The US Big 3 questionable status

[Good Times]

What are your thoughts on the current outcome of the senate rejecting the bailout for the big three? If one of them goes into bankruptcy, how if any would it affect us? I don't think we currently have any members working for the big three but I'm sure we have friends/families that either work directly or indirectly that may get affected by what may or may not happen coming the first of the year.

Since the senate is now on official recess, what are the odds that the current administration will use the 700B and bail the big three out?

[4x4mike]

Doesn't Frank, elripster, work for GM?

I'm not sure what to think about the whole thing. I look back to elementary school when we saw the movie Tucker. The company made cars, people bought the cars. Things were good and bad but in the end couldn't make it so they closed up shop. No bailout, no excuses. I'm not saying the big three should go belly up and it would be bad because there goes a ton of jobs, directly and indirectly like Lance said. It'll be interesting to see what happens.

[Vermejo]

The banks that have received bailout funds should be lending the money to Detroit. Rather than lending the banks are buying other banks and paying dividends. Even if the legislation is passed before the end of the year the operating expenses of these companies is huge. 15 billion is merely a band aid on a gaping wound. If a bailout is given to the “Big Three” government leverage on what type of cars are produced is eminent.

If this whole situation was not reality, it would be a bad movie. Bankruptcy is not the apocalypse; these companies will exist beyond and most likely become streamlined and gain new leadership. Someone will pay, be it the autoworkers, taxpayers or our children.

[elripster]

I don't work for GM (I work for Argonne National Lab) but I work with them a lot so I get to visit the proving grounds see a lot of their testing. It's actually pretty cool, they test their stuff hard.

I think the administration will step in, I think they have to. Adding 10% to the unemployment rate would be devastating. I'm not one for corporate welfare but this situation is so far beyond the norm that some intervention is necessary unless we all want to accept a large decrease in financial stability and quality of life. Not to mention if the Big 3 go down, we'll all get to pay a lot more for our vehicles. Also, we should remember, we are talking about loans, not a bail out. The white collar financial industry on the other hand got a bail out. GM employs a ton of people who are paying their bills and mortgages and helping to keep this economy moving at all. We don't want to lose sight of that.

Another thing to consider is that if Toyota or another Japanese automaker has to seek help from their governments, they will likely get it without much issue. Japan gave Toyota a lot of dough just to produce the Prius at a time when they were ridiculously profitable. To remain competitive we in an extreme case like this will need to do the same unless competing countries stop.

There is an upside to all of this. The union issue has finally come to light. Our manufacturers bleed cash supporting unrealistically high wages and benefits. For example, one of the most desirable jobs on the production line is the filling of the coffee pots. It's a seniority based position. That person makes $80k/ year. I have a bachelors and masters degree in mechanical engineering and don't make that much dough. When a company has a competitive ball and chain like that they simply cannot compete with other companies that don't.

That is why when I hear people talk about how the B3 are out of touch, clueless, or the likes, I get really irritated. They understand the situation completely but have 20% of the vehicle profit margin with which to work. They do their best to stay in the black and remain technologically competitive.

I could type on this for a long time so I'll subscribe.

If I had the dough right now I'd go by an H3 Adventure, F/R selectable lockers, 4:1 t-case, 125A alternator, 20MPG on the highway, good truck at a great price.

Frank

[4runnerchevy]

Here's an idea, may have already been said. Why don't we make the oil companies bail out the automakers. :clap:

[elripster]

That would be something.

Oil companies and auto companies don't mix well though. When oil goes up car sales and most other goods impacted by reduction in expendable income goes down. The more money oil is making typically the less money car companies make unless the economy tanks for an unrelated reason like that of the current financial crisis.

Frank

[paddlenbike]

A friend sent me this today:
http://home.off-road.com/~kemanuel/temp/bailout.jpg

[Scuba]

A friend sent me this today:
http://home.off-road.com/~kemanuel/temp/bailout.jpg



Seen that, Freakin hillarious..

Didnt the bailout get shotdown?


:bling:

[elripster]

Guys, these are loans. The financial industry got a bail out. Congress did not pass it, the Bush administration will have make them now.

Actually, that might be good. Congress was putting these ridiculous caveats on the loans that should not be there. They are way to far from the day to day operations of the automakers to decide where the money should go within the company.

