Big 3 Auto Bailout?

[fc3]

I am going to chime in here one last time and then you won't here from me on this subject any longer. I have read so much mis-information and negative postings on Detroit on this forum and elsewhere that I am thru trying to discuss it.

I'll leave you guys with one last thought. Peter De Lorenzo is one of the most respected Auto Jounalists in the Nation.

He may be a very respected auto journalist, though I've never heard of him and I do follow autos. However, he seems to be not much of a bankruptcy attorney or accountant. Chapter 11 does not mean dead forever. It means reorganization. Why is that concept so hard to grasp? People spend hundreds of dollars to buy tickets for themselves and their families on bankrupt airlines that might not honor those pre-paid tickets on departure day. Why would these same people suddenly recoil in terror from a car company? There are several accounting and financial methods that can be implemented to ensure that everyone's warranty will be honored. The only real losers are going to be the execs, (can't earn a big bonus in bankruptcy), the unions, some marginal suppliers, and some marginal dealers.

Entrepreneurs will fill the gap.

I doubt it. The cost of entry to auto manufacturing is far, far too high. I don't think it can be done. It certainly cannot be done in this environment. Who would provide venture capital? It costs over a billion dollars to bring a new car platform to market. The only start-up that I know of with startup cost even remotely close are bio-pharmaceutical startups. But they are very different. Auto startups burn their cash in engineering and design. You need a billion before you have anything to show. Biopharms can do their science much more cheaply. Then, once they have something promising, that's when they need to raise almost a billion dollars for clinical trials. But once past a successful phase I clinical trial, money is pretty easy to come by. There are no such milestones in engineering a new car. Don't see any auto entrepreneurs in the near or far future. Look at the history. Very few startups since the 1920s. Those few that have tried, failed. Would you want to invest in such a venture with that kind of record?

Best regards,
Frank

 

[Nehalennia]

...............Chapter 11 does not mean dead forever. It means reorganization. Why is that concept so hard to grasp? People spend hundreds of dollars to buy tickets for themselves and their families on bankrupt airlines that might not honor those pre-paid tickets on departure day. Why would these same people suddenly recoil in terror from a car company? ............
Best regards,
Frank

One of the big reasons I can think of is the difference booking a $300 ticket online for a flight vs. $30,000 for a new ride which you worry how warranties, potential lack of parts and even more exponential depreciation may occur because that brand now has black mark on it. The only risk you have with the airline is losing your $300.

 

[comsnark]

Especially when it is buisness travel and *someone else* is picking up the tab.

I once had a $500 flight cancelled on me two hours after scheduled departure. Airline offer was same flight, next day. Without blinking, I booked a different flight on a different airline for $1200. And bought a pile of clothing when I landed (my luggage arrived not one, but FOUR days later)

And who in their right mind would by any car, especially an upscale American car without a warrenty?

 

[tmhudson2]

And who in their right mind would by any car, especially an upscale American car without a warrenty?

Assuming we have any solvent large property and casualty insurance companies left, one warranty solution would be for the auto company in reorganization (whether Chapter 11 or government-mandated under a Czar) to purchase warranties which are underwritten by an insurance company, which is the same thing you can buy as an 'extended warranty' on your car after its standard warrenty expires now.

Come to think of it, the auto company could sell the car with only a minimal warranty, and then the buyer could purchase whatever length additional warranty makes them comfortable.

Wall Street could then package these warranties, and sell them as securities. My head is starting to hurt....

 

[Novation]

The loans give the auto companies what they need most....time. Time to make the cuts in programs, staffing, etc. and most importantly time for the credit industry to stabilize so sales can begin to recover. Not many businesses experience a 35% drop-off in sales in one month like the auto industry suffered beginning in October, whether foreign or domestic. Although a bankruptcy trustee could slash costs, it wouldn't have any more success selling units (probably significantly less) in this current market where too few people are buying any cars, foreign or domestic.

The government can take preferencial positions in the loans to ensure the loans are protected in the event of bankruptcy, so money is not being given away here. It is far more likely that these loans will be repaid especially compared to the loans/giveaways to the financial sector. So I'm not sure why the hostility toward this industry is so passionate as compared to the mortgage/financial sector.

 

[Banagy]

On the news tonight three foreign cars had tires cut and written on the cars were BUY American. This happened in Woodhaven, Mi.

 

[fc3]

One of the big reasons I can think of is the difference booking a $300 ticket online for a flight vs. $30,000 for a new ride which you worry how warranties, potential lack of parts and even more exponential depreciation may occur because that brand now has black mark on it. The only risk you have with the airline is losing your $300.

$300 x family of 4 = $1,200. I've not seen $1,200 of warranty work on any of the cars I've owned in many, many years. On the other hand, too many people don't think. They feel. So who knows? On the other, other hand, so much the better for those of us who do think. While wandering dealerships yesterday, I found a new loaded out Navigator for $50k, Top of the link fully loaded Buick for $24k and a fully loaded top option package Suburban for $45k. Some nice deals.

