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GM declines $3billion Canadian bailout
January 23, 2009 - 11:57pm
Just heard this. No explanations. But everyone is surprised.
You have to think the only reason GM would decline the money is because of the strings about keeping jobs in Canada.
In practice, this would have to mean keeping the Oshawa car plant at least close to current levels. And maybe GM just decided it could not guarantee keeping open any plant anywhere. The bailout in the US does not keep GM from closing any particular large assembly plant in the US.
If this is true, it doesn't necessarily meand they are planning on closing or drastically trimming Oshawa car. But it would mean at least they aren't sure they will want it.
It is time this company ceased to exist.
_____________________________________________________________________________________________ We are like cloaks, one thinks of us only when it rains.
To be slightly more precise, it's long past the time this company should have ceased to exist.
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Eleutherophobics of the World...Unite!!!
I wonder how philosophical you would both be if you worked for GM.
GM to announce more production cuts on Monday
http://www.autonews.com/apps/pbcs.dll/article?AID=/20090123/ANA02/901239957/1176
Rumour mill only mentions Lordstown, Ohio. But it will be broader than that.
One possibility:
Includes layoffs at Oshawa car or other Canadian operations, that even if not huge, are bigger than the Harper government felt it could agree to to under bailout... with the Throne Speech and Budget votes coming up.
So if there are significant Canadian cuts on Monday, I wouldn't be surprised to see the bailout re-surface after the Commons votes. No significant further cuts. [ "It could be worse you know."]
Before the wheels fell off financial capitalism in Britain and America, somewhere around one of every two new cars were obtained through some various leasing arrangements and financed through the bond market. I think people would still be buying those gas guzzling SUVs and trucks, as well as the more fuel efficient GM models, if financial capitalism wasnt so hopelessly bankrupt right now and looking for taxpayer handouts to prop it all up until such times when the really-really big one hits.
As we speak those very taxpayer handouts are being used to bring back car leases and other ways to bribe people into buying new cars.
GMAC is priming the pump on leases.
Given the circumstances Big Auto is eager to lose money on the financial end of the transactions if they can get away with it.
Ken, do you know if GMAC will be financing leases through the bond market, or can they use the pile of cash handouts to finance leases? I ask because Niall Ferguson, some Harvard professor, says he thinks the $80 trillion or so bond market could be ripening up for a big hit. He says the bond market is generally how governments finance their money needs over and above tax revenues. Duncan Cameron dropped in here one day last year and explained how governments sometimes finance various program spending themselves through the sale of government backed? bonds, and I cant find that thread anymore.
GM couldn't raise a dime on the bond market.
GMAC actually got that money from the US bank bailout money.
But Chrysler Financial, which cannot qualify as a "bank" is using its scarce auto bailout money to throw money at consumers.
I'd hate to see GM collapse completely - wouldn't that put a hell of a lot of people out of work? I'd like to see it run more intelligently, however - get rid of the shitty products it now makes like their small truck, and gas guzzlers like their really big SUVs. Anything that GM makes that isn't selling well or is a gas guzzler - put it on the chopping block, and use those manufacturing lines for products that people actually want. The new Camaro, for example, looks like another shitty, irresponsible decision by GM. I wish the Corvette was dropped entirely. And those monster executive salaries at the top need to be jettisoned entirely (by Ford and Chrysler as well).
On a different track, I'd like to see the Ford Mustang and Dodge Challenger dropped as well because those dinosaurs just encourage more irresponsible street racing and dumb driving in general. It's my guess that smaller sportscars like the Mazda Miata don't have such a huge carbon foorprint as the Corvette and the pony cars.
Thank you, Boom Boom. Other than a single earlier comment, I was rather surprised to find a debate on this issue, in this forum, which focused on companies and vehicles, and didn't consider workers.
GM is toast and really should be allowed to collapse.
Not only is the US government propping up GM but it's propping up GMAC (even with access to TARP funds it's in real trouble). GMAC has stated that it's going to use those funds to loosen lending standards so that people that couldn't ordinarily obtain a loan will be able to buy a new car (haven't they noticed that loose lending standards are what got GMAC into trouble in the first place).
So now we have the US government propping up the manufacturer (i.e., subsidizing the product) and at the same time subsidizing the consumer. Somehow this does not compute.
Of course, at their current burn rate GM is going to go through the Fed funds in a month or so and will have to come back with its hand out. The big difference this time is that they'll be able to say that the only way the government will see any of its money back is to advance even more (which is why the original bailout shouldn't have happened).
But don't be surprised if the US says that any job cuts have to be at facilities outside the country (maybe my tinfoil hat is slippting but that may well be the reason that GM decided not to accept any money from Canada).
KenS, I feel sorry for the workers which will become unemployed however the GM and the other northern American automakers are not designing cars that people need or require. Nor do they appear to want to produce vehicles are fuel efficient and environmentally friendly any time in the near future.
