Why Loan them $34 Billion if you can BUY them for $11?

[inchhigh]

I just don't understand why this question isn't being asked. Right now at their current stock prices the market caps of Ford and Gm are $6.81 and $2.99 Billion. If you figure that Chrysler is still worth the 1.18 Billion Daimler said it was worth last year (even though it now says it's 20% share of Chrysler llc is worthless) then the combined Market values of the (not so) Big Three is only $10.98 Billion.

Why would we even consider loaning them three times that much?

Buy them! Keep those employees working and slowing move them toward building the things we REALLY need instead of Monster trucks and SUV's.

From my experience Auto workers are among the most patriotic people I have ever met. I think they would love truly working FOR US.

Inchhigh

Edit: Spelling

[aquart]

1. Agreed. It's silly.

[baldguy]

Because this isn't a sale, it's an extortion.

[truedelphi]

57. Ding Ding Ding. We have a winner. n/t

[donco6]

2. I agree - let's become their major shareholders.

Fire the CEOs, install our own, and change their direction.

[inchhigh]

8. Could we really run them any worse?

"Fire the CEOs, install our own, and change their direction."

I think this really has been the critical missing link between Capitalism and Democracy all along. The Corporations have too much power and don't reflect our interests because they aren't really owned by us. There would be no disconnect between their needs and our needs if we owned them.

[Ganja Ninja]

3. I think they ought to buy GM before giving them any money.

That way they can get right in and make sure they spend the money on their American operations instead of using it to buy more parts from China.

[sourmilk]

4. I asked the same thing last month after the AIG bailout...

As Sylvester the Cat would say:

"What a revoltin' development."

[marketcrazy1]

7. you could buy GM

for 3 billion ( market cap ) but then you would OWM their 60 billion of debt, you would OWN their 34 billion in un funded pension liabilities, you would OWN their 4 billion a month operating costs plus billions more in supply line accounts payable!! total cost of ownership would be well north of 100 billion.... just for GM!! still want to buy them????

[inchhigh]

13. Absolutely

"but then you would OWM their 60 billion of debt, you would OWN their 34 billion in un funded pension liabilities, you would OWN their 4 billion a month operating costs plus billions more in supply line accounts payable!! total cost of ownership would be well north of 100 billion.... just for GM!! still want to buy them????"

Aren't we essentially going to end up owning those pension liabilites anyway? Would it really be better to cut those pensioneers off from any income if GM fails?

Many of those liabilites will end up falling on the taxpayers anyway, so at least let US decide how to run the company along the way.

[marketcrazy1]

18. for GM

chapter 11 is the best option, the government will need to provide DIP financing and loan guaranties but under chapter 11 mutch of their debt would be wiped out or restructured, and they would be held STRICTLY accountable for putting forward a workable plan. jobs would be lost, factories closed and staff ( white collar ) cut but all this WILL happen anyway! chapter 11 is better for them the AND cheaper for US...... as for stock holders - screwed! and bond holders - pretty screwed! and CDS holders WAY screwed ( probably the biggest problem no one is talking about )

[Hannah Bell]

99. Per their annual report, the pensions are overfunded, & the union has taken over the

healthcare obligations.

So you'd own only their debt - which isn't so bad, according to their report.

[TexasObserver]

5. Because when you buy the stock of a company, you buy their liabilities.

Their liabilities are huge, much larger than their value.

Buying their stock would not solve anything. Then the US would be on the hook for every obligation these bad companies have made.

When you buy a distressed company, you NEVER buy the stock, because that's buying the liabilities. You buy the ASSETS, not the stock. In this case, the US should not do the bailout or the buying of the stock or assets. The US should wait until the companies go into bankruptcy, and then help whoever wants to step up and buy the assets and put them back to production. The US funds should go to the new owner of the assets after they are baptized in bankruptcy.

There is simply no sane reason to give money to the same bad ideas and incompetent managers who got the companies in the ditch.

[Kalyke]

10. How come you're the only person making sense on this topic?

I don't always agree with you, but, in this case, you're right on the money.

