The Economy, The Stock Market, & Your Personal Finances

General Motors Bailout*
Good evening. So GM is not only losing a lot of money, but also is burning through cash at a stunning pace. It is projected that, at this rate of burn ($1B a month?) they will run dry sometime after the 1st of next year.
GM - along with a group of mostly Dem members of Congress, want the government to help GM out with another $25B from the $700B package that was approved to help banks.
GM earlier was given access to a different $25B to be used to develop more fuel efficient cars. That has been largely untapped thus far.
Some questions:
1) Should GM get this infusion of $25B?
2) If so, should it come from the $700B or be a separate bill that Congress and the President agree to?
3) Is GM a viable business? Can it survive?
4) What would be the ramifications if it doesn't survive? From Detroit to your town?
Feel free to drift away from these questions to other things I haven't thought of.
Thanks. rjb

*Oh, yeah. The word bailout is not intended to be a code word for my opinion. It is merely shorthand for whatever the alternatives are.

I feel sorry for the masses who are tied to GM purse strings, but not the corporation and its masters. The top brains made dumb decisions and are now paying the price for being bad capitalists. Years ago the government told car companies to update their products to help solve environmental problems and prepare for peak oil. Companies like Toyota and Honda meet with their engineers to look at the future, companies like GM and Ford went to lawyers to whine about unfair demands. GM dumped the electric car and put it's marketing clout behind the Hummer. Toyota and Honda went ahead with hybrid technology. Who should be rewarded?

I have no idea if we should save GM for the sake of the economy. I expect the government will throw some money to GM (and Ford too). Maybe this downfall will spur a national health plan to pick up where these corporations are bailing. Maybe some CEO's will learn what it is like to stand in a soup kitchen line. Maybe something good can come of this mess - maybe not.

i could see a major restructuring of the big three into the big two; GM merging with Chrysler, abandoning many models while developing 21st century technology (hybrids etc) probably shutting down 1/3 capacity and modernizing their manufacturing.

I think you miss the idea. The plan is to combine GM with Chrysler, creating a monstrosity so huge the government couldn't possibly let it fail.

In my evil moments, I'm inclined to say "Let them Fail". If they haven't found a way to show a profit on small, economical small cars since 1973, they just aren't going to. Lots of other companies have been able to do it, and some have set up production in the U.S. Their over paid workforce won't be the first to be dumped on the market with no long term benefits.

I favored the Troubled Assets Relief Program on the concept. The concept was not to bail out every company and every industry that dug themselves into hole they can't climb out of.

On another thread, Hamburger made mention of the number of unsold new vehicles piling up. I found this. I neglected to write down the source. I can find it if asked.
New cars sitting on dealership or factory lots, in transit or at ports of entry as of Oct 1, 2008 totalled 2.9 million. All brands, domestic and foreign.
New car sales (but I don't know if that is of domestic and/or cars through Sep) were 10.8 million.
Used cars on the market? I cn't find anything.

Is there a comparison to Oct 1, 2007 available?

Nevermind. I could do my own search.

I saw some numbers, Roger, but I didn't quite trust them enough to post.

GM (and the other two) are going to be a real problem for the canadian (ontario)
economy . 80 % of all cars produced in ontario were for export to the U.S.
because of government health insurance system , canadian subsidiaries of the BIG THREE weren't saddled with high medical insurance costs (as in the U.S. ) .
so they just churned out cars , vans , trucks double quick !
but what now ? it's all come to a screeching halt .
"auto industries need government (read taxpayer) help " is the battle cry ; but making more cars subsidized with even more taxpayer money won't revive a dead horse .
i don't know how to resolve the dilemma - there'll likely be several 100,000 more unemployed from auto and supplier industries double quick .
the government (taxpayer) will have to help the workers re-train and find new jobs . but how much time will that take and where are the jobs going to be ?
i don't think anyone has any idea at this time .
lot of talk about : economy "basically" sound - but that won't produce any jobs and won't pay any wages .

(reminds me of that crude joke : operation succesful ! patient dead !) .
hbg

Thanks for the post, hbg. I wasn't aware of how big the auto industry in Ontario is and how dependent it is on the U.S. market. I, like you, don't know how this will play out. I think it looks bad for yall. rjb

rjb :

overview of ontario automotive sector - some easy graphs :

http://www.2ontario.com/industry/automotive.asp

Is there still an obligation for the citizens of the United States to buy a vehicle made by one of the big three?
How many plants have been built over seas by the big three?
How many americans have lost their jobs because of the outsourcing?
Will the bailout money keep the money in the United States.

bring it all home on the bailout

So wrapping this bailout of the automobile industry in the American flag - saving domestic jobs - seems to be a bit of a charade, as I read it. I wonder if any polictico will point out that?
And, husker, you have opened a whole 'nother can of worms with the "keep the job in America" thing. Too late tonight for me to go into that.

