Corporate Welfare

Put Chrysler Back In Christmas

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It's official:

General Motors Corp. and Chrysler LLC will get $13.4 billion in initial government loans to keep operating in exchange for a restructuring under a rescue plan announced by President George W. Bush….

The money will be drawn from the Troubled Asset Relief Program and the automakers will get an additional $4 billion from the fund in February for a total of $17.4 billion in assistance, according to a statement from the Bush administration. The funds would allow GM and Chrysler to keep operating until March….

In exchange for the money, the automakers must provide warrants for non-voting stock, accept limits on executive pay, give the government access to financial records and not issue dividends until the debt is repaid. The government will have the authority to block transactions larger than $100 million.

NEXT: Try to Relax Over the Few Weeks, Because Obama is Gonna Stimulate the Hell Out of the Country Come January

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  1. $17.4 billion? Don’t bother me with fiddling small change.

  2. That’ll last ’em, what, a week and a half?

  3. Good ole Boy Dictator Bush just LOVES giving money away at Main Street Americas expense doesnt he!

    jess
    http://www.privacy-center.be.tc

  4. Now we will hear (in the press) from the unskilled illiterate UAW members about how they are still entitled to exaggerated wages and benefits while the rest of the country suffers.
    Stand by…..

  5. WTF? Why even bother? What is the point of keeping them going until March? Are they going to get more money then? Obviously, they will.

  6. In exchange for the money, the automakers must provide warrants for non-voting stock, accept limits on executive pay, give the government access to financial records and not issue dividends until the debt is repaid. The government will have the authority to block transactions larger than $100 million.”

    Throwing out the wisdom of the bailout in the first place how is some of the above going to help?

    Why would any executive who is any good want to work for a company where their pay is limited?

    Why would an investor want to buy stock in a company that will not be allowed to pay dividends?

  7. Take that, Detroit. We really showed you guys, didn’t we?

    Obama should pick Gettelfinger to negotiate with Kim Jong Il on nuclear issues. He certainly stomped the balls off our guys.

  8. Why would any executive who is any good want to work for a company where their pay is limited?

    Why would an investor want to buy stock in a company that will not be allowed to pay dividends?

    Let’s wait until wee see how “limited” executive compensation really is. And people have been buying Berkshire Hathaway shares for decades; Buffet has never paid a dividend.

    But- it’s highly unlikely there will be any visible price appreciation for GM shares.

  9. There was one news report yesterday that said the purpose of the 17B loan was to fund GM & Chrysler till March 09 or so that they could be prepared for an “orderly bankruptcy” then rather than a “disorderly bankruptcy” now.

    Today’s new reports only mention “restructuring”, so it’s not really clear to me that this is a bailout or just a holding pattern.

  10. Two things: 1) since this was done by the president and the treasury with no legal authorization whatsoever, the incoming administration can change the terms of the deal on a whim. Which if course they will.
    2) the loans are going to be “senior” to existing debt – including that secured by the assets of the company. If (when) the company eventually goes bankrupt anyway, the government gets paid first – meaning people further down the capital structure get screwed. A couple of good law sites are already talking about the 5th amendment takings issues that this brings up – since effectively the government is taking the cash from junior claimants.

    Good case for IJ to take up or file amicus brief when this inevitably gets litigated.

  11. “Why would any executive who is any good want to work for a company where their pay is limited?

    Why would an investor want to buy stock in a company that will not be allowed to pay dividends?”

    Maybe driving the stock value down abruptly is the real purpose behind this plan ? You know, like what Allende (and then Chavez) did to nationalize companies on the cheap ? Fast forward to March 2009, and Obama announces executive failures are forcing him to put the Big 3 under direct federal management.

  12. Just say no.

  13. How can the Detroit 3 survive if the demand side of the equation is ignored? Consumers have to want to buy cars, otherwise no amount of bailout loans, etc. to the manufacturers will help. For the most part, those driving clunkers that need replacing are the same folks who can’t afford a new car or can’t get a loan. Those driving newer cars are still concerned about their jobs or the hit their retirement savings took. So, because cars are so much more mechanically sound than they were a decade ago, these folks have little to lose by just driving their current car another year or so until the economic outlook brightens.
    I have been replacing my car every three years – not because it needed it but because I wanted to. My present car is three years old this month, running fine and I expect to keep it another two or three years. Multiply me by thousands and you have a serious drop in new car sales that won’t be helped by loans to the Big Three unless car prices are slashed to “going out of business” levels.

