No help or wrong help for Detroit?

With automotive supplies (Delphi, J L French, and now Dana)
running for bankruptcy protection, it must be wondered if GM
and Ford can be far behind. The President has vowed no help
for Detroit, and cautioned the automakers about their obligation
to their retirees. Of course, when government spending exceeds
income, the government merely prints more money, an option that
is skewing the President's thinking.

It would seem, as a self-proclaimed war president, the President
would want to retain war capable American companies. Nothing
matches this description better than the auto companies. And if
he were to come to this conclusion, it is obvious he would throw
money at the problem, as that is always his solution. Yet money
for Detroit is not the answer.

The typical demand of the critics is that Detroit must compete.
The implication is that Detroit isn't building good products.
What this ignores is two of the the big three factors of selling
products: product quality, distribution, and quantity of
competition.

"Build a better mousetrap and the world will beat a path to your
door"? That's factor one, but its still not enough. Yet that's
the shallow single demand of the critics.

People will not make excessive efforts to seek out the best
product. They will make reasonable efforts. It has to be
convenient. Having a good product is not enough, and, in fact,
terrible products capture market share. Yugo is a perfect
example. If what the critics say were true, Yugo wouldn't have
sold a single unit.

Another enlightening example is the history of minivans. In
the 80s, the Chrysler vans were the pick of the class. Yet
mediocre products such as Ford's Aerostar and GM's Astro got
significant market share. Even some of the hideous looking and
ill handling conversions of Tokyo delivery vans by Toyota
and Nissan were sold.

The Ford and GM products sold because of great distribution. The
Asian products sold because of reasonable distribution and the
inability of their buyers to look beyond the nameplate and see
the products for the mediocre commercial vehicles they really
were, ill suited to passenger use.

It can be expected that the President will remain in denial until
the last possible moment. The ability to deny - and the ablity
of the person to believe his own denial - dies hard. Even
attending dozens of AA meetings can't change this.

Then a public outpour of criticism, similar to the post-Katrina
rantings, will prompt the President to throw money at the problem.
This is not certain, but probable, as the President would first
have to find an automotive services company run by cronies, in
the mold of Haliburton, to which he could award the contract.

The real problem lies in the quantity of competition factor. Its
model and brand proliferation. Having a good product - or even
the best product - isn't enough to overcome the onslaught of every
automaker wanting a piece of the American market. The fact that
most that attempt will eventually fail doesn't solve the problem.

The actual solution is reduction in brands and models. A
prohibition on new brands would prevent disruption by those
marginal players likely to fail anyway. Telling Honda, Toyota,
and Nissan they must each reduce the number of models offered
by one or two would clear a market currently so crowded people
can't even learn of all the choices.

If brand and model limitation and reduction were enacted, the
remaining question for the President would be whether
Daimler-Chrysler, though not an American company, qualified as
one that can be relied upon as a war industry, and thus provided
protection, or as a foreign company to be ordered to reduce model
offerings. Superficially, it seems foreign status would apply,
and Daimler-Chrysler be considered an enemy company, not a friendly one.

However, the practical matter is that Daimler-Chrysler should
receive the same benefits as GM and Ford. The cooperation of
Daimler-Chrysler in war production might not be voluntary, but it
can be counted upon. After all, the President has the advantage
of enforcement, since the US occuation forces from World War II
remain in Germany. Protectorates tend to be compliant.

In article <1byepsn0xd6rl$.7sfst4a1qac1$.dlg@40tude.net>, Comments4u wrote:[color=blue]
> With automotive supplies (Delphi, J L French, and now Dana)
> running for bankruptcy protection, it must be wondered if GM
> and Ford can be far behind. The President has vowed no help
> for Detroit, and cautioned the automakers about their obligation
> to their retirees. Of course, when government spending exceeds
> income, the government merely prints more money, an option that
> is skewing the President's thinking.[/color]

Really odd considering that the perscription drug thing was motivated not
only by the often mentioned profit motive for the drug companies but to
serve as a way for companies like GM to end their coverage of retires and
shift the burden to taxpayers.
[color=blue]
> money at the problem, as that is always his solution. Yet money
> for Detroit is not the answer.[/color]

