gm filing for bankruptcy

NJPOLKER

shack wrote: »

My thoughts...as stated earlier



A great example is what is going on now. There appears to be a non-automotive investment group that is very interested in buying the Hummer brand as a going concern. There is also really good interest in Opel and Saab in Europe. IMO GM could have sold these brands on their own. I might actually keep the partnership with Daewoo just for the ability to quickly bring small fuel efficient cars to the US market. Kill Saturn (or sell it), keeping one or two of the of non-Opel vehicles like the Sky (especially since the Pontiac Solstice is gone as well) and rebranding them as Chevys. Merge Buick into either Cadillac or Chevy. Get rid of either GMC or Chevy Trucks by merging one into the other. Shut down the most inefficient factories and move to the newer ones (if that means moving from places like Detroit to the new Saturn facilities...so be it). Narrow the product line (especially in the truck and SUV line-up) to 3 Caddys, 2 Buicks, 4 or 5 Chevys and 2 Corvettes (make the Sky a baby Corvette - it worked for Porsche with the Boxster) and I would even limit the trucks and SUVs to one brand (maybe excepting the Escalade - because we want the pro athletes to still have something to drive besides Bentleys). Deal with the Unions and creditors under chapter 11. IMO, GM could have done something similar to this WITHOUT the help of any govt or Union. In 6-18 months they could have emerged as a lean company without all the baggage of the past. Some jobs would be lost, but maybe...just maybe...those jobs could be regained as the company prospers.

As I said...I have NO confidence in the ability of a govt to run a company.

Run a company??? How about health care?????????? Wake up America!!!!!!!

madmax

The government is not as efficient as the private sector. Even so, I bet they run GM in the ground even faster than it was moving before.

wizzy

Without the gov't GM would most likely be a bankruptcy resulting in liquidation ... not a reorganization.

Reorg is one thing, but liquidation another. If the gov't hands in it saves the company and makes it so reorg and exit is possible, this is a Good Thing for our national security.

tonyb

wizzy wrote: »

Without the gov't GM would most likely be a bankruptcy resulting in liquidation ... not a reorganization.

Reorg is one thing, but liquidation another. If the gov't hands in it saves the company and makes it so reorg and exit is possible, this is a Good Thing for our national security.

How does national security have anything to do with bail outs of auto makers?
And how does this play out with GM's competition being at a disadvantage now with GM haveing the deep pockets of the USA behind it?

wizzy

tonyb wrote: »

And how does this play out with GM's competition being at a disadvantage now with GM haveing the deep pockets of the USA behind it?

Good question.

Kex

xcapri79 wrote: »

No the government wants Ford too. American capitalism is gone with a whimper because of the "sheeple" of this country.

It is very sad that the Russians have to tell us this because this is the change we got.
http://english.pravda.ru/opinion/columnists/107459-0/

If you need Russian propoganda to defend your theory, you may very well be barking up the wrong tree. They are "known and universally respected" for their "free press", after all ... It even reads like anti-American propoganda, and the author seems to revel in our misfortunes.

John30_30

tonyb wrote: »

And how does this play out with GM's competition being at a disadvantage now with GM haveing the deep pockets of the USA behind it?

How do you think Japanese electronics, Toyota and Nissan, et. al., got a foothold here in the first place?

Answer: Japanese Gov't. subsidies

Hillbilly61

wizzy wrote: »

Without the gov't GM would most likely be a bankruptcy resulting in liquidation ... not a reorganization.

Reorg is one thing, but liquidation another. If the gov't hands in it saves the company and makes it so reorg and exit is possible, this is a Good Thing for our national security.

The one thing that bugs the hell out of me concerning all of this is that the money being dumped into GM and Chrysler is no where near the amount that has been dumped into AIG and the banks that were being bailed out. Yet, Chrysler and GM is getting all of the grief ... let them go under sort of thing. The number of jobs, multiplied spending power and retained USA capability put into the automakers far outweighs the banks.

My biggest long term worry concerning the auto makers is a government running a business. Most european countries do not well do this with their nationalized industries.

Sami

Danny Tse wrote: »

Believe me, the fiscal year is coming to an end here in the CA State government, and we have been told to blow out the funds that we haven't used. I don't think any private companies, nor your own household finances, are run like that.