  14. I love how they threaten to take back the money which is supposed to get them through the next three months. Out of what pile of gold left lying around by GM?

    And how they act as if any threat they make now will be honored by Obama. And “don’t want to buden the new administration with a bankrupt industry” is a laugh! What do they think they have there come March?

    I also wonder why bankruptcy is supposed to scare buyers off, but pronouncing the industry dead on its feet is not going to bother anyone….

    They just kicked this down the road a couple of months. Really lame.

  15. It’s a good time to buy a used car. With the shit economy and end of the year inventory tax panic, I set my barracuda of a wife loose of hapless salesmen and ran off with a 2006 ex-lease in perfect condition for a song.

  16. And “don’t want to buden the new administration with a bankrupt industry” is a laugh!

    Would you believe more if it were phrased, “Don’t want them to go bankrupt before Obama’s Administration starts, and let Obama blame us while remaining vague over whether or not he would have saved them?”

    On the one hand, the President-elect has continually issued statements saying that he wants something like this to be done so that they don’t go bankrupt. On the other, perhaps he doesn’t really mean it, he wants it to collapse but wants to be able to blame Bush.

    I remember when Roderick Long pointed to the Chrysler bailout as an example of the government always encouraging a fewer number of firms in various industries. Really? Not just a case of protecting incumbents. He really thinks that the bailouts don’t increase the number of car companies, that there would be plenty of car startups instead of existing car companies taking up the market share?

  17. I love how they threaten to take back the money which is supposed to get them through the next three months. Out of what pile of gold left lying around by GM?

    That’s the thing: in bankruptcy, the equity holders get nothing, the unsecured people get nothing, and even the secured people take a haircut – maybe they’d get 85 cents on the dollar after selling the assets. GM has 38 bn of long term debt – so I’m figureing the assets are worth ~32.5 bn in liquidation.

    Now, assuming GM gets 15bn of the TARP funds for itself, and then burns through that by march and goes bankrupt then. The government puts them into chapter 7 and pays itself back 15 bn by selling the assets. That means there is only 17.5bn left to pay back the senior secured. So thats 46% recovery – massive taking.

  18. My wife and I will probably be in the market for two new (or, more likely, somewhat used) cars in the next year. She’s driving a 1996 Mercury Villager (which is actually a Nissan Quest) that is on its last legs, and I’m driving a 1995 Honda Accord that is approaching 200K. We haven’t even considered buying an American replacement for either, because we like driving cars into the ground.

    I think engine performance in the U.S. cars is much better that in the past and often comparable to what the Japanese are producing; however, my feeling is that U.S. manufacturers muck around too much with all of the other systems, just to be “different” from year to year. Honda doesn’t do that–some of the features on my ’95 Accord are the same as on my old ’85 Accord, even though the cars look entirely different. Through two Accords, the only problem I’ve had any frustration with is the A/C, and that only with this car after owning it for seven years.

    Next up? Probably a Sienna (two adults and four kids requires a minivan) and another Accord. I was thinking about getting something different for myself this time around, but I really like the new Accord.

    For those shaking their heads at a lawyer driving a ’95 car, well, (1) waste not want not and (2) I’m not that kind of lawyer ? I do have, by far, the cheapest car in reserved parking at work, however.

  19. Pro Lib,

    nice one. I have always subscribed to the same philosophy. My first car was the most I ever spent, and since then I have made an art form of paying the least$/miles over the life of my vehicles. I tend to acquire my used cars between 60-100k and ditch them ~150-200k if im lucky. paying 3-6k instead of 25k that the orginal owner shelled out. My friends in finance shake their heads, but I just laugh when their BMW’s and Lexuses (Lexi?) started getting keyed a few months ago.

  20. Next up? Probably a Sienna (two adults and four kids requires a minivan) and another Accord

    Ha ha! ProL will be driving mini-van!

  21. GM’s 8.375 percent bonds due in July 2033 rose 2.5 cents to cents[sic] on the dollar, yielding 46.4 percent, according to Trace, the bond-pricing service of the Financial Industry Regulatory Authority.

