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post #171 of 261 (permalink) Old 11-18-2008, 11:14 AM
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Paulson voices opposition to Big 3 bailout bill

WASHINGTON (AP) - Treasury Secretary Henry Paulson told Congress on Tuesday that the administration remains firmly opposed to dipping into the government's $700 billion financial bailout fund for a $25 billion rescue package for Detroit's Big Three automakers, no matter how badly they need the help.
"There are other ways" to help battered automakers, Paulson told the House Financial Services Committee as the bailout bill clung to life support on Capitol Hill.

Committee members grilled Paulson on the administration's stance that the $25 billion must come from separate legislation passed by Congress in September. The measure was designed specifically to help auto manufacturers retool their factories so they can make more fuel-efficient vehicles.

The $700 billion bailout plan enacted by Congress in October and signed into law by President George W. Bush did not envision that the program would be used to help rescue nonfinancial companies, Paulson said. "I believe the auto companies fall outside of that purpose."

At the same time, he testified, "I think it would be not a good thing, it would be something to be avoided, having one of the auto companies fail, particularly during this period of time."

Paulson said that solving the financial problems of the automakers should be done in a way "that leads to long-term sustainable viability" for the industry.

Auto executives, backed by leading Democrats, insist they need another $25 billion in emergency bridge loans—on top of the $25 billion already approved and being administered by the Energy Department—to avert a collapse of one or more of their companies. That would bring the total federal help for the industry to $50 billion this year.

The executives, along with the head of the United Auto Workers union, were making their case at a hearing before the Senate Banking Committee as auto bailout backers hunted the votes necessary to pass the plan in a postelection session. Aides in both parties and lobbyists tracking the plan privately acknowledge they are far short.

Karen Majewski, mayor of Hamtramck, Mich., said police, fire and public works departments would face major cuts if they lost tax factories from GM and American Axle plants in her city. "We're talking about the lifeblood of our city," she said.

She was among local officials from cities with auto plants making the rounds on Capitol Hill on Tuesday, lobbying for the $25 billion in auto-industry bridge loans.

The debate comes as the financial situation for General Motors Corp., Ford Motor Co. and Chrysler LLC grows more precarious.

General Motors, Chrysler and Tesla Motors Inc. have already applied for loans under the existing $25 billion Energy Department program and Ford CEO Alan Mulally said the automaker plans to apply on Tuesday. GM, Chrysler and Ford have not disclosed the amount of aid they're seeking or for what purposes. Tesla said it was seeking about $400 million in loans for two projects.

Cash-strapped GM said it will delay reimbursing its dealers for rebates and other sales incentives and that it could run out of cash by year's end without government aid.

Mulally argued Tuesday in advance of the hearing that his company already been laboring to "transform our business" into a more profitable one that meets 21st century demands for fuel-efficient vehicles.

Interviewed on ABC's "Good Morning America," Mulally denied that automakers resisted restructuring their companies or that it has been badly managed.

Sen. Carl M. Levin, D-Mich., an architect of the auto bailout, said that auto executives need to address the perception by some lawmakers "that there's still some quality issues with the Big Three, and they haven't begun to do the necessary restructuring—because they have."

Levin's bill would provide loans with initial interest rates of 5 percent to the U.S. automakers and suppliers in exchange for a federal stake in the companies or warrants that would let the government profit from future gains. Loan applicants would have to give the government a plan for "long-term financial viability."

But it stops short of giving the government a say over the firms' operations through an oversight board or hard limits on executive compensation. While taking advantage of the program, the companies could not pay dividends, award bonuses to executives making more than $250,000 a year, or give golden parachute payments to top people departing from the firms.

A vote on the measure—which includes an extension of jobless benefits—could come as early as Thursday. But Majority Leader Harry Reid, D-Nev., also laid the groundwork for a straight up-or-down vote on the more widely supported unemployment measure, which is probably all that can pass this week.

Paulson voices opposition to Big 3 bailout bill

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post #172 of 261 (permalink) Old 11-18-2008, 11:21 AM
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Originally Posted by elau View Post
I am not sure where you get the 20% figure from. Base on NAICS 3361 3363 3363, the total overall manufacturing job from the auto industry is on 7.7%. That is the highest figure since 2000 and have drop a couple of percent points since that I am sure. My source is from Department of Labor, Bureau of Labor Statistics as viewed on March 3, 2005.

I agree manufacturing base is the backbone of any country, but you refuse to see is the auto industry has not been in that equation since the early 90's and that the industry has been dying a slow death for almost 2 decades. Employment by auto industry based on NAICS 3361 in 1990 was 271.4, and at the end of '04 the number was 256.1. Where is the growth in that industry? You also forego the impact of issues such as the Consolidation of the North American Auto Industry under NAFTA which allows Mexico to raise the auto parts imported to the U.S. from 12% to almost 30% ($20B and 278K work force which is larger than our own); and Canada automotive part export accounts for 23% of its total national export. Where is the manufacturing base in the U.S. that you talked so much about? It looks to me we already pawned that off a long time ago.

