The Auto Bailout – Chrysler / Cerberus

Can anyone explain to me why the government would get involved with bailing out an auto company, with extremely high fixed costs, that is owned by a private equity company? What’s really amazing is watching the chairman of Cerberus, John Snow, squirm when asked on CNBC the other morning why their own private equity dollars (which have loads of cash on the sidelines right now) won’t be used to help Chrysler. He finally basically said that Cerberus has already wasted/lost enough money trying to fix the sinking ship and they weren’t going to provide any more support. If they are willing to let it fail why is the federal government not willing to? It’s another example of wasted tax dollars. The American auto industry needs to be allowed to fail so it can restructure to meet the current needs and demand of the auto market.

This is $15 billion wasted, almost like giving an alcoholic one last drink before they go into rehab. At the end of the day the big 3 can’t compete with Toyota, Honda, or Nissan. At the end of the day, since 2005, GM has lost $2,300 for every car and truck sold compared to Toyota’s profit of $1,400. Poor management and negotiating got thee companies here and they must be allowed to fail and restructure. Don’t give me that crap about if they fail they’ll never make another vehicle. Yes there will be casualties but to look at another industry that has had it fair share of problems, people still fly.

Here's my take on privately held chrysler getting bailout money. John W Snow was the former treasury secretary from 2003 to 2006. If you can't give tax dollars to your friends why be president? Of course I'm being sarcastic but it still chaffs my britches that people like this choose to buy a company, can't make a go of it, then look for people like us to cough up the dough to keep him in the lifestyle he so richly deserves.

and if they fail we will all be driving chinese cars.......i'm not happy with the bailouts either......why cant thy instead slow down the imports and get americans back to work.....the lack of american made goods has me sicker

billw wrote:Here's my take on privately held chrysler getting bailout money. John W Snow was the former treasury secretary from 2003 to 2006. If you can't give tax dollars to your friends why be president? Of course I'm being sarcastic but it still chaffs my britches that people like this choose to buy a company, can't make a go of it, then look for people like us to cough up the dough to keep him in the lifestyle he so richly deserves.

Cerberus didn't really buy Chrysler from Daimler after it raped it, almost all the money they spent on it went to it's operations. Daimler still is on the hook for hundreds of millions on this deal and still own 20%.

lincolnmania wrote:and if they fail we will all be driving chinese cars.......i'm not happy with the bailouts either......why cant thy instead slow down the imports and get americans back to work.....the lack of american made goods has me sicker

What imports would you be referring to? Cars or misc goods? Toyota has upwards of 13 car manufacturing plants, Honda has several, Nissan several, and on and on. Most foreign cars bought in the US are made in the US. Interestingly enough a large portion of "US" cars from the big 3 are made in Mexico and Canada. It all comes down to the unions. They have bleed the big 3 dry for years with their guaranteed contracts and leadership at the big 3 has been to lax in allowing it. I am not saying unions are bad but what good is a guaranteed raise and job security when it bankrupts the company. The foreign car makers have lower wage costs per car then the big 3. In order for the big 3 to survive they must downsize which they are basically unable to do with the current contracts. Most people GM lays off, for one, need to commit to paying those "laid off" employees for up to 2 years while providing medical coverage. How can a company succeed if there is only demand for 50% of the cars they have the capacity to make when they still have to pay 100% of the employees? Greed all around, not just on Wall Street.

Misc goods I agree but it all comes down to the al mighty dollar. Would you rather by crap at a cheap price from China or slightly better crap, made by Americans, at a higher price?

They have bleed the big 3 dry for years with their guaranteed contracts and leadership at the big 3 has been to lax in allowing it. I am not saying unions are bad but what good is a guaranteed raise and job security when it bankrupts the company.

These arrangements were made in the good old days before the japanese auto companies took off, when the big three saw sales and profit growth year after year. I can't fault the unions for trying to hold onto every dollar they can for their members. It's their job. That being said this is exactly why this bailout should not happen. Allow the big 3 to fail, file for a reorganizational bankruptcy and let them get their house in order. The multiple levels of management, duplication of products, lack of quality control, and employee compensation all need a serious adjustment. This bailout is only going to prolong the agony and in the end it will end up with the same results, bankruptcy and reorganization. So why waste our money trying to postpone the inevitable? But what the hell do I know I'm just another old geezer trying to get by.

Ford announced today that they are in good enough shape to pass on the bailout.

http://www.msnbc.msn.com/id/28159257/

Pretty good move business wise if they can pull it off.

That's good news.
Ford has a diesel powered Focus they sell in Europe. It gets 45 MPG city and 70 MPG highway. I'm not sure why they won't sell it here but I think it's a big mistake.

http://www.stevelarkins.freeuk.com/ford_focus_tdci_review.htm

Why would Ford waist thier time going to Washington to fight for the bailout only to say they don't need it in the End? I think the reasoning for the change is that the bailout is not as large as originally thought or the oversight that was attached. If they really wanted to help thier image they should have let GM and Crysler go to washington without them - that would have made more news then this last minute headfake. People will always remember the "Big 3."

The headline could have been

"GM, Chrsylser begging - Ford well positioned for downturn"

From Wikipedia, the free encyclopedia
Chapter 11 is a chapter of the United States Bankruptcy Code, which permits reorganization under the bankruptcy laws of the United States. Chapter 11 bankruptcy is available to any business, although it is most prominently used by corporate entities.

What part of this do the moron's in DC not understand?? We are not talking about going out of business! You listen to these people and realize how clueless they really are, why do we keep reelecting them???

billw wrote:This bailout is only going to prolong the agony and in the end it will end up with the same results, bankruptcy and reorganization. So why waste our money trying to postpone the inevitable?

Right. They are just going to p*ss this money away -- effectively they are going to steal it -- just like they have p*ssed away all their opportunities for the last 40 years to produce a car that people want. I buy Japanese cars, not because I don't WANT to buy GM or Chrysler or Ford, but because the cars perform well, don't burn as much gas, and go 200,000+ miles with minimal repairs.

Ford has enough cash for 2009. They wanted to be able to get some bailout money if they needed to.

coalmeister wrote:From Wikipedia, the free encyclopedia
Chapter 11 is a chapter of the United States Bankruptcy Code, which permits reorganization under the bankruptcy laws of the United States. Chapter 11 bankruptcy is available to any business, although it is most prominently used by corporate entities.

What part of this do the moron's in DC not understand?? We are not talking about going out of business! You listen to these people and realize how clueless they really are, why do we keep reelecting them???

Because our choice is frying pan or fire.

billlindley wrote:Why would Ford waist thier time going to Washington to fight for the bailout only to say they don't need it in the End? I think the reasoning for the change is that the bailout is not as large as originally thought or the oversight that was attached. If they really wanted to help thier image they should have let GM and Crysler go to washington without them - that would have made more news then this last minute headfake. People will always remember the "Big 3."

The headline could have been

"GM, Chrsylser begging - Ford well positioned for downturn"

"
Mulally appeared before Congress last week with the CEOs of GM and Chrysler, and said he did so to support the other automakers and to line up a government loan just in case the economy worsened and Ford might needed the money in the future. If one or both of the others go into bankruptcy, it could drag down parts suppliers and force Ford into the same situation, Mulally said."



From this article . http://www.pressconnects.com/apps/pbcs. ... 1/81210021

I wouldn't be so against this bailout if part of the stipulation was guaranteeing more American jobs .Not using the money to expand in other countries . I would rather see more jobs created building or repairing roads ,dams ,powerplants .Instead of handing out billions of dollars we will probably never see again in our lifetime . How many infrastructure jobs could almost 800 billion dollars create?