It's official: General Motors has started its death spasms and, of course, wants you------I'm talking about you, schmuck, the American taxpayer------to bail them out. President-elect Barack Obama is on board with the idea, and I suppose that means GM will soon be getting billions of federal money.
Is it possible to impeach a president prior to his inauguration?
Why? Because if GM is in such dire financial straits, then where did they find the $300 million to build a new auto factory in Russia? (And note the date of the grand opening----today, November 7, the day they announced to the world they're going broke!)
And in September, GM opened another $300 million dollar plant, this time in India. Of course, I don't want to forget the $250 million facility they are building in China.
In other words, will any GM bailout go to help save the American auto industry or will it instead go to help the auto industries of Russia, India, and China? (Hint: this is a how damn stupid are you anyway?? type of question.)
The root of General Motors's problems are twofold: 1) they are bloated, producing too many brands that compete with each other more than they compete with other automakers, and 2) GM makes poorly built, crappy cars that offer terrible value for the money.
GM's current problems are exacerbated because of GMAC, the auto financing arm once wholly owned by GM. For years, GMAC provided financing for customers purchasing GM cars through GM dealers and, even more importantly, was how GM dealers financed their inventory. Not only was GMAC the lubricant that kept the GM sales machine running, it was also a cash machine for GM, generating $2.4 billion in pre-tax profit for GM in 2005.
But then GM's executives got a bright idea: to make up for declines in their auto sales and auto profits, they would sell 51% of GMAC to Cerberus Capital in 2006. GM got $14 billion for that 51%, and that allowed GM to show a nice profit in 2006.
But. . . . . . . .
. . . . . . . GM lost control of their ability to finance both their customers and dealers. And that is beginning to squeeze hard now. Have you seen any of the recent GM commercials with their "financing that fits" promotion? That's because GMAC is no longer financing any individual customers but the most credit worthy (credit scores of 700+), and those people can usually get a better credit rate elsewhere. Even more ominous is what GMAC is doing to GM dealers. GMAC is now only financing inventory for three months instead of the previous six and no longer finances any used car inventory. In short, GMAC, at the behest of Cerberus, is slowly strangling GM, much like a python coiled around GM's neck.
And why would they do that? Well, guess which company bought Chrysler last year and took it private?
Yep, Cerberus. The financing arm GM depended on for decades to provide credit to its customers and dealers is now controlled by a competitor. That was the reason for the recent flurry of rumors about a GM/Chrysler merger or acquisition-----Cerberus was trying to force GM to buy Chrysler at a price that would make a nice profit to Cerberus for one year's "work." And that plan would likely have gone through if not for GM steep nosedive over the past quarter.
Of course, the same fools at GM who engineered the sale of GMAC, such as Rick Wagoner and Bob Lutz, are still there and still making nice paychecks even as their dumbass decisions have put the company's survival into question.
A federal bailout of General Motors will not save GM or the American auto industry. A bailout will not alter the fundamentals of the industry (like overcapacity) or make GM's management any brighter. All it will do is keep those new plants in Russia, India, and China running.
It's time for some tough love.
The proper solution for GM's problems, as well as those for Chrysler, Ford, Goldman Sachs, or any of the other leeches wanting federal money, is called a Chapter 11 bankruptcy.
Chapter 11 isn't nice for anyone involved. Existing management is fired, the board of directors is replaced, labor contracts are voided, creditors are paid just a fraction of what they are owed, assets are sold, shareholders have their investment reduced to pennies per share, and control of the company is in the hands of court-appointed trustees and managers.
But it does give the company a clean slate, fresh management, a new structure, and a greatly improved chance for survival. It is no guarantee of survival, but in GM's case it represents the only realistic chance for survival.
If I were the court-appointed trustee to oversee GM in Chapter 11, I would immediately discontinue the Buick, Pontiac, Saturn, and Hummer brands. I'd sell them to a foreign manufacturer if I could; if I couldn't, I'd stop production of them to focus on just the Cadillac, Chevrolet, and GMC brands. I'd sell the start-up operations in places like Russia, India, and China to instead focus on the still-profitable European operations. I'd also greatly reduce the number of GM dealers.
Advocates of a federal bailout for GM would probably wail, "But what about those who would lose their jobs in Chapter 11?" Guess what? Those jobs are going to disappear regardless. It's a much better idea to take the bailout money you were planning to give to GM and instead spend it on extended unemployment benefits and other financial assistance, transitional medical care, and training for new jobs for affected workers. It would also be a lot cheaper than giving the money to Wagoner and Lutz so they can just piss it away, and they would be coming back in 2011 for another bailout anyway.
You didn't know GM was investing more in new facilities in Russia, India, and China than they are in the United States, did you? That's because most of the mainstream press just regurgitates corporate press releases instead of doing any research. It took me about ten minutes on Google to find the news about GM's overseas investments, and I bet I could've found more with a little extra effort.
President Bush's bailout of Wall Street investment firms cemented his claim to being the dumbest bastard ever to occupy the Oval Office. But if Obama gives in to demands by GM and the rest of the auto industry for a comparable bailout, then he will have taken the first step toward giving Bush a serious run for that title. Enough already! This country simply can't afford to write a check to every company, or individual, that makes dumb financial decisions. One day there has to be a reckoning. And this day is as good as any to start that process.
Okay, I promise I won't turn this into a political opinion or rant blog. But today's announcement by GM, and the sympathetic press coverage that provided no analysis or insight into how they got into their predicament, sent me over the edge. I'm now going to pour a couple of glasses of Pandasol sangria and try to calm down.
And it really was a beautiful day here; highs in the upper 70s, low humidity, and not a cloud in the sky.
