GM Loses Another $16 Billion -- Bankrupt?

[KrazyHorse]

What?

[DanS]

I doubt that it will bring up protectionism, but the irony is that the US bailing out its auto industry will lead to others bailing out their own auto industries -- a net wash for the US auto industry from a competitive standpoint. Yes, you will probably see the result as a glut of cut-priced cars. As an example, the European automakers are asking E40 billion from their own governments.

[KrazyHorse]

I hope the Canadian government just decides to let both Canadian GM workers and Canadian car purchasers free-ride off the US government's largesse. And if Japan and Europe do it too, so much the better.

[DanS]

Yes, as stated, the Mexicans also will be benefitting greatly even though they aren't paying a cent for the bailout.

The number of GM workers in the US isn't that high nowadays.

[One_more_turn]

After the Lehman scare, it's bailout galore across the globe.

[Slaughtermeyer]

If you want to cash in on the bailout you can buy GM short-term bonds that have a maturity date of July 1 2009 and a maturity price of $25. They closed at a price below $12 today so you'd more than double your money in just over half a year. The ticker symbol for those bonds is GRM.

[Ben Kenobi]

I wonder.

What's the thermal value of each share of GM? Suppose you got GM to send you a paper certificate for every share. You could probably save money on your heating bills.

[notyoueither]

Originally posted by Slaughtermeyer
If you want to cash in on the bailout you can buy GM short-term bonds that have a maturity date of July 1 2009 and a maturity price of $25. They closed at a price below $12 today so you'd more than double your money in just over half a year. The ticker symbol for those bonds is GRM.

1. Buy those bonds
2. Buy insurance on those bonds at less than the spread
3. Gather ???
4. Profit!

ermmm, is AIG still selling credit insurance?

[Vanguard]

Originally posted by Sandman
So, erm, isn't this going to cause a massive glut of superfluous cars and worldwide waves of carmaker protectionism?

Originally posted by DanS
I doubt that it will bring up protectionism, but the irony is that the US bailing out its auto industry will lead to others bailing out their own auto industries -- a net wash for the US auto industry from a competitive standpoint. Yes, you will probably see the result as a glut of cut-priced cars. As an example, the European automakers are asking E40 billion from their own governments.

If the problem is that labor contracts are too expensive (as most here have stated), then cars are, presumably, overpriced.

So a bailout will not result in a glut of "superfluous" cars. Instead the resulting cheaper cars will better satisfy true demand. Obviously!

[Sandman]

Cars aren't overpriced because there are more efficient carmakers around. Isn't that why the Big Three kept losing money?

[Dinner]

Australia is giving $4 billion to help it's auto industry. Cheap(er) Holdens seem to be in the near future for Australian.

[Dinner]

Originally posted by Sandman
Cars aren't overpriced because there are more efficient carmakers around. Isn't that why the Big Three kept losing money?

Basically, yes. There was an article I linked to earlier by the Detroit News which showed Ford's newest plant in Brazil which is ultra modern and far more automated (using robots) then any factory in America. The big problem is the UAW union refuses to allow many more new robots because it means job loses as robots replace people. That opposition makes it hard to reduce the number of man hours needed to produce a car. Then comes the high costs of health care which foreign makers get taken care of through national health care while the big 3 have huge pension costs and horrible union contracts which require them to pay workers even if they don't work.

Cutting the legs out from under the union will help enormously as then the Big 3 can really get into automation and improve efficiency not to mention stop paying workers when they don't even work (because production is shut down or what not). Lastly, national health care would greatly improve costs from a competitive stand point.

[Vanguard]

Originally posted by Sandman
Cars aren't overpriced because there are more efficient carmakers around. Isn't that why the Big Three kept losing money?

What do you mean by "more efficient"? Do Toyota's robots weld with less steel than GM's robots? Do they spray on less paint?

GM isn't "less efficient" than Toyota. They just have higher costs. But costs do not necessarily affect wealth creation. Measured by sales, GM creates more wealth than Toyota.

Or did. Who knows what is happening now.

[KrazyHorse]

Originally posted by Vanguard
GM isn't "less efficient" than Toyota. They just have higher costs

Please explain.

[Dinner]

Isn't producing the same (or roughly similar) cars for less money the very definition of greater efficiency? The Japanese make cars with fewer man hours largely because they use more robots. Robots which the UAW are militantly against because they eliminate jobs. If you notice the Japanese (and Germans and even Hyundai's new factory) were all placed in states with almost no union membership precisely because they wanted to avoid the unions.