Metalcutter
Titanium
- Joined
- Sep 14, 2005
- Location
- San Diego
Please tell me the Auto Bail Out is a loan.
Regards,
Stan-
Regards,
Stan-
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Auto Bail Out is a Loan?
- Thread starter Metalcutter
- Start date
- Replies 27
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Ries
Diamond
- Joined
- Mar 15, 2004
- Location
- Edison Washington USA
so far, anyway, there is no auto bailout.
All kinds of things have been proposed, but NOTHING has been agreed upon.
So maybe it is a loan, and maybe its not.
Nobody knows yet.
All kinds of things have been proposed, but NOTHING has been agreed upon.
So maybe it is a loan, and maybe its not.
Nobody knows yet.
Stuart Caruk
Stainless
- Joined
- Feb 20, 2007
- Location
- Ridgefield, WA
O/K, so if it's a bailout of a business model that's likely going to fail anyway, why pour good money down the drain?
If it's a loan, isn't that what got us into the sub prime mess in the first place. Lending institutions making loans to borrowers who really didn't have the equity position in the property with little hope of repayment? Hmnn a business model that loses millions every day without a plan and they expect to have money lent to them.... ahahahahaha.
Sure, right after you restore the credit lines and allow loans to the millions of small businesses that the banks are decimating to help save them from the mess they fidn themselves in.
If it's a loan, isn't that what got us into the sub prime mess in the first place. Lending institutions making loans to borrowers who really didn't have the equity position in the property with little hope of repayment? Hmnn a business model that loses millions every day without a plan and they expect to have money lent to them.... ahahahahaha.
Sure, right after you restore the credit lines and allow loans to the millions of small businesses that the banks are decimating to help save them from the mess they fidn themselves in.
garyphansen
Titanium
- Joined
- Feb 9, 2004
- Location
- Traverse City, MI
What they are talking about is a loan! If you remember back in the 1970's congress gave out a big loan to one of them that was paid back early with interest. It kept thousands of people from loosing their jobs. It also kept the government from losing millions in taxes. It was win-win. Gary P. Hansen
jdj
Diamond
- Joined
- Oct 22, 2007
- Location
- detroit,mich.
Yes. They were asking for low interest LOANS. Not just vague, totally free money like
the financial industry received.
Thank you Gary, for pointing out a case where those loans worked out well. (Chrysler? 1980's?)
Jeff
the financial industry received.
Thank you Gary, for pointing out a case where those loans worked out well. (Chrysler? 1980's?)
Jeff
Spelunker
Aluminum
- Joined
- Sep 20, 2007
- Location
- Central Valley CA.
oh yeah!.....How could we forget Lee Iacocca? Lee for Prez. (jk)
Wren
Aluminum
- Joined
- Jul 12, 2007
- Location
- Tuscaloosa, AL
It's a loan as currently structured.
It is not neccesarily throwing good money after bad as the Big 3 have a real shot at being competitive in a few years when the new union contracts come into effect. They will have costs similar to the foreign/non-union automakers and will no longer have to do some of the more bizarre things they did before, like build cars that they know they can't sell since it was cheaper to build cars than to stop production for a while.
It is not neccesarily throwing good money after bad as the Big 3 have a real shot at being competitive in a few years when the new union contracts come into effect. They will have costs similar to the foreign/non-union automakers and will no longer have to do some of the more bizarre things they did before, like build cars that they know they can't sell since it was cheaper to build cars than to stop production for a while.
jim rozen
Diamond
- Joined
- Feb 26, 2004
- Location
- peekskill, NY
Bridge loan, right.
Bridge to NOWHERE.
They'll be right back begging for
more in three months. Anyone who
thinks a couple of billion will solve the
car makers' ills is sadly delusional.
Jim
Bridge to NOWHERE.
They'll be right back begging for
more in three months. Anyone who
thinks a couple of billion will solve the
car makers' ills is sadly delusional.
Jim
Can't remember where I read it, but there was an interesting detailed analysis a few months ago in one of the business publications of how we and the auto industry would actually have been better off if Chrysler had gone belly up the first time !
Think about it...less traumatic outcome for the general economy back then and most importantly...way less competition and increased market share for Ford and GM...they both would have sold more vehicles over the past two decades and might be in much better shape today.
I don't recall, but suspect the original Chrysler loan was secured with some collateral, where as GM at 60 billion negative net worth has no collateral. Any GM or Chrysler "loan" is a gift from us....aren't we nice ?
Sort of reminds me of "Charlie Wilson's War".... outcome seemed good at the time, but look what it wrought.... be careful what you wish for...
cnctoolcat
Diamond
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- Sep 18, 2006
- Location
- Abingdon, VA
Let's not forget the magnitude of how $4 per gallon gas crippled the Big 3.
