GM Lost $6 Billion Last Quarter
By Alan Stewart Carl | Related entries in Bailouts, Business, Cars
Despite all the government assistance and talk of providing more, GM lost $6 billion last quarter with earnings dropping by 47%.
GM executives say car buyers are turning away from GM out of concern the company will end up in bankruptcy and won’t honor its warranties. Could the prospect of bankruptcy help force bankruptcy? To put it dramatically, is GM in a death spiral?
The company has until June to provide the government a restructuring plan. But another quarter like this past one is going to make Americans extremely wary of handing out yet another bailout.
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This entry was posted on Thursday, May 7th, 2009 and is filed under Bailouts, Business, Cars. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
May 7th, 2009 at 11:44 am
GM executives say car buyers are turning away from GM out of concern the company will end up in bankruptcy and won’t honor its warranties.
And lenders and investors have turned away from GTM despite government “assistance” on the reasonable and well-evidenced assumption that their money will simply be turned over directly to the government and the UAW, in violation of the 5th Amendment and the laws of contract and bankruptcy.
May 7th, 2009 at 11:57 am
Tully hit it on the head. The death spiral isn’t coming from the bankruptcy, but from this administration’s specific solution to the crisis. Of course, it’s exactly this kind of government power grab and political payback that had many centrists worried about a Dem Congress/Dem White House. Obama is simply banking on the chance that inflation won’t hit before the 2010 elections.
May 7th, 2009 at 2:37 pm
5th amendment?
I’ll give you contract law, and I understand bankruptcy law–though it should be noted that bankruptcy law has been rewritten in the last 10 years to greatly benefit the powerful creditors as opposed to what it was intended for–to give the debters a chance to regroup and start over–but fifth amendment?
I can only assume you mean “deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.” but since there is no public use this isn’t relevant.
The other thing that I have a problem with in this line of thinking is that is seems to be OK for these investors and lenders to play financial games designed to push a corporation into ruin for short-term gain, but it’s not OK to deprive them of this gain?
I cannot help but wonder if the real thing that sticks in your craw is that the UAW might survive and gain a voice in how the company should be run and returned to prosperity.
Here’s the real question, though, for all you “free marketeers” (and I use that term loosely)–why is it OK for the government to create and amend laws to benefit the wealthy, but as soon as it steps in to help a company that millions of workers depend on that we’re suddenly a socialist state?
The hue and cry about the relative pittance given to the automakers is nothing compared to the largess poured upon the banks and investment houses–and it is the banks and the investment houses that created the situation that has made it impossible for the automakers to survive.
For 30 years now, the government has been doing it’s darndest to ensure the rich get richer, but there was never an outcry of “Hey, stop…”
May 7th, 2009 at 5:32 pm
eh, let it die. But i’m just bitter from what they did to saturn.
May 7th, 2009 at 5:42 pm
I can only assume you mean “deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.†but since there is no public use this isn’t relevant.
Yes, it is relevant. A taking is a taking. As the Obama admin has proposed taking private property (secured debt held by others) and converting it into public property(equity held by the government) it’s a pretty direct taking.
The other thing that I have a problem with in this line of thinking is that is seems to be OK for these investors and lenders to play financial games designed to push a corporation into ruin for short-term gain, but it’s not OK to deprive them of this gain?
Like all those pension funds and mutual funds that over the last deacde have invested in secured bonds issued by GM? Whom the Obama admin has decided to put at the back of theline, behind the (unsecured) UAW obligations and the (unsecured) government loans? Those bastards! Plotting all these years for that short-term gain!
Don’t let facts stand in the way of you “eat the rich” ranting. After all the rule of law is important…until it gets between you and a strawman scapegoat.
May 8th, 2009 at 7:26 am
It wasn’t the pension funds and the mutual funds standing in the way of a non-bankruptcy solution–it was the hedge funds and the investment houses that helped create the financial crisis we find ourselves in.
May 8th, 2009 at 8:22 am
Gerry why be so utterly opaque on Tully’s point? Seriously. You want one standard for your class of evil investors, and a different standard for the “good” investors who are regular folks.
I’ve got no problem at all pointing a finger at various financial entities who helped orchestrate the bad-laon fuled real estate bubble and its collapse. And hopefully ways are found to hold them to account and better regulate the home mortgage market better.
But Tully’s still right that the changes being made made to save GM representing a taking. Various groups invested on the basis of legal rules which proscribed the order in which lenders would be able to make claim should GM fail. Perhpas one can argue that changes to thes rules are warranted, but why be so effing blithe about it?