    That’s quite a risk premium; it’s almost as if they don’t think those loans will be repaid.

    from the Bloomboig link

  22. ProL will be driving mini-van!

    I’m keeping my fingers crossed that while the kids are in school he cruises town and uses it as a bang bus. There’s some good money in amateur porn if you know what you are doing.

    I’m with PL. My wife and I also drive cars into the ground. We just traded in her ’95 Saturn SL2.

  23. I tend to acquire my used cars between 60-100k and ditch them ~150-200k if im lucky

    My family has a pretty cool scheme going. My grandfather, who likes cars, buys new Toyotas and Lexuses for cash (right now he has an Avalon and an LS 430). He puts few miles on them. After a few years, he will sell them to someone in the family for a song. Then after more years, the car will be given to a young person in the family who is just starting out/in college/etc. This scheme works out pretty damn well.

  24. Pro L-

    I have a couple of friends who say the Honda Odyssey is the way to go, minivan-wise.

  25. You can get a roomy, stylish and powerful two year old Suburban for about fitty bucks, I hear.

  26. implied recovery is in the low teens – I was far too optimistic @10:41…

  27. I used to buy used cars and then drive them until they failed (two subarus lasted to 140K or better). Now I try buy new cars and drive them until they fail. Haven’t actualy achieved that though.

    My late 90’s Nissan 200SX had 125K and was running strong when I hit two deer at 50+ mph on the freeway. The insurance totalled the vehicle rather than repair it. My 2002 Xterra has 115K and I expect to get at least another 60K or better out of it.

    The advantage of buying new is that you know for sure that all scheduled maintenance has been performed. There is no reason to expect the cars will ever stop running if you start new and do all scheduled maintenance.

  28. I blame MNG for this bailout.

  29. kinnath
    back in the day i did my own maintenance. I target 60-100k because usually there’s nothing major to be done before then. I like to get anal family man types who I know change the oil every 3k – but that said if you dont have the time inclination to give the engine a once over yourself – new is probably safer. I never ended up with a dog though…

  30. Naga, would you buy one of these used?

  31. Domo, I used to do a lot of my own work as well. Two things happened: I got older and I found a dealer I trust completely.

  32. Episiarch,

    It’s usually my wife driving the minivan, but I drive the one we have on occasion. Naturally, I hate it. But there aren’t many cars that can seat 7, especially when one is a baby in a baby seat. We actually own three cars, because my wife came to the marriage with a Mitsubishi Eclipse Spyder. I’m driving that right now, while the minivan is in the shop (Mrs. Libertate’s driving the Accord). I don’t care much for the Spyder, which is a chick car in my opinion. At least it’s a standard–I can’t abide automatics. It’ll go (trade-in or, more likely, sale) when we buy the new minivan.

    I went back and forth on the Sienna vs. the Odyssey. Looks like the former is the superior value, though the Odyssey is a good car, too. The Odyssey is definitely the second choice. We’d considered a Pilot or a Highlander, but even the big ones are a little tight for the Libertate Bunch.

  33. Episiarch,

    You have my attention! Continue.

  34. Two things happened: I got older

    Getting there for sure…

  35. Naga, it’s not in very good condition. The windshield is smashed and it rolled over. Then it blew up when some dude tried to take the gas. How about a bottle of Thunderbird for it?

  36. So ProL, you are saying that you drive either chick cars or mini-vans. And to think I used to think you were cool, man.

  37. Episiarch! Opinions on Musk’s Tesla? And, must one play Tesla when driving it?

  38. Well, I mostly drive the Accord. But my coolness was absorbed by the greater needs of the Family? long ago. Fatherhood is the jumping the shark of adult maleness.

  39. Epi, leave PL alone. He’s obviously hyper-fertile. He could probably knock up on-line if he tried real hard.

  40. Fatherhood is the jumping the shark of adult maleness.

    For a while.

    The most satisfying thing about getting the 350Z was knowing both my children are now driving minivans 😉

  41. Episiarch! Opinions on Musk’s Tesla?

    You mean the electric roadster? I’m sure it’s cool and all, but I think I’d miss the roaring engine.

    And, must one play Tesla when driving it?

    Obviously. But it wouldn’t have to be that loud, because…no engine noise.

  42. I think I’d miss the roaring engine.

    Maybe you can download a Ferrari v-12 track from itunes.

