GoodBye GM: Hello Government Motors

Oh, so it's official today. Just like I said on November 11th. (only way to save GM...) HERE

(or updated at the end, on 11-20), saying they needed to go into bankruptcy to reduce dealers.

Oh, and Chrysler is finally sold to Fiat, and will be OUT OF bankruptcy this week.

We are only forgetting the MOST important thing.

Making these companies become GREEN, and important employers of RETRAINED green workers (see my discussion at above location).

cheers to all, and good luck

RIP: Chrysler goes Chapter 11

Ok. I said in december (and November!) 2008, that Detroit needed to go into bankruptcy court to get out of the excessive dealer networks that they had.

Case in Point: GM.

But now, poor little chrysler is in Chapter 11.
Oh shades of Lee Iococca.

Oh those mean old bond-holders who wanted all their money.

oh mean Mr. Grinch, you steal me blind.

It will be good for them...

In a related AP/ABC article, I found this subtle quote:

The administration also said there will be no layoffs associated with the bankruptcy.

Although dealerships will eventually take a hit and will be closed over time, but it is unclear at this point exactly how many.

The company will be able to operate normally during the bankruptcy process. Americans will be able to buy Chrysler cars and warranties will be honored.

So, I guess my prediction rate is still pretty good...

Oh, and regarding those terrrible Hedge funds that refused to negotiate?

The article also says that:

...(statistics from (yeah?) "well-known bankruptcy expert Lynn LoPucki's Web site that tracks (bankruptcy) filings (and) found that from 2000 to the present,

that the length of the median "pre-negotiated" bankruptcy case was about 5.3 months. During the same period, the length of the median "prepackaged" case was about 52 days, according to the same data source.

"Prepackaged" means that the debtor drafted the plan and successfully solicited votes on it before filing the case. Prepackaged cases nearly always are filed solely to modify the company's liability on junk bonds. Once filed, these cases move very quickly.

"Prenegotiated" means that the debtor negotiated the terms of the plan with some, but not all creditor groups before filing -- even if no prefiling vote was taken on the plan. An example would be a plan to sell the debtor's business, which has been drafted and negotiated with a large secured creditor before filing, but not with trade creditors.

So it looks like the junk bond (and hedge funds) will LOSE this fight....
And who knows, maybe we will have a new viable car company...

We can pray.

AUTO-Bailout - and the economy

ONE Last (I think) discussion piece on the Auto Industry.

Am I the only one (no, I don't thinkso....) that understands that about

One in ten jobs

in this country are related to the automobile industry???

What I see as the main (and perhaps only reason to save the Detroit auto industry is that the amount of new unemployment that would be created will throw us into what the Fed chairman (Mr. Ben B.) received his Doctorate for studying, what I call, "Depression 2.0.


The sudden demise of Chrysler, and closing of myriad auto plants will not only affect the 40-100,000 direct employees of this company, but will also affect workers in companies downstream from them.

(this paragraph really belongs in the 'useless facts you already should have know department')

---

The auto industry under Henry Ford quickly became a totally integrated industry, which started out creating everything, and slowly started to shed manufacture of some items, by either spinning out ownership of some plants or simply by subcontracting.

---

Now. With unemployment (as of 2/1/09) standing at 8.1 percent officially (with some estimates as high as 10% unofficially, and up to 28% in Detroit), we approach reason one why we need to save the automakers:

* Adding 300-500,000 jobs in One industry to the "been there, done that" department will not help our country recover.

Reason two adds critical details on what to do with all this idle labor.

* Using the manpower of these jobs to concentrate on "green manufacturing", and Mass/Heavy/Light ** transit will provide thousands if not hundreds of thousands of these jobs (AND will ALSO help to resolve some 'downstream' [read:Dealer related] job redirections that will need to happen.

Review:
Reason 1: 100K-500K jobs eliminated is not good in economic 'recession'
Reason 2: re-directing these jobs into GREEN economies will help US manufacturing base.

'nough said today.. Schluffy calls!

