Should GM Survive? A Wall Street Analyst's View

Editor's Note: For arguments in favor of a GM bailout, see Jane Hamsher's Tuesday post, Zapping the Volt and Slouching Towards Bankruptcy, by Marissa Colón-Margolies.

I watched with interest the first round of questioning by Senate Democrats of the Big 3 auto execs yesterday.  They're still dancing around each other but the battle lines have been drawn:  Right-to-work red state senators want to destroy Detroit so Toyota and Honda can build beatific non-union plants in their states, while the Big 3 execs assert that all they need is cash to weather the current credit crunch and it will all be beer and skittles again.

We know the first group is full of shit, but how about the second?

I had a very enlightening converation with former Wall Street GM analyst Ron Glantz, who is also a founding partner of Pantera Capital Management, a global macro hedge fund.   Ron made the Institutional Investor All America Research team 17 times, and was the number-one auto analyst for seven consecutive years. 

Although we have a philosophical difference about the situation at hand, his analysis is sobering and deserves serious consideration.

Ron's message was unambiguous -- he believes that Congress should let GM die. 

In his 60 Minutes appearance, Obama said that he believed that assistance to the auto industry should be "conditioned on labor, management, suppliers, lenders, all the stakeholders coming together with a plan (for) what does a sustainable U.S. auto industry look like."

Ron didn't think such a thing was feasible for a variety of reasons I'll get to later, but I asked him to humor me.  Assuming that the government somehow took on responsibility for the healthcare of GM workers, what would such a plan look like?

Ron said that first and foremost, unions would have to accelerate their 2010 concessions and vote to surrender their pensions, which are also a part of the legacy costs -- "difficult," he said, "because retirees vote in elections and there are 4 or 5 retirees for every one still working."

Secondly, he said that "bondholders have to agree to trade in their bonds for equity in order to remove the interest payments on the bonds and improve the industry's balance sheet." 

When he was analyzing GM 2 years ago, the outstanding bonds had a $300 billion face value.  It's less now because they sold off part of GMAC, but because a lot of their sales were to blue collar workers who needed financing, the credit crunch means they can't sell cars.  One of the reasons for the October sales collapse was that in September, GMAC stopped auto leasing and raised credit standards. 

The overriding problem, however -- and the one he thinks is insurmountable -- is the legacy of bad product that the US auto makers have in this country.  

Right now, it's harder to sell American cars in America than it is to sell foreign brands.  So if Toyota and Chevy make the exact same car, the American car has to be sold for $4000 less (factoring in both American buyer's nervousness that the brand will go bankrupt, along with bad product legacy). Ron said that American automakers have now developed the same worker productivity that the Japanese automakers had by changing their culture, and can build just as good a car, but consumer trust isn't there and nobody will buy them at the value they will give for a foreign brand.

"The guy who buys an American car is like the only person at the party who doesn't get the joke," he said.

His experience tells him that Waggoner represents "genuinely bad management.  He likes Bob Lutz (father of the Volt) but thinks that he is "fighting with one and a half hands tied behind his back."  He also thinks highly of GM President Fritz Henderson.

He thinks the Volt is largely a PR concern at this point because it doesn't have a battery and there isn't the R&D money available for Lutz to work with (though the battery issue seems to have had some resolution).   He says the Cruze may be a very good car, but they're going to build and sell them them in Korea because it costs less to build there.  He also believes the Malibu is an excellent car.

For the near future, he thinks that GM has a much brighter possibilities overseas where there is more faith in their brand.  Just this month they put cash into a Russian auto plant because they can build Opals there, and it seems that Buicks actually sell quite briskly in China.

Possibly the most interesting thing he said was that Americans are never going to buy low-mileage cars at a price that is going to be profitable to auto manufacturers unless there is a gas tax levied.  So what he proposes is that an escalating gas tax be put in place for the future in order to give people time to prepare, such that they know gas will cost $4 a gallon at the end of this year, then $4.25, then $4.50, etc.  Otherwise, both demand and profitability are going to lie with gas hogs whenever gas prices are low.

Bottom line -- he thinks GM should probably just declare bankruptcy, break the contracts with the unions, close 75% of the plants and sell the rest to the Japanese with the promise to employ some UAW workers.  He said GM passed the tipping point years ago and is probably beyond redemption, and that he sees no need for the United States to have an ongoing auto manufacturing interest.

I have a fundamental philosophical belief that the US should not cede domestic auto manufacturing to foreign companies for a variety of reasons -- not the least of which is I think it would be demoralizing and economically destabilizing at a difficult time.  But after listening to Ron, it because clear that the most daunting task before GM is the rehabilitation of its brand.  The $1000 per car legacy costs pale beside the $4000 devaluation due to lack of consumer confidence.

If it's possible for GM to come back, the hope really does rest with the Volt.  Its $40,000 pricetag means it's not going to be a cheap mass-market car, but much like the "green marketing halo" that the Prius cast over the Toyota brand, the Volt has the potential to reinvigorate GM's image.  Reviews are glowing, and the 100+ mpg it promises put it leagues ahead of anything else from a major manufacturer on the market at the same time. 

If GM were making crap cars, not even the Volt could save them.  But as Ron notes, they are making cars that are just as good as those produced by Japanese manufacturers.   They can deliver the goods.

Day 1 of the auto hearings (liveblogged by emptywheel and he NYT) were very dramatic and compelling.  It will be interesting to watch over the next few days to see if the automakers, the unions and the lawmakers try to cobble together the kind of plan Obama has called for, a vision for a "sustainable U.S. auto industry" -- if such a thing is possible.

Comments (84)

1. Well this answers the other article on the same subject.

   I agree with Ron Glantz 100%. The government should put the money they would use to bail out these obsolete companies into the rebuilding the infrastructure.

   It would create jobs, union jobs as well and it needs to be done.

   Posted by jeffe at 11/19/2008 @ 10:29am

2. Politically, I don't see how SOME kind of auto bail-out doesn't happen. Dems and Obama can't let Detroit AND Michigan AND the vendors spread across the country go belly-up, even for a few months under some bankruptcy re-organization.

