U.S. Could Take Stakes in Big 3

[SnyderShrugged]

So we're getting more nationalization, unqualified "business managers", production demands for public transit, and potentially UAW seats on the company boards.

wonderful:rolleyes:

edit: add link: http://online.wsj.com/article/SB122875608562688401.html?mod=special_page_campaign2008_mostpop

WASHINGTON -- Congress and the White House inched toward a financial rescue of the Big Three auto makers, negotiating legislation that would give the U.S. government a substantial ownership stake in the industry and a central role in its restructuring.

Under terms of the draft legislation, which continued to evolve Monday evening, the government would receive warrants for stock equivalent to at least 20% of the loans any company receives. The company also would have to agree to limits on executive compensation and dividend payments, much like those contained in the government's $700 billion rescue of the financial industry.

GM's Hourly Workers Losing Edge Over Salaried OnesMany Car-Parts Makers Could Go UnderAutos Blog: Summary of Bailout Bill Complete Coverage: Detroit in CrisisIn the case of General Motors Corp., such a move could give the government a large stake in the company and may hurt existing shareholders. GM is seeking about $10 billion in short-term loans and has a market capitalization of about $3 billion. The legislation didn't specify what kind of stock the government would take, leaving open the option it could be preferred, common, voting or nonvoting.

Assuming congressional Democrats and the White House come to agreement on the plan, the car industry would be the latest to submit to strict government scrutiny in return for a bailout, joining most prominently the banking sector.

The auto industry would undergo a restructuring process akin to bankruptcy reorganization, only with fewer rigors and with the government, not a judge, in control, and with many associated political complications.

The program would be overseen by an official, tapped by President George W. Bush, whom congressional aides and lawmakers describe as an "auto czar." This person would act as a kind of trustee with authority to bring together labor, management, creditors and parts suppliers to negotiate a restructuring plan. He or she also would be able to review any transaction or contract valued at more than $25 million.

"We call this the barbershop," said House Speaker Nancy Pelosi, a California Democrat. "Everybody's getting a haircut here, in terms of the conditions of the bill," she said, noting the likely impact on labor, bondholders, shareholders, car dealers, suppliers and executives. "The management itself has to take a big haircut on all of this."

Senior congressional Democrats and top Bush aides wrestled late Monday with final details of the package, which the White House would prefer were even tougher on the car makers. GM, Ford Motor Co. and Chrysler LLC have asked for a total of $34 billion to weather the downturn in the economy and steep slump in vehicle sales. GM and Chrysler say they need a cash infusion before the end of December to avoid shutting down.

The White House has been pressing for a compromise package but gave a chilly reception to the latest overture by Democrats. White House officials suggested the package isn't rigorous enough, people familiar with the matter said, and would open the door for companies that aren't financially viable to receive long-term financing.

"We'll continue to work with members on both sides of the aisle to achieve legislation that protects the good-faith investment by taxpayers," said White House spokeswoman Dana Perino.

The latest version of the bill would extend to the companies billions of dollars in short-term financing. These bridge loans are expected to total about $15 billion, enough to carry the auto makers through next March.

Any deal would have to be ratified by Congress. Support there remains tepid and opposition remains high, especially among Republicans in the Senate, who can block the bill through a filibuster.

A handful of Republican senators have said they are willing to help the industry, but it isn't clear how many will swing behind legislation this week. Senate Minority Leader Mitch McConnell (R., Ky.) said the rescue must be financed out of existing funds and include strong taxpayer protections. Mr. McConnell stopped short of endorsing the bill Monday, but did note the auto industry is "an important source of jobs throughout America, including my own state of Kentucky."

Democratic leaders hope to push a bill through Congress this week, with the Senate likely moving first. "Congress is trying to save Detroit," said Senate Majority Leader Harry Reid (D., Nev.). "If senators are willing to work together...we can pass legislation."

In a statement, GM noted the "extraordinary action" that both the auto makers and Congress will be taking. "As part of our plan, we will abide by the conditions proposed in the bill and will continue our restructuring with great urgency," the company said, urging passage of the bill.

Chrysler said it looks "forward to working with Congress and this administration, and the next administration, and to completing our restructuring in an orderly fashion."

Ford, which has said it is in better health than its peers, said it wouldn't seek a short-term loan. It threw its support behind the effort to aid the other two, saying "a failure of one of our competitors could affect us all."

As in bankruptcy court, the legislation tries to establish a process under which the auto makers would negotiate with creditors. The companies would be expected to modify contracts with bondholders and unions. The threat looming under the proposed program would be an actual bankruptcy filing -- which the trustee could prompt by withdrawing the loans -- something auto makers have argued could lead to their liquidation as buyers flee.

