GM and Chrysler Pushing for Merger

[cruzin4u]

Wrong Now a days those foreign cars aren't any more reliable than a GM or Ford and i don't find them fairly priced especially for a Honda or Toyota. my 2002 Highlander has been just as good as my old ford explorer

I can tell you don't travel much to the states. I go to the states a lot for work i see a lot more of the big 3 cars down there than i do up here in Ontario i see why they produce a million cars a year.

So you mean to tell me your Ford Explorer never Exploded?

I've been to the US many times and have seen their poor taste in vehicles.

The reason why many of them drive big 3 cars is because it's hard to find a dealership, such as Nissan/Infiniti. They are not around the corner like you have them here. Often times, residents have to drive hours just to get to a dealership, such as the one I described. Most people simply don't have the time or cannot afford such a trek, so they settle for a big 3 vehicle.

I've owned 5 Japanese vehicles and never had a problem with them. May be I've been lucky?

 

[Admiral Beez]

For the purposes of rebutting the comment that Americans do not buy their own cars, it is not important as to WHY they buy their own cars, such as lack of alternatives, etc. That said, these are certainly important points to the Big 3 as they plan how to move forward and survive.

 

[Whoaccio]

You may want to take more time to clarify your "logic" as none is evident.

If there is no proof that giving billions to a private company will improve the overall economy, there is no point in giving it. What is confusing about that?

You have billions available? I'm sure no one will compel you to hand over your new-found wealth. As prejudicial statements, here is one you made in an earlier posting of yours:

Huh? Can you argue about anything other than mundane semantics? Is it really confusing to anyone here that I meant I am opposed to the government giving over billions in aid. Did anybody miss that?

Can you prove definitively that North American consumers don't like the automobiles produced by the big three producers?

Umm, yes. The Big 3 are on the verge of insolvency. They have a negative net income. If N. American consumers liked their products (sufficiently), they could just raise their costs until they were profitable. They obviously feel that, if they sold their products for what it costs to make them, nobody would buy them. (once again, this is not prejudice. Ask Bob Lutz why they are loosing money) Maybe I can just ask you this: if demand for Big3 cars is strong, why are the companies going bankrupt. Please, if you answer nothing else, answer that.

No specific subsidy has been proposed or has been put into place as of yet.

Jesus. I am arguing we shouldn't put one in place.

But here's a question for you to ponder: think of the one Western industrial nation that has no large-scale public healthcare system. Imagine the pressure such a system could take off corporations in that particular nation when negotiating wage and benefit agreements with its employees.

I think the US should have a universal health care system. If I ever suggested otherwise, it was a confusion. From the evidence I have seen, the status quo health care system in the US is a clear failure in terms of costs and efficacy. If the argument is that, because the USA has a neurotic health care system, the auto sector qualifies for subsidies though, I would still disagree. The US' stupid health care system weighs equally on all parts of the economy roughly equally, so there would be nothing to qualify the Big3 for subsidies above and beyond the norm. Sure, implement some kind of universal health care system. That would be far more constructive than giving "aid" to the Big3. It is unfortunate that health care reform has been railroaded by various bailouts.

Yes, it is an open-ended question and a bit of a reuse as you want to invoke some kind of universal parallel between your uncounted money losses, your (unproven) attribution that most people have the same experience as you, and large corporations with hundreds of thousands of employees and millions more employed downstream.

Ha, right you were to see through my clever reuse! Nobody's equity has decreased over the past few months. Sure, home values have plummeted and the stock markets are in the pits, but only a fool would assume that people have lost money. It makes implicit sense that, when the economy contracts and equity markets plunge, people's assets increase. (/sarcasm) In any case, am I to imagine that you can't argue why any and every firm that has accrued losses shouldn't receive a pro-rata bailout? Is this, what, the 4th time I have asked why a GM worker is proportionately more valuable than every other worker? One of these days...

