $1 million each.
To turn this failing American economy around give a “Bailout Check”
Of $1,0000.00 to all Working and LAID OFF taxpaying American Citizens.
Our “Bailout Check”, would help:
1. American home owners that are behind in their mortgages should be able to negotiate with the bank and pay off their mortgages; those that have been foreclosed on should have the opportunity to repurchase their homes or purchase a new home from their BANK.
2. The money could only be spent in the United States of America on American made Cars. (Ford, Chrysler and GMC) sell cars at a fixed price $30,000 per car this would help the Auto Industry and put AMERICAN WORKERS back to work.
3. Consumers could invest in their children’s College plan, and Retirement plans
4. Investments in Wall Street.
5. Some consumers will go on vacations only within America that would help the Airlines and Transportation.
6. Other consumers will go shopping.
DO THE MATH; $305 MILLION -$700 BILLION
THE BOTTOM LINE
“BAILING OUT” All Americans will ALSO help this economy.
LAL of DC
Absolutely save GM and Ford!
Think about it from a business standpoint: These companies have paid TENS OF TRILLIONS OF DOLLARS in taxes over their lifetime. What's wrong with giving them a $25 Billion loan? If they pay it back, then the taxpayer makes money from the interest and an entire industry is saved. Even if they can't pay it back, we've still profited by TENS OF BILLIONS OF DOLLARS.
Come on . . . a $25 Billion loan is a small price to pay now to ensure a lot of future tax revenue and good lives.
If even one of you believes that you will not be significantly affected if one of the big three goes down then I have a bridge to sell you. Do I want to do this. NO! For all of the reasons stated above, however, you are foolish if you think you are punishing them. You will suffer just as much if not more. I work in healthcare, a relatively protected field and we are already being hit because people lost jobs and don't have insurance. You may be angry about it but a bail out it the right thing to do for now . . . .
How can the U.S. auto makers survive? I say quite simply "Reduce, Reuse and Recycle!!". If you look at the Japanese auto makers for instance you'll notice a couple of things that are done quite differently than the U.S. automakers. First of all they don't have 25 different models of cars and trucks available. And secondly, they don't throw out their well respected name and replace it with an unknown.
Take Honda and Toyota. Honda has the Accord and Civic (sold in the U.S. since 1976 give or take) and a pretty long run on some of their other models such as Odessy and CRV. Toyota has the Camry and Corolla with other long timers 4Runner and Land Cruiser. It seems to work for them. I think the longer they keep a name the more value it holds (hence their much higher resale value). On the flip side when someone says "I drive a Chevy Cavalier" my first thought would be 'Oh, an old clunker ... they don't even make those anymore'. Or if someone says "I drive a Ford Fusion" some might say 'I haven't even heard of that model. Is it any good?'. If the Big 3 keep manufacturing this over abundance of models (now mostly trucks and SUV's) and keep changing their names like used underwear, what kind of reputation are they giving their product?
Why not build a few great cars and trucks instead of saturating the car lots with a whole lot of 'who knows what' (even I've given up trying to keep up with all the new and retired models). Keep focused on the very best models and retain their value by changing the body style every few years instead of retiring their names into the history books and hoping for decent sales on the next one.
I think it's a good place to start. Maybe not a simple or inexpensive change for the Big 3 in the short term but the likeliest option (in my opinion) for keeping themselves viable in the future.
I truly love our cars and all they stand for. We just need our auto makers to take a stand ... one that stands the test of time!!
Today, I sent the following email to Barack Obama to help him find a better, more creative solution to the Automaker crises. I hope that CNN and all Americans will promote and support this practical, workable idea.
[QUOTE]
"Barack, My Man,
Here's how you solve the US Automaker crises and win the hearts and souls of all Americans.
Instead of giving taxpayers' money to the automakers, give the money to the taxpayers!
Here's my plan: All Americans who buy a car from one of the big three American automakers in the next 12 months get the TOTAL COST of the vehicle deducted from their declared income when they file their 2009 income taxes.
So, if you are earning $40,000 a year and you purchase a $29,000 American-made car, you will pay NO TAXES in 2009.