Considering the union contracts, they are basically running a
welfare/entitlement government operation. They just don't have the power
to print money or tax. (as you've mentioned)
[color=blue]
> The typical demand of the critics is that Detroit must compete.
> The implication is that Detroit isn't building good products.
> What this ignores is two of the the big three factors of selling
> products: product quality, distribution, and quantity of
> competition.[/color]
[color=blue]
> The actual solution is reduction in brands and models.[/color]

The solution is never controlled choice. That was tried with CAFE and the
big three got drunk on SUV profits and lured back to where they were in
the 1970s. What should be done regulation wise is remove CAFE. Ford and
GM would be wise to give up their assinine opposition to world wide
standards based one ECE standard for things like vehicle lighting etc to
allow them to more freely move models between markets as demand required.
That also goes into the union contracts which current restrict that.
[color=blue]
> However, the practical matter is that Daimler-Chrysler should
> receive the same benefits as GM and Ford.[/color]

Chrysler already had a taxpayer funded bailout.

> On 3/3/2006 6:02 PM ... Brent P wrote:[color=blue]
> In article <1byepsn0xd6rl$.7sfst4a1qac1$.dlg@40tude.net>, Comments4u wrote:[color=green]
>> With automotive supplies (Delphi, J L French, and now Dana)
>> running for bankruptcy protection, it must be wondered if GM
>> and Ford can be far behind. The President has vowed no help
>> for Detroit, and cautioned the automakers about their obligation
>> to their retirees. Of course, when government spending exceeds
>> income, the government merely prints more money, an option that
>> is skewing the President's thinking.[/color]
>
> Really odd considering that the perscription drug thing was motivated not
> only by the often mentioned profit motive for the drug companies but to
> serve as a way for companies like GM to end their coverage of retires and
> shift the burden to taxpayers.
>[color=green]
>> money at the problem, as that is always his solution. Yet money
>> for Detroit is not the answer.[/color]
>
> Considering the union contracts, they are basically running a
> welfare/entitlement government operation. They just don't have the power
> to print money or tax. (as you've mentioned)
>[color=green]
>> The typical demand of the critics is that Detroit must compete.
>> The implication is that Detroit isn't building good products.
>> What this ignores is two of the the big three factors of selling
>> products: product quality, distribution, and quantity of
>> competition.[/color]
>[color=green]
>> The actual solution is reduction in brands and models.[/color]
>
> The solution is never controlled choice. That was tried with CAFE and the
> big three got drunk on SUV profits and lured back to where they were in
> the 1970s. What should be done regulation wise is remove CAFE. Ford and
> GM would be wise to give up their assinine opposition to world wide
> standards based one ECE standard for things like vehicle lighting etc to
> allow them to more freely move models between markets as demand required.
> That also goes into the union contracts which current restrict that.
>[color=green]
>> However, the practical matter is that Daimler-Chrysler should
>> receive the same benefits as GM and Ford.[/color]
>
> Chrysler already had a taxpayer funded bailout.
>[/color]
That was all returned, with interest.

In article <foWdnZvYzvhZe5XZRVn-gg@comcast.com>, jcr wrote:
[color=blue][color=green]
>> Chrysler already had a taxpayer funded bailout.[/color]
> That was all returned, with interest.[/color]

And so? They still have had one and GM and Ford haven't. It was a fairness
arguement being made.

On Fri, 3 Mar 2006, Brent P wrote:
[color=blue]
> Chrysler already had a taxpayer funded bailout.[/color]

Bzzt! Chrysler never had any such a taxpayer-funded bailout. The
government signed loan _guarantees_, which is not at all the same thing as
giving a loan. The loans came from banks. Lots of them, all over the
world. And Chrysler paid 'em all back, well ahead of schedule. Not one
taxpayer-cent was given to Chrysler for a "bailout", pop mythology
notwithstanding.

In article <Pine.OSX.4.64.0603032215100.283@daniel-j-sterns-computer.local>, Daniel J. Stern wrote:[color=blue]
> On Fri, 3 Mar 2006, Brent P wrote:
>[color=green]
>> Chrysler already had a taxpayer funded bailout.[/color]
>
> Bzzt! Chrysler never had any such a taxpayer-funded bailout. The
> government signed loan _guarantees_, which is not at all the same thing as
> giving a loan. The loans came from banks. Lots of them, all over the
> world. And Chrysler paid 'em all back, well ahead of schedule. Not one
> taxpayer-cent was given to Chrysler for a "bailout", pop mythology
> notwithstanding.[/color]

Work the semantics any way you wish. Because ultimately, the taxpayers were
the one on the hook if they went under.