Do so few people really not get "buyout" vs. "bailout" vs. "loan?"

Now, for the part I don't necessarily agree with: it hasn't been all management's fault. The lack of tariff's on foreign cars, the recession, the failure of Americans to want anything but trucks and SUVs, low-priced oil (up until summer 2008) and the fact that Asian governments subsidize their auto-makers R&D have all contributed to the mess the Big 3 find themselves in.

[TexasObserver]

41. I want to see jobs saved, but I don't see how pouring $ behind the same management can work.

Every business that runs into the ground has a bunch of overpaid officers who suddenly think EUREKA, NOW I'VE GOT IT!! As the inevitability of their demise approach, their detachment from reality accelerates.

The top management has to be run out of town on a rail. New management that is committed to dramatically changing the industry has to be brought in.

I fear that we cannot squeeze out all the bad thinkers without this industry going under water until all the top people have expired. THEN help.

Did Exxon put that Captain of the Valdez in charge of their sea vessels after he ran the Valdez aground?

[inchhigh]

46. But the Exxon Execs kept their jobs and just got BIG bonuses

"Did Exxon put that Captain of the Valdez in charge of their sea vessels after he ran the Valdez aground?"

No. But I believe the guy who WAS in charge of their sea vessels kept that job after the Valdez ran aground.

[defendandprotect]

82. Let Exxon-Mobil bail them out ...that's who they made cars for ...not consumers ---

[sam sarrha]

27. under condition that the Corporate fools that caused this resign without compensation in disgrace

[inchhigh]

35. Without a doubt

If we own them then we control the BOD and we set the compensation for all the execs. I think it goes without saying they they get the normal two weeks severance and are escorted to the door with their personal belongings on the day the deal closes.

As long as the current shareholders control the BOD they will be looking for ways to re inflate those golden parachutes the minute we all stop looking.

[TexasObserver]

39. I also want them all to pay back any bonuses they got the past 2 years.

And I want them sued for such bonuses, if they refuse to give them back. There is ample law to support such. These officers at the top essentially set their own salaries, and manipulate their own bonuses. They have failed to properly protect the assets of the company, and in doing so, have failed in their duty to put the corporate interests above their own. They are guilty of breaching the duty against conflict of interest. They have overpaid themselves, and it should be considered more embezzlement than bonus.

Make them give it back. Same for the financial guys. Make them pay the bonuses back, and sue them if they don't.

[Nederland]

42. That's a lawsuit you'll never win

I'd be a waste of money to even pursue it.

[TexasObserver]

43. You're wrong and ignorant. It's a lawsuit I've won.

Unlike you, I've actually sued and defended officers and directors for breaches of their duties, and further, advise boards regarding the appropriateness and legality of their conduct as directors and officers. Daily.

So stick to whatever you know, because it's not D&O liability. I've represented in such litigation the interests of the D&O carrier, the interests of shareholders, and the interests of directors. I represent boards that make million dollar decisions daily, and I am hired to tell them what they can and cannot do, under the law.

What area of expertise, if any, do you have?

[Nederland]

50. I don't believe you

But I'm prepared to admit I'm wrong. Any of those judgments you've won happen to have online court docs?

[TexasObserver]

53. I don't care. My expertise in law speaks for itself.

And "judgment" is spelled with one "e," not two in the legal profession.

I'll allow readers to draw their own conclusions over which of us advises boards and which of us is sitting in his apartment wishing he understood the duties owed by a corporate board member or officer to their stockholders.

[Nederland]

54. Thanks for pointing out the spelling error

...but that's the only objective point you've made so far.

[TexasObserver]

58. Please tell us about your expertise.

Please, tell me why your opinion on the duties of directors and officers should have any value, and further, why you would know ANYTHING about the advisability or efficacy of suing officers and directors for violations of their duties not to self deal, not to commit conflicts of interests, and not to waste the assets of the corporation.

[Nederland]

60. I'm a Nobel Prize Laureate

My name is Robert Mundell and I won the Nobel Prize in Economics in 1999.

