Let GM fail!

Agreed.. no more bailouts.

 

No sir. Absolutely not. GM has just shy of 15 billion cash reserves. Mind you they burned approx 7 billion last quarter alone.

Not to mention that GM self declares that they need 14 billion on hand, at any given time, to perform monthly operations.

How many parents buy their kids a Chevy Aveo for Christmas?

Exactly.

Without a cash injection by the end of this month GM is filing bankruptcy because their creditors already know what I'm saying now. GM is horribly managed, and more importantly it's cash is horribly managed. GM's creditors are NOT extending further credit. Tis why they need government support.

The whole planet knows that GM is going to fail or it would've been bought right now. I even considered purchasing GM shares because it's so low, but when you review the financials..... it's not being undervalued. It's being exposed is all.

GM will fail, and the time is now.

 

I stand behind the bail-out of the banks 100%.

What I do not stand behind is the failure to act on what is justifiably labled as fraud.

I am glad to see though that the government is taking a stand against executive bonuses for companies who accepted fed money.

 

Turn out them Lights..
And buy a HONDA..

 

I'm suggesting we turn some of them out for good.

And I'd rather buy a Tesla Roadster.

http://www.teslamotors.com/

 

I don't know enough about GM per se, Mak.

Usually bailouts are followed by managerial re-structuring. I hope you can appreciate my point here--- that industry in this country has been sapped by predatorial finance for decades now.

It's easy to point out the poor shape of U.S. industry now after Wall St. was given a free hand to undercut it---

My point goes beyond GM: bailout industry and real productive jobs; let finance sink.

 

I do appreciate your point, but mind you as well the general idea here is that GM took advantage. Other industrials took advantage. (Esp housing). Any industry that took advantage of the "good lending era" is now in terrible turmoil. I say let them fail, and I mean builders, automotive, and mining camps, etc

Why not the banks? Because whether we like or not we cannot operate without them. Whatever sectors are standing after the fall will still need the banks, and now more than ever.

I do believe that the banks and other lending institutions should be investigated and I think a lot of execs should be seriously considered for prosecution at this point. However handing over money to companies that have been faking it for years is a bad idea. GM has been operating forever on accounts receivables. Now they realize how few accounts are receivable and so do their creditors. Give them what, $100 billion? They'll likely have eaten it by next Christmas.

 

It's amusing that our perspectives are diametrically opposed---

I think the U.S. would do well to circumvent the banks altogether in propping up it's industry. Any sovereign country has the authority to extend credit--- not just banks.

Although it is true that the Fed and the banks are so interconnected now, it would be impossible to generate sovereign credit.

FDR faced the same problem during the Great Depression--- what did he do? he arbitrarily gave the Tenessee Valley Authority (TVA) lending powers to finance infrastructure projects (which is semi-legal ; but much more legal than the privatization of the Fed)--- and told the banks to go fuck themselves.

That little move was what transformed this country from what was basically a depression-ridden Third World country (prior to WWII) to the superpower it became after the war.

It's true that a capitalist system needs private lenders, but what we're faced with today is not simple private lending--- we're talking about a monopoly on capital liquidity that can only be restricted by government.

I think the average U.S. citizen would do well to have more than four banking conglomerates at their disposal.

 

You cut the banks out of the picture and how many companies fail within 6 months? Some companies can't float without almost daily credit.

Let's roll with this though:

If you cut the banks we need inter-market credit. Ie. Material suppliers supplying on credit to manufacturers that will extend credit to the client. The client will pay when the product sells. The manufacturer will pay when the client pays. The suppliers of raw materials will get paid after everybody else gets paid. This system is worst suited for those with whom the process begins.

What happens when the client can't move the merchandise to the customer? The manufacturer doesn't get paid.

What you're talking about is the end of the Wal-Mart dynasty. You're talking about quick cash conversion cycles and low volumes. You're also talking about the super-duper-inflation that everybody thinks is coming now. The average person would do well to operate outside of the mainstream banking system, but the fact is that everything the average person does is tied directly to the mainstream banking system whether they try to avoid it or not.

Mom and pop shops are gone for now. And until we bring them back into the picture Wal-Mart will rule the world and we will be dependent on a revolving credit system for every convenience and price advantage we enjoy. Pumping over $700 billion into the banking system is nothing compared to what would happen had those banks failed.

GM, for instance, would have already shut their doors because there wouldn't be a single auto maker out there with enough cash reserves to even consider buying them.

 

That is why I'm making the distinction between public credit and private lending---

What is happening with the bailout of the banks is that public credit is being generated to give to private lenders to give to industry, right?

Well--- how's about generating public credit to give directly to industry and cut the middle-man?

