Obama To Detroit City; Drop Dead

[FlyingJ]

Stickin' it to the UAW Health Plan? Thus Won't End Well;

http://online.wsj.com/article/SB124035637935940943.html

[MIRepublic]

Detroit as a moniker for the domestic auto industry? Yeah, sure. It's been plainly obvious for some time, now. Detroit "City" as in the "municipality of Detroit/Detroit city government"? No, and I'm a bit confused why you'd even add it as if he's made or even implied a public judgement on Detroit as a municipal unit. The addition of "city" knowing that Detroit City collectively means city government was just such an odd choice of a term.

[Novine]

It's more conservative claptrap. The WSJ is trying to claim that if only Obama stood out of the way, the bondholders and unions would hold hands and sing Kumbaya while Americans would rush in to buy GM products in a way that they haven't been doing. Obama isn't telling GM how to run their business. He's telling them that they can no longer stick their heads in the sand, at least not on the US taxpayers dollar.

[R8RBOB]

After reading the article which was more satire than informal, it appears that the creater of this thread wants Detroit to drop dead, not the president. The writer of that piece did not mention Detroit once in his article. So, why would Obama want the city of Detroit to drop dead? Is there anyway to delete this nonsense?

[Mikeg]

I'm not going to try defending the original poster's addition of the word "city" in the thread title, but honestly, some of the reaction to this article is "over the top".

It's an undeniable fact that a GM bankruptcy [["surgical" or otherwise, they're the same thing) won't end well for the city of Detroit, the state of Michigan, the UAW or GM's many retirees. It's also clear that so far, the money loaned to GM by the executive branch of the Federal Government - and the many strings that are seemingly attached to it - have had little impact on creating the sense of urgency that is needed to cause all parties to come to an agreement and avoid a Chapter 11 filing by GM.

First off, the article did use the word "Detroit", but as a euphemism for GM, Chrysler and Ford.

Secondly, an attempt to dismiss the points made in this article by labeling it "conservative claptrap" or "satire" shows that you probably didn't fully read the article [[or else you would have seen the word "Detroit") and that you are letting your political views blind you from some economic realities.

Unlike the recent spike in oil and gasoline prices, the Federal Government's CAFE laws never saved a single drop of foreign or domestic oil [[it has enabled drivers to drive more miles per year on the same budget). If President Obama actually believes what he says [["the only sensible way to reduce fossil-fuel dependence is to put a price on it"), then he is admitting that it makes no sense to continue with the CAFE regulations.

How can you make the claim that President "Obama isn't telling GM how to run their business" when in fact he [[along with a complicit Congress) has told them to:
a) fire their CEO
b) eliminate certain divisions and products and keep others in their product line-up
c) increase the fuel economy of the fleet they sell, regardless of what consumers are willing or able to buy
d) give equity positions to their lenders and suppliers of parts and labor in return for voiding contractual agreements and writing-off promises of cash payments
e) leave all of the other provisions of their contract with the UAW intact, except for the VEBA
f) do all of the above and make a profit - but only after they pay back the money the government loaned them, possibly in the form of equity in the company, which reads to me like a threat of nationalizing the company.

What you have here is in effect the executive branch of the Federal government directing a defacto GM bankruptcy case as a condition of making a temporary loan [[while also dictating some non-economic issues), instead of the typical Federal government role where the judicial branch oversees the bankruptcy case in a court of law and without meddling in non-economic issues.

[iheartthed]

Well, if it hadn't been for the executive branch, the legislative branch would have let "Detroit" drop dead months ago.

[exdetroiter]

Blame should not be placed on Obama, how many people on this forum currently drives an American made automobile? How many people in your family supports the American made products? Finally, how many people in your families that don't support American made products will be affected by this bankruptcy? EVERYONE! No one would feel any better if the government was giving money to the GM without asking questions! Find someone else to blame and it starts with a look in the mirror.

[Mikeg]

Well, if it hadn't been for the executive branch, the legislative branch would have let "Detroit" drop dead months ago.

It depends on how you look at it. If back in December 2008 President Bush had chosen not to use TARP funds for a loan to GM and Chrysler [[funds which had been provided by the legislative branch to be used by the executive branch as they saw fit), GM and Chrysler would already be half-way through the Chapter 11 bankruptcy process and much of the psychic pain that is still to come would already be behind us - without the non-economic meddling. A Chapter 7 bankruptcy leaves a company [[and in this case, possibly a whole region) "dead" and by prolonging the inevitable, the executive branch has likely signed the death warrant for at least one of the Detroit-based auto manufacturers.

No one would feel any better if the government was giving money to the GM without asking questions!