It's all a little more complicated than you make it out to be, but I'll play along. If your money problems are bad due to unemployment (and not bad management), there is always EI (which supported by taxpayers) [which all unemployed Big 3 workers would qualify for]. When that runs out there is always welfare for you (also taxpayer supported) [which all unemployed Big 3 workers would qualify for]. If you want to learn a new trade to make yourself employable once again (beyond personal money-management), there are retraining programs available, or you can always attend a college or university (also publicly supported with taxpayer dollars) [which all unemployed Big 3 workers would qualify for]]. None of those things guarantees that you will be a success in the end, but the supports are available to you.

So, in addition to all the interventions the entire economy enjoys (including unemployed Big3 workers), why do the Big3 deserves aid above and beyond the normal arsenal of welfare programs, which I more or less support.

Then again, maybe we should just let you fail. By your own admission, you've lost a lot of money. Maybe subsidizing you isn't worth it.

Got that right. Now use you're (correct) logic there, and sub in "GM" for "you" and it will be just as true.

 

[Glen]

If there is no proof that giving billions to a private company will improve the overall economy, there is no point in giving it. What is confusing about that?

They are asking for loans, not handouts.

Umm, yes. The Big 3 are on the verge of insolvency. They have a negative net income. If N. American consumers liked their products (sufficiently), they could just raise their costs until they were profitable. They obviously feel that, if they sold their products for what it costs to make them, nobody would buy them. (once again, this is not prejudice. Ask Bob Lutz why they are loosing money) Maybe I can just ask you this: if demand for Big3 cars is strong, why are the companies going bankrupt. Please, if you answer nothing else, answer that.

They still sell a significant number of cars. One they they do face is large legacy costs tied to the number of retired employees. This expense equates to $1600+ per car sold. That is what happens when increasingly fewer employees must support the retirement benefits and health care cost of a disproportionately large number of pensioners.

So, in addition to all the interventions the entire economy enjoys (including unemployed Big3 workers), why do the Big3 deserves aid above and beyond the normal arsenal of welfare programs, which I more or less support.

Automotive jobs (as do most manufacturing jobs) support far more secondary jobs than most other sectors. As such the direct loss of 100,000 auto jobs in Canada may spiral into total losses upwards of 200,000. As a taxpayer the issue becomes do we give aid in the form of EI benefits and welfare, or by loaning them money?

The big three are capable of making great cars. For example, the new Malibu is arguably a better car than either the Camry or Accord. They are capable of designing/engineering and producing cars that are at the top of class. We should give them the chance to do so. In the end it might be the cheapest solution.

 

[Whoaccio]

They are asking for loans, not handouts.

I will have to concede to Hydrogen that, yes, there is nothing certain at the moment in terms of government aid. That said, low interest government loans are certainly a form of subsidy. Further, many US Democrats are proposing strait up handouts under the TARP to all sorts of wacky proposals like making car loans tax deductible. We will see what happens, but lets not pretend that this is laissez faire economics.

They still sell a significant number of cars.

One they they do face is large legacy costs tied to the number of retired employees. This expense equates to $1600+ per car sold. That is what happens when increasingly fewer employees must support the retirement benefits and health care cost of a disproportionately large number of pensioners.

Don't get me wrong, the UAW have to a large extent bent the Big3 over a table. I love the quote that "UAW officials so far have told the Obama team that they don't believe they have to make concessions." Thats promising for the future of the Big3 right there. Its still managements fault for accepting these labor contracts (and not just offshoring as soon as possible) as well as the unions fault for pushing such ludicrous benefits. If anything, the legacy costs make me less inclined to support a potential bailout, as both the management & labor have knowingly screwed themselves.

Automotive jobs (as do most manufacturing jobs) support far more secondary jobs than most other sectors. As such the direct loss of 100,000 auto jobs in Canada may spiral into total losses upwards of 200,000. As a taxpayer the issue becomes do we give aid in the form of EI benefits and welfare, or by loaning them money?

