U.S. automakers bailout outlook in doubt-senator

[Ovaltine]

http://www.reuters.com/article/marketsNews...20081114?rpc=44

 

U.S. automakers bailout outlook in doubt-senator

 

By John Crawley and Rachelle Younglai

 

EXCERPT:

 

WASHINGTON, Nov 13 (Reuters) - A senior Democratic senator raised doubts on Thursday that an attempt to bail out U.S. automakers had enough support to clear Congress this year.

 

As Republicans amplified their concerns about a bailout, Senate Banking Committee Chairman Christopher Dodd raised the biggest red flag for fellow Democrats trying to craft a $25 billion rescue and pass it during a post-election session set to start next week.

 

"Right now, I don't think there are the votes," Dodd of Connecticut told reporters about prospects in the Senate. "I want to be careful of bringing up a proposition that might fail," he said.

 

Although Dodd said "we ought to do something" and personally backed using money from the ongoing $700 billion financial services rescue program to help Detroit, he was skeptical that enough Republicans would support a bailout.

 

Senate Majority Leader Harry Reid, a Nevada Democrat, also cautioned that success of a bailout rests with Senate Republicans and the White House. With their slim majority, Democrats cannot force a measure through the Senate or trump a White House veto.

 

The White House opposes the approach being taken by congressional Democrats but has not threatened to block any bailout. Bush administration officials have said they would consider other steps Congress can take to help General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz), Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz) and Chrysler LLC.

 

Dodd said there have been "legitimate issues raised" about how to help. He plans to hold a hearing next Tuesday, and a House of Representatives Financial Services Committee hearing is set for Wednesday.

 

House Financial Services Chairman Barney Frank, a Massachusetts Democrat, is trying to write a bill that would amend the financial services rescue package to include $25 billion for carmakers.

 

The government would likely take an equity stake in the firms and Congress would impose stiff conditions.

 

 

CONCESSIONS FROM AUTOMAKERS

 

In a letter to automaker chief executives on Thursday, the senior Republican on the Senate Finance Committee recommended specific concessions from the automakers.

 

"They should take every step possible, including cutting executive salaries and bonuses, and exhaust all alternatives before coming to the taxpayers for tens of billions of dollars in help," Charles Grassley of Iowa said.

 

 

-Ovaltine

[RangerM]

Translation: "I'm not going to put my ass on the line, without some of the opposition party with me"

[lfeg]

History repeats itself.

I was in the middle of the steel collapse, and this is following the same path, only about ten times faster. Our country has pretty much always taken the easy way out when it came to social programs like health care and retirement - throw the burden onto the domestic employers, and then take credit for the good times. In the meantime they have pretty much left the domestic employers exposed to global competition from companies assisted and subsidized by their national governments (either directly or indirectly by way of currency manipulationsand the government taking on the social responsibilities and then rebating the associated taxes on exports). Well, the buzzards have come home to roost. I would like for one of the Detroit 3 to make this offer to our totally without a clue house and senate:

We do not want a bailout, or any money from the treasuary, but for us to continue as a viable enterprise we will do the following:

1. End all company paid employee and retiree benefits for everyone, except for basic health care and life insurance for active employees only.

2. Only those actively working will get paid. Salary and hourly and executive.

3. We will adjust staffing weekly.

4. Cut dealers loose as we see fit, damn any state laws.

5. Close, sell, open, or offshore any departments or divisions as we see fit.

6. Demand any and all tax breaks, incentives, and other benefits ginen to offshore competitor facilities by any governmental unit. Retroactively 10 years.

7. If the house and senate desire, they can bail out those who are affected by our business decisions.

 

Let us see how our elected bozos would respond.

Edited November 14, 2008 by lfeg

[kpc655]

If they really wanted to help..

 

Delay cafe changes

Cut fuel taxes

Drop tax rebates for hybrids

 

That's political suicide though. The government's pushing the Detroit 3 to make unprofitable cars that not many people want.