Households most likely not, but private companies do that as well. If your team/division/etc has money allocated to them in the budget, they feel obligated to spend it because to them it is not saved money. Use it or lose it. Small private companies are of course a different story but it's the same thing in large companies.

shack

Hillbilly61 wrote:

The one thing that bugs the hell out of me concerning all of this is that the money being dumped into GM and Chrysler is no where near the amount that has been dumped into AIG and the banks that were being bailed out. Yet, Chrysler and GM is getting all of the grief ... let them go under sort of thing. The number of jobs, multiplied spending power and retained USA capability put into the automakers far outweighs the banks.

You are just flat wrong on this one.

AIG or any single one of the top five or ten big banks failing would cost the government more than they have invested in all of the banks. A failure by one of those would send a tidal shock wave throughout the economy that would make a GM or Chrysler failure look like a ripple in comparison. The problem is the way all the banks and insurance companies interact with each other. If CITI fails, chances are 3 or 4 of the top twenty go with them, not to mention all of the regional and community banks. Banks all have "correspondent relationships" with other banks. They have accounts, investments, loans that are shared (pooled) with many other institutions. Then you would have the FDIC insurance and the Pension Guarantee Corp, and so forth that would have to pony up funds. These are all just the direct problems.

Even bigger is the loss in confidence by the public if a big one fails. The run on the banks would be too much to handle and the system would collapse. I hate the govt has to invest in the banks to keep many of them afloat. Unfortunately it is a necessary evil.

Remember too the TARP funds are not just handouts. They are loans backed by stock warrants, convertible to common stock in 5-10 years if not repaid. The banks are paying the govt 5% for the use of these funds. They are basically a bank at this point, issuing treasury instruments paying 2% and loaning the funds to the banks at 5% for a 3% spread. I wish we as a bank could get those margins on all of our loans. The banks are all wanting to pay the TARP funds back. The TARP program is earning the govt $35 billion a year on its $700 billion investment. Not a bad rate of return in these times.

As far as AIG. Who will pick up the insurance coverage and investments if they fail? The multiples are tremendous based on the number of policy holders and investors. The impact on retirees and pension plans from the loss of uninsured paid up policies and annuities alone would be huge. The loss of P&C coverage could be even bigger.

I have less problems with the govt jumping into the financial sector than a mfg or service industry. After all, they are in the banking and insurance business and have been for years. They set the rules and regs for the banks and really do understand the ramifications of their actions in these industries. The failures and problems of the financial sector in many ways has more to do the the govt getting out of the business (so to speak) by easing the regulations on banks, insurance companies and investment houses.

Refefer

There's some serious FUD going on in this thread.

wingnut4772

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madmax

If GM or any other company can't make it on their own I think they should fail.

obieone

wingnut4772 wrote: »

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Did you just take a shot at the 'state run media'??:D

Hillbilly61

shack wrote: »

You are just flat wrong on this one.

AIG or any single one of the top five or ten big banks failing would cost the government more than they have invested in all of the banks. A failure by one of those would send a tidal shock wave throughout the economy that would make a GM or Chrysler failure look like a ripple in comparison. The problem is the way all the banks and insurance companies interact with each other. If CITI fails, chances are 3 or 4 of the top twenty go with them, not to mention all of the regional and community banks. Banks all have "correspondent relationships" with other banks. They have accounts, investments, loans that are shared (pooled) with many other institutions. Then you would have the FDIC insurance and the Pension Guarantee Corp, and so forth that would have to pony up funds. These are all just the direct problems.

Even bigger is the loss in confidence by the public if a big one fails. The run on the banks would be too much to handle and the system would collapse. I hate the govt has to invest in the banks to keep many of them afloat. Unfortunately it is a necessary evil.

Remember too the TARP funds are not just handouts. They are loans backed by stock warrants, convertible to common stock in 5-10 years if not repaid. The banks are paying the govt 5% for the use of these funds. They are basically a bank at this point, issuing treasury instruments paying 2% and loaning the funds to the banks at 5% for a 3% spread. I wish we as a bank could get those margins on all of our loans. The banks are all wanting to pay the TARP funds back. The TARP program is earning the govt $35 billion a year on its $700 billion investment. Not a bad rate of return in these times.

As far as AIG. Who will pick up the insurance coverage and investments if they fail? The multiples are tremendous based on the number of policy holders and investors. The impact on retirees and pension plans from the loss of uninsured paid up policies and annuities alone would be huge. The loss of P&C coverage could be even bigger.