[TexasObserver]

61. Wonderful. So you admit you have no expertise in director and officer liabilties.

[Nederland]

63. Nope. But I stayed at a Holiday Inn Express last night.

[Javaman]

64. man, that guy was a little angry, huh? nt

[Terry in Austin]

67. Bob Mundell! Hey, that's rich!

So there was that little scheme for an international currency you cooked up back in '03 that Bob Bartley gave you such a good writeup about.

If you're really Mundell, why don't you tell us the name of the currency? (hint: there were actually two names).

[Nederland]

76. Intoro

Also called the "dey". Took me a few different Google searches to find that...I mean, jog my memory...but there you go. :)

[Terry in Austin]

77. Nicely done, sir n/t

[sam sarrha]

56. it isnt only the CEO's, this is a RICO, the Board of Directors are rewarded for approving the theft

share holders and company funds, i read that while the CEO got $400 million, the Board members were approved by the CEO to receive $102 million. they were rewarded for approving his excessive bonus..that translates into Conspiracy to defraud

this is criminal.... and their best thief is Paulson
http://www.iht.com/articles/ap/2006/12/21/business/NA_FIN_US_Goldman_Sachs_Bonuses.php

"snip..oldman said last week it had set aside a total of $16.5 billion (€12.5 billion) this year for salaries, bonuses and benefits. On average, this would translate to $622,000 (€471,105) per employee...snip"

[nc4bo]

47. I came to this conclusion too. nt

[lumberjack_jeff]

36. If they fail, we own the liabilities anyway, primarily retiree benefits.

Bankruptcy only serves to destroy the UAW.

[inchhigh]

40. Exactly

We need to control the BOD to make sure the money goes to the employees, not the execs. We only do that if we BUY them and appoint our own BOD (who then hires new execs).

[TexasObserver]

45. Under the PBGC, we will own only part of those liabilities.

I invite you to acquaint yourself with them. We'll pay part, not all, of those liabilities.

http://www.pbgc.gov/about/pensionend.html

[lumberjack_jeff]

51. The welfare of those retirees become our responsiblity

... as opposed to the responsibility of those who are contractually obliged to provide it.

Whether we intend to do it on the cheap when their pensions default is immaterial.

[sam sarrha]

59. so what.. they will join our Homeless injured soldiers living on the Streets..!! no one cares,

homelessness reached 8,000,000 under Reagan.. soon to be Sainted if not Deified by proclamation

[inchhigh]

52. Thanks for the invitation

"We'll pay part, not all, of those liabilities."

But we will pay ALL of several other liabilites that will be created by the collapse of those pension funds, like the medicaid costs for those suddenly empoverished former workers.

I basically agree that they are too big to fail, but they are also too big to be left in the hands of those who caused that failure.

[defendandprotect]

83. Presumably the oversight for pensions was also corrupted --???

[leveymg]

103. But, what happens to the workers' pensions if the companies go Ch 11?

All those people will be left without a source of income in their retirement, or a greatly reduced one. Doesn't that shift the social cost to the public, anyway?

No, allowing the auto makers to go into bankruptcy may have greater social costs than keeping them in operation, pension liabilities, and all.

[leftofthedial]

6. Nationalize.

Nationalize.

We should also own most of the financial sector by now. (But those criminals have accomplices in high places.)

[deaniac21]

9. Just look at Yugo!

[leftofthedial]

11. just look at the "big 3"

[deaniac21]

20. Refer to #9

[sam sarrha]

32. look at who made it

[lumberjack_jeff]

37. ... and the Range Rover! n/t

[LanternWaste]

68. Or the Willys Jeep...

Or the Willys Jeep-- oh, wait...

[grantcart]

15. even on a temporary basis

after stable then issue another IPO

[AngryAmish]

34. Thinking like that enabled British Leyland to continue to make wonderful vehicles until today!

[defendandprotect]

84. True ...and NO Reform ...NO Re-Regulation --!!!

[On the Road]

12. It Seems Perverse, Doesn't It

I personally want to make sure that taxpayers get as much value as possible from saving the companies.