   Plus I don't see the Repubs filibustering any move like that (or if Franken and Martin wins, they wouldn't be ABLE to anyway).

   Posted by Mask at 11/19/2008 @ 10:36am

3. We're headed for Paper Tiger status & the paper will be in plutocratic hands. The general public? Left holding a bag of tiger poop.

   Keep bolstering non-productive sectors & trashing the productive ones. Great friggin policy!

   Posted by Sorelish at 11/19/2008 @ 10:59am

4. Actually, Jane, I'm not sure the right to work "Red Staters" (I thought we wern't thinking like that anymore) are any more full of shit than you are.

   Rather depends on ones point of view, eh?

   Chip

   Posted by CHIP THORNTON at 11/19/2008 @ 11:08am

5. But to kill off GM means to kill off one of strongest unions in the U.S. At this point in time when we need a strong union prescence-killing off the big three would be wicked in my opinion

   Posted by dlagorio at 11/19/2008 @ 11:17am

6. To clarify my post above, rebub suckasses, keep in mind that your "right to work" wages are predicated on the basis of UNION WAGES. The minute unions are busted, wages ALWAYS fall. Check the stats.

   Posted by Sorelish at 11/19/2008 @ 11:24am

7. Interesting to note that Chrysler bailout Lee Iaocca style was a loan guarantee on Chrysler's paper which meant that the government assumed the risk but didn't fork over the money. This time, nobody wants the paper of the Big Three, despite the potential for a loan guarantee. Doesn't say much about investors expectations for the Big Three going forward, and perhaps more disturbing, about the creditworthiness of our Federal Government.

   Posted by OneVote at 11/19/2008 @ 11:28am

8. Nobody is talking about HEALTHCARE. My grandparents are retired autoworkers in Detroit. YOU WOULD NOT BELIEVE THE LEVEL OF BENEFITS THEY HAVE!

   Its healthcare that is killing DETROIT. WE MUST STOP ADDRESSING ISSUES individually. AUTOS AND HEALTHCARE ARE CONNECTED AND NEED to be addressed in PARALLEL.

   WE NEED A NEW PARADIGM of how we approach issues. FAST AND SLOPPY IS NOT THE WAY!

   Giving me a TAX INCENTIVE to buy ANOTHER GAS GUZZLER is BEREFT! to quote papa BUSH: "I'm NOT GONNA DO IT"..........gas will be up to $4 a gallon next summer again and unsuspecting Americans will be stuck with incentivized GAS HOGS compliments of the US GOVERNMENT!

   Fool me once, shame on you. FOOL ME TWICE SHAME ON ME!

   Posted by ajdjr73 at 11/19/2008 @ 11:36am

9. DOES ANYONE KNOW HOW MANY BIG 3 AUTOS are in Inventory right now SITTING ON DEALER LOTS?

   What happens to those GAS GUZZLERS that no one wants????

   I know!

   reduce gas prices temporarily to get people to buy them, give them a federal tax incentive and then next summer jack the price of gas up to $4 a gallon again!

   A free jar of vaseline with every purchase and dealer/tax incentive!

   Posted by ajdjr73 at 11/19/2008 @ 11:41am

10. Posted by ajdjr73 at 11/19/2008 @ 11:36am

    Who shot down mileage requirements for autos rolling off the assembly lines? More than once, btw

    Answer- Republicans

    Posted by Sorelish at 11/19/2008 @ 11:45am

11. Posted by ajdjr73

    Yeah, too bad about those health benefits your grandparents have. So good you might have wait longer for an inheritance.

    Posted by Sorelish at 11/19/2008 @ 11:52am

12. "So what he proposes is that an escalating gas tax be put in place for the future in order to give people time to prepare, such that they know gas will cost $4 a gallon at the end of this year, then $4.25, then $4.50, etc."

    I am sorry but screw that! Unless that tax revenue will go to buying my current vehicle from me. Cars are expensive and if gas stays higher that $4 for long no one would buy my truck. So all this would do is force me to pay more for gas and wish I could have better fuel economy. And what would $5 a gallon gas do to the economy? High gas prices this past summer are surely one of the catalysts of our current economic mess.

    Posted by Extraneous at 11/19/2008 @ 12:15pm

13. Ron Glantz, a hedge found capitalist, is going to write the eulogy for GM? Really? The people that encouraged the 700 billion dollar bail out and who has dirty hands stuck in the sovereign fund sewer? What is wrong with the American DNA? Why has labor making things become such a dirty word? When did dirty finger nails by making things become so shameful? When did the myth of "wealth creation" by shipping jobs away become the big acceptable lie? There is really only one way to create wealth, making things. The rest of that crap is Las Vegas casino fantasy. The house wins the rest of us loose. Where did the 300 billion that Paulson spent go Ron?

    Posted by lachatte at 11/19/2008 @ 12:15pm

14. It is becoming very clear that this contrived crisis of 'disaster capitalism' is focused on de-industrialization, de-laborization, and entrenching the corporatist financial Empire in the driver's seat of the US economy.

    This is starting to smell like the Reagan union busting of his disgraceful 'air controllers' outstings -- and for the same reason,: to simply bust the unions.

    Social sustainability and stability:

    Advanced social democracies, Germany and Japan, know well that any chance of maintaining a broad 'working class' high tech, high income manufacturing industrial base in their countries and continuing a middle-class life-style and fairly egalitarian distribution of income for their citizens requires a robust, advanced, sustainable, and environmentally balanced automotive manufacturing base --- which is also true for advanced machine tools, information technology systems and chip manufacturing technologies, the latest energy generation technologies and the like.

    Germany and Japan as former empires until the end of WWII have seen the light regarding their country and citizen benefits of liberal social democracy and advanced education, technologies, and a broad working-class based on development AND manufacturing of world class sustainable products ---- which has allowed their societies to consistently score admirably on GINI Coefficients of income equality (0.23 to 0.30) for their educated, satisfied, and well served citizens within their social democracies, which enjoy basically harmonious social contracts with their business sectors.