Do it, Barack. Americans will love you forever. The car companies will get the money they need . . . BUT they will have to perform to earn it, by delivering a product to the American people. And, the banks will get to finance a whole bunch of automobile purchases.
The average American will win by acquiring a NEW CAR in the midst of tough economic times. American workers will win, by keeping their jobs, while they build those cars for their fellow Americans.
All Americans will win by being encouraged to BUY AMERICAN!!!! Maybe that will start a whole new trend in your country.
America has given its economy away to the Japanese, the Chinese and to other foreign competitors. It is time to stop the bleeding by rewarding your own people and workers!!!!
A new AMERICAN car in every driveway, will help drive the American economy in the right direction.
Good luck in your presidency, Barack. You are the right person for these times.
Sincerely
Doug Long
http://www.douglong.com
[END QUOTE]
GM going bankrupt would be more devestating to Main Street. All 3 going bankrupt was impact all of us. I am originally from Michigan and have worked at various capacities at all three companies. At GM I worked in a Strategic Planning department in the 90s'. I actually met and worked with upper level management and I was in meetings with various executives then the future CEO Rick Waggoner. There are a lot of things that went wrong with this company. First, they listened to marketing consultants and their staff that told them Americans didn't want hybrids and alternative vehicles. And, they believed them. 60 minutes did an interview of a top consultant years ago. He was the one who encouraged sales of vehicles like SUVs, Trucks and the Hummer. And for reasons I personally will never understand, people bought it (Hummer). I hate to say it, but a lot of people did not become energy conscious until gas prices raised dramatically and economy went south. But, I am not saying it is the consumers fault, because the Big 3 are suppose to think ahead, in fact they pay people to do so.
However, here are the automotive facts:
1. When oil prices went up, car sales went down.
2. Automotive companies were offering to pay for your gas for a year if you bought a new car. That is called desparation.
3. And, the economy has gotton so bad that people with good credit have had trouble obtaining car loans.
Here are the Main Street facts. If the Big 3 go under.
1. The following states will be impacted, first: Michigan, Ohio, Pennsylvania, Illinois, Indiana, Arizona. The other states will be impacted due to the failure of some local plants and dealerships.
2. The advertising industry. Most large companies like Campbell Ewald have multimillion dollar accounts with one or more of the Big 3. Local advertising dollars will be lost as well, because the dealerships will go under.
3. The IT Industry. HP, IBM, EDS, Dell and others all have multimillion dollar accounts with th Big 3. They provide computer supplies or IT Support. IT was outsourced by the Big 3 to save money and focus on making cars. Isn't that funny.
4. Business Consulting and Contracting industry – Companies ranging from Booz-Allen to Manpower to Kelly have multi-million accounts with the Big 3.
5. American Automotive Suppliers (large and small)- Supplier range from Automotive Parts, Tool Builders to Office Supply Companies. There are Automotive Suppliers all over the country.
6. Small and Large cities – If all of these people are unemployed, the are filing for unemployment, and the are definitely not buying anything.
7. The oil companies. (But I have no sympathy for them. I think that they should bail out the Big 3. They can afford it. )
8. We live in a global economy and these are global companies. So, we will not just harm ourselves.
I am torn as to whether the car makers should be bailed out or not. The thing that bothers me the most is Chrysler – why would this company hire Bob Nardelli knowing that he nearly threw Home Depot under the bus, he is not car knowledgeable and his only interest is himself, certainly not his employees. I do believe the big three should be forced to eliminate all bonuses and cut their salaries so that more of this money can go to aiding the repair of their companies instead of firing their employees without whom they would not even exist. I do feel that the ripple effect of letting them fail may possibly be horrific but I also feel that the American public should not always have to bear the burden of fixing all wrongs.
The auto industry should look to the oil industry for a bail out. Its not like big oil doesn't have money these days. Exxon Mobil could write a check for twenty-five or thirty billion. Stop molesting the government. Enough already.
For an innovative nation and one with the best work force in the world you cannot see beyond the edge of your noses and national pride.
You are being beaten by something called competition ( Toyota and Nissan) whose labour costs are higher, but are more productive and hit the road with fuel efficient cars, first !
Combine that with Medical cover costs and service levels ( too many exclusions and QED enormously burdensome to individuals) which are out of control compared with any where else in the world, both for companies and individuals.