There are some legitimate questions over how a government-run company would operate, what kinds of decisions it would make, and how it would return to profitability.

[Tierra_y_Libertad]

14. It's kind of like getting a $300k loan on a house that's valued at $100K and falling apart.

It only makes sense to P.T. Barnum and advocates of corporate welfare.

[inchhigh]

17. So why not at least look at Rent to Own

"It's kind of like getting a $300k loan on a house that's valued at $100K and falling apart."

If the house really is falling apart, why should we loan them anything? Because we trust the people who ran it into the ground to fix it back up again? Ha!

Let's buy it and fix it up ourselves!

You think private interests can run a company better than a democratically elected body? Then why aren't we talking about GM bailing out the US government instead of vice-versa?

[Tierra_y_Libertad]

19. Why loan or buy?

If we buy it, then we're stuck with trying to sell products that nobody wants to buy, or has the money to buy.

The thing that dumbfounds me about this whole "loan" scam is that no one seems to be asking when and how the "loan" will be paid back to the suckers who give it.

[Poll_Blind]

16. In all seriousness- can someone give me the main arguments for bailouts of this nature?

  Because this is just ridiculous.

PB

[inchhigh]

21. Too big to fail

The reason to bail them out is to prevent the damaged to the economy caused by all those people becoming unemployed, going on unemployment or welfare.

Well isn't this EXACTLY the answer to those people who complain about welfare queens, that they don't work? Are we really bettrer off to have all those workers sitting at home on unemployment (until that runs out) than going to work and making things that we REALLY need, like fuel effecient cars?

[defendandprotect]

85. We can put the workers back to work building Electric Cars ---

[marketcrazy1]

25. outrage

is the VERY public face, the need to bailout these guys because they were, well basically, STUPID!! ( in managing their business ) the REAL problem spoken of only in the back rooms and hallways is the "shock" to the already fucked financial markets!!! in BK bond holders and stock holders could be wiped out. thats tens of billions in losses to banks and investment funds holding their paper. PLUS their are probably hundreds of billion in CDS liabilities out there witch would be called....

[indepat]

22. Makes about as much sense as putting $150 billion into AIG whose stock at the time

would have been worth only a few billion. :P

[inchhigh]

24. Agreed

So all talk of a LOAN should cease immediately and buyout talks should commence.

[sam sarrha]

23. THE APPROVED $750 BILLION WOULD GIVE EVERY man/moman/child $2.5 million, that'd fix everything

[marketcrazy1]

26. need to check your math Sam!

750 billion divided by 300 million is only 2,500!!!!

[sam sarrha]

33. even that works for me.. i like my math better,, anyway it will eventually cost that much

calculator doesn't go that high..

sorry, i was using Halliburton math

[sam sarrha]

62. actually i am a victim of the "New Math" program of the early 60's.. fuck'd me up for life

[anigbrowl]

74. This is why we can't have nice things....

Why do people keep posting this BS over and over without reaching for a calculator? You're off by a factor of 1000, so apparently you believe a billion is actually a trillion.

[mudesi]

28. Because somebody has to SELL them

The controlling shareholders, namely, the Ford family in one case, will not sell.

[inchhigh]

30. Model T solutions in and Aerospace age

"The controlling shareholders, namely, the Ford family in one case, will not sell."

They we say "No soup for you!"

The Fords can take the money and run, or just plain run. Makes no difference to me.

[The Backlash Cometh]

29. Hmmmm...

Too logical. Brain wanna go booom!

[gollygee]

31. You'd still have to invest a lot of money after buying them to make them healthy companies

but it is one option. Still, that option would end up costing far more than $11 billion too.

