I posted this on another thread a while ago; this thread just popped up on FR and I finally found an article where someone thinks just like I do about the Big 3 and their pleas for loans:
Well, contrary to popular opinion on this web site, I do not want the auto companies to go down. That will leave us with only foreign owned auto companies in the U.S. Where do you think the military gets all of its vehicles from? Mostly from GM, according to my nephew who is a veteran. Humvee’s, tanks, etc. Now, in wartime, we switch our auto industry over to a war footing, have them retool to produce our military equipment. Are you going to entrust this to foreign owned auto companies in the U.S.? What if they are amongst the belligerents we are fighting against, or sympathetic to them? China is getting ready to enter our automobile market very shortly. Would you ever want us to be at the mercy of a foreign company for our military vehicles?
Plus, we just can’t let that much of our manufacturing base go overseas or just simply die on the vine in this country. We can’t be dependent on everyone else in the world for our basic necessities and goods. Look what that attitude has gotten us into with regard to oil and our country’s needs. We are at the mercy of hostile nations, Saudi Arabia, Venezuela, Russia, even Mexico doesn’t like us much. You just can’t totally decimate your manufacturing base without jeopardizing your country’s security needs. So, even though it makes one gnash our collective teeth, I want a loan given to the auto companies.
Plus, I must say, Bush via Paulson, has GIVEN away billions to our financial companies, and now is squawking about giving a LOAN to the car companies. Granted there is some risk with these loans, but at least they are loans, not bailouts like the banks and AIG got. The one example of a gov’t loan given to a car company was Chrysler 30 years ago, and they paid it back plus some. It is a calculated risk, but one I believe we must take, primarily because of the security needs of our country via the military vehicles produced by our U.S. car companies. We just must not let our entire manufacturing base dissolve while other countries via unfair trade practices are supporting and subsidizing their companies abroad, including their auto industries, while we aren’t. It is an unfair playing field. I’m surprised our auto companies have survived as well as they have for many years considering what they are up against from foreign competition that hits below the belt whenever possible when it comes to trade practices.
It IS a security issue primarily. For this reason alone I want them to survive. And American pride. I know this is a nebulous concept, but I remember the pride of the American automobile in our country’s history, and I don’t want that pride to disappear. Do you feel pride about Honda, Toyota, Kia? Does that fit into the American history and mystique of the automobile? Is that the Model T Ford, or the big finned cars of the 50’s, or the Corvette? I’m sorry, but that means something to me. I don’t get that same sense of Americana from foreign owned car companies. Do you? Some things are worth saving and our automobile industry is one of them, in spite of the Unions, in spite of the mismanagement by some of their leaders. And because of the unfair playing field they have had to cope with along the way.
P.S., I also believe if the auto industries end up in bankruptcy, they won’t come out of it. No bank will give them loans, even now before being in bankruptcy. What makes anyone think the banks would do so after bankruptcy. So a Chapter 11 (reorganization) would become a Chapter 7 (bankruptcy) in short order. The auto companies would not have the wherewithal to reorganize for lack of any financial backing to get them over the interim hump of a soured economy.
As to quality of the autos, I’m tired of hearing U.S. citizens constantly bad mouth U.S. cars. I’ve had plenty of cars in my lifetime, both American and the occasional foreign car. Most have been pretty good, both foreign and American. The quality of U.S. cars has vastly improved, but because they had a bad image on quality in the further past, that image has stuck and now for many Americans it’s just by rote that they spout how lousy American made cars are, whether it is any longer true or not. My latest car, a Pontiac, I love. I’ve had it five years now, and nothing has gone wrong yet, nothing. That’s a pretty good track record. I’m sick of hearing our American citizens, who should be patriotic on this, raving about foreign cars and preferring them over our own.
I want to support American made products to the extent that I can. I want our country to continue to have a manufacturing base. I don’t want to be dependent on foreign countries for anything and everything. I don’t want to only see “made in China” on the bottom stickers of most of what I buy. Makes me sick. I love my country and want to support its goods and products when possible. I realize it is a global economy and do buy foreign made items also, but given the chance, I look for “made in America”. It’s my country.
