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WSJ Report: GM Seeking Federal Loan Guarantees For Itself & Suppliers

Link: http://www.reuters.com/article/marketsNews/idINN2237993020080822?rpc=44

Article Quote:

DETROIT, Aug 22 (Reuters) - The Big 3 Detroit-based automakers are seeking about $25 billion in federal loans as they struggle to ride out a steep downturn in U.S. auto sales, The Wall Street Journal reported on Friday.

The U.S. automakers -- General Motors Corp , Ford Motor Co and Chrysler LLC -- briefed White House officials, Congressman John Dingell and Michigan Democrats on a possible bailout and plan to unveil the proposal next month, according to the report.

GM Chief Executive Rick Wagoner said on Thursday that the top U.S. automaker was seeking federal loan guarantees for itself and its suppliers. He declined to say how much the company was looking to borrow under such a program if it were approved by the government.

The Detroit Free Press reported earlier this month that executives at GM, Ford and Chrysler met to agree they would need about $40 billion to ride out their current troubles, and the way out of the losing streak would be a government bailout.

Full article at link. No subscription necessary to view.
 

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http://www.reuters.com/article/marketsNews/idINN2237993020080822?rpc=44

DETROIT, Aug 22 (Reuters) - The Big 3 Detroit-based automakers are seeking about $25 billion in federal loans as they struggle to ride out a steep downturn in U.S. auto sales, The Wall Street Journal reported on Friday.

The U.S. automakers -- General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz), Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz) and Chrysler LLC -- briefed White House officials, Congressman John Dingell and Michigan Democrats on a possible bailout and plan to unveil the proposal next month, according to the report.

The plan is for the government to lend some $25 billion to the automakers in the first year at an interest rate of 4.5 percent, or about one-third what the companies are currently paying to borrow, the report said.

Under the proposal, the government would have the option of deferring any payment at all for up to five years, the article said.

Representatives at GM, Ford and Chrysler were not immediately available for comment.

GM Chief Executive Rick Wagoner said on Thursday that the top U.S. automaker was seeking federal loan guarantees for itself and its suppliers. He declined to say how much the company was looking to borrow under such a program if it were approved by the government.
 

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Re: WSJ Report: GM Seeking Federal Loan Guarantees For Itself & Suppliers

40 billion? I wonder which of the Big 3 needs the majority of the money...
 

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Of course, if the federal legislature does this, the Treasury just borrows the money from Japan and China, to name two, and the tax payers are on the hook for another $25, billion dollars the "government" doesn't have and may not get back!!! :mad:
 

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Of course, if the federal legislature does this, the Treasury just borrows the money from Japan and China, to name two, and the tax payers are on the hook for another $25, billion dollars the "government" doesn't have and may not get back!!! :mad:
Well, with our committment in Iraq set to be over soon, we do have a couple extra bucks lying around.

In the event of bankruptcy, lenders to the bankrupt company get paid first ;)
 

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Re: WSJ Report: GM Seeking Federal Loan Guarantees For Itself & Suppliers

If the government knew what was good for this country, they'd lend them the money.
 

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Re: WSJ Report: GM Seeking Federal Loan Guarantees For Itself & Suppliers

If the government knew what was good for this country, they'd lend them the money.
I think they will. First, when the government made the loans to Chrysler, it got a high return on the debt (which was paid ahead of time) and tens of millions of dollars on exercising stock options, plus it did not have to pay for the mess that follows should Chrysler gone under (aid to displaced workers, states and cities). Same thing should happen here, plus if we are so hot for energy independence, we would support efforts such as hydrogen cars and the Volt. I am not proposing permanent subsidies or grants, just in this case a lender of last resort.

Also consider the bank bailouts. The mortgage banks got themselves into a mess that was unnecessary, whereas the Big 3 have been hamstrung with union contracts in place for decades (when there was little global competition) that pay for pension and health benefits, that for the foreign automakers are paid by the taxpayers in their respective countries. The foreign car buyer is paying less for their cars because of these taxpayer subsidies.
 

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I don't believe reduced spending in Iraq will eliminate the $482 Billion deficit, so we're still borrowing. It remains to be seen how much it's going to cost to bail out Fannie Mae and Freddie Mac. And they're in the que before the automakers.
At the current cash burn rate for GM and Ford, not including Chrysler or the suppliers, $25 Billion buys them about 18 months. Is this "rearranging the deck chairs on the Titanic?" Yes, the borrowers get paid before the stock holders. As you know there is an order to this payout and this doesn't mention where the Treasury will be in the que. If the Treasury is far enough down the que they may only receive partial repayment or theoretically it could be none. I haven't taken the time to check GM and Ford's book value and existing debt levels, however their market cap is about $15.5 Billion, This doesn't look like a great bet.