Update! It just gets worse. Since finishing the post above, it turns out GM is now making more plans to expand its presence in China.
Is it possible to impeach a president prior to his inauguration?
Why? Because if GM is in such dire financial straits, then where did they find the $300 million to build a new auto factory in Russia? (And note the date of the grand opening----today, November 7, the day they announced to the world they're going broke!)
And in September, GM opened another $300 million dollar plant, this time in India. Of course, I don't want to forget the $250 million facility they are building in China.
In other words, will any GM bailout go to help save the American auto industry or will it instead go to help the auto industries of Russia, India, and China? (Hint: this is a how damn stupid are you anyway?? type of question.)
The root of General Motors's problems are twofold: 1) they are bloated, producing too many brands that compete with each other more than they compete with other automakers, and 2) GM makes poorly built, crappy cars that offer terrible value for the money.
GM's current problems are exacerbated because of GMAC, the auto financing arm once wholly owned by GM. For years, GMAC provided financing for customers purchasing GM cars through GM dealers and, even more importantly, was how GM dealers financed their inventory. Not only was GMAC the lubricant that kept the GM sales machine running, it was also a cash machine for GM, generating $2.4 billion in pre-tax profit for GM in 2005.
But then GM's executives got a bright idea: to make up for declines in their auto sales and auto profits, they would sell 51% of GMAC to Cerberus Capital in 2006. GM got $14 billion for that 51%, and that allowed GM to show a nice profit in 2006.
But. . . . . . . .
. . . . . . . GM lost control of their ability to finance both their customers and dealers. And that is beginning to squeeze hard now. Have you seen any of the recent GM commercials with their "financing that fits" promotion? That's because GMAC is no longer financing any individual customers but the most credit worthy (credit scores of 700+), and those people can usually get a better credit rate elsewhere. Even more ominous is what GMAC is doing to GM dealers. GMAC is now only financing inventory for three months instead of the previous six and no longer finances any used car inventory. In short, GMAC, at the behest of Cerberus, is slowly strangling GM, much like a python coiled around GM's neck.
And why would they do that? Well, guess which company bought Chrysler last year and took it private?
Yep, Cerberus. The financing arm GM depended on for decades to provide credit to its customers and dealers is now controlled by a competitor. That was the reason for the recent flurry of rumors about a GM/Chrysler merger or acquisition-----Cerberus was trying to force GM to buy Chrysler at a price that would make a nice profit to Cerberus for one year's "work." And that plan would likely have gone through if not for GM steep nosedive over the past quarter.
Of course, the same fools at GM who engineered the sale of GMAC, such as Rick Wagoner and Bob Lutz, are still there and still making nice paychecks even as their dumbass decisions have put the company's survival into question.
A federal bailout of General Motors will not save GM or the American auto industry. A bailout will not alter the fundamentals of the industry (like overcapacity) or make GM's management any brighter. All it will do is keep those new plants in Russia, India, and China running.
It's time for some tough love.
The proper solution for GM's problems, as well as those for Chrysler, Ford, Goldman Sachs, or any of the other leeches wanting federal money, is called a Chapter 11 bankruptcy.
Chapter 11 isn't nice for anyone involved. Existing management is fired, the board of directors is replaced, labor contracts are voided, creditors are paid just a fraction of what they are owed, assets are sold, shareholders have their investment reduced to pennies per share, and control of the company is in the hands of court-appointed trustees and managers.
But it does give the company a clean slate, fresh management, a new structure, and a greatly improved chance for survival. It is no guarantee of survival, but in GM's case it represents the only realistic chance for survival.
If I were the court-appointed trustee to oversee GM in Chapter 11, I would immediately discontinue the Buick, Pontiac, Saturn, and Hummer brands. I'd sell them to a foreign manufacturer if I could; if I couldn't, I'd stop production of them to focus on just the Cadillac, Chevrolet, and GMC brands. I'd sell the start-up operations in places like Russia, India, and China to instead focus on the still-profitable European operations. I'd also greatly reduce the number of GM dealers.
Advocates of a federal bailout for GM would probably wail, "But what about those who would lose their jobs in Chapter 11?" Guess what? Those jobs are going to disappear regardless. It's a much better idea to take the bailout money you were planning to give to GM and instead spend it on extended unemployment benefits and other financial assistance, transitional medical care, and training for new jobs for affected workers. It would also be a lot cheaper than giving the money to Wagoner and Lutz so they can just piss it away, and they would be coming back in 2011 for another bailout anyway.
You didn't know GM was investing more in new facilities in Russia, India, and China than they are in the United States, did you? That's because most of the mainstream press just regurgitates corporate press releases instead of doing any research. It took me about ten minutes on Google to find the news about GM's overseas investments, and I bet I could've found more with a little extra effort.
President Bush's bailout of Wall Street investment firms cemented his claim to being the dumbest bastard ever to occupy the Oval Office. But if Obama gives in to demands by GM and the rest of the auto industry for a comparable bailout, then he will have taken the first step toward giving Bush a serious run for that title. Enough already! This country simply can't afford to write a check to every company, or individual, that makes dumb financial decisions. One day there has to be a reckoning. And this day is as good as any to start that process.
Okay, I promise I won't turn this into a political opinion or rant blog. But today's announcement by GM, and the sympathetic press coverage that provided no analysis or insight into how they got into their predicament, sent me over the edge. I'm now going to pour a couple of glasses of Pandasol sangria and try to calm down.
And it really was a beautiful day here; highs in the upper 70s, low humidity, and not a cloud in the sky.
Update! It just gets worse. Since finishing the post above, it turns out GM is now making more plans to expand its presence in China.
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