That is pure CAW economics. These job multipliers are infuriating. If you compiled the various multipliers every industry's lobby groups put out for it, Canada would have 30m jobs or some such ridiculous figure. (Isn't Jim Stanford's going line that every one manufacturing jobs "supports" 7 others?). There is no correlation between the relative strength a country's manufacturing (read, automotive) sector and its overall economy. Countries like Germany & Japan, both with quite strong manufacturing sectors (at least by 1st world standards), have quite weak overall economies and especially weak service sectors (both per capita poorer than Canada). Even within countries, manufacturing strongholds like Michigan or Ontario have trailed quite noticeably behind national wage increases.

The big three are capable of making great cars. For example, the new Malibu is arguably a better car than either the Camry or Accord. They are capable of designing/engineering and producing cars that are at the top of class. We should give them the chance to do so. In the end it might be the cheapest solution.

When was GM founded, 100 years ago? At what point in that period were they denied said chance? The Big3 just came out of one of the biggest market bubbles in a while loosing market share. I could sort of buy that argument if we were talking about ZENN Cars or some kind of boutique car maker that has had trouble gaining market share (against the big 3...), but these are some of the largest companies around. Its almost like saying Microsoft never really had a chance.

It should also be said that it doesn't follow that if one of the Big3 falls, all the rest are doomed as well. If Chrysler failed or GM was forced to shutdown its less effective marquees (i.e. just keep Chevy & Cadillac), it would strengthen the US car makers who actually do make decent products like the Malibu. If Chrysler got bailed out, with pretty much no decent products in development and still trending poorly in build quality, it would be a real slap in the face of Ford, which has made strides in improving build quality.

 

[Hydrogen]

If there is no proof that giving billions to a private company will improve the overall economy, there is no point in giving it. What is confusing about that?

You are the one who is confused. These companies have been viable and profitable in the past - otherwise they would have gone out of business a long time ago. They employ hundreds of thousands of people, and millions of other jobs are associated with their operations. You presume that this all means nothing, and instead would prefer the economic and social costs of hundreds of thousands of unemployed people.

Huh? Can you argue about anything other than mundane semantics? Is it really confusing to anyone here that I meant I am opposed to the government giving over billions in aid. Did anybody miss that?

Your error. I was only noting it.

So what if you are opposed to the government giving money as aid? That "aid" will have to be returned to the government at some point. You'd clearly just prefer that absolutely nothing be done. The trouble is that you just can't quite comprehend that letting one or more of these companies fail will have a significant cost anyway. You refuse to acknowledge that fact. It's much better to keep people employed than to allow hundreds of thousands to lose good paying jobs and to see a significant portion of the automobile manufacturing sector continue to shift off the continent.

Umm, yes. The Big 3 are on the verge of insolvency. They have a negative net income.

Now the little caveats slip in. You don't speak on behalf of every North American car buyer. It's better that you avoid such a baseless position. There is a big difference between negative income, consumer preference and car sales. You would prefer to avoid these differences

Maybe I can just ask you this: if demand for Big3 cars is strong, why are the companies going bankrupt. Please, if you answer nothing else, answer that.

Reality isn't quite like your simple scenario. Look at the economic situation and the downturn in all purchases - including automobiles. Even Toyota's sales are down. Look at the supports being offered by governments in Europe to some of the car manufacturers there. Look at the withdrawal of some Asian manufacturers from the North American market place. Compare worker wages in one jurisdiction to the next. Compare government support for manufacturers from one continental jurisdiction to the next. Just because you wish for things to be simplistic doe not mean that they are.

Jesus. I am arguing we shouldn't put one in place.

And I'm pointing out to you that any such aid package has not been put into place. Get it? You are arguing about something that does not exist as of yet.

I think the US should have a universal health care system.

But it doesn't, which is a huge cost to American car manufacturers when compared to those in other nations.

