General Motors Likely To Ask For Fed Loans -Report

[Purveyor]

Source: Reuters

DETROIT, Oct 11 (Reuters) - General Motors Corp is likely to seek a direct loan from the U.S. Federal Reserve as it seeks to bolster its cash position to survive a deepening downturn in automobile sales, Barron's said on Saturday.

The business publication said GM was expected to make the unusual request to the U.S. central bank based on two unnamed people it said had direct knowledge of the situation.

A Fed spokesman declined comment.

A GM spokesman said while the No. 1 U.S. automaker was not actively pursuing access to low-cost Fed loans it also wanted to keep all options open.

"In this period of continued uncertainty in the markets, you really can't rule out anything," said GM spokesman Greg Martin.

---
GM has also had in preliminary talks about acquiring Chrysler LLC, according to a person familiar with the matter.

Shares in GM dropped to an almost 60-year-low this week and the automaker has faced increased scrutiny from investors and creditors over its cash position. U.S. auto sales are at 15-year lows and there are expectations that the slowdown is now spreading to markets in Europe and Asia.

Read more: http://www.reuters.com/article/rbssConsumerGoodsAndRetailNews/idUSN1142263220081011

[liberal N proud]

1. Do I understand this correctly

GM wants to borrow money from the Government so they can buy Chrysler?

:shrug:

[Donnachaidh]

4. It does look that way, doesn't it?

I have no pity for these companies that took jobs out of the States. Don't they have that GMAC financing? Let their financial section LOAN them the money, at 25% or higher interest.

[liberal N proud]

7. But they want to sell that to the group that is selling Chrysler

It is all fucked up and looks like a big shell game

[kurtharp]

8. no

No,

GM is considering trading their GMAC division to the owners of Chrysler for the Chrysler company.

[flvegan]

16. Welcome to DU!

:hi:

[Fenris]

13. No.

The money they plan to borrow is unrelated to the reported talks with Chrysler.

[Divernan]

20. Chrysler initiated the merger talks with GM and is in the stronger position financially

More likely Chrysler(Cerberus Capital Management) is telling GM to come up with more money to put on the table. Chrysler is also talking with two foreign car manufacturers re merger.

However 2 failing auto manufacturers will not magically turn into a single successful manufacturer. Such a merger would, however, make it easier for Bushco to declare the resulting company is "too big to allow to fail" and throw additional billions at them. Meanwhile the inept executives who diversified into too many models, none of them economical or appealing on the foreign market, will still be in charge, with all their perks and bonuses, etc. They both need to divest of all but perhaps 5 models, start building them better, and get rid of all their deadwood, braindead top managers. I just returned from Europe/Germany - didn't see ANY huge cars or pretentious Hummers, stretch limos or even SUVs there. There was, however, a fantastic public transportation system - clean, comfortable, with frequent schedule. I never had to wait more than 5 minutes for S-Bahn or U-Bahn.

DETROIT — General Motors Corp., Chrysler LLC and Cerberus Capital Management LP have held preliminary talks about a merger or an acquisition of Chrysler by GM, according to a person familiar with the talks. Chrysler, which is 80.1 percent owned by Cerberus, already has a joint venture with GM making a hybrid gas-electric powertrain, and has discussed a full merger or acquisition with GM, said the person, who did not want to be identified because the talks have not been made public.

The Wall Street Journal, citing people it described as familiar with the discussions, reported that Cerberus, a private equity firm that also owns 51 percent of GMAC Financial Services, proposed trading Chrysler's automotive operations to GM in exchange for GM's remaining 49 percent stake in GMAC. The New York Times, also citing people familiar with the talks, reported that the automakers were discussing a merger. GMAC, primarily an auto lender, also has significant mortgage lending operations that have been hit hard by the crisis in that industry.

The talks have stalled because of the recent turmoil in the financial markets, according to the Journal. Its sources said negotiations could resume if markets stabilize because both GM and Cerberus want to quickly divest the assets under discussion. The negotiations between 100-year-old GM and 83-year-old Chrysler have began more than a month ago. The Times said its sources pegged the chances of a merger being completed at "50-50."

[dkf]

2. Didn't they get a loan from the Govt?

Am I missing something?

[Dover]

5. Yes. And now they want more. As a tax paying co-investor, I don't see them as a good risk

unless......instead of laying off half their work force and cutting pensions (thru bankruptcy or other means) they instead eliminate the leadership of this company who continually drives it
into the ground, only to need yet another government infusion.

