Wednesday, May 6, 2009

Bailing bailing

Kiss it goodbye. 
$7.2 billion dollars in taxpayer money for the Chrysler bailout~ gone. 

CNN reports:

"This revelation was buried within Chrysler's bankruptcy filings last week and confirmed by the Obama administration Tuesday. The filings included a list of business assumptions from one of the company's key financial advisors in the bankruptcy case.

Some of the main assumptions listed by Robert Manzo of Capstone Advisory Group were that the Treasury would forgive a $4 billion bridge loan given to Chrysler in the closing days of the Bush administration, a $300 million fee on that loan, and the $3.2 billion in financing approved last week by the Obama administration to fund Chrysler's operations during bankruptcy.

"The reality now is that the face value [of the $4 billion bridge loan] will be written off in the bankruptcy process," said the official, who added that the 8% equity stake that Treasury will be receiving as part of the company's reorganization is meant to compensate taxpayers for the lost money.

"While we do not expect a recovery of these funds, we are comfortable that in the totality of the arrangement, the Treasury and the American taxpayer are being fairly compensated," said the official.

The company filed for bankruptcy Thursday as part of a deal with the federal government, unions, some lenders and Italian automaker Fiat to keep the company from being shut down.

The Obama administration official said that other money being made available to Chrysler, such as the $4.7 billion that will go to the company as it exits bankruptcy, will be a loan that the government expects to be paid back. In addition, that loan will be secured by company assets, unlike the previous loans to Chrysler.

According to the filing, the company's financial advisor also foresees the need for an additional $1.5 billion loan from the Treasury Department by June 30, 2010.

Lori McTavish, a spokeswoman for Chrysler, said some of the assumptions made by the company have changed since its bankruptcy filing on April 30. But she could not say specifically if the company still hoped for the additional federal loan in 2010.

"The content of the document needs to speak for itself. We are simply not in a position to comment," she said."

Major banks and hedge funds that loaned Chrysler $6.9 billion were offered only $2.25 billion to settle those loans by Treasury. While major banks accepted the offer, hedge funds rejected it, forcing the company into bankruptcy.

He said the fact that Chrysler isn't paying what is owed should be a warning that the $15.4 billion loaned to General Motors by Treasury since December, as well as any bankruptcy financing it might need, is also at risk.

"Certainly there are red flags," he said." 

Certainly there ARE red flags. As for that Chrysler spokeswoman who is "not in a position to comment", well of course you are not in a position to comment. What are you going to say really? Suckers!  

Unlike the notorious bank robbers like Baby Face Nelson, John Dillinger, or the early twentieth century Willie Sutton, when asked why he robbed banks, he was famously reported as answering "Because that's where the money is."  Now in the 21st century, any one wanting to make a heist of large sums of money knows better than to go to a bank-- they are failing-- they go the the Government- they hit the Federal Reserve. 

Although they arrived in private jets, dressed in their fancy suits & ties, they came to ask for money. The people's money- and lots of it. Although there was much grandstanding, and the good argument that not only would the demise of the big three take down so many other businesses - dealers, mechanics, suppliers, etc, but the country would lose an entire industry. 

How powerful could a superpower be, if it could not even make it's own vehicles?

All good questions, but none of the fundamental questions were being asked, such as:

• What caused US carmakers to fail?

~ They totally missed the boat on Hybrids & fuel efficient vehicles at the time fuel soared to an all time high. 

• Why are the foreign car makers more successful?

~ They made a better product. Consumer reports, and resale values were generally better.  The vehicles had a much longer engine life. 

They made decent cars at affordable prices. 

• Even to this day, the new car write up section in the Saturday paper featured a Dodge truck that gets 13 miles to the gallon. 13 miles to the gallon in the 21st century? 

~ My 15 year old  Dodge vehicle gets 18 miles to the gallon. They are going backwards in terms of fuel efficiency. 

Dave Letterman discusses electric cars with Elon Musk, CEO of the Tesla electric car manufacturer.
Dave does not mice words...when he says GM's VOLT--getting 40 miles to the charge electric car as "crap".

The generation 2 EV1 electric cars GM made in 1996 could get 75 to 150 miles to the full overnight charge.
But the new Volt will get 40 mpg. & cost $35,000 or more.

These two US automakers are not so much victims of the economy, but more victims of going backwards.
Victims of not keeping up. Victims of thir own lack of vision to change with the times.
In GM's case, they failed to respond to consumer feedback. Even ex CEO Rick Wagoner said if he could turn back time, they would never have gotten rid of the EV1 electric vehicle.

He's right. If GM had a decent, affordable electric car when gas prices were at $4.50 per gallon, they would have had a hard time keeping those electric cars in stock. Kind of like the Toyota Prius.

So here are my recommended solutions:

No more bailout money.
Give generous rebates for people buying electric vehicles (like they did when the Hybrids first came out).
Let consumers get a break for buying "green"cars.
Help save the planet from toxic emissions, and let the company make their money with volume sales.
Reward the company that comes up with the most efficient & affordable vehicles with more generous rebates and tax break incentives.

Since General Motors does not seem to get it either, I'd be willing to say it is only a matter of time before GM is filing for bankruptcy too. Let's stop throwing billions in the garbage if a forced reorganization is what is really needed.

This should be a wake up call for Ford as well. Maybe they should team up with Tesla & literally, get electric cars on the road, en masse. Functional cars that get at least 100 miles to the charge.
The government needs to also make a change to new building codes that require an electrical hook up in garages, for future electric vehicles- as well as solar panels.

Let the automakers who are in tune with meeting consumer demand, and making not only reasonably priced vehicles, but of good quality. win.


eProf2 said...

Great post, Fran. When I read what Fiat wants to do in Europe with the money they got through the backdoor by joining in with Chrysler last weekend I came to the same conclusion: Thanks, sucker, for your money. Taxpayer money down the drain and into the pockets of those in the know. And, today, the banks want more taxpayer money, too. GM is next in line! Keep printing those dollars, America, someone will line up to take it if you're willing to give it away. Fools!

Fran said...

Somebody really should stop this money madness!

enigma4ever said...

I wanta Tesla...sooooo badly...I wish 6-6 would fit in one....damn...

well , until I hit lotto I have lots of time to decide....


Doncha love dave....