Anyone who has followed the decline of General Motors and Chrysler since the two companies received a combined $17-plus billion in bailout money in December won't be surprised at the news that they need more -- or at the government's convenient weekend timing of the news.
The financial cliff on which Chrysler stands was a given by the time its first bailout installment arrived. But, as shown in early March in a post by yours truly at BizzyBlog (mostly mirrored at NewsBusters), GM's sales non-performance has deteriorated to the point where it has become worse than Chrysler's during the two months following the George W. Bush-decided, Barack Obama-supported bailout decision:
January's and February's disastrous sales results have probably made GM's situation at least as perilous as that of its smaller competitor.
On Saturday (naturally), we learned via Bloomberg that GM and Chrysler "may" need more money ("may" apparently now means "as sure as the sun rises in the east") -- lots more:
GM, Chrysler May Need More Aid Than Requested, Rattner Says
General Motors Corp. and Chrysler LLC may need "considerably" more than the $21.6 billion in aid they requested, which was based on optimistic recovery plans, said Steven Rattner, the Treasury’s chief auto adviser.
President Barack Obama’s auto task force is assessing proposals from GM and Chrysler to decide whether to recommend U.S. assistance or tip the carmakers into bankruptcy. Rattner made the comments yesterday on Bloomberg Television’s "Political Capital with Al Hunt," airing this weekend.
The task force will give its "sense of direction" by March 31, Rattner said. The companies have received $17.4 billion since December and asked for the additional $21.6 billion in aid last month, an amount that depends on achieving turnaround plans that are "somewhat ambitious," Rattner said.
“It could be considerably higher, I won’t deny that,” Rattner said, when asked whether U.S. aid sought could rise. "Like all management teams they tend to take a reasonably, slightly perhaps, optimistic, view of their business. So it could be more, I can’t rule that out."
Greg Martin, a GM spokesman, said yesterday its restructuring plan has "a conservative outlook." The company will continue working with the task force "and we’ll keep them informed of our liquidity needs," Martin said in an e-mail.
What is particularly galling is that news organizations like Bloomberg that should and probably do know better are letting the companies get away with saying they were overoptimistic before. GM pointedly claimed the exact opposite twice in the past four months:
- In early December, in its aid request to Congress, GM said that it would "only" need $18 billion to "weather the current economic stresses, and .... position the new GM to be profitable."
- On February 18, GM, as paraphrased by the New York Times, "vowed ..... that its latest request for federal aid would be the last it would need to carry it through the biggest reorganization in its history."
But now we're supposed to believe that the companies' forecasters have finally gotten it right.
There's a high probability that they are still wrong. GM, and the government, badly underestimated the bailout's impact on consumers' willingness to buy its vehicles, either for ideological reasons (opposed to bailouts), practical ones (concerned about warranty and repair issues), or both. The company's request for even more money than anticipated are likely to worsen that perception problem.
Here's a former pet phrase notably missing from news coverage of both GM and Chrysler: corporate welfare. The low-rate loans involved, especially if they are never repaid (which appears more and more likely), dwarf the amounts those who have complained about "corporate welfare" in the past could ever hope to cite.
Mark Zandi of Moody's is looking smarter with each passing day. In early December, he "suggested during one of the auto bailout hearings on Capitol Hill that the Big Three could need between $75 billion to $125 billion over the next two years if they are to survive." The additional requests by the bailed-out will push the current number to over $40 billion ($17.4 + $21.6 plus "who knows?") -- well past halfway to the Zandi's low end of $75 billion. Even that doesn't take into account the $5 billion bailout of suppliers that Treasury whipped through last week, and previous bailout billions provided to GMAC and Chrysler Credit.
Also missing from news coverage: How candidate, president-elect, and now President Obama's relentless pessimism, his promises to starve the nation of fossil-fuel energy, and his pledges to raise taxes in the teeth of an economic downturn convinced consumers, perhaps in the millions, to postpone major-ticket purchases, particularly of vehicles.
The consequences of these positions, echoed in earnest by congressional leaders Nancy Pelosi and Harry Reid since June of last year, are quite ironic, given that the Democratic Party is supposedly best buds with Big Labor. United Auto Workers union members have borne the brunt of an auto-industry downturn that Obama, Pelosi, and Reid helped to make much worse than it should have been. But the well-being of the rank and file was apparently unimportant compared to scoring electoral and then vindictive points. This is yet another crucial connection the establishment media probably won't make any time soon.
