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What would have happened without the auto bailouts of GM and Chrysler?

T. Bejma 2012/09/09 18:20:47
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I agree with CNN: 1.5 Million Auto jobs and many suppliers saved! Conventional bankruptcy was just not an option. Ford was in such bad shape in 2007 that they had to go the much more expensive and risky route of secured loans. Without those loans, they would have went under themselves. GM and Chrysler were a little better off and tried to go the same route in 2008, but it was too late because the banks were on life support (or taxpayer support, if you will) themselves.

From the CNN Article...

http://money.cnn.com/2012/09/06/autos/auto-bailout/?source=cn...

"This is central to the election debate over the bailout. Mitt Romneyclaims that if GM and Chrysler Group had gone through a privately-financed bankruptcy process, they would have emerged even stronger than they are today.

But many auto industry experts, including the Obama administration's former car czar, Steven Rattner, a Democrat, and former GM Vice Chairman Bob Lutz, a Republican, say there was no private-sector financing available in 2009 and the bailout was the only way to keep the companies alive.

"He thinks we didn't try to borrow money from the banks?" Lutz told theDetroit Free Press in February. "The banks were even more broke than we were. Who had the money?"

Without financing during bankruptcy, GM and Chrysler would have had to go out of business, taking down many suppliers. That would have likely caused bankruptcies at the healthier automakers such Ford Motor (F,Fortune 500), who would not have been able to get the parts they needed to build cars. That is why Ford went to Capitol Hill in late 2008 pushing for the rescue of its rivals.

The Center for Automotive Research, a well-respected Michigan think tank estimates that the bailout therefore saved 1.5 million U.S. jobs by keeping GM, Chrysler and the companies that depended on them in business.

Even if one assumes private financing could have been found, what's clear from Romney's own criticism of the bailout is that the autoworkers at GM and Chrysler today would have been far worse off today than they were with the bailout.

The pension plans for United Auto Workers union members at the companies were basically left untouched. It's likely that without Treasury financing those pension plans would have been dumped on the government pension agency, reducing payments to many retirees. Plus, automakers would have likely tried to cut wages in bankruptcy, as many companies do. That didn't happen during these bankruptcies since Treasury, not bankers, was calling the shots."

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  • Daniel 2012/09/09 18:46:08
    None of the above
    Daniel
    +3
    I have to agree with Mitt as will all of America after the election. GM is still failing. Our company is getting rid of all our Chevy's and buying Fords. I know of 5 companies here in Tucson doing the same. GM is only surviving because they got bailed out a second time. 78% of last months sales were purchased with your tax dollars. So Biden could say they-re alive. They will still go under and Trump or Mitt will by them out. That's how it works. Hell give it to China for all I care it's in Mexico today.

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  • Vision of Verve 2012/09/09 20:27:52
  • WhereIsAmerica? ~PWCM~JLA 2012/09/09 20:16:45
    None of the above
    WhereIsAmerica? ~PWCM~JLA
    They would go through the processes that every single freaking business who does NOT get special favors from the government has to go through does, and life would go on. I do not think they would be out of business, we were all scammed, and so were all those GMers who lost their pensions!
  • T. Bejma 2012/09/09 19:39:56
    Things would be much worse than they are now
    T. Bejma
    GM received $49.5 billion from taxpayers, and has returned about $24 billion of that through loan repayments and the sale of stock during its initial public offering in November 2010.

    And with Wall Street Analysts predicting Ford ($9) and especially GM ($21) stock rising, it looks like it's a good idea for the government to hang on to the stock instead of dumping it...

    http://seekingalpha.com/artic...
  • Rebel Yell 2012/09/09 19:35:52
    None of the above
    Rebel Yell
    +1
    From the emotional viewpoint, I supported the bailout because the auto industry is part of America's fabric. We have a very long history from its days as a horseless carriage.

    In normal times, bankrupcty would have been the way to go because it forces reorganization. Normally a company can keep operating, declare Chapter 11 but keeps operating but that depends on being able to continue to get credit lines to do business. And that was out of the question. Credit lines were frozen. So Chapter 11 would quickly become Chapter 7 which is liquidation where we see the industry disappear . Then there are a million plus jobs disappearing along with suppliers folding and dealers folding. That industry supports one of every 10 jobs in the United States. U.S. automakers buy more U.S.-made steel, aluminum, iron, copper, plastics, rubber, electronics, and computer chips than almost any other company. It would have been a disaster .

