On Jun 1, 2009, at 8:50 PM, Chris Gehlker wrote:
On Jun 1, 2009, at 1:00 PM, Charles Bennett wrote:
Neither, I just think it's a shame that the bond holders were
portrayed as a bunch of fat cats that could afford to take 10 cents
on
the dollar, when, in reality there are a lot of small folks that are
going to get hurt. *if* the government was going to get involved at
all, it should have made sure that the small bond holders. say 150k
or
less, were protected first.
I'm not without sympathy for the small bondholders but my sympathy is
tempered by the realization that when GM decided to abandon their
electric car and de-emphasize smaller lines like the Saturn in favor
or pushing Hummers it was pretty obvious that they were making a big
bet on declining real oil prices. My recollection is that GM bonds
have been low rated for years. They were a fairly risky investment and
most people knew it.
I have this bad feeling that we will end up driving Trabants because
some Barney Franks type
will decide that GM needs to make a small car, regardless of whether
anyone wants to buy it and he will have the full power of the
treasury
to insure that they stay in business.
This argument would carry a lot more weight if events hadn't proved
the Barney Franks of the world right. I'm a big white guy and I own a
big white truck but I have to shake my head in wonder when some of my
buddies talk as if GM's problem was that they didn't appeal to our
demographic. Their problem is they didn't do anything else. Should've
listened to Barney Frank.
I do see your point that they didn't do anything else, but I don't
know that it would have made much of a difference.
They weren't winning the quality wars anyway and their cost of sales
was too high compared to the foreign cars. Honda, Lexus and Accord
on the high end, Hundai KIA etc on the low end.
Really, their truck sales and the fleet sales of cars like the Impala
were the only things I can think of that was going their way.
My truck is whatever fancy word Dodge uses for gold this week. OTOH,
our other car is a VW new Beetle.
(I love driving it when I can get it away from my wife) but the truth
is I accept that I'm happy banging around in a truck.
I would buy a hybrid truck if they made one I could afford and it had
4wd capable of hauling logs, brush and deer out of the back of my
farm. Perhaps by the time my wife is making the big bucks someone
will make a viable one.
Add to that that the unions vote can now be bought by simply pouring
government money into their company, profitable or not, and you
have a
witches brew that boggles the mind.
You can make an argument that unions still have too much political
power but to be credible you have to start out acknowledging that
their power has been diminishing for decades and that they certainly
don't bear much responsibility for the current financial collapse.
The only part that the unions really played is the huge burden of the
retirement packages and I'm not blaming them, just recognizing that
that obligation hurt GMs bottom line and set a base price for a car
that didn't compete in the world market.
I don't really blame the union at all for negotiating the best deal
they could get and GM should have been actually putting the money in a
fund that would support their obligations, you know like the social
security fund. Oh, wait..
In any case it's pretty much all at GM management's feet as far as I'm
concerned.
My, poorly stated, worry is not about assigning blame for the past but
that going forward, the government has a vested (literally) interest
in pandering to a union that in turn will vote for them as long as the
company is not allowed to fail.
Who will set the wages now? The government?
They can actually buy vote for themselves by not negotiating the best
deal, and that worries me a lot.
Chuck
Precious Metals: Gold, Silver, Brass & Lead
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