What the executive branch is doing in return for loaning the money to GM and Chrysler has gone far beyond "asking questions".

When you borrow money from a bank, they rightly have you answer a lot of questions and possibly promise some collateral, but they don't interfere or dictate how you budget your money or who makes your financial decisions, make you divorce a spouse, make you move in with a former competitor, etc.

[R8RBOB]

When you borrow money from a bank, they rightly have you answer a lot of questions and possibly promise some collateral, but they don't interfere or dictate how you budget your money or who makes your financial decisions, make you divorce a spouse, make you move in with a former competitor, etc.

This would be true if GM and Chrysler didn't come back with their tin cups begging for more and more.

For those who don't think a bank would interfere, I was watching a doc years ago about Trump when he was going through his problems and they had a guy, I don't who it was but I remembered what he said. He said: when you owe thousands of dollars to the bank and can't pay it back, the bank will go all out to destroy you, but when you owe millions of dollars, the bank want to be your partner to work out a plan to recover the money.

The White House had history to back the removal of Wagoner. In 1920, it was the BANKS that forced out the founder of General Motors Billy Durant after he returned to GM from his first exile. So you see what Obama did would have been no different that any bank president would have done.

[detrola]

And I thought the dems were pro labor.

[FlyingJ]

R8RBOB, not hardly...I'm paraphrasing a NY Daily News Headline on our own[[or Omaha's?) Gerald Ford. Obama thinks he's Harry Truman or JFK taking on the Steel Industry-or even Harry S. on Coal-but he's looking at it as a lawschool excercise instead of the potential Realpolitik Disaster. But don't mind me, I'm just a guy with $120,000 of GM products in my driveway when the Red Wings are playing, 2 union cards in my wallet, whose informational picket was bitched out & moved 'round back by Democratic Party muckety-mucks while the jackals we were striking against rolled past in limos. Couldn't see if they were laughing at us thru the tinted windows, sorry

[R8RBOB]

R8RBOB, not hardly...I'm paraphrasing a NY Daily News Headline on our own[[or Omaha's?) Gerald Ford. Obama thinks he's Harry Truman or JFK taking on the Steel Industry-or even Harry S. on Coal-but he's looking at it as a lawschool excercise instead of the potential Realpolitik Disaster. But don't mind me, I'm just a guy with $120,000 of GM products in my driveway when the Red Wings are playing, 2 union cards in my wallet, whose informational picket was bitched out & moved 'round back by Democratic Party muckety-mucks while the jackals we were striking against rolled past in limos. Couldn't see if they were laughing at us thru the tinted windows, sorry

Sorry you feel that way. However, saying that Obama want to take on the auto industry is over the top. What!!! You think the President was drooling at the mouth saying "I can't wait to bring GM and Chrysler to its knees." Would you prefer him to roll up his sleeves like Bush and sound and look tough?

The President was dealt a losing hand. He can't throw the cards on the table and say fold. He has to play the cards and try to make it a winning hand.

[iheartthed]

Wow, why would it be necessary for anyone to have $120,000 worth of GM products in his driveway at one time? And the fact that you can afford to spend that much money, and have spent that much money, on GM products somehow makes GM's viability a priority for the rest of America?

Also that NY Daily News headline was not referring to the Ford administration refusing to assist a private sector corporation. The headline was referring to the Ford administration refusing to use federal funds to bailout the New York City government, which at the time was on the verge of being the only major American city in history to have ever become insolvent [[Detroit today is coming close to making history in that regard).

[firstandten]

What the executive branch is doing in return for loaning the money to GM and Chrysler has gone far beyond "asking questions".

When you borrow money from a bank, they rightly have you answer a lot of questions and possibly promise some collateral, but they don't interfere or dictate how you budget your money or who makes your financial decisions, make you divorce a spouse, make you move in with a former competitor, etc.

The executive branch, if they are giving you a loan, or purchasing equity in your company as a form of a bailout has the right to ask you just about anything they deem important.Especially if you know the company is going to come back for more loans. Regardless of how you feel about bailouts not to ask those types of questions would be irresponsible of our government.

[Novine]

" If back in December 2008 President Bush had chosen not to use TARP funds for a loan to GM and Chrysler [[funds which had been provided by the legislative branch to be used by the executive branch as they saw fit), GM and Chrysler would already be half-way through the Chapter 11 bankruptcy process and much of the psychic pain that is still to come would already be behind us - without the non-economic meddling."