    However, HOWEVER, the super-capitalism and de-regulated crony finance capitalism unique to the United States has promulgated an entirely different modern world, no where near as satisfying, nor stable within our finance dominat

    Posted by amacd at 11/19/2008 @ 12:20pm

15. The only vehicles the Big 3 make well are trucks. Maybe they should focus on their strengths and drop the passenger car.

    Posted by Extraneous at 11/19/2008 @ 12:22pm

16. Unbelievable: " ...first and foremost, unions would have to accelerate their 2010 concessions and vote to surrender their pensions..."

    So, how are these people supposed to live? Work forever at lower wages, perhaps? One of the unfortunate legacies of the auto makers is their former support of for-profit health and insurance companies. Had big business and corporations been in favor of universal health care years ago, some of their problems might have been alleviated. But before insurance costs became unaffordable to business as well as real people, the business community stuck together. We now all suffer the consequences.

    And how is it that working people are supposed to give up their pensions and living wage salaries, but the financial entities who are the recipients of tax payer billions in bailouts want to keep their golden parachutes after running the economy into the ground?

    There's something wrong with this picture.

    Posted by LeeAnnG at 11/19/2008 @ 12:32pm

17. Posted by Extraneous at 11/19/2008 @ 12:22pm

    Please Extraneous, stop listening to the propaganda & get some facts. Why is replacing a part for an import a labor of love, but doing the same for a domestic a rage inducing ripoff?

    Posted by Sorelish at 11/19/2008 @ 12:39pm

18. Mask is correct- this is about politics. And politically Obama wouldn't have the balls to do the right thing for the future by sacrificing popularity now.

    It's an age old problem, and our politicians always screw the future for the now.

    These companies (and the financial companies that were given handouts) need to survive or die on their own.

    American car companies want to prosper? - give us something worth buying.

    The cycle will never end though - the big wigs will blame the unions, and the workers will blame the rich big wigs.

    America will become a victim of its own success. I would not be the least surprised to see in my lifetime (I'm 29) an America that is a lower tier 1st world country - if not a 2nd world country.

    I forget who wrote it, but another poster said the only way to economic success is to make things - I agree. The problem, of course, is that the rest of the world doesn't want many of the things we make -- add to that about 1/5 of our GNP is now financial service based - meaning essentially a paper tiger - and well, the U.S. is in for a hurtin' in the long run.

    Posted by urmygyro at 11/19/2008 @ 1:03pm

19. And by the way the GM retirees don't climb aboard their private jets and spend their legacy in other countries shopping for 10,000 dollar shower curtains and searching for face lifts and hair transplants. Enough with blaming blue collars for all the crap created by the "so called" Wal Street suits. I have driven some of the crap produced in Japan, Korea and Germany.

    Posted by lachatte at 11/19/2008 @ 1:11pm

20. Posted by lachatte at 11/19/2008 @ 1:11pm

    Ditto, lachatte, I've had one of those cute little toys with the sewing machine motor. Once overheated (150 mile night trip) they're shot & presto, engine replacement or equally expensive repairs.

    Posted by Sorelish at 11/19/2008 @ 1:22pm

21. This is the company the spied on Ralph Nader, has opposed every environmental and safety regulation, busted the heads of workers striking for a living wage, and the list goes on. They are still unrepentant. Bub Lutz is a Global Warming denier- one of the 'good guys' mentioned in the article. Screw em and let them die.

    Posted by NoPCZone at 11/19/2008 @ 1:52pm

22. Posted by Sorelish at 11/19/2008 @ 12:39pm

    I am not listening to propaganda, I am speaking from experience. As far are replacing parts I don't know what your babbling about. Don't put words in my mouth.

    Foreign companies do not make decent 1ton+ trucks. I have domestic trucks for work and foreign companies don't even play on the same field. As far as passenger cars I would rather have a toyota Camry then a Chevy Malibu. Sure when and if you need to replace a part on the Camry it will cost more. But in my experience with domestic cars you are more likely to have problems. Maybe they are getting better, but it is going to take some time to overcome their history of poor quality before I would think to buy one. In addition they hold their resale value much better, I sold my wifes Honda civic in 3 hours after posting it on craiglist. I seriously doubt I could do that with a taurus.

    Posted by Extraneous at 11/19/2008 @ 1:58pm

23. Posted by Extraneous at 11/19/2008 @ 1:58pm You're up to your chin in propaganda. You & your fellow travelers. btw, I don't speak to just to one insignificant dupe, I'm talking to a class.

    Posted by Sorelish at 11/19/2008 @ 2:11pm

24. Bailing out GM, Ford and Chryler is poppycock and balderdash. What does make sense is a government supported and coordinated restructuring of key elements of the U.S. economy as it impacts GME, Ford, Chrysler, and the entire manufacturing sector (what's left of it).

    What are the elements? Nothing more and nothing less than what Barak Obama promised us over the last 24 months:

    1. Universal Health Care System. Based on a study by Lancet in 2006, one can assume somewhere between $1500 and $2000 of the cost of a new GM or Ford or Chrysler vehicle goes to pay for health care of current and retired employees. A universalized national health care system can replace this need for this excess cost and help make domestic vehicles more competitive.

    2. National Infrastructure Initiative. Redevelop and revitalize our crumbling infrastructure, with a very strong emphasis on public transportation. We need more light transit vehicles, busses, and commuter trains not more Volts or Prius's. We need to socialize transportation.

    3. Workplace Education. Automakers will have to right-size their businesses. Workers need to be redeployed to other sectors of the economy. Transition will require workers to adapt or learn new skills.

    4. Development of Green Technologies. Support the development of alternative forms of energy and of transportation itself. It is absurd that demand for space on Chicago rapid transit trains results in the taking out of seats from existing stock because new cars cannot be delivered when they are needed, resulting in a shortage of useable train sets. At the same time 1000's of automobilies and trucks collect dust in warehouse lots.

