GM Viability Plan Cuts Saab, Pontiac, Saturn, Executive Pay

At least one analyst thinks that GM's viability plan, which it is submitting to Congress today, is strong enough to win some converts in Congress:

A Wall Street analyst said Wednesday that General Motors Corp.'s survival plan submitted to Congress will likely get a "significantly improved reception," and that the $18-billion request is "potentially just enough" to get GM through a recession.

JPMorgan analyst Himanshu Patel said he expected Congress would, at the very least, approve next week the $4 billion the company says it needs by the end of the month to avoid bankruptcy, "if for no other reason than to keep its options open, as well as those of the next administration."

Read the GM bailout plan (PDF)

Comments

[fpomareda]

I'm a Finance Director at what used to be the number 1 Saturn dealership in the southeast region, Saturn of Doral in Miami, Fl (formerly Saturn of West Dade). I hear everyone talking about Saturn going down and how GM is falling apart. People only feed off the negativity and only talk about the cars and sales. We are forgetting the big picture and how jobs are on the line here. I have a family, I can't afford to NOT a job. GM is asking for a loan, not a gift or a favor. I can't understand AIG getting all this money without a problem and yet "the big 3" are left for dead. It was mentioned earlier that if the big 3 go down, the recession will turn into a depression, no doubt about it. All I'm asking for is a bit of support from everyone. I know we all have different opinions on the issue, but those who see my point please advise everyone else you know.

[JayDDrew]

Paucity of comments for such an important topic.
I'm hearing today Congress may divert 25 billion it already has earmarked to the Big Three for R and D, and give it to them now. You realize that means we're ALREADY sending these guys billions? I bet we're not sending Toyota, Honda and Mitsubishi billions! We're already subsidizing these guys, meanwhile, they turn around and lobby AGAINST making better vehicles!
I say give them the money (34 billion) and, like a child with a drug habit, tell them that's it FOREVER. If you fail, don't come back trying to scare us with the domino effect you'll have on the economy. No more subsidies, no more loans, no more lobbying to keep the Fed from demanding improvements. I don't think Honda and Toyota are asking Japan for loans.

[HBD]

Bankruptcy would not be the end of these companies. For examples, look at the airline industry...United, USAir and others who've gone through it and come out stronger and leaner. Bankruptcy forces negotiation with creditors without relying on taxpayers.

[senorlou]

The only ones pushing for bankruptcy for the big 3 are Republicans who got us into this massive mess in the first place. These are the fools who've been wrong about everything, sorry to say they're probably wrong again.

[NearlyNormalWarren]

Bankruptcy would cause the fatal shot to the economy that we're trying to avoid. Would you buy a car from a bankrupt company? The suppliers are just hanging on. Bankruptcy would place them in a position forced to negotiate how much of the money owed to them they would get. That's not an option for survival.

Worst case - Give them the loans (this is not a bailout) and 3 years later they fail. That would be well worth the cost. It would avoid the hit on the economy at this time when we cannot afford the devastating ripple effect. It would provide the time to attempt to make American manufacturing into the engine of green manufacturing. If that fails, or the Big 3 fail to be fully part of that, then we'll have to take the hit of their failure, but we, as a country, deserve the chance to try.

Do you not know that Japan provides interest free loans to their car companies? Do yo not know that our international competitors have nationalized health care and in many cases retirement programs. Do you not know that 1 in 10 jobs in the US is tied to the auto companies. If they go down it will effect you regardless of where you live.

[DrDemon]

US CARS SUCK!

Lets take the "corvette" for example. They cost between $50k - $100k and they are all plastic junk!
Another example;

I have an 08' Denalli which cost over $58k and it's been in the shop 4 times within the last yeart for an ac condensor problem.

I'm going back to German made vehicles...and not quick enough!

[Quixotic2]

One other point. As much as I hesitate to bail out GM without demanding restructuring, I fear what Toyota and Honda will do to car pricing if American car manufacturing disappears and there are no American brands to compete against. They may even stop manufacturing in US factories (shipping in finished cars rather than parts) because we have no leverage left to bring to a negotiation.

[NearlyNormalWarren]

Yes, its not even a question of what they would do to car pricing but what the drop in supply would do.

[Quixotic2]

You can't expect GM to change it's strategy unless you change the CEO. Remember when they sold cars designed for early obsolescence (i.e., to wear out at 75K miles). Remember that they spend a fortune lobbying to keep gas economy standards low. Remember the arrogance of both GM and the unions for saying that they have given up enough and won't change (or negotiate)? As long as you have CEO's that are without vision, you will never see a change from the car and marketing strategy that left them unprepared for expensive gas or a weak economy. Loan or no loan. Congressional oversight won't fix it, either (they couldn't oversee the tarp restrictions on compensation and lost billions from lack of oversight of monies in Iraq. They can't force a car company to have vision).
And, yes, I think GM's Rick Wagoner is the worst of the lot and Ford's Alan Mulally is the best of the three.

[Tweet]

The car makers say that part of their problem is that people can't buy their cars because the banks won't issue loans. They're right.

We just gave the banks billions to loan, and they won't loan it. This was entirely foreseeable. Even I foresaw it. To be fair, the problem is not solely that they'd rather use the money to buy back their stock or make acquisitions. There is also the problem that they can't tell who's going to be able to pay back a loan. But that tracks back to prior bank loan practices, so they can't escape the blame.