I have less problems with the govt jumping into the financial sector than a mfg or service industry. After all, they are in the banking and insurance business and have been for years. They set the rules and regs for the banks and really do understand the ramifications of their actions in these industries. The failures and problems of the financial sector in many ways has more to do the the govt getting out of the business (so to speak) by easing the regulations on banks, insurance companies and investment houses.

So, you are saying that the government should have bailed out the banks (which I inherently agree) 'cause they were individually allowed to get so large that their failure would have caused a depression. Right? The fundamentals of these deals were set up under the Bush administration and they allowed using some of the bail out money to give multi million $ bonuses to the same individuals that put said banks into the position.

The eight years of the Bush administration systematically tearing down the rules and regulations, many of which were in place as a result of the Great Depression, is what lead to those mega bank failures putting the national security at risk if those mega banks or their insurer (AIG) failed. A greater national security issue lay with allowing internal USA heavy manufacturing capability to fail.

For example, Chrysler and its subcontractors arrived at the Abrams tank design - one of the best tanks in the world and the only five star tank that can be mass produced & maintained in numbers. There is a reason why the Chinese is interested in picking up the Hummer line....

Prior to arriving at the Abrams tank design, Chrysler groveled to the US Government for a bailout during the mid 80s and the government got paid back in full - plus eventually got one of the best tank designs ever put into service. Had the government said "No" and the company went under, it is doubtful if America would have gotten such a superior weapon whose design elements are considered to be a national secret.

Edit: To add, I am not pro Bush or pro Obama. Obama simply has not been in charge long enough to cause lasting damage - yet. Unfortunately, Bush & his cronies were.

shack

Hillbilly61 wrote:

So, you are saying that the government should have bailed out the banks (which I inherently agree) 'cause they were individually allowed to get so large that their failure would have caused a depression. Right? The fundamentals of these deals were set up under the Bush administration and they allowed using some of the bail out money to give multi million $ bonuses to the same individuals that put said banks into the position.

The eight years of the Bush administration systematically tearing down the rules and regulations, many of which were in place as a result of the Great Depression, is what lead to those mega bank failures putting the national security at risk if those mega banks or their insurer (AIG) failed. A greater national security issue lay with allowing internal USA heavy manufacturing capability to fail.

Again wrong. The bank deregulation started long before W ever took office. CITI, Chase, BOA etc were megabanks to big to fail way before his administration. And AIG does not insure banks.

Since they are loans to be repaid...how the money is used should be up to them. Some of the bonuses were justified and contractually unavoidable.

There is nothing in a hummer that the Chinese don't already have.

As to no Abrams...a void is never allowed for very long...something always moves to fill it. If not Chrysler...then some other company.

exalted512

Hillbilly61 wrote: »

There is a reason why the Chinese is interested in picking up the Hummer line....

Youre not really serious are you?
-Cody

Hillbilly61

shack wrote: »

Again wrong. The bank deregulation started long before W ever took office. CITI, Chase, BOA etc were megabanks to big to fail way before his administration. And AIG does not insure banks.

Since they are loans to be repaid...how the money is used should be up to them. Some of the bonuses were justified and contractually unavoidable.

There is nothing in a hummer that the Chinese don't already have.

As to no Abrams...a void is never allowed for very long...something always moves to fill it. If not Chrysler...then some other company.

That's your opinion and you are wrong. The bank "loans" are no less a loan than the U.S. government has taken with the auto makers. Equity share. AIG is an insurance company and was insuring mortgage defaults to the banks ... which got over their head when too many defaults to bad mortages surfaced. That caused the system to collapse as buyers of the mortgage based bonds offered by the banks no longer had any confidence that any such security would not go under.

It takes $500M - $1B to put up a major manufactuing plant. The same for autos or chips. That kind of capital excludes most everyone for any kind of real defense capability, unless the infrastructre is already in place. Toyota?

We are not going to agree on this. Let's move on and get along. I think you and I can agree that the overall situation is FUBAR.

Hillbilly61

exalted512 wrote: »

Youre not really serious are you?
-Cody

They are looking for the distribution network.

shack

Hillbilly61 wrote:

That's your opinion and you are wrong.

