why don't the oil companies bail out the auto makers?

Moderators: Elvis, DrVolin, Jeff

why don't the oil companies bail out the auto makers?

Postby bigearth » Fri Oct 31, 2008 11:24 am

now here's an idea!

this has been a VERY mutually beneficial relationship for around 100 years or more..why should tax payers bail them out???

Auto aid pleas mount; Treasury says no GM talks
Fri Oct 31, 2008 9:22am EDT

By David Bailey and David Lawder


DETROIT/WASHINGTON (Reuters) - Six U.S. governors and a group of chief executives on Thursday urged the Bush administration in a letter to aid the embattled auto industry while the White House rebuffed a request for direct support of a merger between GM and Chrysler.

An administration official said the focus instead would be on speeding of $25 billion of low-interest loans for factory retooling, a step the industry's allies say does not go far enough to reverse a deepening industry crisis.

Meanwhile, auto parts makers worried that a merger would eliminate vehicles that they supply, and a prominent industry consultant said GM could up to 40,000 Chrysler jobs and 16 of its 26 models.

GM and Chrysler-owner Cerberus Capital Managementhave been in talks for weeks over a merger that would combine struggling automakers hit by a sales downturn that started in the United States and has spread globally.

GM had been lobbying for up to $10 billion in government support in advance of a merger that analysts have said would likely result in thousands of job cuts across the white-collar and blue-collar work forces with plant closings.

GM, Chrysler and Ford Motor Co -- the potential odd-man out if GM and Chrysler get together -- have focused on maintaining cash to withstand the sales downturn and U.S. market share losses.

U.S. auto sales have fallen 13 percent through September and automakers expect to report October monthly auto sales on Monday that reflect the continued downturn.

All three automakers face increased scrutiny from creditors and investors over whether they have the financial strength to ride out the slump, which is now seen continuing through 2009.


The governors of Michigan, New York, Ohio, Kentucky, Delaware and South Dakota sought an immediate response to an auto industry crisis that puts at risk "the financial well-being of other major industries and millions of American citizens.

"The auto industry; their network of suppliers, vendors, dealers and other businesses and the communities that rely on those businesses face unimaginable challenges -- challenges we urge you to address," the letter said.

Michigan Gov. Jennifer Granholm, told reporters that quick loans were needed for the industry to get through the next six to 12 months.

"The bottom line is that all three automakers need some liquidity, some assistance with cash and they need it right now," Granholm said.

"The alternative is worse," Granholm said. "The alternative is the industry doesn't have access to funds and we lose a company or two. We don't want to do that."

The Business Roundtable, a group of chief executives of some of the largest companies in the United States, supported Treasury providing direct capital injections to automakers and their finance companies.

The group sent its letter to President Bush, Federal Reserve Chairman Ben Bernanke and lawmakers.

The massive U.S. auto parts supply base, comprised of a handful of large publicly traded companies and thousands of smaller private independents, also has been worried that a merger might drive even more firms out of business.

An investment banker familiar with the talks said suppliers were in for hard times regardless of whether there is a GM deal because the industry has far too much production capacity.

"A lot of plants have got to get closed," the banker said. "Regardless of government intervention, the impact will still be the same on suppliers."


Ford Motor Co also has had discussions with policymakers and would want some support should the government assist a GM and Chrysler merger, the automaker's president of the Americas told reporters.

"We have ongoing dialogue with policymakers and the powers that be to not only talk about the challenges facing the industry, but also the challenges facing Ford," Mark Fields, Ford's president of the Americas, told reporters.

"We just want to make sure we continue that ongoing dialogue and make sure that whatever happens there is a degree of parity," he said.

Kimberly Rodriguez, principal of Grant Thornton's automotive practice, said a GM-Chrysler merger would not be optimal, but was a good choice under the current circumstances and would require government aid or outside investors to work.

"There remains risks within a combined structure," she said. "There will be a lot of pressure on them to perform."

A Grant Thornton study of the merger potential found 30,000 to 40,000 of Chrysler's employees might be eliminated. The ripple effect could bring job losses in the 100,000 to 200,000 range when taking into account suppliers and dealers.

The study also found the combined company could slice up to $10 billion of costs, mainly in corporate functions such as accounting or information technology, purchasing, research and development and engineering.

(Additional reporting by Soyoung Kim, Poornima Gupta in Detroit, Karey Wutkowski in Washington and Jui Chakravorty in New York)

http://www.reuters.com/article/newsOne/ ... VI20081031

Chevron profit tops expectations
Fri Oct 31, 2008 9:44am EDT


NEW YORK (Reuters) - Chevron Corp's third-quarter profit more than doubled, easily beating Wall Street forecasts as high oil prices and healthy margins at its refineries boosted its bottom line, the oil major said on Friday.