On Fri, 3 Mar 2006 22:16:27 -0500, "Daniel J. Stern"
<dastern@127.0.0.1> wrote:
[color=blue]
>On Fri, 3 Mar 2006, Brent P wrote:
>[color=green]
>> Chrysler already had a taxpayer funded bailout.[/color]
>
>Bzzt! Chrysler never had any such a taxpayer-funded bailout. The
>government signed loan _guarantees_, which is not at all the same thing as
>giving a loan. The loans came from banks. Lots of them, all over the
>world. And Chrysler paid 'em all back, well ahead of schedule. Not one
>taxpayer-cent was given to Chrysler for a "bailout", pop mythology
>notwithstanding.[/color]


Absolutely correct. Furthermore, the government, under the agreement,
had first claim to all Chrysler's assets in the event liquidation
became necessary. The asset value exceeded the loan amount to such a
degree that the government never had any significant risk.

Yet years later, we keep hearing the pop mythology you refer to.

> On 3/3/2006 9:09 PM ... Brent P wrote:[color=blue]
> In article <foWdnZvYzvhZe5XZRVn-gg@comcast.com>, jcr wrote:
>[color=green][color=darkred]
>>> Chrysler already had a taxpayer funded bailout.[/color]
>> That was all returned, with interest.[/color]
>
> And so? They still have had one and GM and Ford haven't. It was a fairness
> arguement being made.
>
>[/color]

As soon as Ford and GM have a viable recovery plan (as Chrysler was
required to do at the time...the numbers had to work), I wouldn't have a
problem with the government lining up loan guarantees for them. The
problem is that if they fail, then the taxpayer IS out the money (the
government is basically co-signing their loans, in other words). Plus
all the retirement guarantees.

I was taking exception to the term ""taxpayer funded bailout". The
Chrysler deal didn't cost the taxpayer a red cent. And Chrysler made
good on those loans well before they were due.

In article <gs-dnUIk7Iwhk5TZnZ2dnUVZ_sadnZ2d@comcast.com>, jcr wrote:
[color=blue]
> I was taking exception to the term ""taxpayer funded bailout". The
> Chrysler deal didn't cost the taxpayer a red cent. And Chrysler made
> good on those loans well before they were due.[/color]

And I was dealing with the fairness arguement. regardless of what it was, the
government already helped out one automaker. How it turned out is not relevant.

> On 3/3/2006 10:41 PM ... edward ohare wrote:[color=blue]
> On Fri, 3 Mar 2006 22:16:27 -0500, "Daniel J. Stern"
> <dastern@127.0.0.1> wrote:
>[color=green]
>> On Fri, 3 Mar 2006, Brent P wrote:
>>[color=darkred]
>>> Chrysler already had a taxpayer funded bailout.[/color]
>> Bzzt! Chrysler never had any such a taxpayer-funded bailout. The
>> government signed loan _guarantees_, which is not at all the same thing as
>> giving a loan. The loans came from banks. Lots of them, all over the
>> world. And Chrysler paid 'em all back, well ahead of schedule. Not one
>> taxpayer-cent was given to Chrysler for a "bailout", pop mythology
>> notwithstanding.[/color]
>
>
> Absolutely correct. Furthermore, the government, under the agreement,
> had first claim to all Chrysler's assets in the event liquidation
> became necessary. The asset value exceeded the loan amount to such a
> degree that the government never had any significant risk.
>
> Yet years later, we keep hearing the pop mythology you refer to.[/color]

How did the Chrysler financials of the day compare with the GM/Ford
financials today? GM already has $270+ billion of debt (according to
yahoo).

