Should we give GM and Chrysler another chance?

Discussion in 'Chrysler' started by xcel, Mar 7, 2009.


Shoud we?

  1. Yes

    3 vote(s)
  2. No

    22 vote(s)
  1. xcel

    xcel PZEV, there's nothing like it :) Staff Member

    [​IMG] "Bailout billions" could be much more effective with less public risk, expert advises.

    [xfloat=right][/xfloat]Wayne Gerdes – CleanMPG – Mar. 7, 2009

    2011 Chevrolet Volt – Ideas “could” save GM so that we may actually see the Volt but the details are controversial and definitely need scrutiny.

    Fort Lauderdale, FL -- "No matter how much money you throw at the automakers, that won't solve the problem. It will actually make things worse" says Viraf Baliwalla, a consumer advocate for car buyers and founder of Automall Network, a professional vehicle buying service. "But there is a less risky solution".

    He compares the auto industry crisis to that of a patient in desperate need of a blood transfusion. "If you don't cauterize the wound, the patient will lose all of their own blood plus any new blood administered" he says.

    Baliwalla believes that giving the automakers more money without fixing the root of the problem is like extending their life support in the hopes that they will heal themselves over time.

    "It is only extending their lifeline so they can cut expenses and staff while shifting the payroll burden off their books to the taxpayers' unemployment benefits tab. You can only cut costs so far. If nobody is buying, no matter how much you cut, you'll still operate at a loss and eventually go bankrupt. Ultimately, the cost will be a lot higher for all involved" he says.

    North American car and truck production plummeted 40% just in the first 7 weeks of 2009 versus the same period in 2008, from 2,157,688 units down to 886,614. Consumers are not buying. Consumer confidence is at an all-time low and with the impending doom and gloom stories, who would want to risk their hard earned money to buy a GM or Chrysler product? Get people buying again and you solve the problem by increasing sales which creates profit ... and jobs.

    "If this is basic business common sense, then why are we throwing good public money at companies that have no plan on how to increase sales, only plans on how to cut costs" he asks.

    Baliwalla suggests a multi-pronged approach to stabilize the problem where efforts come from all sides:

    Auto manufacturers:
    • Who would buy a new GM or Chrysler vehicle with the impending fear of bankruptcy? What good is a 3 year bumper to bumper warranty when there are no dealerships to service the vehicles and when the manufacturer isn't around to honor it. Manufacturers should include a fully insured third party warranty with every new vehicle. This would give more peace of mind that even if GM or Chrysler went broke, my vehicle is still covered. It would also allow third party warranty companies and independent garages to increase jobs. Manufacturers would prefer to channel the business only into their dealerships however what is the worse of two evils - forcing consumers into dealerships that may soon be vacant or increasing sales potential of vehicles with dealerships still probably getting a large chunk of the repair business?

    • Compensate the CEO and top brass with limited but reasonable salaries and put greater weight on bonuses based on bringing the company back to profitability. Then, keep the structure that way. If the top management isn't confident in themselves to turn things around, why are they still there taking a big paycheck?
    • Replace the bailouts with matching manufacturer rebates to consumers. This will make vehicles more affordable and help lower income earners pass credit requirements to get money flowing. (ie: a Chevy Malibu is advertised for about $22,000 with approximately $4000 in manufacturer rebates. If the government matches the rebate, it then costs only $14,000 for a brand new midsize vehicle. Now it becomes affordable for more people).

    • Give them a small lifeline if needed to implement these changes but mitigate the risks. If consumers still aren't buying because they don't like the product, then the company will eventually go broke anyways but for different reasons than the economy. At least you haven't thrown away good money after bad.
    • Cost of labor is too high. The reality is that costs have to come down for the manufacturers to survive and thus be able to keep you employed.

    • Eliminate job protection for underperforming workers. Union or no union, if someone doesn't perform or doesn't take pride in their work, they shouldn't be working there. This is costing your employer and ultimately costing everyone.
    • Buy, but buy smart. Live within your means and don't let higher debt for a fancier vehicle get the better of you.
  2. ILAveo

    ILAveo Well-Known Member

    The bondholders and retirees are going to have to take a haircut one way or another. Equity owners are already wiped out, autoworkers have been making concessions. The first round of government loans bought time to work out a deal with their bondholders, but if they aren't gonna deal I think we need to see them in Chapter 11 court. Subject to that comment I voted "yes," but may mean "no."

    The same principle should apply to insolvent (not just illiquid) investment banks/insurance companies--bonds being written down should be a precondition for further loans. (Defining bank insolvency is tricky right now because current financial markets are too volatile and illiquid to provide reliable valuations.)
  3. Indigo

    Indigo Witch with wry sense of humor

    If our government is going throw around billions of dollars, it should throw it at the "micro-3" not the "big-3". Who are the Micro-3? Tessla, Fisker, and ZAP. They could easily become America's next-generation carmakers if they had a healthy infusion of capital and R&D funds.
  4. GrendelKhan

    GrendelKhan Well-Known Member

    I agree with Indigo.

