Auto Bailout

[starsapphire]

So, in classic form, the bigwhigs from the auto makers came to the Hill to seek money for a bailout in their PRIVATE Jets. Great. One Senator said something like, "that''s like a guy showing up to a soup line in a tophat and tux, with a tin cup in his hand!"

 

[FrekeChild]

I don''t even want to comment on how ridiculous that is.

 

[icekid]

well, if that does not make it abundantly clear how they got themselves into this mess, then it CERTAINLY makes it obvious that they don''t deserve our money to bail them out!

 

[Lauren8211]

Well maybe they don''t *personally* deserve bailout money, but those aren''t the people who are suffering, unfortunately.

Michigan''s unemployment rate just hit nearly 10%. It''s really bad here.

I''m not an econ-guru, so I''m not sure what the best course of action here is, but someone needs to figure something out... and quickly.

 

[Rank Amateur]

Between incompetent management, lousy cars, and being saddled with the self-centered UAW I just don''t see how ANY bailout is going to work, especially for GM.

 

[meresal]

One of my friends did his final Finance thesis on GM, in Dec 05, almost 3 years ago. He predicted that even if they were to sell GMAC, which they did in March of 2006, that they would be out of money in 2 years. They blow thru what, apprx $2 billion dollars a month, this money won't fix any of their problems. IMO, as a compnay they are better off claiming Bankruptcy and getting out of many of their contracts.

And private jets to DC... please

. These guys can't spell budget.

ETA: I don't think that bankruptcy is a good solution, and that it's ok by any means. However, in this case, it is inevitable. If that means not wasting $25 billion, just to amount to the same eminent demise, then don't waste our money.

 

[Dancing Fire]

there're no simple solution to this problem

don't mind if it was a one time deal to save all those jobs,but what if the automakers want another $25 bil 2 years from now,then what? give each of them another $25 bil?

 

[NewEnglandLady]

The thought of all the U.S. auto makers folding is completely baffling to me--I know that it is a product of their inability to stay competitive, but it's also very scary.

GM has not been laying off any employees because they are honestly trying to do the right thing, but the problem it has cost them more in the long-run. The very thought that they are considering buying Chrysler JUST for access to their cash is very telling of how desperate they are right now. If they hadn't already gotten a bailout earlier this year, I don't know if they'd have any money at all right now. If they get another one or they buy Chrysler, they will be right back here in less than a year.

ETA: If they did fold, I can't imagine what the spike in unemployment would do to our economy--not just from the layoffs in Detroit, but all over. Heck, several hundred employees at my own company are supported by GM (and most of them are even against the bailout). The U.S.'s relatively low unemployment rate and stable GDP has been the only thing keep us from spiraling into a deep depression.

 

[fleur-de-lis]

I''m glad someone started a thread about this in ATW (Thanks Starsapphire!), because if the headline isn''t enough, you GOTTA read the details: http://www.abcnews.go.com/Blotter/WallStreet/story?id=6285739&page=1



... (GM CEO Rick) Wagoner flew in GM''s $36 million luxury aircraft to tell Congress that the company is burning through cash, ask for a $10-12B for GM alone...

... Wagoner''s... private jet... is just one of a fleet of luxury jets owned by GM that continues to ferry executives around the world despite the company''s dire financial straits...

... Ford CEO Mulally''s corporate jet is a perk included for both he and his wife as part of his employment contract along with a $28 million salary last year. Mulallly actually lives in Seattle, not Detroit. The company jet takes him back and forth on weekends.

I might have more sympathy for ''em if their cars weren''t utter polluting, gas-guzzling, fugly crud.

 

[iheartscience]

I loved this story! So ridiculous. The best part is I''m sure these CEO''s didn''t even begin to think it was a bad idea to fly there on their private jets. Hilarious! What, they couldn''t at least ride in ONE private jet together? Organize a jet-pool?