All 3 were either profitable (or on track to be profitable) when gas prices started shooting through the damn roof.
All automakers were caught off guard by the oil shock. The foreign builders are having to retool their product mix same as Big 3 are.
All 3 were either profitable (or on track to be profitable) when gas prices started shooting through the damn roof.
All automakers were caught off guard by the oil shock. The foreign builders are having to retool their product mix same as Big 3 are.
GM has been on the verge of bankrupcy for at least since 2004. Read this if you don't believe me...note the date of the article -http://www.businessweek.com/magazine/content/05_50/b3963114.htm
Any cash they had back then wasn't enough to pay outstanding debt...they still had a negative net worth...a company with negative net worth is not "profitable"
Gas was less than $2.00 a gallon in 2004/5
Back to the original question; the bailout is a loan. But like Milacron says GM and Chrysler have negative net worth which is why no bank will give them a loan. Also understand that this is a bridge loan and will only give them a few months worth of operating capital.
The interesting thing to me in the whole deal is Ford. They are standing there with the other two asking for help but don't need the money. My guess is that they want Chrysler to get the money, then they will use theirs to help buy Chrysler.
As long as the government is loaning money n the cheap, they are likely figuring might as well take advantage of it.
The interesting thing to me in the whole deal is Ford. They are standing there with the other two asking for help but don't need the money. My guess is that they want Chrysler to get the money, then they will use theirs to help buy Chrysler.
As long as the government is loaning money n the cheap, they are likely figuring might as well take advantage of it.
metlmunchr
Diamond
- Joined
- Jul 25, 2004
- Location
- Asheville NC USA
I'd imagine Ford wants to have their hat in the loan ring in case one of the others does go totally belly up. If that happened, the bankrupt one would likely make a last ditch effort for cash by dropping prices so low on current inventory that Ford would either have to sit by and watch with no sales, or join the battle and risk bankrupting themselves in the process.
Another scenario that would put Ford in need of money would be Ch 11 filing by one or both the others. If GM were to file on a Friday, they'd open the doors on Monday morning essentially free of the current pressure for cash. They'd be under no legal liability to continue paying on ANY obligation incurred prior to the filing, and the creditors couldn't do a thing to pressure them to pay. Although all the liabilities would have to be sorted out over the long term, the immediate effect could be the lowest operating costs of any carmaking operation in North America, and lower than Ford's costs by miles. Once again, Ford would find itself in a world of hurt from a competitor that by all rights should be dead and buried.
A third reason they want to be ready to request money if necessary is the current condition of the credit markets. They don't have an endless supply of money, and can only survive for so long if credit stays as tight as it is now. They're not blind to the fact that Lunk O'Shit Paulson has done nothing to free up credit even though he's shoveled 300+ billion to the finance wizards, so they have no real reason to think the money's going to be there within some specific time frame that'd help finance retail sales or finance the dealer floor plan for inventory. Lots of different ways things could play out that would have the net effect of putting Ford in a cash bind. I think they're hoping for the best, but preparing for the worst.
Another scenario that would put Ford in need of money would be Ch 11 filing by one or both the others. If GM were to file on a Friday, they'd open the doors on Monday morning essentially free of the current pressure for cash. They'd be under no legal liability to continue paying on ANY obligation incurred prior to the filing, and the creditors couldn't do a thing to pressure them to pay. Although all the liabilities would have to be sorted out over the long term, the immediate effect could be the lowest operating costs of any carmaking operation in North America, and lower than Ford's costs by miles. Once again, Ford would find itself in a world of hurt from a competitor that by all rights should be dead and buried.
A third reason they want to be ready to request money if necessary is the current condition of the credit markets. They don't have an endless supply of money, and can only survive for so long if credit stays as tight as it is now. They're not blind to the fact that Lunk O'Shit Paulson has done nothing to free up credit even though he's shoveled 300+ billion to the finance wizards, so they have no real reason to think the money's going to be there within some specific time frame that'd help finance retail sales or finance the dealer floor plan for inventory. Lots of different ways things could play out that would have the net effect of putting Ford in a cash bind. I think they're hoping for the best, but preparing for the worst.
Wren
Aluminum
- Joined
- Jul 12, 2007
- Location
- Tuscaloosa, AL
I think that the reason that Ford is encouraging it is the same reason that Toyota and Honda are encouraging the loans.
Without GM and Chrysler, suppliers are going to start to fail and that will likely kill Ford and seriously hurt the transplants.
jim rozen
Diamond
- Joined
- Feb 26, 2004
- Location
- peekskill, NY
If folks want to claim that bulldozing piles of cash into a sewer manhole is
a loan, then yep, it's a loan all right. Have a nice time getting your money
back.
It's a hail mary pass folks. That money's gone and it ain't coming back.
This ain't the 80s folks. Nice try.