Some congressional officials are floating the idea that Kenneth Feinberg, the lawyer who oversaw the 9/11 victims' compensation fund, should be considered for "car czar." The decision is ultimately up to the president.

One danger for auto makers is exposing the industry to congressional meddling as it attempts to build a new business model. The legislation, among other things, would bar the companies from participating in legal challenges to state laws designed to impose limits on greenhouse-gas emissions. The White House opposes that provision, congressional aides said.

The big three would have to analyze whether excess production capacity could be used to make trains and buses for public transit authorities.

Also, in a slap, the legislation would require companies to sell or cancel lease agreements for private jets. The Detroit chief executives raised the ire of lawmakers in November by arriving in Washington on their own planes.

If the car companies don't make satisfactory progress toward fixing their long-term problems by the end of March, the auto czar could submit to Congress a plan "and request legislative implementation," according to the draft bill.

The short-term loans would be financed out of an existing $25 billion program created to help the industry meet fuel-economy standards. Under the terms of the bill, the loans would mature in seven years. For the first five years the companies would pay a 5% interest rate; after that, a 9% rate would be levied, the bill says.

The bill doesn't specify what would happen to a company's existing management. GM Chief Executive Rick Wagoner has come under pressure from top lawmakers to step down. He was defended Monday vigorously by GM Vice Chairman Bob Lutz, who said in an interview that Mr. Wagoner has "total support of the board of directors" and shrugged off criticism from lawmakers.

"To blame the American automobile executives for this frankly is ridiculous," Mr. Lutz said, suggesting an unforseen downturn in the economy and housing market are the culprits. "How were we supposed to forecast this when the government doesn't forecast it and the financial institutions couldn't?"

In a sign of how messy the reorganization could become, the United Auto Workers union is seeking to attach strings to any concessions it makes for the Big Three. Marc McQuillen, president of UAW Local 2404 in Charlotte, N.C., said the union is looking for an equity stake in GM and likely a seat on the company's board. UAW officials in Detroit couldn't be reached for comment.

[robotfire]

I can see bailing out Ford. They are trying to fix their business model to match Honda and Toyota (better cars, more efficient).

What are GM and Chrysler doing? As far as I can tell, they're still just overpricing their terrible cars. Instead of making better cars, they pump money into advertising. After my experiences with these two companies (Dodge Grand Caravan, every Chevy I've ever owned/been around including the Chevy Celebrity), I can tell you that no amount of advertising will make me want to buy one of their automobiles. The problem is image. That image won't change until the quality changes. The quality obviously hasn't changed for decades, so they need to fail. It's as simple as that.

[Koolblue13]

When the government owns the big three (not us, we have given up our tax dollars), I would like to be given a Jeep. I think we should all be given Jeeps. The roads won't have to be good. Good fuel economy. They don't do enough damage to make it to unsafe to each other.

I want my Jeep.

[No_Pressure]

There are 3 basic types of car buyers, I know it's not quite this simple but bear with me:

1. People who are buying for looks/power

2. People who are buying for efficiency/economy/use

3. People who are buying for luxury

------------------

Flashback to 1972, American auto makers get the awesome idea in their heads that no, American consumers don't care about good style and power. I know there were new emissions regulations that cut back on some aspects of the car's power up to that point, but the Corvette stayed powerful as hell forever during that time period so it's no excuse to me.

Anyways, around 1970-1975 a strange thing happened in America- their cars that people had bought for power and looks i.e. the Ford Mustang, Dodge Charger, etc. went from this:

To this:

...

So in other words, one massive niche that the American car makers had- beautiful and powerful cars, was killed off in favor of ugly and weak cars.

American cars were never extremely luxurious but cars like the Lincoln Continental and Cadillac didn't undergo major design changes until the 80's and they didn't really make massive gains or losses in this area.

In the third market, economy and use, Americans have had trucks and always had trucks. It's difficult to screw up making a truck because most people that need one to work with could really care less if it looks nice and just care that it works, which they did for the most part. The more domestic consumer however got economy cars with terrible gas mileage, bad style, bad mechanical issues, and not always low prices between 1970 and now. I mean really, the only thing that American car manufacturers did to compete with foreign car makers between 1970 and 1990 was laugh at them, and by the time people like Honda, Toyota, Hyundai, etc. hit their stride, American auto makers sat around with their thumbs up their asses.

