GM, Ford shares jump on bailout outlook

[Oracle of Delphi]

November 26, 2008 - 1:00 pm ET

UPDATED: 11/26/08 1:19 p.m. EST

DETROIT (Reuters) -- Shares of General Motors and Ford Motor Co. jumped today after Deutsche Bank said chances have improved for the struggling U.S. automakers to receive a government bailout.

"There is growing concern about the risks to the U.S. economy that would be derived from inaction," Deutsche Bank analyst Rod Lache said in a research note.

"The proximity of these bailout hearings to the Citigroup bailout may have also tipped the scales somewhat," Lache said, referring to the massive government rescue of the bank announced Sunday.

Shares of GM, which hit a 70-year low of $1.70 last week, surged as much as 64 percent as of 1 p.m., trading at $5.86 a share -- up$2.30 a share on heavy trading on the New York Stock Exchange.

Ford shares were up 33 percent, or 55 cents, to $2.20 a share.

Lawmakers, who last week rejected pleas from GM, Ford and Chrysler LLC for $25 billion in federal loans and asked the companies to submit detailed turnaround plans, are rescheduled to convene out of session in the week of December 8 to review the plans and consider aid.

Lache said the U.S. automakers would likely present "relatively aggressive" plans to Congress, addressing challenges to both operating costs and revenues.

"We believe winning over skeptics will require U.S. automakers to submit plans that demonstrate an ability to achieve cash flow breakeven at relatively low demand and conservative market share levels," Lache said.

He added GM could cut its annual fixed costs for North American operations to the low $20 billion range from the current $31 billion, but that would involve "significant execution and timing risks."

Even if GM is able to restructure outside of bankruptcy, existing shareholders will likely be diluted to near $0 value for the stock, Lache said.

Link: http://www.autonews.com/article/20081126/A...paign_id=alerts

[PurdueGuy]

I just can't decide if this is the best or worst time to buy stock in one of the big 3. It could easily be either.

[haypops]

I just can't decide if this is the best or worst time to buy stock in one of the big 3. It could easily be either.

If your intent is to help GM then this might be a safer route.

http://www.gmacbank.com/index.html

The stock market might get you get better returns on your investment. It might also get you an ulcer.

[FUTURE_OF_GM]

So, they're either going to let Detroit die or force them to kill themselves by downsizing?

[haypops]

So, they're either going to let Detroit die or force them to kill themselves by downsizing?

The new administration has promised to SAVE or create 2.5 million new jobs. I think the auto industry bridge loan program is a sure thing.

[thegriffon]

'The Engine of Democracy' Coalition to Send Workers From 50 States to Washington to Support Auto Bridge Loans

WASHINGTON, Nov. 26 /PRNewswire-USNewswire/ -- The Engine Of Democracy, a coalition of organizations representing more than 6 million jobs related to the American automotive industry, today announced plans to send representatives from all 50 states and the District of Columbia to Washington, D.C., to show support for $25 billion in federal loans to General Motors Corp., Ford Motor Co. and Chrysler LLC.

Spearheaded by suppliers and dealers in all states, this effort shows the massive, nationwide support for the federal loans the automakers need to help ensure the national security of the United States, the continuation of a robust automotive manufacturing base and the economic well-being of the nation and its citizens.

"This is about line workers, parts suppliers, dealership mechanics, and hard working moms and dads earning a living for their families," said Carl Galeana, an automobile dealer in several states and a coalition organizer. "As Americans, we depend on the auto industry to drive our economy in these very tough times. The role it played in reinvigorating our economy after 9/11 is just one example. And please, let's not forget how this industry turned on a dime and became what President Roosevelt called 'The Arsenal of Democracy' during World War II."

On December 5, 2008, 51 people from the 50 U.S. states and the District of Columbia who are directly or indirectly employed thanks to GM, Ford or Chrysler will gather outside the U.S. Capitol Building to tell their employment story and the impact of automakers on their locale. Each participant will be wearing a red, white and blue sport jersey with key data about the industry's impact on their state emblazoned on them.

