GM and American Auto Industry Near Bankruptcy News and Discussion
11-10-2008, 02:25 PM
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The UAW is a cancer, that needs to be purged.
"Labor Costs: The three automakers lost $15 billion last year. Chrysler pays an average $75.86 an hour in wages, pension and health care benefits, GM pays $73.26 and Ford pays $70.51. Toyota pays U.S. workers about $48, U.S. automakers say."
"Labor Costs: The three automakers lost $15 billion last year. Chrysler pays an average $75.86 an hour in wages, pension and health care benefits, GM pays $73.26 and Ford pays $70.51. Toyota pays U.S. workers about $48, U.S. automakers say."
and I won't get into a political discussion on here, but with a certain someone if office... the unions will become even more powerful and destructive
Last edited by ChaseSS; 11-10-2008 at 02:31 PM.
11-10-2008, 08:25 PM
#22
If things are really that bad, why don't the Big 3 offer "cash back plus low financing" incentives? Always take one or the other. You want to sell some cars? Then mark them down AND offer very low financing. At least you won't have as many cars sitting on the lot.
How much money do they make on a car that does not sell?
All I can say is "Karma is a ******-****** man" - greedy *** holes are getting exactly what they deserve IMO.
How much money do they make on a car that does not sell?
All I can say is "Karma is a ******-****** man" - greedy *** holes are getting exactly what they deserve IMO.
11-10-2008, 10:22 PM
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Obama asks Bush to provide help for automakers
By Jackie Calmes Published: November 11, 2008
WASHINGTON: The struggling auto industry was thrust into the middle of a political standoff between the White House and Democrats on Monday as President-elect Barack Obama urged President George W. Bush to support immediate emergency aid.
Bush indicated at the meeting that he might support some aid and a broader economic stimulus package if Obama and congressional Democrats dropped their opposition to a free-trade agreement with Colombia, a measure for which Bush has long fought, people familiar with the discussion said.
The Bush administration, which has presided over a major intervention in the financial industry, has balked at allowing the automakers to tap into the $700 billion bailout fund, despite warnings last week that General Motors might not survive the year.
Obama and congressional Democratic leaders say the administration has all the authority it needs under the bailout law to extend assistance.
Obama went into his post-election meeting with Bush on Monday primed to urge him to support emergency aid to the auto industry, advisers to Obama said. But Democrats also indicate that neither Obama nor congressional leaders are inclined to concede the Colombia pact to Bush, and may decide to wait until Obama assumes power on Jan. 20.
Separate from his differences with Bush, Obama has signaled to the automakers and the unions that his support for short-term aid now, and long-term assistance once he takes office, is contingent on their willingness to agree to transform their industry to make cleaner, more energy-efficient vehicles.
A week after Obama's election, and more than two months before he takes office, the steadily weakening economy and the prospect of many more job losses are testing his effort to remain aloof from the nation's business on the argument that "we only have one president at a time."
As the auto industry reels, rarely has an issue so quickly illustrated the differences from one White House occupant to the next. How Obama responds to the industry's dire straits will indicate how much government intervention in the private sector he is willing to tolerate. It will also offer hints of how he will approach his job under pressure, testing the limits of his conciliation toward the opposition party and his willingness to stand up to the interest groups in his own.
GM's shares tumbled on Monday to 1946 prices, closing down 23 percent to $3.36, as analysts downgraded the stock on worries it would soon run out of cash and shareholders would be wiped out by any federal bailout.
Obama has been far more receptive than Bush to having the government intervene to rescue another major sector of the economy. He called automakers "the backbone of American manufacturing" in his first post-election press conference last Friday, and many thousands of their employees belong to unions that are part of the Democratic Party's base.
But Obama's stance raises the question, with the country in a worsening economic situation, where would the Democrat draw the line as president?
Bush has drawn his line at the automakers' doors, having already been forced to shelve the free-market principles of his Republican Party to bail out the financial industry over the past two months. But Republicans say he would acquiesce in aid to automakers in return for Congress's ratification of the Colombia pact and pending trade agreements with Panama and South Korea.
The outgoing and incoming presidents met at the White House in private, without staff.
The Democratic leaders in Congress, the speaker of the House, Nancy Pelosi, and the Senate majority leader, Harry Reid, have declined to call a lame-duck session for next week, as they had hoped, without assurance that Bush would support a stimulus package.
Obama has called on the Bush administration to accelerate $25 billion in federal loans provided by a recent law specifically to help automakers retool. Late in his campaign, Obama proposed doubling that to $50 billion. But industry supporters say the automakers, squeezed both by the unavailability of credit and depressed sales, need unrestricted cash now, simply to meet payroll and other expenses.
On Friday, Obama said he would instruct his economic team, once he chooses it, to devise a long-range plan for helping the auto industry recover in a way that is part of an energy and environmental policy to reduce reliance on foreign oil and address climate change.
While Obama campaigned on a promise of bipartisan conciliation, his choice for his White House chief of staff, Representative Rahm Emanuel, indicated on Sunday that no such deal linking auto-industry aid and a stimulus package with trade pacts was in the cards. "You don't link those essential needs to some other trade deal," Emanuel said on ABC's "This Week."
Democrats close to both Obama's transition team and to Congressional leaders seemed willing to call Bush's bluff, calculating that he would not want to gamble that GM — an iconic, century-old American corporation with business tentacles in every state — would fail on his watch and add to the negative notes of his legacy. Also, economists as conservative as Martin Feldstein, an adviser to a long line of Republican presidents and candidates, have called more broadly for stimulus spending of up to $300 billion.
The major automakers — GM, Ford and Chrysler — are each using up their cash at unsustainable rates. The Center for Automotive Research, which is based in Michigan and supported by the industry, released on Election Day an economic analysis of the impact of one or all of them failing. If the Big Three were to collapse, it said, that would cost at least three million jobs, counting autoworkers, suppliers and other businesses dependent on the companies, down to the hot-dog vendors and bartenders next door to their plants.
The center also concluded that the cost to local, state and federal governments would reach to as much as $156.4 billion over three years in lost taxes and higher outlays for things like unemployment and health care assistance. Separately, some economists say the demise of even one of the automakers could tip the current recession toward a depression.
For Bush, however, the hard-line approach is his only leverage to make the trade agreements part of his legacy. The Colombia deal, especially, is strongly opposed by organized labor groups, which are a major force in the Democratic Party, and by human-rights activists.
In the Senate and during his nomination race against Senator Hillary Rodham Clinton, Democrat of New York, Obama opposed the pacts and especially the Colombia agreement, given that country's reported human rights abuses against unionists. He insists he favors free trade, but only if trading partners agree to protections for their workers and the environment — reflecting the standard Democratic Party line since President Bill Clinton's administration.
On his campaign Web site, Obama said he would oppose the Colombia pact "if President George W. Bush insists on sending it to Congress because the violence against unions in Colombia would make a mockery of the very labor protections that we have insisted be included in these kinds of agreements."
Organized labor is not the only interest group with influence in the Democratic Party that is weighing in as Obama plans his transition. Environmentalists are adamant that any aid be conditioned on the auto industry's dropping of its opposition to higher fuel-efficiency standards and investing more in new technology. That puts them at odds with unions, who oppose any strings, leaving it to Obama to mediate.
Both as a candidate and now as president-elect, Obama has been in contact with former Vice President Al Gore, who last year won the Nobel Peace Prize for his work on climate change. In a column published in Sunday's New York Times, Gore wrote that "we should help America's automobile industry (not only the Big Three but the innovative new start-up companies as well) to convert quickly to plug-in hybrids that can run on the renewable electricity that will be available."
Obama has said that he wants to meet with the Big Three auto executives, but advisers say no meeting is scheduled. Among his advisers who have communicated with the industry chiefs and their representatives are Jason Furman, the Obama campaign's economic policy director; John Podesta, the head of Obama's transition; and former Treasury Secretary Lawrence Summers, an Obama adviser who is under consideration to be Treasury secretary again.
By Jackie Calmes Published: November 11, 2008
WASHINGTON: The struggling auto industry was thrust into the middle of a political standoff between the White House and Democrats on Monday as President-elect Barack Obama urged President George W. Bush to support immediate emergency aid.
Bush indicated at the meeting that he might support some aid and a broader economic stimulus package if Obama and congressional Democrats dropped their opposition to a free-trade agreement with Colombia, a measure for which Bush has long fought, people familiar with the discussion said.
The Bush administration, which has presided over a major intervention in the financial industry, has balked at allowing the automakers to tap into the $700 billion bailout fund, despite warnings last week that General Motors might not survive the year.
Obama and congressional Democratic leaders say the administration has all the authority it needs under the bailout law to extend assistance.
