Jobs Report - Ouch
- Thread starter Bonestorm
- Start date
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The Almighty
Yes you twit.... IF they didn't get financing chapter 11 would not work. Thank you for that brilliant analysis Captain Obvious.
Not only were they buying it, they were REQUIRED TO PROVE THAT THEY WERE. (the caps there are the part that everybody seems to ignore so they can pretend that 'deregulation' is the only culprit.)
A government requirement is the very definition of regulation. It was like people were actually planning and working towards the failure of the Lending institutions.
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The Almighty
Personally, I wouldn't buy from Ford, GM or Chrysler anyway. Toyota and Honda make better vehicles.
That said, yes, I would buy a car from a company in bankruptcy, if the car had good data from consumer reporting entities
A car is an investment, with long-term warranties & service needs. Bankruptcy would kill sales; it would just be the beginning of the end.
blackascoal
The Force is With Me
How would you know the company would even be around in 3 years to service your car?
Most people would not buy a car from a company that may go under.
The model for what need be done can be found in 1979 with government assistance to Chrysler .. which repaid the 1.5 billion dollar loan guarantees by 1983 .. along with $350,000.00 in interest.
How do you know it when they are begging for "bailout" money now?
It's silly to suggest that we can be assured they'll never fail because they stink so bad they can't make it without bailout cash, but we can all rest assured they didn't go into bankruptcy.
Shoot, many of the people here are saying, "Even if they fail in a couple years, at least it will be then..."
Nobody suspects these companies to do anything other than fail spectacularly as their track record of the past three decades show that failure is the only thing they are good at.
Why did they have to be taken over by the government? Because the government allowed them (along with Bear Stearns, Lehman Brothers, Morgan Stanley, Goldman Sachs and Merrill Lynch) to carry ridiculous debt to net capital ratios coupled with what you post above (and what I actually pointed out to you from the Economist piece relating to the GSE's purchasing AAA rated mortgage backed securities, not buying up subprime loans), the crash of the housing bubble and increasing foreclosures devaluing their assets left them out hugely in debt without sufficient capital reserves such that they needed an influx of cash (a bailout) to remain afloat.
Also, I'll take a citation for the claim that the GSEs owned 50% of the mortgage-backed securities until 2004 (Also, note that the really shitty loans and the really shitty mortgage-backed securities exploded in 2003, right when the GSEs were backing down on their purchases of same).
Uh, re-read your post. You appeared to claim that the autos could do the same thing as the airlines. They can't. I was just attempting to have you understand why you appeared to be wrong.
Apparently you agree with me but that doesn't stop you from calling me names (as usual for you). And while it may be obvious to you that DIP financing from the government (aka a "bailout") is required for a Chapter 11 reorganization, it may not be obvious to everyone (including toppy).
Relax.
Are you comfortable with no bailout, given the current state of the economy & the jobs report this morning?
But don't the companies need another Lee Iacoca instead of the twits they have now? I am thinking of the right time period and right guy aren't I?
My answer.......no.
blackascoal
The Force is With Me
That's not neccesarily true and I find it amazing how so may Americans have just given up on American "can do-ism."
Don't look now but foreign automakers are equally in danger .. thus the argument that it's solely because of "bad products" rings false.
Placing all the blame on Detroit doesn't approach the truth.
The Issue: Auto Industry Crisis
A congressional tug-of-war has been set into motion as automakers plead their case to a Congress seared by recent bailouts. Automakers have emerged from their deathbeds to request an additional $25 billion bailout with their last dying breaths.
In November 2008, the Big Three U.S. auto manufacturers - General Motors, Ford and Chrysler - warned that unless they receive their sought-after funding in the short to medium term, they are in imminent danger of declaring bankruptcy.
Spurred by the global financial crisis and the subsquent credit crunch, the automotive industry has been pummeled this year, but the underpinnings of the Big Three’s looming collapse have been brewing for over three decades.
In 1980 Japan became the world's leading auto maker, the first year since 1905 that the United States had been outproduced by any other nation. Numerous entities have aided in Detroit’s downfall including Detroit exectutives, state and foreign governments and the union.
The auto industry began crumbling when American politicians ordered the industry to build smaller cars to align with new energy policies while Americans were given no incentives to buy the mandated fuel-efficient vehicles. Americans had developed a love affair with SUV’s and showed no signs of abandoning their beloved gas-guzzlers, but the industry continued to pump out fuel-effiecient vehicles no one wanted. Thus GM poured million of dollars into lobbying efforts against stricter fuel economy standards so they could continue manufacturing SUV and truck behemoths, instead of taking advantage in their technological lead in electric cars.
Soon after gas prices skyrocketed Americans pined for a more viable mode of transportation, but the automakers, succumbing to demand, were still producing their main cash cow: SUV’s and trucks. Foreign manufacturers had the upper-hand in producing fuel efficient vehicles as they had been perfecting them while the U.S. demanded SUV’s.
Foreign brands have been welcomed into the U.S. with open arms for decades, ever since the U.S. Justice Department ruled that Detroit could not tell its dealers to keep foreign brands out of their franchised showrooms. Meaning a Ford dealer could sell a Toyota in the same showroom. Foreign brands were allowed to be imported into the U.S. and placed directly next to American manufactured automobiles. To America’s detriment, we gave foreign automakers a break by allowing them to bypass the start-up costs needed to establish dealerships. They could simply ship their cars directly to our showrooms.
