The Return of "Spanish Mike"
Earlier this year, I embedded a youtube video "The One Semester of Spanish Love Song", since then, Spanish Mike has graduated to the second semester and completed his 2nd Semester of Spanish, Spanish Love Song Starring Erik Estrada. "Keep your pantalonies on Erik Estrada."
Friday, October 31, 2008
Bush Administration says No $ for Chrysler/GM Merger
Yesterday, the big news was that GM and Chrysler had the merger terms all wrapped up except for the money. A $10 billion triviality. Today, the Treasury Department said no funding will be available for the merger, and the prospects for merger now seem to be all but dead.
What happened to the merger? I'm guessing what happened to the merger is that in their mad panic, the GM/Chrysler crew put together a deal filled with holes, then mis-sold it to the Treasury Department. It looked like Cerberus was trying to dump its crap on the US government and walk away clean. To get a deal done, they probably would have had to put something together where one of the two companies, probably GM was sent through a prepackaged Chapter 11 and immediately rescued by the other company with government help. To sell the deal, Cerberus would have to bring some new money to the table, and Cerberus's bankers would have had to be in for some new money as well. Oh yes, they would have had to give "Hey Rick" Wagoner the boot as well. Since they couldn't/wouldn't do any of those things, the merger was destined to go nowhere.
Apparently somebody in the government got wise to the catch 22 about the GM/Chrysler merger. To be popular, the merger would have to save jobs. To work, a lot of jobs, maybe 40,000 or 2/3 of Chrysler's workforce, would have to be cut. Using government money to pay people $100,000-140,000 each to leave their jobs doesn't sit well with Joe Six-pack (or Joanna Lawyer) who can expect to receive a big fat nothing sandwich when he or she gets laid off due to the bad economy.
Although both Obama and McCain have pledged support to the domestic auto industry. It remains to be seen whether Chrysler or GM can hold out until February. GM in particular has shown signs of being in a severe cash crunch. The General has recently announced cash saving measures from the mundane, shutting down escalators and http://www.thetruthaboutcars.com/gm-voicemail-cuts-explained/, to the drastic, suspending most product development including must-have models such as the compact Chevrolet Cruze.
The importance of the product development delays can't be overemphasized. The Cruze is the replacement for the Chevrolet Cobalt, one of General Motors' best selling cars, but the Cobalt is destined to suffer as newer competitors come out. The Cruze is already in production in Korea as the Daewoo Lancetti, and GM either was set to receive, or has already received, millions of dollars in incentives from state and local governments to tool up the Lordstown, Ohio facility to build it. In other words, this isn't a low-volume, fringe product that needs billions of dollars in R&D to turn into a product, this is a current product set for production in a current factory where there are already incentives in place to start production, and it's a product that could perhaps outsell every other model in the Chevrolet line-up. Still, General Motors can't come up with the cash to get this thing into production by 2010.
If General Motors is already in such a cash crunch that it can't fund essential projects like the Cruze, one wonders whether it's even too late for a Chapter 11 bankruptcy. As we have seen with Delphi, getting sufficient debtor-in-possession financing to continue business is not easy in this climate. Robert Farago postulates that Chrysler is headed for an imminent Chapter 7 liquidation. Ironically, if it doesn't kill the supplier network, the liquidtion of Chrysler might be GM's last best hope, because it might cement the political will to keep GM alive. (Can you say "Lehman Brothers"?) Without government funding, General Motors' chances of survival look bloody awful. With government funding, GM actually looks to have some pretty good long term potential. GM has supported a $30 billion market cap in the past, if the government put $30 billion into the company, assuming the development delay doesn't slow the new model pipeline unduly, the company could easily be worth that much again. GM has some good models and some world class technology. It just needs to pare down deadweight brands and trim dealers. It's going to take $30 billion though, $10 billion will just delay failure.
Yesterday, the big news was that GM and Chrysler had the merger terms all wrapped up except for the money. A $10 billion triviality. Today, the Treasury Department said no funding will be available for the merger, and the prospects for merger now seem to be all but dead.