Obama went into his post-election meeting with Bush on Monday primed to urge him to support emergency aid to the auto industry, advisers to Obama said. But Democrats also indicate that neither Obama nor congressional leaders are inclined to concede the Colombia pact to Bush, and may decide to wait until Obama assumes power on Jan. 20.
Separate from his differences with Bush, Obama has signaled to the automakers and the unions that his support for short-term aid now, and long-term assistance once he takes office, is contingent on their willingness to agree to transform their industry to make cleaner, more energy-efficient vehicles.
A week after Obama's election, and more than two months before he takes office, the steadily weakening economy and the prospect of many more job losses are testing his effort to remain aloof from the nation's business on the argument that "we only have one president at a time."
As the auto industry reels, rarely has an issue so quickly illustrated the differences from one White House occupant to the next. How Obama responds to the industry's dire straits will indicate how much government intervention in the private sector he is willing to tolerate. It will also offer hints of how he will approach his job under pressure, testing the limits of his conciliation toward the opposition party and his willingness to stand up to the interest groups in his own.
GM's shares tumbled on Monday to 1946 prices, closing down 23 percent to $3.36, as analysts downgraded the stock on worries it would soon run out of cash and shareholders would be wiped out by any federal bailout.
Obama has been far more receptive than Bush to having the government intervene to rescue another major sector of the economy. He called automakers "the backbone of American manufacturing" in his first post-election press conference last Friday, and many thousands of their employees belong to unions that are part of the Democratic Party's base.
But Obama's stance raises the question, with the country in a worsening economic situation, where would the Democrat draw the line as president?
Bush has drawn his line at the automakers' doors, having already been forced to shelve the free-market principles of his Republican Party to bail out the financial industry over the past two months. But Republicans say he would acquiesce in aid to automakers in return for Congress's ratification of the Colombia pact and pending trade agreements with Panama and South Korea.
The outgoing and incoming presidents met at the White House in private, without staff.
The Democratic leaders in Congress, the speaker of the House, Nancy Pelosi, and the Senate majority leader, Harry Reid, have declined to call a lame-duck session for next week, as they had hoped, without assurance that Bush would support a stimulus package.
Obama has called on the Bush administration to accelerate $25 billion in federal loans provided by a recent law specifically to help automakers retool. Late in his campaign, Obama proposed doubling that to $50 billion. But industry supporters say the automakers, squeezed both by the unavailability of credit and depressed sales, need unrestricted cash now, simply to meet payroll and other expenses.
On Friday, Obama said he would instruct his economic team, once he chooses it, to devise a long-range plan for helping the auto industry recover in a way that is part of an energy and environmental policy to reduce reliance on foreign oil and address climate change.
While Obama campaigned on a promise of bipartisan conciliation, his choice for his White House chief of staff, Representative Rahm Emanuel, indicated on Sunday that no such deal linking auto-industry aid and a stimulus package with trade pacts was in the cards. "You don't link those essential needs to some other trade deal," Emanuel said on ABC's "This Week."
Democrats close to both Obama's transition team and to Congressional leaders seemed willing to call Bush's bluff, calculating that he would not want to gamble that GM — an iconic, century-old American corporation with business tentacles in every state — would fail on his watch and add to the negative notes of his legacy. Also, economists as conservative as Martin Feldstein, an adviser to a long line of Republican presidents and candidates, have called more broadly for stimulus spending of up to $300 billion.
The major automakers — GM, Ford and Chrysler — are each using up their cash at unsustainable rates. The Center for Automotive Research, which is based in Michigan and supported by the industry, released on Election Day an economic analysis of the impact of one or all of them failing. If the Big Three were to collapse, it said, that would cost at least three million jobs, counting autoworkers, suppliers and other businesses dependent on the companies, down to the hot-dog vendors and bartenders next door to their plants.
The center also concluded that the cost to local, state and federal governments would reach to as much as $156.4 billion over three years in lost taxes and higher outlays for things like unemployment and health care assistance. Separately, some economists say the demise of even one of the automakers could tip the current recession toward a depression.
For Bush, however, the hard-line approach is his only leverage to make the trade agreements part of his legacy. The Colombia deal, especially, is strongly opposed by organized labor groups, which are a major force in the Democratic Party, and by human-rights activists.
In the Senate and during his nomination race against Senator Hillary Rodham Clinton, Democrat of New York, Obama opposed the pacts and especially the Colombia agreement, given that country's reported human rights abuses against unionists. He insists he favors free trade, but only if trading partners agree to protections for their workers and the environment — reflecting the standard Democratic Party line since President Bill Clinton's administration.
On his campaign Web site, Obama said he would oppose the Colombia pact "if President George W. Bush insists on sending it to Congress because the violence against unions in Colombia would make a mockery of the very labor protections that we have insisted be included in these kinds of agreements."
Organized labor is not the only interest group with influence in the Democratic Party that is weighing in as Obama plans his transition. Environmentalists are adamant that any aid be conditioned on the auto industry's dropping of its opposition to higher fuel-efficiency standards and investing more in new technology. That puts them at odds with unions, who oppose any strings, leaving it to Obama to mediate.
Both as a candidate and now as president-elect, Obama has been in contact with former Vice President Al Gore, who last year won the Nobel Peace Prize for his work on climate change. In a column published in Sunday's New York Times, Gore wrote that "we should help America's automobile industry (not only the Big Three but the innovative new start-up companies as well) to convert quickly to plug-in hybrids that can run on the renewable electricity that will be available."
Obama has said that he wants to meet with the Big Three auto executives, but advisers say no meeting is scheduled. Among his advisers who have communicated with the industry chiefs and their representatives are Jason Furman, the Obama campaign's economic policy director; John Podesta, the head of Obama's transition; and former Treasury Secretary Lawrence Summers, an Obama adviser who is under consideration to be Treasury secretary again.
11-10-2008, 10:30 PM
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GM needs federal aid in coming weeks
General Motors is in such dire financial straights that it needs to line up a federal aid packaged before president-elect Barack Obama takes office in January, the automaker's chief executive said Monday.
Nov 10 08:16 PM US/Eastern
"This is an issue that needs to be addressed urgently," Wagoner told Automotive News, adding that now is the time to "overshoot, not undershoot" the level of assistance.
GM is willing to offer the government preferred stock, speed the introduction of fuel-efficient vehicles and set limits on executive compensation in exchange for financial aid, Wagoner said.
But Wagoner did not think it would be "a very smart move" for him to resign.
"It's not clear to me what purpose would be served" Wagoner said. "I think our job is to make sure we have the best management team to run GM."
On Friday the biggest US automaker warned it would run out of cash in the first half of next year and appealed to the US government for help to save it from collapse.
The company announced a third-quarter loss of 2.5 billion dollars and said it had burned through another 6.9 billion of cash during the three-month period, leaving it with cash reserves of 16.2 billion.
GM has said it needs cash reserves of between 11 and 14 billion dollars to cover the cost of its operations.
Wagoner said that while the company's cash burn in the fourth quarter should ease to one billion dollars a month, it will likely not be able to survive without government help.
GM has developed a turnaround plan which assumes that sales fall to 11.7 million vehicles next year from recent averages of around 15 million a year.
"I'd question whether the US industry as a whole could survive that without support," Wagoner said, adding that even with government help the automaker will have to do "significantly more restructuring" if industry sales stay that low.
Wagoner and executives from Ford, Chrysler and the United Auto Workers Union asked for the federal government to speed up delivery of 25 billion dollars in loan guarantees for the development of fuel-efficient vehicles.
They also requested another 25 billion in loan guarantees to support operations amid a sharp economic downturn which has pushed vehicle sales to a 25 year-low.
Democratic leaders in the US Congress called Saturday for funds contained in a 700-billion-dollar federal rescue plan for the financial sector to be diverted to the struggling auto industry.
Obama's chief of staff urged swift action Sunday to rescue the US auto industry, but declined to say whether Obama supported the appeal by Democratic House speaker Nancy Pelosi and Senate Majority leader Harry Reid.
"As president-elect Obama has said throughout the campaign and as I think as recently as Friday ... the auto industry is an essential part of our economy and an essential part of our industrial base," Congressman Rahm Emanuel told ABC.
General Motors is in such dire financial straights that it needs to line up a federal aid packaged before president-elect Barack Obama takes office in January, the automaker's chief executive said Monday.
Nov 10 08:16 PM US/Eastern
"This is an issue that needs to be addressed urgently," Wagoner told Automotive News, adding that now is the time to "overshoot, not undershoot" the level of assistance.
GM is willing to offer the government preferred stock, speed the introduction of fuel-efficient vehicles and set limits on executive compensation in exchange for financial aid, Wagoner said.