Not surprisingly, foreign governments did not return the favor. While we encouraged our foreign counterparts to outsell American manufacturers, they imposed laws and regualtions to keep us out. Koreans used to order an income tax investigation of anyone who bought a foreign car and the Japanese ensured no foreign auto companies could be built in their country.
On November 17, House Speaker Nancy Pelosi met with Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke to persuade them to allow money from the $700 billion bailout package to be spent on Detroit. The Senate plan included $25 billion in 10-year low-interest loans, charging 5 percent interest for the first five years and 9 percent for the remainder of the loan term. The plan also included fast processing, fast turnaround, and no golden parachutes of any sort.
Henry Paulson supports help for Detroit, just not out of the Fed’s own financial coffers. He opposes the proposal to extend the Troubled Asset Relief Program to inject capital directly into the Big Three. Paulson stated that the Bush Administration believes any assistance to the automakers should come from the Department of Energy, and that auto manufacturers should focus on producing more fuel efficient vehicles. The Big Three are as key to our manufacturing base as Fannie Mae and Freddie Mac are to the housing market, and should receive consideration as such.
If GM is refused all assistance, the company may be forced to file Chapter 7 bankruptcy, or total liquidation, as it would lack the means to seek Chapter 11 bankruptcy. Since the credit freeze has locked available credit, the auto manufacturer would have no viable means of keeping the bankruptcy court at bay, which is required of Chapter 11 claimants. GM would then be forced to sell itself off. A Chinese company that partners with GM, Shanghai Automotive Industry, has already expressed interest in acquiring this U.S. staple. Losing GM to China would be the nail in the coffin to America's manufacturing base.
America has subsidized its own demise, but the blame is on American policies rather than American automakers. Allowing the auto industry to fail would be allowing America’s manufacturing prowess to dissolve. America pioneered the auto industry and if we can no longer manufacture cars, we’ll have nothing left. A country cannot sustain itself if it does not produce anything.
http://www.economyincrisis.org/articles/issues?i=Auto+Industry+Crisis
Case in point of what I bolded .. this past black friday one of the biggest sellers was flat screen TV's .. produced in China. How much did that help the US economy?
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The Almighty
they didn't back down, they were getting outbid by the brokerage houses. The fact that their situation wasn't as bad as it could have been doesn't change the fact that they had a lot of subprime debt on their books.
"I'll take a citation for the claim that the GSEs owned 50% of the mortgage-backed securities until 2004 "
"Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication. One reason is that Fannie and Freddie were subject to tougher standards than many of the unregulated players in the private sector who weakened lending standards, most of whom have gone bankrupt or are now in deep trouble."
I think you'll find the source is rather familiar....
http://www.mcclatchydc.com/251/story/53802.html
Actually, that says that they held the subprime loans themselves, not the mortgage-backed securities. And again, the subprime loans that they held were A-, not the crazy shit because they "were subject to tougher standards than many of the unregulated players in the private sector who weakened lending standards."
The problem with the GSEs is that they bought the bundled crazy shit that the unregulated players were selling in the form of AAA rated horseshit.
KingCondanomation
New member
But we are NOT bailing out the auto industry, we are being forced to bail out 3 companies in the auto industry. The rest of the auto industry isn't doing all that bad.
blackascoal
The Force is With Me
You are indeed .. and Iacocca had plans in his hands when he went to congress for help .. plans that far exceed what was asked of the banking industry before congress gave them a trillion dollars. Truth is there is no Iacocca among the bankers either.
blackascoal
The Force is With Me
That's not true.
"However, Japanese automakers suffered on the release of dismal November U.S. sales data. Honda Motor (nyse: HMC - news - people ) plunged 6.3% and Toyota Motor (nyse: TM - news - people ) dropped 1.9%, after both carmakers said November U.S. sales plunged over 30.0% as incentives failed to attract consumers. Toyota's 34.0% fall was the automaker's biggest drop in over two decades."
http://www.forbes.com/markets/2008/...dday-markets-equity-cx_twdd_1203markets1.html
"The U.K.'s Guardian reports, "Profits at Toyota are on course for their biggest annual fall in 13 years after a drop of almost 70% in the latest quarter, the Japanese carmaker said today." The announcement "threatens to bring an end to eight straight years of growth for the Nagoya-based company."
The San Antonio Express-News reports, "Toyota on Thursday said it expects earnings for this fiscal year will be less than a third of last year's profit." The company has already "slashed production and cut its temporary work force in Japan - a bellwether for how a company is doing there," and "stopped production of Tundra pickups at its San Antonio assembly plant."
More cuts are expected. Edmunds Inside Line reports, "Toyota established an emergency team, headed by company President Katsuaki Watanabe, to look at ways to cut costs and improve profits. Among moves to be considered: re-evaluating vehicles in the pipeline for overall reduction or in terms of timing and scale; cutting capital spending; adjusting factory production to meet lower customer demand; and revising pricing by models and regions globally."
http://usnews.rankingsandreviews.co...rs-Suffer-Record-Losses-More-Cuts-Inevitable/
I am uncomfortable with leaving the same people in management, even if they are only getting paid $1 per year they are overpaid.
I am unwilling to buy failure.
I am comfortable with fixing it, not simply buying more trouble.
I do note that they are still reporting profits, just not growth. They are also not hands-out to the US government begging for them to buy their failure. They had 8 straight years of record growth followed by one year where they are showing less profit. (Not no profit, not negative returns like the US firms, just less profit.) They are not "in trouble", nor are they asking me to pay into their failure.
American can-doism notwithstanding. We can fix them, but not by following the same "leaders" of the company into failure.