 

[Beacon]

Date: 11/19/2008 6:49:33 PM
Author: Dancing Fire
there''re no simple solution to this problem

don''t mind if it was a one time deal to save all those jobs,but what if the automakers want another $25 bil 2 years from now,then what? give each of them another $25 bil?

Forget two years, they would be back in two months. Remember the 25bill is split amongst the 3 companies. GM goes through 4 bill/ mo. They''ll be back by New Years.

They need to face the truth, file Chapt 11, kill the Union contracts, sell those private jets, reduce the way too many types of cars they sell, focus on the winners and get on with it.

It is amazing that they have the gall to come in and act like this 25 billion will fix their troubles. That is scandalous. I guess they just like flying around in those jets.

 

[TravelingGal]

Date: 11/19/2008 8:34:09 PM
Author: thing2of2
I loved this story! So ridiculous. The best part is I''m sure these CEO''s didn''t even begin to think it was a bad idea to fly there on their private jets. Hilarious! What, they couldn''t at least ride in ONE private jet together? Organize a jet-pool?

*snort*

I don''t know what the solution would be at this point, but I would recommend they cut the budget to save money to hire a PR exec.

 

[Beacon]

It is a terrible PR position they are in, for sure.

But I believe that most CEOs of big companies are required to fly privately as it is required by their insurance. So we would not expect to see them in coach on UAL.

None the less, these companies are badly run and throwing good money at them will not change the fundamentals. They need a restart.

 

[movie zombie]

its part of their contract....and in one case the CEO''s wife gets the privilege also.

movie zombie

 

[TravelingGal]

Date: 11/19/2008 10:37:23 PM
Author: movie zombie
its part of their contract....and in one case the CEO''s wife gets the privilege also.

movie zombie

Then it needs to end. While that money wouldn''t save a company alone, it could go to marketing or R&D budgets. Something. Anything.

 

[Skippy123]

Date: 11/19/2008 10:46:59 PM
Author: TravelingGal

Date: 11/19/2008 10:37:23 PM
Author: movie zombie
its part of their contract....and in one case the CEO's wife gets the privilege also.

movie zombie

Then it needs to end. While that money wouldn't save a company alone, it could go to marketing or R&D budgets. Something. Anything.

Agreed. Bill Ford's personal use of the jets cost the company $185,232, while Mulally's use cost the company $172,974 and the cost for Padilla was $82,265 for the six months he was with the company during the year http://money.cnn.com/2007/04/05/news/companies/ford_execpay/ old article but gives you and idea on how much the jet use costs.

 

[fleur-de-lis]

Date: 11/19/2008 10:33:40 PM
Author: Beacon
It is a terrible PR position they are in, for sure.

But I believe that most CEOs of big companies are required to fly privately as it is required by their insurance. So we would not expect to see them in coach on UAL.

None the less, these companies are badly run and throwing good money at them will not change the fundamentals. They need a restart.

As someone whose job it was to negotiate corporate contracts (including those for insurance), I call B.S. on that bolded part which these companies have put out in the media. Changing the terms of an insurance policy to accommodate flying commercial first class is possible with a relatively minor adjustment to one's terms and resultant rate per annum.

It's like how I can get a discount on my homeowner's policy by having a home security alarm system and a further discount by having a service that auto-calls the police if a break-in is sensed; if I were to cost-cut by cutting the auto-call portion of my service, I just lose the beneficial rate my insurance company gives me for having that service and pay a slightly higher rate.

f-d-l

 

[starsapphire]

I mean, I am not against Capitalism or anything, but, sometimes, I think things have really gotten out of hand. A Big 3 auto worker makes $70 fricken dollars an hour????? Plus retirement, healthcare, etc?????? That is more than cops, firefighters, and TEACHERS! There is something wrong here. Plus the Legacy costs run around $2000+ a car?????? I think we need a reset or something.

 

[decodelighted]

The CNN article compared it to arriving at a soup kitchen in a top hat & tails! I agree ... insurance policies can be changed. This is obviously a perk that no one has *wanted* to change. Now there''s incentive. What a racket! The mayor of NYC is taking THE SUBWAY everyday ... Biden was taking AMTRAK but these blowhards are soooooo important, as proven by their running their companies into the ground, that they require private jet service. Sniff sniff STINKS.