But Wagoner did not think it would be "a very smart move" for him to resign.
"It's not clear to me what purpose would be served" Wagoner said. "I think our job is to make sure we have the best management team to run GM."
On Friday the biggest US automaker warned it would run out of cash in the first half of next year and appealed to the US government for help to save it from collapse.
The company announced a third-quarter loss of 2.5 billion dollars and said it had burned through another 6.9 billion of cash during the three-month period, leaving it with cash reserves of 16.2 billion.
GM has said it needs cash reserves of between 11 and 14 billion dollars to cover the cost of its operations.
Wagoner said that while the company's cash burn in the fourth quarter should ease to one billion dollars a month, it will likely not be able to survive without government help.
GM has developed a turnaround plan which assumes that sales fall to 11.7 million vehicles next year from recent averages of around 15 million a year.
"I'd question whether the US industry as a whole could survive that without support," Wagoner said, adding that even with government help the automaker will have to do "significantly more restructuring" if industry sales stay that low.
Wagoner and executives from Ford, Chrysler and the United Auto Workers Union asked for the federal government to speed up delivery of 25 billion dollars in loan guarantees for the development of fuel-efficient vehicles.
They also requested another 25 billion in loan guarantees to support operations amid a sharp economic downturn which has pushed vehicle sales to a 25 year-low.
Democratic leaders in the US Congress called Saturday for funds contained in a 700-billion-dollar federal rescue plan for the financial sector to be diverted to the struggling auto industry.
Obama's chief of staff urged swift action Sunday to rescue the US auto industry, but declined to say whether Obama supported the appeal by Democratic House speaker Nancy Pelosi and Senate Majority leader Harry Reid.
"As president-elect Obama has said throughout the campaign and as I think as recently as Friday ... the auto industry is an essential part of our economy and an essential part of our industrial base," Congressman Rahm Emanuel told ABC.
11-10-2008, 10:36 PM
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GM says GMAC mortgage unit may not survive
By BREE FOWLER and TOM KRISHER, AP Auto Writers – Mon Nov 10, 4:17 pm ET
DETROIT – Bad news kept piling up for General Motors Corp. on Monday as its shares plunged to their lowest point in 60 years and the company said in a government filing that the mortgage unit of its finance arm may not survive.
GM also said that Delphi Corp., its former parts operation that was spun off as a separate company in 1999, may not be able to emerge from Chapter 11 bankruptcy protection.
GM shares dropped $1, or 23 percent, to close at $3.36.
They earlier plummeted as low as $3.02 on increasing worries about accelerating cash burn and mounting losses. That marked the automaker's lowest share price since Dec. 2, 1946 when it hit $3, according to the Center for Research in Security Prices at the University of Chicago. The price is adjusted for splits and other changes.
Before the markets opened Monday, Brian A. Johnson of Barclays Capital cut his rating on GM to "Underweight" from "Equal Weight" and slashed his price target for the Detroit-based automaker to $1 from $4.
Johnson said that without additional funding, GM's gross cash will likely fall below minimum levels in the first quarter of next year.
The analyst also said that while additional government assistance will likely decrease the likelihood of a bankruptcy protection filing at the nation's largest automaker, it also would likely significantly dilute its equity.
Separately, JPMorgan's Himanshu Patel said he expects GM to receive some form of federal aid, but advised investors to be cautious given the uncertainty. He added that he expects the automaker to end 2008 with $12.6 billion in cash on hand, just above midrange minimum cash and excluding government loans.
Both analysts said they expect the automaker's per-share losses for this year and next to be significantly larger than what was expected. Both slashed their estimates.
Early in the afternoon, GM filed its quarterly report with the U.S. Securities and Exchange Commission that contained more bad news.
The company said that the troubled mortgage industry and frozen credit markets have raised doubts that the mortgage business of its GMAC LLC financial arm can survive.
The filing says that the value of Residential Capital's mortgage loans have deteriorated due to weak housing prices, delinquencies and defaults. It is also having trouble raising capital.
GM owns 49 percent of GMAC LLC, with the rest owned by Cerberus Capital Management LP.
Market developments have so harmed Residential Capital, called ResCap, that there is "substantial doubt about ResCap's ability to continue as a going concern," GM said in the filing.
The automaker also revealed that ResCap's deteriorating finances forced ResCap to shore up its standing with mortgage finance giant Fannie Mae, the largest U.S. buyer and backer of home loans.
ResCap said it posted an additional $200 million in collateral with Fannie Mae and sold off the rights to collect payments on $12.7 billion in loans, or 9 percent of the total amount it collects for Fannie Mae. Had ResCap not acted, Fannie Mae could have severely curtained its loan purchases from ResCap.
GM also said in the filing that Delphi Corp., its former parts-making operation that was spun off in 1999, is unlikely to emerge from bankruptcy protection in the short term and may not be able to emerge at all.
http://news.yahoo.com/s/ap/20081110/...ge/gm_shares_3
By BREE FOWLER and TOM KRISHER, AP Auto Writers – Mon Nov 10, 4:17 pm ET
DETROIT – Bad news kept piling up for General Motors Corp. on Monday as its shares plunged to their lowest point in 60 years and the company said in a government filing that the mortgage unit of its finance arm may not survive.
GM also said that Delphi Corp., its former parts operation that was spun off as a separate company in 1999, may not be able to emerge from Chapter 11 bankruptcy protection.
GM shares dropped $1, or 23 percent, to close at $3.36.
They earlier plummeted as low as $3.02 on increasing worries about accelerating cash burn and mounting losses. That marked the automaker's lowest share price since Dec. 2, 1946 when it hit $3, according to the Center for Research in Security Prices at the University of Chicago. The price is adjusted for splits and other changes.
Before the markets opened Monday, Brian A. Johnson of Barclays Capital cut his rating on GM to "Underweight" from "Equal Weight" and slashed his price target for the Detroit-based automaker to $1 from $4.
Johnson said that without additional funding, GM's gross cash will likely fall below minimum levels in the first quarter of next year.
The analyst also said that while additional government assistance will likely decrease the likelihood of a bankruptcy protection filing at the nation's largest automaker, it also would likely significantly dilute its equity.
Separately, JPMorgan's Himanshu Patel said he expects GM to receive some form of federal aid, but advised investors to be cautious given the uncertainty. He added that he expects the automaker to end 2008 with $12.6 billion in cash on hand, just above midrange minimum cash and excluding government loans.
Both analysts said they expect the automaker's per-share losses for this year and next to be significantly larger than what was expected. Both slashed their estimates.
Early in the afternoon, GM filed its quarterly report with the U.S. Securities and Exchange Commission that contained more bad news.
The company said that the troubled mortgage industry and frozen credit markets have raised doubts that the mortgage business of its GMAC LLC financial arm can survive.
The filing says that the value of Residential Capital's mortgage loans have deteriorated due to weak housing prices, delinquencies and defaults. It is also having trouble raising capital.
GM owns 49 percent of GMAC LLC, with the rest owned by Cerberus Capital Management LP.
Market developments have so harmed Residential Capital, called ResCap, that there is "substantial doubt about ResCap's ability to continue as a going concern," GM said in the filing.
The automaker also revealed that ResCap's deteriorating finances forced ResCap to shore up its standing with mortgage finance giant Fannie Mae, the largest U.S. buyer and backer of home loans.
ResCap said it posted an additional $200 million in collateral with Fannie Mae and sold off the rights to collect payments on $12.7 billion in loans, or 9 percent of the total amount it collects for Fannie Mae. Had ResCap not acted, Fannie Mae could have severely curtained its loan purchases from ResCap.
GM also said in the filing that Delphi Corp., its former parts-making operation that was spun off in 1999, is unlikely to emerge from bankruptcy protection in the short term and may not be able to emerge at all.
http://news.yahoo.com/s/ap/20081110/...ge/gm_shares_3
11-11-2008, 10:06 AM
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White House is open to Big 3 aid
Administration says $700B bailout not for carmakers, but would consider other funding.
David Shepardson / Detroit News Washington Bureau
Tuesday, November 11, 2008
WASHINGTON -- The White House said Monday it would consider additional immediate aid for Detroit's Big Three if Congress acted, but signaled that it does not support opening the $700 billion Wall Street rescue package to the automakers.
The Wall Street bailout was designed to help financial institutions and there was no specific discussion about helping auto companies as part of that plan, White House spokeswoman Dana Perino said.
"Congress is going to come back into town next week," Perino said. "If they decide to try to do something more on the auto industry, we would listen."
President-elect Obama and President Bush discussed the problems of the Big Three during a meeting Monday in the Oval Office.
