I found this e-mail in my inbox (actually Spam) this morning. My company has a deal with GM to get discounts on their cars, so I had signed up at one point when I was considering a GM product. To be clear, they do not supply GM, they just buy the cars and use them. Thought others might find it interesting that they would send out mass e-mails to try and drum up support...

Just my opinion- but let them fail.
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Because our futures are linked, I want you to know that General Motors is doing everything possible to deal with the impact the financial crisis is having on the domestic auto industry. Yet despite our successful efforts to restructure, reduce costs and enhance liquidity, we are facing an uphill battle with the current administration and Congress in securing a bridge loan.

That's why we need your help now. Simply put, we need you to join us to let Congress know that a bridge loan to help U.S. automakers also helps strengthen the U.S. economy and preserve millions of American jobs.

Despite what you may be hearing, we are not asking Congress for a bailout but rather a loan that will be repaid.

The consequences of the domestic auto industry collapsing would far exceed the $25 billion loan needed to bridge the current crisis. According to a recent study by the Center for Automotive Research:

• One in 10 American jobs depends on U.S. automakers
• Nearly 3 million jobs are at immediate risk
• U.S. personal income could be reduced by $150 billion
• The tax revenue lost over 3 years would be more than $156 billion

Discussions are now underway in Washington, D.C., concerning loans to support U.S. carmakers. I am asking you to support this vital effort by contacting your representatives.

Please take a few minutes to call your representatives by dialing 1-866-471-5332. Just state your name and address, and your message will reach your legislators. You can review a script that will help you state your support at gmfactsandfiction.com. Under the "Mobilize Now" section, click on "I'm a Supplier." If you would rather e-mail your representatives, use the link "I'm a Concerned American."

Please share this information with friends and family using the link on the site.

Thank you for helping keep our economy viable.

Sincerely,

Troy Clarke

Do not take this as an absolute fact, but I read somewhere (I cannot remember exactly) that part of the 3 million jobs at immediate risk were auto repair jobs. Something to the tune of 3/4 of a million jobs.

I mean, really? Why don't they include all the jobs at gas stations too. Its obvious that if the big three go under that we will have no use for cars anymore. Better yet, include all the gas truck drivers, the twinke delivery drivers (who buys them anywhere but a gas station?), and the people who install the condom vending machines in the bathrooms.

This is fear mongering at its worst, and to insist that this is not a bailout is insulting to my intelligence.

Chapter 11 would definitely help them shed those stupid union contracts and obligations to support outrageous benefit programs such as those for retirees. Argument that they'd have trouble finding cash after BK is bogus. Give them a bridge loan once they've cleaned their business of the leeches and conditioned and believable sustainability (unlike the fairy tales from previous years).

Then in 2010, get out of BK protection and resume business on much healthier ground, well assuming they don't forget which decisions got them in trouble in the first place (and have sacked the clueless CEOs).

tazzy531 said:What is the problem with going into Chapter 11 bankruptcy? If it's so bad, why do we even have bankruptcy laws? Everyone should ask for a bailout from the government.They may still do it but Ford/GM's difficulties have a lot to do with their labor costs, which are difficult to solve in a bankruptcy context. In simple terms, bankruptcy reorganizations are often undertaken by retailers who need to get rid of unwanted leases because lease breakage costs are far lower in a bankruptcy context. The same is true for airlines or other types of merchants whose financial difficulties are related to executory contracts (long term supplier contracts, long term leases, unsecured loans, etc...), which can be re-negotiated or even terminated far more cheaply in the bankruptcy context.

The bankruptcy code does also allow you to terminate and re-negotiate union contracts, which is one of the big things that makes life difficult for GM/Ford, but in practice it's not so easy. Unions would threaten to organize massive strikes that could cripple these companies and both political and public pressure on these companies is to continue employing all the workers, paying pensions and healthcare benefits to the retirees, etc... So, the management of these companies can't just run them the way that other types of companies with fewer implications for so many US workers are run -- it's difficult for Ford/GM to make a practical case for declaring bankruptcy, terminating union contracts, firing hundreds of thousands of people and letting cheaper overseas labor lower their production costs, greatly reducing or eliminating healthcare and pension benefits for retirees, etc...