[TahitiNut]

38. MYTH ALERT! -- A company CANNOT be 'bought' for its Market Capitalization!!

This idiocy seems pervasive and totally fails to comprehend the essentials of the market. There is an economic myth inherent in the very presentation of "Market Capitalization" - the valuation of ALL outstanding shares of stock based on the price of the last trade in that stock on the open market. The fact of the matter is that the stock market is almost the epitome of a supply/demand model, where the price of a share of stock is set by finding a 'willing buyer' and a 'willing seller' at some agreed price. When the number of willing buyers exceeds the number of willing sellers at some price level, the price goes up - that's the textbook effect when demand exceeds supply. Likewise, when the number of willing sellers exceeds the number of willing buyers, the price goes down.

If someone (anyone!) attempted to BUY all of the outstanding shares of stock in ANY company on the open market, the price of those shares would skyrocket. The sky would be the limit UNTIL the demand balanced the supply ... and those last shares of stock would be priced beyond measure.

This is, of course, the basis for the Greater Fool Theory. When people have LOTS of money to 'invest' and they go into the stock market, their demand causes the price of stock to increase. That increase does NOT reflect any substantive underlying increase in value of the company ... merely money chasing stock. (The textbook definition of 'inflation' is increasing amounts of money chasing an amount of goods or services that's not increasing as much.)

It's utter nonsense to pretend that 'market capitalization' reflects anything approaching the price of a publicly traded company.

[inchhigh]

44. Horse Hockey!

Buyouts happen all the time based on the price of stock. Sometimes buyout offers happen for higher than the current price and that drives it up in the open market, but sometimes the buyout offers are for LOWER than the market price (and the market price slowly drifts down to that price by the closing date).

If we don't bail them out and the price of the stock falls another 40% before they declare BK, then do you think the shareholders would be happy to take the $11 billion?

But maybe you're right and there is no connection between the market cap and the buyout price, so I say we offer them $5 billion for starters and let them stew on that while we ignore their bailout pleas...

[endarkenment]

49. Fine so we buy them for 20B. nt.

[JVS]

91. It could be eminent domained for market cap.

[Rabrrrrrr]

93. Hell, thanks to the Republican Supreme Court, it could be eminent domained for $0.

Oh, not the companies themselves, but thanks to the Republican rightwing Supreme Court, the government could just eminent domain all the land, factories, offices, and so forth.

"Okay, your company is still technically public and whatnot; however, all your physical capital are belong to us. You are now the proud owners of a company that owns nothing but debt and liabilities. Get off our land. And go shove your jet up your ass."

:7

[JVS]

94. I say we go for it!

This bailout stuff should be lauded for undermining the ethical consistency needed to maintain the concept of private property. Who is to say that we shouldn't take the factories?

[Rabrrrrrr]

92. It's been utterly hilarious lately reading posts from people with no economic understanding

who think that whatever four paragraphs they actually read of "Das Capital" give them insight to comment on complex financial situations, or who think that because they balance their checkbook they understand the stock market, or that "let the government run it!" is somehow a genius and perfect panacea, which idea they get from their illustrious God Emperor Hugo Chavez or Fidel Castro.

Absolutely fucking hilarious.

"Why not just BUY GM for 3 billion" - priceless!

:rofl:

I so do appreciate your constant intelligent, insightful, and FACTUAL REALITY-BASED comments to all the fucking idiots here, TahitiNut. It's too bad the Chavez-worshipers will never listen to you, though.

It's deplorable that in this country, which is such a capitalist and market based country, that only about 0.01% of the population actually care to understand just what the fuck "money" is and how it works in our system.

Seriously, money is the most important thing in the world next to love and sex - one would think that people would be more interested in understanding it.

But then again, most Americans can't be bothered to learn anything about love or sex, either, so I guess I should at least compliment them on being consistent.

[TahitiNut]

95. Indeed. There are some pretty bizarre and simplistic "world views" espoused ...

... but I guess that's what makes a discussion forum. Sometimes, no matter how hard I try, I just don't seem to be erudite enough to explain it so that it's understandable to some. When I get responses that seem to indicate no comprehension of what I've explained, I can only feel inadequate in explaining it. Thus, I don't even get into leveraged buy-outs, hostile take-overs, and other forms of M&A. (sigh)

[Hannah Bell]

100. Yeah, let the smart folks who pushed for the wall street bailout 'splain it to the morons.

[TexasObserver]

96. Yes it can. By tender offer, where a price is specified.

The reality is that GM isn't worth the paltry price of its common stock, which is held now by speculators who think they're going to make a bundle after a bailout.

