The Market Cap for GM plus Ford is 4.1 B ... so we should lend them 25 billion when

[TheCoxwain]

we can own them 100% for 4.1 Billion?

I say buy them outright for 4 Billion .. Fire the Upper management -- pump 20 Billion to retool the factories so that they make 21st century cars, transfer the health coverage to government.

We can sell the company back to private hands for a tidy profit.

[thewiseguy]

1. I am for that plan

[Demeter]

2. That's So Crazy, It Just Might Work!

One question, though---where do we find competent management?

[wolfgangmo]

5. Where do we find competent management?

Raid Toyota and Honda.

Where do you think they got there good people?

[wtmusic]

10. Make Lee Iacocca the Minister of Automotive Affairs

Tongue only half in cheek. Lee is one of the few people in the industry today who knows what's wrong and how to fix it.

[Demeter]

20. If He Wants the Job, It's His

Also, I would have the nationalized auto manufacturers start building the designs of the innovative electric car startups, who will go under if they don't get a boost fast.

[question everything]

3. Makes sense. I will also add a tax credit of, say, $1,000 for a tax payer

who purchase a Detroit-made car. Keep it for 5 years.

Also, why not merge all three?

[LSK]

4. Dr Ravi Batra said something similiar a few weeks ago

He said buy it and then sell it to the WORKERS of GM.

[Sal Minella]

6. Yes. Yes. Yes.

[htuttle]

7. I agree -- The government should help finance the formation of a cooperative

It's the best way I know of to keep the jobs in the US. Nobody is going to vote to send their own job overseas.

[Dogmudgeon]

8. Maybe the UAW (and other unions) can buy the auto makers

It would be an historic economic change. And it might just work outrageously well.

--p!

[wtmusic]

9. Who gets the retooling job?

Attractive idea at first, but who are you going to put in charge of retooling them? If American automakers had ideas they wouldn't be in this mess, so those who are even capable of retooling are going to come from foreign non-union competitors.

Or how about this: buy them out for market cap and sell at auction (at a loss), with the understanding that the buyer will receive handsome subsidies for building 21st century cars as will all other American automakers (incl Tesla and other startups).

Handsome tax credits to buyers of these cars.

[drm604]

11. Interesting idea! n/t

[Oregone]

12. This is the answer!

[leftofthedial]

13. Nationalize the auto industry

make it green, make it work, make it profitable, make it employ american workers at good middle class wages


We could buy the whole damned industry right now for less than $25B and still have enough left over to jump start a crash green car R&D program.

[TahitiNut]

14. Start buying that stock and just watch the price rise.

The myth of market capitalization is a pernicious one. The idea that ALL outstanding shares are valued at the price of the last share sold is total bullshit. Try to SELL all of the for than and watch the price go to zero. Try to BUY and the price will go through the ceiling. ANY change in the balance between sellers and buyers and the price changes.

Anyone who thinks this has much to do with the fundamentals of the business itself is smoking too much Greater Fool weed.

[pampango]

15. You could buy controlling interest for half that $4.1 B which would make it an ever better deal.

If we are going to loan $25 billion to an entity worth $4 billion (+Chrysler's market cap), they better have a damn good plan for using the money. If I tried to borrow $600K on my $100K house, I suspect the bank might want to hear a pretty good plan on how I was going to use that money, since there would be so little collateral for them to fall back on if my plan didn't work out.

I suspect that the Big 3 would argue that they were worth 10 times as much a couple of years ago, so $25 billion is not that much. It is unfortunately true that the Big 3 may have us over a barrel. Despite management's dismal performance, they can make a legitimate case that we either loan them 6 times what they are worth now or we will pay a much greater price later in our national economy. Their executives may not be very good a managing automobile companies, but they seem to be quite skilled at using the resulting crisis to their benefit.

(I just wish I could reasonably threaten my local bank that, if they don't loan me the $600K, I will plunge our town into a depression :) )

[ipfilter]

18. You can't buy the controlling interest in F from the Ford family.

They won't sell it to you.

[pampango]

19. If that is true, the Ford family seems willing to obtain a loan from me (and millions of others)

but wouldn't deem to sell any stock to the same people willing to give them a loan. I guess our money is green enough, but our blood is not blue enough. (I hope they don't use this approach in any future negotiations with Congress over a bailout/loan.)

[mudesi]

25. LOL

I bet they will at the right price.

[JVS]

16. We should Eminent Domain these fuckers.

The public would benefit from them being totally re-organized.

[ContinentalOp]

17. Bingo! Let's do it! -nt-

[gravity]

21. GM's book value is negative $60 billion

Ford is only negative $2 billion.

The government will still have to pay down their liabilities eventually.

[Romulox]

29. I don't think people understand how assets vs. liabilities work here.

:shrug:

[HamdenRice]

22. I doubt they're worth $4 billion after this week

I'm all for nationalization, but there's this thing in this country against so called socialism. I see no reason to save the common stock holders. I hope Obama does what you suggest, but I can see the Freepers heads exploding now -- this will confirm that he's a Manchurian candidate Muslim.

[rvablue]

23. Thank you cubed for finding this and posting...I was thinking about this myself

when I heard the 25 bill. number....

Why on earth are we giving them this much money when the companies aren't even worth that.

More highway robbery brought to you courtesy of big business and the U.S. Congress.

When will it stop????????

[drm604]

24. As soon as you start buying large numbers of shares the price per share will rise.

The more you buy the higher it will go. You can't buy it all for 4.1 billion, the act of buying it will increase the price.

[HamdenRice]

26. Not necessarily. The feds could presumably use "tender offer" rules

The corporate law rules of most states were changed back in the 1980s in response to investment banking and takeover artist greed, to make it easier for an investor to acquire a corporation through a "tender offer". The price will rise and the acquirer does indeed pay a "control premium", but the state court can limit the power of holdouts to demand a higher price.

[drm604]

28. I wasn't aware of that.

Thank you for the info.

[KharmaTrain]

27. And What Are We Getting For The 25 Billion?

I ask this sincerely. I understand that for my union brothers and sisters, its their livelyhoods and no one wants to see that industry or any one collapse, but what assurances are there that this money would have any positive effect? The fact that none of the big three even had a proposal or could even ad lib one that described how they were going to make structural reforms shows that they felt entitled to this money and spread plenty of fear around to try to intimidate Congress to cave in.

The major problem isn't the cars being made, it's the ability for people to afford them. Millions have lost jobs, even more have seen their savings and investments (money used to help buy a car) all but vanish...those people aren't getting a loan or bailout. The automakers are facing the same crisis many businesses are...unable to generate revues due to an economy in total lockdown and not able to secure credits to keep the game rolling. Until the consumer market recovers, no amount of Federal money is going to be of much good...other than a stop-gap reaction that is rife for abuse (look at how other money has been squandered).

If we're going to invest 25 billion, the money is a lot better spent in rebuilding the entire economy...putting it where jobs can be created now to start a recovery that will then "trickle up" to the automakers as the consumer economy recovers.

[ProfessorGAC]

30. Absent The Details, It's Not A Horrible Idea

Have to figure out whether the liabilities incurred put the money at more risk than you suggest, but could be a pretty good idea.
The Professor