Auto Co Execs.

[Trout Maharishi]

One thing you can be sure of, a bail out is coming. The rust belt and the unions supported the Democrats and now, that note has come due, they owe them. All this barking about corporate jets and come up with a plan is just posturing.

[Silver Creek]

One thing you can be sure of, a bail out is coming. The rust belt and the unions supported the Democrats and now, that note has come due, they owe them. All this barking about corporate jets and come up with a plan is just posturing.

Are you sure enough to buy F or GM? That is the real test.

[phg]

The aren't going to bail out the stockholders, just the execs and the union workers.  The problem is, their business model is dead, but neither the execs nor the union will admit it.  As we say here in the South, "they done milked that cow dry!"

[Silver Creek]

I must be missing something. How do does a bailout not raise the stock price?

Look at how much Citigroup moved after the bailout over the weekend:

http://finance.yahoo.com/q/bc?s=C&t=5d&l=on&z=m&q=l&c=

[phg]

I must be missing something. How do does a bailout not raise the stock price?

Look at how much Citigroup moved after the bailout over the weekend:

http://finance.yahoo.com/q/bc?s=C&t=5d&l=on&z=m&q=l&c=

Silver, if you can stand it, feel free to invest in them.  Citi has a reasonable chance of recovering, although they still have HUGE exposure to consumer debt (credit card) defaults.  It may take several years before they become a "good" investment again.

As for Ford and GM, while no one wants to see them go out of business, and with the price of gas below $2 again, they might get a bit of breathing room.  Their problem, though, is a broken business that is nearly impossible to fix.  If they can't make money building cars the rest of us can afford, as they claim, then adding a federal subsidy to each car built is the only solution, and I don't see that happening.  What I do see as much more likely is a Chapter 11 solution where the stockholders get wiped out, or at least downgraded.  The union contracts get renegotiated to a more realistic wage, the legacy health care and pension obligations are off loaded onto the Fed., and the car companies reemerge with a leaner, more efficient cost structure that can compete.  Several airlines have already shown us how to do that....

Still, if you have the spare cash, and want to take a flier, go for it.  Personally, I think I can find far better returns with a lot less risk.   Now GE at $15.77.... ::)

[Silver Creek]

Silver, if you can stand it, feel free to invest in them.  Citi has a reasonable chance of recovering, although they still have HUGE exposure to consumer debt (credit card) defaults.  It may take several years before they become a "good" investment again.

As for Ford and GM, while no one wants to see them go out of business, and with the price of gas below $2 again, they might get a bit of breathing room.  Their problem, though, is a broken business that is nearly impossible to fix.  If they can't make money building cars the rest of us can afford, as they claim, then adding a federal subsidy to each car built is the only solution, and I don't see that happening.  What I do see as much more likely is a Chapter 11 solution where the stockholders get wiped out, or at least downgraded.  The union contracts get renegotiated to a more realistic wage, the legacy health care and pension obligations are off loaded onto the Fed., and the car companies reemerge with a leaner, more efficient cost structure that can compete.  Several airlines have already shown us how to do that....

Still, if you have the spare cash, and want to take a flier, go for it.  Personally, I think I can find far better returns with a lot less risk.   Now GE at $15.77.... ::)

I'm not going to invest in the auto companies, nor was I telling anyone else to do so. My comment was directed at this post:

One thing you can be sure of, a bail out is coming. The rust belt and the unions supported the Democrats and now, that note has come due, they owe them. All this barking about corporate jets and come up with a plan is just posturing.

Ergo, if TM was so sure of a bailout, the proof would be by his investment in the stock of these companies. If he has not invested, then my conclusion must be that he is not that sure about a bailout, regardless of the statement above.

My reply to you was based on your statement below that it a bailout would not raise the stock price.

The aren't going to bail out the stockholders, just the execs and the union workers.  The problem is, their business model is dead, but neither the execs nor the union will admit it.  As we say here in the South, "they done milked that cow dry!"

I certainly think a bailout would raise the stock price based on the reaction of the other companies whose stocks have gone up with the support of the US treasury, Citygroup being the latest company stock to rise after an infusion of funds. Even JPM went up altough they got no extra funds.

So for me a decison to buy F or GM is not based on fundamentals, but on the prospects of a short term gain based on the probability of Federal Funds. Right now, it is not a bet I would take. I say bet because, as you know, it has nothing to do with the fundamentals at all. An investment in GM or F right now is a wager in the purest sense of the word - it is a gamble based on the odds that the Congress and President will give F and GM the financing they need to avoid bankruptcy.

Hence if TM thinks it is a sure thing, he should buy stock.

[flatlander]

I agree with TM.  Pelosi was tripping over herself to bring the Detroit bailout before Congress two weeks ago.  She has to pay off the unions for their votes.  This business about sending the auto execs home to come up with a plan and chastising them for flying in on corporate jets is a bunch of cover smoke to hide their intentions from the public.  The Democrats are going to give Detroit something, but they're going to make the big 3 jump through some hoops before they do it so they can look like they're being prudent with taxpayer money.

