Chrysler 30-day Production Shut down

[Americano]

Chrysler is stopping production of cars and trucks in all 30 plants for 30-days. Lack of product demand.

http://www.washingtonpost.com/wp-dyn/content/article/2008/12/18/AR2008121800719.html?hpid=news-col-blog

All workers will receive unemployment benefits 'near' to full pay. There's no way Chrysler should be bailed out, no product demand equals failure.

[Michael]

Looks like the North American auto industry is 'shut-down and wait' mode till mid-January - hoping for a bailout package in late-January.

I agree that Chrysler is the 'weakest' of the three, but GM has huge legacy issues. Ford seems like the strongest of the three.

A comprehensive US universal healthcare program could really do wonders for the survival of these companies. Taking healthcare off GM's books would allow them to fully restructure their operations on a more competitive basis.

Either way, $25 billion is peanuts to the US Treasury given present spending patterns and that is a small price to pay to avoid the fiscal nightmare and potential depression/deflation effects if GM and Chrysler were to face bankruptcy-liquidation. Just throwing useless wasted cash at these guys right now would be a very good investment for the US economy to avoid a worst-case outcome. The US could easily be a world leader in the production of environmentally smart cars and companies like Ford and GM will be needed to do that.

[Americano]

Looks like the North American auto industry is 'shut-down and wait' mode till mid-January - hoping for a bailout package in late-January.

Actually they're running out of storage room for unsold product and if GMAC does default that vaporizes 75% of GM's dealer flooring financing.

I agree that Chrysler is the 'weakest' of the three, but GM has huge legacy issues. Ford seems like the strongest of the three.

They all face the same legacy issues. Ford has more cash, but that's primarily due to tighter board control over management.

A comprehensive US universal healthcare program could really do wonders for the survival of these companies. Taking healthcare off GM's books would allow them to fully restructure their operations on a more competitive basis.

Either way, $25 billion is peanuts to the US Treasury given present spending patterns and that is a small price to pay to avoid the fiscal nightmare and potential depression/deflation effects if GM and Chrysler were to face bankruptcy-liquidation. Just throwing useless wasted cash at these guys right now would be a very good investment for the US economy to avoid a worst-case outcome. The US could easily be a world leader in the production of environmentally smart cars and companies like Ford and GM will be needed to do that.

That $25B is a drop in the bucket compared to what they'll require to keep operating with sales declining every month. GM alone has lost $67B without Q4, which promises to be a real disaster.

UHC won't help any of them with their existing labor contracts. Their problems are immediate.

Labor is only 10% of operating costs for the former big three, I say let them file for reorganization. The public is going to end up getting stuck for their legacy costs one way or another and let's see what rises from the ashes. I'd rather see public money going for basic food/shelter for the affected current workers than carrying all three operations at public expense. That gene pool does need to be cleaned.

Everyone seems to be operating on the assumption that the current economic dilemma will be the usual 1-2 year recession and then everything will be rosy. I think it's far, far more serious than that.

[Michael]

Actually they're running out of storage room for unsold product and if GMAC does default that vaporizes 75% of GM's dealer flooring financing.



They all face the same legacy issues. Ford has more cash, but that's primarily due to tighter board control over management.



That $25B is a drop in the bucket compared to what they'll require to keep operating with sales declining every month. GM alone has lost $67B without Q4, which promises to be a real disaster.

UHC won't help any of them with their existing labor contracts. Their problems are immediate.

Labor is only 10% of operating costs for the former big three, I say let them file for reorganization. The public is going to end up getting stuck for their legacy costs one way or another and let's see what rises from the ashes. I'd rather see public money going for basic food/shelter for the affected current workers than carrying all three operations at public expense. That gene pool does need to be cleaned.

Everyone seems to be operating on the assumption that the current economic dilemma will be the usual 1-2 year recession and then everything will be rosy. I think it's far, far more serious than that.
Filing for bankruptcy at this time with frozen credit markets means that Chapter 11 is not a viable option. That means Chapter 7 and that means liquidation.

Liquidation of GM would pretty much garentee the depression situation that everyone wants to avoid.

Btw, Canada just advanced some $4 billion in loans to GM and Chrysler. We got share ownership in exchange.

[Americano]

Filing for bankruptcy at this time with frozen credit markets means that Chapter 11 is not a viable option. That means Chapter 7 and that means liquidation.

Liquidation of GM would pretty much garentee the depression situation that everyone wants to avoid.

I can't see where it would make much difference in avoiding what looks to be inevitable. With a $15T GDP, much of it from financialization, GM's 2008 $182B (est) revenue from vehicles and parts is a drop in the bucket. Give them a three times economic multiplier and it's still only $546B or 3.6% of GDP. I'm reading plenty of comments expecting a minimum 5% drop in GDP in the first half of 2009. Foreign marques with US production facilities would absorb a minimum of 50% of GM revenue generation.

If we're going to spend borrowed money, put it in the hands of viable industries that offer future economic contributions, not antiquated failures shedding market share.

I also understand the political ramifications of letting GM liquidate, and realize emotion usually always beats numbers.

Btw, Canada just advanced some $4 billion in loans to GM and Chrysler. We got share ownership in exchange.Were they straight loans or preferred shares? The US government has been taking preferred shares in exchange for their bailouts, no loans involved. I can't get a reading from the Internet or anyone I know on their pecking order in relation to issue status. Preferred shares are normally ranked by issue date in liquidation payouts. Which is why sly old Henry had the Ford family hold most of Ford's preferred shares with voting rights.

Old money only buys preferred, as they normally have guaranteed dividends regardless of company performance and are first in line in liquidations.