    Posted by Masaniello at 11/19/2008 @ 2:25pm

25. The problem with accepting what Ron Glantz has to say is that the assumption is he wants what is best for America-WRONG!! It's all in his title-hedge fund manager-he urges ditching Detroit because in the long run he will make more money. Living in MI i can tell you that every single business in my town is dependent on the auto industry-they supply parts or labor, or cater to the UAW employees who spend money in their shops. There are alot more than 3 million jobs that will be affected by refusing a bailout. Yes there are alot of problems such as healthcare/retiree benefits that would have been fixed long ago if the big 3 had supported universal health, etc. But someone commmented earlier that Shelby is just trying to satisfy the foreign car lobby in AL, and this is also true. Why pay union when you can pay $9.85/hour with no benefits? He is a tool, of the foreign automakers and the Republicants' broken policies. I have lived in both AL and MI, and worked for both-the Toyota/Huyndai/Mercedes etc. are only out to exploit the American workers and pay us the most substandard wage they can get away with-why else do you suppose they put their plants in states like AL, where union intidmdation is rife and they can control the local governments..at least in Detroit workers are given respect, the opportunity to have a union, healthcare, and retirement benefits. Yes, big 3 wants profits, but they are NOT getting away with screwing the workers, which is what you will have and what neocons want, if they go down. This is jut another last minute attempt by the Bushites and conservatives to really, really ruin the country before they leave office, hoping Obama will not be able to put Humpty back tgether before the next election. they make me ill.

    Posted by oldintel at 11/19/2008 @ 2:25pm

26. oldintel - most people don't believe in "trickle down" economics on this board. it's gonna take more than that to sway 'em.

    Posted by urmygyro at 11/19/2008 @ 2:34pm

27. The idea of letting the most significant manufacturing sector left in the US, that would (including parts manufacturers) negatively effect an estimated 2 million jobs, go belly-up and into a Airlines style bankruptcy and labor busting restructuring for 25 billion is unsupportable -unless you're a hedge fund manager, conservative bonehead, and sadly it seems -many liberals.

    These same politicians over the past 8 years have had, on a monthly basis, no trouble throwing more than 25 billion a month down the hole for our 2 un-winnable wars. The same politicians and free-marketeers who see red when anyone talks about a national heath care plan, the kind that has taken the burden off of auto manufacturing in other developed nations.

    Their cure is not redirecting wasteful defense spending, getting rid of blood money health insurance companies, and reeling in big pharma. Their cure is throwing out labor contracts that are already concessionary, driving down wages and benefits of the people who actually spend money in this economy.

    Posted by Suttree at 11/19/2008 @ 2:38pm

28. Posted by oldintel at 11/19/2008 @ 2:25pm

    I couldn't have said it better and ITA. The Big 3 should have come out about this long time ago. I actually would support a bailout of the Big 3 due to the millions of working families that are tied to the industry instead of the current bailout the Democrats capitulated to. Alot of people want the auto industry giants to die but noone is talking about what to do with the millions of people who will be out of work or their affected children. There are many more families, businesses, and cities that will be negatively affected by the demise of the auto industry than with the demise of the banking industry. Most people I know don't have more than $150,000 in assets nor own stock.

    Posted by k330k at 11/19/2008 @ 2:41pm

29. This country appears to be slowly self-destructing. Government and big business are controlled by thieves and con-artists. Let GM die by its own hand, or pound another nail into the government's coffin. Which option is the least destructive?

    Posted by NukularProficy at 11/19/2008 @ 2:48pm

30. The last few months remind me of the months leading up to the Iraq invasion.

    "We gotta do this, we gotta do that. If we don't terrible things will happen."

    Guess what, we did something and terrible things happened.

    I've had enough bailouts for one year. (And no matter what the execs say, this is a BAILOUT.)

    Posted by bleedingheart at 11/19/2008 @ 2:49pm

31. Posted by Sorelish at 11/19/2008 @ 2:11pm

    Nice thanks, excellent response. I guess when you have nothing of substance to say you just stoop to insults.

    Posted by Extraneous at 11/19/2008 @ 3:02pm

32. A collapse of the US auto industry will likely have a far more significant effect on the average American, than the so-called "credit crisis" and resulting bank bailout. Credit is not a necessity, but jobs are a necessity. So why did the US Congress, after a bit of squabbling, so eagerly jump on a close to one trillion dollar cash handout to the big banks? Doesn't that demonstrate very clearly who the US Congress answers to? Wake up America.

    Posted by NukularProficy at 11/19/2008 @ 3:06pm

33. Posted by bleedingheart at 11/19/2008 @ 2:49pm

    Bleeding continues to expose himself as the Repub we always knew he was....and prove that his claim to "Naderite" was a lie.

    Posted by Mask at 11/19/2008 @ 3:10pm

34. How are the car companies going to pay this money back?

    Congress will bail these companies out, you can bank on it (pun intended).

    And if you run a small business, or try to start one up, and you fail -- guarantee your requests for assistance (if you dare try) to Congress will be ignored.

    Keep bailing big business out - they will incorporate the idea of bailout into their business models. When things get too bad after we've taken too many risks or put out a bad product for a long time - no worries - Congress will lend a hand!

    Posted by urmygyro at 11/19/2008 @ 4:23pm

35. The bigger they are, the harder they fall...more and more methinks it will serve us well to sink into a 1930's style depression.

    Posted by Masaniello at 11/19/2008 @ 4:55pm

36. If the current political thinking is to let the current auto industry "die", shouldnt out government let the financial instutions that mismanaged themselves into the mess that they are current;y in also "die" instead of bailing them out?

    Posted by jloughry1976 at 11/19/2008 @ 5:01pm

37. Wanted: master degree or better to work in attractive environment greeting people as they enter store. starting pay 3.50 per hour with potential for a raise after several years of service.

    equal opportunity employer. chance for promotion to stocking shelves with appropriate recommendation. Must attend early morning rah rah sessions and learn to chant Wal Mart is great, WALLY WORLD IS SUPERB.