[Trout Maharishi]

Are you sure enough to buy F or GM? That is the real test.

I'm not that sure My current goal is to reduce my debt as much as possible. I'm am trying to become completely debt free if I can, and I am close. I think even if the money is given to the Auto Industry it will only be a bandaid given the current economic conditions.

[fleming13]

The biggest question I would like to see put to this is how long do we think this recession will last and can the government afford to float the Big 3 until the end of the recession.  If we can't then should we fund anything at all?  I think it's a short term fix.  And I don't think the economy will recover quick enough for them to recover.  So it just looks like quite a waste of money to me.  I think somebody is going under in this case.  It can happen now with no waste of taxpayer money.  Or it can happen down the road and they can take a significant amount of tax money with them.  I know what my preference is.

[Peddler]

If I had the floor at the auto rescue talks

BY MITCH ALBOM • FREE PRESS COLUMNIST • November 23, 2008
OK. It's a fantasy. But if I had five minutes in front of Congress last week, here's what I would've said:



Good morning. First of all, before you ask, I flew commercial. Northwest Airlines. Had a bag of peanuts for breakfast. Of course, that's Northwest, which just merged with Delta, a merger you, our government, approved -- and one which, inevitably, will lead to big bonuses for their executives and higher costs for us. You seem to be OK with that kind of business.
Which makes me wonder why you're so against our kind of business? The kind we do in Detroit. The kind that gets your fingernails dirty. The kind where people use hammers and drills, not keystrokes. The kind where you get paid for making something, not moving money around a board and skimming a percentage.
You've already given hundreds of billions to banking and finance companies -- and hardly demanded anything. Yet you balk at the very idea of giving $25 billion to the Detroit Three. Heck, you shoveled that exact amount to Citigroup -- $25 billion -- just weeks ago, and that place is about to crumble anyhow.
Does the word "hypocrisy" ring a bell?
Protecting the home turf?

Sen. Shelby. Yes. You. From Alabama. You've been awfully vocal. You called the Detroit Three's leaders "failures." You said loans to them would be "wasted money." You said they should go bankrupt and "let the market work."
Why weren't you equally vocal when your state handed out hundreds of millions in tax breaks to Mercedes-Benz, Hyundai, Honda and others to open plants there? Why not "let the market work"? Or is it better for Alabama if the Detroit Three fold so that the foreign companies -- in your state -- can produce more?
Way to think of the nation first, senator.
And you, Sen. Kyl of Arizona. You told reporters: "There's no reason to throw money at a problem that's not going to get solved."
That's funny, coming from such an avid supporter of the Iraq war. You've been gung ho on that for years. So how could you just sit there when, according to the New York Times, an Iraqi former chief investigator told Congress that $13 billion in U.S. reconstruction funds "had been lost to fraud, embezzlement, theft and waste" by the Iraqi government?
That's 13 billion, senator. More than half of what the auto industry is asking for. Thirteen billion? Gone? Wasted?
Where was your "throwing money at a problem that's not going to get solved" speech then?
Watching over the bankers?

And the rest of you lawmakers. The ones who insist the auto companies show you a plan before you help them. You've already handed over $150 billion of our tax money to AIG. How come you never demanded a plan from it? How come when AIG blew through its first $85 billion, you quickly gave it more? The car companies may be losing money, but they can explain it: They're paying workers too much and selling cars for too little.
AIG lost hundred of billions in credit default swaps -- which no one can explain and which make nothing, produce nothing, employ no one and are essentially bets on failure.
And you don't demand a paragraph from it?
Look. Nobody is saying the auto business is healthy. Its unions need to adjust more. Its models and dealerships need to shrink. Its top executives have to downsize their own importance.
But this is a business that has been around for more than a century. And some of its problems are because of that, because people get used to certain wages, manufacturers get used to certain business models. It's easy to point to foreign carmakers with tax breaks, no union costs and a cleaner slate -- not to mention help from their home countries -- and say "be more like them."
But if you let us die, you let our national spine collapse. America can't be a country of lawyers and financial analysts. We have to manufacture. We need that infrastructure. We need those jobs. We need that security. Have you forgotten who built equipment during the world wars?
Besides, let's be honest. When it comes to blowing budgets, being grossly inefficient and wallowing in debt, who's better than Congress?
So who are you to lecture anyone on how to run a business?
Ask fair questions. Demand accountability. But knock it off with the holier than thou crap, OK? You got us into this mess with greed, a bad Fed policy and too little regulation. Don't kick our tires to make yourselves look better.
Contact MITCH ALBOM at 313-223-4581 or malbom@freepress.com.

[Silver Creek]

Excellent essay, Peddler. Thanks for posting.

[Woolly Bugger]

Kudos!