U.S. Auto Makers to Shake Down Government for $50 Billion

Looks like the U.S. auto industry is planning to suckle at the teat of big government again to the tune of $50 billion of your hard earned dollars. You read right, you, me, your kids, your friends; we are all going to be paying for yet another bailout. This time, it’s for another industry that didn’t bother to plan well for the future

Details, details…

The automakers are looking for some $50 billion in low-interest loans over three years to help them modernize their assembly plants and develop next-generation fuel saving vehicles. My question is why are we paying for them to retool? Aren’t they supposed to have cash management strategies in place? Shouldn’t this have been planned for when they were selling SUV’s faster than they could make them? Isn’t this why they hire friggin’ CFO’s?

Anyway, if I was the UAW, I would petition some court somewhere that the automakers would never be able to shutter one of these tax-incentivized “retrofitted” plants or the loan would be accelerated and due immediately. Don’t get me wrong, I am as anti-union as the next capitalist pig, but these guys have a legitimate beef!

But it gets better!

The loans would provide low-interest credit for up to 30 percent of the cost of retooling facilities to build hybrids, plug-in hybrids, electric cars and other alternatives. All I can think about is the tax incentive the government took away a few years back to buy exactly these same cars.

Automakers see huge losses

Detroit’s automakers have struggled this year amid a sluggish economy and consumers shunning large sport utility vehicles and trucks because of high fuel prices. General Motors (GM, Fortune 500) reported a second-quarter loss of $15.5 billion and Ford Motor (F, Fortune 500) reported an $8.7 billion loss. Didn’t you guys see this coming? So once again, we have to pay for your bad planning?

Political Ramifications

In what appears to be a political Twilight Zone, McCain is against the loans to big business and instead is promoting a $5,000 tax credit for consumers who buy fuel-efficient vehicles while Democratic Presidential hopeful Barak Obama has come out in support of the loans along with a 10-year, $150 billion green manufacturing program. But hey, it is an election year and each is trying to appeal to the other’s base.

Don’t call it a bailout

Auto industry whores officials have mounted a defense that the loan program isn’t a bailout as much as it is assistance to speed the process to more fuel-efficient technology. Last time I checked this is what a good R&D budget is for.They also claim that the government owes it to the industry after bailing out Wall Street banks and mortgage firms on the brink of collapse.

By the way, in case you missed it, there was $25 billion built into last year’s energy budget which hasn’t gotten funded yet. But like I said, it’s an election year so if you’ re good little boys and girls maybe Ford, Chrysler, & GM can be spending your Christmas money on retooling a factory.

Coming Soon: Electric Cars For Sale

The question is, will it last? Is this finally the time that the big three realize that the only way to avoid the fate of the dinosaur is to give the people what they want. Or is this just another market over-reaction that will continue for the foreseeable future, only to be cast aside when gas prices ease? You have people buying electric car kits, spending money on electric car conversions, and trying to find out exactly what electric cars are and how they work. But if gas sees sub two dollars a gallon, will we forget about the pain of $5 a gallon gas?

Most people say no. Most people realize we have gone down this road before and they are not willing to get caught behind the eight ball again. Problem is, no one tells car makers like General Motors.GM is preparing to rollout the Volt in model year 2010. They can’t afford to be labeled as the company that killed the electric car….again! So they will chug along hell bent on making sure this car hits the market. If gas is cheap again, I assure you that consumers will pick up right where they left off and drive up demand for SUV’s and other gas guzzlers.Then GM will dump the Volt, swear their allegiance to the truck platform, and ramp up manufacturing on a large scale once again. All in time for some other world catastrophe that will force oil prices skyward….you get the idea. Point is, let’s all learn from history on this one.

What do you think?

1. Are gas prices going to remain high?

2. Are electric cars viable alternatives to their gas swilling cousins?

3. If you ran GM, what would you be doing to move your company in the right direction?

GM Off The Dow? Part 2

I left the 7 of you who read this blog yesterday waiting in anticipation for my lock on turning around GM right now. Ready?

Bob Lutz, General Motors Vice Chairman

Born in 1932, Bob Lutz has been in the car business for almost fifty years. He has a fantastic resume with having a hand in some of the most famous production vehicles of all time:

While VP of Sales for BMW, Bob had a hand in developing THE best selling 3-series

While President of Chrysler, Bob developed the Viper, the Prowler, and the LH platform of autos.

He brought the Pontiac GTO, arguably one of the most famous muscle cars ever to the U.S. while stationed in Europe for General Motors

His reference to global warming as a “crock of shit” didn’t warm him up to the environmental crowd, but the guy can sell cars. He has vast experience in selling and manufacturing cars both in the States as well as Europe which provides Bob with the chops needed to take GM into the next decade.

But Bob is too old!

Mr. Lutz is 76, Senator McCain will be 72 in two months, and if he gets the job he’s after, they’re going to give him effing launch codes, so I’ll take my chances with Mr. Lutz. Besides, he can’t do any worse than the current D-heads running GM right now!

Even though Lutz is 76, he used to fly jets for the Marines, so I am pretty sure he can still kick my ass. He’s smart and knows his way around the car business. He got blown up during the abortion that was the “merger of equals”  between Chrysler and Daimler back in 1998, went on to become CEO of Excide for four years until returning to GM in 2002. Point is, this guy knows the car business better than anyone in Michigan.

The Board

Once the board gets up enough balls to fire Rick Wagoner then I am positive all points will lead to Bob stepping in and saving this truly American institution, and not just by putting lipstick on a pig.

Wow! GM Off The Dow?

I was reading a pretty good article yesterday by Paul La Monica from CNNMoney.com calling for the removal of GM from the Dow Jones Industrial Average. Paul made some decent points about the car manufacturer’s recent troubles but I have to ask…..Paul, have you lost it?

Paul’s opening paragraph:

GM may still be the biggest of the Big Three. But it’s getting more and more difficult to justify keeping GM in the Dow Jones Industrial Average, an exclusive list of what’s supposed to be the 30 leaders in the U.S. markets and economy.

Paul, General Motors is the fifth largest company in the world, how could they not belong on the Dow? GM auto parts are sold everywhere, I mean, General Motors recalls more cars than some manufacturers make, but let’s kick around some talking points.

Hummer-I disagree with the disposition of this unit as well, the military contracts alone make this a keeper.

The Stock is at a 33 year low-OK, the economy has fallen out of bed and the Wall Street Journal is full of companies whose stocks are at 33 year lows.

You note that GM still employs a large number of people. GM employs almost 300,000 people Paul. That is an boat load of people.

Like you mention, GM is going to do $179 BILLION dollars in sales this year. Paul, that is a boat load of cars and trucks!

You state GM could easily be replaced by Toyota or Honda but that the editors at the Journal maintain a strictly American list. GM isn’t just about maintaining an American list, GM is THE manufacturing bell weather within the United States. GM has thousands of suppliers that have thousands of suppliers, there isn’t a community in this country that isn’t touched by this company in some way.

In other words, It’s not just about the share price!

You quote Chuck Carlson, CEO of Horizon Investment Services as saying:

“It’s possible GM could be removed. On the one hand, GM as a stock is not all that relevant,”"But it’s still a barometer of the auto industry and that’s significant.”

That’s a bold statement coming from a fund manager that has less than $80 million dollars total in six funds that barely beat the respective averages they are weighed against. But that isn’t my biggest bone of contention with the article. It seems that you will only be satisfied with GM’s removal from the DJIA and that they is no chance for a turnaround. Well, I’ll tell you what, there is one sure way GM could make a comeback starting today, starting right now….but your going to have to wait until tomorrow!