    There's no denying the American auto companies have made major mistakes, by over-investing in S.U.V.'s, for example, and failing to quickly streamline their opertions. They need to modernize their manufacturing facilities and operations to build more fuel-efficient vehicles. That cannot happen if the industry no longer exists.
  • Space Invader 2012/09/09 19:27:57
    None of the above
    Space Invader
    +2
    they would have filed for reorganization of the companies; and a master would be appointed to reorganize their expenses vs their profit.
    they would have cut out the over indulgence and streamline the companies; and they would set a payment plan for repayment; while the companies would continue to stay in business; and the taxpayer would not have been on the bad end of this deal...
    but the Unions would have gone nuts because they'd have lost control over the people they seek to control.
    it would have been better for the bankruptcy to have been done...
  • T. Bejma Space I... 2012/09/09 19:33:10
    T. Bejma
    The taxpayers would have been on the hook for the pensions of not just Delphi, but GM as well...

    "It's likely that without Treasury financing those pension plans would have been dumped on the government pension agency, reducing payments to many retirees."

    In addition:

    "The $60 billion that taxpayers shelled out in the two bailouts may have still been a bargain, even without the $33 billion that has already been returned to Treasury. If the two automakers had gone out of business, it would have significantly cut taxes collected from the automakers, their suppliers and dealers, let alone from the 1.5 million suddenly unemployed workers.

    Reduced personal taxes collected and increased safety net payments such as unemployment benefits and food stamps, would have cost the federal government up to about $50 billion to $60 billion in the first year alone, and another $34 billion to $54 billion in the second year, according to the Center for Automotive Research."
  • Space I... T. Bejma 2012/09/09 19:45:36
    Space Invader
    It is not the responsibility of the taxpayer to make sure that Union pensions were still in place because of bad management and the unions...
  • T. Bejma Space I... 2012/09/09 19:52:18
    T. Bejma
    Agreed, but the Taxpayers still would have gotten stuck with the bill under the PBGC since it is essentially Bankrupt...
  • Space I... T. Bejma 2012/09/09 19:57:08
    Space Invader
    +1
    then it needs to be changed..no taxpayer should be responsible for pensions that a Union has for their members.
  • Zervur 2012/09/09 19:18:16
    None of the above
    Zervur
    +2
    The Free Market.
  • Daniel 2012/09/09 18:46:08
    None of the above
    Daniel
    +3
    I have to agree with Mitt as will all of America after the election. GM is still failing. Our company is getting rid of all our Chevy's and buying Fords. I know of 5 companies here in Tucson doing the same. GM is only surviving because they got bailed out a second time. 78% of last months sales were purchased with your tax dollars. So Biden could say they-re alive. They will still go under and Trump or Mitt will by them out. That's how it works. Hell give it to China for all I care it's in Mexico today.
  • WhereIs... Daniel 2012/09/09 20:18:27
    WhereIsAmerica? ~PWCM~JLA
    +2
    Exactly, GM has not changed ONE BIT, the government is buying its product and propping it up, the whole thing is corrupt and just plain WRONG!
  • Daniel WhereIs... 2012/09/09 21:09:37
    Daniel
    Did you see where Biden challenge reports to fact check him? He said they were thriving but that's not true. Fox took the challenge and post their fimdings on Foxnews.com. Between both parties Obama's House was found to have the liars but we knew that.
  • T. Bejma Daniel 2012/09/19 16:21:39
    T. Bejma
    Then why is GM a recommended buy stock? What does FauxNews say about that?

    "Having said that, GM still has many other drivers to propel its stock price, such as the reorganization plan, the new product lineup, and the rising Chinese market share. A recent boost of the CEO's holdings also gives a positive signal. Therefore, the stock is recommended as a buy."