Mikeg, you didn't mention the massive economic pain that would have come with that. I don't know if there's any way to avoid it but only dishonest debaters will pretend that it could have been if only their plan had been followed. The argument that federal regulations are tying the hands of the domestics ignores that they apply equally to the foreign auto companies. People might not like the rules on the playing field but they apply to all companies equally. In response to the specifics of what the federal government might be telling GM to do, I would say that most of those steps are things that GM would have had to do whether the feds were involved or not. Are you going to claim that GM could somehow avoided all of those painful steps if only the federal government was not involved?

[Mikeg]

The White House had history to back the removal of Wagoner. In 1920, it was the BANKS that forced out the founder of General Motors Billy Durant after he returned to GM from his first exile. So you see what Obama did would have been no different that any bank president would have done.

First of all, the White House is not a bank and President Obama is not a bank president. Secondly, it was not bankers who forced Billy Durant out in 1920, it was the DuPonts on the board of directors who forced him out during a financial downturn. If only GM had such an aggressive board of directors in recent years.....

So other than the revisionist type, what other history can be offered as support for the White House's attachment of so many strings to the use of TARP funds? I think the answer is "none", because we are in uncharted territory and once the government agrees to become the "lender of last resort", the temptation for politicians to usurp the roles of corporate board of directors and Federal Bankruptcy judges is irresistible. That is how we end up with elected officials pledging to honor warranties on GM vehicles and the health care of UAW retirees [[with your tax dollars) while at the same time pressuring bondholders and creditors to accept pennies on the dollar in exchange for equity positions in a restructured company. Somehow, I think that the bondholders and creditors will prefer to accept whatever they can get in the more level playing field of Chapter 11 proceedings in Federal Bankruptcy Court.

Edited to add this response to Novine:

I only mentioned the "psychic pain" because the massive economic pain would not yet have kicked in. There is no way to avoid it and I'm afraid that it will still come to that. I don't think a "brokered" restructuring like what is being attempted to avoid a Ch 11 for Chrysler or GM will work in the long run without a long-term involvement of the Federal Government and the promise of more "loans" or pledges to continue protecting certain classes involved in the restructured corporate business relationships, in other words, a partially-nationalized corporation.

The billion-pound gorilla lurking in the corner is the impact that a termination of the GM pension plan would have on the Government Sponsored Entity known as the Pension Benefit Guarantee Corporation. The assets and obligations of the GM pension plan dwarfs those of the PBGC and a termination of the GM pension plan will initiate a death spiral of the PBGC unless the Federal Govt. steps in with $$$$$ just like they did with Fannie Mae and Freddie Mac. In the long run, I think it would have been much cheaper [[for the Federal Govt.), fairer for all creditors and quicker if GM and Chrysler had filed for CH 11 back in December. I know that Ch 11 is a slow process, but I think it is inevitable anyway and the sooner they file, the sooner we all can get out from under all the economic uncertainty that is paralyzing our region.

[jiminnm]

What the executive branch is doing in return for loaning the money to GM and Chrysler has gone far beyond "asking questions".

When you borrow money from a bank, they rightly have you answer a lot of questions and possibly promise some collateral, but they don't interfere or dictate how you budget your money or who makes your financial decisions, make you divorce a spouse, make you move in with a former competitor, etc.

Mike, if you'd ever been involved in corporate lending, especially unsecured lending to a financially shaky borrower, you'd know that the lender gets heavily involved in the borrower's business and often do exactly the things you describe.

[Novine]

" I know that Ch 11 is a slow process, but I think it is inevitable anyway and the sooner they file, the sooner we all can get out from under all the economic uncertainty that is paralyzing our region."

If you think 'economic uncertainty' is the source of the economic problems in Detroit and Michigan, just wait until you see how a Chapter 11 drops on us. We'll look back on this time as the "good old days".

[Mikeg]

Mike, if you'd ever been involved in corporate lending, especially unsecured lending to a financially shaky borrower, you'd know that the lender gets heavily involved in the borrower's business and often do exactly the things you describe.

Sure, they will heavily involve themselves in the business through due diligence before-hand and to monitor the financial health afterward and even involve themselves in some corporate boardroom decision-making. However, if they are smart, they aren't going to unilaterally force decisions that they are not qualified to make and which could jeopardize the repayment of the loan.

Would or should a non-shareholding banker have the power to unilaterally make a company merge with a competitor or decide which products that company should or should not make? Once the board of directors have no say in decision-making, corporate governance has been effectively hijacked and the stockholders have lost all of their rights.

[Mikeg]

If you think 'economic uncertainty' is the source of the economic problems in Detroit and Michigan, just wait until you see how a Chapter 11 drops on us. We'll look back on this time as the "good old days".