    Posted by lachatte at 11/19/2008 @ 6:44pm

38. Many Europeon countries and even China are having similar problems with their auto industry. They are all in the process of "bailing out" their automobile manufacturing companies.

    The only reason you see many here railing against such a bailout is the destruction of trade unions associated with the auto industry. Duh..

    Posted by chaoszen at 11/19/2008 @ 8:04pm

39. Mask,

    I voted for Nader.

    I believe in evolution.

    The big three can't compete.

    The big three have been selected for extinction.

    C'est la vie

    Posted by bleedingheart at 11/19/2008 @ 9:04pm

40. Posted by bleedingheart at 11/19/2008 @ 9:04pm

    That would work if not for all the OTHER posts you make that seem to "drift Right" (when you're not paying attention)...

    like quoting DRUDGE REPORT headlines, linked to right-wing breitbart.com.

    Posted by Mask at 11/19/2008 @ 10:24pm

41. what's a drudge report?

    Posted by bleedingheart at 11/19/2008 @ 10:59pm

42. Posted by bleedingheart at 11/19/2008 @ 10:59pm |

    More inane crap.

    I am so happy I am not you.

    Posted by chaoszen at 11/19/2008 @ 11:18pm

43. chaoszen,

    If you only knew....

    Posted by bleedingheart at 11/19/2008 @ 11:28pm

44. By the way, why didn't we give all of those dotcoms some government money back in 2000?

    And, does anybody know where I can get a new wagon wheel for my buggy?

    Posted by bleedingheart at 11/19/2008 @ 11:33pm

45. I don't think GM products are as bad as being portrayed. It just seems like there are too many. Buick, Pontiac and Chevy all make comparable models. Throw in Ford and Chrysler, now your are looking at 10 mid level sedan models, plus a few cars that overlap this model. It's too much to sustain.

    A couple of things to consider about allowing American auto industry to fail...

    The initial ammount that the big 3 are asking for isn't nearly as much as we just shoveled over to the Wall St. crooks. Also, it is being termed as a loan. GM, Ford and Chrysler all have assets that could be liquidated to repay the loan.

    What would losing GM et al... do to the already reeling economy? Does anyone really want to risk making things worse?

    Finally, at least the auto companies make something, a real product, and not just debt or stock or credit. The "overpaid" autoworkers are actually building something. They are putting engines into cars, while the bankers on Wall St. were putting money into high risk, hyper-leveredged mortgage based securities.

    Posted by koroviev at 11/19/2008 @ 11:48pm

46. Aw hell, Extraneous, let's let bygones be bygones. No hard feelings. We're both dealing in anecdotal material. Substance there too.

    Posted by Sorelish at 11/20/2008 @ 12:23am

47. Ditto, lachatte, I've had one of those cute little toys with the sewing machine motor. Once overheated (150 mile night trip) they're shot & presto, engine replacement or equally expensive repairs.

    Posted by Sorelish at 11/19/2008 @ 1:22pm

    Try putting water in it next time.

    My 28 years in the automotive business and 9 years as a shop owner. (Not to mention 30 years or so, collecting a fleet of junk), tell me that you don't have a clue what your talking about.

    My civic is an uninspiring transportation appliance. But, it is also the finest crafted machine I own.

    And it sounds like a retarded bumble bee, not a sewing machine.

    (Besides, I still use the same sewing machine my mother used when I was a kid. What year model is your car?)

    Posted by Malcontent at 11/20/2008 @ 12:53am

48. (I hope nobody here mentors any retarded bumble bees....I can hear them now...)

    Posted by Malcontent at 11/20/2008 @ 12:55am

49. Posted by Malcontent at 11/20/2008 @ 12:53am

    Every fucking mechanic I talked to said the car I had came into their shops with a warped head ALL THE TIME. You don't even know what the make was. What are you a clairvoyant?

    Posted by Sorelish at 11/20/2008 @ 01:25am

50. Posted by chaoszen at 11/19/2008 @ 11:18pm

    Chaos....you're not falling for BL's pose...are ya?

    Posted by Mask at 11/20/2008 @ 09:29am

51. Reuters GMAC applies for bank status Thursday November 20, 8:07 am ET

    NEW YORK (Reuters) - The money-losing finance company GMAC said on Thursday it has filed to become a bank holding company, joining the growing list of lenders making such a move in a bid to secure U.S. Treasury funds. GMAC said its application for funds from the government's $700 billion Troubled Asset Relief Program is conditional on its becoming a bank.

    The company, which had previously said it was contemplating becoming a bank, did not disclose how much it might seek from the government.

    Private equity firm Cerberus Capital Management LP (CBS.UL) owns 51 percent of Detroit-based GMAC and automaker General Motors Corp (NYSE:GM - News) owns 49 percent.

    GMAC follows other financial, non-bank companies such as credit card company American Express Co (NYSE:AXP - News) and commercial lender CIT Group (NYSE:CIT - News) in applying for bank status and Treasury funds.

    GMAC hopes to have increased funding flexibility as a bank. The credit crunch has made it hard for the company to raise capital, and slumps in the mortgage and housing markets have battered its earnings.

    The troubled finance company also said in the statement on Thursday that it is exchanging and offering cash for about $38 billion of outstanding debt at GMAC and its mortgage subsidiary Residential Capital to increase capital.

    The company, which has been the primary lender to GM customers but has curbed loans to borrowers who do not have good credit, lost $2.52 billion in the third quarter, its fifth straight quarterly loss.

    (Reporting by Elinor Comlay; editing by John Wallace)

    The Hank Paulson approach for accessing the slush fund. Make yourself a bank...