On Fri, 03 Mar 2006 23:07:31 -0500, jcr <nospam@nospam.com> wrote:

[color=blue]
>How did the Chrysler financials of the day compare with the GM/Ford
>financials today? GM already has $270+ billion of debt (according to
>yahoo).[/color]


I don't know but part of the deal was a huge amount of debt
forgiveness. The banks had to forgive debt, then loan **more**
although those loans were guaranteed. I have a vague recollection of
some little bank in a place like Rockford Illinois almost sinking the
whole thing not wanting to forgive part of some small loan... under
100k.

On Fri, 03 Mar 2006 22:05:33 -0600, [email]tetraethylleadREMOVETHIS@yahoo.com[/email]
(Brent P) wrote:
[color=blue]
>In article <gs-dnUIk7Iwhk5TZnZ2dnUVZ_sadnZ2d@comcast.com>, jcr wrote:
>[color=green]
>> I was taking exception to the term ""taxpayer funded bailout". The
>> Chrysler deal didn't cost the taxpayer a red cent. And Chrysler made
>> good on those loans well before they were due.[/color]
>
>And I was dealing with the fairness arguement. regardless of what it was, the
>government already helped out one automaker. How it turned out is not relevant.[/color]


The government had no discernable risk. See my other post.

> On 3/3/2006 11:28 PM ... edward ohare wrote:[color=blue]
> On Fri, 03 Mar 2006 23:07:31 -0500, jcr <nospam@nospam.com> wrote:
>
>[color=green]
>> How did the Chrysler financials of the day compare with the GM/Ford
>> financials today? GM already has $270+ billion of debt (according to
>> yahoo).[/color]
>
>
> I don't know but part of the deal was a huge amount of debt
> forgiveness. The banks had to forgive debt, then loan **more**
> although those loans were guaranteed. I have a vague recollection of
> some little bank in a place like Rockford Illinois almost sinking the
> whole thing not wanting to forgive part of some small loan... under
> 100k.[/color]

It would be interesting to know the difference in the "risk profile" of
that past deal with Chrysler compared with what might be able to be
worked out with GM/Ford today. If it is a similar profile, it might be
worth helping them. Of course the competitive dynamics are different
now, especially with the Korean makers and the Chinese makers knocking
on our door. I simply might be too much for the domestics to compete with.

On Fri, 03 Mar 2006 22:41:22 -0500, edward ohare
<edward_ohare@nospam.yahoo.com.invalid> wrote:
[color=blue]
>On Fri, 3 Mar 2006 22:16:27 -0500, "Daniel J. Stern"
><dastern@127.0.0.1> wrote:
>[color=green]
>>On Fri, 3 Mar 2006, Brent P wrote:
>>[color=darkred]
>>> Chrysler already had a taxpayer funded bailout.[/color]
>>
>>Bzzt! Chrysler never had any such a taxpayer-funded bailout. The
>>government signed loan _guarantees_, which is not at all the same thing as
>>giving a loan. The loans came from banks. Lots of them, all over the
>>world. And Chrysler paid 'em all back, well ahead of schedule. Not one
>>taxpayer-cent was given to Chrysler for a "bailout", pop mythology
>>notwithstanding.[/color]
>
>
>Absolutely correct. Furthermore, the government, under the agreement,
>had first claim to all Chrysler's assets in the event liquidation
>became necessary. The asset value exceeded the loan amount to such a
>degree that the government never had any significant risk.
>
>Yet years later, we keep hearing the pop mythology you refer to.[/color]

So, if Chrysler had all of these assets, why did they need a
government guarantee?

On Sat, 04 Mar 2006 05:03:40 GMT, [email]gRmEcMgOrVeEw@mindspring.com[/email] (Gordon
McGrew) wrote:

[color=blue][color=green]
>>Absolutely correct. Furthermore, the government, under the agreement,
>>had first claim to all Chrysler's assets in the event liquidation
>>became necessary. The asset value exceeded the loan amount to such a
>>degree that the government never had any significant risk.
>>
>>Yet years later, we keep hearing the pop mythology you refer to.[/color]
>
>So, if Chrysler had all of these assets, why did they need a
>government guarantee?[/color]

It needed a combination of lower debt and fresh cash. The banks wrote
off a lot of the existing loans and the government guaranteed the new
loans, taking first claim on company assets... meaning the remaining
old loans had little security.

Chrysler's assets were insufficient to secure more loans on top of the
old ones, but sufficient so that the new ones against the assets were
reasonably secure.