  43. Epi,

    Don’t be taken in by the Tesla, dude. If anyone tries to steal the battery, will it explode? Can you fit a huge turbocharger in front? Most important of all, can you outrun the Humungous and his band of warrior outlaws in a Tesla? I think not.

  44. Perhaps Musk could build into the Tesla the sound of the Falcon 1 launching. Without any volume control. Rocket car, bitch!

  45. Fatherhood is the jumping the shark of adult maleness.

    And a microcosm of the horrors of collectivization.

  46. Yes. I provide all of the income, and the unrestrained government decides what to do with it. Fortunately, she is relatively frugal and benevolent.

  47. *Pro Liberate in his rocket car*

    What happened to the brakes?

    *Naga Sadow jumps out the back of the car, screams*

    Wilcard, bitches!

  48. Larry Kudlow just came on and said, “You now own General Motors.”

    It’s worse than that. We don’t own anything. We’re just pounding money down a rathole.

    And now that fucking lowlife moron scumbag Wagoner is having a press conference, to “thank his key partners.”

    Good fucking grief.

  49. When do we get to throw shoes at the president?

  50. Episiarch,

    You’re right, of course. Skip the Tesla and buy Musk’s Falcon sports car. Zero to escape velocity in 200 seconds! Vrrroooom!

  51. P Brooks,

    I hereby vote myself a new Camaro as a senior stockholder! I’m in it to win it! Wildcard, bitches!!!

  52. That’s okay Bush. You had me at “Mission accomplished.”

  53. I’m going to buy a Tesla and have the electric motor removed and a Ferrari V12 put in.

  54. Seriously, how is it almost 2010 and me without a job that requires commuting to orbit? Or, better yet, to a planetary body? And that’s a short commute–20-30 minutes each way.

    Yes, I’m serious.

  55. GM doesn’t make anything I want. Can I opt out, and have my money back?

  56. All of this should remind us that centralization, in and of itself, has been a colossal failure. Centralized management, centralized political organization, centralized electrical grids, centralized communications systems, etc….

    A significant school of libertarian thought scoffs at the notion that big is necessarily bad and that centralization is necessarily bad. I have always regarded that school of thought to be amateurish, almost knee-jerk in its application to criticims of big and centralized being bad, in and of themselves.

    I submit that the empirical evidence suggests otherwise. GM and Chrysler are just the latest examples.

  57. Prolib-

    Centralized, top-down organizational, management and political structures have not helped.

  58. Wery soon, GM make Volga. Only car you need. Drive good.

  59. This bailout is illegal.

    The President wants to fund the bailout from the Troubled Asset Repurchase Program (TARP). The TARP authorized funds for financial institutions only.

    Since (a) the auto companies are not financial institutions and (b) the Senate explicitly voted down giving them a bailout, it is illegal for the President to give them money from the TARP.

    Why are so few people picking up on this?

  60. Epi,

    Where the hell is a V12 gonna fit? You’re gonna tear the wheels right off of your Tesla. Listen, all you gotta do is get your hands on one of the new Challengers. I’m sure room can be found for your V12. Your a senior stockholder now! Live it up my friend.

  61. There’s always room for a v-12.

  62. Naga, being a pimp-type person, I would of course have to have a Cadillac. There’s no other option.

  63. You know, like what Allende (and then Chavez) did to nationalize companies on the cheap ?

    Ahem, we only nationalize successful companies.

  64. Personally, I’m gonna put in one of those ejection seats I saw on MythBusters. When I’m done wit da girl, I’ll just say “WTF are you still doin’ here? Get out there and make my money!” and KA-BLAM! She gets blasted through the roof out onto the street. Just how I roll . . . nuff said.

  65. “Blindsided! We never saw it coming! I’m still trying to figure out what happened.”

  66. In exchange for the money, the automakers must provide warrants for non-voting stock, accept limits on executive pay, give the government access to financial records and not issue dividends until the debt is repaid.

    What’s missing from this list? Starts with a U . . . .

  67. I need to calm down. I’m in way to good of a mood this morning.

  68. “I’ll NEVER leave. I’m a fucking genius, and NOBODY could ever figure out how to run this company better than me! Just look at my unbroken string of triumphs over the years!! Goddammit, are you people BLIND?”