    Posted by OneVote at 11/20/2008 @ 09:45am

52. The Asians, typically, took the long view and gave us competent and relevant automotive products.

    The Big Three took the short view and let their bean-counters tell them what to jam down our throats. Certainly, union excesses and the heinous cost of health care represent an onerous burden. But after decades of fighting CAFE standards, paying billions in exec bonuses, conditioning Mom to haul groceries and little crumb snatchers around in Suburbans, and producing crusher food like the Pinto and the X-cars, these guys have no right getting into my pocket.

    The Big Three have not only made their beds, they've shit in 'em.

    Break out the toe tags.

    Posted by drhammer at 11/20/2008 @ 09:52am

53. I hope the democrats grow some balls and don't bailout the Big 3...and the real bonus would be less stupid car commercials during the Super Bowl!

    ...oh, wait - the advertising budget will probably go up! gotta spend lots of money on actors trying to convince us to get to their dealers lots, instead of making cars that will convince our friends and neighbors to persuade us to get to their dealer lots.

    People like Mask, et al support this bailout purely for political purposes. They are democrats, and they believe not supporting this bailout will cause a shift next midterm election. Mask doesn't care about Detroit shedding the fat and competing in the market - just assuage the UAW and we'll retain our seats in Congress.

    Posted by urmygyro at 11/20/2008 @ 11:21am

54. Not only US automakers produce an inferior product, they are constantly behind the curve and playing catchup to overseas competition (witness the Prius as an example) in product offerings and production techniques. Further, their re-packaging of the same car under different brands is just plain stupid. It's been this way since the 80's and we bailed out Chrysler then for the same reasons that we need to bail them all out now.

    They didn't learn their lesson the first time - why should we think they will learn their lesson the second time around?

    Screw 'em.

    Posted by Balrog at 11/20/2008 @ 11:37am

55. I do not work for any auto company nor any supplier. I am a Detroit native and resident, for full disclosure purposes.

    In my observation and experience I do sincerely believe that the overall quality gap between "imports" and "domestic" cars has largely been closed. I do have to admit, though, I don't know what are considered to be the ground rules for what constitutes an import or domestic model.

    Around these parts, reference is typically made to percentage of American made content.

    Posted by schnellerheinz at 11/20/2008 @ 12:38pm

56. this myth that the end of the big 3 is the end of big unions in america is ridiculous. First of all the UAW has rendered itself complicit and irrelevant by constantly bending to the requests of Detroit. Not only has the new CBA completely gutted the benefits that autoworkers were renowned for, but it has continually pushed back wages.

    I know everyone thinks a bailout (loans) is the only way to go, but everyone should heed the example of the Ontario government in Canada. The Ontario government provided GM with 300 million worth of R&D loans in 2002 with specific job levels, and security clauses in the contract. GM in return decided to shut down the Oshawa Truck plant despite the contract assuring the people of Ontario that their money would give them job security. This is plant that is recognised as JP Power as the 2nd most efficient in North America, and just had a 150 million retrofit to produce hybrid pickups.

    Corporate America is having a field day with this year of the bail out is taking the tax payers for a ride. either the big 3 can hack it on their own or they fail, no more concessions for companies that dont care about north america or canadian or american citizens.

    Posted by squintz21 at 11/20/2008 @ 12:39pm

57. "Warning of economic disaster, Democrats and Republicans from auto industry states reached a deal Thursday on an alternative package that would temporarily divert money from a fuel-efficiency loan program to cover the Big Three's immediate costs. But it was unclear whether it could draw enough support to pass."

    GM SHOULD GO UNDER ASAP!!!!!!!

    Posted by jrs112 at 11/20/2008 @ 1:48pm

58. AMERICAN TRUCKS AND SUVS ARE IN BOTTOM TEN FOR RESALE AS OF THIS MORNING!!!!!

    THE BOTTOM TEN ARE ALL GM AND FORD PRODUCTS!!!

    LOOK IT UP FOR YOURSELF!!!

    Posted by jrs112 at 11/20/2008 @ 1:49pm

59. AMERICAN TRUCKS AND SUVS ARE IN BOTTOM TEN IN RESALE VALUE AS OF THIS MORNING!!!!!

    THE BOTTOM TEN ARE ALL GM AND FORD PRODUCTS!!!

    LOOK IT UP FOR YOURSELF!!!

    Posted by jrs112 at 11/20/2008 @ 1:49pm

60. Posted by Sorelish at 11/20/2008 @ 01:25am

    And your point is? You bought a lemon?

    So what, they've all made 'em. This changes nothing about the relative value of Japanese cars to American cars.

    Not a big fan of European cars. Most of them are reasonably made, but overpriced, even before the currency exchange issues.

    Drive what makes you happy. It's America, right? Just don't use my taxes to bail out companies that have never even tried to be long-term viable.

    Bail 'em out yourself. Go buy a piece of GM junk.

    (Full disclosure; I agree with whomever praised domestic trucks. I do own an old 1 ton chevy, for occasional towing and delivery. And the aforementioned old junk. Big domestic V8s in little aisian cars were fun, in the cheap gas days.)

    Eric

    Posted by Malcontent at 11/20/2008 @ 2:33pm

61. A friend of mine from school told me that she believes we should bail out the Big 3. She drives a Toyota Corrolla.

    Irony.

    Many democrats claim we have to bail out the Big 3 - but if Americans in general bought cars from American owned car companies this situation wouldn't exist.

    Irony writ-large.

    Posted by urmygyro at 11/20/2008 @ 3:27pm

62. Any analysis in a progressive publication that favors management over labor and which does not account for the large number of jobs that will be lost in a reorganization of the auto industry should be questioned. What progressives should be seeking are solutions that favor labor and economic security over capital. To do that, one must first have an understanding that neo-liberalism reigns as the economic ideology of the day and almost any solutions put forth by current policymakers will support the health of the financial markets over the health of the Republic.

    From my view, if an automaker can no longer survive, it should be nationalized and then restructured by the government as an ESOP, an employee operated company. Some of the best companies in the world are state operated enterprises (SOEs) or have shares in companies that were financed by government funding when they were launched. Only in the US is there such anathema against having an ownership interest in key enterprises. Lower Saxony, a state government in German, for example, is the largest shareholder in Volkswagen with an 18.6% stake.