So, you're right about one thing. GM is not worth the current market price of its stock. It's worth even less. And contrary to your misstatement, a company can be bought for the price of its outstanding common stock. Unfortunately, that purchase comes with more liabilities than assets. GM has negative value right now. It COULD be bought for the value of its outstanding common stock, simply by making a tender offer and waiting until sufficient levels of stock are tendered to effect control of the board.

As I said, the price of the stock is a pittance compared to the liabilities, which is why no one will buy the stock, but there will be buyers for the assets if GM goes into bankruptcy.

[Hannah Bell]

101. read their annual report. it paints a rather different picture.

i don't think they're in bad shape. they've already off-loaded most of their legacy costs. Their costs, when the provisions of the 2007 contract kick in, will undercut toyota.

they turned a profit on their automotive operations in 2007. Their losses came from gmac mortgage losses & a one-time/one-quarter book of some kind of tax scam charge. Maybe you'll get it, I didn't.

I've been wondering why, though everyone says GMs busted, they keep building plant, hiring overseas, planning new ventures, etc, & why their sales keep going up. They're not *acting* like a bankrupt.

I think it's a con.

[TexasObserver]

104. Then I assume you've put your 401K fully into GM stock!

"they keep ... hiring overseas"

Right. That's part of the problem.

You should probably switch careers and advise investors for a fee, with your insights into the true value of GM. Because EVERYONE else, including me, is getting it wrong.

I have news for you. If a company's stock is worth $3 billion, and it will go into bankruptcy without $4 billion from the government in the next 4 weeks, IT IS INSOLVENT. I don't know where you learned economics, but it clearly wasn't from anyone who understands economics.

[Hannah Bell]

105. i'm not trying to be snarky. i'd assumed gm was in really terrible shape

from all their poor-mouthing.

but the numbers in the report for their auto business were good.
They would turned a profit if not for their mortgage financing.
Their labor cost is under Toyota's as soon as all the provisions of the 2007 contract go fully into effect. They've just built several state of the art plants. They have an existing line of credit.

GM was the #1 car seller in the world in 2007 - but you tell me they're worth 3 billion?

http://www.autoblog.com/2008/01/03/by-the-numbers-2007/

Nah.

[TexasObserver]

107. Then you should invest every dollar you can get with GM.

If you really believe that the value of GM can be found in your sources, you are tragically uninformed. The value of the company is reflected in the value of the stock. The business community knows that GM is in trouble, and has financial obligations it cannot meet. The stock value is a daily reflection of what the markets thinks of the company, and in this case, the market thinks GM is a good place to make a really long shot bet. That's why the people holding the GM stock are speculators. They are counting on Uncle Sugar bailing GM out, and figure they'll get a free ride up on stock values.

[Hannah Bell]

108. I'll try once more. Per the 2007 report:

1. GM sold more cars than any other automaker in the world in 2007. Revenues = 178 billion.

2. More than half their sales were overseas, where their market share is growing, not declining. The US is the only market where their share is declining, but it's offset by gains elsewhere.

3. GM has been #1 in China for the last 3 years. 1 mill & growing there v. 4.5 mill in N.Am.

4. They've off-loaded their health care responsibilities to the union to manage; their payments will now be predictable & half of current spending (~2 billion/yr v. 4 bill+). Health care is underfunded, but that will be the union's problem by 2010, not GM's.

5. GM pensions are currently over-funded by 18 billion (they've put an average of 7 billion/yr into them since 1993). They don't anticipate having to put more $ into these funds in "the forseeable future", & the pool of potential retirees is shrinking, not growing.

In 2007 they expect to pay pensions of 7.6 billion, with payouts declining every year thereafter, to 6.8 billion by 2013.