Nobody's equity has decreased over the past few months. Sure, home values have plummeted and the stock markets are in the pits, but only a fool would assume that people have lost money.

So economic situations beyond your control are not your fault, but economic situations beyond an automobile manufacturer is their fault? Once the housing market bounces back, you will see an increase in your equity. If you are unemployed and can't pay your mortgage, what equity you have will rapidly mean nothing if you lose your home

So, in addition to all the interventions the entire economy enjoys (including unemployed Big3 workers), why do the Big3 deserves aid above and beyond the normal arsenal of welfare programs, which I more or less support.

Unemployed people draw on welfare programs and employed people pay the taxes that support these programs. In the past, the automobile companies have been profitable and have paid taxes. If they fail - as you want them to - the company will not pay taxes. The former employees will pay no taxes. Tax burden will then shift to a smaller pool of employed people. Subsidized retraining and education programs cost money, and that money comes from taxpayers. If you are going to "more or less" support something, at least understand how it works.

Got that right. Now use you're (correct) logic there, and sub in "GM" for "you" and it will be just as true.

No. I support unemployment insurance, welfare, supported retraining and education initiatives. I also support the idea of maintaining employment. Automobile manufacturers have been profitable in the past, they can be so again. I think considerable restructuring is required. That's all quite different from your position of letting the jobs and an entire manufacturing sector vanish - which is what you are advocating here.

 

[Admiral Beez]

This all makes me wonder how the economy of Ontario would have developed if we didn't sign the Auto Pact of the 1960s and didn't build any large auto plants. What would Ontario's blue collar folks be building today?

 

[Hipster Duck]

An excellent article by David Brooks in the New York Times.

Bailout to Nowhere
By DAVID BROOKS

Published: November 14, 2008

Not so long ago, corporate giants with names like PanAm, ITT and Montgomery Ward roamed the earth. They faded and were replaced by new companies with names like Microsoft, Southwest Airlines and Target. The U.S. became famous for this pattern of decay and new growth. Over time, American government built a bigger safety net so workers could survive the vicissitudes of this creative destruction — with unemployment insurance and soon, one hopes, health care security. But the government has generally not interfered in the dynamic process itself, which is the source of the country’s prosperity.

But this, apparently, is about to change. Democrats from Barack Obama to Nancy Pelosi want to grant immortality to General Motors, Chrysler and Ford. They have decided to follow an earlier $25 billion loan with a $50 billion bailout, which would inevitably be followed by more billions later, because if these companies are not permitted to go bankrupt now, they never will be.

This is a different sort of endeavor than the $750 billion bailout of Wall Street. That money was used to save the financial system itself. It was used to save the capital markets on which the process of creative destruction depends.

Granting immortality to Detroit’s Big Three does not enhance creative destruction. It retards it. It crosses a line, a bright line. It is not about saving a system; there will still be cars made and sold in America. It is about saving politically powerful corporations. A Detroit bailout would set a precedent for every single politically connected corporation in America. There already is a long line of lobbyists bidding for federal money. If Detroit gets money, then everyone would have a case. After all, are the employees of Circuit City or the newspaper industry inferior to the employees of Chrysler?

It is all a reminder that the biggest threat to a healthy economy is not the socialists of campaign lore. It’s C.E.O.’s. It’s politically powerful crony capitalists who use their influence to create a stagnant corporate welfare state.

If ever the market has rendered a just verdict, it is the one rendered on G.M. and Chrysler. These companies are not innocent victims of this crisis. To read the expert literature on these companies is to read a long litany of miscalculation. Some experts mention the management blunders, some the union contracts and the legacy costs, some the years of poor car design and some the entrenched corporate cultures.

