No help or wrong help for Detroit?

Really odd considering that the perscription drug thing was motivated not only by the often mentioned profit motive for the drug companies but to serve as a way for companies like GM to end their coverage of retires and shift the burden to taxpayers.

Considering the union contracts, they are basically running a welfare/entitlement government operation. They just don't have the power to print money or tax. (as you've mentioned)

The solution is never controlled choice. That was tried with CAFE and the big three got drunk on SUV profits and lured back to where they were in the 1970s. What should be done regulation wise is remove CAFE. Ford and GM would be wise to give up their assinine opposition to world wide standards based one ECE standard for things like vehicle lighting etc to allow them to more freely move models between markets as demand required. That also goes into the union contracts which current restrict that.

Chrysler already had a taxpayer funded bailout.

That was all returned, with interest.

And so? They still have had one and GM and Ford haven't. It was a fairness arguement being made.

As soon as Ford and GM have a viable recovery plan (as Chrysler was required to do at the time...the numbers had to work), I wouldn't have a problem with the government lining up loan guarantees for them. The problem is that if they fail, then the taxpayer IS out the money (the government is basically co-signing their loans, in other words). Plus all the retirement guarantees.

I was taking exception to the term ""taxpayer funded bailout". The Chrysler deal didn't cost the taxpayer a red cent. And Chrysler made good on those loans well before they were due.

And I was dealing with the fairness arguement. regardless of what it was, the government already helped out one automaker. How it turned out is not relevant.

The government had no discernable risk. See my other post.

No risk means the government wasn't needed. There's a flaw somewhere.

Yes indeed. The flaw is in your cognitive abilities, as it seems. See, if a company has lots of assets but no cash, that's a problem, because if they sell their assets (such as factories, production machinery, and so forth) to raise cash, they no longer have the assets, and without the assets, they cannot function. Assets *AND* cash are necessary.

There...now, that wasn't so hard for you to understand, was it?

Ok mr smarty pants that needs to be insulting, riddle me this. I have good credit. If I am low on _cash_ I go to the bank and get a loan on my assets. I don't need the US government or anyone else to co-sign my loan. My good credit rating and my assets to secure the loan are enough.

Obviously, Chrysler corporation had more than a cash flow problem, if it was just being cash poor and asset rich, a bank would have loaned them money secured by the assets and their good history of paying back loans. Obviously there is a flaw somewhere if they needed a cosigner. (the federal government of the USA)

Ah, but you see there's something different between you and Chrysler at that time.

The bank isn't loaning you money on the value of your CURRENT assets. They are loaning you money based on the value of your FUTURE assets. As long as you alive and healthy, and of working age and not just about ready to retire, the bank is viewing your warm body as being able to produce in the future, and that production is worth something. You don't need the banks's money to go dig a ditch, and that ditch digging is worth something to someone, which makes it worth something to the bank.

With the Chrysler loans, the only future assets were the ability to sell cars. The banks (and most people) didn't believe Chrysler could do this at that time, and theres no guarentee that if you give a company a pile of money that they are instantly going to be able to go out and sell a whole bunch of product. The bank wasn't so much worried about Chryslers credit rating, after all it wasn't like if the company got money in the future that they would be able to run away from the banks. Nor were they concerned much with Chrysler's current assets - because there's no guarentee those assets would be available in the future when the time came to pay back the money. That is why they needed the US Governments guarentee.

No they wouldn't. Business credit is a totally different animal than personal credit. When a bank contemplates a loan to a business they don't concern themselves that much with the businesses credit history, in fact they don't care even if the business is deeply in debt. All they care about is if the future value of the business is going to be more than the money that is owed to the bank. If it is, and if the bank wants it's money, the business isn't going to be able to get out of paying the money back, simply because it is impossible to conduct business without the aid of a bank - the bank always has a big bat they can hold over the business.

Individuals, by contrast, can get a big fat loan and then suddenly decide they are going to quit their job and go get a job that pays under the table, and they are going to do cash only, and so on. It's a lot harder for a bank to get it's claws into an individual if that individual is determined to keep money away from the bank.

Ted

Ted, I agree with much of what you say, but a bank generally will not do an unsecured loan. Sure, they will loan me the money for a car because having been employed for the length of time I have been and making the income I am making they are fairly certain I will pay them back. They use statistics for this.