What happened to the merger? I'm guessing what happened to the merger is that in their mad panic, the GM/Chrysler crew put together a deal filled with holes, then mis-sold it to the Treasury Department. It looked like Cerberus was trying to dump its crap on the US government and walk away clean. To get a deal done, they probably would have had to put something together where one of the two companies, probably GM was sent through a prepackaged Chapter 11 and immediately rescued by the other company with government help. To sell the deal, Cerberus would have to bring some new money to the table, and Cerberus's bankers would have had to be in for some new money as well. Oh yes, they would have had to give "Hey Rick" Wagoner the boot as well. Since they couldn't/wouldn't do any of those things, the merger was destined to go nowhere.
Apparently somebody in the government got wise to the catch 22 about the GM/Chrysler merger. To be popular, the merger would have to save jobs. To work, a lot of jobs, maybe 40,000 or 2/3 of Chrysler's workforce, would have to be cut. Using government money to pay people $100,000-140,000 each to leave their jobs doesn't sit well with Joe Six-pack (or Joanna Lawyer) who can expect to receive a big fat nothing sandwich when he or she gets laid off due to the bad economy.
Although both Obama and McCain have pledged support to the domestic auto industry. It remains to be seen whether Chrysler or GM can hold out until February. GM in particular has shown signs of being in a severe cash crunch. The General has recently announced cash saving measures from the mundane, shutting down escalators and http://www.thetruthaboutcars.com/gm-voicemail-cuts-explained/, to the drastic, suspending most product development including must-have models such as the compact Chevrolet Cruze.
The importance of the product development delays can't be overemphasized. The Cruze is the replacement for the Chevrolet Cobalt, one of General Motors' best selling cars, but the Cobalt is destined to suffer as newer competitors come out. The Cruze is already in production in Korea as the Daewoo Lancetti, and GM either was set to receive, or has already received, millions of dollars in incentives from state and local governments to tool up the Lordstown, Ohio facility to build it. In other words, this isn't a low-volume, fringe product that needs billions of dollars in R&D to turn into a product, this is a current product set for production in a current factory where there are already incentives in place to start production, and it's a product that could perhaps outsell every other model in the Chevrolet line-up. Still, General Motors can't come up with the cash to get this thing into production by 2010.
If General Motors is already in such a cash crunch that it can't fund essential projects like the Cruze, one wonders whether it's even too late for a Chapter 11 bankruptcy. As we have seen with Delphi, getting sufficient debtor-in-possession financing to continue business is not easy in this climate. Robert Farago postulates that Chrysler is headed for an imminent Chapter 7 liquidation. Ironically, if it doesn't kill the supplier network, the liquidtion of Chrysler might be GM's last best hope, because it might cement the political will to keep GM alive. (Can you say "Lehman Brothers"?) Without government funding, General Motors' chances of survival look bloody awful. With government funding, GM actually looks to have some pretty good long term potential. GM has supported a $30 billion market cap in the past, if the government put $30 billion into the company, assuming the development delay doesn't slow the new model pipeline unduly, the company could easily be worth that much again. GM has some good models and some world class technology. It just needs to pare down deadweight brands and trim dealers. It's going to take $30 billion though, $10 billion will just delay failure.
Tuesday, October 28, 2008
Barack Obama Stiffs Blogger
According to fivethirtyeight.com, Barack Obama's chance of victory is now up to an astounding 96.7%. I guess that's why his campaign has decided that I don't need a yard sign even though I paid for it weeks ago. You'd think that they'd make sure I received my sign because I live in the middle of the only white (totally up for grabs) state of the union, Indiana. Apparently his people have seen my yard.
Friday, October 24, 2008
From the "Dave's not here, man" file:
Oot & Aboot
I'm going to be without a computer through Sunday, it appears. There's a lot of news about Chrysler & GM. Chrysler is laying off 25% of its white collar workforce. There's a boatload of anecdotes about emergency cost-cutting measures at GM. Check in at thetruthaboutcars.com (ttac.com) for the latest news and rumors.
