RKMBs Forums .::Important::. Politics and Current Events Democrat Leaders Want Automaker Bailout

...which they were apparently able to weather without a bailout.

Again, disproving your point.

...of course, the goal was to bail out the Obama donors in the UAW.

I still don't know what Bush was thinking but it's obvious what Obama's plan is since the only people his plan has helped was the UAW and, possibly, a handful of executive who are getting their golden parachutes

Actually it helps quite a few more people than just those...

...

Industry Fears U.S. May Quit New Car Habit: The New York Times reports that many auto industry experts think that the slump for GM and Chrysler is permanent.

General Motors is trying to prove that it is the little engine that could. But the bankrupt automaker may never fully climb the mountain ahead of it, if Amtrak is any example.

Some analysts say the federal government's effort to prop up the nation's largest auto manufacturer is eerily similar to a 40-year effort to revive the nation's ailing railroad system. Billions of taxpayer dollars later, Amtrak still needs the government to survive -- and critics say General Motors appears to be headed down the same track.

"I see no hope whatsoever for the situation," said Wendell Cox, a policy consultant who sat on the government-appointed Amtrak Reform Council a decade ago and draws parallels to the GM intervention today.

The Obama administration is committing $50 billion to General Motors -- $30 billion on top of the $20 billion it has already invested. Administration officials will not speculate on when taxpayers may see a return on the White House-engineered investment, but they insist that Washington will cut off Detroit after that and will be a "passive" investor.

President Obama said Monday the U.S. government, which now owns 60 percent of GM, wants to prop up the company and then "get out" of the auto business. Under the restructuring plan, the Canadian government will take a 12.5 percent stake, and the United Auto Workers will have a 17.5 percent stake. Bondholders receive 10 percent.

Critics say this looks like Amtrak all over again.

Analysts said the government's hope of creating an efficient mass transit service through a partial nationalization of the rail system was stymied by its inability to get tough on unions and rein in labor costs. The same could hold true, they say, as the Obama administration deals with the UAW.

Amtrak has fielded criticism over the years for being guided by officials with little or no transit experience. Today, Obama's Auto Task Force has a combined experience of zero years in the auto industry.

With Amtrak, the government got too involved in decision-making, leading to inefficiencies in the system that would never be corrected, say analysts. Since its creation in 1970, Amtrak has sucked up $30 billion in taxpayer money, and the money is still flowing. The original aid package from Congress in 1970 was $340 million with an expectation the railroad would make a profit in five years.

The potential parallels are worth being concerned about, critics say.

"I think the $50 billion might as well be kissed goodbye. I would expect that this is just the beginning," Cox, principal at the Wendell Cox Consultancy, said of the GM deal.

"I think the long-term outcome will be the same," said Ronald Utt, a senior research fellow at the conservative Heritage Foundation. "It's unlikely to ever recover the huge investment that's been made in it, and you will then be carrying this forever and ever and ever. (The government has) been carrying Amtrak now for more than 35 years."

Conservatives in Washington treated Monday's announcement with a hefty dose of skepticism. They called for a clearly stated exit strategy and said GM's success is by no means assured.

"I think that President Obama is planning on staying in the automobile industry for quite some time," Rep. Pete Hoesktra, R-Mich., told FOX News Radio.

"Does anyone really believe that politicians and bureaucrats in Washington can successfully steer a multinational corporation to economic viability?" House Minority Leader John Boehner said in a written statement.

Though the rhetorical question might sound like a recycled GOP talking point, the analysts who spoke to FOXNews.com say the fear is justified. The government will have a hard time resisting getting closely involved in GM management, leading to the kind of problems that dogged Amtrak over the decades.

Utt and Cox said parochial, political interests have driven Amtrak to make ineffective decisions -- like maintaining costly, long-distance lines and setting up inefficient routes that detour through low-population areas.

Amtrak has experienced a boost in ridership recently, which its management attributes in part to high gas prices and better service. Though it is still in the red, Amtrak reported a record 28.7 million passengers in fiscal year 2008, marking its sixth straight year of record ridership.

The company notes on its fact sheet that "no country in the world operates a passenger rail system" without public support.

At the same time, Amtrak reported earning $2.45 billion in fiscal year 2008, and racking up $3.38 billion in expenses. Congress last year committed another $13 billion over five years to the rail service, with proponents of the investment saying at the time that the service had been underfunded for too long and this would finally help "rebuild" Amtrak.

It's unclear whether that will happen. And it's unclear whether the Obama administration will be able to exit its budding relationship with GM as quickly and efficiently as it hopes.

Obama on Monday said the government would act as "reluctant shareholders" and has "no interest" in running GM -- though the U.S. federal government will name a majority of board members.

