GM Wants A Bailout? Here Are Our Conditions (GM)

Henry Blodget | Nov 13, 08 10:51 AM

rickwagoner.jpgGeneral Motors (GM) lobbyists are trying to terrify the nation into keeping the company on life-support.  Jjudging from the panicked whimpering from Washington, it appears they are succeeding. So it's time we started talking about the conditions we're going to put on this latest bailout.

Thomas Friedman (NYT) and Paul Ingrassia (WSJ) have started the list. We've added to it. Here it is in bullet form:

  • Stock goes to zero
  • Existing debt-holders take a hit ($0.30-$0.40 on dollar?)
  • Money dispensed in small amounts in return for senior convertible debt, pending the meeting of goals
  • Management and board gone as soon as strong replacements can be found
  • Union contracts torn up
  • Company radically downsized
  • Remaining employees offered new, fair employment terms (pay, benefits) which they can accept or decline at their choosing
  • Company commits to designing and building cars that people want.

Anything else?  Let us know below, and we'll add.

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44 Comments

scott said:
Commit to global R&D center (fuel cells etc) to be based in US - no outsourcing engineering etc.
K said:
Let GM go , forget the recession and welcome a Depression . 1 good thing though is that asshats like you will have to get a real job and stop spewing your personal garbage out. BUY AMERICAN
Mike said:
The union has already gave almost everthing up! Put a cap on top brass pay and bonus!
Mike said:
What is wrong in this country? The union's set the standard of living. Now we let the companies outsource everthing for cheap labor.
Don said:
Just keep buying those Jap cars and we will be flying their flag instead of our Red/White & blue...All the money you spend on those Jap cars gpes back to Japan so they can loan you money at a high rate...Hmmm sounds good to them...
Paco said:
Nope....create jobs by investing in Toyota and Honda .........they are investing in plant and equipment here and hiring people here......they are the economy.....stop trying to fund companies that are failing and will fail..........how many times do you want to pay for that chevy
Lora Fulmer said:
I agree, let them go and get rid of the unions. I have two GM cars and I have found that everyone at that company keeps getting more and more pay over the years and the quality of the cars get cheaper and cheaper. I'm sick of working harder to bail everyone else out. I own my own business an dhave gone with pay myself to pay my bills and employees.
Close the doors and take the CEO's asset that they always found money for.
Lets get this Country back on track.
Charlie said:
The union has not given up anything! The union retirees still have their health care paid for and they also get Christmas bonuses! Give me a break. The only ones to give up anything is salaried retirees. The unions in our country have helped get us where we are today. The executives are not helping with their large salaries and bonuses. Let's call a spade a spade. GM is not the only company that is in bed with the unions.
ABe said:
Mike and K--

Au contraire, what is really wrong in this country is that the taxpayers and car buyers have been subsidizing a standard of living for the union workers far above what they deserve. I buy Japanese precisely because the money I pay corresponds to the value in the vehicle, not to fund some obscene pension for a lazy UAW worker (at the expense of my own pension, I may add.)

You may not call that a tax, but it is. And the money does not go to investment (see the $25bn loans approved for the Big 3, when in fact there were other, more efficient competitors doing just fine in this and every other market environment; those loans appear to be $50bn short of the mark. How is that even possible???) The money goes is strictly for wealth redistribution.
Hatch said:
Consolidation, spinoff, and/or elimination of duplicative GM brands. If people don't want a buy a crappy Chevy, then they don't want to buy a crappy Pontiac.




@scott
So you're in favor of green energy reserach, but you want it to be hamstrung by protectionist laws?
Dave barta said:
The car co. were making cars that we wanted to buy, until gas hit 4.50 a gal.
Who's fault is that, big oil ( + Dick, George)
Lets have the oil co. bail out the car co., they have the money and were the cause.
JERRY NEVINS said:
The Union contracts should be the first to go.Re negotiate new labor agreements that pay workers a fair wage for the work they perform and eliminate wasteful agreements such as the jobs bank and supplemental unemployment benefits. Its past time to face reality. The union demanded these things,(among others), but it took management to agree to them. That is where the blame lies. Many of us has seen this coming for years.
Secondly, a survey should be conducted to see what brand of cars our elected officials and government employes drive. None of these people should be drawing a paycheck and benefits trom the tax payers if they drive anything other than an American brand.They should be ran out of office or resighn.
Drastic you say?? You bet! But drastic conditions require drastic measures.
CU Writer said:
Gotta love it when people demonize the unions or say that they are the only thing keeping workers in their jobs paying a fair wage lest we all become slaves to corporate overlords.