 

[Dancing Fire]

Date: 11/19/2008 8:54:01 PM
Author: Beacon

Date: 11/19/2008 6:49:33 PM
Author: Dancing Fire
there''re no simple solution to this problem

don''t mind if it was a one time deal to save all those jobs,but what if the automakers want another $25 bil 2 years from now,then what? give each of them another $25 bil?

Forget two years, they would be back in two months. Remember the 25bill is split amongst the 3 companies. GM goes through 4 bill/ mo. They''ll be back by New Years.

They need to face the truth, file Chapt 11, kill the Union contracts, sell those private jets, reduce the way too many types of cars they sell, focus on the winners and get on with it.

It is amazing that they have the gall to come in and act like this 25 billion will fix their troubles. That is scandalous. I guess they just like flying around in those jets.

you''re right. more like two months

 

[tradergirl]

Supposedly the reason they can''t file Chapter 11 is that debtor in possession financing is nearly nonexistent these days. Okay, fine.

Then let the government guarantee the DIP or post petition financing made by a lending institution who HAS received bailout money rather than making directly loans or assistance. That may be kicking the can down the road, maybe not, if they are then forced by a bankruptcy judge and their creditors to rework some of their legacy obligations and current labor costs. These unions who say they will make no further concessions have nowhere for their workers to go if the car companies go belly up.

 

[strmrdr]

Date: 11/19/2008 11:24:47 PM
Author: starsapphire
I mean, I am not against Capitalism or anything, but, sometimes, I think things have really gotten out of hand. A Big 3 auto worker makes $70 fricken dollars an hour????? Plus retirement, healthcare, etc?????? That is more than cops, firefighters, and TEACHERS! There is something wrong here. Plus the Legacy costs run around $2000+ a car?????? I think we need a reset or something.

Jealous much?
Ever worked in a auto plant?

The starting wage is between 14 and 16 an hour and they work very hard.
The only ones making 70+ is skilled trades.
They do not have 401k and the only retirement the people have that put in 30 years is a traditional pension.
The average for the local plant is 40k + benefits which is less than my dad made in 1987 doing the same job.
The industry average is 28 an hour and the average age is 50.

 

[NewEnglandLady]

I think I''m the only one who doesn''t have a problem at all with them taking private jets to DC. They already own the jets, they have private pilots and basically the only additional cost was the fuel, which is probably cheaper than buying a ticket on a commercial flight. And I find it hilarious that Capitol Hill wants to complain about them flying in private jets? They are the KINGS of unnecessary spending.

 

[iheartscience]

Date: 11/20/2008 9:13:16 AM
Author: NewEnglandLady
I think I''m the only one who doesn''t have a problem at all with them taking private jets to DC. They already own the jets, they have private pilots and basically the only additional cost was the fuel, which is probably cheaper than buying a ticket on a commercial flight. And I find it hilarious that Capitol Hill wants to complain about them flying in private jets? They are the KINGS of unnecessary spending.

Yes, they already owned them, but apparently the GM CEO''s flight was estimated at about $20,000 round trip! I''m sure that''s equivalent to the salary of one of the laid off workers. You have to admit it''s a pretty bad PR move on their part. They just exemplified exactly what everyone hates about the bailout while they''re asking for a bailout themselves. Dumbest move ever.

 

[Ellen]

Date: 11/20/2008 9:13:16 AM
Author: NewEnglandLady
I think I'm the only one who doesn't have a problem at all with them taking private jets to DC. They already own the jets, they have private pilots and basically the only additional cost was the fuel, which is probably cheaper than buying a ticket on a commercial flight. And I find it hilarious that Capitol Hill wants to complain about them flying in private jets? They are the KINGS of unnecessary spending.

