Apparently if you are a huge mismanaged bank, you can show up in Washington on a Sunday night and have $85,000,000,000 by Monday morning with few strings attached. However, if you are a 100 year old automobile company whose survival impacts somewhere up to 3,000,000 people and you need a LOAN, then you can just forget about it.
Make no mistake folks, this was not about the pea on the plate of $14B, it was about breaking the union's back (UAW). So for the sake of getting a political toe hold, they are going to torpedo the industry and ALL of us are going to feel it, and it's not going to feel good people.
Lastly, you think $14B is a lot? Wait until you see how much it will cost us in bankruptcies, not just the car companies, but all the down stream businesses that supplied them as well. Oh yeah, if they file for bankruptcy there will be more debt placed on the Federal Pension Corporation that is already underfunded by $44B as result of past massive bankruptcies, airlines, etc. And the layoffs and firings? The extra burden on tax payers will be huge. And just in case you really think this is about protecting the tax payer, think again - there is this issue of $2,000,000,000,000 that they refuse to disclose who they gave it to.
Take a look at world markets today and in particular our own. Well done boys, you caused the entire world to panic today!
What would bankruptcy look like? Click here and read.
My previous post on GM.
4 comments:
In 2007 GM & Toyota reportedly sold about the same number of cars, somewhere around 9.3 million each. Toyota made $17B and GM lost $38B.
I want to understand how GM will become competitive either with or without assistance. I assume it is much more complicated than the simple facts above.
But it does create this simple question in my mind. Removing politics, either pro or anti UAW; Will a "bailout" lead to the same end state for the Big 3 as no bailout?
I don'y know the answer and don't know what the answer should be.
Is Thomas Friedman correct?
http://www.nytimes.com/2008/12/10/opinion/10friedman.html?em
The big (medium) 3 need time to right size and adapt. The union issue is only a part of the story (problem). Can they adapt? Good question and in normal circumstances and a sound economy, I would agree that Chapter 11 would be a better solution since DIP financing would be easy to come by. However, with the banks in a twist, DIP financing would all but be impossible to obtain thus forcing a liquidation that would send shock waves through the international markets. There is no easy solution, but there seems to be a double standard here and it is clear to me that politics is again taking precedence over people and jobs.
Oh yeah - the electric cars are coming, but there are economic impacts that need to be considered as well, such as what happens to the mom and pop convenience store owner whose profit margin is in the Pepsi they sell and not he gas? That is only one of many considerations before we make a wholesale conversion without giving thought to the down stream effects. Not to mention the increased production of electricity that requires the burning of more coal, etc.
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