Obama spokesman Robert Gibbs said topics included "the need to get the economy back on track" and "what's going on in the auto industry." The discussion on the auto industry wasn't limited to just one of the nation's three largest car makers, he said. "It was a discussion about the broad health of the industry."
Perino noted that the administration had "rushed" to get regulations finished last week for $25 billion in low-cost loans to automakers and suppliers to speed production of more fuel-efficient vehicles.
"The Energy Department is now accepting applications for those loans and we'll continue to work with Congress on the others," she said.
Michigan lawmakers and the automakers are moving aggressively to try to shift public opinion in favor of more federal aid for the Big Three.
Michigan's congressional delegation on Monday wrote to Treasury Secretary Henry Paulson, urging him "in the strongest possible terms" to use his authority under the Emergency Economic Stabilization Act, which birthed the Wall Street rescue plan, or other laws, to "provide emergency assistance to the domestic automobile industry."
Automakers seeking support
Before Congress returns for a few days starting Nov. 17, carmakers are reaching out to policymakers, consumers, employees, retirees and dealers, urging them to contact lawmakers and express support for the domestic auto industry.
The push for federal aid comes after GM said Friday that it burned through $6.9 billion in cash in the third quarter, leading to a $2.5 billion loss in the quarter, and said it may not have enough cash to survive past the middle of 2009. It said it had called off merger talks with Chrysler. On Monday, analysts said GM could run below minimum funding levels to operate by the first quarter of next year.
Ford Motor Co. also reported a third-quarter loss Friday and said it burned through $7.7 million in cash during the period.
GM posted a link on a company Web site for its dealers to send letters to Congress, and will be posting similar letters for retirees and consumers. The effort is called "Mobilize Our Auto Nation."
"What happens to the U.S. auto industry matters on Main Street," the letter said. "There are some 14,000 U.S.-brand dealers in cities and towns across the country, employing approximately 740,000 people, with a total payroll of some $35 billion.
"The collapse of the U.S.-based auto industry would account for a direct, indirect and spin-off employment drop of 2.95 million people, and a personal income drop of $150.7 billion."
Perino was asked why the administration was willing to boost the bailout to insurer AIG to $150 billion, $27 billion more than previously, but not take equity stakes in automakers. "If (Congress) wants to do anything in addition for the automakers, we'll certainly listen to ideas they have on how to accelerate the (retooling) loans to viable companies, as laid out in the legislation. I think right now we need to let them to continue to do their work," she said.
Rep. John Dingell, D-Dearborn, chairman of the House Energy and Commerce Committee, questioned the AIG bailout, when the administration isn't moving to help automakers.
"One thing is certain: as the federal government continues to help prop up Wall Street, it cannot afford to ignore Main Street and blue-collar jobs," Dingell said. "The situation with our automobile industry is dire and it is vital that our government provide low-interest loans now to help out domestic automobile manufacturers weather this economic storm."
Can Big 3 meet eligibility?
One big issue for automakers is whether they can meet the requirements on "financial viability" that are part of the $25 billion Energy Department loan program. GM, Ford and Chrysler are burning through large amounts of cash amid plunging car and truck sales and it isn't clear whether they could pass financial tests required in the Energy Department rules.
GM and Ford have not applied for funds yet. GM isn't likely to apply until the end of this month. Chrysler applied on Monday, but it was not clear how much the automaker requested.
House Speaker Nancy Pelosi, D-Calif., and Sen. Majority Leader Harry Reid, D-Nev., sent a letter to Paulson on Saturday urging him to grant automakers immediate access to the $700 billion Wall Street bailout in exchange for equity stakes and limits on executive compensation and bonuses.
There appears to be some support for broadening the plan to include the automakers. Before Congress voted on the Wall Street rescue in September, the Treasury Department sent a letter to U.S. Rep. Joe Knollenberg, R-Bloomfield Township, that said automakers were eligible for the program if Paulson and the Federal Reserve certified that it was necessary to stabilizing the economy.
Republicans and Democrats said "inaction is not an option."
"The health of our nation's economy hangs in the balance," said Rep. Fred Upton, R-St. Joseph, and co-chairman of the Congressional Auto Caucus. "We can either stand by and do nothing, watching tens of thousands of jobs in Michigan and Middle America evaporate, or we can meet our challenges head-on, proudly protecting America's middle-class workers and putting us back on the road to economic recovery."
http://www.detnews.com/apps/pbcs.dll...811110396/1148
Administration says $700B bailout not for carmakers, but would consider other funding.
David Shepardson / Detroit News Washington Bureau
Tuesday, November 11, 2008
WASHINGTON -- The White House said Monday it would consider additional immediate aid for Detroit's Big Three if Congress acted, but signaled that it does not support opening the $700 billion Wall Street rescue package to the automakers.
The Wall Street bailout was designed to help financial institutions and there was no specific discussion about helping auto companies as part of that plan, White House spokeswoman Dana Perino said.
"Congress is going to come back into town next week," Perino said. "If they decide to try to do something more on the auto industry, we would listen."
President-elect Obama and President Bush discussed the problems of the Big Three during a meeting Monday in the Oval Office.
Obama spokesman Robert Gibbs said topics included "the need to get the economy back on track" and "what's going on in the auto industry." The discussion on the auto industry wasn't limited to just one of the nation's three largest car makers, he said. "It was a discussion about the broad health of the industry."
Perino noted that the administration had "rushed" to get regulations finished last week for $25 billion in low-cost loans to automakers and suppliers to speed production of more fuel-efficient vehicles.
"The Energy Department is now accepting applications for those loans and we'll continue to work with Congress on the others," she said.
Michigan lawmakers and the automakers are moving aggressively to try to shift public opinion in favor of more federal aid for the Big Three.
Michigan's congressional delegation on Monday wrote to Treasury Secretary Henry Paulson, urging him "in the strongest possible terms" to use his authority under the Emergency Economic Stabilization Act, which birthed the Wall Street rescue plan, or other laws, to "provide emergency assistance to the domestic automobile industry."
Automakers seeking support
Before Congress returns for a few days starting Nov. 17, carmakers are reaching out to policymakers, consumers, employees, retirees and dealers, urging them to contact lawmakers and express support for the domestic auto industry.
The push for federal aid comes after GM said Friday that it burned through $6.9 billion in cash in the third quarter, leading to a $2.5 billion loss in the quarter, and said it may not have enough cash to survive past the middle of 2009. It said it had called off merger talks with Chrysler. On Monday, analysts said GM could run below minimum funding levels to operate by the first quarter of next year.
Ford Motor Co. also reported a third-quarter loss Friday and said it burned through $7.7 million in cash during the period.
GM posted a link on a company Web site for its dealers to send letters to Congress, and will be posting similar letters for retirees and consumers. The effort is called "Mobilize Our Auto Nation."
"What happens to the U.S. auto industry matters on Main Street," the letter said. "There are some 14,000 U.S.-brand dealers in cities and towns across the country, employing approximately 740,000 people, with a total payroll of some $35 billion.
"The collapse of the U.S.-based auto industry would account for a direct, indirect and spin-off employment drop of 2.95 million people, and a personal income drop of $150.7 billion."
Perino was asked why the administration was willing to boost the bailout to insurer AIG to $150 billion, $27 billion more than previously, but not take equity stakes in automakers. "If (Congress) wants to do anything in addition for the automakers, we'll certainly listen to ideas they have on how to accelerate the (retooling) loans to viable companies, as laid out in the legislation. I think right now we need to let them to continue to do their work," she said.
Rep. John Dingell, D-Dearborn, chairman of the House Energy and Commerce Committee, questioned the AIG bailout, when the administration isn't moving to help automakers.
"One thing is certain: as the federal government continues to help prop up Wall Street, it cannot afford to ignore Main Street and blue-collar jobs," Dingell said. "The situation with our automobile industry is dire and it is vital that our government provide low-interest loans now to help out domestic automobile manufacturers weather this economic storm."
Can Big 3 meet eligibility?
One big issue for automakers is whether they can meet the requirements on "financial viability" that are part of the $25 billion Energy Department loan program. GM, Ford and Chrysler are burning through large amounts of cash amid plunging car and truck sales and it isn't clear whether they could pass financial tests required in the Energy Department rules.
GM and Ford have not applied for funds yet. GM isn't likely to apply until the end of this month. Chrysler applied on Monday, but it was not clear how much the automaker requested.
House Speaker Nancy Pelosi, D-Calif., and Sen. Majority Leader Harry Reid, D-Nev., sent a letter to Paulson on Saturday urging him to grant automakers immediate access to the $700 billion Wall Street bailout in exchange for equity stakes and limits on executive compensation and bonuses.
