"Viability Now?" Congress Needs to Get Real.

[...] loan requires the automakers to become “viable” by the end of March, 2009.    As I wrote last week, “viability” in three months is a tall [...]

It's the UAW that is killing the Big 3. I heard Toyota sold something like 9.3 million cars last year and Ford sold 9.7 million. Toyota around 15 billion and Ford lost 38 billion. You cannot pay the benefits and the salaries that the big 3 are paying and compete with those that aren't. The Democrats owe the unions and the environmentalists so they will nationalize the auto industry to do so. Everyone is so excited about gas prices being low but the Dems have no intentions of drilling in this country. They want us all driving ugly two seat cars that you plug in every 40 miles while they drive their big SUVs and fly their jets. They believe they know best, not. I want my SUV so start drilling and let the Big 3 file bankruptcy and restructure without the UAW. Things would turn around in a hurry. And I don't have a warm fuzzy knowing a Chicago politian will be taking over next month, doesn’t he owe the UAW after they donated about 360 million toward the elections.

Even if two of the big three (not counting Ford, they're not currently poised to take Fed string-attached money) took a tack to become "profitable", they'd still have to spend time and money to figure out where in their behemoth organizations they could squeeze out waste without violating contract/legal obligations. Organizations that large do not move fast (if at all), they need multi-year planning and enormous lead time. Once they decide on an acceptable course of action, it still takes 18 months or so to get over the hump of the main thrust of any action they take, and usually another few months for the shattered pieces to be swept up. Ford started this planning two years ago, and if the government would simply let the weaker guys (ie, those that played fat dumb and happy for the past three years) fail, Ford would be the big winner.

Comment on Texas's comment: You are doing a good job of stating that the economy and government is intricate. I figure the reason the politicos are being "tough" here is that the public now knows they have been faking it all along. Imagine us sending someone to Washington on an all expense paid trip with full lifetime health benefits plus whatever they can steal just because they are able to work their way up in local politics and get votes ? The journalists have presented the maximum number of words and the lousiest amount of clear thinking because they have a corrupt thesis. They think their "job" is to report the news. This guy Brian Sullivan is one of the few who exhibits any brainpower.

Brian, I was listening today on XM and I think you were on with Shep discussing the auto bailout. All of your points were spot on, including and most importantly a "consumer bailout". This is because none of the plans currently involves an increase of new auto sales beyond the projected 11 million (+/-)for 2009, as opposed to a more normal 16 million units. That's at the root of the "good money after bad" argument, because no one sees a recovery in sales-which, in my opinion is THE key in part to "jump starting" a recovery, or at least bridging the longer (more realistic)period to viability. I believe we can make more effective use of the monies about to be wasted to prop up the manufacturers instead by giving an incentive to consumers to spend more, and clearing out inventories which will keep the production lines moving, and more importantly take the focus off the negative climate onto a positive one covering the sales increase. I've been in the retail management sector of the auto business for 18+ years, so I've seen the ups and downs up close, and have a grasp of what works and what doesn't. Moving iron cures many ills, point blank, and here's the best way to utilize government funds to stimulate the market. In fact, you should pass it along to the key players for consideration. We know that Congress is willing to go along with some form of spending to help out, originally expecting the amount to be about $25B. They just can't agree on how it should be utilized for best results. Well let's look at it from a macro sales point of view. As stated above, in recent years about 16 million new cars/light trucks would be retailed. At an average transaction price of $25000/unit, that would total about $400B in gross sales dollars(pardon the loose math). This would mean at a national average sales tax rate of 5%, approximately $20B would be collected by the states in sales tax revenue. If, beginning in January of 2009 for a period of one year, sales tax on new cars were waived to consumers, the federal government could reimburse the states the amount they normally would collect from buyers (up to the $20B). The states would still receive their funds, consumers would respond extremely positively to the notion of not giving money to the government, banks would be in a better position to approve the loans with no sales tax financed in the deal, and the consumers along with the auto companies both get a stimulus package that costs less than the $25B that has been discussed already. Much more bang for for the bailout buck, so to speak. And most importantly, the national focus (media) would be on something other than the doom and gloom so prevalent now. This will work as the best solution on all fronts. Similar programs already work extremely well in states like Tennessee where they sponsor a tax-free day just before school starts for families to buy anything related to school preparation. Businesses do very well on those days, and it's the consumers driving the success through more spending. Give me your thoughts on the viability of a program like this at jeffmays7@hotmail.com

Re: Comment by KB I am in the new car business and I guarantee you that they do not have a clue. Few businesses are so regulated by governmental agencies -- from the Consumer Product Safety Commission on up to the IRS. In between we have OSHA, the EPA, EEOC,NHTSA, and all the agencies that regulate lending, financing,etc. Even the window sticker on a car is regulated. And that doesn't include the state agencies. But does anyone even have a total picture of what the business model involves -- the answer is a resounding NO! Our dealership foresaw problems back in 2006 and as a result we have been restructuring constantly for two years and have more to do. And it has been tough. But we don't have enterprise partners who are standing in the way of it with legions of lawyers like GM, Ford, and Chrysler will face. Imagine the UAW, the vendors, the suppliers, the sub-contractors, the lenders, and the shareholders with their lawyers all trying to influence the nuts-and-bolts of a realistic turn-around plan. It is simply not going to happen. And if a plan even makes it to paper, it will be "Obamacized", that is it will say everything and mean nothing and they will be back at the table for more. I can believe the Administration, Congress, and the Senate all can fool themselves to believing something can be done. After all -- most are lawyers and are good at persuasion including persuading themselves something is what it is not. Prepare to open your wallets permanently.

Of course they're pandering. The gov't is pandering to a public that is being fear mongered again. Gov't exists in permanent crisis mode now. That's the only way it can get away with stealing from the taxpayers in the name of saving them from a worse calamity. What so many don't want to accept is the fact that gov't stealing causes greater calamities down the road. Keynes tried to justify gov't stealing, called it investment. I just hope at some point we'll all point out that the emperor has no clothes and tell gov't to stop spending, give it back to the citizens, let us take care of business and our neighbor. We'll do it. And we'll do it better and more effectively than the gov't could ever hope to do. Alas, though, I'm a realist. I don't expect the general populace to point out the naked emperor in my lifetime.

congress just does not get, it's not the big three's fault that this economy is very bad right now,they're giving the automakers all kinds of concessions for the 15 billion dollar [LOAN] not a bailout. do they realize the severerty of what would become of AMERICA if these companies fail. they gave wall street 700 BILLION no questions asked,do they realize how many jobs would be lost, who's gonna pay taxes in america if these are lost. in Arlington'TX they estimate it too be around 350 million dollars per year. The Republicans who are in congress just dont get it thats why they suffered massive losses in the election this year,I truly believe they only want two classes of people in this country the RICH and POOR. how do they know what their constituent's want george bush and the republican party are responsible for this country's demise!!!! And the November 4 2008 election should let you know that people have had ENOUGH!!! You all should give up your salaries because none of you deserve a penny!!! It will be a sad day for all if the big three fail.

Brian is the ONLY one making any sense. It does not matter what the gov or car companies do; does not matter what costs they cut; if now one is buying cars it isn't going to work. Yet no one is looking at this angle. We're pouring the money in a hole.

The conversion to natural gas would work. How you say, well a considerable number of homes already use the stuff to heat, get hot water, and cook. So, why not fuel the daily driver as well. The distribution system is already in place (for some) and installation of the appropriate system in homes would not be that difficult nor would converting most gasoline powered cars. Now, how do we pay for it. Simple, federal grant to individual owners through their respective natural gas suppliers. Besides natural gas is here and not over there. It's cheaper to use and not as polluting as gasoline. As a side benefit your gasoline powered vehicle will run cleaner maybe resulting in longer life an less maintenance.

The conversion to natural gas would work. How you say, well a considerable number of homes already use the stuff to heat, get hot water, and cook. So, why not fuel the daily driver as well. The distribution system is already in place (for some) and installation of the appropriate system in homes would not be that difficult nor would converting most gasoline powered cars. Now, how do we pay for it. Simple, federal grant to individual owners through their respective natural gas suppliers. Besides natural gas is here and not over there. It's cheaper to use and not as polluting as gasoline.

Yes, this auto bailout is about jobs. And, it is specifically about Democrats protecting union workers: the very unions that support Democrat politicians. I think they call this payback. To assume that the average joe does not see through the dog-and-pony show currently going on is a fallacy built upon a house of cards. I wish I lived where I could vote against Pelosi, Reid, Franks and Schumer. The stench coming out of Washington will only clear for a little while once George Bush leaves town with his tail between his legs. And, his golden parachute firmly in hand.

How do they become profitable in a short period of time? It's easy, just take some whiteout and cover up the negative sign! Seriously, you're right and it shows one of two things (maybe both): either Congress and the White House really don't have a clue, or they are simply pandering to the (vast) majority of people who truely don't understand.

Is this the same congress that just bailed out Wall Street? Are we asking that reality become part of the equasion now? What is the actual dollar amount Per actual tax payer who pays some form of real taxes? We know that 120 million of our 300 million are under age 18. We have retired and then another what 40% who pay little no taxes at all. The government earns just over $100 Million dollars per day in the 18.5 gas tax; so would the government be hurting itself by making the car companies raise significantly the mileage requirements and according to the new Obama plan; he wants to have all cars off oil and gas in the next 10 years. (ok, won't happen) So, this amounts to just over 3 Billion in government revenue a month; where does all this money go? Isn't it supposed to go to repair our roads? This is just the gasoline revenue; what about the diesel federal tax at 26.4 per gallon. Big Rig trucks get around 6.5 miles per gallon average; some a little more some a little less. 52% of a barrel of oil goes to gasoline; the reminder is broken down to diesel; heating oil, lubricants, jet fuel, road tar and various other products. How much is the cumulative taxes on the rest of these products? If the real intent is to save jobs; then lets begin some retro conversions on the cars that do currently exist. It does not take much to convert a car to use alternative fuels such as propane or a list of several other types of fuels other than gasoline. Natural gas is very readily available. The conversions are not overall difficult to do. If this is truely about saving jobs; then lets have a National jobs plan to convert the current cars to some alternative fuel. The line workers are typically some type of mechanic who can be trained to do the conversions. If GM has all these people that they are paying anyway; then let's invest in some form of long term solution by getting off our gas dependence and work on bringing up the fuel standards of the cars that are already in the market. People are looking at keeping their cars longer. The credit crisis is preventing new buyers from purchasing; so lets implement a plan that acutally will have some effect other than simply throwing more money at a problem. If congress wants us to convert; then we have how many UAW workers who need something to do other than cash their checks for being off the line. This would bring in almost immediately the cash flow that GM NEEDS without having to sell only new cars. They have other skill sets here that can be used. Their research in some form of hybrid technologies certainly can be applied in some form to up the current mileage standards of cars that have already been produced. Currently, we have what around 2.2 cars per person in the US. We have plenty of cars. Let's have a new approach to solving the problem of cash flow for this giant company. Besides; repair work and upgrades to cars is a position that would be exceptionally difficutlt to outsource to a foreign country. Obviously, the car dealers have the capacity for retrofitting and there are how many plants sitting idle. There are how many workers available for this task alone. Let's call it a National Investment program by keeping people working and in the long run; we actually get some benefit out of it. We get cars that are on the road already to get higher mileage; run on alternative fuel sources to lower our dependence on foreign oil; so now countries such as Saudi Arabia have less influence on our overall national security and effect on our energy costs. I guess then the government will have to increase some other taxes to recover the taxes they have lost if this would go into effect; they always look at it as a zero sum gain or loss. Let's see what we can do about finding a positive in all this mess.