No. They said last night, it cost 20,000.00 to fly there, vs. 600.00 (per person) both ways, commercial. And doesn't the pilot still have to get paid? And don't they have to maintenance (which means paying some one) the planes?

They should ditch the planes imo. The CEO's should also take a pay cut. To me, if you're making 36 million a year, you could easily lose, oh, 35 million and still live well.

But it's not just these guys, everyone should be pitching in/doing there fare share to help.


ETA Typing while thing was!

 

[iheartscience]

Oh, and apparently all three companies asking for a bailout still operate fleets of private jets. I think all three companies have 8 jets each in their fleet. And I agree with Ellen-I''m sure it costs plenty to maintain them and have pilots for that many planes on staff.

 

[strmrdr]

re-Jets they are used for far more than moving executives around.
They have teams of troubleshooters for the very high end equipment that fly around the country and repair things.
It is far cheaper than and likely it is pretty much impossible to maintain staff at every plant for this type of thing and they need to get there quickly as every hour of downtime can cost millions.
They are also used to move parts around as needed.
Several times they have used them to fly into my cities airport to pick up enough small parts to keep the plants going when something in the procurement process fails and it will take 24 hours for a truck to get there.
One example was engine mount bolts, they didn't order them in time and since they used the same bolt as another company but with a different coating and the producing company could spare some of the other companies part and still meet orders they flew in and picked up 10 boxes of bolts which is enough to keep the plant up until the truck arrived with the right parts.
Which is why some cars ended up with gold bolts instead of blue ones and you will occasionally find a bolt with another car companies logo on it.
A mechanic buddy of mine tore apart a GM engine once and all the block bolts had the ford emblem on them.
The same thing happens to borrow parts from another factory.

Even moving the execs is grounds for a jet as they will often have 3-4 meetings in 3 different states in the same day.
You can not do that with commercial.
It is less important with the internet than it used to be but somethings have to be done in person still.

 

[Ellen]

strm, if that''s the case, then why didn''t they say that? The ONE reason I heard was that they were for security puposes. For what? Is someone going to kidnap one of these guys and hold him for ransom? Would anyone even know who they were?? Sounds, very questionable to me. But ok, maybe they do need a plane or two, but do they really need a whole fleet? And did they really need to fly to the hearing on a private jet?

 

[purrfectpear]

I work for an aerospace mfr. (the same one that Mulally left). We have a corporate jet. We don''t pick up parts in it

We use FedEx or other carriers and ship them counter to counter when we have an AOG.

The jet does make sense to fly our CEO because he has to travel with bodyguards at all times. When the plane would be going back empty from Wichita, St. Louis, Chicago etc., they''ll call any of us who have commercial travel plans to WA and ask us if we want to go on the jet instead on the return hop to Seattle. Rarely does the CEO travel alone. Usually there is an entourage of at least another 5 or 6 execs with him, plus the bodyguards.

I''m not saying it saves money, but it is practical to have ONE corporate jet. I''ve been on it by the way, and it''s pretty bare bones. I expected a bit more luxury but it was def'' the economy model.

 

[purrfectpear]

Date: 11/20/2008 10:36:43 AM
Author: Ellen
strm, if that''s the case, then why didn''t they say that? The ONE reason I heard was that they were for security puposes. For what? Is someone going to kidnap one of these guys and hold him for ransom? Would anyone even know who they were?? Sounds, very questionable to me. But ok, maybe they do need a plane or two, but do they really need a whole fleet? And did they really need to fly to the hearing on a private jet?

You wouldn''t think it (I didn''t) but they actually ARE targets for kidnapping and mayhem. I was at a big conference at an Anaheim hotel and when our CEO arrived, they cleared the ballroom and brought in bomb sniffing dogs first. It''s pretty sad when you think about it, but I guess if you were a terrorist you could get a lot of publicity if you blew up the Pres. of the biggest Aerospace or Automotive manufacturing.

They''re easily recognizable now because of the internet. They''re on the news, on Utube, etc.

Our top execs have bodyguards. They''re needed