And your qualifications for understanding all of the issues in the financial sector are....?

sucks2beme

Regardless, I think I'm gonna take it right in the wallet. All the bailouts are
NOT doing well. They can't print money fast enough to cover all the losses.
I can only hope all this stuff is as toxic to China as it's been to us.
Hummer is dead, as well as a lot of other GM divisions. RIP.

shack

sucks2beme wrote: »

Regardless, I think I'm gonna take it right in the wallet. All the bailouts are NOT doing well.

About half the top 19 banks (and many of the smaller ones) that took TARP funds are ready or close to being ready to pay back the loans. They DON"T HAVE THE RIGHT to pay them back unless the govt. allows them to do so before 5 years. (one of the bad things about TARP IMO) The TARP funds did most of what they were designed to for the banks....shore up their capital position...while they are shedding the toxic assets and cleaning up their balance sheets. Of the big banks CITI, BOA, 5th/3rd, and Regions still have some work to do, but they are improving and for the time being they are generating enough profits to cover new loan losses. The Govt will own a piece of AIG for quite some time...at least 5 years. Their biggest issues were the risk swaps and their pension funds. Their core insurance business has continually done quite well.

The problem with financials is that all the big ones wanted to become "one stop shopping" financial institutions. The lines between, lending, investments, insurance, mortgages, investment banking, etc...all became blurred. If AIG had stuck to underwriting insurance they would have done just fine. It was their "financial division" that got them in trouble. The same is true for CITI and BOA that got into investment banking and other areas outside of their core business. It never should have happened.

Hillbilly61

shack wrote: »

And your qualifications for understanding all of the issues in the financial sector are....?

And what are yours, particularly with whether or not GM should be allowed to go out of business? That is what this thread is about. Heavy manufactuing is not banking, but it has been expressed by you that those companies should be allowed to go under, while the banks saved.

exalted512

Hillbilly61 wrote: »

They are looking for the distribution network.

You do know that GM's Hummer did not have anything to do with military vehicles when it was/is being sold correct?

Hillbilly61 wrote: »

And what are yours, particularly with whether or not GM should be allowed to go out of business? That is what this thread is about. Heavy manufactuing is not banking, but it has been expressed by you that those companies should be allowed to go under, while the banks saved.

Actually, he didnt express that they should be allowed to go under, rather that people should not compare giving money to GM vs AIG as AIG going under when have a far greater impact.
-Cody

shack

Hillbilly61 wrote:

And what are yours, particularly with whether or not GM should be allowed to go out of business? That is what this thread is about. Heavy manufactuing is not banking, but it has been expressed by you that those companies should be allowed to go under, while the banks saved.

Let’s see. A BS in finance, a graduate degree in banking, a holder of a federal and state securities licenses (no longer active), 30+ years as a banker and financial analyst dealing with private clients, commercial customers and commercial R/E portfolios. Currently I'm a SVP for a publicly traded bank started less than 10 years ago. Previously I was a SVP at two of the banks that were part of the 19 largest banks to go through the recent "Stress Test". I have worked with companies going thorough bankruptcy on several occasions both as a lender to the bankrupt company and as a lender to customers acquiring the assets of bankrupt companies.

If you read what I said in regards to GM and Chrysler, I did not say they should be allowed to fail (although bankruptcy in and of itself is a form of failure)...I said they should be allowed to go through reorganization without the help of the govt. and outlined how that could be accomplished in a way that would streamline the companies to make them profitable IMO. If you lend to commercial clients you learn to analyze a balance sheet, income statement and cash flow to understand how a company operates. While GM is much more complicated than most, the underlying factors are pretty much the same. I also said that experts in the auto industry should be handling the reorganization...not someone who with no automotive mfg experience...and definitely not politicians...as some in congress are wanting to do.