---

** My definitions of XXX Transit:

Mass Transit: High impact /(often underground=EXPENSIVE) Commuter rail projects that bring jobs to the people (and people to the jobs--the two are very different, see an older post I wrote about Robert Moses, how he destroyed the NYC /LI/NJ economy by deliberately refusing to consider anything but automobiles for transportation HERE.)

Light Transit: Think streetcar. Think electric powered bus in a dedicated lane . Think FAST construction, FAST payback times. Think Baltimore (?..)

Heavy Transit: NEW Freight Rail lines, designed to OFFLOAD existing (18 wheel) tractor trailers from existing highways, by running down the CENTER of existing highways.

Think Heavy construction, but the ABSOLUTE fastest and most critical infrastructure payback that we can create for our country. (See here) . Creating Heavy Rail will eventually lead to more interconnected rail systems and fewer trucks. This new system must NOT be owned by any existing rail-roads, or monopoly conditions will be re-created.

The AUTO-Bailout- Continued -- (some perspective)

• The Economy has CHANGED...

Duh

The US Car industry will NEVER ever be the same.

Duh!?

• Am I saying something that is in a foreign language?
• Am I saying something in some un-comprehensive sentence structure that isn't understandable?
• We need to preserve the manufacturing jobs and expertise of all of the associated trades involved in the creation and manufacture of automobiles in our country.
• Our Country will NEVER ever again support the purchase of five to ten million new cars per year in our country.
• 
  

Duh

Let me repeat that. (in bigger PRINT!)

Our Country will NEVER ever again support the purchase of five to ten million new cars per year in our country.

I re-peat... I re-peat...,I re-peat... We can never ever expect "Detroit" to become profitable on the old terms.

We MUST not allow the anti "BUY out/public money" backlash to prevent investing in
the CRITICAL asset of manufacturing in our country.


We need to invest ENOUGH money to STOP these companies from laying off EVERY one of their employees.

We need to invest ENOUGH money to get them to START to use their engineers to START building public (mass/heavy/light) rail transit projects.

We need to get the auto companies to accept a PRE-PACKAGED bankruptcy. THIS will allow all parties (dealers, workers, bankers) to EQUALLY share in the pain of the needed reductions.

GM has been estimated to have about 7,000 dealers in the US.

They need to reduce this to ONE GM dealership serving a (perhaps) 35 square mile area (who is able to sell all GM), and put 6,000 dealer networks Into new businesses.

Yes, this will also hurt the local populations, however this will eventually lead to new opportunities for the local networks (local rail installations, etc!)

Again, we MUST put money into these companies and NOT fire the workers but Push (SHOVE) them into the transportation business.

AUTO-Bailout

I should have posted this yesterday before the official plan was released:

PS: I agree Rick Wagoneer needed to be SURGICALLY separated from GM...



I've said it before (HERE, HERE, here, and HERE) :

that we MUST MUST MUST change the marketing, as WELL as the focus of the car companies.

And as I have said before.. (here!!!!)

ALL the companies need to go through a PRE-Packaged (5 minute) bankruptcy.

This will allow the companies to scrap both the labor AS well as the DEALER contracts


Detroit needs at least 75% fewer auto dealers.

GM can still have 5 car brands, but only ONE dealer network that can sell all 5 cars.


doy. This way they can CLEANLY eliminate almost 90 years of excessive marketing and dealers that happened.

It's time to ask the DEALERS (as well as GM itself) to take part in the bloodletting. NOT just the employees.


SO based on this, the Obama plan laid out today lacks certain appeal

However it DOES say that the Federal government will back the warranties of cars sold in the meantime (a great idea-- I said it last november!!!!)

UNLESS a federal bail-out (or takeover) of the car companies include DEALER givebacks or REMOVALS of dealerships the US Auto industry CANNOT be saved...

There are WAY too many dealerships in the US car industry to survive.

Perhaps a reduction from 7 (or 2 for chrysler) dealer networks into ONE each would be a start, and make those dealers have a 30 mile territory instead of a 5 mile territory.

Banking: Previously/more Sources

Interestingly enough tonight (2-19-09) on Marketplace Money a commentator discusses the concept of a TRILLION dollars.

###--->>> Look at this post from 1-19<<<---### I had to REVISE these predictions!!!