The real culprit here is GM management for three reasons:

1) Giving in to UAW demands time and again. The union is supposed to ask for the world. It's not supposed to get it, that's why we have negotiations. GM never negotiated, it just conceded everything
2) Betting on the SUV high margins. What an incredibly stupid move, especially given that the commodities market was in a 20 year recession until the early 2000s. Was that going to last forever? Please.
3) Not admitting their errors and trying to restructure something, ANYTHING, for the last four years. Gas hasn't been cheap since I the dawning of this decade and GM has doggedly pursued a business model that leads to a giant black hole. They deserve to be there.

If the feds have to provide the DIP financing for Chapter 11, that's fine. But to just hand them cash is totally absurd since we'll be in this same boat six months from now.
Don said:
Just do some checking on how many American dealers are allowed in Japan..None..They have a protected policy in Japan to protect there workers. They waon't even allow an American auto company to build a factory over there...So are they playing fair for our workers...No
CU Writer said:
Dave: Yeah, because supply and demand as well as the prospect for future demand (you can't tell me you all believed a huge recession was coming) didn't drive the price of oil higher. It was all an energy sector conspiracy.

How do you idiots manage to breathe, much less get jobs? I'm 23 with degrees in English Lit and polisci, and even I get this simple economics stuff.
AB said:
I am happy for GM, Ford, and Chrysler to be recipients of governmnet pork bail-out money.

But they need to start making good cars that people would buy. This is the biggest problem facing the Detroit Big Three. They will not be viable businesses until they start making cars that people want to buy.

The Japanese and Germans design and build cars in the US and they are all successful in their respective market segments (eg Acura, Honda Accord, Toyota Camry, BMW X5, Mercedes M, etc.)

Most of Ford, GM, and Chrysler products are quite simply: SHITHOUSE! They are cheap, crass, irrelevant, poorly designed and engineered, and manufactured.

Pete said:
Would someone please tell me which cars are "American"? Would that be a GM car made in Mexico? A Ford car made in Indiana with a Japanese engine? Would it be a Honda made in Ohio? Help me out here.
JP said:
How I see the difference is the support of our own country. We seem to be "fair weather friends" when it comes to issues with manufacturing. When times are good, everyone is in agreement and Manufacturer and UAW get along (for the most part). Then as soon as something challenging comes along the UAW and UAW leaders turn and run. The Government wants to be at arms length. Manufacturer wants to place blame on "them" and the Americans want to say: quit out sourcing. I know what would have happened to GM if Billy Durant had the same attitude. GM would not have been here to support me and my family to date. It pains me to see people paying more for a gallon of milk, then one share of GM stock. I challenge anyone who has direct or indirect contact with GM to go buy one share of GM stock and hang on to it. The only way to keep American companies on American soil is for Americans to invest. If every person did what I recommend, just think of the overall effect. What would happen if they bought 2 or 3 shares? Would you rather have, your tax money given to big company(s) without your voice being heard or would you rather set an example of being an American investing into America Companies? Quit being fair weather friends and adopt the principals of Billy Durant. Make this Nation strong again.
Steve said:
How did GM get into this mess? Its board has kept on a CEO, Rick Wagoner, under whose watch GM stock has lost 95% of its value -- the stock dropped from $68.63 on June 1, 2000 when he took over to $3.33 today. There are two reasons for this: First, GM refused to invest the profits from its SUVs and trucks into more fuel-efficient vehicles that customers would want to buy as gas prices rose. Second, it depended too heavily on auto finance for its profits -- and given the current credit crisis, such dependence is fatal.
Gumby said:
General Electric, next?
Boeing?
DuPont?
Caterpillar?
the long list goes on...
Unions destroy American competition...
Gumby said:
All is really needed..
Is $20 oil barrels...
Car buyers will return in droves...
Gumby said:
If GM and Ford goes under..
What do you do next??
Dump Big Oil Stocks!
Nobodywill be driving anymore..
Gumby said:
If GM and Ford goes under...
Japan will relax buying dollars...
Dollars will plummet to 50 yens or lower..
Civics, Corollas, Priuses will zoom in prices to $50,000 and up...
NObody will be driving anymore after all used cars are bought up and worn out...
We will be Havana, Cuba.....
Gumby said:
If GM and Ford goes under.
Used Jap cars will go up in prices....
Invest in used Jap cars now...
Gumby said:
If GM and Ford goes under...
Toyota Honda will still lose sales
Many Americans will lose jobs
Not buying cars and gasoline..
Dick (no, not that one) said:
The irrational union bashing here is amusing and reflects what is wrong with most of the thinking about bailing out the big 3. GM and Ford are global companies. Both have factories in Mexico, Canada, and Europe. The UAW only really has anything to do with the U.S. factories. Detroit is where Ford and GM build trucks and SUVs. As long as gas was cheap, these factories, staffed with union labor, were hugely profitable. It was because of this profit on union made trucks, that led the execs to ignore cars.

