Chrysler and GM on the ropes as funding fails
12 December 2008

The US Senate failed to vote through a $14 billion bailout proposal for GM and Chrysler last night in a move that could sink both firms.

Republican opposition to the House of Representatives bill had been mounting in the Senate, and the package was eventually thrown out by a 52-35 vote.

"We have worked and worked and we can spend all night tonight, tomorrow, Saturday, and Sunday, and we're not going to get to the finish line," said Senate Majority Leader Harry Reid. "That's just the way it is. There's too much difference between the two sides."

Before the vote, it emerged that General Motors had already hired a team of lawyers and bankers to work out whether the car maker would be better served applying for Chapter 11 bankruptcy protection.

This morning shares in London plummeted 180 points on the back of the US deal collapsing.

If GM and Chrysler do go bankrupt, the knock-on consequences for Ford will be extremely disruptive. Its key tier one suppliers are likely to go out of business.

Asian car companies - including Toyota, Honda and Nissan, whose shares have all taken a battering as a result of this – are concerned that, if GM and Chrysler collapse, the market could be flooded with cheap cars.

A glimmer of hope for GM and Chrysler comes from the White House.

In an effort to urge sceptical congressmen to pass the bill, Bush administration officials briefed that if Congress didn’t act, the White House may have to step in order to save jobs.

Bush could siphon funds from the Troubled Asset Relief program, and this loan could be offered to the car makers with much fewer restrictions than the Congress package.

Private conversations are understood to be continuing behind the scenes.

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12 December 2008

Had a scoot on CNN, I have included a link to the article and also placed on a snap shot from the base of article: http://edition.cnn.com/2008/US/12/11/auto.bailout/index.html:

Here is the snap shot:

"As part of their effort to urge skeptical Republicans to back the deal, Bush officials made clear that if Congress didn't act, the White House would have to step in to save Detroit from collapse with funds from the Troubled Asset Relief Program, according to the sources familiar with the conversations"

Thus I think what may happen is that the funds set aside to bail out the banks i.e. the $700bn will have part of it diverted to the auto industry; watch what happens in the next few days.........also watch in Germany re. Opel and the German gov (interesting for what happens and where)......Sweden (were/are) putting up cash for Saab and Volvo!

12 December 2008

Im not really sure how their government structure works over there - Senate etc - but wont Obama have full control on 1st January 2009? Cant they just wait 3 weeks until then...

12 December 2008

21st January. But I think things still have to go through both houses, and the Senate is currently too close for anything to go through without bipartisan support.

12 December 2008

i think its all just show.......the US administration will never let GM go under. they just want to appear to the mass public that they are not just rubber stamping it.

12 December 2008

Its kind of similar to here in that the Senate is the upper house (like we have the house of Lords).......with house of commons (if you like the lower house) being a bit like the governors in the US; thus generally, the lower house MPs = governors (1) and upper house Senaters (2) = Lords; (1) vote every 2 years, (2) vote every four years (I think); it was set up so that you always had balance and relevance (its well thought out).

But they can vote for the upper house (unlike us)....we cannot vote for members to the Lords (which in my mind is wrong......we should be able to vote for both houses)......this does not mean a President (the Queen, Prince Charles etc.....do a great job and should be in place)....but I think we have the right vote for the upper house as well as the house of commons!!....

Anyway, basically if the Senate vote failed and it goes to the bail out (the $700bn originally set aside for banks) then the car firms have less (no) restrictions i.e. no clauses for green cars etc.......(according to CNN)

12 December 2008

Bloody unions!

12 December 2008

[quote jonfortwo]

i think its all just show.......the US administration will never let GM go under. they just want to appear to the mass public that they are not just rubber stamping it.

[/quote]

Nail on the head here, How many people would lose their jobs if they don`t give them the money?

Maybe they are trying to make the unions sweat and force the wages of U.S. carmakers down a little, which is a good thing for the rest of the country. It will enable the Americans to compete a little with (......them thar) Koreans maybe.

I think that they will have an uncertain Christmas (or what ever they call it over there) and in the new year the factory workers, well more likely their wives will have a say etc the attitide will "soften" the men will accept a zero % pay increase over the next 3 years or something similar.

The other question is when if at all, will they pay the money back?

It is very interesting to see that Ford have gone their own way though, maybe they know something more than everyone else.

Good old uncle Henry!

12 December 2008

I think a lot brinksmanship but not only in terms of the US, also overseas.........the Swedish thing for Volvo and Saab went through (the day after the US one did not?).......maybe with the threat of all those job losses in Germany Merkel might speed up some cash for Opel......how much would you like to see it go?.......GM might be saying (but its not really GM saying it....as strategy goes (I coudl be totally wrong) but if right its amazing!!!)

Plus under the bail out cash ($700bn) there are no terms/restrictions on the cash; thus the government gets no controls which would mean the Obama administration could not force anything through on the car companies and thus potentially alter his strategy etc........who knows!!.....time will tell!

I think Uncle Henry and Uncle Sam are playing blinders!!.......and I suspect GM and the Republicans are also brinksmanshiping!!!......as has been said.....interesting time indeed!!

12 December 2008

[quote julianphillips]Bloody unions![/quote]

That's what I was thinking too.

While I'm not anti-union per se (they have their uses), I would've thought they would see some sense when faced with the imminent threat to the livelihood and future of their members and accept they cannot continue to insist on bleeding the US car companies dry. The wages, pension and benefits etc that their members have enjoyed (compared to their Japanese rivals anyway) are one of the main reasons why their industry is going down the toilet.

12 December 2008

[quote julianphillips]Bloody unions![/quote]

You blame the unions for the problems - unbelievable! Perhaps if the management treated and managed their workforce in a responsible manner there wouldn't be any need for union intervention.

Bring back slavery. Abolish the minimum wage. Let's put our children to work rather than send them to school. Lets abolish healthcare - anyone who falls ill, tough luck. You could save the car industry single handed Julian.

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