    And Chrysler already had their second chance.
  5. Chuck

    Chuck just the messenger

    Hint: I am midstream in planning a parody video about this.
  6. MaxxMPG

    MaxxMPG Hasta Lavista AAA-Vee Von't Be Bach

    Recessions have a way of showing many people just how overextended they are. Almost everything the modern family owns is purchased with borrowed money. Own it today, pay for it in the future.

    Buy a half million dollars worth of house in 2005 with a Ninjna loan and you move right in with almost no investment and a cost of only two-weeks-pay a month.

    Add on two sign-n-drive leased cars/FSPs with the lease payments adding up to $700 a month and you can swing that too, even though you never actually own the vehicles.

    When the TV blows up, buy a huge 120Hz 52" monster with crap you don't even know how to use. And add in the extended warranty for a grand total of $3000 or so. No payments and no interest for 24 months!

    But when the pink slip comes, how much of it is really yours? The bubble of the last six years was created by the scenario above - people buying today with easy credit and paying in the future. And worse, many paid down debts by borrowing more and more against their real estate's appraised value. And that is money that never existed in the first place. Once the housing market crashes, people owe double what the house is worth and they walk away from it. The bank is on the hook for half a million dollars on a house that they can't give away for less than half that amount, and the rest is a loss. And we have to cover that loss with a big TARP check to the banks.

    Whether we're talking about GM or Chrysler or any other automaker, they're in hot water right now. Look around you on the road and see how many of the cars and trucks are only a couple of years old and in good shape. People don't *need* a new car every few years. With discretionary income all but gone, they will stick with what they have. And since the automakers set their business plans based on perpetual sales increases, a sudden drop in demand can destroy them in under a year.

    The size of the automaker, whether measured in volume or profits, doesn't matter as much as whether they can tread water at much lower sales volumes. What GM and Chrysler have done to themselves is really no worse that what the guy who owns only 2% of his McMansion and sign-n-drive luxury SUV did to himself.

    Based on what I'm seeing in the news, it looks like the McMansion predatory-lending victims and the automakers will get their bailouts from the feds. And whether automakers and homeowners get their money to keep what they have, or they all crash & burn, the taxpayers are still on the hook. Your home loses value when 1 out of 3 in the area are foreclosed and unoccupied. Your real estate taxes go up because the local governments need their revenue streams for their promised services and entitlements. Even if your income taxes don't increase, taxes on goods and services will close that gap and take more money from your pocket. The government would need to fund all the entitlements and healthcare for the automaker's warranties, retirees and unemployed workers.

    Do GM and Chrysler deserve another chance? The only realistic way anyone can answer that question is to read their plans (I downloaded and read both) and decide for yourself if you think they can remain viable for the next few years until the economy has completed rebooting itself after the crash last year. Many people will say "no" based on their automotive brand preferences, or believing that it would eliminate cost to the taxpayers. But that ignores the question of which is the lesser of two evils - spending "X" billions of dollars to keep them from sinking, or spending "Y" billions of dollars for salvage and cleanup after the sinking. Either way, we're on the hook for it.

    My opinion? I'm just not sure. I am not sure I trust GM and Chrysler to stick to their viability plans. That "trust us" pitch they're offering is similar to that same request from a spouse who has cheated for years, or an addict who declares himself "clean", or a crook with a long rap sheet who tries to convince the parole board that he's rehabilitated. Do you want to trust them after years of awful behavior? Do their recent actions suggest that they really changed, or are they just showing you what they think you want to see? What should the punishment be for "falling off the wagon"? At what point do you cut your losses and cut them loose to sink or swim? These are decisions we can only discuss here, and the actual decision will be made my 536 fine human beings working near the Potomac river.
    Last edited: Mar 7, 2009
  7. Blackbelt

    Blackbelt Well-Known Member

    I have LOT more faith in GM and Chrysler than i do in AIG and the other greedy wall street "masters of the universe" (points for knowing where that comes from). Banks got 750B and the government said"be good guys", while the automakers got what? 20-30B and the politicians grilled them for days? C'mon!!!!
  8. brick

    brick Answers to "that guy."