[ironhorse]

1.Let customers deduct interest on car loans like mortgage loans or let individual taxpayers depreciate their vehicles to lower their taxable income.

[LSFan00]

1.Let customers deduct interest on car loans like mortgage loans or let individual taxpayers depreciate their vehicles to lower their taxable income.

 

Possibly the best post I've seen on here all year. This is a terrific idea, which I've long supported. Somehow, I doubt this becomes part of any "package" this year. It's actually more likely they'll just start taxing older cars more heavily, to get people to buy new ones (a la socialist Europe).

[ironhorse]

For example if you bought a $30,000 vehicle,and could depreciate it over 5 years,what would you do in 5 years? BUY A NEW CAR.

 

This could be a graduated depreciation schedule where a truck or SUV had to be depreciated over 5 years and a more fuel efficient vehicle could be depreciated over 3 years. This depreciation would be for NEW vehicles only.

Edited November 14, 2008 by ironhorse

[FordBuyer]

It's starting to look like GM will get no help until the new Congress takes over in January and Obama is President. Right now no one is running the country. Waggoner should just spend his time cost cutting to last until Spring and bring back employee pricing to at least get cash flow by inreasing sales. No buyouts this time; just fire people like Ford did couple months ago. GM has no more money for buyouts. Right now it's survival. The only good think is lots of GM dealerships will fold and GM will not have to buy them out. GM will come out of this with a lot less dealers. Then maybe they can take GMC, Pontiac, and Buick and put everyone under same roof since they will not get rid of them. Make one division out of the three.

[97svtgoin05gt]

History repeats itself.

I was in the middle of the steel collapse, and this is following the same path, only about ten times faster. Our country has pretty much always taken the easy way out when it came to social programs like health care and retirement - throw the burden onto the domestic employers, and then take credit for the good times. In the meantime they have pretty much left the domestic employers exposed to global competition from companies assisted and subsidized by their national governments (either directly or indirectly by way of currency manipulationsand the government taking on the social responsibilities and then rebating the associated taxes on exports). Well, the buzzards have come home to roost. I would like for one of the Detroit 3 to make this offer to our totally without a clue house and senate:

We do not want a bailout, or any money from the treasuary, but for us to continue as a viable enterprise we will do the following:

1. End all company paid employee and retiree benefits for everyone, except for basic health care and life insurance for active employees only.

2. Only those actively working will get paid. Salary and hourly and executive.

3. We will adjust staffing weekly.

4. Cut dealers loose as we see fit, damn any state laws.

5. Close, sell, open, or offshore any departments or divisions as we see fit.

6. Demand any and all tax breaks, incentives, and other benefits ginen to offshore competitor facilities by any governmental unit. Retroactively 10 years.

7. If the house and senate desire, they can bail out those who are affected by our business decisions.

 

Let us see how our elected bozos would respond.

 

I love this and all so true. The only issue we have here are the old old folks who will be in deep trouble without the benefits. Perhaps Obama could come up with something for them. The fat cats however who are getting BIG pensions..bzzzz. Sorry, free ride is over. Its not the same game it was when all that was created.

[ANTAUS]

The biggest issue is pensions. Throwing a bit of money that way isn't going to fix the problem long term, rather just have the automaker limping for another year or 2.

 

Legacy costs of around $2500-3000 are built into a vehicle. Imagine if that need weren't there, the vehicles would be prices more competitively.

[TStag]

Just read on the BBC that the EU is planning to study the terms of any bailout and if it breaks WTO law they will appeal to the WTO.

 

I think the EU loans to car makers will be on "commercial terms" so they will pass the WTO test. As long as the US does the same thing I suspect they will be OK but it will mean GM, Chrysler and possibly Ford will emerge from this with much larger debts.

[lfeg]

The biggest issue is pensions. Throwing a bit of money that way isn't going to fix the problem long term, rather just have the automaker limping for another year or 2.

 

Legacy costs of around $2500-3000 are built into a vehicle. Imagine if that need weren't there, the vehicles would be prices more competitively.

