Infinite Unknown

Chinese carmakers SAIC and Dongfeng have plans to acquire GM and Chrysler, China’s 21st Century Business Herald reports today. [A National Enquirer the paper is not. It is one of China's leading business newspapers, with a daily readership over three million.]

The paper cites a senior official of China’s Ministry of Industry and Information Technology- the state regulator of China’s auto industry- who dropped the hint that “the auto manufacturing giants in China, such as Shanghai Automotive Industry Corporation (SAIC) and Dongfeng Motor Corporation, have the capability and intention to buy some assets of the two crisis-plagued American automakers.”

These hints are very often followed with quick action in the Middle Kingdom. The hints were dropped just a few days after the same Chinese government gave its auto makers the go-ahead to invest abroad. And why would they do that?

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Tags: China, Chrysler, Economy, financial crisis, General Motors, GM, Politics, U.S.

Nov. 20 (Bloomberg) — U.S. lawmakers deadlocked on a plan to bail out the Big Three automakers, leaving General Motors Corp. facing the prospect it could run out of cash before a new Congress can come to the rescue next year.

Democratic congressional leaders disagreed with Republicans and President George W. Bush’s administration over how to provide $25 billion in aid to GM, Ford Motor Co. and Chrysler LLC. Only two days remain in a lame-duck session for lawmakers to resurrect a compromise.

Senate Majority Leader Harry Reid, a Nevada Democrat, suggested yesterday the situation was dire and refused to set aside time today to debate a compromise proposed by Senator Kit Bond, a Missouri Republican. Reid said Bond’s plan hasn’t been put in writing and the House of Representatives is about to adjourn.

“We have to face reality,” he said. “The reality is that we tried a number of different approaches.”

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Tags: bailout, Chrysler, Congress, Economy, financial crisis, Ford, General Motors, GM, Politics, U.S.

‘But, but, but … that money was only for my friends on Wall Street and not for the people.’
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Henry Paulson, U.S. treasury secretary, left, and Ben S. Bernanke, chairman of the U.S. Federal Reserve, right, listen during a hearing of the House Financial Services Committee in Washington, on Nov. 18, 2008. Photographer: Jim Lo Scalzo/Bloomberg News

Nov. 18 (Bloomberg) — Treasury Secretary Henry Paulson rejected using the government’s financial-rescue program as a “panacea” for economic difficulties, clashing with lawmakers who want the funds to help beleaguered homeowners.

“The rescue package was not intended to be an economic stimulus or an economic recovery package,” Paulson said in testimony to the House Financial Services Committee in Washington. The Troubled Asset Relief Program was designed to stabilize financial markets and the flow of credit and “is not a panacea for all our economic difficulties.”

Representative Barney Frank, who heads the House panel, cut off Paulson during the question-and-answer session, saying “the bill couldn’t have been clearer” in also being aimed at reducing foreclosures. Paulson told lawmakers he has no plans to use the second half of the $700 billion program, indicating it will be up to the incoming Obama administration to resolve the matter.

“We don’t have a lot of time and I don’t usually do this,” Frank said in interrupting Paulson during an exchange on how to deploy TARP cash. “I read sections of the bill that says — write it down — give them assistance,” Frank, a Massachusetts Democrat, told the Treasury chief.

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Tags: bailout, Banks, Ben Bernanke, Chrysler, Congress, Economy, Fed, Federal Reserve, Ford, Foreclosures, General Motors, GM, Government, Henry Paulson, Politics, Treasury, U.S.

Should Congress bail out the Big Three? Here’s what lawmakers are considering and what’s at stake.

NEW YORK (CNNMoney.com) — For more than a century, the U.S. auto industry has been at the center of the American industrial economy. Events over the next month could determine if that remains the case.

This week, Congress will consider whether to cough up billions of dollars to bail out the troubled companies.

There are loud advocates with strong arguments on both sides.

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Tags: bailout, Cars, Chrysler, Congress, Economy, financial crisis, Ford, General Motors, GM, Government, Politics, U.S., Wall Street

BERLIN (Reuters) - Germany said on Monday it was ready to help General Motors’ struggling German unit Opel, though it would make sure any aid did not seep over to the U.S. parent or trigger a flood of demands for support.

Chancellor Angela Merkel is due to meet Opel representatives at 1530 GMT on Monday. Opel has asked the federal government and German states to help it through a financial rough patch that has been aggravated by troubles at its parent GM.

“I think the government will do everything that is necessary to help the company but on the other hand, it will of course respect the consequences with regard to dealing with other companies,” government spokesman Ulrich Wilhelm said.

“This cannot be about taking action that we would then not be able to maintain with regard to similar cases,” he added at a regular government news conference.

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Tags: Angela Merkel, Economy, General Motors, Germany, GM, Opel

Nov. 16 (Bloomberg) — U.S. automakers should not get $25 billion in proposed federal loans to save them from possible bankruptcy, Senator Richard Shelby, the top Republican on the Banking Committee, said.

“Companies fail every day and others take their place,” Shelby said on CBS’s “Face the Nation” today. “There’s not a bank in this country that would loan a dollar to these companies.”

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Tags: bailout, bankruptcy, Bush administration, Chrysler, Congress, Economy, Ford, General Motors, GM, Politics, U.S.

Nov. 15 (Bloomberg) — General Motors Corp., burning through cash as sales slump, would cost the government as much as $200 billion should the biggest U.S. automaker be forced to liquidate, a forecasting firm estimated.

A GM collapse would mean “more aid to specific states like Michigan, Ohio, and Indiana, and more money into unemployment and extended benefits,” Nariman Behravesh, chief economist at IHS Global Insight Inc. in Lexington, Massachusetts, said yesterday in an interview.