I'm not advocating barter here either. I think if the financial conglomerates fail, all that's going to happen is they'll be broken down into smaller banks: which is the only way small business and manufacturing can thrive again.

So, I'm not saying do away with banks. I'm saying, restore banks to their initial mission, which is to aid the production of material wealth as opposed to speculation in fiat money--- which necessarily saps industry and small business potential.

 

Much of the bailout money isn't being used in a manner consistent with the implicit promise used to help effect its passage. Would there be public support if it was made known that we'd be mortgaging our future so that relatively stable banks would usurp a portion of the billions to either sit on or buy up smaller banks? Public opinion was used to blackmail congress during an election year to enable the financial sector to further rob us.

Propping up an institution only prolongs the inevitable... whether it's banking, insurance, or automotive. Let them all crash and burn and the global economic fever will break FAR sooner than if we keep throwing borrowed money at a monster that isn't going away.

 

If a food company goes bankrupt , is there no longer any food in the world?
Ofcourse not!

Its the same here , people dont choose to make billions to buy ever bigger houses.
Its because we have the bizarre situation that paper can control politics ,elections, production , wars , everything.

I'm in finance , so I know about this.And a Chief Economist at JP Morgan told me exactly the same..

But if it makes some of u feel better , blame it all on Iceland or some poor guy in a trailer park who lost his job and defaulted on his mortgage..

 

While I do agree to a point, I think there is far more public outrage about the bonuses that were given with that money than the buying of smaller banks.

Again, the buying up of smaller banks is a strategic move to free up credit, and that's why the money was given. If you buy a smaller bank with excesses in cash reserves it's very probable that those cash reserves can put the larger bank into a better debt-equity ratio and frees up credit.

Grant it that's not exactly how people thought the money would be used, but they also didn't say they were against it as part of the money lending.

We asked them to arrive at a destination and gave them money to get there. They are on their way to arriving using the money we gave them. To me it's that simple.

 

Why should GM not be rescued by its shareholders? Its obvious right? Nobody would pay because they can get a better deal for their money elsewhere.

This is where our economy and lifestyle let us down.

If you have cash you invest it, eventually it all goes in the stock market. Sometimes you make money sometimes you lose money but when you lose, you only what you had invested. If you have $100 and invest $10, if you lose everything you invest, you still have $90.

Business is meant to be accountable to shareholders but I believe shareholders should also be accountable to the business in which they invest. If you have the confidence to buy a share in a company should you not also be prepared to invest more money to help it survive because you believe in the company or its product.

If the government helps GM out then the government must become a shareholder in GM. As such the eventual profits both from the products and any increase in share value should be returned to the government and eventually to the taxpayers.

If the current shareholders were willing to belly up and invest say $1, $10 or $100 for every share they hold - whatever it takes to bail them out, then they would not need the government to do it. In return for their investment the shareholders get more shares in GM and would hence get a cut of all future profits. If current shareholders are not willing to pay, open it to employees, everyone. Invest $1 in GM and you too can get a cut of its future.

This is what the stockmarket used to be – invest in something and get a return on it. Now the stockmarket is far removed from the operation of the business invested in, and the stockmarket only cares about numbers.

Are YOU willing to invest in GM? If so, go buy some of their shares. If not, buy Toyota and say ‘fuck em’. There is more to the value of a company than the price on todays stock exchange. Look at it this way, If you live in car town and you need GM then you should be investing in GM. We need to stop investing in the short term – look for the long term. Where will your kids work?

I think the people who take what money they have left and buy what they believe in, what is important to them and what they can get involved in will prosper long term. Go support your favorite store in the local mall, buy shares in them. Support your local GM, buy shares.

But what I think will happen is the ones with stacks of money will invest it outside North America, why? Because by investing in China, they can get more money faster. Even the ones with a little will do the same because they want to have stacks of money.

 

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You make many valid points(and especially the one at the end), but I will address the ones that I think are more on point with the topic.

Investing in GM is a foolish move, and whether it's the people or the government, handing over cash will not fix their problem. They've been poorly managed for years, and their cash has been poorly managed for just as long.

Accounts receivables is an asset. It stands as collatteral. If you have 2.8 billion in accounts receivables, getting a 1.8 billion loan is a breeze as you have ample equity.

What happens when each year for 10 yrs you're righting off more and more of your accounts receivables but you're still borrowing money off them like they're gold? You find yourself dissapointing creditors and operating more off of cash.

What happens when somebody takes that cash and uses it to develop a product that doesn't sell? You lose that cash.

What happens when somebody takes that cash and blows it on marketing, instead of efficiency studies and you still don't sell enough? You lose more cash.

