Economics

GM, Chrysler to Gov't: Give Us More Money Now. Or More Money Later. But Definitely Give Us More Money.

|

There's a reason why GM and Chrysler announced their long-awaited, much-anticipated restructuring plans (the homework requirement for taking taxpayer loot last year) after the markets closed yesterday: The plans pretty much model the Saturday Night Live sketch in which automakers explain to Congress that they will need more federal dollars even or especially if there's an uptick in the car business.

From the Detroit Free Press:

General Motors Corp. and Chrysler LLC summoned the prospect Tuesday of their collapse unless they get $7 billion in federal aid within six weeks—part of a dramatic plea for a total of up to $39 billion to survive the worst economic crisis in the history of Detroit's signature industry.

Yet the automakers warned that any new money from the federal government would be much cheaper than the staggering cost of bankruptcies and forced liquidation of the two companies. By their estimates, bankruptcies would cost a combined $124 billion in federal loans and up to 3 million lost jobs.

Saints preserve us, I've seen junkies with better raps than that one. Among the options outlined by Chrysler is a merger between it and GM, thus producing the fugliest business baby since Kmart and Sears hooked up.

Yesterday, Reason.tv's Michael C. Moynihan and Dan Hayes detailed the basic problem with the auto industry and its ongoing bailout. Watch now (and go here for downloadable versions, links, and more):

NEXT: Coming Today: A Brand New Plan to Pump Up to Reinflate the Housing Bubble That Helped Get This Whole Economic Mess Started

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. Yet the automakers warned that any new money from the federal government would be much cheaper than the staggering cost of bankruptcies

    “Nobody move, or the nigger gets it.”

  2. Anyone else getting sick and tired of these idiots with their free hand outs? When will enough be enough?

    RT
    http://www.anonymity.eu.tc

  3. Yet the automakers warned that any new money from the federal government would be much cheaper than the staggering cost of bankruptcies and forced liquidation

    Bitches. They’re basically making the case that overall expense is the one and only thing that should be considered here. Why don’t they just make a bid to cut 2 million jobs and take a mere $110 billion and present it as an offer the people can’t refuse… oh wait, they pretty much did that.

  4. Detroit R.I.P

  5. Yet the automakers warned that any new money from the federal government would be much cheaper than the staggering cost of bankruptcies and forced liquidation

    Can the FBI bring extortion charges against them? Blackmail is a crime.

    “Nobody move, or the nigger gets it.”

    “Listen to him, men. He’s just crazy enough to do it!”

  6. Yet the automakers warned that any new money from the federal government would be much cheaper than the staggering cost of bankruptcies and forced liquidation of the two companies. By their estimates, bankruptcies would cost a combined $124 billion in federal loans and up to 3 million lost jobs.

    Auto makers (Oct. 2008): Give us money or we’ll collapse and lose jobs.

    Auto makers (Feb. 2009): Give us money or we’ll collaspe and lose jobs. And we won’t be able to pay you back.

    Maybe collapsing the entire economy is what we need at this point (since it look like the Obama Administration is doing this on purpose). A nice, clean slate might do us some good.

    Granted, life may suck for about 40 years, but someone’s got to clean up the Baby Boomers’ mess.

  7. Wow, I think that it is now Un American to buy an American car.

  8. Hey, so how come Reason TV doesn’t have a link to post the video on Facebook?

    Get with the times peoples.

  9. I have a business plan. I propose a merger between the CEO’s of GM and Chrysler and my left and right fist, respectively…

  10. Aanybody who quotes numbers from the Center for Automotive Research should be flogged.

  11. “Maybe collapsing the entire economy is what we need at this point…”

    Yup. It’s the only way the revolution will come. Just like Obama is the reaction to Bush. Free-market economics and capitalism will be the response to government financed bullshit.

    I don’t think it will suck for 40 years though. Everything moves much faster now.

  12. Yo, fuck GM and Chrysler.

  13. I think Xeones sums it all up.

  14. This is actually similar to the tack that “debt reduction” services take with creditors when trying to get them to accept less than what they’re owed, so it’s not really blackmail.

    Of course, in that case they’re not asking for MORE money, so you guys might have a point.

  15. I should add that Congress and Obama are fools if they give GM the money they’re asking for. Which means they’re definitely going to be fools.

  16. Wow, I think that it is now Un American to buy an American car.

    I certainly will never buy another Chrysler or GM. And I’ve about decided not buy another Ford, either, as any money I send to Ford goes mostly to the UAW.

    And, of course, they’re lying about the cost of bankruptcy. Probably a safe working assumption is that the cost of shutting down would be half that. Which sounds to me like a real bargain.

  17. We finally got rid of our last American car in December. Never, ever going back.

  18. I have a Ford. It’s actually been pretty reliable. I bought it used from my uncle. That said, I would pick a Toyota or Honda over an American car any day of the week.

  19. Yet the automakers warned that any new money from the federal government would be much cheaper than the staggering cost of bankruptcies and forced liquidation

    SUNK COST FALLACY!

  20. I have a Volkswagen with 140K on it that runs better than my parents GM with 60K

    I’d have to get an American car for free to get another one.

  21. Free-market economics and capitalism will be the response to government financed bullshit.

    Powder and artillery are the most efficacious, sure and infallible conciliatory measures we can adopt!