Honestly, those adds are just too full of it to be funny. GM sells more cars than any other company on the planet. Their cars and trucks are MPG leaders in their classes, especially their trucks. The same is true for Ford. Quality is a wash nowadays. Toyota has had to deal with major engine issues starting in 1990 and has had it's share of recalls, etc... Consumer reports took Toyota off the auto-recommended best buy list for reasons. American autos have had great powertrains but flimsy chassis and sometimes cheap interiors. Today their chassis are rigid, interiors are nice, they got better. (Let's leave a lot of Chrysler's out of this one...)

Let's all remember that while many people are unable to pay their mortgages, the people employed (hundreds of thousands) at our auto companies are their suppliers are part of that segment of the population that IS paying their bills keep what economy we have moving.

Frank

[DHC6twinotter]

I'm not an expert on the matter, but would it be possible for the big 3 to file for chapter 11? A lot of the airlines have done it. While they are still struggling and have taken a loss this last quarter, Delta has exited chapter 11, and has just recently purchased Northwest. Delta is now the largest airline in the world and expects to make a profit by the last quarter of '09.

Would it be possible for the auto makers to do the same? File for chapter 11, reorganize, and possible start pulling in profits in the near future? It seems like it would be better than everybody loosing their jobs anyway.

There are a lot of jobs both directly, and indirectly tied to the automobile industry. I would hate to see so many people lose their jobs.

Just out of curiosity, if one of the big 3 gets a loan and still goes under, what happens to the money that is owed to the government? Do the tax payers cover that?

I dunno. I’m not familiar with how chapter 11 or any of this works, so I'm just thinking as I type.

[DHC6twinotter]

A friend sent me this today:
http://home.off-road.com/~kemanuel/temp/bailout.jpg


Funny thing is, Ford no longer makes the Windstar. :D

[elripster]

They could go into BR and reorganize but they don't want to do so. They don't think people will buy cars from a bankrupt company. They are probably right.

Let's keep things in perspective here. We don't have an auto company crisis, we have a GLOBAL financial crisis which is hurting our largest heavy industry as well as others. The financial crisis was caused by irresponsible lending which was enabled by the federal government but actually performed by the lending companies and lenders. We are dumping billions into this mostly white collar industry and flat out mismanaged itself into a deep hole taking the US with it. We did not ask them to reorganize, remove those responsible, or otherwise because it would be too disruptive at this hard time... Now we have our auto companies that employ a lot more of the average Joe who can't get these loans from the financial industry so they ask government. I say make the loans like the banks would with the caveat being they get paid back with interest, not that put this much here.. this much there...

They don't really need to reorganize, sell off brands, etc... they need to get through this period, renegotiate with the UAW, and continue on with the plans in place before our economy tanked. As far as negotiating with the UAW this has allowed them to do that. It looks like the job bank is finally going away. Basically, let's say you work for a US automaker. The plant you work at gets closed. There is no other plant within 60 miles of your home. You get paid full wages until that plant reopens or they build another close enough. You might never work another day and still get paid. Now see why our US companies struggle? The foreign companies don't have these burdens.

Frank

[tulsa_sr5]

Frank, I disagree on a couple of your points. I think their hesitation to avoid chap 11 is a mistake, and the sudden press about how close to failing they are means that folks are avoiding them more now. In many ways they are being punished like they filed, with none of the benefits.

I also disagree that the financial crisis is to blame. It's certainly sped up the timeline for them running out of cash, but it's been obvious for the last few years they were heading in that direction. The cash burn has accelerated the last quarter, but they have been burning thru their billions for years with no improvement.

I also see a strong need to cut brands and dealers, GM especially is built like a company with 40 or 50% market share which they haven't been for decades. Saab, Hummer, Buick, Saturn and Pontiac all need to go, GM can't possibly support development for all of them at 18-20% market share without continuing to simply badge engineer every car. It spreads sales around some but doesn't really sell more cars. GM also has 3 or 4 times as many dealers as Toyota but only a few % more market share. Without going chap 11 or something very similar they have no cheap way to shed that extra capacity. Shuttering Olds cost about 2 billion.

My personal belief on the bailout/bridge loan thing is that they can call it whatever they want. We'll never see a penny back from any of them. I do think they'll be back to beg for more over & over till the govt finally says no more. Everyone rips on GM for riding *huge* profits during the SUV boom but if you actually go dig thru the financials from 90 on they never did as well as toyota last year when toyota *only* made about 6billion in profits. Even during the good times GM would have struggled to payoff the type of money they say they need to keep the lights on till march.