However, there is always the chance that something might happen to affect my income. That's why they would have a lien on the car, and that's why you generally can't borrow more than the car is worth. Bail on the loan, and you lose the car. Of course, the banks don't want the car and are not in the business of selling cars, so they will wholesale it for whatever they can get and you will be stuck for the difference, if there is any.

Another example is if you want to start a small business. You cannot get a loan on expected future earnings. Banks just simply don't operate that way. As for loaning money to Chrysler, the fact that the government was a co-signer had boatloads to do with it, plus the fact, from the perspective of the government, that competition was important enough to take the risk.

Bottom line, though, was if this venture had failed, we taxpayers would have had to pony up. Fortunately, that didn't happen.

But that's why they loan based only on the *LOAN* value of the car,which is much less than the retail/street value. The 'loan' value is intentionally low so there is no difference/loss to them when they have to possess and wholesale the car (though in reality, after all expenses, etc., they may end up with a slight loss - I'm not in that business, so I wouldn't know).

Bill Putney (To reply by e-mail, replace the last letter of the alphabet in my address with the letter 'x')

In general, this hasn't been true for a long time. If people consistently pay for their cars, lenders are willing to loan them far more than they (the lenders) could recover if repo were necessary. More than loan value, more than wholesale, more than retail, more than retail plus sales tax. They'll even do it for people who only pay more or less on time.

Sure, the owner can't sell the car outright, but because of the system above, if he's paid regularly, can trade it, even if he's buried. The lenders will help him get buried more.

The problem comes in when there's an involuntary outright sale, which is essentially the situation if the car is totalled. The insurance company is buying the car for its actual market value, which may be a lot less than what's owed. In that case, the lender might accept an exchange for a lien on a similar car which can be purchased for the insurance proceeds, the buyer retaining an amount owed higher than the car's value. OTOH, some insurance companies offer (for an additional premium) coverage that will pay the loan amount if greater than the value of the car. Where there's a demand, someone will step in and make money off it.

I know several people who have rolled several negative equities along into the next car. Before long, they have a $25,000 loans on $18,000 cars, or $40,000 loans on $27,000 cars!

I know some of these idiots personally. I also hear this stuff over and over on radio consumer and finance shows, so it's fairly safe to say that this stuff happens all the time.

There is a concept of "Too Bog To Fail" that will ultimately be brought into play here as it was with Chryslar in 1979.

That's pure bullshit. The government (you and me) are already on the hook through the PBGC for underfunded pension plans. The already insolvent PBGC will go further in the red when they have to pick up those huge plans. The retirees will get screwed because they will get cents on the dollar.

Have no idea how his relates to GM and Ford.

And we are even farther afield here.

Naw, the big three built up a reputation of building largely dull cars that had quality problems while the competition put out cars that had fewer problems. The quality problems are now not as severe, but the image continues.

The other issue killing detroit makers is their cost of unionized labor.

But they will go in droves to the Toyota and Nissan dealer down the street if they offer a reliable car that looks and drives good. And that's what happened.

Naw, that has nothinbg to do with it. It is the image and reality of a quality car at a decent price pure and simple that attracts people to asian cars.

What does it mean to "be in denial"? I've heard that psycho-babble phrase so often but it means nothing. And what makes you think he is attending AA meetings.

Naw, "Too Big To Fail" will be resurrected once again to justify a bailout.

That's nonsense. Quality (the lack of) is what gto detroit makers into trouble. Decades ago they had the market but became so arrogant and complacent that they failed to take account of who their competition was and the kind of products they were capable of making. And they have been falling further behind ever since.

Possibly could help the detroit makers to reduce their lines if coupled with a real move toward quality products. And if they cut labor costs. GM's attempt at building a car using japanese techniques failed miserably. The Saturn turned out to be a piece of junk.

Why should we tell Toyota to stop making a definitively better product that consumers want. That makes no sense whatsoever.

This is so far out in left field....

Whaaaaattt???? You are nuts!

Yes, that happened in the 80's most certainly. On one hand you had General Motors with the computer-controlled Varajet that the garden variety mechanic could not make head nor tail of, in a big old boat of a car that sucked gas like no tomorrow. On the other hand you had the imports with fuel injection and small gas saving cars easy to fix.