    /\ Good post! (Maxx) /\
  9. Chuck

    Chuck just the messenger

    We have discussed bad policy by both Detroit and Washington, but the American consumer bears a lot of responsibility for this recession. For over a generation, millions have lived beyond their means and it was going to come crashing down sooner or later.
  10. greenrider

    greenrider Well-Known Member

    Well put. Not to steal from good 'ol Pee-Wee Herman, but the word of the day (or year) in this case is "personal responsibility." If a lot more people were more responsible personally, the Big 3, Countrywide, Freddie Mac and a lot of other corporations would not have had the opportunity to become so big & irresponsible because people would have lived within their means and thought through the implications of a financial decision, read the contract or whatever else came into play before buying McMasions and Escalades.
  11. drimportracing

    drimportracing Pizza driver: 61,000+ deliveries

    I say it is inevitable that they collapse and we should let them. Let the pain come now and let's get on with finding the unemployed new places to work. The sooner we face our fears the faster we can begin the long recovery. - Dale
  12. ArizonaChris

    ArizonaChris Well-Known Member

    Good Points MaxMPG, one question - do YOU have a house payment and Car payment? (Heh, Heh)

    I would hope most of us on this list are like us, have paid off thier house, and cars ASAP....
  13. Massageguy

    Massageguy Active Member

    How about if we make the government rebates for buying a car also tie in with the fuel economy of the vehicle. Add some incentives for cars that are fuel efficient, less incentives for gasoline hogs.

    Any electric cars should not cost the consumer more than $12,000, the balance paid for by the gov't.

    When enough cars are not running on gasoline, then there no longer is a political risk to raise gasoline prices through taxation. Gas should be a minimum of $4 a gallon, with yearly inflation adjustments.
  14. MaxxMPG

    MaxxMPG Hasta Lavista AAA-Vee Von't Be Bach

    One car payment - should be paid up in August, other cars are paid off. House is half paid off, but with this mess going on around us, I am budgeting to get it prepaid within about four years. We all use credit in some form or another, and it can be very easy to abuse. I am always amazed by some of what I hear when I talk to my friends in financing. People with three mortgages, two car payments, and almost six figures in unsecured debt. :(
  15. Blackbelt

    Blackbelt Well-Known Member

    Here is one reason i hope that Chrysler can survive.
    Of course, i am unhappy that they are saying no TD for US!!! Why not??? Damn that's frustrating. But even with the 1.4, this car looks like a winner. I would give up my xB for one of these. Fiat has come a long way since the days of Fix It Again Tony. Chrysler could sell a pile of these cars, and they wouldn't have to pack the glove compartment with $100 to move them.
  16. xcel

    xcel PZEV, there's nothing like it :) Staff Member

    Hi Blackbelt:

    ___Read some of the European reviews on the 500/Ka from the major outlets. It sucks and will be a Micro-niche product at best.

    ___Good Luck

  17. Blackbelt

    Blackbelt Well-Known Member

    Really?? All of the reviews i have read so far have been glowing. Do you have any links?
  18. Chuck

    Chuck just the messenger

    Suppose you are Ron Bloom - as close to a "car tsar" as the Obama Administration will appoint and he sees something like this: 2009 Dodge Ram 1500: No longer just for work...I'll be only slightly blunter than the review: a 10mpg truck from the "all hat - no cattle" guys that like to you think Chrysler has gotten it?
  19. xcel

    xcel PZEV, there's nothing like it :) Staff Member

    Hi Blackbelt:

    ___The Telegraph and Times are two of the UK's and Europe's best.

    Ford Ka: on sale now
    Ford Ka review
    Ford Ka Zetec 1.2
    ___I suspect that the Fiat 500 is going to go over like a lead balloon over here and I suspect it will sell to the tune of the Fortwo. 2,000 to 3,000 per month (25,000 – 35,000 units per year) at best... About the same profit as they are making on the 1,000 Durango’s they are selling each month as of late.

    ___Good Luck

  20. Blackbelt

    Blackbelt Well-Known Member

    From Car and Driver
    2008 European Car of the year.
    AUtombile magazine
    Seeing as how it won enough European auto journalists acclaim to be named the European car of the year, i would hardly think that it 'sucks'. Niche car? Not in Europe. Here? Who knows for sure? I guess i have pretty much been against the mainstream most of my automotive life. When everyone else was driving muscle cars and FSP's, i was driving VW's. I have an aversion to "belly button cars". You couldn't GIVE me a Hon-duh, so a car like this 500 gets my attention.
    As to the smart, the sales numbers were supply constrained. But any 2 seat car will play to a limited audience. Fine by me, that keeps it from becoming a "belly button car".
    Delta, what would you have Chrysler do? Throw out the millions they spent in development costs for that truck? Take all the ones that have already been made to the crusher? They need to sell what they have NOW to try to stay in business. And that includes trucks. Considering the development time required to bring a new vehicle to market, i wouldn't expect to see an overnight transformation of any car company. That doesn't mean that they should not be given a chance. Personally, i LIKE to have choices when i buy cars. Not everyone wants a Civic or a Fit!! That's why i like the idea of the 500 being sold here. More choice is a good thing.
    Oh well, just my opinions. I don't expect agreement, i am used to swimming against the tide...LOL

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