 

Exactly. We as a country are putting a heavy burden on a few employers. And then we wonder why the problems continue to come. Let the bailout be the house and senate coming up with a way to fund the safety net and legacy costs for the autoworkers and retirees. Let the automakers pay a prevailing wage for manufacturing with basic benefits and set staffing levels as they see fit. Then without the burdens, let the companies survive or fail on their own.

The only way a domestic steel industry survived (with much of it under foreign ownership I might add) wad by dumping just about all pensions and retiree benefits, massively cutting benefits for current workers, massively cutting staffing levels, and by reducing the number of companies. The only way to save the domestic auto industry is by doing the same thing again. Will our grand and glorious politicians step up to the bar? No, they will be on the sidelines making catcalls and talking tough.

[jpd80]

Just read on the BBC that the EU is planning to study the terms of any bailout and if it breaks WTO law they will appeal to the WTO.

 

I think the EU loans to car makers will be on "commercial terms" so they will pass the WTO test. As long as the US does the same thing I suspect they will be OK but it will mean GM, Chrysler and possibly Ford will emerge from this with much larger debts.

The EU can study all they like, their own governments and banks know exactly what's going on.

The US government is borrowing the cash to on-loan to everyone so, yes it is on commercial terms.

This has all been a coordinated effort with basically the G20 countries and banks, every government around the world will be helping their respective local industries as they see fit - you watch the Germans!!

Edited November 14, 2008 by jpd80

[mnm]

The biggest issue is pensions. Throwing a bit of money that way isn't going to fix the problem long term, rather just have the automaker limping for another year or 2.

 

Legacy costs of around $2500-3000 are built into a vehicle. Imagine if that need weren't there, the vehicles would be prices more competitively.

ok. so what do you say to a guy who is 76 years old,spent 42 years busting his ass in a factory. and is now living off that pension? sorry no more pension for you. go get a job? obviously no one would hire him- so what do you do? let him and wife starve and die? is that what america is becoming? and dont argue he should have saved more. he worked for 42 years with the promise there would be a pension for him when he retires. damn shame this country considers its seniors and children as liabilities.

[Ford Jellymoulds]

Just read on the BBC that the EU is planning to study the terms of any bailout and if it breaks WTO law they will appeal to the WTO.

 

I think the EU loans to car makers will be on "commercial terms" so they will pass the WTO test. As long as the US does the same thing I suspect they will be OK but it will mean GM, Chrysler and possibly Ford will emerge from this with much larger debts.

 

Ford have pumped billions into and propped up deadword like Land Rover/Jaguar for decades, l can't ever remember the EU complaining T-Stag?

[Michael Reynolds]

Ford have pumped billions into and propped up deadword like Land Rover/Jaguar for decades, l can't ever remember the EU complaining T-Stag?

 

If Ford had retained those companies you wouldn't hear a peep from TStag. Ever since Ford dumped those leeches it has been nothing but non-stop complaining and whining.

[jpd80]

Ford have pumped billions into and propped up deadword like Land Rover/Jaguar for decades, l can't ever remember the EU complaining T-Stag?

That POS, Volvo has mounting losses - $720 million for the first 9 months of this year.

Maybe EU would like to refund Ford their losses on the Swedes.

[RichardJensen]

Well, it's like this: The Dems need Michigan, Ohio, and Indiana; the Republicans covet Michigan, Ohio, and Indiana.

 

So welcome to 'men behaving badly' also known as politics.

 

See, it's NOVEMBER, and GM's not going to run out of cash until DECEMBER, so you got plenty of time for grandstanding, finger pointing, hoo-hah, folderol, hot air, the trumpeting of isolated know-nothings, and so on and so forth.

[lfeg]

ok. so what do you say to a guy who is 76 years old,spent 42 years busting his ass in a factory. and is now living off that pension? sorry no more pension for you. go get a job? obviously no one would hire him- so what do you do? let him and wife starve and die? is that what america is becoming? and dont argue he should have saved more. he worked for 42 years with the promise there would be a pension for him when he retires. damn shame this country considers its seniors and children as liabilities.