But today it's not true anymore. Take a look at the warranties offered by the domestics and foreign manufacturers, they are all the same 3/36 If the imports were so much more reliable their warranties would be longer.

Operative word there is image. The domestics hurt themselves by having bad quality in the late 70's early 80s as compared to the imports. Unfortunately that gave Generation X an image and that image hasn't changed with that generation. They will be buying imports until they die, and they are influencing their parents purchases today, which 30 years ago was unheard of.

When your parents (if they are still alive that is) were in their 20's, they would have never been asked for advice on purchasing anything by your grandparents. That has changed 180 degrees today, and it started with the Gen Xers because they were the first generation to be young enough to climb into the computer and information culture. The generation that is following Gen X was raised in the computer culture, you see, and they will not have the same influence over their parents - the Gen X'ers - as the Gen X'ers have today over their own parents, the baby boomers, because both the Gen Xers and their children are of the same information culture.

When historians look back 100 years today they will point to the 1990's as the decade that American culture started the Information Age and ended the Industrial Age. The Gen Xers were on the cusp of that change and as a result they are rapidly gaining far more power in shaping the culture than most generations had. The Baby Boomers had that same power as well and they use it to change people's attitudes towards each other. In the 60's they used it to promote tolerance, and today they are using it to promote intolerance. The GenXers power isn't in that area, instead the Gen Xers power is in changing people's attitudes towards how they make an effect in the material world. That's why the Gen Xers are so interested in people's effect on the environment, and that's why they are so interested in how corporations use employees, etc. The big 3 automakers in Detroit still haven't figured this out in their marketing, the foreign automakers have, though.

A person who is in denial is a person who continues to believe his own view of the world, after being presented with irrefutable evidence that his world view does not agree with the actual world itself. That is a pretty basic definition that anyone knows it is not psycho-babble.

The poster apparently thinks that Bush firmly believes Ford and GM will be able to pull themselves up out of their own holes without government help, and the poster thinks the reality is that they can't do it, and that proof of that has been shown to Bush who is refusing to believe it. Of course this is a rather preposterous set of suppositions, but this is what it means.

Or more likely a merger. The Justice Department has been approving quite a lot of corporate mergers that in prior years would have been considered violations of the Sherman Anti-Trust act. Most likely what the President has been told by his economic advisors is that if General Motors bought Ford, that it would not create a trust because on a global scale there's many many many automakers out there, and that the US citizens would still have many many choices. And those advisors have probably been sold the line that if those two companies merged that it would so greatly increase the manufacturing economies of scale that it would allow GM to spend even less money manufacturing a car, thus the combined entity would become very profitable.

Of course these same advisors seem to think that Goliaths in government organizations are wasteful and a Bad Thing, which goes to show that people have the capability of believing that two completely opposite statements are both true at the same time.

The exact same thing would happen to the foreign car makers if they "had the market" If we don't have domestic car makers left then what will we do?

That isn't why Saturn isn't doing well. Saturn isn't doing well because GM totally underestimated how hypocritical American consumers really are. For years and years since time out of mind the American consumer has ranked the honesty of the typical car dealer somewhat on the level of the average lawyer, and complained endlessly about how they couldn't stand to haggle when purchasing cars. GM fell for that line and created the no-haggle sale. Then they discovered years later that only a small percentage of American consumers actually were serious about not wanting to no-haggle a car sale, the rest of them may have bitched a blue streak about having to dicker, but when cash started talking and bullshit started walking, most consumers figured they would get a better deal down the street from the dealer willing to haggle.

Ted

If GM buys Ford, both Henry Ford and William C. Durant will turn over in their graves. . . . There will be a big earthquake in Detroit.

Charles of Schaumburg.

LOL! Ted - you need to coyright that sentence. That's funny I don't care who you are!!

Actually there's a dealer in the small town where I live that some would claim invented the no-haggle deal (probably 45 years ago). He's outsurvived all the other dealers in town, which flat out disappeared, went out of business, or changed hands several times over the same period of time. But, I think you're right in general - he's the exception that proved the rule - to use another cliché.

Bill Putney (To reply by e-mail, replace the last letter of the alphabet in my address with the letter 'x')

Gawd. GM and Ford merge? I sure hope fscking not. Japan can support a half-dozen car companies but the Americans can only compete if they get down to one?