Lets recap:

1. American luxury cars were always a matter of personal style and nothing unique other than the size, not a massive selling point.

2. American econo/utility cars were neglected and joked about for at least 20 years while they slowly let Asian and European companies gain a foothold on the market of lower end cars with cheaper, more efficient, and more reliable cars that finally started being perfected between the mid 80's and 90's.

3. The ONLY THING American auto makers had going for them was they designed some beautiful ass muscle cars that people loved. Lots of people like driving around in a cool car, a fast car, and the combination of the two is a nice thing. What did they do with their stranglehold on this maket? They voluntarily decided "hey lets not make these cars look good or have power anymore. Lets make them ugly and weak and hope people continue to buy them". By the time these assclowns figured out that they've been making a mistake for the last 30+ years A.K.A. the return to form with the Mustang, Charger, Challenger, and Camaro, it was way too late and more people wanted cars based on reliability and fuel economy than looks and power.

These idiots have nobody to blame but themselves. The free market has spoken: make terrible cars for about 38 years and we'll put your asses out of business. Let them die. They deserve it. Sure a lot of people will be laid off and a massive industry in America will come to an end, but thats life in a free economy. Turn out a ****ty product for a long time and the people of America will tell you to go **** yourself.

Rant over.

[TrumanB]

Yet we're supposedly not a socialist country. :doh:

The beginning of the end people.

[Busch1724]

Yet we're supposedly not a socialist country. :doh:

The beginning of the end people.

Bingo!

[Kunia5]

Worked out pretty well with the Chrysler bailout in 1980. The government actually made money.

The idea that government and industry working together is always inefficient is simply not true. People read Ayn Rand or Milton Friedman and become absolutists for life.

[TrumanB]

Worked out pretty well with the Chrysler bailout in 1980. The government actually made money.

The idea that government and industry working together is always inefficient is simply not true. People read Ayn Rand or Milton Friedman and become absolutists for life.

You can't seriously be comparing that to what's happening now. :doh:

This is a bailout of ALL THREE of the largest U.S. automakers, which is on the heels of the bailout of one of the largest financial companies in the world (Citigroup), which came on the heels of the bailout of the largest insurance company in the world (AIG), etc. etc.

[Burgold]

Boy, are you behind the times...

http://www.extremeskins.com/showthread.php?t=260297&highlight=United+States+Socialist+Country

[TrumanB]

Boy, are you behind the times...

http://www.extremeskins.com/showthread.php?t=260297&highlight=United+States+Socialist+Country

Actually, I'm not. My comments are dispersed throughout that thread.

[Burgold]

Ah, then my memory is faulty and I'm senile... which is not entirely impossible

We have been a partly "Socialistic" country for well over a hundred years in any case.

I do think the kind of government takeovers we've been seeing and speculating about is something fairly new (and a bit scary). The problems are that we've allowed too much consolidation and have allowed a non competitive market place where the "players" are too big to "let die" Those of us who have been grouchy about this for years and decades are loath to pin it on the now.

The bigger problem is while curing the condition we also have to treat the symptoms, because the symptoms can kill us as much as the disease.

[Tut77]

The-Rock,

I agree with you. I'd also add that car buyers who are interested in looks and power often don't look at American cars anymore, either. Too many Japanese and German options in that segment now.

As to nationalizing the car industry---I am not quite decided on this, but I don't think I like it. On the one hand, I want to get some return on the investment--better than whatever sweetheart interest rate the automakers would get, but I don't like the idea of the government bureaucracy being involved in decision making with these companies that have already demonstrated enough red tape and bureaucracy of their own.

[No_Pressure]

The-Rock,

I agree with you. I'd also add that car buyers who are interested in looks and power often don't look at American cars anymore, either. Too many Japanese and German options in that segment now.

As to nationalizing the car industry---I am not quite decided on this, but I don't think I like it. On the one hand, I want to get some return on the investment--better than whatever sweetheart interest rate the automakers would get, but I don't like the idea of the government bureaucracy being involved in decision making with these companies that have already demonstrated enough red tape and bureaucracy of their own.

Absolutely, many Asian car makers took a while to realize that power and style were big selling points, so once they had a grip on what was really important (the overwhelmingly large number of people who want a cheap, reliable, efficient car) the luxury side of these companies like Acura, Lexus, and Infinity followed up by making both luxurious and sporty options. The inifinity G35 from about 05-06 which is now the G37 I believe is an example. It looks good, has around 300 horsepower, and Americans buy it. The European makers like Mercedes and BMW have always gone at it from that angle, leaving Volkswagon, Saab, and Volvo to pick up the economy aspect.