"America's car companies play a crucial role in the nation's economic engine," said Neil DeKoker of the 400-member Original Equipment Suppliers Association. "Almost 4 percent of U.S. gross domestic product is auto-related and represents 10 percent of U.S. industrial production by value. Ford, GM and Chrysler account for more than 70 percent of U.S. production and support more than 6 million jobs across all 50 states and the District of Columbia."

According to Driving the Future: The New American Auto Industry by The Automotive Trade Policy Council, the U.S. auto industry invests $10 billion in this country in plants and equipment each year. In addition, the U.S.-based auto industry is second only to the semiconductor industry in R&D spending -- $12 billion last year alone, the study said.

A significant portion of that R&D money is spent developing alternative energy vehicles that will move the U.S. away from its dependence on oil. Without the work of GM, Ford and Chrysler, the U.S. could be forced to import critical technologies such as batteries, biofuel technology, advanced internal combustion engines and transmissions, hybrid systems, and fuel cells. That, in itself, has all the markings of a national security disaster.

The auto industry has one of the largest economic multipliers of any sector of the U.S. economy. Its growth or contraction can be detected in changes in the U.S. Gross Domestic Product. In many states, employment in automotive and automotive parts manufacturing ranks among the top three manufacturing industries, according to a recent report by the Center for Automotive Research (CAR).

The Engine of Democracy coalition also will launch a microsite entitled "The Engine of Democracy," Monday with the URL www.THEENGINEofDEMOCRACY.com. Automotive employees, retirees, car owners, auto supplier employees, dealership employees, mayors, state legislators and interested citizens will be encouraged to go on the site and add their stories about America's car industry and its impact on their lives. Visitors also will be encouraged to write their Congresswomen, Congressmen, Senators, Secretary Paulson, President Bush and President-Elect Obama -- as well as legislators from other states -- to encourage the U.S. Government to approve a bridge loan for America's car companies.

Visitors also will be able to see the impact of Detroit's automakers on their state as well as key facts and myth-busters concerning Detroit's automakers such as:

-- The automakers are requesting a bridge loan, not a bailout as Wall

Street has done. The companies need the loan because the U.S. credit

freeze has essentially closed capital markets and squeezed their cash

flow from operations that are being devastated by extremely low

consumer demand across the industry. This freeze is happening as the

automakers are in the midst of huge restructuring costs, heavy pension

and health care payments and massive-yet-crucial product and advanced

technology investments so that today's and tomorrow's vehicles are

even safer and more environmentally friendly.

-- GM, Ford and Chrysler make vehicles Americans want to buy. 50 percent

of the products sold in this country come from those companies. The

best-selling vehicle in the U.S. is a Ford; No. 2 is a GM product.

-- Motor vehicles and parts are the single largest export from the U.S.,

topping aerospace, medical equipment and communications.

-- According to J.D. Power, three of the top five brands for

dependability are American made: Buick, Cadillac and Mercury. The

2008 Chevy Malibu is the highest ranked midsize car in initial

quality. The 2008 Chevy Silverado ranks highest in large truck

quality. Ford quality is on par with Toyota and Honda.

-- Ford has the most five-star safety rated vehicles in the industry and

GM has the same number of vehicles as Toyota that achieved the top

safety rating, according to the Institute for Highway Safety.

-- GM, Ford and Chrysler build fuel-efficient vehicles. GM has twice as

many models that get 30 mpg or better than its nearest competitor.

GM's four new midsize crossover vehicles have best-in-class fuel

economy. GM has eight hybrids on the road today, with a total of 20

planned by 2012. The 2-Mode Chevy Tahoe full-size SUV was named Green

Car of the Year last November. The new Ford Fusion Hybrid and Mercury

Milan Hybrid beat the Toyota Camry Hybrid by 6 miles per gallon. In

minivans, Chrysler is better than both Nissan and Toyota and basically

tied with Honda.

-- GM, Ford and Chrysler have been restructuring their businesses over

the past few years that included the loss of tens of thousands of

jobs, a new labor contract with the UAW that will bring costs in line

with foreign competitors in this country, and productivity gains that

have put them on par with the competition. Ford was profitable in the

first quarter of 2008 before the economic crisis began and has been

working for two years to improve its balance sheet through aggressive

restructuring while accelerating the development of new, safe,

fuel-efficient and high quality products. GM has reduced structural

costs in North America by $9 billion since 2005, eliminated raises and

bonuses for executives and salaried employees, and aggressively

addressed its manufacturing footprint, shifting from truck and SUVs to

smaller cars and crossovers.

