Lurking in the background is GMAC LLC in which the auto maker has a half interest.

Its financials as of Sept 30, 2008 are here http://www.sec.gov/Archives/edgar/data/40729/000095015208009024/g46784e10vq.htm

It’s a $211 billion balance sheet, supported by $9 billion of equity. As the firm’s funding runs off, either one of two things will happen:

• New funding will be found costing less than income from the car loans, mortgages and leases; or

• GMAC will flounder into reorganization itself.

Included here are
$43 billion of vehicle loans
$30 billion of residential mortgages
$26 billion of dealer financing.

Also,
$13 billion of debt is due within one year.

$72 billion of the long term debt of $160 billion is unsecured.

Did I follow this correctly? Is the UAW saying that they need $25B for medical coverage for 780K employees and their dependents? That comes out to something like $32K per retiree. If they have dependents other than maybe a spouse, why can’t they pay the full amount for coverage for the others? Is that supposed to be for one year? Does it cost $32K/year for medical coverage over and above what employee contribution there may be?

Kowalski talked about cost of doing it vs not. That’s valid to look at, but I know I’ve become jaded over always hearing this “investment” business used to describe any sort of welfare black hole. For example Head Start was going to reduce crime, improve scores, blah blah blah, and now we’ve got a $7B/year black hole that is soon to grow exponentially with nothing to show for it once kids are in school a couple of years. You could find dozens of “investments” that end up being just a permanent waste of taxpayer money when all is said and done.

Is either of these $25B pieces being called a loan vs a gift? At least with the housing bailout there is some chance of repayment if we wait long enough. Any money that in effect goes to the UAW would seem to be gone forever the instant the check is cut, and the prospects are so bleak for GM it’s hard to see them ever repaying anything either, even if their intention is supposedly to do so.

Lastly, where does the bailout business end? USPS is going to lay off 40K people, DHL is shutting down ops, etc. Why not bail everyone out? Perhaps newspapers wouldn’t need to do layoffs – let’s bail them out too.

Maybe that making GM conform to some arbitrary ‘environmental’ standard is a part of what put GM in the position they’re in, in the first place (i.e. CAFE standards)?

GM’s problems aren’t ones of environmental standards, although they may not have helped matters. Rather, their problems are from not recognizing the potential for demand shifts in response to higher fuel prices; not diversifying their offerings enough to accommodate such potential shifts; chasing after fad vehicle designs rather than investing in back-to-basics vehicles that consistently sell well, if at lower volumes, but across a wider range of models; and overpaying workers due to union negotiations and mistrust borne of conflicts thirty and more years ago. Environmental standards don’t help, but notice it’s only the American industry that’s in such bad shape; the foreign companies aren’t in danger of going under. The depth of GM’s problems (likewise for the others in the once-Big Three) is the result of its own actions.

The game is and has been who’ll get the H&W trusts and attendent liability. UAW wants the power of having all that money, but they really don’t want the liability. Plus, Rs always underestimate the revenge factor in D politics. The joint trust is a creature of the Taft-Hartley Amendments to the National Labor Relations Act done by the Republican controlled 1948 Congress. Organized labor has never forgotten nor forgiven the Taft-Hartley Amendments. Doing away with Taft-Hartley trusts would be a monumental victory for them.

Nothing would be more destructive to the planet than our immediate cessation of the use of fossil fuels. If there was an economically viable alternate, it would already be here.

If there were an economically viable alternative to fossil fuels, it almost definitely would not already be here.

The cost of entry to the auto fuel market is colossal, and the first entrant bears all the risk without any guarantee on cornering the upside. On the other hand, it’s pretty easy for me to sell an alternative fuel if (a) the distribution network is already up and running, and (b) everyone’s car is already compatible.

I think proponents of alternative energy believe that network effects and economies of scale will be on their side, and that we’re basically facing a collective action problem in deciding who moves first. Forcing GM to move first could solve this problem.

The reason this is even discussed is that the only way GWB could get a tax cut was to promise that it would expire at a certain date. That date is arriving soon, but if he had agreed to during his term, they could have moved the date to any date in history on a whim.

A congress can really only permanently fix tax rates for the term they are in. You can’t obligate future voters to any tax rate or tax plan.

That way it becomes a pure Democrat thing…

Of course the government shouldn’t bail out any companies — but it also seems to me sensible to do the thing that’s most likely to do serious harm. The government shouldn’t spend taxpayers’ money on foreign wars either — but if it has to to guard it’s citizen than that’s surely the lesser evil.

That is a strategy to preserve the status quo. It does not actually address the problem. To use your metaphor of foreign wars: If the government is only interested in guarding its citizens, then it will embark on a long, never-ending commitment of watchfulness. This is what the bail out will do. If the government is interested in eliminating the threat, then it will attack the root of the threat and destroy it. This is what would be letting the market forces sort out the winners and losers.

Bailing out these industries and institutions fixes nothing and solves nothing. It merely kicks the problem 15 years down the road. It does not strengthen the entity; it enfeebles it. It adds great uncertainty to the rest of the markets, as other players line up at the door for their handouts, and investors lose sight of the industry strengths and weaknesses. This type of distortion generates far more havoc than it forestalls.

The government does not belong in that game. Its duties and obligations are different; its priorities are different. It is not obliged toward profitability or a healthy bottom line – nor should it be. That is why it has no business in business. Let the market work in its sphere without the government distortions.

The only reasons this time is different are
1) the “B” at the beginning of “Billion”
2) The bailout we just authorized
3) we finally see that there is no saving these companies. They WILL die. It’s only a question of when and how expensive.

Potential grows for lame-duck session of Congress

House Speaker Nancy Pelosi, in a statement released Tuesday afternoon, called on key congressional leaders to work with the Bush administration “to craft legislation to provide emergency and limited financial assistance to the automobile industry under the Emergency Economic Stabilization Act.”

According to spokesman Brendan Daly, Pelosi believes that the administration can assist the auto industry under its existing authority, but “in case [the administration doesn't], it needs to be done one way or another.”

In her statement, Pelosi directed House Financial Services Committee Chairman Barney Frank to draft legislation extending the Treasury Department’s authority to use bailout funds for the auto companies.

So, if the only upside is counting on the ChiComs to pay us money to be bailed out, I think I have to go with ‘Let it burn.’ I’ll grant the suggestion of having Bush offer to sign off on it if they’ll extend the tax breaks for 3-5 years is tempting. But the counterpoints against it are correct, no matter what he does Bush will only get blame for what goes wrong while all credit will be granted to the Marxist. It’s time for them to grow up and make their own decisions, then live or die by them.

That you and I and Fancis are diametrically opposed to their vision (at least in this instance) doesn’t affect whether or not it is their vision. And one of the few points of commonality that our diverse viewpoints have is that winning elections has consequences.

Which of course means they in fact are bancrupt: their liabilities are higher than their assets.

Actually I am very surprised this is even possible (without being in bancruptcy/chapter 11/whatever). Shocking!

Perhaps I should look into US bancruptcy laws and why this is even possible .. on the other hand.. perhaps not..

I love it.

If the Bush tax cuts expire, Obama raises taxes even if he takes no action to raise taxes, and raising taxes in a recession is unwise.

If Obama really wants a Big 3 bailout, it’s happening after Jan 20 anyway. If it happens now, Obama gets to share some of the credit or blame with Bush, kind of like voting present.

Bush won’t be running in 2012, so it won’t hurt Obama to share some credit with him. If a Big 3 bailout stinks, it will be to Obama’s benefit if he can blame it on Bush.