There appears to be some support for broadening the plan to include the automakers. Before Congress voted on the Wall Street rescue in September, the Treasury Department sent a letter to U.S. Rep. Joe Knollenberg, R-Bloomfield Township, that said automakers were eligible for the program if Paulson and the Federal Reserve certified that it was necessary to stabilizing the economy.
Republicans and Democrats said "inaction is not an option."
"The health of our nation's economy hangs in the balance," said Rep. Fred Upton, R-St. Joseph, and co-chairman of the Congressional Auto Caucus. "We can either stand by and do nothing, watching tens of thousands of jobs in Michigan and Middle America evaporate, or we can meet our challenges head-on, proudly protecting America's middle-class workers and putting us back on the road to economic recovery."
http://www.detnews.com/apps/pbcs.dll...811110396/1148
11-11-2008, 10:27 AM
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GM shares hit 60-year low on worries of collapse
Posted by Bree Fowler | The Associated Press November 10, 2008 19:46PM
DETROIT — Bad news kept piling up for General Motors on Monday as its shares plunged to their lowest point in 60 years and some industry analysts predicted the automaker would collapse without a government bailout.
In addition, GM said it would cut 1,900 factory jobs on top of the 3,600 cuts announced on Friday.
"Without government assistance, we believe that GM's collapse would be inevitable, and that it would precipitate systemic risk that would be difficult to overcome for automakers, suppliers, retailers and sectors of the U.S. economy," Deutsche Bank's Rod Lache wrote in a note to investors.
He essentially said GM's common stock is worthless by cutting his price target to $0.
RELATED STORIES
• Aides: Obama suggested to Bush more help for auto industry
• GM to lay off 1,900 factory workers
• 4 Mich. cities seek US help if plants close
• GM: GMAC mortgage unit may not survive
GM shares dropped $1, or 23 percent, to close at $3.36. Shares slipped at one point to $3.02, the lowest level since Dec. 2, 1946, according to the Center for Research in Security Prices at the University of Chicago. The price is adjusted for splits and other changes.
The weakening economy and tight credit markets have worsened conditions for the Detroit-based automaker, which has been reporting steep sales declines from foreign competition and changing consumer preferences.
On Friday, the automaker reported a $2.5 billion loss in the third quarter and warned that its cash levels could fall below what's needed to run its business by the end of the year if the U.S. economy doesn't turn around and it doesn't get government aid.
Also Monday, GM said in a regulatory filing that Delphi Corp., its former parts operation that was spun off as a separate company in 1999, may never emerge from Chapter 11 bankruptcy protection. It also echoed statements from last week that the mortgage unit of its finance arm may not survive.
Lache said Monday that GM, whose cash burn accelerated to $6.9 billion during the third quarter, would be unable to fund its operations past December without a government bailout. That's assuming suppliers don't tighten commercial payment terms.
The three U.S.-based automakers have been pressing for an additional $50 billion in loans from Congress to help them survive the tough economy and pay for health care obligations for retirees. That's on top of a previously approved $25 billion government loan package for new technology.
Lache estimated that the government will need to provide GM with $10 billion in loans to keep it going through 2010 and as much as $25 billion to fund its cash burn and recovery.
The 1,900 additional layoffs will come in the first quarter of next year at parts stamping, engine and transmission factories in North America as GM cuts expenses to deal with its worsening cash crisis.
Spokesman Tony Sapienza said the cuts are in addition to 3,600 factory layoffs announced on Friday, bringing the total announced in the past week to 5,500.
Sapienza would not say which plants would be affected by the new round of layoffs. GM has 26 powertrain and 22 stamping plants in North America.
The layoffs will be indefinite, he said, but no plants will be closed.
GM also filed a notice with the state of Michigan saying it would lay off 650 factory workers and another 52 salaried employees at its Orion Township, Mich., assembly plant starting Jan. 23. Sapienza said those layoffs are part of the 3,600 announced Friday.
The Orion plant makes the Chevrolet Malibu and Pontiac G6 sedans, which Sapienza said are selling well but have fallen victim to the overall U.S. market decline.
At Delphi, struggling parts maker may be forced to sell its assets if it can't find new investors and can't escape from bankruptcy, and that could cost GM more money, the automaker said in its filing.
"As a result, we may be required to pay additional amounts to secure the parts we need until alternative suppliers are secured or new contracts are executed with the buyers of Delphi's assets," GM's filing said.
Out of necessity, GM took a greater role in Delphi's reorganization this fall after a group of equity investors pulled out of a deal to invest up to $2.55 billion in April. Delphi has been operating under court protection since Oct. 8, 2005.
GM's finance arm, GMAC LLC, said last week that auditors had raised doubts about the viability of its mortgage business, Residential Capital LLC. GM repeated that warning in a regulatory filing Monday, saying the value of ResCap's mortgage loans have deteriorated due to weak housing prices, delinquencies and defaults, while the company also is having trouble raising capital.
GMAC is 51 percent owned by the New York-based private equity firm Cerberus Capital Management LP, while GM holds the rest.
Before the markets opened Monday, Brian A. Johnson of Barclays Capital cut his price target for the Detroit-based automaker to $1 from $4. The analyst also said that while additional government assistance could decrease the likelihood of a bankruptcy protection filing at the nation's largest automaker, it also would likely significantly dilute its equity.
If the government steps in, shareholders may be shut out because, similar to bankruptcy rules, the automaker's secured and unsecured credit holders are better protected than equity holders.
Also Monday, the entire Michigan congressional delegation in a letter urged Treasury Secretary Henry Paulson "in the strongest possible terms" to use authority given him under the $700 billion Wall Street bailout legislation to provide emergency help to domestic automakers. They said the struggles of the auto companies were "well within the broad mandate of the Treasury Department to promote stable economic growth."
Over the weekend, Democratic leaders in Congress urged the Bush administration in a letter to consider expanding the $700 billion bailout to include the U.S. automakers.
White House spokeswoman Dana Perino said Monday that protecting the financial markets "is what Congress had in mind when it passed that rescue package. There was not discussion of specific help to auto companies during that debate, and so Congress' intent was to help financial institutions."
Perino said "that doesn't mean that Congress wasn't also thinking about the auto industry," since Congress approved $25 billion in loans for the companies to retool plants to build more fuel-efficient cars. If Congress chose to provide more help to the auto industry, Perino said the White House would listen.
The Treasury Department was reviewing the letter from the Democratic leaders, a spokeswoman said Monday.
Posted by Bree Fowler | The Associated Press November 10, 2008 19:46PM
DETROIT — Bad news kept piling up for General Motors on Monday as its shares plunged to their lowest point in 60 years and some industry analysts predicted the automaker would collapse without a government bailout.
In addition, GM said it would cut 1,900 factory jobs on top of the 3,600 cuts announced on Friday.
"Without government assistance, we believe that GM's collapse would be inevitable, and that it would precipitate systemic risk that would be difficult to overcome for automakers, suppliers, retailers and sectors of the U.S. economy," Deutsche Bank's Rod Lache wrote in a note to investors.
He essentially said GM's common stock is worthless by cutting his price target to $0.
RELATED STORIES
• Aides: Obama suggested to Bush more help for auto industry
• GM to lay off 1,900 factory workers
• 4 Mich. cities seek US help if plants close
• GM: GMAC mortgage unit may not survive
GM shares dropped $1, or 23 percent, to close at $3.36. Shares slipped at one point to $3.02, the lowest level since Dec. 2, 1946, according to the Center for Research in Security Prices at the University of Chicago. The price is adjusted for splits and other changes.
The weakening economy and tight credit markets have worsened conditions for the Detroit-based automaker, which has been reporting steep sales declines from foreign competition and changing consumer preferences.
On Friday, the automaker reported a $2.5 billion loss in the third quarter and warned that its cash levels could fall below what's needed to run its business by the end of the year if the U.S. economy doesn't turn around and it doesn't get government aid.
Also Monday, GM said in a regulatory filing that Delphi Corp., its former parts operation that was spun off as a separate company in 1999, may never emerge from Chapter 11 bankruptcy protection. It also echoed statements from last week that the mortgage unit of its finance arm may not survive.
Lache said Monday that GM, whose cash burn accelerated to $6.9 billion during the third quarter, would be unable to fund its operations past December without a government bailout. That's assuming suppliers don't tighten commercial payment terms.
The three U.S.-based automakers have been pressing for an additional $50 billion in loans from Congress to help them survive the tough economy and pay for health care obligations for retirees. That's on top of a previously approved $25 billion government loan package for new technology.
Lache estimated that the government will need to provide GM with $10 billion in loans to keep it going through 2010 and as much as $25 billion to fund its cash burn and recovery.
