GM seeks $16 billion more in U.S. help

[bobdoering]

Jamie LaReau and Harry Stoffer

Jamie LaReau and Harry Stoffer of Automotive News

DETROIT -- GM asked the federal government today for an additional $16.6 billion in federal aid to help it survive. Without the new funding, the automaker could run out of money sometime in March.
Under the plan submitted to the Treasury Department, GM loans and lines of credit would total $30 billion.
GM would also cut 47,000 jobs globally by year end and close five U.S. plants by 2012. It raised the possibility of killing the Saturn brand when production of its current models ends in 2012.
GM received the last installment of a previously approved $13.4 billion loan today, but is requesting another $4.6 billion to meet its Dec. 2 request of $18 billion. It then will ask for $4.5 billion to help it repay a revolving line of credit coming due in the fall of 2011.
GM also is asking for a $7.5 billion revolving line of credit to help it if auto sales worsen later this year or next year. GM plans to start repaying the loans in 2012.
The proposals are contained in a restructuring plan made public by GM today. Both GM and Chrysler LLC were required to deliver plans to the Treasury Department today. Chrysler is asking for an additional $2 billion in loans.
The plans fall short of the government's original requirements in some regards. Although the UAW announced late today that it had reached agreement on concessions with the Detroit 3, GM still is negotiating with bondholders.
Under terms of loan agreements approved by the Bush administration in December, the plans must show how the companies will become viable for the long-term and be able to repay federal loans.

 

[wmarhel]

It's time to let them fail, and see if any investors who might actually know how to run a business would fare. This is really getting to be .

Wayne

 

[bobdoering]

It's time to let them fail, and see if any investors who might actually know how to run a business would fare.

Think there are more folks out there like Cerberus?

 

[wmarhel]

Think there are more folks out there like Cerberus?

No, at least not at as a "buy it and keep it in its current structure"; which is where Cerberus went wrong. Most VC/PE (Venture Capital / Private Equity) firms don't have strong operations groups. They really aren't looking to run or manage companies. They want to get in, do some restructuring, and get out. I think Cerberus saw an opportunity and bungled it.

I think there might be investors who would be willing to buy elements or pieces of the companies. From an asset standpoint, I don't think they are worth much given the state of the economy and a person should easily only pay pennies on the dollar. There might even be a possibility to get the government to underwrite part of the buyout in the name of stimulus.

Wayne

 

[bobdoering]

No, at least not at as a "buy it and keep it in its current structure"; which is where Cerberus went wrong. Most VC/PE (Venture Capital / Private Equity) firms don't have strong operations groups.

True, especially to take over companies this size.

I think there might be investors who would be willing to buy elements or pieces of the companies.

So, maybe there is a new economy that negates economy of scale by cutting big companies into little chunks. Think we will end up like pre-Model T auto manufacturers? Kooky.

 

[Bev D]

True, especially to take over companies this size.



So, maybe there is a new economy that negates economy of scale by cutting big companies into little chunks. Think we will end up like pre-Model T auto manufacturers? Kooky.

well, I dont' think large companies will ever go out of style. But GM is both large and ineffective. they have no idea how to fix their problems nor do they have the intestinal fortitude to do it. I think they should fail. It's sad and tough but the dinosaurs did it! breaking them up and selling off what's valuable will provide many good seeds for future strong(er) companies. Much like the forest needs an occasional fire to clear out the deadwood and reinvigorate the growth.

 

[Craig H.]

So, maybe there is a new economy that negates economy of scale by cutting big companies into little chunks. Think we will end up like pre-Model T auto manufacturers? Kooky.

Bob, there is a sister to the "economies of scale" theory called the "diseconomies of scale". This occurs when the company becomes so bloated that the resulting bureaucracy required to control such an enterprise is more expensive per unit sold than a smaller company would have.

 

[bobdoering]

Bob, there is a sister to the "economies of scale" theory called the "diseconomies of scale". This occurs when the company becomes so bloated that the resulting bureaucracy required to control such an enterprise is more expensive per unit sold than a smaller company would have.

Sounds like the definition of government.

 

[bobdoering]

well, I dont' think large companies will ever go out of style. But GM is both large and ineffective. they have no idea how to fix their problems nor do they have the intestinal fortitude to do it. I think they should fail.

I do not dispute that GM is both large and ineffective. I also do not dispute that they have no idea how to fix their problems nor do they have the intestinal fortitude to do it.

I do dispute that 'failing' is the answer. Many of the businesses that are failing are not being sold off into chunks and having groups of small little companies spring up to replace them. They are just gone. We just do not have them anymore. And, perhaps we really didn't need them anymore, like blacksmiths. So, maybe we can support Kia and Hyundai instead of GM or Chrysler. Let them disappear. Who cares, we'll get cars somewhere, right? How could it hurt? It really is that simple, isn't it?

Or is it a short sighted simplification of the problem? Let's look at the models of success for breaking up companies and making them more efficient, and their products more affordable.

Shall we start with ATT?