Why is our government so willing to keep propping these poorly run companies up?

[dkf]

6. Our Govt is helping GM for the workers and retirees.

I can't imagine how devastating it would be if GM failed.

[ann_american2004]

12. I AGREE WITH THIS

Fire the leadership, make the companies green - fuel-cell or electric hybrid ONLY, and retrain the labor IN THE UNITED STATES. This is the new supply and demand. People arent buying gas cars any longer. Stop making them. Train American Labor and get the jump on new generation vehicles. Solve part of the energy crisis and free us some from enemy oil. Period.

[Dover]

19. The auto and energy companies seem linked.

What I see, via our renewed interest in Afghanistan and continued presence in Eurasia, is
a continuing dependency on foreign fuel sources, and particularly natural gas (via the Caspian Sea, etc). So I'm guessing that, besides biofuels, these companies will be creating natural gas models.

I don't know why those in charge of Michigan's economy allowed that state to become so dependent
on one industry rather than diversifying it. That is a recipe for disaster. And they continue
to place their chips in one place, and a sinking industry at that. Why not diversify the economy,
use loans to retrain workers and attract new business/industry? These 'big three' have a monopolistic stranglehold on this country, and rather than more consolidation, why not fund and
incentivise smaller, agile and innovative companies (in transportation and other sectors)?

[happyslug]

15. From what I have read, it is GM taking over Chrysler in exchange for Stock in GM

Basically Cerberus would be exchanging their sole ownership of Chrysler to be the single largest stockholder in GM (Through Cerberus will own way less than 50% of GM, probably less then 10%). GMAC would still stay 50% GM owned (I believe Cerberus owns the other half, do to a deal between them and GM BEFORE Daimler sold Chrysler to Cerberus).

For more on GMAC:
http://en.wikipedia.org/wiki/GMAC

For more on Chrysler (Including that Daimler still holds 19% of the stock):
http://en.wikipedia.org/wiki/Chrysler

Sorry the sticking point may be Cerberus may be obligated to buy out Daimler before Cerberus can sell Chrysler to anyone (I do NOT know, just guessing), but I do NOT see GM paying cash for anything right now (GM does NOT have the cash and everyone knows it). All this is is an attempt by GM to expand its market. GM could shut down most (if NOT all) of Chrysler's plants, and supply the dealers with GM cars with Chrysler names on them (The exception could be the Dodge Dakota, GM S-10 pickups is smaller and its full size pickups are larger so a nice niche, and the Jeep Wrangler, which dominates the "Small" four wheel drive market). GM could do this starting in model year 2009, the upfront money would be minimal, and would bring in needed cash revenues do to selling more cars then are presently being made in GM plants. The down size that it will bring in more competition to local dealers (i.e. increase the number of GM dealers by the number of Chrysler dealers in the area) is a minor concern for GM.

[glowing]

3. If GM wants to borrow money from the govt, then I suggest that the govt

impose on them to re-tool their plants to make cars people will buy.. eco-friendly vehicles.

[Frisbee]

9. That's probably why...

they'd like to get this done BEFORE an Obama administration who might just do that.

[mcollier]

11. Will they cut the jobs before or after they get the loan?

[Frisbee]

14. That's really the only question, isn't it?

That seems to be their solution to everything.

[Frisbee]

10. Haven't you heard???

what's good for GM is good for the country. Actually, I do wish they'd get their shit together, too many people either through their pensions or their jobs depend on GM (and Ford & Chrysler). But unless they make huge changes they are destined to failure. I'd say I hope they see the writing on the wall, but how many times before has the writing been clear only to be ignored.

[happyslug]

17. Duplicate subject and source, see:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x3538854

[ForrestGump]

18. I'd like one, too, please

Thank you.

[Dover]

21. A little refresher course on Cerebus...

Such an appropriate name...the mythological dog who guarded the gates to Hades.

These guys are so deep into corruption and fraud, everything they touch is suspect:


----

Created in 1992, Cerberus is a hedge fund, a type of private investment group that's not regulated by the Securities and Exchange Commission. It's named after the mythical, three-headed dog guarding the gates of Hades.

Often called a "vulture fund," Cerberus invests mainly in companies in or on the verge of bankruptcy, buying those firms' bonds in the hopes of converting them into cash or stock in a revived company. In 2000, the company hired former vice president Dan Quayle as a top executive.