The 1,900 additional layoffs will come in the first quarter of next year at parts stamping, engine and transmission factories in North America as GM cuts expenses to deal with its worsening cash crisis.
Spokesman Tony Sapienza said the cuts are in addition to 3,600 factory layoffs announced on Friday, bringing the total announced in the past week to 5,500.
Sapienza would not say which plants would be affected by the new round of layoffs. GM has 26 powertrain and 22 stamping plants in North America.
The layoffs will be indefinite, he said, but no plants will be closed.
GM also filed a notice with the state of Michigan saying it would lay off 650 factory workers and another 52 salaried employees at its Orion Township, Mich., assembly plant starting Jan. 23. Sapienza said those layoffs are part of the 3,600 announced Friday.
The Orion plant makes the Chevrolet Malibu and Pontiac G6 sedans, which Sapienza said are selling well but have fallen victim to the overall U.S. market decline.
At Delphi, struggling parts maker may be forced to sell its assets if it can't find new investors and can't escape from bankruptcy, and that could cost GM more money, the automaker said in its filing.
"As a result, we may be required to pay additional amounts to secure the parts we need until alternative suppliers are secured or new contracts are executed with the buyers of Delphi's assets," GM's filing said.
Out of necessity, GM took a greater role in Delphi's reorganization this fall after a group of equity investors pulled out of a deal to invest up to $2.55 billion in April. Delphi has been operating under court protection since Oct. 8, 2005.
GM's finance arm, GMAC LLC, said last week that auditors had raised doubts about the viability of its mortgage business, Residential Capital LLC. GM repeated that warning in a regulatory filing Monday, saying the value of ResCap's mortgage loans have deteriorated due to weak housing prices, delinquencies and defaults, while the company also is having trouble raising capital.
GMAC is 51 percent owned by the New York-based private equity firm Cerberus Capital Management LP, while GM holds the rest.
Before the markets opened Monday, Brian A. Johnson of Barclays Capital cut his price target for the Detroit-based automaker to $1 from $4. The analyst also said that while additional government assistance could decrease the likelihood of a bankruptcy protection filing at the nation's largest automaker, it also would likely significantly dilute its equity.
If the government steps in, shareholders may be shut out because, similar to bankruptcy rules, the automaker's secured and unsecured credit holders are better protected than equity holders.
Also Monday, the entire Michigan congressional delegation in a letter urged Treasury Secretary Henry Paulson "in the strongest possible terms" to use authority given him under the $700 billion Wall Street bailout legislation to provide emergency help to domestic automakers. They said the struggles of the auto companies were "well within the broad mandate of the Treasury Department to promote stable economic growth."
Over the weekend, Democratic leaders in Congress urged the Bush administration in a letter to consider expanding the $700 billion bailout to include the U.S. automakers.
White House spokeswoman Dana Perino said Monday that protecting the financial markets "is what Congress had in mind when it passed that rescue package. There was not discussion of specific help to auto companies during that debate, and so Congress' intent was to help financial institutions."
Perino said "that doesn't mean that Congress wasn't also thinking about the auto industry," since Congress approved $25 billion in loans for the companies to retool plants to build more fuel-efficient cars. If Congress chose to provide more help to the auto industry, Perino said the White House would listen.
The Treasury Department was reviewing the letter from the Democratic leaders, a spokeswoman said Monday.
http://www.mlive.com/business/index....low_on_wo.html
Maybe if Congress off of their *** and did something about the unfair trade advantages the foreign automakers had the Big 3 would have a chance to dig themselves out of the hole. Toyota has lost law suits and been found guilty of using slave labor, yet GM is expected to not only compete with Toyota but also pay its workers a fair wage. Odd how that works.
11-11-2008, 10:30 AM
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GM either needs to make the cash up front, via a markup, or else get it from you over time via the interest. GM prefers the upfront deal, since inflation works in the consumer's favor when they off 0% APR loans, no interest rate to offset inflation, so overtime your no interest payments become less valuable.
Not that their current model isn't crappy, but liquidating billions of dollars worth of vehicles at a loss would be stupid.
11-11-2008, 12:24 PM
#31
Maybe if Congress off of their *** and did something about the unfair trade advantages the foreign automakers had the Big 3 would have a chance to dig themselves out of the hole. Toyota has lost law suits and been found guilty of using slave labor, yet GM is expected to not only compete with Toyota but also pay its workers a fair wage. Odd how that works.
11-11-2008, 12:26 PM
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LOL! Sorry but Wagoner needs to leave, GM has had a shitty higher management team for a while now, It took them THIS long to finally bring good cars out but they already lost the people to others....it's time for new management and to get rid of some of the brands and get back in the game.
It would be REALLY REALLY sad to see GM go under.....that and our economy can't afford to have that happen.
11-11-2008, 12:55 PM
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What real unfair advantage does Toyota have?
Most of these foreign companies engineer and assemble vehicles in the US for the US market just like Ford and GM do abroad.
Most of these foreign companies engineer and assemble vehicles in the US for the US market just like Ford and GM do abroad.
11-11-2008, 02:47 PM
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Democratic aides: Pelosi supports automakers help
Nov 11, 3:22 PM (ET)
By DAVID ESPO
WASHINGTON (AP) - Democratic aides say Speaker Nancy Pelosi intends to seek legislation to provide relief to the battered auto industry, and wants it done in a post-election session of Congress likely to convene in the next few days.
Pelosi is not expected to specify how large a bailout she wants. The aides who described her views Tuesday did so on condition of anonymity, saying they were not authorized to discuss it publicly.
The speaker's decision comes a few days after General Motors warned it is rapidly running out of cash, and Ford announced its situation was only slightly better.
President Bush would have to agree to sign the legislation, which would be passed well before President-elect Obama takes office.
http://apnews.myway.com/article/20081111/D94CUL0O0.html
Nov 11, 3:22 PM (ET)
By DAVID ESPO
WASHINGTON (AP) - Democratic aides say Speaker Nancy Pelosi intends to seek legislation to provide relief to the battered auto industry, and wants it done in a post-election session of Congress likely to convene in the next few days.
Pelosi is not expected to specify how large a bailout she wants. The aides who described her views Tuesday did so on condition of anonymity, saying they were not authorized to discuss it publicly.
The speaker's decision comes a few days after General Motors warned it is rapidly running out of cash, and Ford announced its situation was only slightly better.
President Bush would have to agree to sign the legislation, which would be passed well before President-elect Obama takes office.
http://apnews.myway.com/article/20081111/D94CUL0O0.html
11-11-2008, 02:47 PM
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GM's Skid Quickens as Crunch Raises Bankruptcy Threat
By Mike Ramsey
Nov. 11
(Bloomberg) -- General Motors Corp., burning cash as U.S. sales slide, is being pushed closer to bankruptcy as it waits to learn whether the auto industry will win a new round of government loans.
The shares slid for a fifth day on concern the biggest U.S. automaker won't have enough cash to make it through the end of the year. Only federal aid could prevent a collapse, and reorganizing in court may not be possible because the credit crunch has dried up financing, analysts said.
``Strategic bankruptcy is not an option for GM,'' said Mark Oline, a credit analyst with Fitch Inc. in Chicago. ``This is an issue of operating or not operating.''
The prospect of a forced liquidation raises the stakes for GM's quest for new federal borrowing after saying on Nov. 7 it may run out of operating cash as soon as year's end. GM had $16.2 billion on hand as of Sept. 30, down from $21 billion at the end of June, and needs $11 billion to pay its monthly bills.
GM is canceling press events set for next week at the Los Angeles Auto Show to focus instead on discussing new models at the North American International Auto Show in Detroit in January, a spokesman, Scott Fosgard, said today.
`Unimaginable'
``A bankruptcy wouldn't address our immediate liquidity concerns,'' said Renee Rashid-Merem, a spokeswoman for Detroit- based GM. ``It's not an option for GM because it creates more problems than it solves.''
Chief Executive Officer Rick Wagoner said GM's U.S. sales ``would be devastated'' by a bankruptcy filing. Deliveries fell 21 percent last quarter and 45 percent in October. The ``unimaginable consequence'' of a bankruptcy ``motivates us to really come up with cash in every way possible,'' Wagoner said in a Nov. 7 Bloomberg Television interview.
Investors may be concluding that GM won't succeed. The shares slid 43 cents, or 13 percent, to $2.93 at 1:30 p.m. in New York Stock Exchange composite trading, chopping their value almost in half in the past week. Deutsche Bank AG said yesterday the stock may be worthless in a year.
The U.S. bond market is closed today for the Veterans Day holiday. GM's 8.375 percent bond due in July 2033 rose 1.75 cents yesterday to 25.75 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The bond yielded 32.5 percent.