Of course, there’s no way to make GM viable without substantially screwing some or even most of the groups involved in the mess in one way or another. So IF you presume GM must be saved, then… .
May 8th, 2009 at 9:02 am
The flip side is that pensions have been raided and stolen for years with barely a whisper.
May 8th, 2009 at 10:31 am
It wasn’t the pension funds and the mutual funds standing in the way of a non-bankruptcy solution–it was the hedge funds and the investment houses that helped create the financial crisis we find ourselves in.
Bullshit propaganda, Gerry, and bad on you for swallowing it whole. Nor is it relevant to the fact that an attempt is being made to run roughshod over the Rule of law and the Bill of Rights. Here’s some of that uber-right media outlet CBS’s editorializing on that, backed with facts instead of straw-man scapegoating:
To say the obvious, without these lenders Chrysler would have been in bankruptcy well before Obama reached office. They lent money to Chrysler long before TARP, long before last November. The White House proposes to pay these lenders who by the Rule of Law are entitled to 100% of their money back before anyone else gets a dime something like 30% on the dollar or less, while the UAW would get something over 50 cents on the dollar for unsecured obligations from a mess they helped create (indeed, which obligations helped create the mess!) PLUS a majority stake in the company.
No matter how you slice it, the White House using political blackmail and bullying to circumvent the Rule of Law (and yes, the “due process” clause of the 5th Amendment of the Bill of Rights) is despicable. That’s aside from the damage that will be done to the economy from the (factual) perception that the administration will continue to facilitate running roughshod over said law in the future. Who will want to lend to the next Chrysler or GM after that, or to any other company that the gov’t has a finger in or might potentially develop an interest in? Knowing that their “secured” loans may well be turned over directly to the politically favored without warning and without recourse, with retailation promised to any who object?
May 8th, 2009 at 11:25 am
On the positive side, the people running the companies, who made the decisions will live unbelievably comfortable lives and be unaffected in any tangible way while 10s of thousands will possibly lose everything.
Their share of the pain is usually 10s or 100s of millions in a golden parachute. Isn’t there something wrong with that?
May 8th, 2009 at 12:27 pm
I have a dumb question.
Suppose out of the goodness of his heart Tully loans entity X, which has no previous debt, 10 bucks on tuesday, with no string attached except that they pay him back later. (yeah Tully I know you’re not that dumb, suppose it was after sex or something LOL)
Then on wednesday I loan entity X $20 and also make them sign a paper saying I am senior debtor and get repaid first if bankruoptcy occurs, potentially screwing Tully, who (according to reason anyway) would be “senior” debtor.
Is it the case case legally that if an early lender fails to prescribe the terms properly they can be so screwed? Or is there a presumption of seniority?
I mean, I can see how if you were a later lender and worried about your exposure you wouldn’t make a loan without certain assurances. But if you make the last loan and the borrower can simply assign you to be first in line, how is that fairs to previous lenders? Seems to me that if seniority were not presumed, every agreement would have “we get paid first” terms or “we are next in line to whatever extent we can be” terms.
[BTW I am not saying that say the UAW is in fact a senior lender, I know nothing of those specifics. I just wonder what the rules are in general. Willing to indulge me Tully? I am asking in good faith.
May 8th, 2009 at 5:24 pm
Wait a second, why are you so gungho to protect “contracts” and legal requirements for the wealth investors who created the mess, but you are so wonderfully eager to broom the contracts and legal obligations owed to the unions?
The unions bargained for these CONTRACTS in good faith, they WORKED for the compensation that was due them to be paid into pension funds and health care, but I don’t hear you complaining about wiping out those contracts–in fact, more than a few people have been arguing it is essential that the companies get rid of this awful overhead and insurmountable debt for the company to survive.
It is stunningly hypocritcal for you to ask for special treatment for one group and dismiss the needs of another.
The truth is, the UNIONS came to the table yet again and made good faith concessions with the expectation that the others at the table would do the same–but instead, those people who are largely responsible for the problems we face are STILL being greedy and still demanding the lion’s share of everything.
Once again, this is yet aother example of the wealthy’s tragically skewed version of capitalism where we privative profit and put risk in the public’s lap.
You trumpet the cause of the RULE OF LAW, but for 30 years of GOP rule the RULE OF LAW has been horribly perverted by the right to benefit the wealthy class, and now when we have an administration who is trying to balance the pain a little the right is screaming “No fair!”
“No fair” is what we have had for 30 years…now you’re getting a taste of it and you don’t like it. Gee, I’m stunned.
p.s.–I love these CAPTCHAs. This one is “It was the way” and “desirous”.
Read into that one what you will.