- Jun 6, 2007
- 852
- 483
- 910
The U.S. government is considering providing financing to General Motors so it can buy Chrysler which is a terrible idea. This will reduce the number of major U.S. automakers from three to two. This reduction is bad for a number of reasons, including:
1) Auto manufacturing creates a lot of jobs, something like one in ten U.S. jobs stem from the auto industry. Losing a major U.S. automaker means losing a potential major job maker and more importantly a potential major middle class job maker.
2) If the nation sees the elimination of Chrysler it will see the elimination of a separate business with its own management staff offering unique innovation, creativity and investment into a vital jobs creating industry. Melding Chrysler into GM will likely bring GM setting a single strategic direction for all Chrysler and GM brands in regards to the power sources for all the vehicles in these brands; with extreme instability in energy prices the American people shouldnt be placing so much trust in one auto company such as GM that they will get it right in determining what types of motor vehicles at what time table America will need in the future. GM in an effort to save money will likely use the same basic designs across several brands which would have multiple negative repercussions from an American economy and an American consumer standpoint.
3) Allowing this merger will result in thousands if not tens of thousands of layoffs of the combined Chrysler and GM companies, something America hardly needs at this time when the nation is in or definitely entering a recession. The layoffs will occur because once combined there will be duplicative staff that will not be needed and GM officials have said as much, that is, once the merger occurs there will be layoffs.
4) Allowing this merger will result in GM having eleven brands (GM plus Chrysler brands) in its corporation. Based on the history of U.S. business in all probability one day in the future GM management will probably say it is in the best financial interests of GM stockholders if we focus on our stronger brands and drop our weaker brands which will in all likelihood be former Chrysler brands which will likely result in the brands being sold to a foreign auto company or retired, considering that foreign auto makers even if they manufacture cars in the U.S. dont use nearly the percentage of U.S. made parts and thus U.S. labor as U.S. automakers these scenarios will likely result in significant U.S. job losses.
5) America has an alarming trade deficit. Automobiles are big ticket items. American automakers have a track record of success in selling automobiles in foreign countries. In allowing the demise of Chrysler, America is likely throwing away a means to help reduce its foreign trade deficit not something which is a good course for America to be taking considering the ramifications of long-term huge trade deficits.
6) If America allows this reduction of U.S. auto industry strength from three major automakers to two it will be establishing a clear sign and symbol that America is not the premier economic power it once was and there is a problem with manufacturing in the U.S., U.S. manufacturers are not as competitively strong relative to foreign manufacturers as they once were. Allowing this merger will result in the U.S. having only two major auto manufacturers where Japan has three, Toyota, Honda and Mitsubishi. The U.S. government in allowing this merger to go through will in a real sense be saying America quits were throwing in the towel; outside of Franklin Deleanor Roosevelt the greatest American president in the last hundred years bar none was Ronald Reagan who brought America back from the brink of a depression and if he wouldnt quit on Chrysler the American people should honor his legacy and likewise not quit on Chrysler and oppose this merger.
This is what the U.S. government should do here. The U.S. government has $25 billion from Congress it is authorized to use to help U.S. automakers to redesign their cars and retool their assembly lines to produce the cars the American people need now and in the future. The U.S. government should just follow this congressional directive for all three U.S. automakers with this $25 billion dollars.
This GM/Chrysler matter is a different matter along with the recession and its impact on the U.S. auto industry. With respect to GM, the only reason GM wants Chrysler is they want the billions of dollars of Chryslers cash reserves so they can ride out the recession. What the U.S. government should do is go to GM, Ford and Chrysler and give them a good credit line to keep them afloat through 2010, this will then take them through the recession. The U.S. Treasury should first use the balance of this already authorized $25 billion for retooling U.S. automakers they dont lend to automakers for retooling for this credit line and take the remainder needed for this credit line out of the $700 billion economic rescue package already passed and when Congress comes back into session they will likely pass separate financing for this credit line because auto industry jobs are too important this industry impacts every Congresspersons district, then Treasury will have this auto credit-line portion of the $700 billion back to fix the economy. It is quite possible if the U.S. government does its job and stabilizes oil prices at around $85.00 dollars/barrel and helps all the viable homeowners that are underwater with their home mortgages putting a floor on home sale prices and fixes the credit markets and does this relatively quickly, America could see come June of next year the economy be on the upswing and the U.S. automakers will not have to tap these credit lines or tap them to a significant degree.
