GM Spirals the Drain (Part 2)

[snoopy369]

Many of GM's and Ford's advantages come from the nature of American capitalism vs (others). You cannot ignore the one and accept the other.

That said, i'd be all for lessening the power of hedge funds. But that's neither here nor there, and does not make me one bit more in favor of a bailout.

[Wezil]

"American capitalism"

Somewhat of an oxymoron these days, no?

[KrazyHorse]

Originally posted by DanS
In the US, the bondholders would be senior to the labor contract. The labor contract can be jettisoned by the bankruptcy judge upon request of the bankrupt company.

Retiree health care is treated the same way as current employee health care is? That doesn't make much sense.

[Dinner]

Originally posted by KrazyHorse


Retiree health care is treated the same way as current employee health care is? That doesn't make much sense.

Especially when you have 1.2 million retirees or spouses of retirees while the big 3 only have around 250,000 active workers in the US. That figure was from 2005 too so it is likely lower now.

[Zkribbler]

AUTO INDUSTRY RESCUE PLAN

NEW YORK (CNNMoney.com) -- The House was poised to vote Wednesday evening on a stopgap bailout to U.S. automakers, just hours after Democratic Congressional leaders and the Bush Administration reached an agreement on the proposal.

Late afternoon procedural votes on the measure passed on an essentially partisan basis, with Democrats voting overwhelmingly to allow the vote later in the day. But strong Republican opposition in the Senate made prospects there less certain.

The bill could provide the $14 billion that General Motors (GM, Fortune 500) and Chrysler LLC need to avoid filing for bankruptcy, allowing them to continue operations through the end of March.

The $14 billion is $1 billion less than what was being discussed earlier in the week, and less than half the $34 billion requested by automakers last week. Still it may well be enough to stave off the immediate threat of bankruptcy.

GM has said it needs $4 billion by the end of the month to continue operations, and believes it'll need an additional $6 billion in the first three months of 2009. Chrysler has said it needs $4 billion by the end of the first quarter.

Ford Motor (F, Fortune 500), which has more cash on hand than its U.S. rivals, is not expected to tap into this bailout in the coming months.

What is in the bill
The stopgap measure is designed to let the new Congress and incoming administration of President-elect Barack Obama to craft a longer-term solution. It would also give the companies time to negotiate with creditors and the United Auto Workers union on additional concessions needed to stem their ongoing losses.

But the bill also sets strict oversight of the companies. There would be limits on executive pay, prohibitions for so-called golden parachutes and requirements that the automakers get rid of their corporate aircraft and not pay dividends while loans are outstanding.

The bill also provides for a presidential appointee, popularly referred to as a "car czar," to oversee the company's efforts to restructure their operations. If the car czar determines that the companies have not made progress on cutting costs, the loans would be recalled within 30 days.

While most House Republicans have been strongly opposed to the auto bailout from the beginning, multiple Republican aides say that the Michigan Republicans and others from the Midwest auto belt are expected to vote for the agreement. Such support would give House Democrats the votes needed to pass the bill.

The agreement came after Democrats dropped a provision in a previous draft of the bill that would have prohibited automakers from continuing their support of lawsuits against states with emission standards more stringent than current federal rules.

"We do not believe there was any chance the legislation would pass if that provision remained in," said White House Deputy Chief of Staff Joel Kaplan.

Still, some Senate Republicans have threatened a filibuster, which could delay and even potentially block a vote on the bill. Five Senate Republican critics of the measure vowed Wednesday to do what they could to defeat the measure.

"What I've seen thus far is a travesty," said Sen. Richard Shelby, R-Ala. "This is an installment on a huge bailout that will come later. This will not make Chrysler, General Motors or Ford competitive. This is only delaying their funeral."

He would not predict whether critics had enough votes to block passage. But he cautioned "I think we're going to have a lot more friends than you probably think."

Senate Majority Leader Harry Reid, D-Nev., said "it appears unlikely" the Senate will vote Wednesday on the legislation, saying that Senate Republicans have told him they want to study it before deciding how to proceed.

White House Chief of Staff Josh Bolton attended a Senate GOP policy lunch in the Capitol Wednesday to try to persuade skeptical GOP senators to support the bill.

A GOP Senate aide emphasized how crucial the meeting was, since Republicans have not been involved in the negotiations and have to be convinced that the White House sufficiently represented their concerns and interests.

It is unlikely that the White House will be able to sway strong Republican foes, such as John Ensign of Nevada and Jim DeMint of South Carolina. The big question is whether the White House can convince enough Republicans to get 60 votes to overcome opposition among those GOP senators.

Meanwhile, Reid said if Senate Democrats and Republicans can not reach an agreement to cut through the procedural steps opponents of the bill are likely to require, the Senate won't have final passage until late Saturday night or Sunday.

Reid held out hope that an agreement will be reached to require a 60-vote threshold for the bill -- the same vote total needed to break a time-consuming filibuster -- but allow final passage by perhaps Friday.