    Finally, there is nothing inevitable about poor performance by public enterprises, just as there is nothing inevitable about profitable performances by private companies. Among other things, successful companies require dedicated and visionary management. GM has long been mismanaged. It is my opinion that the collusion between GM's managers and its board is central to its management problem. They should not be rewarded with public funding. On the other hand, autoworkers deserve better and the nation needs a vital transit industry. Retooling one of the automakers to manufacture mass transit vehicles would be an investment that would better serve the public interest.

    Posted by afrothetics at 11/20/2008 @ 4:36pm

63. Let's just bail 'em out.

    Then we can change the name of GM to American Leyland.

    Then after decades of money hemorrhaging, poor designs and pathetic marketing, they can quietly die, after no one cares anymore.

    I mean, nobody in England complains about their auto industry or subsidies anymore.

    At least since 1990.

    America doesn't just need to return to manufacturing. We need to address the short sighted management style that has always typified American industry. Then we need to address the fact that American products haven't had global (or much domestic) appeal for some time.

    America used to be revered for our technology and industrial processes. We stopped competing long ago. We don't need only factories. We need quality, appealing products too.

    Posted by Malcontent at 11/20/2008 @ 6:14pm

64. I deeply appreciate this article because I have been wondering for some years now what had happened to the layman's view of capitalism that I first encountered in the mid-1960's.....much like what Bucky Fuller said about boats "There are no bad boats. They all sank". So about capitalism, the view was Darwinian....that the weak would be culled out and so the survivors would be the fittest. Of course, this was in the unspoken context that these companies would still be participating in common society rather than in the heady niches of the few at the top of the money pile.

    chriss

    Posted by nessmuk at 11/20/2008 @ 8:30pm

65. Is this, or is this not the result of the so-called free market? A free market that GM has used, abused, and manipulated for years?

    GM has failed. End of story. Companies fail ALL THE TIME.

    This particular failure is just much longer overdue than most.

    Keep pumping out shitty products nobody wants, while the Japanese beat you on price, style, technology, reliability, and value. GOOD IDEA!

    Hey, maybe people will start buying Chevy Tahoes soon?! Please? PRETTY PLEASE?

    If the car companies want help, I suggest they stop panhandling in D.C. and go to Saudi Arabia for their handout.

    Posted by TexasFlood at 11/20/2008 @ 8:38pm

66. Maybe GM didn't notice, but the federal government isn't exactly rolling in it.

    Posted by TexasFlood at 11/20/2008 @ 9:02pm

67. Thank you Afroethics, a solution that doesn't involve needlessly bankrupting the city of Detroit. But still doesn't let the (clearly unqualified) management of the big three continue to keep running what was once a great company into the ground through horrific boneheaded mistakes that a child could point out. Of course, Washington will bail out the big three, this time anyway. As the party that favors propping them up is the party about to come to full power. When they burn the $25 billion dollars and come back, maybe we'll see some real back bone from Washington, maybe we'll see a standard set for the full on creation of a corporate welfare state. Maybe Washington will be so broke finding the money for the companies will become exceedingly hard. At any rate, I hope some sort of a citizen movement is formed soon to push the demo's to embrace some pro life continuing on this planet as we know it policies, as Wall Street will not save us.

    Posted by shadow master at 11/20/2008 @ 11:00pm

68. Should GM Survive? Regretably no.. targeted 'bail out' only of employees: Medicare-like health ins, unemployment $, mortgage support, like govt pays 50% of anyone who can demonstrate they've had a mortgage for 5 years and can afford to pay the other 50%... AND some blend of purchase/ green retooling / incentive$ so factories are converted auctioned to Big 3 or any other interested party with bona fides.

    Posted by winyahn at 11/20/2008 @ 11:43pm

69. As a letter to the WSJ pointed out this morning: Toyota made a profit of 17 billion and Honda made a profit of 6 billion in US markets in 2008, while GM lost 38 billion...an infusion of 25 billion would only exacerbate the ineptitude which allowed this calamity to happen in the first place....toyota and honda have produced more jobs than the detroit three....so the claim of "saving jobs" is patently false...retirees want their pensions even while they are destroying the very companies which allow them to live the life of leisure...and while these domestic car companies refuse to invest in fuel efficient automobiles....they are out of touch and only bankruptcy has a chance of making them change!!!!

    Posted by jrs112 at 11/21/2008 @ 10:23am

70. why don't they eat cake?

    Posted by emile duBois at 11/21/2008 @ 1:40pm

71. Right on, masaniello, with your four-point plan. We can't compete internationally if health care is added on to the cost of our vehicles. The solution to both the competition problem and the sickness in Detroit lies with the incoming Obama administration. Screw partial bandaid approaches--we need the Conyers-Kucinich HR 676 expansion of Medicare to everyone. If the feds find the money to provide everyone with health coverage, autoworker retirees will be taken care of and management can focus on designing better, greener vehicles. If Germany and Japan can find solutions to these problems, so can we--it's a question of political will. I hope Henry Waxman leads the way re pushing Obama. Use the bailout money to fund light transit and infrastructure repairs!

    Posted by mimsky at 11/21/2008 @ 2:04pm

72. It's so sad that the automobile industry and our long fascination with cars is possibly going to be the proverbial 'straw'.

    I think that we have to bail them out, but only on strictly monitored conditions. We can't lose that many jobs at once. And this whole thing about them taking corporate jets to go ask for money... it's the perfect example of why they are in trouble... bad judgement at crucial times. At least they could have thrown us a bone and paid for their own flights. These guys are multi-multi millionaires.

    Add to that the first test of the 'Volt', which couldn't even climb a hill. They won't bring the EV-1 back because it's so efficient. A sad time for America. the Dems finally get power back and they are left (?) holding the bag for years of misdirection and foolishness. Somehow, predictably, it will be 'all their fault' in the final analysis.