Now, GM and Ford both build and sell cars profitably in Europe. US consumers, however, can't buy those cars. The problem facing GM and Ford is that they made the conscious decision not to compete with the Japanese in the US with cars. Why? Because they could make $10,000 profit on each Suburban or Expedition. So why worry about making $1000 on a car? They simply thought the good times would last forever. The small cars are crap and they only build them (in Mexico) so they can meet CAFE standards.

So, how can they build small profitable cars in socialist Europe with their strong union culture? It's mostly because of healthcare. While health insurance in the US has increased 300% over the last 12 years, costs have remained stable in Europe because of universal health care.

Finally, how much has GM paid Waggoner for driving it into the ground? I bet it's a little more than $32 an hour. I bet he gets a little better pension also.
Krapital said:
Union needs to go first, they are a drain on GM's money. some workers are there sitting in a room because they have no job but the company can't fire them. Once the union is gone, GM can divert its capital to to building better cars. But in order to get rid of the union, they will have to go thru some kind of restruturing. (thus bankruptcy). If they re-emerge, they will be a much stronger company.

and for those of you who are against japanese cars: these japanese manufacturers also have plants in the US hiring US workers, so not everything is taken back to japan. Also, as consumers, we are also benefitting, instead of buying a piece of crap american car that dies after 5 yrs, consumers can buy a japanese car with 10 yrs of life span and cheaper maintainence cost.
Nick T said:
Unions are the bane in this country. They want increased wages, more benefits, less work, more employees to do the same job. Unions had a place in this country years ago when workers were victimized by employers, and paid below standard wages and were totally controled. Now the pendulum has gone to the other side. Why do more and more companies outsource to foreign countries? Their labor and benefits cost is too high for them to compete in todays world environment. Yes the automakers made some dumb errors and pushing the SUV's, etc, from which they made record profits. Senator Pelosi who advocates support for the oil companies and the open card policy for unionization is way off in her thinking, that more unization will create more competition amongst unions and increase production. Sorry, but it will push more companies to outsource work to foreign companies. If you think the current administration created the current financial disaster, then I guess you have to go back to the clinton years in office, when he pushed bills that all Americans should own homes, and pushed banks to lend in all areas, whether or not the borrowers had the financial wherewithal to support a mortgage. Yes that is the Democratic philosophy, yet Uncle Sam will take care of you. Unfortunately politics run our lives, and there aren't any good politicians, they all lie and promice and then change their position once elected.
Chuck said:
Remember a few years back when the Packers had a big Monday night football game on the schedule? The GM plant in Janesville had to bring in big screen TVs to the plant so the United Auto 'Workers' could watch the game while they 'built' cars. Why didn't they just fire all the overpaid UAW 8th grade grads who called in sick? No doubt those cars were built right while Brett Favre was back to pass.

And we're supposed to subsidize those companies and their UAW. Eff that.
Robert said:
All vehicles, cars and trucks, implement hybrid tech within 3 years. Difficult? Yes. Possible? Absolutely.

