Only $25 Billion-plus for GM and Chrysler and Ford?

Struggling carmaker GM is getting a cold response to its demand for another $10 billion from the feds (this comes after a $25 billion plan for the Big 2.5 was passed not so long ago).

Treasury officials were said to be reluctant to broaden the $700 billion financial rescue program to include industrial companies or to play a part in a GM-Chrysler merger that could cost tens of thousands of jobs.

But it remained unclear whether the officials were also seeking to avoid making any decision that would conflict with the goals of a new presidential administration. The Democratic candidate, Senator Barack Obama, has said in recent days that he supports increasing aid to the troubled auto companies, while Senator John McCain has not said whether he would support aid beyond the $25 billion.

More here.

My sympathies are with the owners of GM and Chrysler cars, not those products' makers (and goddamn it, I drive a 1999 Buick—where's my bailout?). While I'm glad to see the Treasury say no to anyone these days, even for a nanosecond, there's still too much bailout money being lobbed in every possible direction.

Prediction: The next big bailout to the auto industry will be taking on some or all or most of the companies' massively underfunded pension liability via the Pension Benefit Guaranty Corp.

Comments

[MichaelB]

I remember reading an article around August or so, that the PBGC was shifting it's investment allocation to heavily overweight equities.

We'll probably need a bailout for the government bailout fund.

[JW]

Nick, I hope you take off The Jacket before getting into said Buick. I, for one, simply cannot reconcile the image of a jacketed Nick, driving very slowly in the left lane, or turning slowly and haltingly onto a busy highway, both hands tightly gripping the wheel at 10 and 2.

[UAW]

Show of hands, brother auto workers. How many of you think it's a public obligation to bail out our bloated, private pension?

Opposed?

I didn't think so.

[P Brooks]

I cannot conceive of any successful turnaround for GM which does not involve bankruptcy.

The sooner, the better. Putting it off just wastes time and cash.

[kinnath]

GM builds a lot of its cars in Canada. So maybe we can just sell Michigan to Canada, and they can take over the cradle-to-grave care and feeding of the UAW.

[R C Dean]

The next big bailout to the auto industry will be taking on some or all or most of the companies' massively underfunded pension liability via the Pension Benefit Guaranty Corp.

Bingo. That makes it more of a bailout of the unions, which is much more Obama-friendly.

I can't tell you how pleased I will be that my tax dollars will be going to support reitred union members at a level that will exceed my retirement. Social justice!

[Er?k Boston, Esq.]

One of the big three execs came up with the best defense of the bailout possible: it's not a bailout, it's a loan to help cover the cost of compliance with federal regulations.

[creech]

Don't worry, the PBGC will greatly raise its premiums on all the companies that responsibly didn't underfund, and this will put the final nail in the coffin of defined benefit funds.

[P Brooks]

all the companies that responsibly didn't underfund

And the companies which refused to sign totally irresponsible labor contracts.

[R C Dean]

Don't worry, the PBGC will greatly raise its premiums on all the companies that responsibly didn't underfund, and this will put the final nail in the coffin of defined benefit funds.

Nah. That will just mean they need a bailout, too. No way this ends until PBGC has shortfalls that are paid out of tax revenues.

[Warren]

Just what this country needs, another Amtrak.

[J sub D]

One of the big three execs came up with the best defense of the bailout possible: it's not a bailout, it's a loan to help cover the cost of compliance with federal regulations.

Other than the uncomfortable fact that it's totally bullshit, it's a good excuse. Many of the great unwashed will buy it.

[J sub D]

30 years and out. Complete medical and dental. Job bank (look it up). A career UAW worker almost always has a cabin up north. Or a 25 ft boat. Or both. Where's the compassion guys?

[JMR]

I second that prediction, but because the PBGC scandal's bipartisan (corrupt union Democrats + corrupt CEO Republicans = fucked taxpayers) we WILL NOT see anything about this particular clusterfuck 'till after the election, even though it's been becoming obvious since the late Clinton administration.

[The Wine Commonsewer]

Saw that story in the morning rag and what I don't get is why GM needs ten billion to merge with Chrysler.

Like Nike says: Just do it.

[P Brooks]

Based on the stories I have seen about the Chrysler cash hoard (which is apparently about three times the market value of GM), which is what GM mostly lusts after, I think Chrysler should just make a tender offer, and buy GM.

Oh, wait- those Cerberus guys are (allegedly) smart.

[ChrisO]

Saw that story in the morning rag and what I don't get is why GM needs ten billion to merge with Chrysler.

My understanding is that GM lacks even the cash that it would cost to merge the two companies' business operations, let alone starting buying out all of the superfluous Chrysler UAW workers and merging manufacturing operations.

GM wants the Chrysler cash hoard, but they also want to become even "too much bigger to fail." The $10 million is just a downpayment, folks.

If I were to guess, I'd say that neither GM nor Chrysler are worth a dime, taking their impossible union contracts and legacy costs into consideration. At best, their assets (vehicle and component designs, plus factories and equipment) would make a valuable purchase in a Chapter 11 proceeding. Notice that no other automakers are fighting each other to acquire GM and Chrysler as going concerns. No company in their right mind would want any part of the GM and Chrysler labor and pension situations.

[Mike Laursen]

You live in Ohio AND drive a Buick?! You should turn in your cosmotarian card right now.