Monday, November 17, 2008

GM and rainy days...

Robin Andrea asked about my thoughts on "the bailout". No, I haven't heard from any coworkers; Dottie was upset enough when I was getting texts from some of them after I retired that I have cut off all of them...

Until October, GM's sales had held at half the loss of the other automakers including the Japanese and Korean ones. Led by the Malibu and the Cobalt, there was hope of them making it to 2010 when more of the new products hit the showroom floor and "holding the line" became "turning a corner".

For those who don't realize, part of financing themselves until 2010 was GM selling 51% of GMAC (General Motors Acceptance Corporation) several years ago. The company that bought that 51% bought DiTech and rolled it in with them. GMAC ended up dealing with it's share of "subprime" woes, and when all of that "hit the fan" they quit loaning money, just like so many other places.

So in October, if you wanted to buy a GM car, you either had to bring your own financing, or go to a dealership large enough to have banks backing it; GMAC lent no money for GM cars in October!

Sales dropped 47%...dealerships closed...thousands lost their jobs in support industries...this culminated in the assembly divisions cutting production, re-rating the assembly lines, and workers being cut in the plants.

For every worker in an auto plant there are 10 people in support industries, be it the modular assemblies (instrument panels, heater and air conditioner assemblies, seats, headliners, door pads, facias...) shipped in for us to install; the truckers hauling in those parts and others, the railroad workers handling the boxcars that bring in more of our parts; the truckers and railroaders that ship our cars all over the country; the people to thread the bolts; the ones that make the glass.

For each of those jobs above there are at least 10 more affected, be it the grocer's, or the department stores, the farmer, the textile worker...

The largest taxpayer in my county is the assembly plant I worked in. They are also the largest customer of our utilities. A friend who was a bookeeper for the power company told me once that "when things are tight we ask GM to pay a month ahead to get us by"...

So when you've given $750 billion to support Wall Street that may or may not ever be seen again in light of the news last week that they've decided not to use it the way it was intended, re-routing $25 or even $50 billion of it for use not as a "bailout" but a loan that will be re-paid, to an industry that supports so many, seems like a no-brainer!

Besides the Malibu and Saturn I was building, besides the upcoming Volt electric; the first generation of hybrid full size trucks had just come out last spring, and the next generations would be on the street by 2010 if they don't have to halt development.

To those who think of Detroit as dinosaurs as I heard a Senator say yesterday, you haven't looked lately. Dottie's Malibu averages 29.7 city, and I've gotten 37 out of it on the highway at 80 with the trunk full and the air on. Yes, it's a 4 cylinder, and if you think it doesn't run I'll happily put you in the passenger seat at freeway speed and watch your eyes open wide as it pushes you back in the seat when I step on it...

A piece I caught on Speed channel last night spoke of the "Smart Car" as getting 36 mpg. If Dottie's Malibu averages 29.7 with room for 5 and trunk big enough for a couple of bodies, is GM really so far off the mark?

My full size Silverado pickup? The V-6 is averaging 18 in the city; the only time I've checked it on the highway I was pulling my boat two summers ago and it was getting 24...

Yes; I think that loaning the auto industry what it needs to weather the financial storm created by Wall Street is a no-brainer. Throwing "the big three" to the wolves at this point will create a loss of jobs that will send unemployment well past the 7.5% they are already predicting for next month, and into the double digits. The losses created by not doing so will affect each and every person you know somehow, be it the loss of jobs, or the loss of tax revenue or payroll.

I also have no doubt that this "lame duck session" of Congress will find many already licking their election-day wounds using it as another soapbox, never minding the backs of the people that the soapbox is perched on!

I've probably prattled on quite long enough here...I'll just say the weekend went well, and that things are OK here. Dottie starts a week's vacation on Wednesday, so if I leave this up for a day or two I may have a hard time updating until she goes back to work...

May the week be kind to each of you!

alan

14 comments:

Teresa said...

Perhaps GM will fare better than Chrysler, which was bailed out in the late '70s, came up with innovative products and still ended up "merging" with Daimler, then being sold off by Daimler.
I, too, believe it's a gotta-do, especially for my home state of Michigan, but we have a greater shift in the global economy going on than Chrysler suffered from in 1980. It may just be more money down the hole in the end.

zilla said...

I appreciate this post. It's impossible for me to think rationally on the topic, despite many similar recent conversations with my mom. I can't see past the fact that my children's father works F&I for our area's largest Chevy dealership, and I worry that the kids will see their dad broken. I can't see past my college friend who is chief engineer for the Volt, and his wife (also an engineer) and two kids -- what stress they must be under right now. I can't see past my cousin, who prematurely inherited a rubber parts company from his father who had a massive coronary the night before a huge union contract negotiation meeting, or his wife, his four kids ... my father's pension which my mother still receives, your pension ... I can't think straight about a problem that affects so many who matter to me so much.