    http://seekingalpha.com/artic...
  • Daniel T. Bejma 2012/09/19 21:52:04
    Daniel
    Biden and President Obama made other statements in their convention speeches on such topics as unemployment and Medicare that fact-checkers said also appear to be inaccurate or at least misleading. Among the questionable remarks were Biden's argument that "after the worst job loss since the Great Depression we created 4.5 million private sector jobs in the past 29 months" – a frequent response by the Obama campaign when questioned about the slow economic recovery. The Associated Press and others point out that statement is misleading because it counts jobs from the recession's lowest point to where employment began to grow again – excluding jobs lost earlier in Obama's term and masking that overall unemployment has increased over that period. "Overall, roughly 7.5 million jobs were lost during the recession that began in December 2007 and ended officially in June 2009," according to the wire service. The Associated Press also points out that Obama said in his speech that he wants to use money saved by ending the wars to build highways, schools and bridges. However, the wars were largely financed by borrowing "so there is no ready pile of cash to be diverted to anything else," the wire service writes. The group FactCheck.org listed eight instances in which either Biden or Obama...
    Biden and President Obama made other statements in their convention speeches on such topics as unemployment and Medicare that fact-checkers said also appear to be inaccurate or at least misleading. Among the questionable remarks were Biden's argument that "after the worst job loss since the Great Depression we created 4.5 million private sector jobs in the past 29 months" – a frequent response by the Obama campaign when questioned about the slow economic recovery. The Associated Press and others point out that statement is misleading because it counts jobs from the recession's lowest point to where employment began to grow again – excluding jobs lost earlier in Obama's term and masking that overall unemployment has increased over that period. "Overall, roughly 7.5 million jobs were lost during the recession that began in December 2007 and ended officially in June 2009," according to the wire service. The Associated Press also points out that Obama said in his speech that he wants to use money saved by ending the wars to build highways, schools and bridges. However, the wars were largely financed by borrowing "so there is no ready pile of cash to be diverted to anything else," the wire service writes. The group FactCheck.org listed eight instances in which either Biden or Obama "spun" facts during their speeches Thursday night in Charlotte, N.C. The group point out that Obama boasted that "independent experts" found his economic plan would cut the deficit by $4 trillion over 10 years. However, one such analyst called a key element of the plan a ‘gimmick,’ the group said. Other examples include the president saying U.S. auto makers are back on top of the world. "Nope," writes FactCheck, pointing out that General Motors has slipped back to No. 2 and is headed for third place in global sales this year behind Toyota and Volkswagen. The group said Biden misquoted Mitt Romney when he said the GOP presidential nominee "believes it's OK to raise taxes on middle classes by $2,000." Romney in fact promises to lower middle-class taxes, FactCheck points out. You should save up your welfare checks and buy stock.
    (more)
  • T. Bejma Daniel 2012/09/19 16:17:12
    T. Bejma
    Get your facts straight...

    "Government purchases were not 79 percent of all GM sales in June. What is true is that GM’s sales to government fleet customers were up 79 percent year over year in June,”

    "Government fleet sales account for only about three percent of GM’s total U.S. sales” from January through July of this year. And about three-fourths of the fleet sales, are to state and local agencies, which have been purchasing an increasing amount of police vehicles. Actually, state and local agency purchases are up 36 percent for the year, so far, while purchases by the federal government are down by 3.5 percent"

    http://factcheck.org/2012/09/...
  • Brainfart " Bane of the Col... 2012/09/09 18:35:45 (edited)
    None of the above
    Brainfart " Bane of the Collective "
    +1
    This is central to the election debate over the bailout. Mitt Romney claims that if GM and Chrysler Group had gone through a privately-financed bankruptcy process, they would have emerged even stronger than they are today



    This is a Lie..

    And we all know GM Did file for bankruptcy in end.

    And a reminder;
    Now 4 years later GM stock IS Tanking and their market Share IS declining.

    Here is what Mitt Romney said;



    IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.



    Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.



    I love cars, American cars. I was born in Detroit, the son of an auto chief executive. In 1954, George Romney my dad was tapped to run American Motors when its president suddenly died. The company itself was on life support — banks were threatening to deal it a death blow. The stock collapsed. I watched Dad work to turn the company around — and ...


























































    This is central to the election debate over the bailout. Mitt Romney claims that if GM and Chrysler Group had gone through a privately-financed bankruptcy process, they would have emerged even stronger than they are today



    This is a Lie..

    And we all know GM Did file for bankruptcy in end.

    And a reminder;
    Now 4 years later GM stock IS Tanking and their market Share IS declining.

    Here is what Mitt Romney said;



    IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.



    Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.



    I love cars, American cars. I was born in Detroit, the son of an auto chief executive. In 1954, George Romney my dad was tapped to run American Motors when its president suddenly died. The company itself was on life support — banks were threatening to deal it a death blow. The stock collapsed. I watched Dad work to turn the company around — and years later at business school, they were still talking about it. From the lessons of that turnaround, and from my own experiences, I have several prescriptions for Detroit’s automakers.