To be sure, there are other problems that Ford/GM face that are also next to impossible to address through the bankruptcy filing. Namely, they suffer an image problem since many of us still equate the much more reliable Ford/GM cars of the present with the aweful cars they used to make in the past. Many of us also think that Ford/GM can build decent big and heavy SUV's and trucks (the sales of which have been aweful lately due to the poor economy and high energy prices) but can't create an attractive and aesthetically appealing car. Hence, their sales have been lagging, which have been exacerbated by the overall weakness in economy, which always causes a decline in consumption of "optional" goods such as automobiles (Honda and Toyota have not been immune from this decline as well).

If the automakers were to file for Chapter 11, their car sales would plunge even worse than they already have. Remember that new car sales are based in large part on the buyers' expectation that the manufacturers will stand behind the warranties and that the resale values of their cars will be reasonable. With car manufacturers in bankruptcy, those expectations will be severely undermined, which will translate into far fewer car sales, which will further exacerbate their problems.

So, as you can see from the above, Ford/GM's problems can't be easily fixed by reorganizing them the way that other types of companies sometimes can.

P.S.
By the way, bankruptcy reorganizations can be enormously expensive. I was previously involved in a reorganization of a well known company in which just my firm's legal fees in connection with our representation of the lead lender in DIP financing exceeded $1MM (plus another $1MM in legal fees to structure exit financing). In another reorganization that I was involved in we once had a legal bill of about $700,000 after just ONE MONTH. In 2006 United Airlines paid about $100MM to its law firm, which was both its lead bankruptcy counsel and the aircraft-lease counsel. Delta paid about $45MM to its lead counsel and another $25MM to its aircraft-lease counsel. The primary counsel for the Delta Pilots’ Pension Preservation Organization billed over $1MM.

tazzy531 said:wilesmt said:Do not take this as an absolute fact, but I read somewhere (I cannot remember exactly) that part of the 3 million jobs at immediate risk were auto repair jobs. Something to the tune of 3/4 of a million jobs.

I mean, really? Why don't they include all the jobs at gas stations too. Its obvious that if the big three go under that we will have no use for cars anymore. Better yet, include all the gas truck drives, the twinke delivery drivers (who buys them anywhere but a gas station?), and the people who install the condom vending machines in the bathrooms.

This is fear mongoling at its worst, and to insist that this is not a bailout is insulting to my intelligence.
On NPR, they had someone from the auto industry on talking about it not just being the jobs at GM plants, but the car dealership and the diner across the street from the car dealership.

Everyone knows that owning a Toyota makes you less likely to eat at a diner.

While Chapter 11 may not be a perfect solution or an easy solution, a bridge loan to a company with a capital structure that is unable to support itself seems to make even less sense.

wilesmt said:This is fear mongoling at its worst, and to insist that this is not a bailout is insulting to my intelligence.ROFL! I don't think I could have made that one up if I tried.

wilesmt said:Do not take this as an absolute fact, but I read somewhere (I cannot remember exactly) that part of the 3 million jobs at immediate risk were auto repair jobs. Something to the tune of 3/4 of a million jobs.
It's the Broken Window Fallacy.

The 1 in 10 American Jobs stat also include car washers. Meaningless stat.

Dealguy123 said:Good points Geo.. but like many folks have said.. frankly I think bankruptcy is the ONLY way to "fix" the company. No question it won't be easy, but I don't see how they survive in their current form. It's simply inconceivable that this loan will allow the company to be very competitive with the foreign car manufacturers. This recession will last years.. and they won't be able to weather it with a mere $25B.

No question legal fees are quite high.. but it's still not that large in comparison to how much the companies are losing. These companies are losing billions, and we're talking about millions for legal costs. Not that significant imo.

While there are definetly warranty concerns, I'm sure there's SOME way to address this. Again, what's the real alternative..? We give them $25B, and they go bankrupt next yr vs. this year? Let's get it over with and right the ship.The only portion of your post I don't necessarily agree with is your expectation that this recession will last years. On average US recessions last approximately 9 months (8-16 months being the range; last time it was a 16 month long recession was in '81-'82) and it would not surprise many of us if we are already 3-4 months into it. This recession certainly doesn't have to conform to the average timelines, so I guess we'll see. I do agree with the rest of your post though.

P.S.
A Nov 17, 2008 report from the Federal Reserve Bank of Philadelphia based on the survey of 51 forecasters, suggested that the recession started in April 2008 and will last 14 months.