Free Markets, Free People

Automakers – Gathering At The Trough Again

To be blunt about it, this just pisses me off:

GM said it might need as much as $100 billion in financing from the government if it were to go through the traditional bankruptcy process. Rick Wagoner, GM’s chairman and chief executive, said the bankruptcy scenarios are “risky” and “costly” and would only be pursued as a last resort.

Really? Well guess what – it’s even more “risky” and “costly” for the taxpayer to give GM another 100 billion bucks (and further on in the article it is acknowledged that a pre-packaged bankruptcy would cost about 30 billion).

GM claims its going to pare down its working force and model line. But what isn’t clear is how it plans on eliminating the legacy costs which still make it uncompetitive. Anyone know what would require them to confront that issue? That’s right – bankruptcy.

As for Chrysler:

Chrysler’s plan said the company would likely have to file for Chapter 11 protection if it doesn’t get additional loans from the government and concessions from unions, creditors and dealers. It said it would need $24 billion in financing if the company were to file for bankruptcy. But company officials said in a conference call that they believe a Chapter 11 filing is “not necessary” for Chrysler’s survival.

Uh no. Want more money? See Cereberus, the company you belong too and which is sitting on about 150 billion in assests. Let them pick up the tab. If not, see you in bankruptcy court.

This is ridiculous.

In particular, new opposition to further aid for Chrysler seemed to be building on Capitol Hill. In an interview Tuesday, Sen. Judd Gregg (R., N.H.) said no more taxpayer money should be given to Chrysler until its majority owner, private-equity firm Cerberus Capital Management LP, agrees to inject more funds into it.

Good. It’s about time this demand was made. What in the world is government doing throwing money at Chrysler when it has an owner with plenty of money? And Cerberus’ answer?

Cerberus said in a statement that it can’t put additional investments into Chrysler because agreements with its investors limit how much it can commit to any single investment. It added Cerberus has agreed to forgo any Chrysler profits before the government loans are repaid.

Tough beans. In that case, Cerberus had better find a way to sell off some of its investments to raise the necessary cash or be prepared to watch Chrysler hit bankruptcy court. Whichever choice it makes, it is not the job of the taxpayer to keep a marginal company afloat. And that’s even more true when that company has private assets upon which it can draw.

But when politicians are in the pain avoidance business, the Constitution is just a piece of paper and whatever they think they need to do to protect their positions of power will be done, regardless of law, principle or morality.

Just watch.


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5 Responses to Automakers – Gathering At The Trough Again

  • I said months ago that the big 3 would be back asking for more money and here they are.  Too bad someone finally gets a spine about $30 billion too late (or  however much we have already donated to them-  Donated because we will never get it back).

  • We still seem to be stuck in this mold, though, of not recognizing the elephant in the room. the UAW.  As I said at OTB, this morning, this whole thing has never been about saving the Big Three… this is about saving the UAW.  The fact was and remains that the very reason why the Big Three have to keep coming back for more bailouts is because the Unions won’t budge from their unsustainable wage and benefit demands, and unrealistic work rules. . And since there’s a Union-backing Democrat in the White House seemingly with a bent to sign taxpayer checks for whoever wants to finncially and physically support Democrats, there’s no reason for the UAW to make any consessions to reality. And this model will continue until the federal government stops issuing checks to make good the difference, for whatever reason… most likely the well being dry… or we get rid of the unions.

  • I shoudl add that the message that the unions will be getting support from the government has not been lost on the Big three, either. Thus, bringing these facts about the UAW and it’s excesses will nto be brought up by the Big Three anytime soon… and for the same reason… the only way out of this bx the Unionas and the government have created, is to grovel in front of the government and the unions and accept the taxpayer funding.

  • I see that GM is talking about 47,000 more layoffs.

    Darn good thing that the White House will handle this internally, instead of a “car czar” who could easily be thrown under the bus.

  • I hate to quote Kirk at a time like this, but “Let them die!”  They will rise from the ashes, stronger than before. 

    GM’s big concern is that no one will buy their cars if they declare bankruptcy.  Who the heck is buying their cars now?  Isn’t that the problem?  Their big plan calls for shutting down 14 plants.  47,000 layoffs?  How is this better than bankruptcy?