You see the problem isn't that people aren't buying cars. The problem is that people aren't buying enough new cars at top dollar, and that GM(and plenty more) are not making the adjustment to refine their processes. GM has enough cars on lots to stop producing today and sell a dozen cars a day for a few years. And THAT is the problem. Demand dropped, supply went up, and companies all over, just like GM, are stuck with too much inventory to move and they're just not moving enough to pay the bills. Perhaps if they would've slowed production a year ago and worked on liquidating they'd be ok now. But their answer, instead was to invent a new SUV to boost sales.

People wont invest in GM because it's a shit company. At $4 a share value buyers would be all over it if the financials looked fixable. They don't. That's why Chrysler didn't buy and that's why people aren't investing. GM, not so long ago, was at $25+ a share. It's 1/4 of that now. Anybody with money who thought the price could return to and past the $25-40 a share that it used to be worth would jump on it. It can't, so they wont.

 

The news about bonuses and luxury vacations and such while outrageous are little more than distractions from the real story about the members of the sector that are NOT needing the cash taking it anyway and using the liquidity NOT to buy up bad loans; they're not even renegotiating them. The taxpayer supplied capital is being used to reshape the financial landscape to make banking less competitive once the economy begins to expand again- and for the few big players to charge whatever they see fit for their services. Bonuses and parties are not going to be rectally violating people's bank accounts fifteen years from now.

 

fitzy for once I dont agree with you .

that is what the point is not though.
If you think about GM failing and the amount of money it would take out of our economy its enormous. I am not talking about just the workers who will be laid off I mean overall peroid. All of the sudden if you take all the money GM creates buying and selling materials cars etc etc and just remove it things will be fucked for a good 4-12 years. Not to mention all the extra unemployment payments the government will be doleing out. The answer to the problem is not to allow companies to get to the point that they have to be bailed out. I am quite sure that gm is just like any other corp and shortcuts where ever they can. If they actually just made a good set of cars they wouldnt need a bail out

 

The fact is that they didn't make a good set of cars and they do need bailed out.

Again, GM could eat $50 BILLION by next Christmas and be no better off. Right now not only are they trying to figure out how to get rid of the rest of the 08's they have in stock but they're adding 09 models to the equation. Even in the face of nothingness GM has continued to focus on marketing and production instead of liquidation. "Gee Ted, what should we do about all these cars we can't sell?" "I dunno, Tom, I think we should create a new class of car and advance our past models. This should get people excited about buying cars again!" "Great idea Ted, let's do it!".

GM is run by uneducated monkeys. You'd have to give them a 5 year supply of cash to even buy them enough time to ATTEMPT to restructure and pull up. Key word there is ATTEMPT. They'd have to completely shut down 90% of it's facilities WHILE it liquidated hundreds of thousands of cars. That would still result in lost jobs etc.

No matter what we do with GM those jobs are as good as gone.

And as for "the money they bring in"... it doesn't exist. If they were bringing in any money they wouldn't be on the verge of collapse. Take the hit now while things are already down and we can start fixing them. But if they are given a money supply they will hobble through the next few years on life support before slowly and painfully halting.

 

I'm far too busy and self-important to read this entire thread, especially since Mak started it. Here's what should happen:

1. Fuck 'em.

2. Shove Ford and Chrysler's nose in it. Tell them they get no help until they retool with an ALTERNATIVE FUEL in 18 months on their own dollar or they get no bailout when their turn comes. See how fast they run to look up hydrogen in the dictionary.

This would have happened when Chrysler almost went under some 20+ years ago, but there was a marked lack of testicles at the time. Let one go, tell the others to get it in line or they're next, force them to EVOLVE! They've all been building shit since 1974 and now they have to pay the piper. Fuck 'em.

 

That is our fault though, isn't it? The majority sat back and said, "Please save us from global meltdown!" And when they threw the plan out, it wasn't questioned... not heavily enough anyway.

The money was to be used "to free up credit", and that's what is being done. Do I necessarily appreciate how it's happening? No. Am I glad something is happening. Yes.

I like the idea of outrageous consumer interest rates. Maybe people will stop borrowing money they can't fucking afford. Maybe banks will more wisely invest the money that doesn't get loaned out?

The fact is that this bail-out has performed almost exactly as was expected. Sure the big bank took the money that the little bank said they needed, but when they bought the little bank did the little bank not end up as a beneficiary in the end? Let's face it, half of those banks were looking to be bought. Many were already positioned for acquisition as if it wasn't a matter of "if" but only of "when". Had they been given the money it would've been used to shore up loose ends to make the purchase look more attractive, and it still would've happened.

The end result was always going to be the same. The rest was a matter of technicalities.