As far as banking...first of all, I did not bring up the topic...I responded to someone else. Furthermore, I would have no problem with some sort of a reorganization for some of the banks without govt help...if that were possible. It isn't. A bank is either solvent or it isn't. There is no chapter 11 for a bank. Banks can't have their liabilities (deposits) discharged, while picking and choosing which assets (loans) they want to keep and holding on to the good stuff as is allowed in a reorganization. Banks (et:al) are unique in that ALL banks, S&Ls and Credit Unions are already insured by either federal or state agencies. They are heavily regulated by the Office of the Comptroller of the Currency, the FDIC, FSLIC, NCUA, State Banking Regulators, the Treasury and to a lesser extent the Federal Reserve Banks. Banks cannot operate without a charter approved by the govt. They cannot open (or close) depository branches or ATMs without govt. approval. They cannot sell themselves or buy other banks without govt. approval. When banks are deemed to be insolvent...they are immediately shut down and all their assets are in control of the regulators and sold or transferred to solvent institutions and the FDIC makes sure all depositors are made whole. The government DOES understand banking because they have been running them for years. The govt. is actually the primary determiner of whether a bank can remain open for business. Banking operates under the auspices of the govt. and therefore govt. really their only source of help when all other sources replenishing capital are gone. BTW there has already been many bank failures this year. In fact more have been shut down through the end of May than were closed in all of 2008...and the list will get much longer. Any one of the top 20 banks failing would wipe out the entire FDIC reserves and could potentially cost the as much (or more) as they have invested in AIG, GM and Chrysler. The couple that were very big (Wachovia, WaMu) were negotiated sales by the govt in lieu of having to take them over.

sucks2beme

Question for you, Shack. What does the financial gurus think about the
second wave? The housing market was one thing, but the office/retail
property crash is just ramping up. With all the closing chains and smaller
mom/pop shops, who's going to pay the rent in those strip malls and
high rise office buildings? All these chapter 11's mean get out of your
lease early chits. I've heard rumbling around Dallas about some very high
profile developments falling on hard times.

shack

sucks2beme wrote: »

Question for you, Shack. What does the financial gurus think about the
second wave? The housing market was one thing, but the office/retail
property crash is just ramping up. With all the closing chains and smaller
mom/pop shops, who's going to pay the rent in those strip malls and
high rise office buildings? All these chapter 11's mean get out of your
lease early chits. I've heard rumbling around Dallas about some very high
profile developments falling on hard times.

There will definitely some hits to be taken in commercial R/E. We are seeing that now, For example, I financed construction of a small commercial office project (30,000 sq ft) two and and a half years ago. The pre-construction appraisal was around $7,000,000. Cost to construct was about $5,500,000 which gave us roughly $1,500,000 equity in the project. We had to foreclose. The foreclosure appraisal was $3,750,000. We were able to sell 3 of the buildings for around $3,300,000 and have 2 buildings left appraised at $1,500,000 with $2,200,000 unpaid. We are fortunate that we can hold them for a while till the market comes back and not take a huge loss...but it is indicative of the market. We are seeing retail rental rates dropping from $25-$30 a sq ft down to $16-$17. Office is down from $22 to as low as $10. This is of course IF the space can be leased at all.

Banks will not bear all of the brunt of the pain in commercial R/E. A lot of commercial R/E debt is held by non-recourse lenders like pension funds, insurance companies and other institutional investors. Part of the purpose of the TARP (Troubled Asset Relief Program) was to give the banks the necessary capital to be able to hold on to foreclosed assets until the market returns value to those assets. As bank were charging off more and more loans, first using up loan loss reserves, then profits and finally capital...their capital levels were getting to insolvency levels. The were forced to sell assets at rock bottom prices just to replenish capital instead of holding them. TARP gives the banks more flexibility. An accounting issue called "Mark to Market" was also causing undue burdens on the banks. There may be some relief there, but it is more of a technical capital calculation issue. Still it posed problems. There will be some issues, but there is probably a shorter time frame that it will be a problem than the residential stuff and hopefully recover quicker. This is assuming that the recession does not become a prolonged problem or even a depression. It appears there are some hopeful signs that the end may come this year with a recovery to really take off sometime in late 2010. If that doesn't happen, all bets are off.

I worry more about credit card debt. It is ALL unsecured and a loss is immediate and finite. However most of it is centered in a few of the large institutions and hopefully they can withstand the losses when they really start hitting.

One final thing. Most publicly traded banks stocks are selling at a fraction of their book value. If the govt. ends up owning bank shares, they are buying LOW (the warrant strike prices have already been set at what is probably the bottom of the market). TARP...in addition to making the govt. money as the banks pay interest...could end up making a nice little profit on stock appreciation as well.

Rivrrat

Nice spam.

exalted512

Reported

obieone

"Manny, choot that piece of chit"- Tony Montana, Scarface