6. Their automaking business turned a profit of 553 million in 2007. This after all adjustments.

7. The corp as a whole lost $1 billion from GMAC mortgages. The bulk of their supposed "loss" of $38.7 billion = 3rd-qtr booking of "valuation allowances recorded against our net deferred tax assets in the U.S., Canada and Germany of $39 billion". This isn't "loss," it's saved-up loss to book whenever they like to avoid taxes.

8. At the end of 2007 they had 27 billion in ready cash + a positive operating cash flow of 5 billion. Their total debt was 39.4 billion, 6 billion short-term, 33.4 long-term (due up to 2052).

9. At the end of 2007 they had open lines of credit with various banks for 6 billion, good until 2011. Their affiliates had another 1.6 billion in available credit.

10. In 2008 alone, GM opened new state-of-the-art plants in Russia, China & India. ~17 billion in 2008 spending to buy property & other assets , more than they spent on pensions & healthcare combined.

11. GM's total labor cost will undercut Toyota's by $10/hr by 2010.



You tell me their stock price = their worth: "everybody knows".

I don't believe it. And the information being put out in the popular press doesn't jibe with the info in their annual report, or their spending.

I believe that bankruptcy & reorganization would be helpful to them in many ways, though.

http://www.gm.com/corporate/investor_information/docs/fin_data/gm07ar/download/gm07ar_full.pdf

[endarkenment]

48. Makes sense to me.

Buy for 11, invest the 25B needed, run it as a nationalized industry.

[Laelth]

55. That's a good idea.

The right, of course, will scream socialism. Nationalized industries are one of their favorite hobgoblins, but I think most sane people would respond favorably if the argument could be put to them as you did so nicely above.

:dem:

-Laelth


Edit:Laelth--sloppy proofreading.

[unblock]

65. if you put in only $11 billion, they will fail. ownership is irrelevant. THEY NEED MORE MONEY.

whether or not the government should insist on more control for the $34 is a good question, i like the idea.

but one way or another, $11 billion is simply not enough money to keep the business afloat.

[taught_me_patience]

66. $11 Billion is the value of the EQUITY

the total value of the comapany is equity + debt. Debt is huge. By buying the common, the taxpayer would then assume the liabilities of the company. Do you really believe the government should be in the business of making cars?

silly idea.

[endarkenment]

69. actually yes I do think the government should be in the business of making cars

why is that a silly idea?

[anigbrowl]

73. Ask a Russian why it's a silly idea.

Governments are good at things like huge infrastructure projects, where a monopoly might be tolerable because there's no commercial entity big enough to absorb the risk involved or where the project is related to a country's economic security - like operating the national grid for example. Or over in Europe, the phone companies used to be public (but were not what I'd call consumer friendly at all).

Government making cars would be a bad idea: nobody would want to compete with such a large entity, and car designs would end up becoming political issues. Imagine if we had Obamamobiles, every car accident in which one was involved would be the subject of a political ad. Or put another way, would you want to drive a car designed by the Republican party?

[endarkenment]

75. ask renault why it is a silly idea

they were in fact rescued by a nationalization, restructured, put back on their feet and re-privatized after returning to solvency.

Toyota and Honda would refuse to sell cars in the US because GM-Chrysler was being run by a government management team? Why is that?

[anigbrowl]

79. I don't think Renault is a great example

Nowadays they're fairly good, but at the time they were really good at building cute cars that fell apart. I also recall that when they were nationalized and the boss they brought in laid off a bunch of workers and closed factories (for sound business reaasons), French leftists took offense and assassinated him. The other French car company, Citroen (which was then merged with Peugot) didn't do so well during this period and failed to innovate much.

I didn't say that Toyota and Honda would refuse to sell cars in the US. However they would probably be reluctant to expand production (ie build new factories) government ownership would have detrimental effect on exportability. Part of Renault's re-privatization was justified by its need to expand into other markets from which it was excluded due to its national status.

Finally, the French have an extremely statist business culture in comparison to most other countries. I don't think it would translate well over here.