There seems to be no one who believes the companies are viable without radical change. A federal cash infusion will not infuse wisdom into management. It will not reduce labor costs. It will not attract talented new employees. As Megan McArdle of The Atlantic wittily put it, “Working for the Big Three magically combines vast corporate bureaucracy and job insecurity in one completely unattractive package.â€

In short, a bailout will not solve anything — just postpone things. If this goes through, Big Three executives will make decisions knowing that whatever happens, Uncle Sam will bail them out — just like Fannie Mae and Freddie Mac. In the meantime, capital that could have gone to successful companies and programs will be directed toward companies with a history of using it badly.

The second part of Obama’s plan is the creation of an auto czar with vague duties. Other smart people have called for such a czar to reorganize the companies and force the companies to fully embrace green technology and other good things.

That would be great, but if Obama was such a fervent believer in the Chinese model of all-powerful technocrats, he should have mentioned it during the campaign. Are we really to believe there exists a czar omniscient, omnipotent and beneficent enough to know how to fix the Big Three? Who is this deity? Are we to believe that political influence will miraculously disappear, that the czar would have absolute power over unions, management, Congress and the White House? Please.

This is an excruciatingly hard call. A case could be made for keeping the Big Three afloat as a jobs program until the economy gets better and then letting them go bankrupt. But the most persuasive experts argue that bankruptcy is the least horrible option. Airline, steel and retail companies have gone through bankruptcy proceedings and adjusted. It would be a less politically tainted process. Government could use that $50 billion — and more — to help the workers who are going to be displaced no matter what.

But the larger principle is over the nature of America’s political system. Is this country going to slide into progressive corporatism, a merger of corporate and federal power that will inevitably stifle competition, empower corporate and federal bureaucrats and protect entrenched interests? Or is the U.S. going to stick with its historic model: Helping workers weather the storms of a dynamic economy, but preserving the dynamism that is the core of the country’s success.

 

[Whoaccio]

(I am also getting annoyed by quotes, I am converting the last post to more conventional formating)

As far as I have been able to discern, Hydrogen's main arguments have been centered around the Big3's large employment and the necessity of government intervention to prevent large scale unemployment which would, presumably, results from a bankruptcy of one or all of the Big3. This view owes nothing to practicality and rationality and more to a misplaced idealism in both the ability of governments to enact beneficial changes in the economy as well as the underlying importance of the Big3 to the North American economy. The market has, quite loudly, spoken about the Big3. Revenues are down, stock price is in the floor, cash reserves are dwindling. Without exaggerating, there is not one marker that has improved for the Big3 over the past few years. The notion that this isn't the Big3's fault (because of a larger slow down in the economy) is also inherently flawed. Companies have a responsibility to plan for "rainy days" and make it through market upsets without relying on government aid, as the majority of the world's firms will now have to do. Indeed, even during the last boom the Big3 lost market share and were circling insolvency, so its hardly as if this problem came out of nowhere.

It has not been explained to me, or anyone else, how a government bailout package will address the underlying issues of the Big3. Entire books have been dedicated to chronicling all of the problems with GM. Generally, the most common flaws cited are; poor product design, incompetent management & overly powerful unions. A bailout will address none of these problems. It might only make them worse. Tying bailout packages to covenants requiring the Big3 to make "green" or "efficient" cars is a bad idea. At best we will end up with a North American Lada or Yugo. At worst, we will end up with the Big3 focusing on areas it otherwise wouldn't simply to satisfy bailout requirements and facing the same problem within short order. Appointing a car "czar" is an unbelievable poor idea. Nobody wants politicians designing their cars. Nobody. And how would a bailout immunize the Big3 against incompetent management? The entire premise of the market is that poor decisions are punished while good decisions are rewarded. Handing over billions to Cerberus or GM wont result in better management, if anything it will simply give incentives for current management to stay on and take the free money. Executive salary caps, likewise, would do little to attract new talent. The unions will almost surely see a bailout as a convenient opportunity to argue for superior wages or some kind of tariff against foreign cars. In any case, the result will be to extort the consumer to benefit a small group of unions employees. I highly doubt the new Democratic Adm. under Obama will feel compelled to tie bailout clauses to anything like wage concessions, given one of his prime success' in the last campaign was Michigan. In all cases, the fundamental problems of the US auto sector (which have been visible since well before the current turbulence) will remain unchanged or quite possibly worse.