Net profit was $7.9 billion, or $3.85 per share, compared with $3.7 billion, or $1.75 per share, in the same period a year before. Revenues rose 43 percent to $78.9 billion.

Analysts had expected the second-largest U.S. oil company to report a net profit of $6.55 billion, or $3.27 per share, on revenue of $89.4 billion, according to averages on Reuters Estimates.

The results come one day after larger rival Exxon Mobil Corp also beat estimates with another record quarterly profit on Thursday, due to higher exploration and production profits and improved refining margins. Exxon also said output should increase in 2009, and plans to stick with its current capital expenditure plans.

Chevron's third-quarter capital expenditures rose to $5.5 billion from $5.2 billion a year earlier. Common stock buybacks in the quarter totaled $2 billion.

"Our disciplined capital spending and tight control over costs remain extremely important in today's uncertain economic climate," Chairman and Chief Executive Officer Dave O'Reilly said in a statement.

Investors are concerned that the credit crisis will trigger a global recession and cut energy demand, so the oil majors' spending plans are being carefully scrutinized.

Chevron said the hurricanes that hit the Gulf of Mexico during the quarter cut its upstream earnings by about $400 million and cut its September production by about 150,000 barrels oil equivalent per day.

Production of oil and gas fell by 5.8 percent during the quarter to 2.44 million BOE per day, hurt by the Gulf storms and the reductions built into production sharing agreements outside the United States that reduce its stake as prices rise.

Since peaking in July above $147 per barrel, crude oil futures have tumbled more than 50 percent, but prices were still well above the year-ago level for the quarter.

The company's refinery operations in the U.S. posted a profit of $1 billion in the quarter after suffering a loss of $110 million a year ago, while its international operations saw profits rise 68 percent to $817 million.

Chevron shares, which were near flat in pre-market trade, have lost a fifth of their value in 2008, compared with a 34 percent drop in the Chicago Board Options Exchange index of oil companies.

(Reporting by Matt Daily, additional reporting by Braden Reddall in San Francisco, editing by Dave Zimmerman)

http://www.reuters.com/article/newsOne/ ... XO20081031
. is it a wise man, who knows that he is not wise
. it's good to have cynicism but not be cynical
. the more truth you live with, in your life, the stronger you are
. intelligence is merely an attitude to knowledge and learning
Posts: 234
Joined: Sun Sep 07, 2008 8:44 am
Blog: View Blog (0)

Postby bigearth » Sat Nov 08, 2008 9:49 pm

. is it a wise man, who knows that he is not wise
. it's good to have cynicism but not be cynical
. the more truth you live with, in your life, the stronger you are
. intelligence is merely an attitude to knowledge and learning
Posts: 234
Joined: Sun Sep 07, 2008 8:44 am
Blog: View Blog (0)

Postby the_last_name_left » Thu Nov 13, 2008 7:31 pm

it's a biggie!?

market orthodoxy would say let them fail. But there'd be a big, big price to pay? Unemployment, loss of skills, loss of industrial capacity, loss of assets, intellectual rights.......

Is it unreasonable to suggest strategic national interests are at stake?

Letting them go to the wall has some big costs - it WILL make a lot of people very unhappy.

Obama stated car companies were critical to putting america on energy security/efficiency path. He seemingly is committed to not letting them fail.

Why do you think the public are against it (if we believe that poll)?
Posts: 328
Joined: Fri Mar 23, 2007 4:52 am
Blog: View Blog (0)

Postby NaturalMystik » Fri Nov 14, 2008 12:43 am

Hmmm the auto companies bailed out the oil companies when they started making electric cars back in the 80s, by destroying all the electric cars they made and never mentioning it again.

Seems only reasonable that the oil industry now owes a favour...

Strange that the price of oil is plummeting so much these days... Safe to by an SUV again?

Do not attempt to adjust the picture. We are controlling the transmission.
User avatar
Posts: 535
Joined: Fri Jan 11, 2008 4:37 am
Location: The Golden Horseshoe
Blog: View Blog (0)

Postby the_last_name_left » Fri Nov 14, 2008 7:18 am

so how can obama make the oil companies do what he wants?

WIll he be able to? Under the free-market, the Big3 fucked it up. So how will Obama make them successful AND use them in his drive for energy efficiency? HOW>>>???
Posts: 328
Joined: Fri Mar 23, 2007 4:52 am
Blog: View Blog (0)

Postby the_last_name_left » Sun Nov 16, 2008 6:27 pm

Nearly three million jobs would be lost in the first year if there was a 100 per cent reduction in Big Three US operations,' Cole said.

Job losses among suppliers of car parts and car sales companies, as well as those on the production lines, would be compounded by a massive drop in taxes and consumer spending power that would further cripple the already hobbled American economy.