Big floor space does not equate to big profits. Again, how many of cars are manufactured in the plants outside of the U.S. by the Big 3? In countries such as Canada and Mexico? The PT Cruiser for one comes in mind, in which it is totally manufactured and imported from Mexico. To further sweeten that deal, Mexico was allowed to launched the Sectoral Promotion Program which helps Chrysler pay even less tariff on those vehicles because PROSEC entitles the Mexican a reduced tariff for not using non-NAFTA parts. You would think Chrysler should rake in profits in bucket load, but why they are still in such sad shape? PROSEC itself further erodes our ancillary parts industry you so fond of if not putting the final nail on the coffin already.
The new car companies will definitely be smaller and leaner, and what is wrong with that? Especially without the UAW, the high health care cost, and the high retirement cost. The Big 3 did not start out as large as it is today at the turn of the century, and the new companies will no doubt one day be as impressive. Give the new ones a chance, the Big 3 only wants them dead even with the expense of their own demise.
Let's face it, most people wants the Big 3 existence solely for nostalgic reason, even in view that the foreign-based producers developed a strong position in the U.S. auto industry which accounts for 43% of all passenger cars production. I personally have not owned a vehicle from any of the Big 3 since 1988 and don't care to ever owning one. I am in rental cars every week and have driven many of the Big 3 products. They are no better today than 10 years ago. Your argument was that the rentals are the base models and I agree with that. But the foreign imports the fleet companies use are much better comparing. If nothing else, the Big 3 should put some decent cars to those fleet companies showing how well put their products are. They fail even for advertisement 101. I recall a few years back I was so impressed with the Nissan Altima after one week of rental that I considered buying one.

There may not be an immediate answer to that question in the near term, at least not until this country figures what will require for us to survive into the 22nd Century continue as the leading Super power both militarily and financially.

I believe we tried that with the Chrysler bail out 30 years ago, not to mention the numerous smaller attempts in the last few years as well that are not publicized. Let them crash and burn is the only way to rebuilt that broken industry. Very tight leash only advocates strong Government control in private industries and that is exactly what we don't need, unless this country is ready to head down the Socalism path. We are picking up the tab regardless except this bail out will be a repetitive process. We reward bad behavior to encourage further bad behaviors. Why keep betting on a losing horse?
A couple of notes about your numbers. Your labor numbers don't match up to the numbers in the Annual reports of the Big 3. While those numbers may reflect hourly assembly labor, they do not account for salaried, administrative or any of the ancillary workers. Your NAICS numbers in paragraph 2 also don't jibe with the BLS numbers in paragraph 1.

I got my 20% number based on the 2006 Dept of Commerce/Center for Automotive Research study [posted earlier] that includes secondary and tertiary impacts. Just today CNN showed on screen a BLS number showing 1 in 10 US manufacturing jobs are tied to Automotive. Here is the breakdown of just Big3, dealer net and supplers. It does not include tertiary impacts [DHL, UPS, Norfolk Southern, City tax bases, etc]

GM 120,000 U.S. employees.
Ford 80,000
Chrysler 66,000.
14,000 U.S. dealerships 740,000 workers.
The suppliers used by the Big Three also employ an estimated 610,000 people.
Add that up and you have more than 1.6 million jobs tied to the auto industry.

The auto industry has fully been in the equation for the last few decades. They have supported this economy with well over a million prety high paying middle income jobs that have supplied much taxes into state and federal coffers. While they have reduced their footprint as other manufacturers have come into the US, they still are a very large factor in this economy. To deny that is simply naive.

You seem to think that the Big3 are after the startups. Where is that from? They are too busy trying to keep themselves afloat to worry about someone that sells 2000 cars a year.

Yes, the startups will be bigger in time. But the thing you are ignoring is what occurs in the interim.

In all of your posts you still don't address the two most critical factors of the debate. First, what industry can step up to provide fuel for the economic engine as we reinvigorate this economy? And Second, what do we, as a country do with the Million plus people who would be economically displaced if we allow this industry to fail? And those include Primary, secondary and tertiary impacts, not just those union workers or those upper management folks who made bad decisions.

Those are the two questions that really count in November 2008, with the CURRENT conditions and the CURRENT environment and the CURRENT economic pressures on everyone from taxpayers to cities to the federal government.


Being smart is knowing the difference, in a sticky situation between a well delivered anecdote and a well delivered antidote - bear.
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post #173 of 261 (permalink) Old 11-19-2008, 08:50 AM
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WASHINGTON (AP) - Detroit's Big Three automakers pleaded with a reluctant Congress Tuesday for a $25 billion lifeline to save the once-proud titans of U.S. industry, pointedly warning of a national economic catastrophe should they collapse. Millions of layoffs would follow their demise, they said, as damaging effects rippled across an already-faltering economy.