One idea, hive off GM, Ford and Chrysler, Fuel efficient cars to a new jointly owned company, and put the $50 billion into that mainly for research and some capital investment, and catch up or beat competition. You could pusue three different options for each mark longer term but have one common to all three for speed and competitiveness, just different design and engine capacity energy style.
The existing $25bn helps cash flow in the nonfuel efficient divisions, and if that runs out tough.
A million details to work out including labour protection issues but do nothing and labour will continue to downsize.
Finally and by the way you have to be price competitive and if that means outsourcing to survive so be it, the profits/dividends of those companies come back to the US eventually, and tax policy can help as side dish to the Fuel efficient car development company, on lower corporate taxes and accelerated capital investment deductions from profits.
For the rest they can survive or not against separate business plans submitted with the hive off plan, with the other $25bn. Save the money on the Iraq war!!
The car industry moguls are part of the cause of the economic woes of America, along with greedy Oil magnates. Sensible oil drilling is fine but Drill baby drill is a failed concept from any perspective, oil will run out and is short termism at its worst.
Regards,
Hodgson.
It's unfortunate that so many people still hold to the perception that domestic vehicles are garbage and the foreign competition can do no wrong. What happened to America first??? True, for many years, domestic automakers built crap and the Japanese were known for quality, but that has long since changed.
GM has won more quality awards (eg: J.D. Power) over the last few years than Toyota, Honda, Nissan, BMW and Mercedes combined!! The Toyota Camry and Honda Accord have lost their quality bragging rights (J.D. Power awards) to GM for a few years now, but people still think they can do no wrong.
Volkswagen had the largest number of vehicle recalls last year, followed by Toyota. Up until then, Toyota was in first place for recalls. If it were GM, it would be front page news, why isn't it when it happens to Toyota??
If GM fails, are the Japanese and Koreans going to help the government pay unemployment insurance to everyone who loses a job as a result of GM's collapse? Because a failure would devestate everything from the steel industry to the tire manufacturers and everything inbetween.
My husband says the oil industry should bail out General Motors.
Bill,
If GM would have been a small business, it would be a statistic that says over 75 percent of small businesses don't survive after five years.
The industrial revolution is over for auto makers in the U.S.
This country's only hope is to invest in the green economy. It will take more than fuel efficient cars; it will take vehicles that run on something than petroleum.
Unfortunately, the Rust Belt is only going to get rustier.
The bailout amount required to save the auto industry is reported to be around $25 Billion. However, what would it cost to not bail out the auto industry? If we don't bail out the auto industry, it will cost the government over $36 Billion dollars. Here's the break down:
2 million jobs lost equates to an avg of $3K per person tax base lost = $6M; unemployment annual benefit of $15K per person per year x 2Mil is $30Billion for a total of $36 Billion. Add to to that, none of these unemployed people will be Xmas shopping and paying taxes either- OUCH!
25 Billion is actually a better deal for us!
All 3 US carmakers should be saved by loans not bailouts. The US and foreign auto industry failed to see the energy ciisis coming and both continued to make trucks and SUV's.The Foreign car companies were in a better position to make more fuel efficient cars. This was due to the wage discrepancy which they paid their workers $20 an hour less than the US Auto industry. The auto industry will recover. Eventually there will be a shortage of late model used cars which will make them more expensive to purchase.
This whole bailout or as they call it rescue plan is a farce. As predicted, the coporations are lining up for their share of the "loot". Sadly everybody can get some money, except the taxpayers. I
t is a big scam and taxpayers as well as politicians are being held hostage economically. The corporations say give us some money or our employees will be out of a job. No one wants to feel responsible for anyone losing their jobs and healthcare. But when are we going to toughen up and say sorry, no go. We'll invest the money in retraining and other supporting programs. We are being scammed and held hostage by these coporations.
The GM leaders are obviously out of touch. Get rid of them. There are actual workers in the plants that deal with the product and staff in person. These are the people that believe in a great product and not just the possibility of great CEO profits. Get rid of the money men and get a final product man. No bailout until the failures are not involved.
