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Question About Auto "Bailout" (Not Politcal)

Old 12-21-2008, 04:46 PM
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Default Question About Auto "Bailout" (Not Politcal)

So, if I understand correctly, the "Big 3" are going to get a 15 or so Billion dollar loan. Ford, as I've heard from some, is the least "Needy" of the 3. But, if these companies have been "losing money" for so long, how in the HELL are they going to be able to turn a profit to where they can even BEGIN to pay ANY of the loan back????????

Don't get me wrong, I'm all for "Buy American" ( I own a Ford, and have owned many), but I always thought that if businesses don't do well, they fail. And if 3 major companies "fail" we need to look at "WHY" they failed and take measures to see that it doesn't happen again.
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Old 12-21-2008, 05:01 PM
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Default RE: Question About Auto "Bailout" (Not Politcal)

Boy this is going to be a LOOOOOOOOOOOOOOOOOOOOOng one


To answer your question, I HAVE NO IDEA and not sure they do either.

There is going to have to be some serious changes and out Big 3 and the UAW do not believe in changes from what I have read.

In fact if what I have read is correct they are talking about shutting down for a month or so but the employees still will get paid, have no freaking idea what that will accomplish but if the Gov is going
to give them the money I HOPE IT WORKS ;? ;?
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Old 12-22-2008, 12:05 AM
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Default RE: Question About Auto "Bailout" (Not Politcal)

All you have to do is answer one question and you'll understand the rest:

If, at about $4.00 per share, you could buy every share of GM for about 3 billion and own the company outright, why would we not buy it?

The answer to your question is that they will have to find a way to significantly improve their cars and reduce the costs to build them. Then, the need to convince us that there are making good cars and we'll start buying them. I personally find GM's product line to be boring, plain and simple. They need to ditch their electronic complexity, put real seats in them and make the cars enjoyable to drive. They can do it - if they make the bean counters quit re-designing the cars. The only thing that has kept them afloat for several years is their trucks, not their cars. Me? If I can't see all the spark plugs, I don't want to buy it.

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Old 12-22-2008, 12:47 AM
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Default RE: Question About Auto "Bailout" (Not Politcal)

Just1more - 12/22/2008 7:46 AM

But, if these companies have been "losing money" for so long, how in the HELL are they going to be able to turn a profit to where they can even BEGIN to pay ANY of the loan back????????
You really don't want to know.
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Old 12-22-2008, 11:56 AM
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Default Re: Question About Auto "Bailout" (Not Politcal)

Interestingly enough, even Toyota is feeling the pinch. Noticed this morning that they are going to be showing a pretty big loss, about 1.7 billion if I remember correctly. Even though Chevy is somewhat "boring" they have more cars types for sale that get over 30 mpg that do Toyota, Honda, etc. I agree, their cars don't inspire much desire to buy. They are planning on coming out with more hybrids and have announced the "Volt" to be introduced in 2010, if they get that far. I think the Bush administration have given them until March 31 to come up with a defensible plan for the future that will enable them to survive. Hope it works as I would hate to see so many people be put out of work.
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Old 12-22-2008, 01:10 PM
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Default Re: Question About Auto "Bailout" (Not Politcal)

JALICHTY - 12/23/2008 2:56 AM

... Hope it works as I would hate to see so many people be put out of work.
Me too. But ...

The current economic model failed, in part, because people that aren't working don't have income. People without income aren't buying. People not buying is causing layoffs. Layoffs means people aren't working. People that aren't working don't have income. People without income aren't buying. People not buying is causing layoffs. Layoffs means people aren't working. People that aren't working don't have income. ....

It's a vicious circle that no one has a clue how to get out of. This time, unlike the great depression, the problem extends globally.
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Old 12-23-2008, 12:09 AM
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Default Re: Question About Auto "Bailout" (Not Politcal)

Eyeball: You are describing what was called "The Velocity of Money" when I took economics. If everyone is afraid to spend (like I am), the economy slows to a stop. The velocity of money is the average frequency with which a unit of money is spent in a specific period of time. If I spend, someone else collects it and then they spend...................
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Old 12-23-2008, 01:49 AM
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Default Re: Question About Auto "Bailout" (Not Politcal)

kerno - 12/23/2008 3:09 PM

Eyeball: You are describing what was called "The Velocity of Money" when I took economics. If everyone is afraid to spend (like I am), the economy slows to a stop. The velocity of money is the average frequency with which a unit of money is spent in a specific period of time. If I spend, someone else collects it and then they spend...................
Ok, you go first. Start spending as much as you can, as fast as you can. The rest of us will fall in behind you.