With respect to Chrysler, the state of Chrysler epitomizes the greed and irresponsibility of Wall Street. Since Cerberus Capital Management took Chrysler private they bled it dry economically and have almost killed it. They did not invest appropriately in car design and plants at Chrysler and the American people have seen a lot of good people leave Chrysler due to its bad ownership during Cerberuss ownership. Chryslers recent poor quality ratings for its cars probably sums it up well what Cerberus has done to Chrysler. What Chrysler needs first and foremost is new leadership immediately at the helm and good long-term leadership that will look out for the long-term interests of the company. The best way to get long-term good leadership at Chrysler is to have the company owned by many people with no one person or entity owning more than 15 percent of the company so that there will be many voices advocating for the long-term health of the company, this could be achieved by taking Chrysler public with one hundred percent of the ownership of Chrysler owned by publicly traded stocks, obviously this is a long-term plan for Chrysler because of its present bleak financial outlook it is not reasonable to make a public common stock offering for Chrysler.
To achieve this returning Chrysler to good health, the Treasury department should arm twist the management of Cerberus to give up control of Chrysler to at least a vast vast degree if not completely; condition any financial help from the U.S. government for Chrysler on this condition. Either the Treasury department should get a good management company like Berkshire Hathaway to put up an equity stake in Chrysler and turn over running the company to them, the equity stakes primary purpose is so that this management company is on the line financially and so has the proper incentive to do a great job. Or, the government can set-up a board of directors of parties that have large vested interest in Chryslers existence until the company becomes healthy and can reasonably be sold through a public stock offering. Such vested interests would be the unions for Chrysler workers and the governors and the county commissioners or mayors of the communities where Chrysler plants and offices are located. Furthermore, the U.S. Government should condition any help for Chrysler that Cerberus sell all its stake in Chrysler through a general public stock offering once the value of the company hits a certain level, a level where it is financially out of danger and no longer at risk of falling into bankruptcy. Moreover, there should be a condition that Cerberus is prevented from buying any ownership interest in Chrysler and any other U.S. automaker for the following twenty-five years after it makes this public offering.
1) Auto manufacturing creates a lot of jobs, something like one in ten U.S. jobs stem from the auto industry. Losing a major U.S. automaker means losing a potential major job maker and more importantly a potential major middle class job maker.
2) If the nation sees the elimination of Chrysler it will see the elimination of a separate business with its own management staff offering unique innovation, creativity and investment into a vital jobs creating industry. Melding Chrysler into GM will likely bring GM setting a single strategic direction for all Chrysler and GM brands in regards to the power sources for all the vehicles in these brands; with extreme instability in energy prices the American people shouldnt be placing so much trust in one auto company such as GM that they will get it right in determining what types of motor vehicles at what time table America will need in the future. GM in an effort to save money will likely use the same basic designs across several brands which would have multiple negative repercussions from an American economy and an American consumer standpoint.
3) Allowing this merger will result in thousands if not tens of thousands of layoffs of the combined Chrysler and GM companies, something America hardly needs at this time when the nation is in or definitely entering a recession. The layoffs will occur because once combined there will be duplicative staff that will not be needed and GM officials have said as much, that is, once the merger occurs there will be layoffs.
4) Allowing this merger will result in GM having eleven brands (GM plus Chrysler brands) in its corporation. Based on the history of U.S. business in all probability one day in the future GM management will probably say it is in the best financial interests of GM stockholders if we focus on our stronger brands and drop our weaker brands which will in all likelihood be former Chrysler brands which will likely result in the brands being sold to a foreign auto company or retired, considering that foreign auto makers even if they manufacture cars in the U.S. dont use nearly the percentage of U.S. made parts and thus U.S. labor as U.S. automakers these scenarios will likely result in significant U.S. job losses.
5) America has an alarming trade deficit. Automobiles are big ticket items. American automakers have a track record of success in selling automobiles in foreign countries. In allowing the demise of Chrysler, America is likely throwing away a means to help reduce its foreign trade deficit not something which is a good course for America to be taking considering the ramifications of long-term huge trade deficits.
