Chrysler to Canada: $2.3B USD Loan or We'll Leave

[LargoWinch]

Well, I guess its buye buye then. It was fun while it lasted.

Chrysler wants a $2.3B USD loan from Canada's federal government as a concession. It says the government must additionally drop a tax dispute and that the Canadian autoworkers must accept pay cuts. If its terms are not met, it says, it can't be profitable and all Chrysler's Canadian manufacturing plants will have to close.

Article link:
http://www.dailytech.com/Chrysler+to...ticle14556.htm

[blazespinnaker]

Re: Chrysler to Canada: $2.3B USD Loan or We'll Leave

Well, I guess its buye buye then. It was fun while it lasted.



Article link:
http://www.dailytech.com/Chrysler+to...ticle14556.htm

What I want to know is what kind of equity are they offering us?

[GRG55]

Re: Chrysler to Canada: $2.3B USD Loan or We'll Leave

What I want to know is what kind of equity are they offering us?

I'm sure I saw something about a 1975 Ramcharger on the list of pledged assets...:rolleyes:

However, on a more serious note, I read something recently that Tony Clement admitted that GM has already pledged all its assets to back the US government loan, and therefore there is no way that Canada can secure any collateral for any bailout funds it may extend.

[mr_fibuli]

Re: Chrysler to Canada: $2.3B USD Loan or We'll Leave

I'm sure I saw something about a 1975 Ramcharger on the list of pledged assets...:rolleyes:

However, on a more serious note, I read something recently that Tony Clement admitted that GM has already pledged all its assets to back the US government loan, and therefore there is no way that Canada can secure any collateral for any bailout funds it may extend.

The tax man has a lien on Chrysler's Canadian assets for a $1B tax bill - they can leave if they want to and we can sell the minivan plant to VW for their version of the caravan!

It will cause a lot of pain if GM and Chrysler were to go but it probably makes more sense to save the money and bribe Toyota, Honda BMW etc. to build plants here than to piss it all away. If we're going to pay for someone's factories let's have a reasonable chance of them staying in business.

I don't see how GM and Chrysler (and eventually Ford) can stay alive with total US sales of 8M/a - they have the wrong structure, shrinking market share, too much capacity and a huge legacy cost anchor around their necks. Let the patient die now or be prepared for very expensive palliative care for a long time.

[LargoWinch]

Re: Chrysler to Canada: $2.3B USD Loan or We'll Leave

Agreed. The price will have to be paid anyway sooner or later. Why waste $2.3B? (funny that they are asking for a loan and not a grant: I guess they hope they will never have to repay it).

Toyota is not far anyway:
http://www.premier.gov.on.ca/news/Pr...ProductID=2682

[GRG55]

Re: Chrysler to Canada: $2.3B USD Loan or We'll Leave

The tax man has a lien on Chrysler's Canadian assets for a $1B tax bill - they can leave if they want to and we can sell the minivan plant to VW for their version of the caravan!

It will cause a lot of pain if GM and Chrysler were to go but it probably makes more sense to save the money and bribe Toyota, Honda BMW etc. to build plants here than to piss it all away. If we're going to pay for someone's factories let's have a reasonable chance of them staying in business.

I don't see how GM and Chrysler (and eventually Ford) can stay alive with total US sales of 8M/a - they have the wrong structure, shrinking market share, too much capacity and a huge legacy cost anchor around their necks. Let the patient die now or be prepared for very expensive palliative care for a long time.

Should not need to bribe them. The best of GM and Chrysler's assets, including some of the plants, tooling, vehicle models, employees and the dealer networks, should have real value and will get picked up by someone at a price that is appropriate to make a decent business return going forward.

The reason governments everywhere, including Ontario, Quebec, and Ottawa keep bribing carmakers was because the whole system propped up a level of capacity and costs that has been unsustainable for many, many years. The government subsidies was the only way a viable return could be generated from an overvalued business. Eventually it had to come out of orbit and morph into a flaming wreck as it enters the atmosphere. Propping any of these companies up just perpetuates the distortion.

The only reason to [try to] bail out the automakers, and one I am sympathetic to, is simply that fair-is-fair. Why should the Wall Street banks and AIG get hundreds of billions of dollars while assembly line workers are turfed out on the street when their companies are asking for a tiny fraction of that?

[Adeptus]

Re: Chrysler to Canada: $2.3B USD Loan or We'll Leave

Considering Canada is 1/10th the size of the USA from a population/capita perspective. Asking us for 2.3Billion (USD no less), is like asking for 23 Billion USD (or 29 Billion CAD). Me thinks we could find better things to do with that much money.

[GRG55]

Re: Chrysler to Canada: $2.3B USD Loan or We'll Leave

Considering Canada is 1/10th the size of the USA from a population/capita perspective. Asking us for 2.3Billion (USD no less), is like asking for 23 Billion USD (or 29 Billion CAD). Me thinks we could find better things to do with that much money.

I don't disagree. But what irks me is that the Government of Canada has already agreed to purchase Cdn. $25 Billion of mortgage debt instruments from the banks, Flaherty has already said he'll do another $25 B, and they've extended guarantees on $200 B of bank debt to match the bailouts of other countries. And all this to a banking sector that they claim is "the strongest in the world" and includes three banks that blew away analyst profit estimates when they reported very recently.