What scares me no end is this:

HERE: I predict that we've only seen 25% of the TOTAL financial crisis.

If you combine this statement (only 25%) with my prediction HERE
where I say it will take between 20 and 70 TRILLION dollars to clean up all the forthcoming mess, I start to shiver and get the shakes.


Please comment. My prediction rate is pretty good. I predicted $100/barrel oil one year before it came. I predicted this financial crisis three years ago.

More Sources: banking; Republicans, Auto-bailout

BANKING Crisis: Alternate views: Brian Lerhrer show 2-18-09 Here:

AUTO-BAILOUT (Brian Lerhrer-Andrea Bernstein: 2-18-09 :Here (and listen to my voice as first caller too!)

BANKING CRISIS: Frank Rich (op-ed) says on Brian Lerhrer, "there's plenty of blame to go around, especially since many consumers partook of the good times, specifically with the large amount of derivatives associated with the consumer credit card market (6 mins,30 seconds to 7:00 in link above on 2-23-09).

Republican Intransigence :
Frank Rich Interview on Brian Lerher 2-23 (see link above) 16mins 15 seconds into segment they discuss how,"

various republican governors are 'living in the past, and are seeming to bet for the country to fail (betting against the stimulus working) and almost ROOTING for more economic disarray and disaster, and,

at the same time, they are standing up for an ideology of being "deficit hawks" that they completely disregarded for the entire eight years of the Bush administration. Not just the trillion or so dollars spent on Iraq, but also on the Bush tax cuts.

And so now they're standing up for a principle that they didn't stand up for before, at a time when it's particularly questionable, and they look like complete hypocrites.

I think what we've got here is a southern, regional largely white male, aging party which is consigning itself to the margins of American politics...

And I don't think thats a good thing for the country, I think we need a serious opposition (party) to any government that we have.

And he concludes... These people are drinking their own kool-aid. Newt Gingrich was crying in the back of the plane during the Clinton years, I think it's just going to blow up in their faces, it already is.

Well (mark breathes...) Frank Rich said it for me today.

These people are drinking their own kool-aid.... I think it's just going to blow up in their faces...Republican governors are 'living in the past, and are seeming to bet for the country to fail...

Thanks again Mr Rich, for your words (again!) backing up my predictions.

NO No NoNO, a THOUSAND times NO. (Car

NO to Saving GM and Chrysler as is.

NO to giving more loans so they can 'cut jobs, and become more profitable' (my words)

That is just SICK... Asking these sick companies to FIRE more workers to try and become TRIM and slim and profitable are COUNTER-productive.

We need to take these valuable manufacturing job and SAVE them.

1. These companies need to be nationalized (or all stock purchased by government) for a period of time.
2. We need to do the following for these companies:
   

• Force these companies into a prepackaged bankruptcy. This will allow them to reduce number of dealers, renegotiate financing and union contracts, and ensure that warranty issues are covered by issuing INSURANCE policies to GUARANTY warranty and post warranty issues.

• "NUDGE" the car companies from being automobile producers into being transportation providers. This will involve:
  

1. Reducing and eliminating car "lines". Instead of 7 dealer networks, there can be one network, capable of selling any brand*.
2. If one dealer can sell any of the 7 cars, you don't need 7 different models, all slightly different (or with different plastic grills...) therefore you can eliminate MOST duplicates (from 4 SUV lines with perhaps 15 variations to 1 SUV brand with maybe 5 different variations.
3. With major reductions in dealer networks (from 7 dealers within 15 miles, to perhaps one dealer in 30 miles) will affect dealer downstream groups, which will also need to be 'nudged' into becoming green 'installation/maintenance' groups for the new rail projects.
   

Reductions as discussed above may help eliminate 50% of a car company's sales lineup of duplicated cars, excess manufacturing, and help save ca$h. Further reductions to the automobile business are needed due to factors such as the rise in gas prices, the current depression, and the world's global warming crisis.

Additionally with regards to new business opportunities, part of the reason for purchasing the auto companies outright is because we need to force them into new businesses, and ensure that their manufacturing capability is NOT destroyed.