Nor has it been explained to me in any detail how a bailout will improve society and the overall economy. Simply saying that GM employs 200k people, and hence is an invaluable component of the economy is incredibly wrong. GM, Ford and Chrysler are just companies, like dozens of other companies that have gone bankrupt. We still have airlines and oil companies, despite several bankruptcies over the years. First of all, in both the US & Canadian cases, any potential bailout will be backed not by the government or some kind of nebulous pool of money, but quite clearly through the successful sectors of the economy. If you take "X" billion dollars from one part of the economy that makes profits and then transfer it to another part of the economy that doesn't, the overall economy will deteriorate. It is that simple. Demand for Big3 cars will deteriorate as disposable incomes fall and taxes rise to finance the bailout. Big3 workers will face poorer non-auto employment prospects as other sectors of the economy are squeezed to pay for any such bailout. It would all be tantamount to a massive transfer of wealth from ordinary tax payers to the management of the Big3 as well as those union members with the best connections or seniority who avoid being laid off. The root causes of this problem will be any bailouts biggest beneficiary. It is completely perverse.

It is completely unfair to the 90% of North Americans who have nothing to do with the autosector. Nobody has proposed bailing out Circuit City, nobody has proposed bailing out Nortel, nobody would ever propose bailing out something like Walmart. There is no justifiable reason to give auto workers an artificial amount of job security, and even less reason to finance this job security with taxes collected from people earning half as much as a typical auto worker. The perverseness of this situation is really quite mind boggling. It is a weirder kind of socialism where the working class's income are redistributed to the industrial bourgeoisie.

 

[Admiral Beez]

Am I the only one that is getting tired of these argumentative posts filled with reams upon reams of quotes from past posts?

I'd love to see the quote function on UT disabled for just a week to see what would happen. I think by week's end we would have folks, I hope, discussing the merits of each other's complete posts, instead of yanking a phrase or sentence or two out of a larger post only to beat that particular phase or sentence to death.

Mods, what do you say? Can we kill the quote function for a week? It might make for an interesting study of human behaviour.

 

[Glen]

I one up your David Brooks by one John Kemp.

LIQUIDITY EVERYWHERE BUT MAIN STREET

The Fed has grown its balance sheet from $884 billion to $2.055 trillion in the space of two months and extended almost $1 trillion in additional support to the banking system through the various emergency lending programs enacted or expanded over the last year.

But precious little of this additional liquidity is finding its way through to households and corporate borrowers. In fact, most of it is now sloshing around the banking system like so much excess ballast.

Banks have increased their reserve holdings on deposit with the Fed from $8 billion to $494 billion. This is $488 billion more than the Fed estimates they would ordinarily need to hold for payment clearing and prudential purposes.
Increased reserve holdings have absorbed perhaps half of the liquidity placed into the banking system from the Fed. Much of the rest has almost certainly been invested into the mountain of Treasury bills the U.S Treasury has been issuing. Only a very small proportion is left for re-lending to the real economy.

It is much safer for the banks to lend surplus funds to the Fed and the Treasury than lend to one another let alone to households and corporations. There is no credit risk. Nor is there any liquidity risk because reserve balances can be accessed on demand, and the Treasury bills have short maturities and can be readily re-discounted.

The Fed has made these perverse incentives worse by agreeing to start paying interest on excess reserves. Previously, the lack of interest payments gave banks an incentive to minimize reserve balances. But now reserves pay interest the net cost is low.

Even low returns on Fed balances start to look attractive when adjusted for the high levels of credit and liquidity risk in extending longer-term credits to other banks and real-sector borrowers.