Oot & Aboot
I'm going to be without a computer through Sunday, it appears. There's a lot of news about Chrysler & GM. Chrysler is laying off 25% of its white collar workforce. There's a boatload of anecdotes about emergency cost-cutting measures at GM. Check in at thetruthaboutcars.com (ttac.com) for the latest news and rumors.
Monday, October 20, 2008
Friday, October 17, 2008
Chrysler take over General Motors?
I've been working out a potential hypothetical scenario whereby Chrysler would technically take over General Motors. It would be messy, but it could be done. In my mind, it makes more sense than for GM to acquire Chrysler. More details as I sort them out, or abandon the idea entirely.
I've been working out a potential hypothetical scenario whereby Chrysler would technically take over General Motors. It would be messy, but it could be done. In my mind, it makes more sense than for GM to acquire Chrysler. More details as I sort them out, or abandon the idea entirely.
Thursday, October 16, 2008
Maybe it's Dean Bob they want?
Maybe GM's board wants Dean Bob Nardelli to to replace Rick Wagoner as CEO. There's no question that Nardelli has cut expenses with more ruthlessness at Chrysler than Wagoner has at GM. Precedent? Steve Jobs was head of faltering Next Computer when Apple acquired Next. Apple got the Nextstep operating system which became OS-X, and Steve Jobs became a capitalist icon, the only person alive with a reality distortion field. If there's one thing the domestic auto industry could use right now, it's a reality distortion field.
GM - Chrysler Merger
You will be Assimilated
Those not in the know have been scratching their heads trying to figure out any sensible reason for Chrysler and General Motors to merge. It doesn't make sense for GM to take over Chrysler just to get Chrysler's cash, because there's not enough of it. Even if there is $11 billion (and I think it's more like 4 billion), it's not enough to cover Chrysler's unavoidable liabilities, the cost of the merger and the cost of restructuring Chrysler's good bits into GM, at least not in the long term.
The Detroit News has an article today speculating that GM's goal is to dismantle Chrysler, keeping Jeep, much like the way Chrysler took over American Motors 20 odd years ago. This would mean the death of the Dodge and Chrysler brands, the shuttering of most Chrysler plants and the dismantling of the entire dealer base. Such a plan would raise a lot of questions relating to state franchise laws, and there would likely be a lot of litigation. Prior to the dismantling of Chrysler, the combined entity would have even more political power to demand government assistance in various forms. The Detroit News speculates that such a combined entity would be "too big to ignore." If GM got rid of Chrysler cars and trucks, it would eliminate 1.6 million units of capacity, an amount close to the amount of overcapacity in the marketplace.
Not stated in the Detroit News article is another possibility. GM may want to acquire Chrysler to get Chrysler Financial. If GMAC is terminally ill, GM may feel the need to get a captive finance company on an emergency basis.
You will be Assimilated
Those not in the know have been scratching their heads trying to figure out any sensible reason for Chrysler and General Motors to merge. It doesn't make sense for GM to take over Chrysler just to get Chrysler's cash, because there's not enough of it. Even if there is $11 billion (and I think it's more like 4 billion), it's not enough to cover Chrysler's unavoidable liabilities, the cost of the merger and the cost of restructuring Chrysler's good bits into GM, at least not in the long term.
The Detroit News has an article today speculating that GM's goal is to dismantle Chrysler, keeping Jeep, much like the way Chrysler took over American Motors 20 odd years ago. This would mean the death of the Dodge and Chrysler brands, the shuttering of most Chrysler plants and the dismantling of the entire dealer base. Such a plan would raise a lot of questions relating to state franchise laws, and there would likely be a lot of litigation. Prior to the dismantling of Chrysler, the combined entity would have even more political power to demand government assistance in various forms. The Detroit News speculates that such a combined entity would be "too big to ignore." If GM got rid of Chrysler cars and trucks, it would eliminate 1.6 million units of capacity, an amount close to the amount of overcapacity in the marketplace.
Not stated in the Detroit News article is another possibility. GM may want to acquire Chrysler to get Chrysler Financial. If GMAC is terminally ill, GM may feel the need to get a captive finance company on an emergency basis.
Wednesday, October 15, 2008
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