Obama said the proceedings, though painful for all stakeholders, would "mark the end of an old GM and the beginning of a new GM." He held up Chrysler's quick, month-long bankruptcy proceedings as evidence that such a restructuring can be accomplished and that his critics were "wrong."

Rep. John Dingell, D-Mich., issued a statement saying he has "every confidence" GM will emerge at the top of the global automotive sector.

With more plants and dealerships set to close and more jobs expected to be lost as a product of the bankruptcy proceedings, the auto workers also claims it has made sacrifices -- brushing off suggestions that it stands to reap benefits from bankruptcy.

"We gave Citgroup hundreds of billions of dollars and AIG hundreds of billions of dollars with no accountability," said Brian Fredline, president of the UAW's Local 602 chapter in Lansing, Mich.

With GM, "We know where that money's going. It's going to support American industry and American jobs, and that's how it will be spent. And if you want to get that taxpayer money back, buy a GM product. You'll like it."

The judge overseeing Chrysler's bankruptcy case said Thursday that the automaker has a good case for the termination of 789 of its dealer franchises as part of its ongoing restructuring.

U.S. Judge Arthur Gonzalez said that under Chrysler LLC's plan, those dealers, which represent about 25 percent of the company's dealer base, will remain with "Old Chrysler," a collection of assets that aren't slated to be sold to a group led by Italy's Fiat Group SpA.

Since those leftover assets won't be making vehicles, there would be little use for the dealers that would go with them, Gonzalez said.

"If the sale would be consolidated, there's a strong argument that no dealer network would be needed," Gonzalez said at the beginning of Thursday's court hearing. "Nevertheless, I think it's still important to have this hearing."

Late Sunday, Gonzalez issued a ruling approving the government-backed sale of most of Chrysler's assets to a group led by Fiat. But the sale has been stayed pending an appeal filed by three Indiana state pension and construction funds. Arguments before the U.S. Court of Appeals for the Second Circuit are slated for Friday afternoon.

Gonzalez was to hear testimony from Chrysler dealers and executives during Thursday's hearing, with legal arguments to follow on Tuesday. It's not clear when he will rule on Chrysler's motion, or if the hearing will delay Chrysler's plans to terminate the franchises effective Tuesday.

Just under 20 Chrysler dealers were sworn in at the beginning of Thursday's hearing. In the first hour of testimony, three dealers took the stand. One broke down in tears when describing to the court how he found out that he was going to lose his franchise.

Auburn Hills, Mich.-based Chrysler claims that it needs to reduce its dealer base to a leaner network of about 2,400 dealers in order to emerge from Chapter 11 bankruptcy protection as a stronger company.

But the dealers argue that they don't cost the automaker anything. They say that if Gonzalez approves Chrysler's motion it will result in the shuttering of hundreds of dealerships and thousands of workers will lose their jobs.

A group representing about 300 of the dealers slated to lose their franchises have filed an objection. They also earlier objected to Chrysler's sale to Fiat, saying it was tied to the plan to eliminate the dealerships.

Two top House Republicans are calling for an investigation into the Obama administration's handling of the way Chrysler and General Motors filed for bankruptcy.

Reps. Jeb Hensarling, R-Texas and Spence Bachus, R-Ala., say some stakeholders were given preferential treatment by Obama's Auto Task Force in the restructuring of the two auto giants and they want the House Financial Services Committee to hold oversight hearings.

Spencer is the top Republican on the panel and Hensarling is the ranking member on one of its subcommittees.

Some small bondholders have been critical of the restructuring deal, saying the United Auto Workers union walked away with a much better deal after agreeing to forgive some of the debt owed by the carmakers to their healthcare fund.

"The possilibity that some have been unfairly treated raises a far bigger concern that the government's handling of the GM and Chrysler restructuring may have serious, long-term consequences for our capital markets if investors and creditors conclude that careful expectations built on the fixed bedrock of our laws can be set aside by government fiat," Hensarling and Bachus said in a letter to Financial Services Committee Chairman Barney Frank, D-Mass.

"Chairman Frank should join with Ranking Member Bachus and me to ensure that taxpayer dollars were not used to give preferential treatment to the administration’s political allies," Hensarling said. "If investors perceive that political might, rather than the rule of law, governs the financial markets, it will greatly discourage further participation in our markets, extending our economic downturn."

Hensarling is also the lone Republican lawmaker on the Congressional panel overseeing the $700 billion in government funds giving last fall to the GM, Chrysler and the ailing financial sector. Hensarling said that panel will hold an oversight hearing in July that will investigate the favoratism claims by the bondholders.

"But the bailout was originally Bush's idea, so any favoritism shown by Obama is really Bush's fault."
Sincerely,
MEM

...only because we beat you to it.