And our problem with buying Humvees made by Toyota, here in the USA, under DoD supervision, is what exactly?
I’m just speculating here, but given the vast sums of money our DoD throws at contractors, how long would a brand new start up company take in providing equipment for our troops?
If GM does go down (not likely IMHO), I’ll bet there will be a lot of real,estate, factories, equipment, etc. for sale at a deep discount, minus the UAW. We can probably get our equipment cheaper since the contracts won’t be loaded down with legacy money.
Just thinking here.
” one example of a govÂ’t loan given to a car company was Chrysler 30 years ago, and they paid it back plus some.”
You misrepresent this by not telling readers that for years almost ALL cars the govt purchased were made by the bailout boy.
Let them go under, let AIG go under.
Privatize Fannie and Freddie and repeal the CRA Law, close the 4.5 PERCENT ACORN gets for EVERY mortgage, stop the 100 million dollars to ACORN in the bailout bill.
You leftists posting here should go back to DU. I’ll bet you still support Bush and McCain and hate Palin.
Not true!. A loan is when you give money to a company who has the present ability to pay it back. GM is insolvent and has no present ability to pay the money back. Its a bailout pure and simple. Packaging it as a "loan" just demonstrates the dishonesty present in the entire program.
The one example of a gov’t loan given to a car company was Chrysler 30 years ago, and they paid it back plus some.
All of the people who brag about how Chrysler paid the loan back ignore one thing. In the 1970's, Chrysler, For and GM enjoyed nearly 90% of the American market. Today, the have a market share well below 50%.
Consider what might have happened if the government had declined Chrysler's request. The unions would have got the message 30 years earlier. Management of GM and Ford would have got the message 30 years earlier. Many of the structural problems that is killing GM and Ford would not be here.
The truth is the American automobile industry has been in decline for 30 years. They have consistently lost more than they made. The Chrysler bailout sent the wrong message and now the situation is 100 time worse.
I appreciate your patriotism.
First, many of the bailouts to WallSt are not money without strings. The “TARP” program quit buying bad paper pretty quickly and the new idea became giving money in return for a senior preferred stock. That’s not “giving” - that’s “buying a piece of the bank.” The Fed has been swapping paper with many of these fools on WallSt - ie, the banks give over some piece of illiquid debt paper and get US Treasuries in return. So it isn’t quite like giving money out like free samples at Costco or something.
Bankruptcy is a tool, an escape hatch if you will. If a company goes into Chap 11 soon enough, while they still have some cash left, they can restructure their obligations and get to a point where they’re cash flow even. The only way the Big Three can shed enough of their fixed costs is to hack and slash at their obligations.
The “bailout plans” that the Big Three submitted contain such stunning gems as this, from the GM plan:
“GM will immediately engage current lenders, bond holders, and its unions to satisfactorily negotiate the changes necessary to achieve this capital structure; Oversight Board involvement may be necessary to be successful. As indicated, GM‘s Plan is to preserve the status of existing trade creditors to avoid collateral damage rippling through the supply chain. Similarly, GM‘s plan would honor terms and provisions of all outstanding warranty obligations to both consumers and dealers, in the U.S. and globally. “
OK, lemme translate that for you: they’re going to honor their obligations with their suppliers and their warranty costs.
People who hold GM bonds, especially the unsecured “SmartNotes” bonds, are screwed. The holders of the three forms of preferred stock are screwed. That’s a lot of people’s retiredment accounts, screwed.
How are they going to “negotiate” with their bond holders without going into bankruptcy? Well, that’s a very good question. But the plan (URL below, please see p. 11) shows that they’re setting up for 10’s of billions of haircuts to bond holders.
http://www.house.gov/apps/list/press/financialsvcs_dem/gm.pdf
Well, they can’t DO that to a bondholder outside of bankruptcy. The ink on the bond agreement says that they’re liable to repay 100 cents on the dollar - that’s their obligation. If they can’t or won’t do that, I can take them to court and drag them into bankruptcy the hard way.
GM has so much paper out there, you can bet that a big bondholder or bunch of bond holders WILL drag GM into court if GM tries to cram-down a haircut on bond holders without a bankruptcy filing.