All makes commit to sell one, standard, low-cost model through Walmart and Target. Hell, sell them through Amazon too. If consumers know what they want, why make them go through dealer b.s. to get it?

Anyone who trades in a 70s or 80s vehicle (which is then destroyed at a new WPA-style job-friendly wrecking yard) gets a $10K new car credit. Cuts pollution, raises national fleet MPG. In a couple of years, expand to include 90s vehicles.

Include Tesla in bailout, get new San Jose factory built, see if a new, ground-up entry in auto biz shows a better way forward. Off limits to UAW.

Current UAW members take hit on pay and benefits in exchange for 10% stake in companies, which vests over 10 years.


Pete said:
What really needs to be changed within the Big 3 is the corporate culture. GM in particular is VERY resistant to change, and most of their cars reek of "design by committee". No doubt internal divisions are strongly protecting their turf. GM has always been capable of building a great car and has done so on occasion but it's almost like they build the great ones by accident or by chance. Most of their newly designed models have serious flaws that should have been spotted well before they were manufactured, but it wasn't really anyone's job to do that. Until this attitude changes, no amount of bailouts will save this industry. New management is needed for sure, but it is critical that they break this old-school territorial culture within.
Rick C. said:
NY Times Op-Ed columnist Thomas Friedman got it right in his 11/11/08 "How to Fix a Flat".

He lays blame for lack of innovation not only on the Big-3 and its unions, but especially on the *enablers* in Congress. Friedman writes:

[ Indeed, if and when they do have to bury Detroit, I hope that all the current and past representatives and senators from Michigan have to serve as pallbearers. And no one has earned the “honor” of chief pallbearer more than the Michigan Representative John Dingell, the chairman of the House Energy and Commerce Committee who is more responsible for protecting Detroit to death than any single legislator. ]

So phone your Congressman, and insist that JOHN DINGELL MUST BE REMOVED AS CHAIR OF THE HOUSE ENERGY AND COMMERCE COMMITTEE, as an essential condition of any bailout!
American said:
Wait...'Company commits to designing and building cars that people want.'

I believe that they most certainly are. Do you think that us as spoiled Americans, our children, and all of their DVD players/Playstations/Car seats/luggage etc... are going to all jump in a Toyota Prius for a road trip. Get real. American car makers are making the cars due to the demand of the public. What the majority of red blooded, wasteful, self centered America wants. Anyone notice that since the gas prices are now declining, no one seems to be openly complaining or seeking out alternative energy sources for cars? We do not care about our environment or energy sources until something happens to inconvenience our daily lives. We as a people are not up for sacrificing anything to assist our country, even though we are in a 10 million dollar a month war. Anyone read about bail bonds in WWII??? Sad, but that is the American way. I love my country, but the people in it need to understand that we drive the demand for vehicles, and everything else we "need".
jim said:
merge general motors and ford FEDERAL MOTORS
Connie said:
GM will get the money, but their workers will have to take cuts in pay and benefits! To bad ole wagoner won't give up his bonus! Keep giving until it hurts workers! So much for voting in that dem president! Guess you should have worked in the financial sector because NO there had to give up anything to get BILLIONS of dollars! In fact, AIG people are still taking high dollar trips$$$
Chuck said:
Speaking of Tom Friedman speaking of enablers, he's should watch his mouth.

Tom Friedman's been living in a 10,000+ square foot house courtesy of his wife's family(Bucksbaum) fortune. Anyone else watching GGP go from $57 to 35CENTS over the last year or so? Now all of the sudden Friedman purports to be an economic expert. Funny thing about that - he doesn't have any degrees in economics, but rather Mediterranean Culture, and Philosphy. I guess economics becomes a topic of interest after you watch your wife's family fortune drop by 4 billion.
MICHAEL said:
It will be such a relief when there are no high hourly salaried positions left. Then only a small segment of the American labor force will be able to afford houses, cars and electronics.
Don said:
New Zealand went through this 15 years ago. You cannot fight the realities of the global market place. If you try to, your country will go under (or to the point of bankruptcy) trying to prop up inefficient industries. Tough medicine, but necessary. I feel for all those workers but they will drag the whole countyry down if they win.
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