As General Motors finally filed for bankruptcy on Monday, some critics of the move have already made the case that Congress, not a White House task force, should have planned the bankruptcy. They are right about one thing: a White House task force should not have planned the bankruptcy. But they are 180 degrees wrong about what the government should have done. The bankruptcy needed much less “public policy” input, not more. If GM were going through a “normal” bankruptcy, here is what would have happened:

When it saw it was running out of cash last November, GM would have been forced to put together a plan that immediately stopped its financial haemorrhaging by selectively suspending its obligations and asked for protection from its creditors by filing under Chapter 11 of the bankruptcy code. To keep going through the process without liquidating, it would have had to get a debtor-in-possession loan (a high-priority loan secured by all the company’s assets). As a condition of providing the DIP loan, the government, like a private lender, might have insisted upfront on installing a management committed to a successful bankruptcy. Once in bankruptcy, GM management would have been required to propose a reorganisation plan with a reasonable chance of success. GM would have been able to determine which contracts to reject, giving it the chance to restructure its dealer networks, supply and long-term debt, secured and unsecured. Crucially, using Section 1113 of the bankruptcy code, it would have been able to reform its labour contracts to the extent necessary to achieve a successful reorganisation. If its proposals are rejected by the union without good cause, the court can impose it.

During bankruptcy, GM would have been able to sell off divisions, facilities and brands. Finally, if a plan of reorganisation that was likely to get a better outcome than liquidation was proposed, the court would approve it and a “new” GM would emerge.

What would have been the impediments to doing this? Management would not face the inevitable, so GM had (perhaps deliberately) placed itself in a position where it needed money to keep going long enough to file for bankruptcy. No private credit might have been available for a DIP loan under the conditions prevailing then and now. If the filing was done without prior negotiation with unions and creditors, the proceeding might have been so messy and protracted that it could have substantially reduced the possibility of a successful reorganisation. The plan might not succeed. Notice that I have not mentioned that the filing and the actions taken to protect GM from its creditors would cause great pain to workers, suppliers, dealers and cities. That is because that pain will occur anyway.

What would have been the role for government in this scenario? Providing bridge financing and a DIP loan, and setting a much shorter deadline for filing than was ultimately adopted. The deadline would have forced all parties to negotiate as much “prepackaging” as possible, because the unions and unsecured creditors would not have wanted to take their chances on a filing, and the secured creditors could not have been assured of a rapid liquidation in such an important bankruptcy. The loan could have been secured by GM’s assets and a claim on its revenues, and not involved the government in owning and managing the company. The billions of dollars the government would have saved by starting this process last winter could have been used to alleviate collateral damage through aid to state governments, unemployment insurance, etc. Both of those activities would have met genuine needs, commercial and social, without the government being forced to own and manage GM.

Instead, the Obama administration overtly played favourites to get the United Auto Workers protection it would not have received under Section 1113, probably elevating costs in a way that will damage prospects for a successful reorganisation. It made and imposed business judgments on GM about what cars to make and what plants to close (and perhaps about suppliers and distribution) that no one in the government or on the task force had the experience to make and for which no one would be financially accountable. Worst of all, despite Sunday’s desperate attempt to distance itself from GM’s future decisions, it left its fingerprints all over the new plan. Inevitably the White House will take political and hence financial responsibility for its success, relieving pressure on management and labour to succeed. Ultimately it elected to adopt an industrial policy toward the industry that failed utterly in the UK, and has worked out badly and expensively in France and Italy.

Finally, in the process, it disturbed the security of expectation that has made lenders willing to provide capital as secured credit, thus handicapping all US industry and undermining what has been, for all its flaws, one of the best financial reorganisation processes in the world, now emulated elsewhere.

The administration took a tragic situation and turned it into an expensive mess to pay a political debt. It wasted billions of dollars over many months delaying GM’s filing and then implicitly put itself on the hook for many billions more. The financial, political and social echoes of that decision will be with us for a long time. In short, they blew it.

I'm a loser!

I love this tranny and must post this picture many times so that I can admire it from many threads!

the Turkish bathhouse tax is eating him alive.

The Supreme Court on Monday granted an emergency appeal asking it to halt the impending government-backed sale of Chrysler to Italian automaker Fiat.

The order stops for now Chrysler's sale

WASHINGTON – Supreme Court Justice Ruth Bader Ginsburg has temporarily delayed Chrysler's sale to Fiat.

Ginsburg says in an order Monday that the sale is "stayed pending further order."

The action indicates that the delay may only be temporary.

Chrysler has said a delay could scuttle the deal.

A federal appeals court in New York had earlier approved the sale, but gave opponents until 4 p.m. EDT Monday to try to get the Supreme Court to intervene.

Ginsburg issued her order just before 4 p.m., when Chrysler would have been free to complete the sale of most of its assets to Fiat.

Ginsburg could decide on her own whether to extend the delay or ask the full court to decide. It is unclear when she or the court will act.

I had a bad night at the bathhouse.

My wife also had a bad night at the bathhouse.