Given the timing, and the group, all Michigan democrats as I recall, that floated this as a trial balloon a few weeks ago. I'm inclined to believe this has a lot more to do Presidential election politics than anything else. :yup:
 

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Re: WSJ Report: GM Seeking Federal Loan Guarantees For Itself & Suppliers

Maybe I'm losing my memory, but I could have sworn just a couple of weeks ago the Rick was assuring us all that GM had enough cash to ride out the downturn ???

Now he's saying they'll need a Federal bailout ?

Which is it ?
 

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Re: WSJ Report: GM Seeking Federal Loan Guarantees For Itself & Suppliers

Maybe I'm losing my memory, but I could have sworn just a couple of weeks ago the Rick was assuring us all that GM had enough cash to ride out the downturn ???

Now he's saying they'll need a Federal bailout ?

Which is it ?
I believe Wagoner said "to get through the year."
 

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Re: WSJ Report: GM Seeking Federal Loan Guarantees For Itself & Suppliers

I think they will. First, when the government made the loans to Chrysler, it got a high return on the debt (which was paid ahead of time) and tens of millions of dollars on exercising stock options, plus it did not have to pay for the mess that follows should Chrysler gone under (aid to displaced workers, states and cities). Same thing should happen here, plus if we are so hot for energy independence, we would support efforts such as hydrogen cars and the Volt. I am not proposing permanent subsidies or grants, just in this case a lender of last resort.

Also consider the bank bailouts. The mortgage banks got themselves into a mess that was unnecessary, whereas the Big 3 have been hamstrung with union contracts in place for decades (when there was little global competition) that pay for pension and health benefits, that for the foreign automakers are paid by the taxpayers in their respective countries. The foreign car buyer is paying less for their cars because of these taxpayer subsidies.
First, the government did not loan money to Chrysler, it guaranteed loans made to Chrysler by third parties. The guarantee was for $1.5 Billion. And yes the government made money on the deal. No guarantees this time and it's not the economy/industry of September 1979.

Given what's happened in the auto industry, the total cost if this is done, may be more than the cost that would have been incurred in letting Chrysler die the first time around. Didn't we have to deal with displaced workers and lost jobs? Weren't there buy outs. Isn't Michigan's economy even further in the tank now than it was then?

Both the bank/mortgage industry problems have been exacerbated by the government trying, unsuccessfully, to regulate choices available to the market as opposed to letting business respond to the market's demand!

As for energy independence, We need to take the resourses we have and use some of them until other technologies become viable. India and China are not going away and neither is increased demand from them or this country. To paraphrase an old Chicago expression "drill early and often."
 

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Re: WSJ Report: GM Seeking Federal Loan Guarantees For Itself & Suppliers

"The foreign car buyer is paying less for their cars because of these taxpayer subsidies."

I wouldn't call it less for a foreign car, they charge full price and get way more profit on it. Where we pay all the tax is in our sales and income taxes. That is what contributes to Health Care. That is at least one reason why our top ten cars in sales tend to be the smaller cars as compared to the states (Cobalt vs. Impala, Corolla vs. Camry, etc.). That and the price of gas (more taxes again). I've heard rumors (not sure if true) that GM is one of the largest providers of health care in the world. We may pay more taxes here but the American auto industry is the one paying for health care in the US.
 

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Re: WSJ Report: GM Seeking Federal Loan Guarantees For Itself & Suppliers

Using Federal loan money to pay for employee health care. Isn't that kind of a round about way have a taxpayer funded health-care system?
 

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Re: WSJ Report: GM Seeking Federal Loan Guarantees For Itself & Suppliers

Wait, I thought I read Chrysler might not be able to get this bc they are private now? maybe I am imagining.

However, I think it would be money well spent if the gov just gave the money to GM and Ford, because I think Chrysler is a sinking ship that is the worse out of the big 3...
 

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Re: WSJ Report: GM Seeking Federal Loan Guarantees For Itself & Suppliers

Feds should give loans only under one condition. GM managment must go. Why would you give more money to idiots that call hybrids joke and that people do not want them. Then they turn around and make hybrid Tahoe that nobody wants and tell you see we told you so. While toyota sold more the one million hybrids. Then GM management will tell you that americans would not buy small cars unless price of gas is $8 per gallon. WOW. Then they tell you gm quality is good well every study will show you that saturn, chevy, pontiac, gmc, saab and hummer are bellow industire average. But gm managers will tell you that is just media telling lies because they do not like us. No why would feds. give money to these morons. Put new management like Ford CEO and then give them money.
 
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