  69. GM and Chrysler needs to gag their workers if they expect this to work.
    Despite the Feds help, most Americans will not buy from a company whose workers continue to feel, and loudly voice their opinions, that they are superior to the common man and immune from pay cuts. We don’t like gangs controlling our streets and we don’t like supporting gangs controlling industry.
    Despite all logic we will not buy from people that feel we “owe” them high wages.
    Do you continue to shop at the store with rude cashiers and sales folk?
    Hell no. Why would we support these loudmouths when there are more polite and reasonable Americans providing the same product?
    Paybacks are a bitch eh?

  70. P Brooks,

    I give up. I can’t figure out where your quotes are coming from. Unless you’re just saying funny ass shit and throwing some quotes around it.

  71. Mr. X | December 19, 2008, 11:16am | #

    This bailout is illegal.

    Only in the same sense that the Iraq War was illegal. Oh wait…

  72. Honey, I’m de-orbiting right now. Need me to pick anything up on the way home?

    The future sucks so far.

  73. This bailout is illegal? You’re illegal! The whole government is illegal! They’re illegal!

  74. I’m liveblogging the GM press conference.

  75. Pro Lib,

    Relax. We got tang and velcro. What more could you want? Sharks with frickin’ lazer beams attached to their heads? It’s a very groovy time, baby. Yeah!

  76. I say, we send Wagoner, his faithful Indian companion Henderson, the entire General Motors Board of Directors and the sitting President to the moon to begin work immediately on the Chevrolet Space Car Assembly Plant. They may not return, except in a functional prototype.

  77. We don’t have sharks with friggin’ lasers attached to their heads. That was just a movie. Just like easy space travel is just a movie.

  78. Pro Lib,

    Calm down. You’re getting all worked up over nothing. We got orbital flights now at least. (shrugs) Space travel just isn’t profitable yet. Give it time.

  79. Give the government time? Ha! NASA’s not going to get me my family-sized, solar-system-ranging space sedan. Nor is government research going to get me fusion power in my lifetime.

    I reject your future and substitute my own!

  80. Pro Lib,

    Being a senior stockholder at GM and Chrysler means you could probably leverage some funding for your rocket car. The government just keeps nuclear waste lying around. Why not rockets that you can attach to your car? Though I would suggest watching some MythBusters before you make any attempt yourself.

  81. While I love Mythbusters, they lack the funds to build a practical rocket car. They’re more like MacGyver with a non-fictional TV show.

  82. Pro Lib,

    You’re gonna ruin my good mood! Listen, I’m told fusion research is . . . coming along nicely. Hey! Sign up as a space trucker and you can be in on the ground floor! There’s room for the odd skank too.

  83. Your not thinking things through Pro Lib. Their rich now too! They are also senior stockholders! I’m sure you could talk em in to prototyping an . . . obital . . . sedan.

  84. How does the president have the authority to do this?

  85. Just for you-all’s information and entertainment, there’s a counter-view going around the cybersphere that the true goal of this bailout is to murder the UAW–a liberal friend of mine sent me this link this morning:
    WaPo article

    In this article you will read that the UAW is responsible for the destruction of racism and the prosperity of the American middle class. All by itself (well, with the assistance of Walter Reuther and Jimmy Hoffa, of course…)

  86. You, too, could own a Space Shuttle!

    http://slog.thestranger.com/slog/archives/2008/12/18/in_search_of

    Just retrofit engines for your flying car!
    (Yes, I know that’s not how the shuttles work>)

  87. Formerly Jennifer? Did you grow a penis or something?

  88. “General Motors Corp. and Chrysler LLC will get $13.4 billion in initial government loans to keep operating in exchange for a restructuring under a rescue plan announced by President George W. Bush….”

    Which won’t do anything to increase their car sales volume one iota – the actual root of the problem.

  89. “In this article you will read that the UAW is responsible for the destruction of racism and the prosperity of the American middle class. All by itself (well, with the assistance of Walter Reuther and Jimmy Hoffa, of course…)”

    That’s almost as funny as another liberal myth that the middle class was created by the government.

  90. My apologies if this has already been brought up, I did not take the time to read all of the comments. However isn’t this illegal, since the TARP was created to help the financial industries? To my knowledge the car companies have nothing to do with the financial sector.

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