[MTL_4runner]

Just in case you all thought it was totally one-sided....having the big 3 fail isn't really a good idea.

http://www.msnbc.msn.com/id/28241203/page/2/

Big 3 woes don’t give Japan’s automakers joy
Industry upheaval weighs on them too, both with consumers and suppliers

TOKYO - In recent years, Toyota has edged closer to overtaking General Motors as the world's biggest automaker.

But now as GM and the entire U.S. auto industry teeter on the brink of collapse, Toyota and other Japanese carmakers are hardly rejoicing. They say the bankruptcy of any of Detroit's Big Three would spell serious trouble for them as well.

Should that happen, "the damage to our business is certain to be tremendous," Toyota Motor Corp. spokesman Hideaki Homma told The Associated Press on Monday. "The conditions for the U.S. auto market are extremely tough right now, and any additional negative is sure to make things worse."

One major problem is that Japanese carmakers in the U.S. share many of the same parts suppliers. If a Detroit automaker were to collapse, suppliers would likely follow, setting off a chain reaction that could would wreak havoc for Japanese production in the U.S., a vital market.

More broadly, the U.S. crisis could lead to huge job losses and further weaken consumer spending, especially for big-ticket items like automobiles. Together, the three big American automakers employ 239,000 workers in the United States. Counting other businesses that depend on the automakers, economists estimate that 2.5 million jobs would be lost if all three companies went out of business.

"Whether it is the impact on consumer confidence or the impact on the suppliers that we all share, having one or more of the major automakers in severe distress has consequences for the entire industry," said Simon Sproule, corporate vice president of global communications at Nissan Motor Co., Japan's third-biggest carmaker.

A possible advantage from a collapse of the U.S. auto industry could come only many years later — perhaps in a decade — when Japanese manufacturers would compete against weaker rivals in the U.S., especially if they further exploit their lead in green technology with hybrids or electric vehicles, said Koji Endo, auto analyst with Credit Suisse in Tokyo.

"But that's for the long, long term," he said. "For now, the situation is bound to get worse for the Japanese."

After the U.S. Senate last week rejected an auto industry bailout, the Bush administration is considering ways of providing emergency aid to General Motors Corp. and Chrysler LLC, which have said they could run out of cash within weeks without federal aid. Ford Motor Co. says it can survive 2009, but it has also asked Congress for a line of credit.

While Japanese automakers are in a far better financial state than their American counterparts, they are all getting battered in the shrinking U.S. vehicle market.

In November, when American auto sales plunged 37 percent to their worst level in more than 26 years, Toyota's sales sank 34 percent, Nissan's were down 42 percent and Honda Motor Co.'s fell 32 percent.

Vehicle sales in Japan and Europe are also waning, and even demand in developing economies in China, India and Latin America is weakening.

"This is a global crisis affecting the entire auto industry: No one is immune," said Nissan's Sproule. "And it is in everyone's interest to see a healthy auto industry that is able to manage through this crisis."

Toyota, Japan's top automaker that makes the Camry sedan and Prius hybrid, has already slashed its profit forecast for the fiscal year through March to 550 billion yen ($5.9 billion), or about a third of its previous year's earnings. Expectations are rife another downward revision is coming.

For now, there are even alarming signs the Japanese may be falling in the footsteps of the U.S. automakers, said Endo.

GM, which has already idled five factories this year, announced Friday it is temporarily closing 21 factories across North America. Toyota has also suspended production at several North American plants in recent months.

The region is critical for Japan's automakers — both Toyota and Honda sell more vehicles in North America than they do in Japan.

"There is absolutely no way in my view that the Big Three's woes can work as a plus for the Japanese automakers," said Tsuyoshi Mochimaru, analyst for Barclays Capital in Tokyo.

"So what if there might be a market-share increase some years ahead? The pie itself is shrinking," he added. "Sales volume is plunging. And that's why all the automakers are suffering."

So far this year, Toyota appears to be on pace to overtake GM in global vehicle sales. Last year, Toyota's group sales rose to 9.366 million vehicles, just shy of GM's 9.37 million.

Toyota's Homma notes that 15 or 20 years ago, when there was a backlash among some American politicians and consumers toward Japanese products, Toyota may have gotten criticized as benefiting from — or even causing — U.S. automaker's demise.

But these days, Toyota is no longer viewed as foreign, and consumers understand that Toyota employs American workers and purchases from American suppliers, he said.

"We are a member of the American auto industry," Homma said. "Without (a bailout), chaos is sure to come."