The banks 'float' the economy. Been that way since the turn of the last century. Right now they can't do that. The banks need to increase the money on hand as a ratio of deposits. That is a new mandate of the Fed Reserve. So banks need to hold more capital in reserve. In addition, they are hunkering down, reducing spending, reducing risk in anticipation of the proverbial squat hitting the fan in early 2009, as if they have a hope in hell of surviving it.


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Old 12-23-2008, 10:45 AM
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Default Re: Question About Auto "Bailout" (Not Politcal)

If the lenders do not let loose of the mounds of cash they are setting on it will only get worse. GMAC is a great model, up to there butts in bad mortgages half owned by Cerberus(owns Chrysler) sets credit score so high no one can borrow. The cycle is going on and on. Banks have cash but they do not trust the borrowers so they loan to people who can live with out it.
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Old 12-23-2008, 11:05 PM
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Default Re: Question About Auto "Bailout" (Not Politcal)

That does seem to be the case. The banks have been given money that they are supposed to lend, but they are just using it to make their balance sheets look better. No loans and the velocity is zero.

I'd love to prime the pump, but I have my wallet buried until I see some direction.
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Old 12-24-2008, 07:48 AM
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Default Re: Question About Auto "Bailout" (Not Politcal)

hhi angler - 12/23/2008 12:45 PM

Banks have cash but they do not trust the borrowers so they loan to people who can live with out it.
Which is a good thing. I laugh when I hear talking heads or braindead politicians whine that banks aren't making "bad" loans right now. Banks are extremely conservative right now as they should be. If they started loaning money to everyone they will find themselves with a massive portfolio of bad debts. Until the landscape becomes clearer, banks shouldn't be making credit assumptions that everyone that wants money will repay it when it becomes due. Our economy is in the process of de-leveraging and that means the availability of easy credit was and should dry up.

As to the Big 3, if they simply closed their US operations they would become viable companies. They make profits outside of the US. Their US business models provide excessive retirement and healthcare benefits and are unsustainable. If they don't deal with that problem and the UAW doesn't wake up to reality, the Big 3 will cease to exist in the US......it's really just that simple. Another place they need to tweak operations is in the area of worker rules. The UAW has bargained for excessive layers of worker oversight and counter-productive labor rules. The end result is too many total labor hours per vehicle. Lastly, the CAFE standards are inconsistent with market demand. The average American doesn't want to own a POS little hybrid. The Big 3 are obligated to produce cars people aren't interested in buying. They have poured billions and billions into these auto and have not achieved a positive ROI on that investment.......I don't know how that problem can be fixed.

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Old 12-24-2008, 07:50 AM
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Default RE: Question About Auto "Bailout" (Not Politcal)

Eyeball - 12/21/2008 10:47 PM

Just1more - 12/22/2008 7:46 AM

But, if these companies have been "losing money" for so long, how in the HELL are they going to be able to turn a profit to where they can even BEGIN to pay ANY of the loan back????????
You really don't want to know.
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Old 12-24-2008, 04:12 PM
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Default Re: Question About Auto "Bailout" (Not Politcal)

The UAW is why the big 3 are in such deep doo-doo right now. Each Ford Taurus made has $2000.00 worth of legacy in it, thanks to the agreements forced on them by the UAW. They have to figure out how to take 2 grand out of each car to compete with Toyota. It's no wonder a Toyota is more luxurious, drives better, and lasts longer than a comparable Ford. I pick on Ford, but every car made by UAW labor in the US has this legacy saddled on it.
The UAW once served a valuable purpose many years ago, but it has now become a parasite that is sucking the life out of the domestic automotive industry.
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