Best regards,
Frank

 

[tmhudson2]

While wandering dealerships yesterday, I found a new loaded out Navigator for $50k, Top of the link fully loaded Buick for $24k and a fully loaded top option package Suburban for $45k. Some nice deals.

Best regards,
Frank

Just curious, were there many others out looking like yourself?

 

[douglee25]

For some that are more knowledgable in this area than myself, I seem to recall that it's much more difficult for businesses to recover from Chapter 11 than what it used to be? Is there any truth to that?

Doug

 

[comsnark]

a fully loaded top option package Suburban for $45k. Some nice deals.

A suburban for $45K? And that's a good deal?

A fully loaded Buick Lucerne did list for $35-40K last year. I also found that a similarly equipped Acura TL or a Lexus E350 would be comparable in cost.

Certainly took Buick off my list. At $24K. . .assuming that's the car you saw. . would be much more reasonable.

 

[fc3]

A suburban for $45K? And that's a good deal?

A fully loaded Buick Lucerne did list for $35-40K last year. I also found that a similarly equipped Acura TL or a Lexus E350 would be comparable in cost.

Certainly took Buick off my list. At $24K. . .assuming that's the car you saw. . would be much more reasonable.

It was a Lucerne. List was $33k. I didn't know they were front wheel drive, which is not for me. But it was pretty nice, a little tight, but not bad for $24k.

I found the paper on the 'burb. List for the loaded LTZ I saw was 55k. Out the door price was $41k with a few grand more that I might or might not have qualified to get.

Best regards,
Frank

 

[comsnark]

Hmmm. Interesting.

I will be looking harder in the Spring. Right now I am thinking used Caddy STS. . . They list $55ish new (loaded, AWD), which is simply crazy talk for what you are getting. 2-3 years old, they seem to be in the Mid-20's which isn't nearly as crazy.

I see that a number of makers are going RWD now, but unfortunately where I live in PA, RWD is not very practical for a primary car.

 

[270SLX]

My economics and finance degree tells me that the means of production belong in the hands of the efficient. Eventually, absent government subsidies, that's where it ends up. I'd rather see my tax money supporting the efficient producers. So, give the money to the U.S. automakers who are efficient (Toyota, Nissan, etc.) so they can build more plants in the U.S. Don't throw good money after bad on the likes of G. M. and Chrysler. Cripes, the rubber room thing ("jobs bank" program) still has me pissed.

 

[fc3]

I've always had RWD and never had any problems in bad weather. On the other hand, never having FWD, engine torque that most ignore drives me nuts. I also don't like cars with half or three quarters of an engine and having that enginette mounted sideways. But to each his own...

The Sigma platform STS (2005 and later) are very nice cars. Have not priced one recently. The only way in 2005 to get all wheel drive was to buy the top option package (Luxury Performance Package, I believe) along with the 4x4 option. List price was in the 60s. My wife wasn't thrilled enough with the car and I wasn't thrilled with the deal, so no deal.

Happy shopping.

Best regards,
Frank

 

[comsnark]

Well. . depends on what part of NJ you live in. If you are in the Ocean County, Monmouth county area. . .then snow and ice are not factors. That would shift thinking towards RWD.

My area (north of Philly) is a bit more hilly, and a bit more prone to Snow. I have an Eldorado ETC now, and the combination of traction control and FWD means that as long as I have ground clearance (i.e. if I am not plowing snow with the floor pan and bumpers). . .I can get through. Conditions are not so consistently bad that I feel the need for an AWD or SUV. . but FWD is a definate prudent precaution.

Well. . .we shall see what deals about when I go shopping in the Spring. From the little shopping I did last year. . .the American cars (luxury and otherwise) just didn't seemed too expensive for what they were selling.

 

[billandamy]

Yea, a rwd would never make it near me in the winter either. Pretty much going into a ditch with the steep grade and windy roads up to my house, or leaving your car at the bottom of the hills. There isnt a homeowner around us that doesnt have at least one 4wd to get in/out of the neighborhood.

 

[sbw1]

The torque steer issue is mostly resolved on FWD Acuras. Big improvement over the earlier years. We need FWD or Quattro to get out of our drive as well. My wife was plowing snow with her TT last week. Needed to run the wipers to clear the snow that was coming over the hood! After she blazed the trail, the TL with 38,000 miles on its tires was good to go as well.

 

[Larry&Leisa]

the TT's are really great in the snow.. I love driving around the SUV wannabes... :grin:

 

[Woody]

The torque steer issue is mostly resolved on FWD Acuras. Big improvement over the earlier years. We need FWD or Quattro to get out of our drive as well. My wife was plowing snow with her TT last week. Needed to run the wipers to clear the snow that was coming over the hood! After she blazed the trail, the TL with 38,000 miles on its tires was good to go as well.

It's not to hard to plow snow when the car only sits 4.5" off the ground.

 

[sbw1]

You need Blizzaks or something similar. The summer tires get you stuck immediately, even with Quattro.