6) If America allows this reduction of U.S. auto industry strength from three major automakers to two it will be establishing a clear sign and symbol that America is not the premier economic power it once was and there is a problem with manufacturing in the U.S., U.S. manufacturers are not as competitively strong relative to foreign manufacturers as they once were. Allowing this merger will result in the U.S. having only two major auto manufacturers where Japan has three, Toyota, Honda and Mitsubishi. The U.S. government in allowing this merger to go through will in a real sense be saying America quits were throwing in the towel; outside of Franklin Deleanor Roosevelt the greatest American president in the last hundred years bar none was Ronald Reagan who brought America back from the brink of a depression and if he wouldnt quit on Chrysler the American people should honor his legacy and likewise not quit on Chrysler and oppose this merger.
This is what the U.S. government should do here. The U.S. government has $25 billion from Congress it is authorized to use to help U.S. automakers to redesign their cars and retool their assembly lines to produce the cars the American people need now and in the future. The U.S. government should just follow this congressional directive for all three U.S. automakers with this $25 billion dollars.
This GM/Chrysler matter is a different matter along with the recession and its impact on the U.S. auto industry. With respect to GM, the only reason GM wants Chrysler is they want the billions of dollars of Chryslers cash reserves so they can ride out the recession. What the U.S. government should do is go to GM, Ford and Chrysler and give them a good credit line to keep them afloat through 2010, this will then take them through the recession. The U.S. Treasury should first use the balance of this already authorized $25 billion for retooling U.S. automakers they dont lend to automakers for retooling for this credit line and take the remainder needed for this credit line out of the $700 billion economic rescue package already passed and when Congress comes back into session they will likely pass separate financing for this credit line because auto industry jobs are too important this industry impacts every Congresspersons district, then Treasury will have this auto credit-line portion of the $700 billion back to fix the economy. It is quite possible if the U.S. government does its job and stabilizes oil prices at around $85.00 dollars/barrel and helps all the viable homeowners that are underwater with their home mortgages putting a floor on home sale prices and fixes the credit markets and does this relatively quickly, America could see come June of next year the economy be on the upswing and the U.S. automakers will not have to tap these credit lines or tap them to a significant degree.
With respect to Chrysler, the state of Chrysler epitomizes the greed and irresponsibility of Wall Street. Since Cerberus Capital Management took Chrysler private they bled it dry economically and have almost killed it. They did not invest appropriately in car design and plants at Chrysler and the American people have seen a lot of good people leave Chrysler due to its bad ownership during Cerberuss ownership. Chryslers recent poor quality ratings for its cars probably sums it up well what Cerberus has done to Chrysler. What Chrysler needs first and foremost is new leadership immediately at the helm and good long-term leadership that will look out for the long-term interests of the company. The best way to get long-term good leadership at Chrysler is to have the company owned by many people with no one person or entity owning more than 15 percent of the company so that there will be many voices advocating for the long-term health of the company, this could be achieved by taking Chrysler public with one hundred percent of the ownership of Chrysler owned by publicly traded stocks, obviously this is a long-term plan for Chrysler because of its present bleak financial outlook it is not reasonable to make a public common stock offering for Chrysler.
To achieve this returning Chrysler to good health, the Treasury department should arm twist the management of Cerberus to give up control of Chrysler to at least a vast vast degree if not completely; condition any financial help from the U.S. government for Chrysler on this condition. Either the Treasury department should get a good management company like Berkshire Hathaway to put up an equity stake in Chrysler and turn over running the company to them, the equity stakes primary purpose is so that this management company is on the line financially and so has the proper incentive to do a great job. Or, the government can set-up a board of directors of parties that have large vested interest in Chryslers existence until the company becomes healthy and can reasonably be sold through a public stock offering. Such vested interests would be the unions for Chrysler workers and the governors and the county commissioners or mayors of the communities where Chrysler plants and offices are located. Furthermore, the U.S. Government should condition any help for Chrysler that Cerberus sell all its stake in Chrysler through a general public stock offering once the value of the company hits a certain level, a level where it is financially out of danger and no longer at risk of falling into bankruptcy. Moreover, there should be a condition that Cerberus is prevented from buying any ownership interest in Chrysler and any other U.S. automaker for the following twenty-five years after it makes this public offering.