Behravesh’s projection of $100 billion to $200 billion in costs dwarfs the $25 billion industry bailout plan that will be debated in Congress next week to prop up Detroit-based GM, Ford Motor Co. and Chrysler LLC. The drain on taxpayers from a rescue or a GM failure is a central issue for U.S. lawmakers.

Included in the Global Insight estimate, which Behravesh supplied to Bloomberg News, are the anticipated costs for existing programs, such as unemployment insurance, and new measures that the economist said would be needed to revive economic growth after millions of auto-related job losses.

A GM shutdown would wipe out jobs among suppliers as well as at the automaker itself, pushing the U.S. unemployment rate next year to 9.5 percent, compared with current projections of as high as 8.5 percent, Behravesh said.

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Tags: bankruptcy, Cars, Chrysler, Economy, Ford, General Motors, GM, Politics, taxpayers, U.S., Unemployment

Vehicles are parked at the Jefferson Chevrolet dealership in Detroit on Nov. 7, 2008. Photographer: Jeff Kowalsky/Bloomberg News

Nov. 12 (Bloomberg) — House Speaker Nancy Pelosi has thrown her support behind the premise that General Motors Corp., the largest U.S. automaker, is too big to be allowed to fail.

In urging Congress to enact emergency aid for the ailing auto industry, Pelosi rejected calls to let GM collapse and sided with the company and its allies in trying to prevent a “devastating” domino effect that would cost millions of jobs.

“Trying to reorganize the auto industry in bankruptcy would be as close to reorganizing the whole U.S. economy as you could get,” said Alan Gover, a bankruptcy lawyer with White & Case LLP in New York. “The vast supply chain involves thousands of businesses, millions of existing jobs and just as many retirees, as well as whole communities and states.”

Passage of an industry bailout plan may keep GM from running out of operating cash by year’s end, which it says may happen without U.S. help. GM is the second-biggest provider of private health-care benefits and was the third-biggest advertiser in this year’s first half.

“It’s truly one of those companies that’s too big to fail, and everybody understands that,” said Nariman Behravesh, chief economist at IHS Global Insight Inc. in Lexington, Massachusetts. “If it does collapse, it could make the recession deeper and longer.”

Behravesh said a GM bankruptcy could send the U.S. jobless rate as high as 9.5 percent, up from a 14-year high of 6.5 percent in October, and produce a recession comparable in length to that of 1980-82.

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Tags: bailout, bankruptcy, Cars, Economy, financial crisis, General Motors, GM, Labor Department, Nancy Pelosi, Politics, Stock Market, U.S., Unemployment, Wall Street

A man exits the American International Building, home to the headquarters of American International Group (AIG), in New York, Nov. 10, 2008. Photographer: Daniel Acker/Bloomberg News

Nov. 11 (Bloomberg) — The revised bailout of American International Group Inc. marks a new phase in the government’s effort to shore up financial markets: It’s the first time cash from the rescue fund Congress created last month has been committed to a failing company.

The Federal Reserve, which saved the insurer from collapse two months ago with an $85 billion loan, yesterday reduced that loan and offered lower rates, while the Treasury chipped in $40 billion from its bank-rescue fund to buy preferred shares. The new terms represent a departure for Secretary Henry Paulson, who until now has said he only wants to invest Treasury funds in “healthy” firms.

Taxpayers are “keeping the zombie alive,” said Robert Eisenbeis, chief monetary economist at hedge fund Cumberland Advisors and former director of research at the Atlanta Fed. “We keep getting deeper and deeper into these holes.”

The shift is likely to vastly expand political demands for saving dying companies in the name of financial or economic stability. The administration of President-elect Barack Obama may soon have to consider credit or capital injections for other insurers, automakers, even retailers as the U.S. slides deeper into what could be the worst recession in a quarter-century.

“Are you going to do General Motors and Ford, and, if you do those, are going to go on and do retailers?” said William Isaac, former chairman of the Federal Deposit Insurance Corp. and now chairman of the Secura Group LLC. “ Where does it stop? That is a very difficult decision we are going to face as a country.”

AIG’s Losses

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Tags: AIG, Economy, Fed, Federal Reserve, financial crisis, Ford, General Motors, GM, Government, Henry Paulson, Politics, Recession, taxpayers, Treasury

Nov. 10 (Bloomberg) — General Motors Corp. plummeted as much as 31 percent and moved toward its lowest level in 62 years after a Deutsche Bank AG analyst downgraded the shares, saying they may be worthless in a year.

“Even if GM succeeds in averting a bankruptcy, we believe that the company’s future path is likely to be bankruptcy-like,” Deutsche Bank’s Rod Lache wrote today in a note. The New York analyst recommended selling the shares and cut his 12-month price target to zero. He previously advised holding the stock.

The decline shows mounting pessimism that a turnaround will succeed at the largest U.S. automaker amid the credit crisis and the worst sales market in at least 15 years. GM is petitioning the U.S. government for aid after saying last week it may not have enough cash to operate this year. A bankruptcy typically wipes out the value of a company’s shares.

Barclays Capital and Buckingham Research Group cut their price targets for GM to $1.

GM, based in Detroit, lost 99 cents, or 23 percent, to $3.37 at 2:45 p.m. in New York Stock Exchange composite trading. It fell as low as $3.02 in intraday trading, which would be the lowest close since Nov. 22, 1946, according to Global Financial Data in Los Angeles. Ford Motor Co. dropped 9 cents to $1.93.

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Tags: Deutsche Bank, Economy, General Motors, GM, Henry Paulson, Stock Market, U.S., Wall Street