1. The Detroit companies will IMMEDIATELY start to work on engineering planning and production of new {green,eco-friendly,commuter-friendly} transportation projects.

• This will be a major component of a future energy reduction plan. By using this crisis to redeploy its employees to green and {heavy and mass} transit projects it will position the companies to become ready to repay and repurchase their stock from the government. Specific initial projects will include:

1. Green expansion of the Eisenhower Highway project. Using the NY MTA's "Air-Train" from Jamaica to JFK airport as a model, MASS transit tracks will be built down the center of every highway in the original Eisenhower system. (See here)
   
2. Additionally a HEAVY rail line (2 additional tracks) will go down these highways. These will be used to take Tractor Trailers (and trucks) down the highway. These will also be available to take cars.. Toll rates (where charged) will be revised to make it cheaper to put your car on this line for more then 5 exits.
3. Light Rail systems: Immediate re-tooling to re-invigorate light rail in the country.

More to come

---

* A pre-packaged bankruptcy will be required for this reduction.

Banks- Nationalize Yes, says a 'publican( update 2-24)

HE Y

I didn't say it.

Sen. Lindsey Graham R-S.C., told George Stephanopoulos on ABC's "This Week", ""I would not take off the idea of nationalizing the banks" from the table."

There. A Republican actually said it.

And that's the Answer.

The answer to Both The Banking Crisis, AND the Automobile companies.

BOTH the banks and our current AUTO industry need to be NATIONALIZED. (I say).

Both industries suffer from:

1. Lack of Customer Trust.
2. A Lack of products that are salable to CURRENT consumer demands.
3. A problem in developing NEW products that are ETHICAL.
4. A lack of forward thinking,

And most importantly, A lack of customers willing or able to use their goods/services.

Auto Industry:

• Poor forward looking (green) planning. Future planning equaled larger and more gas guzzling products.
• Over production of automobiles, based on over-consumption.
• Poor business practices.
• Overly dependent on questionable (long term) business practices (zero percentage financing, leasing, etc).
• Production goals company focused, not country (or world, or ethically) focused.
• Continued insistence of lack of responsibility for current crisis.
  

Financial Industry:

• Unethical product development, and inappropriate marketing to inappropriate customers.
• "slice and dice" of traditional mortgages into 'dicey' financial instruments
• Unethical (fraudulent) "insurance suitability" scandals, originators paid for insurance ratings.
• Refusal of management to admit culpability.
• Continued insistence of lack of responsibility for current crisis..
  

MORE to come...


Here's the deal. We NEED to remove all collateralized debts from the financial system.

I said HERE WHY we need to remove these debt bombs from our society.

More Sources: Auto Mag says, Make it: Trains/Subways...

OH. I love these "more sources" columns that I find when others finally write about what I've been saying.

Please forgive my 15 seconds of "patting myself on my back".

There. I'm done now.

Jamie Kitman, a columnist for automobilemag.com writes here in the Feb. 09 issue (written as he says, during the December auto fiasco in congress), and says, (extra lines added for comprehension...)

The American automobile industry is melting down.

We're staring not just at the end of our industry's dominance of its domestic market but at the threat of its utter demise.

Some of our largest industrial enterprises, once America's preeminent job makers, teeter on the edge of insolvency.

...I have been harsh in my assessment of the American automotive industry. ...

Fuel prices helped throw the country into a recession, a credit crunch set consumer finance reeling, and now - barring extraordinary, never-before-attempted measures of government intervention - the domestic industry is going to die.

Unless you save it.So I have a plan, one I think you could live with. It's a big plan, and it addresses: national security, energy policy, and the collapse of the car industry...

But follow my plan and the Big Three will be seen as having arrived at the brink of bankruptcy at exactly the right moment. Because these companies, their factories, and their workers are going to have to diversify.

They might not be financially viable today, but it's not like these great enterprises and their people are no longer of value to the nation, far from it.

It's just that now is the time for them to build new things. New kinds of cars, trucks, and buses - after all, GM invented two-mode hybrid diesel bus technology - that don't burn fossil fuel, or that use less of it.