Save them? Who was there to save me when my job went with the change in the economy? Why do we endorse socialism when it serves the automakers and capitalism for the MILLIONS of the rest of us? Automobiles are overpriced and we are running out of oil. Let them go and inject the money into what is important. Why doesn't the single CEO for Chrystler give up the 200 million dollar bonus this year he got when he was fired from Home Depot which would bankroll all of us for a lifetime!
Ange from Kentucky is absolutely right.
If the feds had given $100 K to each family in the U.S. instead of the Wall Street bankers that orchestrated this mess, we would all be a lot better off. Money would be flowing again, and mortgages as well as new purchases could be paid off/down. (I am against ANY of the bail-out, but as long as it was voted in by the lobbied elected, we have to pay for it anyway.)
Q: Where is the oversight? A: With the same people who are responsible for the mess, the Fed Reserve and Paulson
No, let GM go bankrupt, reorganize minus the greed of the top brass and produce alternative energy automobiles, affordable, and safe, to reposition this large free enterprise manufacturer.
I have the answer to a broken automotive industry...Obama, please listen. Take 40 billion dollars and designate it to the first 4 million consumers who purchase or lease a new or pre owned vehicle. That would equate to a $10,000 credit towards their next vehicle.
Disclaimer: Must be a GM, Chrysler, or Ford product.
The "Big 3" should absolutely NOT be bailed out. They have run poor business models for 25+ years. Have promised way too much to the auto workers union (incidentally, what the heck have the unions done to help save their companies?). Notice that Toyota, Honda and other foreign auto makers may be doing poorly right now but they are not begging their own governments for money. That is because they make a quality product! Why should a GM 2008 SUV get roughly the same gas mileage as a Model T did 100 years ago!
No doubt the "Big 3" will get a welfare check from the Democratic controlled government. Afterall, unions are big contributors to their campaigns. The bankrupting of our children's future will continue as long as we have this mentality that government will save us all.
I swear....if those incompetent boobs get a taxpayer bailout I will NEVER buy a "Big 3" vehicle again. Yes, jobs will be lost if GM goes bankrupt. However, at somepoint we must stop selling our children's future so that our generation can continue to live without feeling the pinch. And no....I did not support bailing out the banks either.
Why can't our government bail us, "The American People" out? If the government gave us the money we could pay our mortgages and other bills. Then maybe we could afford to buy cars or spend a little extra at our local stores.
$13-$14 an hour for new hires with limited benefits? How in the world is a family of say four suppose to survive on that? if we bail out GM and that's what they pay their workers instead of the current $29 an hour plus full benefits, then we are going backwards as a country. I understand the need to save money but this is ridiculous. How about the government addressing the enormous healthcare costs that are adding to GM and many other companies problems?
No! GM made many mistake and should have to answer for them. The world doesn't need GM. A better company will take it's place, the consumer will get a better product and we'll all be better off. Imagine if one of GM's workers came to their boss and said they needed a loan to bail them out of their bad home mortgage because they were to vital to the company to fail!
Yep ...
TOO much useless management – buildings of PEOPLE that were NOT pulling their WEIGHT ...
Improved QUALITY control and focusing on just KEY products will MAKE the difference.
(Hopefully????)
I have spent 20 years as a new car manager for GM stores and 9 years went to Lexus where GOOD cars are built and the customers aren't taken for granted. My question is: How do you "bailout" a company(Ford,GM) that people really don't want to buy a car from? I realize all the implications but GM has been telling us how much better and snd smarter they have been getting for 30 years and look at the mess. IF I hadn't left I would be livng in a trailer IF I was lucky but Rick Hendrick happens to own Lexus in Kansas City and he is the BEST dealer in the country and instead of the musical chair leadership/golden parachute General Motors has selfishly taken they need to buy into the right philosophy. I feel sorry for the "big 3" but I know from being there they brought it on themselves and I really see no realistic answers to the problem. All I have heard from the news is we have to do something but no solid ideas have been presented.
Barney Frank & Nancy Pelosi seem to think so. Is there 'pork' involved?
I don't think it is a matter of if GM is worth saving or not. The real deal is if they or the other auto makers go bankrupt millions of people will lose jobs and that will kill our economy. So we really don't have a choice but to help them. It's either that or get ready for another great depression.
Cindy...Ga.