[DanS]

Originally posted by KrazyHorse
Retiree health care is treated the same way as current employee health care is? That doesn't make much sense.

Well, what precisely do you mean by the "same way"? Both are in the labor contract but are treated differently as far as the law is concerned.

Bottom line is that current employee health care in some form won't go away no matter what happens. The retiree health care likely would go away (with no compensation) in a bankruptcy.

[KrazyHorse]

I mean they both appear to have similar seniority according to you. The employee delivered his services to GM over a period of X years and is now owed Y health plan and Z pension. It's different from an employee who continues to provide services to GM in exchange for health benefits and pay, no?

[KrazyHorse]

It's like if I'm a supplier under contract to GM to deliver parts at a given price. The bankruptcy judge should have a fairly easy time tearing up the contract for continued delivery, but the money GM owes me for parts already delivered should be much more senior than that.

[Dinner]

"What I've seen thus far is a travesty," said Sen. Richard Shelby, R-Ala. "This is an installment on a huge bailout that will come later. This will not make Chrysler, General Motors or Ford competitive. This is only delaying their funeral."

Shelby is a piece of crap. Alabama gave hundreds of millions of dollars to foreign automakers to get them to build factories and yet this douche bag dares to talk about the free market? Also everyone knows this small loan is just to tide GM & Chrysler over until Bush is out of office and then the new President and the expanded Democratic majority in Congress can work out a comprehensive solution. We just need to make sure everything doesn't go to hell until after Republican obstructionism powers are virtually eliminated come January.

[Vanguard]

Originally posted by Asher


It made sense when he used it. When you used it, it showed me you don't know what's going on here.

It is just as valid for me to say it as it was for KH.

Most of you seem to believe that a GM bankruptcy will not hurt the US because it will simply free up resources that will be used elsewhere.

But you are forgetting that in order to free up those resources, you have to destroy GM. GM is one of the largest industrial companies in the US. It sells more cars than anyone except Toyota. It has long experience in making automobiles, huge amounts of industrial expertise and a proven record of designing solid, mechanically sound automobiles.

If you destroy it, you are "breaking a window" simply because you believe replacing it will generate economic activity.

This is a Broken Window fallacy. You just don't realize it.

Of course the Broken Window fable can be used to prove almost anything you want. It is really nothing more than an economic koan. That's why I said it was a stupid argument.

But the fact that you did not even know why Broken Window proves nothing shows me that.... you don't know what is going on here.

[Vanguard]

Originally posted by KrazyHorse
Sometimes I feel bad when I destroy people so completely that they continue to pwn themselves even after I put them on my ignore list.

Other times it makes me happy. Now is one of those times.

I admit that I am sometimes embarrassed to be found in the same forum with you guys.

"Subsidies are good!"

"Alabama has market clearing wages. But Michigan doesn't!"

"Profits are wealth creation. Wages aren't!"

Lawl.

[Aeson]

Originally posted by Vanguard
If you destroy it, you are "breaking a window" simply because you believe replacing it will generate economic activity.

GM and UAW broke it already... can't blame that on us.

[Asher]

Throwing money at GM, who will fail anyway, just delays the inevitable.

Unless you bust the UAW, there's no point.

[DanS]

Originally posted by KrazyHorse
It's like if I'm a supplier under contract to GM to deliver parts at a given price. The bankruptcy judge should have a fairly easy time tearing up the contract for continued delivery, but the money GM owes me for parts already delivered should be much more senior than that.

As I understand it, seniority is based upon what keeps the company in business -- it is practical. So the parts suppliers may be paid partial arrears in order that they still deliver parts. Employees would be paid wages and most benefits, but retiree benefits wouldn't. After several months, the labor contract would be thrown out and the retiree benefits would cease to be an obligation. The union can then strike because it doesn't have a contract, of course. Or the company and union could then agree to a contract which includes retiree benefits, if the court thought the company was viable with these benefits and the union wanted to subordinate current employees' interests to their retirees' interests.

Bottom line is that retiree health care would be the first thing to go. And rightly so.

I think there's a seniority list out there for corporations, but a few moments of googling doesn't yield a well-formatted list.

[Dinner]

Originally posted by Asher
Throwing money at GM, who will fail anyway, just delays the inevitable.

Unless you bust the UAW, there's no point.

I don't know. Ford is healthy enough or rather will survive. reduced wages and benefits would be enough with good models and an end to the credit crisis. Sales fell 7 million units nation wide last year which was a disaster not of the making of the UAW or GM. The company is already with in 17% of the costs of the transplants so reducing pension and health care costs should further create a more equal playing field provided that national sales go back up and the credit crisis doesn't worsen. Of course if national car sales continue to go down (went from 17.5 million to just 10.5 million in one year) then it will be impossible to run a car company.

You have to sell cars and right now everyone is hurting badly.