My garden hoses are covered with snow, by the way :-) Not for laziness, though; I spent yesterday installing an old-school VCR so I could tape something for MrZ. We've got Dish, and I had to move TV #2 to the #1 position (TV #1 moved out with Moose) in order to connect the VCR to the receiver, and blah blah blah, can't do that sort of thing without dusting and vacuuming under the furniture, so it turned into a four hour project, and this morning's snow was kind of a surprise :-S I've got high-quality hoses and crossed fingers and egg on my face...

LucyTolliday said...

When even Honda has hangers full of unsold cars, you know there's trouble.

I fear the day of reconing has only been pushed forward Ford's debt is up in 2011 and Gm's aren't far off either, without a recession there was a good chance one or both might have failed without action. Ford have been doing the right things by selling non core units like Jaguar and focusing on smaller cars, GM have been doing the same.
The private equity guys at Chrysler are just looking for a way out, a stock market float is out so they are trying to merge with anybody.

While their actions are very late I dont think its too late to avoid total collapse but they will be smaller.

dragonflyfilly said...

Well, as usual the "Big Guys" get the bailouts while the "little guys" have to make do with the scraps, same old story *sigh*...what's to be done? i sure don't know.

well, i hope, alan, that you get some down time, before you move on to your next project, whatever that might be.

cheers for now,
love and light,
pj

Carolyn Ann said...

Well said, Alan! Detroit is too important to let fail. If the Treasury can bail out the financial firms, they can certainly bail out the auto-industry! (Maybe someone should point out that GM and Ford actually are financial firms, first? And automakers second?)

I'd forgotten about the GMAC deal; I remember thinking, at the time, that it was a dubious decision.

I see that Senators BMW and Toyota are saying the American auto industry is in fine shape...

Carolyn Ann

Sassy said...

I should just get me a bicycle.

sigh

Hope your week is kind!

Annie said...

so...it isn't okay to stay in touch with people you worked with? :(

robin andrea said...

Thank you so much for responding to my question, alan. I appreciate it immensely. I've been reading a lot about the "bailout" and have heard it also referred to as a loan, which sounds quite reasonable to me. I have read that the $25 billion will seem like nothing compared to the cost to our economy if we let the Big Three fail. This rescue seems like a no-brainer to me. Of course it should happen, and it is absolutely part of the bigger rescue already in progress.

ryssee said...

So timely...I wanted to ask you your position on a possible bailout or loan. I can see both sides of the argument, but I'm still ambivalent.

I hate to say I haven't bought an American car since the 80's - and I buy lots of cars. I love small cool sporty 2-doors and hatchbacks. I wish they'd bring some of the small ones they make for the market in Europe here - great mileage, great features, sporty compacts and hatchbacks that are fun to drive, under $20K. I want to believe they're coming, and I hope they do!

nerdgirlsspace said...

Alan, thank you for this post. It taught me a lot about the subject and why a decision like this would be made. Thanks! =))

Connie in FL said...

Thanks for the enlightenment. My grandfather had a hand in establishing Buick as a part of GM. He was a car dealer as was my father and his brother and my first husbands father and brother. To say I am familiar would be an understatement.

I've been thinking about a post on the subject but haven't sorted it all out in my mind exactly. You very well stated the facts and I agree a LOAN is necessary. On the other hand, changes are a must.

I have a big problem with bailouts that turn into handouts then the company does nothing to change the ways that got them into the mess in the first place. The AIG HANDOUT I do not understand at all. Plus, their arrogance in spending so much for luxuries even still is infuriating.

How about we change some of our ways of doing business while we're changing the nation anyway?

mrsmadrigal said...

I'm normally opposed to bail-outs. But these are strange times and, as you point out, the flow-on effects are quite serious. A loan from the Government would be an investment in American jobs.

JLee said...

Good points Alan. I really hope GM can make a turnaround with it's new hybrids, etc. Hope you have a great weekend :))

CrackerLilo said...

I really wanted to know what you were thinking. I agree that the auto industry would be a much better use of money--the big problem is we've already committed to that $700 billion, and we taxpayers only have so much money! But I knew you would know more than I did. I didn't know about the GMAC debacle, for instance. That is absolutely horrible.

Did you hear about Tony Stewart linking to a petition to Congress for the auto industry bailout on his website? He's almost as invested as any autoworker past or present now. Also, I saw a Ford Focus Hybrid as the pace car on the track--I hope the company can release it as planned.

You and your blog make this so real to me. I've thought of you often in the past week or so. I wish you and yours well--toes crossed so I can type!