[endarkenment]

88. "Nowadays they're fairly good"

you can stop right there. There would be no nowadays for Renault had there not been a nationalization. The rest of your argument fails because of that fact.

[anigbrowl]

90. Not so. someone else would have bought them, which is what usually happens.

It's just that the French would be happy with an American or Japanese or German company buying up Renault for a song.

[inchhigh]

70. Do you really believe the government should be in the business of making cars?

Yes I do! The companies doing that now have shown almost zero concern for the welfare of our country as a whole, sending our jobs overseas instead to enhance their bottom lines.

I'm not so sure there is any real relationship between their Market Cap and their actual "Value" although I know that in theory their total value equals equity + debt. What Congress is proposing now is to ONLY assume their debt (by replacing their loans from others with loans from us). Where's the "equity" in that?

[hunter]

71. Why not just pay all the assembly workers to stay home for a year?

They keep their salaries, they keep their health benifits, and the companies have time to get their act together... or not.

Meanwhile any workers who wanted to leave the auto business during this year would have the opportunity to find new work, perhaps building a high speed rail system or other government funded infrastructure improvements. Or they could just sit back and enjoy the break while spending money that supports the rest of the economy.

[inchhigh]

78. Becasue they are GREAT workers

We want them to WORK because the middle class really was born from thier ranks. They helped build America once and they cold do it again if the Execs would just get out of their way. We want them at their jobs because there are great cars in their futures if they could only be given a chance to build them.

[anigbrowl]

80. with what? Revenue from the non-sale of the cars they're not making?

You realize the values of the cars sitting on lots have already been booked, yes?

[hunter]

86. We're going to bail the car companies out anyways, right?

I think our first concern should be for the workers, they should get the money.

And then we should decide if these automobile companies are viable or not, and figure out what it will take to fix them if they can be fixed. Otherwise, if our government is paying people to build cars that can only be sold at a loss, we are simply digging the hole deeper and deeper.

Sometimes it's worth slowing down and taking a breath before you fall over dead. The autoworkers shouldn't have to suffer for the short-sightedness of their executive managers. Let the workers take a break, and let the company management sweat bullets fixing what they broke.

[anigbrowl]

89. Nice sentiment, but I think you're missing some basic accounting

Look, right now the workers are being paid to make cars that sell at a loss. Say they lose $1000 for each car sold - a million cars, that's a billion dollars, ouch. But if we're paying people to do nothing, then it's going to cost much more. I don't see how you expect the management to fix something in that situation since they'll still be in a financial hole when everyone comes back a year later, and won't have sold anything in the meantime (plus all the workers at the parts companies etc. will since have been laid off). Your heart is in the right place, but the idea makes no sense.

[hunter]

98. Hey, the guys at AIG are paying massive 'retention bonuses" to keep their "talent" from leaving...

Fuck up, win a prize. Work hard, get kicked under the bus.

Dealerships are dying everywhere too, and it's not for a lack of inventory.

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=4588584&mesg_id=4588584

Let's put all those people to work too building a new sustainable transportation infrastructure.

[keepthemhonest]

72. if that is true then we should buy them your right nt

[defendandprotect]

81. Absolutely..FIRE executives - keep workers - build electric cars --!!!

NATIONALIZE oil industry --- Save the planet --

[QueenOfCalifornia]

87. You are 100%

correct.

They should be building mass transit vehicles on those lines - bullet trains, trolleys, subways, monorails - things that do not clog the streets or use fossil fuel - and paying to have these various transportations - installed throughout the country - we need a bullet train on the west coast - cities need rapid transit that works and runs on time. Build it in those factories. Get people out of their cars and save the planet.

[dysfunctional press]

97. if you bought them for $11billion, you'd still have to put the $34billion into it to make a go of it

at the very least.

[judasdisney]

102. Nationalize GM? But that's c-o-m-m-u-n....

...i-t-y oriented.

You thought I was going to spell something else?

[melm00se]

106. i am sure that this

has already been said but if you buy GM then you also own:

$185,977,000,000 in liabilities