  22. I’d have to get an American car for free to get another one.

    Which is fortunate, since Obama promised us all one, didn’t he?

  23. This is actually similar to the tack that “debt reduction” services take with creditors when trying to get them to accept less than what they’re owed, so it’s not really blackmail.

    Exactly, it’s extortion!

  24. I will concede the point to Taxtix.

  25. but the jobs will be lost anyway, nobody wants to buy your crappy car and take on more debt right now. its not give me money or our demise wrecks the economy. it is give me money AND we wreck the economy but this way it is SLOWER and MORE PAINFUL. fuckin’ sadists!

  26. In the spirit of the times, the national anthem definitely needs to be changed from “The Star-Spangled Banner” to Spinal Tap’s “Gimme Some Money”.

  27. Just as an aside, the Sears – Kmart merger actually made some conceptional sense in way Chrysler -GM does not. The former consisted of two different players in the same overall industry but slightly different niches. Theoretically, they could have achieved efficiencies by merging supply chains but maintaining separate branding. Chrysler & GM otoh, completely overlap – the only way consolidation makes sense would be to reduce production overcapacity, but then only at the cost of what everyone is ostensibly trying to avoid – the loss of tens of thousands and jobs and the effective dissolution of one of the companies. Which is more than likely at this point inevitable.

  28. I’m too lazy to do a site search, but I knew a asserted on these pages that they’d be back for more.

    They’ll be back again and the government will continue to throw good money after bad.

    Chrysler is the automotive manufacturing equivalent of Terry Schiavo. GM is a roulette wheel.

  29. knew a asserted —-> know I asserted.

    If only there was a preview option for comments here.

  30. The Kmart and Sears mashup had a couple of things going that could have been properly executed.

    The question of the property ownership was that the business of Kmart basically came for free with the purchase of the land at the price it was executed – hence Sears being lauded as a genuis (don’t recall the CEO name).

    However, they failed in the final execution. What should have been done to maximize/lock in the value was to create a holding company for all of the land under the stores, sell it to that holding company, and lease it back under favorable terms. Create preferred voting shares with reduced dividend payouts covering 51% ownership, and sell the rest of the shares on the open market to monatize the land deal and lock it in without having to give up control of the land. Insurance funds love the long-term lease revenue, and idiots won’t notice the voting issues.

    Name the remaining stores S-mart. Shop Smart, shop S-Mart!

    Watch the real-estate market crash. Practice your evil cackle laugh. Buy back land holding company with large paper loss (but real profits) to offset taxes for the next 10 years.

    Net gains: public paid you value difference on land then vs. now. If RE market had done well, still have both locked in good lease rates and control of company (plus your shares were probably valued at a higher multiple due to lack of land-drag on ROI) since RE market tanked, buy back at low value plus major future tax gains due to loss of value on assets by holding firm, plus the real cost of that loss was bourne by the public investors.

    Gain massive sales increase from Evil Dead fans.

  31. I second J Sub.

    GM has a chance (a slim chance!) To be daved through redtructuring, while Chrysler is just shit out of luck. The only valuable brand it has left is Jeep, and that will probably be picked off ChryCo’s corpse by Ford.

  32. Let’s try to keep in mind a couple of things. This circus is NOT about economics, business strategy or long-term viability of these companies. So all the discussion about what’s the cheapest, most effective option to deal with the issue is entirely beside the point. It IS about the politics of protecting the UAW’s narrow self-interest (which btw is not synonymous with the interests of “labor” generally or even of all its members). GM and Ford compete quite effectively, for instance, in Europe, where they are not hamstrung by CAFE regulations that are a transparent UAW protection racket. It is also not about whether the companies can profitably produce cars the public will buy (they can — the vehicles just happen to be SUVs and trucks, not fuel-efficient, politically correct compacts), nor is it about whether cars can be economically produced in the USA (they can, as Honda, Toyota, BMW, Mercedes-Benz, etc. have proved). The next bailout will pass, and the next one and the next one. My guess is that this will be true in spite of the fact that a majority of America opposes it, both viscerally and rationally. It’s what our democracy has come to.

  33. I nominate ChiSailor as thread winner, based on his Army of Darkness reference.

  34. For the record, I *was* given an American car. The transmission failed at less than 40K miles, the headlights and dash lights “flicker” (by design, apparently), and the power steering pump makes a weird clattering noise when it’s cold.

    Just sayin’.

  35. Does it explode if you travel over 40 mph?

  36. Chrysler should go into Chapter 7 liquidation, sure. But we all know that isn’t going to be allowed happen. Chrysler will always get a bailout to at least limp along through a Chapter 11, multiple times if necessary.

    However, if GM and Chrysler are merged, then when GM goes through its eventually-inevitable Chapter 11 reorganization, the merged-in Chrysler operations can be liquidated as part of the reorganization.

    Accordingly, a GM-Chrysler merger should be encouraged, as the fastest way to eliminate Chrysler as an eternal bailout case.

  37. I think Chrysler wants to merge so that they can be nationalized, and then become the sole supplier of our ever increasing bureaucracy. If merging with GM is the best you can come up with to increase your competitive edge, you are headed for a long and successful career in Washington.

Please to post comments

Comments are closed.