I never said it was the source, but if we are ever going to experience a rebound, economic uncertainty has to be behind us. This uncertainty is affecting even the non-automotive sectors of our state's economy. Until then, outside investment money will continue to go elsewhere where there is less uncertainty and local discretionary purchases will continue to be deferred.

[Novine]

Let me make it clearer for you, Chapter 11 would be an economic tsunami for SE Michigan. We won't have to worry about economic uncertainty because we can be guaranteed that it will be an economic wasteland for years to come. Perhaps you can explain why that will be a better situation for SE Michigan and its residents.

[Supersport]

The outcome of this will be interesting, as will the impact to the Democratic party. There is no denying that I like much of what Obama has done thus far, though the road we are about to head down may lose him a lot of support.

Union members are historically more Liberal than conservative, why? Well, the Democrats have historically been more pro-union than the conservative party. Yet with the current situation of the auto industry, the direction manufacturing in this country is heading, that long time love affair may be about to end. I immediately questioned Obama's decision when he told Chrysler "Join an alliance with Fiat, or go out of business!" Does anybody realize what exactly that means? Initially, Fiat will own 35% of Chrysler, with the option to own up to 55%. Essentially, Chrysler is being given away! Fiat does not wish to take on any of Chrysler's debt, nor offer any money to Chrysler. The only thing to be gained by Chrysler is access to their small car/fuel efficient technology.

Seriously, there is no doubt a market for small/compact/fuel efficient cars, yet are they really for everybody? Does a family of 4 or 5 really want to all pack into a little compact car? I'm not saying there isn't a place for them, but the market is not as big as some people seem to believe. Plus, not everybody lives 30-45 miles from work. Me, I commute 4 miles to and from work. To somebody like me, should I really care what kind of mileage I get? Fuel is a fairly insignificant part of my monthly expenses.

Lastly, and perhaps most importantly, do we really want our federal government coming in and taking control of companies that are struggling? I mean come on, and entity that doesn't have to live/die by balancing a budget every year? These stimulis money to "jump start" they economy...where is it coming from? Surely not out of thin air. Are we selling more bonds to China, or somebody else this time around?

I truly thought during last election that Obama would have been the better of the two candidates for the economy. Instead, it appears he is ready to pick out tombstones for at least 2 of the big 3. What happens to middle class America if you take away their pay? What happens to their kids that they had hoped to send to college, which costs increasingly more every year?

I've vowed many times to be bi-partison, and by no means to I feel the conservative party could have done any better. In fact, I was shocked that after the financial bailout that Bush even tossed the auto industry a bone to keep them afloat. My concern is that both parties seem to still be focused on the high paying/well to do financial market, and have given up on "main street America."

People are worried. Never in my life have I known so many friends to be unemployed, unable to find work in ANY state. Never before have my parents been this unstable in their field of work. My dad was laid off from a company that had never before laid people off during it's 30-40 year history. That company is now on the brink of closing it's doors. My mom, her company lays people off for weeks at a time, calls them back for short runs, and plan future shut downs this summer also lasting months. My parents are "main street America," by dad went above and beyond the advised investments for retirements, only to watch those stocks get cut in half in recent years.

I love what the federal governement is doing in regards to the mass transit initiative, I would love to see an efficient rail system during my lifetime. Yet so many other areas I feel the government is failing us. When our middle class becomes lower class, what becomes main street at that point?

[firstandten]

BREAKING NEWS

GM is getting rid of the Pontiac brand

[Mikeg]

Chapter 11 would be an economic tsunami for SE Michigan. We won't have to worry about economic uncertainty because we can be guaranteed that it will be an economic wasteland for years to come.

There is more to SE Michigan's economy than just the auto industry. Yes, it is heavily dependent on it but regardless of a company's level of direct dependency, no one is investing in assets or creating jobs here without government subsidies as long as the uncertainty continues to exist around the post-Ch 11 or 7 future of GM and Chrysler.

We've been in the middle of that tsunami for years already and it is unstoppable. Ch 11 would bring the crest and if either of the automakers can successfully emerge from it, there will continue to be jobs for the survivors. It's been the equivalent of the frog in a slowly warming pot of water - he doesn't know that the end is near until the temperature reaches the boiling point. Yes it will be painful. I fully expect that my GM pension will be reduced by 30 to 50%. But the sooner the shell of our auto industry is able to restructure, the sooner we will be able to start the recovery. The longer the executive and legislative branches of the Federal government delay the inevitable with loans and meddling, the more remote the chances of a successful re-emergence from Ch 11 become.

[firstandten]

http://www.foxnews.com/politics/2009...-close-plants/


http://blogs.usatoday.com/ondeadline...iac-brand.html