And how about trains, trolleys, and subway cars? We used to manufacture them here, but those once-lucrative industries are now dominated by foreign companies. It's time to reclaim these honorable lines of work on our way to actually doing something about energy independence and curtailing carbon emissions.

Wow.. (Mark here again...)

I am floored. I never EVER said I was the ONLY one that had these ideas. I am just usually SO SO far ahead of my time, that I never get taken seriously.

Mr. Kitman: Look HERE. I said the exact same thing in November. I truly hope your editorial gets noticed. I certainly was floored by it.

Thanks again...

mark brown in NJ

Detroit -- A restatement of the OBVIOUS

OK. Previously I stated that the AUTOMOBILE industry is Dead. Totally dead.
Or maybe you want to see where I said it HERE, which starts out, "

"The time has come," the Walrus said,
"To talk of many things:
Of shoes—and ships—and sealing-wax—
Of cabbages—and kings—
And why the sea is boiling hot—
And whether pigs have wings.
...
And Boy oh Boy,do the PIGS in Detroit have HUGE WINGS!

and boy, oh boy, I hear the wings are SO SO big, they're ALREADY complaining that the new Obama administration rules will kill them (see NYTimes HERE) -less then one hour ago in TODAY's issue...

As I said in the FIRST post above (here again)

I believe:

We are asking conflicting (and also the wrong) questions about the current Auto industry Crisis.

Why are we bailing out the Automobile Industry?
Answer 1: Because we want the US Automobile Industry to be Healthy and self supporting?

Answer 2: Because we want the manufacturing capacity of our country to remain intact.

Answer 3: Because we want the manufacturing capacity of the country to remain intact AND we want the Detroit companies to RETRAIN their workers into GREEN and Productive new industries.

Answer 4: Because we want to throw money at a dying industry, so that their employees can then get unemployment.


The correct Answer for OUR COUNTRY? 2.
Because we don't want to lose the MANUFACTURING capacity of OUR COUNTRY...

But see the post for a DETAILED analysis of WHY we want this.

And REMEMBER:

if we PUSH/SHOVE/Drag (kicking and SCREAMIN) the AUTO industry and MAKE it the TRANSPORTATION
Industry (SEE HERE) THEN
we can SAVE the JOBS from the FORMER AUTO industry AND
also TURN the country green.


Bottom line answer for Detroit?

Yes. You're Right. We WANT to kill the car.

Yes, you can still make (and TRY and sell)
ONE small car,
ONE SUV
ONE MiniVAN
ONE PANEL Truck
ONE Pickup Truck

but the REST of your production capacity MUST become GREEN, and become JOBS for PUBLIC transportation and INFRASTRUCTURE.

and rest assurred, it ISNT only the Detroit Auto industry that's dead and buried today.
It's NOW a WORLD-WIDE funeral.

And the rest of the world will eventually get the reason why we need to save the jobs too, but then it will be too late to save the MANUFACTURING base of the United States of America.

Take that and put it in your Peace Pipe before it's too late!!

The Auto Bailouts: Or a tale of Dee and Dum (Tweedle)

To Quote Lewis Carroll,

"The time has come," the Walrus said,
"To talk of many things:
Of shoes—and ships—and sealing-wax—
Of cabbages—and kings—
And why the sea is boiling hot—
And whether pigs have wings.

And Boy oh Boy,do the PIGS in Detroit have HUGE WINGS!


Point One:
(See previous post HERE) discussing whether we are seeking the WRONG Outcome in Detroit.

Based on this discussion, I feel that we need to UNDERSTAND the bailout in much CLOSER details.

Point One: HOW can we expect Detroit to take bailout money, and within three months simply arrive at a new way of becoming PROFITABLE? (See previous post!)

Point Two: In order to (to quote the White House), "Share the pain", we need to spread the pain of the cuts required between employees, shareholders, AS well as suppliers AND DEALERS.

2.1: The Big three insist that they can NOT use bankruptcy as a tool, because no one will then believe in the companies, and their ability to provide warranties on their products.

2.1.a: The answer to this is simply for the auto companies to arrange for INSURANCE with a major insurance company , (such as MET LIFE), that will guarantee warranty service, even past a bankruptcy. (Perhaps PRE-Pay warranty costs in the insurance policy...?)