-- According to The Harbour Report, the manufacturing productivity bible

of the industry, GM has more plants leading their respective segments

in productivity than any other competitor, foreign or domestic.

The Engine of Democracy Coalition is an informal, ad hoc group of concerned automotive supplier and dealership employees and affiliated organizations that are impacted by the future of America's car companies. This group is self-funded and has received no funds from Chrysler, Ford or General Motors.

Source: Engine of Democracy Coalition

[thegriffon]

So, they're either going to let Detroit die or force them to kill themselves by downsizing?

Or buy only building vehicles no-one is willing to buy at $2 a gallon gas.

[Oracle of Delphi]

NO BRIDGE LOAN, NO PEACE!

[thegriffon]

There remains a high probability that this or a future arrangement put together next year will demand line-item control over product development and production decisions by people with no concept of supply and demand in a competitive automotive market. remember, these are by and large the same people who think people bought more SUVs because automakers made more of them, and that people would all be driving 37 mpg vehicles now if only someone made them. Well they do make them and they don't buy them. CAFE for 30 years has caused automakers to increase fuel-efficiency to world-class levels without any effect on CAFE or national fuel consumption. It has merely enabled people to buy larger, heavier vehicles such as full-size SUVs which use comparatively more fuel. Only high fuel prices and recurrent charges linked to fuel consumption can improve CAFE, not manufacturers' efforts to improve economy.

[thegriffon]

What's odd is that at the same time they think the Detroit automakers are in trouble because they are building the wrong kind of vehicles. But then holding two opposing views at the same time is what politicians do best.

[Oracle of Delphi]

What's odd is that at the same time they think the Detroit automakers are in trouble because they are building the wrong kind of vehicles. But then holding two opposing views at the same time is what politicians do best.

100%

[CARBIZ]

There remains a high probability that this or a future arrangement put together next year will demand line-item control over product development and production decisions by people with no concept of supply and demand in a competitive automotive market. remember, these are by and large the same people who think people bought more SUVs because automakers made more of them, and that people would all be driving 37 mpg vehicles now if only someone made them. Well they do make them and they don't buy them. CAFE for 30 years has caused automakers to increase fuel-efficiency to world-class levels without any effect on CAFE or national fuel consumption. It has merely enabled people to buy larger, heavier vehicles such as full-size SUVs which use comparatively more fuel. Only high fuel prices and recurrent charges linked to fuel consumption can improve CAFE, not manufacturers' efforts to improve economy.

These same people believe that if they reduce the number of lanes on city streets and dedicate them to bicycles, that more people will abandon their vehicles and take bicycles to work.

There is no end to the lunacy in political circles. I shudder at the thought of Washington getting an 'ownership' position in GM or Ford.

[A Horse With No Name]

Carbiz, a bicycle makes perfect sense in a -30 degree Toronto winter. Your just not being creative enough in your thinking.

The Lunacy of our leaders knows no end. But look at the bright side, we already have the engeneering done for the Trabant, and GM should be able to knock these out and sell them at a price all of the people working at fast food and lawncars jobs can afford.

See, there is a rational plan...

Chris

[FUTURE_OF_GM]

The new administration has promised to SAVE or create 2.5 million new jobs. I think the auto industry bridge loan program is a sure thing.

Via a "GREEN" initiative..

That hardly sounds like Detroit money to me...

[FUTURE_OF_GM]

NO BRIDGE LOAN, NO PEACE!

:angry2:

[haypops]

Via a "GREEN" initiative..

That hardly sounds like Detroit money to me...

I am not sure it is limited to a green initiative as infrastructure and education are frequently mentioned. However, nothing is more of a green initiative than a strong Detroit since by necessity a large portion of our energy utilization is for transportation.

Although I am pretty optimistic by nature, I do fear that on one end the help may come just a little too late for GM. On the other hand i fear that Chrysler isn't positioned as well as Ford and GM to survive from the nature of the probable offer of help.