 

The same thing that LTV, Bethlehem, and the other steelmakers did when we had the steel meltdown. Tough luck, thats the way it goes. None of them received even a "we're thinking of you" from the government. The only one who tried to do something was Jim Trafficant, which is why many still support him though he is in prison

[NickF1011]

The same thing that LTV, Bethlehem, and the other steelmakers did when we had the steel meltdown. Tough luck, thats the way it goes. None of them received even a "we're thinking of you" from the government. The only one who tried to do something was Jim Trafficant, which is why many still support him though he is in prison

 

I miss Jim Trafficant. Sure he was probably the most corrupt member of Congress I've seen in my lifetime, but he was so much fun when he talked to the press. :lol:

[lfeg]

If his name would show up on a ballot today, he would get at least 40% of the vote in his corner of Ohio no matter what. When it came to corruption, he was a small timer compared to the other Mahoning County politicians. One thing few outsiders know is that when the steel mills were shutting down in Youngstown and many were having their homes forclosed, he refused to hold sherriffs sales. This allowed the people to stay in their homes a while longer. This also made many enemies for JT among the bankers and their bought and paid for pols. Funny thing is that they then tried to have him ruled incompetent on grounds of insanity. After the probate trial, the judge ruled him sane, probably making him the only one in congress legally sane.

Edited November 14, 2008 by lfeg

[FordBuyer]

The same thing that LTV, Bethlehem, and the other steelmakers did when we had the steel meltdown. Tough luck, thats the way it goes. None of them received even a "we're thinking of you" from the government. The only one who tried to do something was Jim Trafficant, which is why many still support him though he is in prison

 

Uh..there is something called the Federal Pension Board run and funded by the government. There is even a web site you can go to, and a formula to figure out how much your pension is worth if your company goes out of business. You get something like .50 on the dollar. Now if all the Big Three went under, it would probably overwhelm this fund and pensioners would be lucky to get .20 on dollar unless the government puts billions more into it.

 

Also, what makes anyone think car prices would come down if GM and Ford had no more legacy costs. It just means they would make more profit or a profit. A Camry or Accord costs just as much or more than Fusion or Malibu and Toyota USA and Honda USA have little in legacy costs. Americans buying them get no price break. If anything, an Accord or Camry will cost you more than comparable American brand. So for Americans to complain about Fusion, Malibu prices is disenguous in the extreme. No reason for average American to even care about what legacy costs Big Three unless you are investor or auto executive.

[lfeg]

Uh..there is something called the Federal Pension Board run and funded by the government. There is even a web site you can go to, and a formula to figure out how much your pension is worth if your company goes out of business. You get something like .50 on the dollar. Now if all the Big Three went under, it would probably overwhelm this fund and pensioners would be lucky to get .20 on dollar unless the government puts billions more into it.

 

Also, what makes anyone think car prices would come down if GM and Ford had no more legacy costs. It just means they would make more profit or a profit. A Camry or Accord costs just as much or more than Fusion or Malibu and Toyota USA and Honda USA have little in legacy costs. Americans buying them get no price break. If anything, an Accord or Camry will cost you more than comparable American brand. So for Americans to complain about Fusion, Malibu prices is disenguous in the extreme. No reason for average American to even care about what legacy costs Big Three unless you are investor or auto executive.

 

That is what the steelmakers did - dump everything to the govt pension insurance (PBGC I think it is). Retirees got about .50 on the dollar, all benefits other than the pension itself were gone.

And it is not about car prices, it is about the company being a viable enterprise. The average american had better care, or the auto industry will follow the trajectory of the steel industry - primarily foreign ownership (loss of local decisions and HQs), fewer (lower paying) jobs, dramatically fewer domestic facilities (far less to tax), and due to all of this, less production capacity (and choice) leading to higher prices (ask anyone buying steel about this).