2.1.b: Once this big problem is eliminated, a PRE-PACKAGED bankruptcy can be negotiated, between the auto companies, the unions, the suppliers AND the DEALER network. ALL these parties must share equally in the pain.

2.1.c: Once everyone agrees in advance, and then the court just goes (in bankruptcy then 30 seconds later the bankruptcy is over.

Point Three: Making the Detroit 3 profitable cannot be a viable answer to the crisis. If we simply tell the companies to cut jobs, we are wasting our money. I don't want to support the Detroit 3. I want to make sure that the three to ten million jobs that they SUPPORT remain here in our COUNTRY.

Point Four: If we want the jobs, but all agree the automobile business in the US is DEAD, then what do the companies do?

Point 4.1: Change them from auto manufacturers into green TRANSIT manufacturers.

Auto Rescue: Think OUTSIDE of the BOX! (what is the question!)

This will discuss the US (and international) Automobile industry.
Before we discuss answers, we need to answer some Questions!

Warning:

I believe that we are asking conflicting (and also the wrong) questions about the current Auto industry Crisis.

Question 1:

---

Why are we bailing out the Automobile Industry?
Answer 1: Because we want the US Automobile Industry to be Healthy and self supporting?

Answer 2: Because we want the manufacturing capacity of our country to remain intact.

Answer 3: Because we want the manufacturing capacity of the country to remain intact AND we want the Detroit companies to RETRAIN their workers into GREEN and Productive new industries.

Answer 4: Because we want to throw money at a dying industry, so that their employees can then get unemployment.


Situational Analysis
Answer 1: If we are giving money to Detroit to be self-supporting, are we presuming that the economy AND (new) Car Sales will return to normal (soon?).

If SO, I predict we will QUICKLY be wasting OUR MONEY, as neither of these will happen shortly. I believe that:
Factors that have not yet been addressed are:

1. How many Employees/Workers will need to be put out of work if we have NO pickup in auto sales?
2. Executive Salaries & Bonuses: Will the companies limit compensation to 20 times the minimum paid employee in their company? See Example 1 below:
3. Will the new industry be GREEN, or merely selling the same old (fuel inefficient) cars?
4. How many cuts of current jobs will be needed to sustain a new, greener, poorer (DEPRESSION) economy.

Answer 4:

Putting big dollars into supporting the Detroit 3, without regards to how many workers and plants they will need to cut, is like mopping the deck on the Titanic. Nice, but the end outcome will NOT be affected by the work/money put into the effort.

If the recovery plans currently under development by the Detroit 3 presume that car sales will pick up soon, the big three will be going right into forced bankruptcy.

Answer 2: Great goal, bad implementation. Giving this bailout money to Detroit will NOT Keep the country's MANUFACTURING CAPACITY available... The Presumed (UNSTATED) goal of the current bailout, is to make the COMPANIES financially Strong, and NOT to keep the workers employed.

Answer 3:
The question we NEED to be asking and sharing in the country now is:
a) do we want to keep the JOBS in the auto industry?
or
b) do we want to keep the Detroit 3 in Business, or
c) BOTH?

I believe that answer C ) Both is the correct answer. However, we cannot keep Detroit in business (presuming that the current economic situation doesnt change for at least 2 years) UNLESS we (the people/Government):

1. Ensure that it is clear that SOME funds are being given to RETAIN and RETRAIN workers.
2. Ensure that the companies do NOT use the funds for bonuses, incentives, or other unnecessary spending.
   
3. Use a (cattle) Prod, to PUSH (Shove) the companies from being AUTOMOBILE companies to being TRANSPORTATION companies.
4. Guarantee to the auto companies that in return for dropping 80% of their dealers AND product lines, The Government will offer New Mass Transit and GREEN transportation jobs for their workers.
   
   

Mark Brown

Example 1: Say a cleaning person at GM makes $20,000 per year (approximately $10.50 per hour) Will Rick Waggonneer agree to take NO MORE(total compensation) then $438,000 in compensation per year? Total Compensation, current and delayed, NOT just salary!!!