Jim
a loan, then yep, it's a loan all right. Have a nice time getting your money
back.
It's a hail mary pass folks. That money's gone and it ain't coming back.
This ain't the 80s folks. Nice try.
Jim
jdj
Diamond
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- Oct 22, 2007
- Location
- detroit,mich.
cnctoolcat
Diamond
- Joined
- Sep 18, 2006
- Location
- Abingdon, VA
Keep in mind a corporation's net worth has little to do with profit.
Net worth is an absolute accounting measure. As long as a company can get financing for it's long term debt, and has the cash flow to make the payments, net worth has little effect on operations.
Profit is an accounting measure for a given period of time, usually quarterly or annually.
GM and Ford had quarters of profitability before the fuel price shock. Both were in process of closing plants and retooling product lines to help insure long term viability.
The Wall Street-induced credit crisis took away the Big 3's ability to finance and refinance long-term debt. Just the same as you and me, if a corporation has cash flow, but can't get the loan, then all bets are off.
The majority of the Big 3's negative net worth comes from their commitments to retirees.
Net worth is an absolute accounting measure. As long as a company can get financing for it's long term debt, and has the cash flow to make the payments, net worth has little effect on operations.
Profit is an accounting measure for a given period of time, usually quarterly or annually.
GM and Ford had quarters of profitability before the fuel price shock. Both were in process of closing plants and retooling product lines to help insure long term viability.
The Wall Street-induced credit crisis took away the Big 3's ability to finance and refinance long-term debt. Just the same as you and me, if a corporation has cash flow, but can't get the loan, then all bets are off.
The majority of the Big 3's negative net worth comes from their commitments to retirees.
Last edited:
"The majority of the Big 3's negative net worth comes from their commitments to retirees. "
I would like to know where this is writ. My own company, US Steel, sends me regular updates on the funds held in the retirement fund, the growth/loss, whatever.
CAN the auto makers produce such a statement, they have "So much in the fund to provide SO much in benefits" or will they tell you that they have to allot 34 bucks an hour of the alleged 74 bucks an hour of their employees compensation to continue sending pension checks and pay medical costs.
ie, they did NOT set aside the funds they withheld from your pay to improve the balance sheet of their obligation. Stock market was healthy enough that that growth was enough to bring the Fund to "fully Funded". NOW, they cry that they are BILLIONS of dollars in debt, due to that damned Union Contract.
Mark my words. They will get out of that contract. They will place it on you and me, aka the Government. We are the ones who pay taxes. We fund the PBGC. Their pension will be halved, at least.
Ironic, is it not, that the idea of Henry Ford, pay his employees enough to buy his cars, and pay a pension, would be undone by the Ford of today. Or, more likely, GM. They absolutely hated that Ford would raise pay to an unholy 5 dollars per day when they could hire for 2 dollars per day. Married men, too, were paid more than unmarried men. Recognition that a man with responsibility needed a bit more than a single man.
That he was an unrepentant anti-Semite to the day of his death does not take away from what he did during his tenure. He hated Jews into the WWII years. (I think the old SOB lived that long, could be mistaken.) Have read that Ford did trade with the NAZIs. But, then, again, ALL our companies traded with the enemy of the day. There is not any one company that is loyal to any one country. They will trade with any company from whom they can profit.
Cheers,
George
I would like to know where this is writ. My own company, US Steel, sends me regular updates on the funds held in the retirement fund, the growth/loss, whatever.
CAN the auto makers produce such a statement, they have "So much in the fund to provide SO much in benefits" or will they tell you that they have to allot 34 bucks an hour of the alleged 74 bucks an hour of their employees compensation to continue sending pension checks and pay medical costs.
ie, they did NOT set aside the funds they withheld from your pay to improve the balance sheet of their obligation. Stock market was healthy enough that that growth was enough to bring the Fund to "fully Funded". NOW, they cry that they are BILLIONS of dollars in debt, due to that damned Union Contract.
Mark my words. They will get out of that contract. They will place it on you and me, aka the Government. We are the ones who pay taxes. We fund the PBGC. Their pension will be halved, at least.
Ironic, is it not, that the idea of Henry Ford, pay his employees enough to buy his cars, and pay a pension, would be undone by the Ford of today. Or, more likely, GM. They absolutely hated that Ford would raise pay to an unholy 5 dollars per day when they could hire for 2 dollars per day. Married men, too, were paid more than unmarried men. Recognition that a man with responsibility needed a bit more than a single man.
That he was an unrepentant anti-Semite to the day of his death does not take away from what he did during his tenure. He hated Jews into the WWII years. (I think the old SOB lived that long, could be mistaken.) Have read that Ford did trade with the NAZIs. But, then, again, ALL our companies traded with the enemy of the day. There is not any one company that is loyal to any one country. They will trade with any company from whom they can profit.
Cheers,
George
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