That is trickle down economics. Banks pissing on people.

As a taxpayer, I would much rather see our government start a national bank and prop up the auto makers rather than follow the same mistakes the US fed made. It would be cheaper than what they have spent so far on 'helping' our banks. It seems we added liquidity to our banks so they can go on acquisition sprees.

 

[Whoaccio]

As a taxpayer, I would much rather see our government start a national bank and prop up the auto makers rather than follow the same mistakes the US fed made. It would be cheaper than what they have spent so far on 'helping' our banks. It seems we added liquidity to our banks so they can go on acquisition sprees.

As an individual, would you buy shares in GM or Ford (or Chrysler, were than an option)? A GM was trading at around 3$ last I looked and Ford is going on 1.85$. How much of you're money would you invest in the companies? If you were CEO of RBC, or whatever bank you want, would you lend money to GM? Fitch Ratings has GM at 8 steps below investment grade, S&P has it at 7 steps below investment grade. Ford is rated well into the junk bonds. I guess the question should be, if nobody wants to invest in or loan money to GM/Ford, why is it a good idea for our governments to do so?

What other sectors of the economy would you apply this to? Should Circuit City qualify for some kind of government loans?

 

[cacruden]

If the US government does a "bailout" (or loans that cannot be repaid - just deferring the problem) - this is what my bailout would be....

Conditions:
- per hour compensation has to be the same or less than Toyota (that means around a 45% cut per employee).
- Options paid to employees based on performance.
- Employee's would be not guaranteed employment - basically - if not needed they would be laid off (severance pay would be limited to 2weeks)
- No strike/contract renegotiation for first 15 years following the bailout.
- CEO has to step aside and allow new blood to come in and run the company
- Union Leader must step down
- Old stock is worth $0.20 per share, New Stock $3.00. Government would buy the new stock at that price per share - same option available to the public. Old Stock holders can buy new stock at $2.80 per share.
- If not acceptable - no deal.

$50 billion is not enough to "rescue" the company. It would have to be higher. Part of the money would go to educational/research organizations (Universities) which would pair up with the company to research manufacturing and design.

 

[Hipster Duck]

Unusually, I find myself in the same camp as conservatives here. Obama made a Faustian bargain with labour unions in rust belt states to help get himself elected and now he'll be stuck supporting an untenable GM bailout and all the precedents it will set. Flaherty was deadpan yesterday in saying straight to the camera that he wouldn't support throwing taxpayer money at a company that has a high likelihood of failing.

 

[Glen]

As an individual, would you buy shares in GM or Ford (or Chrysler, were than an option)? A GM was trading at around 3$ last I looked and Ford is going on 1.85$. How much of you're money would you invest in the companies? If you were CEO of RBC, or whatever bank you want, would you lend money to GM? Fitch Ratings has GM at 8 steps below investment grade, S&P has it at 7 steps below investment grade. Ford is rated well into the junk bonds. I guess the question should be, if nobody wants to invest in or loan money to GM/Ford, why is it a good idea for our governments to do so?

What other sectors of the economy would you apply this to? Should Circuit City qualify for some kind of government loans?

I would rather buy GM at $3, even without hope for government assistance than CIBC without government assistance. With some good products on stream and more coming (thanks to Bob Lutz) and a Chapter 11 clearing, makes GM at $3 look cheap. CIBC or BMO, without help, look(ed) overpriced.

I don't think that they should give them assistance without conditions, but I do think that they are more than salvageable. Unlike banks, auto manufacturers face much greater latencies in effecting changes. New products take 3 to 4 years to develop and ready for production. As I taxpayer, I think that $1 billion in loans (with conditions) to the auto sector is a much more prudent use of resources than this weeks $75 billion purchase of mortgages by the BoC. What are the banks doing with the added room on their balance sheets? I don't suspect we are going to see $75 billion in increased lending.