The northern American automakers are a dying dinosaurs trying to gasps for a few more months of life after the asteroid has hit the planet. If these turbulent times did not occur they would be still making vehicles that serve no purpose except for icons for North American consumerism.
I agree with Boom Boom, I would like to see the company ran more intelligently perhaps it should be nationalized if they are going to receive very large amounts of taxpayer money.
However at the end of the day, it is a large corporate organization who's main goal is making money, they have no love for the worker. A good example of this is when GM sold "GM Defense" to General Dynamics Land Systems in 2003. Why they would sell a profitable division is unknown to me.
______________________________________________________________________________________________ We are like cloaks, one thinks of us only when it rains.
They may well end up having to sell some of those overseas operations and/or cut production there as well.
If you actually think any future funds from the US won't come with serious strings attached I can make you a deal on some swampland in Florida. What form those strings will take is anyone's guess but don't expect them to be favourable to Canada or the CAW (remember that if the UAW goes on strike GM is automatically deemed to be in default and, cynic that I am, I can't see the UAW agreeing to job cuts in the US if there are other options available, e.g., cutting jobs in Canada).
Thats a perfectly reasonable suspicion. But I think the issue really is that GM's survival means it cannot be tied to not cutting shifts at or closing entirely any particular assembly plant.
Limits on cuts in Canada would inevitably effectively translate as not being able to significantly cut production at Oshawa car.
And, as much as the UAW and US politicians would have liked to keep jobs in the US [which given the number of plants to choose from would not be as restrictive as the same limit in Canada].... they knew such limits would not work. Non starter.
Same point really.
There are only a limited number of cases where cuts in production could be in the US or Canada [or Mexico]. That was true in the case of Oshawa truck. But not true the vast majority of cases.
And overseas cuts are an entirely seperate animal.
For example- if the German government does not bail out Opel [GM] big time, then there will be bigger cuts there.
Another example- Ford in general does not need help for overseas operations. While whether or not they need bailout funds in North America still remains to be seen.
Apologies if this has been posted before (?), but here is Buzz Hargrove last Wednesday pitching (to the Dragons' Den) the need for fair trade in auto with Japan, Korea, and China; eased credit to allow new-car purchases; and $1B per year to the auto industry for the next 2-3 years:
Hargrove on Dragons' Den
Precisely.
Toyota is going to kick GM's arse from one end of the continent to the other and car production is, as a consequence, going to shift to the Toyotas of the world and away from ossified companies like GM.
As production moves from GM to Toyota, so will jobs move from GM to Toyota.
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Eleutherophobics of the World...Unite!!!
What part of "easy credit is what got the world into this mess" doesn't he understand? [And that's already being granted with the US funding of GMAC.]
I didn't want to start another thread on this but figured it's peripherally related and interesting in any case.
The best selling car in the world isn't really a car. It's the Ford F150 pickup truck. And the thing can bury a Porsche Boxter. But as the reviewer says "it's rubbish" (quality control is discussed around about 5:50 of the following - he compares it negatively to a Russian Jeep - and then goes on to discuss technology etc.)
http://vids.myspace.com/index.cfm?fuseaction=vids.individual&VideoID=36327772If the best selling vehicle in the world is this poorly regarded outside of the US, I don't think any sort of "fair trade agreements" with Asia will help.I thought it was unfortunate that Buzz was the one defending GM. He has no input, no control of the things GM needs to do - change the kind of vehicles they make. Of course, neither do the bosses here in Canada.
I believe Canada only gets the contracts for the big ugly gas guzzlers, and that has pretty much sealed the fate of Canadian workers. They've been on life support for a while.It is unfortunate for the workers that the company has no vision, but I think GM is toast because of it and it is the workers who will suffer and that's a shame.
Exactly!!
People have, for years, lived beyond their means because they consumed more than they earned (and, thus, they amassed more and more debt).
What is the natural consequence?
People are going to have to live BELOW their means for a long time. Meaning: They will have to spend a lot less than they earn (in order to reduce debt).
And, that's going to be very, very ugly.
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Eleutherophobics of the World...Unite!!!
Interesting. So you think the "credit crunch" is a good thing? Discipline everyone to live within their means? Wonderful. Now only those with property and high incomes will be able to buy cars, or anything else for that matter. How many real people do you know who have savings accounts with any money in them?
I thought the credit problem had something to do with facilitating borrowing (especially for homes) based on no realistic value whatsoever, then re-packaging and buying and selling the debts and mortgages themselves, until someone noticed the emperor had no clothes.
I didn't realize the problem came from consumers defaulting on auto purchases.
ETA: Whoops, I cross-posted with Sven, who is championing the chorus of the rich and wealthy going back centuries: Life would be just fine if the lower classes knew their place.
The math involved in this matter is exceedingly simple:
If spending > income, then debt will accumulate.
If spending < income, then savings will accumulate.