GM, Ford Motor Co. and Chrysler LLC have asked for $50 billion in aid to weather the worst auto market in 17 years, people familiar with the discussions said. That would be in addition to $25 billion approved in September to help retool plants to build more fuel-efficient vehicles.
White House View
President George W. Bush would consider ``ideas on accelerating'' federal loans to the automakers, though borrowings under the $700 billion bank-rescue plan have gone ``as far as they can,'' a White House spokeswoman, Dana Perino, told reporters traveling with Bush in New York.
She denied a New York Times report that Bush linked auto- industry assistance to a free-trade agreement with Colombia when he met yesterday with President-elect Barack Obama at the White House. ``There was no linkage,'' Perino said.
The White House signaled its opposition yesterday to a proposal by House Speaker Nancy Pelosi of California and Senate Majority Leader Harry Reid of Nevada for Treasury Secretary Henry Paulson to tap the bank-rescue package.
Democrats' View
Democratic lawmakers reject Paulson's arguments that he lacks authority to do so, Senator Carl Levin of Michigan said yesterday in an interview.
Should Paulson continue to resist using funds from the financial bailout approach, Congress would craft language to help the automakers and add it to the stimulus plan to be considered next week, Levin said. Treasury spokeswoman Brookly McLaughlin referred questions to the White House.
GM is cutting jobs and shutting plants after almost $73 billion in losses since the end of 2004. U.S. sales were hammered this year by gasoline prices that peaked at $4.11 a gallon in July, damping demand for light trucks, then crimped further when the credit freeze curbed buyers' access to loans.
Wagoner, 55, told trade publication Automotive News that GM needs an aid package before Obama takes office in January. The automaker had about $43 billion in debt at the end of 2007, according to a regulatory filing.
Default Risk
Credit-default swaps protecting against a GM default for one year rose yesterday to a level that implies the market has priced in a more than 71 percent chance of default, according to CMA Datavision.
One-year credit-default swaps were quoted at a mid-price of 55.5 percentage points upfront, compared with 51 percentage points on Nov. 7, CMA data show. That means it would cost $5.55 million initially in addition to $500,000 over one year to protect $10 million of GM bonds.
Bill Ackman, manager of the Pershing Square Capital Management LP hedge fund in New York, said GM shouldn't take government money because ``it has been hamstrung for years because it has too much debt and it has contracts that are uneconomic.''
Ackman, who said he doesn't have a position in GM securities, said yesterday on the Charlie Rose show the automaker should file for a so-called prepackaged bankruptcy with financing to keep operating while in court protection.
That may be difficult. Such debtor-in-possession loans have ``all but shut down,'' CreditSights Inc. said yesterday in a report. The loans, which are paid off when companies exit bankruptcy, aren't being made as lenders become more averse to risk, wrote Chris Taggert, a New York-based analyst.
GM would have no choice but to shut down, said Maryann Keller, an independent auto analyst and consultant based in Greenwich, Connecticut. A GM failure that stops production would cost 2.5 million jobs in the U.S. in the first year, according to the Ann Arbor, Michigan-based Center for Automotive Research.
``In this world, you don't go Chapter 11 reorganization,'' Keller said in an interview. ``You go Chapter 7 liquidation.''
By Mike Ramsey
Nov. 11
(Bloomberg) -- General Motors Corp., burning cash as U.S. sales slide, is being pushed closer to bankruptcy as it waits to learn whether the auto industry will win a new round of government loans.
The shares slid for a fifth day on concern the biggest U.S. automaker won't have enough cash to make it through the end of the year. Only federal aid could prevent a collapse, and reorganizing in court may not be possible because the credit crunch has dried up financing, analysts said.
``Strategic bankruptcy is not an option for GM,'' said Mark Oline, a credit analyst with Fitch Inc. in Chicago. ``This is an issue of operating or not operating.''
The prospect of a forced liquidation raises the stakes for GM's quest for new federal borrowing after saying on Nov. 7 it may run out of operating cash as soon as year's end. GM had $16.2 billion on hand as of Sept. 30, down from $21 billion at the end of June, and needs $11 billion to pay its monthly bills.
GM is canceling press events set for next week at the Los Angeles Auto Show to focus instead on discussing new models at the North American International Auto Show in Detroit in January, a spokesman, Scott Fosgard, said today.
`Unimaginable'
``A bankruptcy wouldn't address our immediate liquidity concerns,'' said Renee Rashid-Merem, a spokeswoman for Detroit- based GM. ``It's not an option for GM because it creates more problems than it solves.''
Chief Executive Officer Rick Wagoner said GM's U.S. sales ``would be devastated'' by a bankruptcy filing. Deliveries fell 21 percent last quarter and 45 percent in October. The ``unimaginable consequence'' of a bankruptcy ``motivates us to really come up with cash in every way possible,'' Wagoner said in a Nov. 7 Bloomberg Television interview.
Investors may be concluding that GM won't succeed. The shares slid 43 cents, or 13 percent, to $2.93 at 1:30 p.m. in New York Stock Exchange composite trading, chopping their value almost in half in the past week. Deutsche Bank AG said yesterday the stock may be worthless in a year.
The U.S. bond market is closed today for the Veterans Day holiday. GM's 8.375 percent bond due in July 2033 rose 1.75 cents yesterday to 25.75 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The bond yielded 32.5 percent.
GM, Ford Motor Co. and Chrysler LLC have asked for $50 billion in aid to weather the worst auto market in 17 years, people familiar with the discussions said. That would be in addition to $25 billion approved in September to help retool plants to build more fuel-efficient vehicles.
White House View
President George W. Bush would consider ``ideas on accelerating'' federal loans to the automakers, though borrowings under the $700 billion bank-rescue plan have gone ``as far as they can,'' a White House spokeswoman, Dana Perino, told reporters traveling with Bush in New York.
She denied a New York Times report that Bush linked auto- industry assistance to a free-trade agreement with Colombia when he met yesterday with President-elect Barack Obama at the White House. ``There was no linkage,'' Perino said.
The White House signaled its opposition yesterday to a proposal by House Speaker Nancy Pelosi of California and Senate Majority Leader Harry Reid of Nevada for Treasury Secretary Henry Paulson to tap the bank-rescue package.
Democrats' View
Democratic lawmakers reject Paulson's arguments that he lacks authority to do so, Senator Carl Levin of Michigan said yesterday in an interview.
Should Paulson continue to resist using funds from the financial bailout approach, Congress would craft language to help the automakers and add it to the stimulus plan to be considered next week, Levin said. Treasury spokeswoman Brookly McLaughlin referred questions to the White House.
GM is cutting jobs and shutting plants after almost $73 billion in losses since the end of 2004. U.S. sales were hammered this year by gasoline prices that peaked at $4.11 a gallon in July, damping demand for light trucks, then crimped further when the credit freeze curbed buyers' access to loans.
Wagoner, 55, told trade publication Automotive News that GM needs an aid package before Obama takes office in January. The automaker had about $43 billion in debt at the end of 2007, according to a regulatory filing.
Default Risk
Credit-default swaps protecting against a GM default for one year rose yesterday to a level that implies the market has priced in a more than 71 percent chance of default, according to CMA Datavision.
One-year credit-default swaps were quoted at a mid-price of 55.5 percentage points upfront, compared with 51 percentage points on Nov. 7, CMA data show. That means it would cost $5.55 million initially in addition to $500,000 over one year to protect $10 million of GM bonds.
Bill Ackman, manager of the Pershing Square Capital Management LP hedge fund in New York, said GM shouldn't take government money because ``it has been hamstrung for years because it has too much debt and it has contracts that are uneconomic.''
Ackman, who said he doesn't have a position in GM securities, said yesterday on the Charlie Rose show the automaker should file for a so-called prepackaged bankruptcy with financing to keep operating while in court protection.
That may be difficult. Such debtor-in-possession loans have ``all but shut down,'' CreditSights Inc. said yesterday in a report. The loans, which are paid off when companies exit bankruptcy, aren't being made as lenders become more averse to risk, wrote Chris Taggert, a New York-based analyst.
GM would have no choice but to shut down, said Maryann Keller, an independent auto analyst and consultant based in Greenwich, Connecticut. A GM failure that stops production would cost 2.5 million jobs in the U.S. in the first year, according to the Ann Arbor, Michigan-based Center for Automotive Research.
``In this world, you don't go Chapter 11 reorganization,'' Keller said in an interview. ``You go Chapter 7 liquidation.''
11-11-2008, 02:48 PM
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Dingell: Waxman 'Anti-Manufacturing, Left-Wing' Democrat
November 11, 2008
by Hill Staff
Rep. John Dingell (D-Mich.) has called his challenger for the chairmanship of the House Energy and Commerce Committee, Rep. Henry Waxman (D-Calif.), an "anti-manufacturing, left-wing Democrat".