But the new rescue plan appeared stalled on Capitol Hill, opposed by the Bush administration and Republicans in Congress who don't want to dip into the Treasury Department's $700 billion financial bailout program to come up with the $25 billion in loans.

My Way News - Big 3 carmakers beg for $25B, warn of catastrophe

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post #174 of 261 (permalink) Old 11-19-2008, 08:51 AM
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CEOs Flew Private Jets to Plead for Public Funds...

The CEOs of the big three automakers flew to the nation's capital yesterday in private luxurious jets to make their case to Washington that the auto industry is running out of cash and needs $25 billion in taxpayer money to avoid bankruptcy. ...

ABC News: Big Three CEOs Flew Private Jets to Plead for Public Funds

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post #175 of 261 (permalink) Old 11-19-2008, 08:53 AM
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ROMNEY: 'Let Detroit Go Bankrupt'...

IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.

Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.

I love cars, American cars. I was born in Detroit, the son of an auto chief executive. In 1954, my dad, George Romney, was tapped to run American Motors when its president suddenly died. The company itself was on life support — banks were threatening to deal it a death blow. The stock collapsed. I watched Dad work to turn the company around — and years later at business school, they were still talking about it. From the lessons of that turnaround, and from my own experiences, I have several prescriptions for Detroit’s automakers.

First, their huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota. Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers.

That extra burden is estimated to be more than $2,000 per car. Think what that means: Ford, for example, needs to cut $2,000 worth of features and quality out of its Taurus to compete with Toyota’s Avalon. Of course the Avalon feels like a better product — it has $2,000 more put into it. Considering this disadvantage, Detroit has done a remarkable job of designing and engineering its cars. But if this cost penalty persists, any bailout will only delay the inevitable.

Second, management as is must go. New faces should be recruited from unrelated industries — from companies widely respected for excellence in marketing, innovation, creativity and labor relations.

The new management must work with labor leaders to see that the enmity between labor and management comes to an end. This division is a holdover from the early years of the last century, when unions brought workers job security and better wages and benefits. But as Walter Reuther, the former head of the United Automobile Workers, said to my father, “Getting more and more pay for less and less work is a dead-end street.”

You don’t have to look far for industries with unions that went down that road. Companies in the 21st century cannot perpetuate the destructive labor relations of the 20th. This will mean a new direction for the U.A.W., profit sharing or stock grants to all employees and a change in Big Three management culture.

The need for collaboration will mean accepting sanity in salaries and perks. At American Motors, my dad cut his pay and that of his executive team, he bought stock in the company, and he went out to factories to talk to workers directly. Get rid of the planes, the executive dining rooms — all the symbols that breed resentment among the hundreds of thousands who will also be sacrificing to keep the companies afloat.

Investments must be made for the future. No more focus on quarterly earnings or the kind of short-term stock appreciation that means quick riches for executives with options. Manage with an eye on cash flow, balance sheets and long-term appreciation. Invest in truly competitive products and innovative technologies — especially fuel-saving designs — that may not arrive for years. Starving research and development is like eating the seed corn.

Just as important to the future of American carmakers is the sales force. When sales are down, you don’t want to lose the only people who can get them to grow. So don’t fire the best dealers, and don’t crush them with new financial or performance demands they can’t meet.

It is not wrong to ask for government help, but the automakers should come up with a win-win proposition. I believe the federal government should invest substantially more in basic research — on new energy sources, fuel-economy technology, materials science and the like — that will ultimately benefit the automotive industry, along with many others. I believe Washington should raise energy research spending to $20 billion a year, from the $4 billion that is spent today. The research could be done at universities, at research labs and even through public-private collaboration. The federal government should also rectify the imbedded tax penalties that favor foreign carmakers.

But don’t ask Washington to give shareholders and bondholders a free pass — they bet on management and they lost.

The American auto industry is vital to our national interest as an employer and as a hub for manufacturing. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs. It would permit the companies to shed excess labor, pension and real estate costs. The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.

In a managed bankruptcy, the federal government would propel newly competitive and viable automakers, rather than seal their fate with a bailout check.

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post #176 of 261 (permalink) Old 11-19-2008, 09:07 AM
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^The public should be so discerning with the Wall Street Crowd.
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post #177 of 261 (permalink) Old 11-19-2008, 07:15 PM Thread Starter
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Give us a 35% rebate for the month of December on any US manufactured car and sales would take care of the problem.

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post #178 of 261 (permalink) Old 11-19-2008, 07:21 PM
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Originally Posted by BMW GUY View Post
Give us a 35% rebate for the month of December on any US manufactured car and sales would take care of the problem.
BMWGUY there is hope for you, but I'm afraid that your relative is too far gone.
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post #179 of 261 (permalink) Old 11-19-2008, 07:22 PM
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I wou;dn't buy their junk, hell I wouldn't take it even if it was free
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post #180 of 261 (permalink) Old 11-19-2008, 07:25 PM
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Not helping Big 3 with $25B while giving a carte blance for $700B for the banks is nothing short of treason.
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