Cross-posted at BizzyBlog.com.
—Tom Blumer is president of a training and development company in Mason, Ohio, and is a contributing editor to NewsBusters
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GM loses money on every
March 22, 2009 - 21:34 ET by MidAmericaGM loses money on every car it sells so maybe if they just shut the doors they wouldn't need as much bailout money. You know, like the government programs that pay farmers not to raise crops it may be cheaper to pay GM not to make cars.
GM plants
March 23, 2009 - 04:58 ET by AgnosticThat is not entirely true in that GM only loses money on every car it makes in the US; it's overseas plants actually make money on their cars. This and poor management decisions is the reason that they have been shifting the focus of the corporation overseas for at least seven years now. Keeping this in mind it is a good possibility that the American Taxpayers have been paying the bills for GM to improve thier operations overseas. Our Congress would not be so stupid as to not put stipulations that money not be shifted oversears due to receiving bailout money?
A person may be won over with logic and reason but the masses must be bought with spectacle and platitudes. - 2008 Elections
→ The Snivelling Two
March 22, 2009 - 23:21 ET by Cool ArrowUnforgiveable these two automakers also asked for, and received, bank bailout money for their financial arms.
Foregone conclusion we'll have to support the Union throughout their days.
I ain't buyin' no GM or Chrysler, although the new Challenger is gorgeous.
LYDSEXICS UNTIE!
Cut GM, Chrysler Loose
March 23, 2009 - 03:10 ET by flyingmonkeyI find it curious that Ford, who hasn't taken any bailout money, has reached parity with it's foreign competitors, salary and benefits wise, while GM and Chrysler have taken bailout money and have made little head-way with their union workers. Could there be no sense of urgency with those UAW members whose salaries are being paid by the taxpayers? I think it's time the government cut GM and Chrysler loose and let them sink or swim on their own.
Looks like we're getting closer...
March 23, 2009 - 07:37 ET by JohnMcGrew...to some government owned & run auto companies. After that bookkeeping change, orders will come down instructing them what kind of cars will be built. After that, laws will be passed with the purpose of eliminating the competition. (Hear that Ford? That will be the price of NOT taking the bailout!) Within a few years, we'll be driving Al Gore approved low-quality death traps. The former Soviets will laugh at us, remembering the Trabant.
The Trabbie was not a Soviet
March 23, 2009 - 07:54 ET by NL207The Trabbie was not a Soviet product. It was the work of the German Democratic Republic, a brutal regime if there ever was one.
I stand corrected
March 23, 2009 - 08:57 ET by JohnMcGrewIt was imported to the Soviet union, as an alternative to the fine automobiles offered there.
"alternative to the fine
March 23, 2009 - 09:17 ET by NL207"alternative to the fine automobiles offered there"
Like the Lada? Ha! The Lada makes the Yugo look good.
Efficient sub-compacts don't sell...
March 23, 2009 - 08:44 ET by jmtI was reading an article yesterday about how many fuel efficient sub-compacts (is that still a car type?) were just sitting on dealer lots. Apparently there are over 90 days at current sales rates of cars on dealer lots and who knows how many backed up in the distribution chain (see this WSJ article).
The guv'ment believes that small cars are the way to go and damn the evidence to the contrary.
jmt
http://www.jmichaelt.org
Americans do not want them
March 23, 2009 - 09:04 ET by JohnMcGrewIn fact, SUVs were a revolt against the CAFE standards that forced automakers to shrink and lighten passenger cars beyond the threshold that consumers would accept.
Of course, this is why there is such interest by the totalitarians to impose punishing fuel taxes like in Europe. Of course, the reality is that in Europe, they don't like small cars any more than we do. It's just that in most older European cities, you simply cannot drive even a mid-sized car due to narrow streets. The punishing fuel taxes are just a bonus of living in a nanny state.
And if you raise fuel taxes
March 23, 2009 - 09:13 ET by jmtAnd if you raise fuel taxes enough to coerce the behavior you want, you reduce your revenue stream (as there is some delay between implementation of punitive taxes and consumer reaction). The delay is just long enough for guv'ment to get addicted to the revenue stream and so have to raise taxes again to keep the money flow coming (a.k.a. "The Cocaine Effect" - you need bigger hits to get the same response).
This is already happening to tobacco.
jmt
http://www.jmichaelt.org