In comparison with this I can well understand why line workers are wondering why US $2.3 B is such a big deal.

Just pointing it out, that's all...

[LargoWinch]

Re: Chrysler to Canada: $2.3B USD Loan or We'll Leave

I don't disagree. But what irks me is that the Government of Canada has already agreed to purchase Cdn. $25 Billion of mortgage debt instruments from the banks, Flaherty has already said he'll do another $25 B, and they've extended guarantees on $200 B of bank debt to match the bailouts of other countries. And all this to a banking sector that they claim is "the strongest in the world" and includes three banks that blew away analyst profit estimates when they reported very recently.

In comparison with this I can well understand why line workers are wondering why US $2.3 B is such a big deal.

Just pointing it out, that's all...

Good point Greg, but two wrongs doesn't make one right.

[vanvaley1]

Re: Chrysler to Canada: $2.3B USD Loan or We'll Leave

Think the Canadians should boot em out.

[LargoWinch]

Re: Chrysler to Canada: $2.3B USD Loan or We'll Leave

Think the Canadians should boot em out.

Unfortunately, I won't happen.

Like all governments faced with clearly identifiable losers/voters (Chrysler Canada, its employees, families and relatives) are clearly more visible than the faceless and voiceless Canadian population.

Here is a good example of governments' stupidity:
http://www.globaltv.com/globaltv/ont...tml?id=1374646

[GRG55]

Re: Chrysler to Canada: $2.3B USD Loan or We'll Leave

Unfortunately, I won't happen.

Like all governments faced with clearly identifiable losers/voters (Chrysler Canada, its employees, families and relatives) are clearly more visible than the faceless and voiceless Canadian population.

Here is a good example of governments' stupidity:
www.globaltv.com/globaltv/ontario/story.html?id=1374646

Sounds like we need to hire Nancy Reagan to teach us how to "Just Say No"...

[vanvaley1]

Re: Chrysler to Canada: $2.3B USD Loan or We'll Leave

Unfortunately, I won't happen.

Like all governments faced with clearly identifiable losers/voters (Chrysler Canada, its employees, families and relatives) are clearly more visible than the faceless and voiceless Canadian population.

Here is a good example of governments' stupidity:
http://www.globaltv.com/globaltv/ont...tml?id=1374646

Ahhhhhh...the squeaky wheel thing.

[GRG55]

Re: Chrysler to Canada: $2.3B USD Loan or We'll Leave

Good point Greg, but two wrongs doesn't make one right.

A while back, on another thread, there was a spirited discussion that the Big 3 US manufacturers were in trouble primarily because they "made fuel inefficient vehicles" or they made "lousy vehicles with poor quality", etc. A few of us argued that although they could be accused of making bland, boring cars, the quality slam was more fiction than fact, and the real problem was financial...bad lending by their credit divisions and uncompetitive cost structure.

Nobody ever accused the European car companies of making inefficient cars, or BMW of lousy quality. So look what's happening there...:eek:

Europe’s EU3 Billion Auto-Loans Package Leaves Carmakers Short



March 13 (Bloomberg) -- BMW, Fiat SpA and carmakers that received 3 billion euros ($3.8 billion) in European Investment Bank loans yesterday will find it’s not much of a rescue...

...“We have 300 billion euros of debt in the European auto sector, so a few million isn’t going to make a big difference,” said Adam Jonas, an analyst at Morgan Stanley in London, the top-ranked analyst in coverage of Daimler...

[mr_fibuli]

Re: Chrysler to Canada: $2.3B USD Loan or We'll Leave

Should not need to bribe them. The best of GM and Chrysler's assets, including some of the plants, tooling, vehicle models, employees and the dealer networks, should have real value and will get picked up by someone at a price that is appropriate to make a decent business return going forward.

The reason governments everywhere, including Ontario, Quebec, and Ottawa keep bribing carmakers was because the whole system propped up a level of capacity and costs that has been unsustainable for many, many years. The government subsidies was the only way a viable return could be generated from an overvalued business. Eventually it had to come out of orbit and morph into a flaming wreck as it enters the atmosphere. Propping any of these companies up just perpetuates the distortion.

The only reason to [try to] bail out the automakers, and one I am sympathetic to, is simply that fair-is-fair. Why should the Wall Street banks and AIG get hundreds of billions of dollars while assembly line workers are turfed out on the street when their companies are asking for a tiny fraction of that?

I am also sympathetic - I work in the auto industry in the supply base so I can see the first hand affect of the implosion of demand for cars. I guess I have lost any hope of saving some of these companies. Not because they are making bad products but because the long term demand for cars is going to decline. In the US the total sales peaked at about 16 million per year but that was propped up by the housing bubble, leasing etc. etc. and is unsustainable. Cars will comfortably last for 10 years and yet people are turning them over every 3-4 years which floods the used market.

People are not going to be able to borrow or lease the way they used to if they don't have a job and need to keep their overheads low. They will buy good used cars and keep them for longer so I think demand will shrink to an annual level of 10 million (8 million for the next year or two)

In the end the overcapacity will have to be dealt with - maybe we should save whatever money we have and invest it for something that will grow in the future rather than trying to perpetuate a dying company.

I don't think anything should be given to the banks - do what the Norwegians did and clean up the mess - giving them money will not stop the day of reckoning just postpone it.

Depressing isn't it..........................