Both the problem and the answer are simple. The government goes into the loan business. Not only does it issue new loans, but it refinances bad mortgages. Not only does this give people money to buy cars but it also creates a huge bureaucracy - which means jobs, which is what we need right now, right? Jobs anyone can do.

We've done this before, right? The GI Bill? Pell grants? We just forgot that the government can deal directly with its citizens without having to go through a corporate intermediary.

[CaptD]

Here is my predictions:

Chrysler will be sold to China, for pennies on the Dollar, and they will then have the cash backing to out sell the other 2 of the Big 3! GM and Ford will battle each other with Ford winning only to lose market share to Chrysler, who will flood the market with very small fuel efficient autos that are also sold in China!

UNLESS

The UAW gets a number of Board seats and the bailout money to then become the "owner" of Chrysler!
Congress should allow the UAW to buy Chrysler and control the Board, they would then lead the American recovery of "our" auto industry...

Happy Motoring!

BTW: Saab and Saturn are the "future" and if they get sold then the folks that OK that decision should be sacked instead... I believe that it is time for the UNION to step up or fire it's "BOSSES" because they are not part of the solution...

[senorlou]

I agree with you. Saturn was one of the better GM divisions in that its cars were affordable and made sense,at first. The Ion was lame, though (except for the Redline). Still, it was affordable and those plastic doors! Their early cars got very good mileage, but then they went backwards and got into making SUVs and Buicks (Aura).

[NearlyNormalWarren]

Yes, they went backwards when Smith left. Saturn was his vision and was revolutionary and was well executed. Once he left it began falling into sameness. There's enough left that whomever buys it will get something with potential.

[Mildmannered]

We have to work something out. If the Big 3 disappear our recession will turn into a depression.

[senorlou]

I skimmed through the PDF bailout plan and saw AGAIN that GM is claiming to have more cars that get 30+mpg hwy mpg than any other car maker on earth. CRAP! What, when you're going downhill with a 70 mph wind at your back? Last month, I spent two weeks in the 2008 GM Chevy Aveo, which is the highest mileage GM car made (and a crappy little bucket), and it averaged about 25mpg combined. This is a tiny car, and the best GM could do was 25mpg. GM has to stop this idiotic, insulting BS line. If they want all that money, they need to be far more truthful than they have been.

[JayDDrew]

You know, we keep hearing that these companies are too big to be allowed to fail. You know what we should do? Break these companies up!
Just like Ma Bell, let's break these companies up by spinning off different segments. If a group of investors want to buy Saturn away from GM, let them do it. Break Chevy off into it's own company. Same with doge and Chrysler - split them up. Divide Ford into a car company and a truck company. If a division is too weak, say, Pontiac, let it die.
The Fed needs to look at every major company in this country and see if it is getting too big or offerring too much to its employees, ie, promises it can't keep.
Can you spell R-E-G-U-L-A-T-I-O-N ?

[NearlyNormalWarren]

This is a good thread to explore. In other countries where car manufacturing has been suscessful they have not, are not, consolidating. Competition between smaller companies has real possibilities. The talk about reducing cost by consolidating ignores the problems of companies that are too big to manage correctly.

[kotexbarbie]

Exactly! If they're too big to fail, they're too big to exist. Either break them up or nationalize them -- whichever fits your political philosophy.

[CHARLESTHETENTH]

Pontiac and Saturn have been money losers for GM for quite a white yet GM did nothing to correct it. They just continued to support these models...stating as one reason it would cost more to close them down. What would be so different this time around? There is more reason to believe that it would be business as usual for GM and somehow they would rationalize their continued support for these failures. There were more than enough signs over the years to point GM in the right direction but their management style and corporate mentality kept them from doing so. Unless there is a complete change at the top and turnaround of past practices nothing will change. A big gamble for the Fed and the taxpayer and certainly more of a long-shot than a sure thing. The Fed has a poor tack record for running Government and GM management a similar track record for running a corporation....so you be the judge!! It appears the taxpayer is caught between a rock and hard place.

[DSciarrino]

I read through the plan and it sounds reasonable, all things considered. Yet, I have a few questions to Rick Wagoner: If GM were NOT in this position, would they want to enact this plan, and if not, why not? Why does it take an emergency to move a dinosaur like GM? How will GMs management philosophy and culture change so they can compete in the long run? How come the price went up from $25B to $34B?

Finally, while not being a fan of GM or bailouts in general, I support this bailout for two reasons: 1st, the workers don't deserve going down the tubes because of bad management and a bad economy, at least not right out of gate. I've got relatives that work for Delphi. They work hard and deserve another chance. Second, if we can throw $2 TRILLION at banks, without oversight, and who acted totally irresponsibly, we can help out the autos. Time to forgive but never forget.

[munki]

Before giving money... we need to create infrastructure...

Could our government hire those unemployed skill workers - especially with financial background to be bailout money compliance officers?

Perhaps we can utilize watchdog to make sure our money is spent where it is suppose to. This way, we can lower unemployment - creating job to protect taxpayers!

Editor, please convey this to Capitol Hill and incoming Administration!
Thank you!