If spending = income, then no additional debt or savings.
The first equation is "living beyond one's means".
Under what circumstances is ever-increasing consumer debt a good thing?
If ever-increasing consumer debt is not a good thing, then that argues in favor of "living within one's means".
It's very simple.
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Eleutherophobics of the World...Unite!!!
That's part of it. But lending money to people that had no hope of repaying the loan was a big part of the problem. If people could have repayed those loans and weren't dependent on inflated appraisals and constantly increasing home prices in order to refinance much of the problem with CMO's, CDS's, CDS Squared's, etc. would never have emerged (after all, those were essentially bets on whether or not people could in fact carry those mortgages).
Who is at fault for extending that credit is another matter and belongs on another thread.
However, we're now looking at a situation where GMAC has access to TARP funds in order to extend loans to people who would not otherwise qualify [given the results of GMAC's loan portfolio that's really saying something] which means the Fed is subsidizing the buyer (of course if the end consumer defaults they get no benefit from TARP, they're still going to be chased by collection agencies, etc.) while at the same time they're propping up the manufacturer.
What about the tens of millions of Americans and Canadians whove not had a real income share in rising corporate profits since 1982? Some huge number of us have only been scraping by paying bills, buying cars so we could get to work on time and making the whole setup work to some degree until now. Some people havent been buying two and three winter homes in the Caribbean and Mediterranean, expensive yachts etc
What's wrong with this picture is the unprecedented concentration of wealth in the hands of a few over the last 30 years. Powers of credit and money creation were handed solely to private banks around the western world in the neoliberal 80s and 90s.
Why can't the US military learn to live within their means? Why can't they live with $300 billion taxpayer dollars a year instead of half a trillion? There's your socialized medicine in America, Sven, a simple socialist measure that would help US auto compete with the Toyotas and VWs and Korean car companies. If Wall Street banks hadnt been declared too big to fail, maybe the casino economy would never have happened. TRillions of dollars in speculative iou's floating around the world, and still there are billions of people living in grinding poverty. Capitalism is a dead end for humanity.
Actually GMACs present limitations, and what sideswiped them is different than the general credit overextension.
GMac, and car leasing in general, hit the skids even faster than the mortgage bubble burst. But it was because nobody wanted to buy the cars after the leases were over. Selling one and two year old cars was the gravy in the leasing game. And the bigger the vehicle the more profit. Then all of a sudden no one is buying, and even less big vehicles. So profits turn into big losses overnight, and the vehicle leasing business collapses.
And GMAC needs TARP funds to backstop [subsidy] to be able to offer financing to buyers with GOOD credit... high risk borrowers are not in the new picture.
There is an interesting sidenote to the GMAC phenomena. GM has not been the majority owner for several years. They sold 51% to Cerebrus well before the latter bought Chrysler.
So I was wondering how does GM get GMAC to offer car financing that meets ITS needs. The profits from car financing promise to be at best very slim.
But for GMAC it was car financing or insolvency. GMAC was effectively insolvent. The package of getting creditors to 'convert' daebt and a bailout from the government meant the doors were still open. And they could only be open via car financing.
GMAC now only has a chance of ultimately being profitable. But for Cerebrus that beats getting nothing for its GMAC ownership stake.
But that's not what GMAC said. The papers were full of various statements from them to the effect that they would be able to loosen loan standards and offer credit to people that would not otherwise qualify.
Which is interesting since Cerberus has been making noises about suing Daimler for fraud and material misrep (over the leasing business yet).
True - so we're now in the uneviable situation of having the US government bail out a hedge fund.
Somebody on a newscast said recently that wherever in the world Toyota or GM or VW sell cars now or in future, those general regions are where they will want cars to be either manufactured or assembled or both, futuristic IT based manufacturing aside.
Canadian economist Michel Chossudovsky says part of the problem with neoliberal economic and trade theory is that productive labour economies are being dismantled and offshored to low wage zones in Asia and developing countries. American corporations buy widgets manufactured in Asia for a dollar and sell them in North America for $10 and add $9 to North American GDP figures - a net increase of 90% growth. The increase isnt real but works to confuse people about the benefits of neoliberal economic voodoo. Before very long, the speculative bubble of the day has to be deflated at some point by a master wizard working behind the scenes, and too bad-so sad for the suckers coming in at the bottom of the pyramid scheme of betting on stocks. In all cases it was Alan Greenspan who, coincidentally, held the view that markets are self-regulating. Greenspan admitted to US Congress that he now realizes his world view of economics and monetary management was entirely flawed.
I wonder if they'll rethink that now.
A 47 per cent drop in sales at General Motors Canada Corp. last month left auto sales this country at their lowest level in 20 years.
Yesterday's gloomy sales numbers came as a union official suggested GM could close its operations in Canada if workers don't accept concessions soon. GM declined to comment.
http://www.thestar.com/Business/article/581931