    Posted by ficheye at 11/21/2008 @ 4:00pm

73. We have now found the perfect storm. We have labor fighting against itself; north, the big three, and south Toyota plants. Profits for Toyota go where? Toyota Camray is so much better than the American Chevy, really? I broke a timing belt on a Camray at 20 below zero and had to tear half the engine out to replace it. Tell some soccer mom that she has to drive seven of the neighborhood kids around in her Honda Civic. 50 miles an hour on the Autobahn at 180 kilometers an hour, sure. Some kid went driving around in the wilderness in his Toyota, got stuck in a snow storm and froze to death,his wife and baby almost perished. All foreign car companies are subsidized by their countries or countries of origin. Are the CEO's of; Chrysler, Ford and GM good employers?, no they are wall street cowboys. They produced shit, because our testosterone demanded new models every year with more and more power, and when gas got to 4.00 dollars a gallon they could hear us whine all the way to China and Korea. that isn't the fault of all the workers at the GM, Ford and Chrysler plants. The workers at these plants don't take their profits back to Japan by the way. What the hell is wrong with us? Have we all gone collectively insane? 300 billion dollars gone to the Wall Street casino boys, and the Paulson cronies, and all we got was a few whimpers from congress. Comes time to help the people who get their hands dirty making things and we scream like stuck pigs at a pig roast. 700,000 kids went hungry last year "in this country". Bill Gates and Warren Buffet are worth, how much? And we are jealous of workers at GM making how much?

    Posted by lachatte at 11/21/2008 @ 10:36pm

74. AH DAMN: 50 MILES A GALLON ON THE AUTOBAHN?

    Posted by lachatte at 11/21/2008 @ 10:38pm

75. Posted by lachatte at 11/21/2008 @ 10:36pm

    I understood the last of your post, but what was the begining about?

    "Some kid went driving around in the wilderness in his Toyota, got stuck in a snow storm and froze to death,his wife and baby almost perished."

    Not sure what your trying to say. But, it's "camry" not "camray". Timing belts seldom break if replaced at scheduled intervals. If you thought that was fun try putting a water pump on a 2.3l Pontiac sometime.

    I would be for bailing out our ailing industries, if the deal included new management and ownership. Not just a handout to the execs who caused the ailment. They weren't even bright enough to try to look needy while they begged.

    Eric

    Posted by Malcontent at 11/21/2008 @ 11:15pm

76. As if the 25 billion (in fake money that doesn't really mean anything) would solve this problem...

    Just tell Benny boy to fire up the printers and make us some more cash! I'm sure nobody will notice.

    Posted by TexasFlood at 11/22/2008 @ 12:18am

77. To MAL: Thanks for the spelling lesson, but I prefer "camray". Point I was making is American choice and there are just as many "camrays in the junk yard as chevys. Driving around in back country in a Toyota is suicidal. The reason that Detroit produced testosterone power is because we bought power and a new model every year to go with our egos. Toyota Prius? Really? I loved my Carmen Ghia, but it was a boutique car and not terribly particle. Point number two.... are you following...? All, All, off shore car companies are subsidized by their governments.

    Posted by lachatte at 11/22/2008 @ 7:56pm

78. correction (not terribly "practical") and furthermore every investment we made in Chrysler came back times ten. Paulson just lost 300 billion to bail out his cronies.

    Posted by lachatte at 11/22/2008 @ 8:03pm

79. "Driving around in back country in a Toyota is suicidal"

    "Some kid went driving around in the wilderness in his Toyota, got stuck in a snow storm and froze to death,his wife and baby almost perished."

    So, are you saying we should bail out the American auto industry or attack those evil Japanese?

    How are more reliable cars dangerous to drive in the "back country/wlidernesss"?

    I got you being for the bailout the first time. Your tirade about Japanese cars reminds me of my deceased grandfather. All emotion, no fact.

    Posted by Malcontent at 11/22/2008 @ 10:40pm

80. Lachatte,

    Next time you see some video on TV, where people are driving around the middle of nowhere (Australian outback, African plains, south american jungles etc.), take a count of the Toyotas vs. Chevys.

    Posted by Malcontent at 11/22/2008 @ 10:46pm

81. Your facts seem to be taken from a comic strip Mal. actually "British Land Rover". Gramps must have been a wonderful human, didn't leave much DNA behind did he? And join my "ingnore list". So long I refuse to debate idiots, and I hate chat rooms.

    Posted by lachatte at 11/23/2008 @ 08:46am

82. Posted by lachatte at 11/23/2008 @ 08:46am

    "Your facts seem to be taken from a comic strip Mal."

    Yep. The comic strip of 30yrs. automotive experience.

    "actually "British Land Rover" (now made by Ford)...is not nearly as popular as toyota landcruisers and trucks. This factoid ages you as much as your irrational hatred of things japanese.

    "Gramps must have been a wonderful human, didn't leave much DNA behind did he?"

    One, we buried his DNA. Two, He was a racist, small minded man...never much cared for him.

    "So long I refuse to debate idiots.."

    I posted facts. You posted irrational, illogical non-sequiturs.

    Ignore away baby. Please.

    Posted by Malcontent at 11/23/2008 @ 2:00pm

83. Actually Land Rover made by Ford. Sorry malcontent Jaguar and Land Rover Freelander were sold to Tata. Get your factoids straight before you go arrogant on people.

    Posted by julien38 at 11/24/2008 @ 2:17pm

84. Posted by julien38 at 11/24/2008 @ 2:17pm

    True. For 5 months now.

    Ford's owned them since 2000.

    I don't feel I went "arrogant" on anybody. I was merely trying to understand what the hell lachatte was talking about. His non-sequiturs about people dying in remote places made no sense to me.

    If you can make sense of his posts, other than the ones ranting at me, please clue me in.

    And toyotas DO seem to be ubiquitous, the world over. Rover no longer dominates the "outback".

    Posted by Malcontent at 11/24/2008 @ 7:43pm