Eventually the government will just get it over with in this country and sieze entire industries and the means of production to gear it towards what they think is best for their people, just like Hitler did in Nazi Germany.

[TrumanB]

Eventually the government will just get it over with in this country and sieze entire industries and the means of production to gear it towards what they think is best for their people, just like Hitler did in Nazi Germany.

Can we have our own "People's car" (Volkswagen)?

[deejaydana]

If the US gov't bails them out shouldn't each and every tax payer get some financial stake in them via a stock holding? That won't EVER happen but this move is just delaying the inevitable demise of the Big 3. What a sad day for America, all these car companies have officially failed.

[No_Pressure]

Can we have our own "People's car" (Volkswagen)?

Yeah you can pick it up at the same place you buy your state issued underpants after waiting in a bread line.

[Koolblue13]

Come on people, the Jeep is so much cooler than a beetle.

[wilsonian]

Worked out pretty well with the Chrysler bailout in 1980. The government actually made money.

The idea that government and industry working together is always inefficient is simply not true. People read Ayn Rand or Milton Friedman and become absolutists for life.

How can you say the Chrysler bailout worked well? They're back once again asking for even more money than they did the first time. If Chrysler was allowed to fail, it could have become a more efficiently run company, but unfortunately, we will never know. The government took all fear out of the equation by bailing Chrysler out; thus, there was no incentive for Chrysler, or the rest of the automobile industry for that matter, to shape up and run a better company. Nevermind the fact that all of that government intervention was unconstitutional.

Prepare for more bailouts and more chaos. The precedent has been set.

[herrmag]

Yet we're supposedly not a socialist country. :doh:

The beginning of the end people.

5 years ago I'd have called you a paranoid cook.

And to think, it all happened with a Republican president. :doh: I'm sure it'll get better once the Dem's own the Whitehouse and Congress.

[TrumanB]

5 years ago I'd have called you a paranoid cook.

And to think, it all happened with a Republican president. :doh: I'm sure it'll get better once the Dem's own the Whitehouse and Congress.

And a Republican AND Democrat Congress. It takes two to tango. And a lot of the mess we're in goes back to the Clinton administration too.

[SnyderShrugged]

How can you say the Chrysler bailout worked well? They're back once again asking for even more money than they did the first time. If Chrysler was allowed to fail, it could have become a more efficiently run company, but unfortunately, we will never know. The government took all fear out of the equation by bailing Chrysler out; thus, there was no incentive for Chrysler, or the rest of the automobile industry for that matter, to shape up and run a better company. Nevermind the fact that all of that government intervention was unconstitutional.

Prepare for more bailouts and more chaos. The precedent has been set.

took the words right outa my mouth. How anyone can claim that the Chrystler bailout "worked" is well beyond me considerring they are in the handout line yet again. If anything, the Chrustler lesson should have taught us all that bailouts dont work in the long term. They are a bandaid paid for ny us, the taxpayer.

[No_Pressure]

And a Republican AND Democrat Congress. It takes two to tango. And a lot of the mess we're in goes back to the Clinton administration too.

Actually it all has to do with ideas about how our country and the federal government should play a role in people's lives that has been snowballing or perhaps falling down the slippery slope for the past 90 or so years more or less.

The mess with our government isn't a specific group of people in a party or something, it's an ideology and mindset that has entered the minds of generations of Americans in either party and is now manifesting itself in bolder and bolder forms.

Kids in school today don't really learn the constitution or how our government functions (or I should say, is supposed to function). I mean they learn it but they gloss over it as quickly as they gloss over WW2 history and skip straight to the holocaust and dropping the atomic bomb. Half the kids in my history classes didn't even know that there was fighting in North Africa, or that bi-planes were WW1 not WW2. Imagine what they know about the constitution. Then half of the teachers who do teach it teach it with the "this is what it says but disregard that because it really isn't important or doesn't really mean that" attitude or the "this was written so long ago it doesn't mean anything anymore" attitude. People either don't know about it or they don't hold it in high regard, and that goes for republicans and democrats. They're basically the same exact party today with the only battle lines being stupid things like abortion, gay marriage, and whether or not to say "god" in the pledge of allegiance.

Ugh.

[Koolblue13]

The mess with our government isn't a specific group of people in a party or something, it's an ideology and mindset that has entered the minds of generations of Americans in either party and is now manifesting itself in bolder and bolder forms.

Ugh.

You get your damn hands off my cheese and stay out of my line.:mad: