Still Losing Jobs

[24788]

Cali is sunk until they allow sales of Weed

I'd move there just to get a med card.

 

[Nester6]

I'd move there just to get a med card.

Place the liberals in charge and keep giving illegals all the free stuff they can imagine at the taxpayers expense, and what is the result? California.

 

[Ceska]

I agree with some of what you are saying. But no one is saying that GM could not have filed Chapter 11. But without D.I.P. financing, how do you propose they would have been able to operate during this period? If and when a company can no longer show itself to be able to operate as a going concern, the creditors and the bankruptcy judge usually move the filing to Chapter 7 status.

Are you suggesting that there were D.I.P. financing sources, other than the government? Can you name them? I can tell you that no one that I know in the automotive or banking universe knew anything about these D.I.P. sources... because they didn't exist.

It wouldn't matter how many concessions the various stakeholders would have been willing to agree to if there were no funds to operate the company. And the only reason GM exited bankruptcy in such a short period of time is because the government ram rodded the process through (right or wrong). Normally this process would have taken many months, or even years. And the operational funds during this period would have come from where???

It depends on which period GM decided to file.
If GM had pursued D.I.P. funding (or the Chrysler merger) earlier it could have been able to obtain the needed funding, thus putting GM on the tough road to recovery much sooner.
GM, however, was having none of it (bankruptcy filing) well into 2009.
"The federal government wasted valuable money and time, and allowed the UAW to "overreach" in its negotiations with management, gaining expensive concessions that would have been unlikely in bankruptcy court."

Was GM simply engaged in poor decision making as usual or did GM / UAW recognize its ability to take advantage of a moral hazard?
Why seek financing early when you are assured of receiving “last resort” bailout funds from the U.S. Government?
After all they were "too big to fail."

GM has been failing for years (hemorrhaging since 2005) and was slow to react. While Toyota, Ford, Honda, and others were focusing on hybrid technology and fuel efficient vehicles, GM was pumping out Escalades, Hummers, Tahoes and other cars and trucks with poor fuel efficiency. The company was relying on trucks for more than 60 percent of its U.S. volume.
http://s.wsj.net/public/resources/images/MK_AU664B_GMLOSS02272009001847.gif

According to GM's financial consultant, Evercore, GM "began working in June of 2008 on capital-raising options and prepared to make a public announcement of its liquidity preservation plan in conjunction with its 2Q2008 earnings release in July." In July, GM "began discussions with several potential underwriters" to obtain secured debt financing.
They were being lined up, but the window was closing quickly at that point.

GM’s common stock had declined by 50% between May 2008 and July 2008. (Compared to 10% drop in the Dow in the same period)
The fact is, GM’s difficulties were not driven entirely by the financial crisis. GM was not doing well long before the recession hit.
By late 2008, GM was unable to obtain funding not just because of the financial crisis but because of GM.

By December 2008 they were receiving billions in TARP funds.
The TARP funds were contingent upon GM "restructuring its labor costs so that its average cost per hour and per person equals the average paid by Nissan, Toyota, and Honda to its U.S. employees" - cost cutting measures that should have been being put in place much earlier.
http://quicktake.morningstar.com/Stocknet/san.aspx?id=268876
By then, the Government was tossing around the idea of D.I.P. funding as part of a managed restructuring, as mentioned previously, GM was having none of it (bankruptcy filing) well into 2009.
Apparently, loan $$$ not due until 2012 (TARP) was preferable. If they could negotiate for more of that rather than submit to deeper restructuring and concessions to get the money, so much the better.

Did this government action set a bad precedent? Not for me to say. Possibly it did. But I'm a realist, not an economic philosopher.

These are not esoteric concepts understood only by economic philosophers. A realist should be able to appreciate and understand that if GM is backed by the national treasury, Ford and other competitors face an uneven playing field with real consequences.

What do you mean, "what demand?" It's a major mistake to believe that North American auto demand dropped to zero units , even at its worst. Demand dropped by nearly 50%, and financing what demand there was made the situation very unpleasant for all involved. ). But there was most certainly some level of demand.

Of course.

Why do you ask me what I mean by "what demand?", then state "Demand dropped by nearly 50%".
Why put up a straw man supposing that I meant "auto demand dropped literally to zero units".?

I have no idea what you mean by "overbuild capacity". Do you mean the overbuilding of production facilities ..

Of course. (and overbuilding production facilities focused on the wrong product lines)

Again. I am happy to see that at first you say you have "no idea" but then immediately come up with it.
It is no secret whatsoever that GM, which has posted significant losses since the start of 2005, has had too many plants, too many workers with too high salaries and too many dealerships for the dramatic decline in sales of its products. Even in an industry with long periods of transition, they have been painfully slow to adapt (relative to their competition).
http://s.wsj.net/public/resources/images/MK_AU664B_GMLOSS02272009001847.gif

And as much as many claim to be all for free markets and (quasi) laissez faire capitalism, the truth of the matter is, Americans would not patiently wait around for the free market to heal itself, once unemployment hit the (as measured) 11-12% mark (actually more like 18-20% using previous methods).

The original point was that there have not been only two choices: Government bailout or catastrophe. That is misleading.

 

[busenbust]

All-important Jobs report due out today...circa 225K Job losses : anything less and will Wall St. rocket???? Oh, the cruelest month! :shocked:

 

[Rey C.]

216K jobs lost --> 9.7% jobless rate.

 

[busenbust]

^More ammunition for Mr DOW: Remember this time (circa.) last year :eek:

 

[jasonk282]

Highest unemployment rate is 26 years:thumbsup:

 

[Rey C.]

It depends on which period GM decided to file.
If GM had pursued D.I.P. funding (or the Chrysler merger) earlier it could have been able to obtain the needed funding, thus putting GM on the tough road to recovery much sooner.
GM, however, was having none of it (bankruptcy filing) well into 2009.

Yes, 20/20 hindsight is a beautiful thing. The 1996 negotiations would have been a perfect time to hammer out a better deal with the UAW. Had that been accomplished, there likely would not have been an issue (or as serious an issue) in 2008. And the 3rd/4th quarter of 2007 or the 1st quarter of 2008 would have been a great time to line up D.I.P financing - right before the bell, eh? But short of doing what Ford did, GM management would have needed a crystal ball to know the precise time by which they would have (truly) needed D.I.P. financing.

GM has been failing for years (hemorrhaging since 2005) and was slow to react. While Toyota, Ford, Honda, and others were focusing on hybrid technology and fuel efficient vehicles, GM was pumping out Escalades, Hummers, Tahoes and other cars and trucks with poor fuel efficiency. The company was relying on trucks for more than 60 percent of its U.S. volume.
http://s.wsj.net/public/resources/images/MK_AU664B_GMLOSS02272009001847.gif

And Chrysler was relying on trucks for over 70% - which is why I wonder why you think a merger with that zombie operation would have been a wise move for GM? A dying person, who can walk, marries one who is on life support... :dunno: We'd been waiting for Chrysler to die since Cerberus bought them. If (once) FIAT finds that it is going to have to pump more than just "technology" into Chrysler, they'll hang a sign on Jeep and regret the day that they got into this deal. Just my :2 cents:

According to GM's financial consultant, Evercore, GM "began working in June of 2008 on capital-raising options and prepared to make a public announcement of its liquidity preservation plan in conjunction with its 2Q2008 earnings release in July." In July, GM "began discussions with several potential underwriters" to obtain secured debt financing.
They were being lined up, but the window was closing quickly at that point.

Yes, and again, the reality of December of 2008 could not have been corrected by going back to July of 2008 or December of 2007, could it? By the late Q3 2008, the list of major D.I.P. financiers had gone from 25+ to something less than 10, and none of them (and no combination that I'm aware of) could have handled a filing the size of GM .

So, I'm going to ask again, dealing not with what should have been done in 1996 or Q3/Q4 2007, where was this necessary D.I.P. financing???

By late 2008, GM was unable to obtain funding not just because of the financial crisis but because of GM.

That's right.

By then, the Government was tossing around the idea of D.I.P. funding as part of a managed restructuring, as mentioned previously, GM was having none of it (bankruptcy filing) well into 2009.

Tossing it around, eh? Was anything proposed in Congress or by the Bush White House? If no (and it is "no"), then Chapter 11 --> Chapter 7.

A realist should be able to appreciate and understand that if GM is backed by the national treasury, Ford and other competitors face an uneven playing field with real consequences.

Perhaps that's why I wrote what I did: Did this government action set a bad precedent? Not for me to say. Possibly it did.

But if this D.I.P. funding that you claim was being "tossed around" had been made available to GM, they would have still had an advantage, as by the natural progression of the free market, they should have been dead. But interestingly enough, GM's competitors did not want a messy bankruptcy either. Because... again... it_would_have_negatively_impacted_them.

Of course. (and overbuilding production facilities focused on the wrong product lines)

Again. I am happy to see that at first you say you have "no idea" but then immediately come up with it.

Notice that my response was followed by a question mark? If I was certain what you meant, I would not have used that device.

The original point was that there have not been only two choices: Government bailout or catastrophe. That is misleading.

It would depend on how broadly you want to define "bailout". If any and all government intervention or funding would have been a "bailout", then yeah, I'd say by late 2008, that scenario pretty well wraps up the either/or package under the tree. You haven't convinced me otherwise here.

My point (moral hazards aside) was that there was no D.I.P. financing, when it became most necessary for GM to restructure or face possible liquidation. And there most certainly would have been an extended shut down period, which would have drug down many of the integrated tier and raw material suppliers. That point has not been well addressed.

To be clear, I am not arguing that the methods chosen were exactly right and proper. But I am stating what most within the industry know to be (again) the reality of the situation at that time: without (some sort) of government intervention, there would have been a massive wave of lay offs. And to stay with the topic of this thread (Still Losing Jobs), the numbers posted would be a helluva lot higher than what we're seeing now.

 

[Rey C.]

Highest unemployment rate is 26 years:thumbsup:

And the longest economic downturn in roughly 70 years. :thumbsup: confused

But none of it's real. McCain's man on the economy (and Enron) said so. Phil Gramm said we just need to stop whining... don't worry and be happy.

BTW, unemployment is a _____ indicator.

 

[busenbust]

^^Lagging (no, not tights). And yet - notwithstanding - IMF are saying Recession (nearly) over. :wtf: are they on???

 

[jasonk282]

Jan 08 4.9% Jan 09 7.6%
Feb 08 4.8% Feb 09 8.1%
March 08 5.1% March 09 8.5%
April 08 5% April 09 8.9%
May 08 5.5% May 09 9.4%
June 08 5.5% June 09 9.5%
July 08 5.7% July 09 9.5%
Aug 08 6.1% Aug 09 9.7%
Sept 08 6.1%
Oct 08 6.7%
Nov 08 6.7%
Dec 08 7.2%

Will September's unemployment be double digits, IMO it will be.
BTW I am not part of that 9.7% since my company just laid off 250 workers due to cut backs.

 

[Rey C.]

^^Lagging (no, not tights). And yet - notwithstanding - IMF are saying Recession (nearly) over. :wtf: are they on???

Ding, ding, ding! A winna! :thumbsup:

And what have you won?! An all expenses paid trip to Huntsville, Alabama: 3 days and 2 nights at the Motel 6 out on Route 1. Your traveling companion will be Baconsalt.

The recession is already over in some parts of Europe. And it seems to be coming to an end here. When GDP shows positive growth, by the classic definition, we're no longer in recession at that point. But unemployment could continue to go up for months after that.

 

[busenbust]

^^I check out immediately - and leave you BSalt.)

I wonder how sustainable their definition of 'no longer in recession' will be :not very:

 

[Rey C.]

Depends on if it's a U or V... or a W.

BTW, I found Bacon a woman (yeah, an actual human female!). When he said 18-80, blind, cripple or crazy, I took him at his word. Yay me! :nanner:

 

[busenbust]

^^Or an L (Hell!!!:eek: )

(Re. BS. Good luck with that!! LOL.

 

[Sky_999]

an L, U, W recession... It's main, that the EU and US would buy our oil. It's my view on the other hand.

 

[tartanterrier]

500 jobs being shed by a US firm in Scotland.

http://news.bbc.co.uk/1/hi/scotland/edinburgh_and_east/8238656.stm

I guess the aftermath of the Al Mehgrahi decision is starting
to kick in.

 

[urgeag]

When GDP shows positive growth, by the classic definition, we're no longer in recession at that point. But unemployment could continue to go up for months after that.

Dont you think someone should create an indicator of our economy that gives the average person a little more attention.

I think that GDP going into positive was accepted as an end to a recession because that meant that goods and services started selling again and even though unemployment would lag, eventually those companies providing the goods and services will need to start hiring again to keep providing those services...what goods and services do we really still provide that will be the foundation of the hiring spree we need.

 

[Rey C.]

Dont you think someone should create an indicator of our economy that gives the average person a little more attention.

I agree with that. But the reality is, it's a rigged game. Even the unemployment figures we see are under reported. It's been like that for roughly 50 years. That's why you can't really compare today's 9.7% to the 20%+ from the Great Depression. At a certain point in time, long term unemployed people in the current measurement system disappear. I'd have to search to find it again, but one piece I read from Harvard Business School had the unemployment rate today at roughly 20%, if we were to use the same methodology as was used in the 1930's/40's.

I think that GDP going into positive was accepted as an end to a recession because that meant that goods and services started selling again and even though unemployment would lag, eventually those companies providing the goods and services will need to start hiring again to keep providing those services...what goods and services do we really still provide that will be the foundation of the hiring spree we need.

I can't answer that. We've been losing manufacturing jobs for a very long time. And the sad thing is, I really don't think that a lot of these jobs will come back very soon, if ever. What's even worse, no one seems to have a plan to deal with this long term problem. Bush didn't. Obama doesn't. And neither the Democrats nor the Republicans have a clue, IMO. It's hard to say what the future holds in that respect. Not good. Not good.

Well, at least (so far) we're still the largest producer of porn. :dunno:

 

[jasonk282]

How about 82 billion of the 787 Billion stimilus actually went for jobs, where did the rest go?