Dingell, who is in the process of whipping up support from colleagues to retain support of the influential committee, told a Detroit radio show last week that Waxman lacks a concern for the manufacturing industry, particularly the auto industry (workers in which populate Dingell's southeast Michigan district).
"At a time when the auto industry, American manufacturing, American industry needs somebody who understands these things in that particular spot to look after them and see that they are fairly treated," Dingell said, "he wants to put in an anti-manufacturing, left-wing Democrat."
Dingell also denied the battle was a proxy battle against House Speaker Nancy Pelosi (D-Calif.) over leadership. "As of this particular time, Nancy is not in this particular race. And we don't want this to get to be a race between us and her," Dingell said. "And I don't think that it is. And if I have any say, it will not become so."
Dingell called the battle between him and Waxman a "long-standing fight" over the policy direction of the committee, but promised that he would win the votes to stay on as chairman.
http://briefingroom.thehill.com/2008...wing-democrat/
November 11, 2008
by Hill Staff
Rep. John Dingell (D-Mich.) has called his challenger for the chairmanship of the House Energy and Commerce Committee, Rep. Henry Waxman (D-Calif.), an "anti-manufacturing, left-wing Democrat".
Dingell, who is in the process of whipping up support from colleagues to retain support of the influential committee, told a Detroit radio show last week that Waxman lacks a concern for the manufacturing industry, particularly the auto industry (workers in which populate Dingell's southeast Michigan district).
"At a time when the auto industry, American manufacturing, American industry needs somebody who understands these things in that particular spot to look after them and see that they are fairly treated," Dingell said, "he wants to put in an anti-manufacturing, left-wing Democrat."
Dingell also denied the battle was a proxy battle against House Speaker Nancy Pelosi (D-Calif.) over leadership. "As of this particular time, Nancy is not in this particular race. And we don't want this to get to be a race between us and her," Dingell said. "And I don't think that it is. And if I have any say, it will not become so."
Dingell called the battle between him and Waxman a "long-standing fight" over the policy direction of the committee, but promised that he would win the votes to stay on as chairman.
http://briefingroom.thehill.com/2008...wing-democrat/
11-11-2008, 03:17 PM
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Senator Carl Levin’s (D-MI) Letter To Treasury Secretary Henry Paulson
Dear Secretary Paulson:
We are writing to urge you in the strongest possible terms to use your authority under the Emergency Economic Stabilization Act (EESA) or other statutes to immediately address a significant and systemic threat to the U.S. economy and provide emergency assistance to the domestic automobile industry.
The U.S. auto industry represents almost four percent of U.S. gross domestic product and represents ten percent of U.S. industrial production by value. One out of every 10 U.S. jobs is auto-related. General Motors, Ford and Chrysler account for roughly 70 percent of U.S. auto production and are estimated to support around five million jobs across all 50 states. According to a report released last week by the Center for Automotive Research, the failure of even one US automaker would mean the loss of millions of jobs and cost our economy hundreds of billions of dollars. Inaction is not an option
These last years have seen the domestic automakers pursue an unprecedented restructuring that has put them in a very competitive position with respect to product quality (Ford has tied Toyota and Honda in quality according to Consumer Reports), fuel efficiency (GM offers 17 models achieving 30 MPG or better - twice the nearest competitor), and advanced technology vehicles (Chrysler has announced the launch of electric vehicles beginning in 2010 and all three companies have extensive hybrid offerings).
In addition, the three domestic automakers spend a combined $12 billion annually on research and development. This R&D capacity is a national asset that would be put at risk if we do not restore the health of our auto industry.
This vital role that the domestic auto industry plays in our economy is broadly recognized. Congressional Leaders in both the House and Senate have met with representatives of the industry and its workers at the most senior level and have expressed to you that A healthy automobile manufacturing sector is essential to the restoration of financial market stability, the overall health of our economy, and the livelihood of the automobile sector’s workforce.
On Friday, President-elect Obama said, The auto industry is the backbone of American manufacturing and a critical part of our attempt to reduce our dependence on foreign oil… I have made it a high priority for my transition team to work on additional policy options to help the auto industry adjust, weather the financial crisis, and succeed in producing fuel-efficient cars
here in the United States of America… I’ve asked my team to explore what we can do under current law and whether additional legislation will be needed for this purpose.
As you know, both General Motors and Ford released 3rd Quarter earnings last week that make clear the severity of the strain the auto industry is experiencing. It is our view that providing emergency assistance to this uniquely important industry, which is struggling to meet the challenge of a severe financial crisis that has spread far beyond Wall Street, is consistent with the authority granted to you by EESA, and indeed well within the broad mandate of the Treasury Department to promote stable economic growth.
Given the urgency of the situation, we ask that you work with us in the coming days to provide immediate loan support to the domestic auto industry, including, if necessary, amending EESA.
Sincerely,
Senator Carl Levin
http://elections.foxnews.com/2008/11...-industry-aid/
Dear Secretary Paulson:
We are writing to urge you in the strongest possible terms to use your authority under the Emergency Economic Stabilization Act (EESA) or other statutes to immediately address a significant and systemic threat to the U.S. economy and provide emergency assistance to the domestic automobile industry.
The U.S. auto industry represents almost four percent of U.S. gross domestic product and represents ten percent of U.S. industrial production by value. One out of every 10 U.S. jobs is auto-related. General Motors, Ford and Chrysler account for roughly 70 percent of U.S. auto production and are estimated to support around five million jobs across all 50 states. According to a report released last week by the Center for Automotive Research, the failure of even one US automaker would mean the loss of millions of jobs and cost our economy hundreds of billions of dollars. Inaction is not an option
These last years have seen the domestic automakers pursue an unprecedented restructuring that has put them in a very competitive position with respect to product quality (Ford has tied Toyota and Honda in quality according to Consumer Reports), fuel efficiency (GM offers 17 models achieving 30 MPG or better - twice the nearest competitor), and advanced technology vehicles (Chrysler has announced the launch of electric vehicles beginning in 2010 and all three companies have extensive hybrid offerings).
In addition, the three domestic automakers spend a combined $12 billion annually on research and development. This R&D capacity is a national asset that would be put at risk if we do not restore the health of our auto industry.
This vital role that the domestic auto industry plays in our economy is broadly recognized. Congressional Leaders in both the House and Senate have met with representatives of the industry and its workers at the most senior level and have expressed to you that A healthy automobile manufacturing sector is essential to the restoration of financial market stability, the overall health of our economy, and the livelihood of the automobile sector’s workforce.
On Friday, President-elect Obama said, The auto industry is the backbone of American manufacturing and a critical part of our attempt to reduce our dependence on foreign oil… I have made it a high priority for my transition team to work on additional policy options to help the auto industry adjust, weather the financial crisis, and succeed in producing fuel-efficient cars
here in the United States of America… I’ve asked my team to explore what we can do under current law and whether additional legislation will be needed for this purpose.
As you know, both General Motors and Ford released 3rd Quarter earnings last week that make clear the severity of the strain the auto industry is experiencing. It is our view that providing emergency assistance to this uniquely important industry, which is struggling to meet the challenge of a severe financial crisis that has spread far beyond Wall Street, is consistent with the authority granted to you by EESA, and indeed well within the broad mandate of the Treasury Department to promote stable economic growth.
Given the urgency of the situation, we ask that you work with us in the coming days to provide immediate loan support to the domestic auto industry, including, if necessary, amending EESA.
Sincerely,
Senator Carl Levin
http://elections.foxnews.com/2008/11...-industry-aid/
11-11-2008, 04:36 PM
#39
Maybe GM thinks selling their product at a loss is a crappy business model?
GM either needs to make the cash up front, via a markup, or else get it from you over time via the interest. GM prefers the upfront deal, since inflation works in the consumer's favor when they off 0% APR loans, no interest rate to offset inflation, so overtime your no interest payments become less valuable.
Not that their current model isn't crappy, but liquidating billions of dollars worth of vehicles at a loss would be stupid.
GM either needs to make the cash up front, via a markup, or else get it from you over time via the interest. GM prefers the upfront deal, since inflation works in the consumer's favor when they off 0% APR loans, no interest rate to offset inflation, so overtime your no interest payments become less valuable.
Not that their current model isn't crappy, but liquidating billions of dollars worth of vehicles at a loss would be stupid.
11-11-2008, 05:37 PM
#40
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Are you talking about OEM's or dealers? To the best of my knowledge, once a car is at the dealership it's already been purchased by that dealer which is a sale for the OEM. Obviously sales volumes are down about 33% right now though from an overall standpoint.