You have touched on one of my growing sore points. I had rather expected that TARP, as it's come to be called, was going to be used to purchase underperforming loans from banks (and investment banks, just by the way), all the while hoping that a large percentage would ultimately be paid at face, leaving the government and its taxpayers with either a small loss, and posssibly a gain in the long term. Then, it developed that we would take equity positions. Swell. Then the government could help with the allocation of credit, which is kind of what caused the mess in the first place. Now, the whole 700 billion is starting to look like an irresistable honey pot for every business and every person that just "hasn't been able to cope."

Today's WSJ headline:

Bailout's next Phase: Consumers
Paulson Quits Plan to Buy Bad Assets; Focus on Credit Cards, Car and Student Loans

What the hell is this about?

Nevermind. I'm just jealous. My car is paid for, I've got no student loans, and my credit card balance is just north of $300.00. Everybody's getting something but me.

I know, this thread isn't given to emoticons.

me to Roger I had make plans and sacrafices 14 months ago before i lost my job - but I have to admit it is harder than hell to pay my property taxes

Good afternoon. This thread is pretty quiet. That is bad, I guess, but good because the other Economics threads have degenerated into personal attacks.
I hope it won't happen here.
It's official. We are in the U.S. in a recession. We have been since last December of last year.
U.S. markets were down 7% or so today.
Big 3 auto sales are looking to come in down 35% vs October.
And on an on.
So, here is my addition, fully realizing that some of yall are skeptical of statistics in general and government statistics in particular. I have mentioned before that I belong to a survey group run by the FRB of Richmond. We give a mid-month report on business results as of each mid-month (we reported on 11/20 for November, for example). We have been doing this for a couple of years, and I think I can correlate our "flash" reports with the Commerce Department reports that come out a couple of months later.
Anyway, there was a gradual decline in, say, retail service sector revenues through September, and then a steeper deline in October followed by, in the report I got last week, a stunningly sharp decline in November.
Big-ticket sales obviously got hit especially hard. But troubling to me are things like shopper traffic, number of employees, and inventories. Retailers in our region are not buying stuff.
And finally, I see the stat called Expected Product Demand for the next 6 months. That has turned decidedly negative in November, which means retailers will probably cut jobs and reduce inventories even more.

listened to interview with a retail analyst on 6 0'clock news .
he painted a grim picture for the retail industry for next year . he claimed that with more people likely to lose their jobs , spending power is going to tank .
he said that even bloomingdale's - who apparently don't like to discount - has slashed prices by as much as 70 % .
he further said that shares of retailers' falling below $ 5 must be considered "junk" .
not looking very good imo .
hbg

but note that the mafia is benefiting from the financial meltdown - they have no "cash problems" :

http://able2know.org/topic/126274-1

Apropos to that, H'burg- One of the tenants in my building here is a dentist. A sole practioner but with a whole bunch of teeth cleaning people. Maybe 6 of them. He came in this morning to drop off his rent check.
We talked about the economy and he mentioned that (for a time-frame I didn't catch...a week or a month) he is having 20% of clients not show up for their routine appointments. His is a mostly blue collar clientele.

i have a good EHB plan from my last employer - a canadian insurance co .
the dental plan paid for - and encouraged - teeth cleaning every 4 months - the plan has recently been changed to pay every 5 month (the plan pays 80 % of most dental work , which is still pretty good imo ) .
they used to cover "out-of-country" medical expenses for up to 6 months - good for "snowbirds" - , but they have now reduced it to a 3 months period .
since not many people left the country for such extented periods of time that's hardly any hardship .

at our recent annual retirees' luncheon we were assured by the president that our pension plan is secure and has passed inspection by an independent firm of actuaries - much relief !
i don't expect a pension increase , but have no trouble with that as long as the plan stays secure .

speaking in very general terms , the financial turmoil hasn't hit canada as the U.S. YET ! but i suspect that the dimished buying power of many american consumers will be felt here .
with the downturn in house construction in the U.S. , canadian lumber exports have tanked - they've hit bottom and will likely not recover for many years .
and let's not mention the automotive industry ... ...
hbg

If you have nothing to do, hbg, please visit a thread on A2K called "A2K NFL Pick 'Um for Season V." There, some 20 of us pick the winners in football games despite not knowing squat about football. In between time we have the most fascinating discussions which have ranged from bellydancing to bovine proctology.
Scroll back to midway down pg 58 and there is the building project here in Cville I am working on.
I am stunned at how construction costs are plummeting. Steel, concrete and lumber way down. And contractors are desperate for work and are cutting their prices out of fear of having to let go of supervisers. The flip side is, of course, what can we get for space in this mixed-use property in a bad market?