In 2003, Cerberus owned more than $140 million in stock and bonds of the bankrupt telecommunications giant WorldCom, financial records show. Its stake in the company, which had filed for bankruptcy protection the previous year, was large enough that a Cerberus executive joined the board of directors of MCI, the company's post-bankruptcy name.

MCI has been a major subcontractor since 2000 on an $8.8 billion project to build a secure computer network for the Navy and Marines. According to a House Appropriations Committee report in 2002, the program had "been unstable since its inception in 1999."

The committee report noted the program's cost overruns, schedule delays and management foul-ups in its report accompanying the 2003 defense spending bill, also sponsored by Lewis. That report called for more and better testing of the program before more computers were added to the network...cont'd

http://www.usatoday.com/news/washington/2006-01-19-cerberus-cover_x.htm

---

Cerberus Capital Management, L.P. is one of the largest private equity investment firms in the USA. The firm is based in New York City, and run by 48-year-old financier Steve Feinberg. Former U.S. Vice President Dan Quayle has been a prominent Cerberus spokesperson and runs one of its international units.

On October 19, 2006, John W. Snow, President George W. Bush's second United States Secretary of the Treasury, was named chairman of Cerberus (Paulson's predecessor).

http://en.wikipedia.org/wiki/Cerberus_Capital_Management

---

Cerberus Takes Over Majority Interest In Chrysler Group and Related Financial Services Business for $7.4 Billion From DaimlerChrysler

http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/05-14-2007/0004587120&EDATE=

---

About John Snow:

Published on Sunday, December 15, 2002 by the Boulder Daily Camera

An Economic Snow Job
by Molly Ivins
http://www.commondreams.org/views02/1215-02.htm


---

John Snow:

...From 1994 through 1996, he was Chairman of the Business Roundtable, a business policy group of 250 chief executive officers of the nation's largest companies, and played a major role in supporting passage of the North American Free Trade Agreement.

..snip..
Snow was nominated as Secretary of the Treasury by President George W. Bush on January 13, 2003 and unanimously confirmed by the US Senate.

In May 2004, it was revealed that Snow's brokers had bought $10 million of debt issued by Fannie Mae and Freddie Mac without his knowledge in February 2003. When Snow found out, he divested the debt holdings. A Treasury ethics lawyer has found that the holdings did not represent a conflict of interest but had the potential to do so in the future.

On May 26, 2006 Snow announced that he would resign effective July 3. He said the White House would make an official statement the following week. On May 30, it was formally announced that Snow would leave this position. On this same day, it was announced that President George W. Bush had nominated Henry Paulson, CEO of Goldman Sachs, to replace Snow...>


http://en.wikipedia.org/wiki/John_W._Snow

[rossmonster]

22. No Forethought... No sympathy....

well GM is now in the can and wants joe average to bail it out? fine. Thats ok to save workers and retirees but its not ok to fund the take over of Chrysler or further inflate executive packages. Remember the EV1? circa 1997-99, a pretty good electric car that was ahead of most of the rest of the market. Once california scrapped its mandatory envrionmentally friendly car sales quotas (under bush schwartzenegger (you will all drive hum-v's ya?) ) about 5 days later GM pulled all the EV1 leases, repossed the cars and CRUSHED them all. 10 years later with petrol three times the price and people less able to pay for it than then where is GM? Broke, devoid of ideas and JUST YESTERDAY I see the GM Volt concept car at the motor show in Sydney Australia.

The GM execs who were all happy to stiffle any advances on there old gas guzler models due to cosy deals with oil companies, higher servicing costs and faster wear out times are now paying the price for lack of innovation.
Someone with a brain could have embraced the EV1 idea in 99 when all the other car makers also strove to crush their electrics. The Volt would have existed as a serious hybrid by 2001 and by now GM would have a HUGE patented chunk of the market that would sell twice as well due to fuel prices. We would have been 5 odd model cycles down the track by now.

Bail out GM by all means but the top execs and board should be immediately let go with the standard 2 week notice and no parachutes. This is what you pay for getting government help. And if chrysler needs help the same applies to it.

This is just another incidious way that Bush has destroyed the US economy by indirect implementation of stupid greedy dogma that has come back to bite everyone 8 years later. So they could save a triffle by not meeting californias build standards in 2001, 7 years down the track the automakers are still producing the same junk, bereft of ideas, broke and with no way now to manouver.... greed is good whilst it lasts but not when you run up an evolutionary dead end with no ability to turn around or get out.

[Fovea]

23. Ok.

Only if they agree to freedom to organize at all facilities worldwide and guarantee 75% domestic content.