'Our model estimates that a complete shutdown of Detroit three US production would have a major impact on the US economy in terms of lost wages, reductions in social security receipts, personal income taxes paid, and an increase in transfer payments,' said Sean McAlinden, CAR's chief economist.

'The government stands to lose $60bn in the first year alone, and the three-year total is well over $156bn.'

http://www.guardian.co.uk/business/2008 ... -joblosses

This can be seen as more of the US/public's ambivalence towards capitalism - a bailout is opposed (it's socialism!) whilst a collapse is seemingly inevitable otherwise. market orthodoxy says the firms should go to the wall - but market orthodoxy led them there in the first place? Just as with the banks?

If they go to the wall the loss of car manufacturing will be (yet another) complaint for americans to put on their list.......along with TVs, computers, etc.......

and still the enthusiastic faith in market orthodoxy persists.......

might there not be a connection between losing manufacturing jobs and (world) capitalism? People put this down to "globalism" - but it's only a particular sort of "globalism", a capitalist one.

Cars, and almost anything else, are cheaper to make in china.....or india.....or ukraine...... Committing to a market system and competition has inevitable consequences, doesn't it? Capital is free to move the world over in search of opportunity - people aren't. blah blah woof woof

Losing the auto manufacturing would be irrational and inefficient - from the perspective of someone wishing to use the auto industry's manufacturing skill and capacity? Sure the auto industry is part of the problem - but would losing it altogether be "a good thing"?

I thought this was interesting too - revealing?

chief executive of the Anderson Economic Group, a US consultancy, believes that at least 35,000 jobs will be lost if the government intervenes to save the industry. <b>'The necessary restructuring to take capacity out of the market would lead to between 30,000 and 40,000 job losses nationwide,' he said.</b>

Proving the marxist criticism that capitalism has inevitable crises of overproduction is completely untrue.........errrr not.

Again - we're faced with destroying and dismantling capacity because people can't "afford" what is produced. There's "insufficient demand" when everywhere there's desperate need.
So factories are smashed, and ruined, until production is scaled back sufficiently ie until supply is reduced and profitability renewed.

Why not at least set them to making windmills? Solar panels? The world's most efficient car? Is that impossible? Under a pure market orthodoxy and small govt. blah blah blah - it is impossible, it's to be avoided.

It's a huge and fundamental decision?
Posts: 328
Joined: Fri Mar 23, 2007 4:52 am
Blog: View Blog (0)

Postby the_last_name_left » Mon Nov 17, 2008 1:16 am

here's engels on GM, FORD, and Chrysler.......well.......ok - not quite

What were the further consequences of the industrial revolution?

Big industry created in the steam engine, and other machines, the means of endlessly expanding industrial production, speeding it up, and cutting its costs. With production thus facilitated, the free competition, which is necessarily bound up with big industry, assumed the most extreme forms; a multitude of capitalists invaded industry, and, in a short while, more was produced than was needed.

As a consequence, finished commodities could not be sold, and a so-called commercial crisis broke out. Factories had to be closed, their owners went bankrupt, and the workers were without bread. Deepest misery reigned everywhere.

After a time, the superfluous products were sold, the factories began to operate again, wages rose, and gradually business got better than ever.

But it was not long before too many commodities were again produced and a new crisis broke out, only to follow the same course as its predecessor.

Ever since the beginning of this (19th) century, the condition of industry has constantly fluctuated between periods of prosperity and periods of crisis; nearly every five to seven years, a fresh crisis has intervened, always with the greatest hardship for workers, and always accompanied by general revolutionary stirrings and the direct peril to the whole existing order of things.

— 13 —
What follows from these periodic commercial crises?


That, though big industry in its earliest stage created free competition, it has now outgrown free competition;

that, for big industry, competition and generally the individualistic organization of production have become a fetter which it must and will shatter;

that, so long as big industry remains on its present footing, it can be maintained only at the cost of general chaos every seven years, each time threatening the whole of civilization and not only plunging the proletarians into misery but also ruining large sections of the bourgeoisie;

hence, either that big industry must itself be given up, which is an absolute impossibility, or that it makes unavoidably necessary an entirely new organization of society in which production is no longer directed by mutually competing individual industrialists but rather by the whole society operating according to a definite plan and taking account of the needs of all.

Second: That big industry, and the limitless expansion of production which it makes possible, bring within the range of feasibility a social order in which so much is produced that every member of society will be in a position to exercise and develop all his powers and faculties in complete freedom.

It thus appears that the very qualities of big industry which, in our present-day society, produce misery and crises are those which, in a different form of society, will abolish this misery and these catastrophic depressions.

Posts: 328
Joined: Fri Mar 23, 2007 4:52 am
Blog: View Blog (0)

Return to Economics

Who is online

Users browsing this forum: No registered users and 1 guest