    First, their huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota. Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers.



    That extra burden is estimated to be more than $2,000 per car. Think what that means: Ford, for example, needs to cut $2,000 worth of features and quality out of its Taurus to compete with Toyota’s Avalon. Of course the Avalon feels like a better product — it has $2,000 more put into it. Considering this disadvantage, Detroit has done a remarkable job of designing and engineering its cars. But if this cost penalty persists, any bailout will only delay the inevitable.



    Second, management as is must go. New faces should be recruited from unrelated industries — from companies widely respected for excellence in marketing, innovation, creativity and labor relations.



    The new management must work with labor leaders to see that the enmity between labor and management comes to an end. This division is a holdover from the early years of the last century, when unions brought workers job security and better wages and benefits. But as Walter Reuther, the former head of the United Automobile Workers, said to my father, “Getting more and more pay for less and less work is a dead-end street.”



    You don’t have to look far for industries with unions that went down that road. Companies in the 21st century cannot perpetuate the destructive labor relations of the 20th. This will mean a new direction for the U.A.W., profit sharing or stock grants to all employees and a change in Big Three management culture.



    The need for collaboration will mean accepting sanity in salaries and perks. At American Motors, my dad cut his pay and that of his executive team, he bought stock in the company, and he went out to factories to talk to workers directly. Get rid of the planes, the executive dining rooms — all the symbols that breed resentment among the hundreds of thousands who will also be sacrificing to keep the companies afloat.



    Investments must be made for the future. No more focus on quarterly earnings or the kind of short-term stock appreciation that means quick riches for executives with options. Manage with an eye on cash flow, balance sheets and long-term appreciation. Invest in truly competitive products and innovative technologies — especially fuel-saving designs — that may not arrive for years. Starving research and development is like eating the seed corn.



    Just as important to the future of American car makers is the sales force. When sales are down, you don’t want to lose the only people who can get them to grow. So don’t fire the best dealers, and don’t crush them with new financial or performance demands they can’t meet.



    It is not wrong to ask for government help, but the automakers should come up with a win-win proposition. I believe the federal government should invest substantially more in basic research — on new energy sources, fuel-economy technology, materials science and the like — that will ultimately benefit the automotive industry, along with many others. I believe Washington should raise energy research spending to $20 billion a year, from the $4 billion that is spent today. The research could be done at universities, at research labs and even through public-private collaboration. The federal government should also rectify the imbedded tax penalties that favor foreign car makers.



    But don’t ask Washington to give shareholders and bondholders a free pass — they bet on management and they lost.



    The American auto industry is vital to our national interest as an employer and as a hub for manufacturing. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs. It would permit the companies to shed excess labor, pension and real estate costs. The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.



    In a managed bankruptcy, the federal government would propel newly competitive and viable automakers, rather than seal their fate with a bailout check.


    Spoken by Mitt Romney;
    Hopefully the next President of the United States.
    The only Man running with a Lick of Financial sense.

    So a Recap here..

    The over used " Let them go Bankrupt " Diss on Romney the Dems used over and over this week was a GIANT Obfuscation of the Facts as usual.
    And
    Romney`s plan was very similar to Obama's with the exception of letting the unions take over and continue running GM into the ground.
    (more)
  • Brainfa... Brainfa... 2012/09/09 18:45:17
    Brainfart " Bane of the Collective "
    +2
    And another Thing;

    The Treasury still owns roughly 30% of GM, and since GM’s shares are worth less than 2/3 of their original value, it is going to be extremely difficult for taxpayers to recover what they put in.
    GM is losing ground to its competition. According to GM’s most recent earnings report, North American market share has also fallen for the last three quarters, now standing at 16.4%.
    Obama may have bailed out GM, but he didn’t bail out the taxpayer – and in the long run, GM won’t be a viable business just because the government cut it a check.
    And just think all that " Success " for only 50 billion taxpayer dollars.
  • WhereIs... Brainfa... 2012/09/09 20:19:40
    WhereIsAmerica? ~PWCM~JLA
    +2
    GM has not learned its lesson, not AT ALL, so they are bound to do it AGAIN...no more special favors and bailouts for a private company that refuses to learn how to operate at a profit! BS we are better off, same old crap, different day.

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