Kevin Colby: News, culture, political blog

Some interesting articles to read:

Now here is a real bright idea!  Subprime borrowers may now be able to get a car loan through GMAC thanks to federal bailout money, according to The Detroit News.   This is exactly what happens when your beloved government doesn’t let these companies file for bankruptcy, but instead handout billions upon billions of your hard earned income to these companies so they can make idiot decisions.

On 24 December 2008, the Federal Reserve accepted GMAC’s application to become a bank holding company in order to gain access to billions of dollars in government aid, a crucial attempt to ensure the survival of the company. GMAC is in discussions with the Federal Reserve on accessing TARP related funding to resume providing auto financing to the American consumer, as reported by the Wall Street Journal.

I guess we haven’t learned our lesson yet.  You don’t give dirtbags any type of loans!  This is like going back to the future with the lowered lending standards that got us in trouble in the first place across so many credit markets.

Applicants with credit scores of less than 620 will now be considered. Of course, if you have terrible problems with credit, it’s probably not a good idea to take on a long auto loan.

It’s clear this is happening right now because car sales were absolutely decimated last month. GM sales were down 45%; Chrysler was down 39%; Toyota was down 39%; and Honda was down 36%. The auto market overall was down an average of 37%.

So the nearly $6 billion made available by the government is being used to make loans to people who may not be able to pay them back — all in an effort to try to move cars that aren’t selling off dealer lots.

This is a really bad freaking idea.  The answer to the lack of demand for these cars is not to go to the subprime market because these people in a very short time will not be able to make the payment and these cars will be coming back through repossession.

Some interesting articles to read:

Interesting articles to read from Clark Howard’s website:

Outrage over government backing GM, Chrysler warranties

It’s now been almost one year ago to the day that Clark made some comments about Chrysler that provoked heated response.

In short, the consumer champ questioned the company’s viability (while expecting them to go bankrupt) and predicted that their warranties would be worthless back in April 2008.  Read the full story.

Cul-de-sac bans as a new money-saving measure for gov’t?

The state of Virginia is banning the building of new neighborhood developments with cul-de-sacs. North Carolina and parts of Oregon are also seeking to do the same, according to The Washington Post.  Read the full story.

REOs remain the good news in a down housing market

CLARKONOMICS: The news on the housing market continues to be bleak, bleak, bleak. In just one example, the latest numbers from the Case-Shiller index show that home values in Phoenix are down almost 50% from their peak in July 2006.   Read the full story.

An early look at the price of gas in summer 2009

Where will gas be as we begin slowly approaching the summer of 2009? $3/gallon? $4/gallon?! How about between $2.25 and $2.35! That’s the latest word from The Houston Chronicle, which closely follows the oil industry.  Read the full story.

GMAC Financial Services is a global finance company operating in and servicing North America, South America, Europe and Asia-Pacific. It was founded in 1919 as a wholly-owned subsidiary of General Motors, Corp. In November of 2006 Cerberus Capital Management, a private firm, and a handful of partners purchased a controlling 51% interest in GMAC. GM continued to hold the remaining 49% ownership stake. But in late December 2008, when GMAC began to participate in the Treasury Department’s bailout of the financial sector, Cerberus reduced its ownership in GMAC by distributing shares of the company to its co-investors. This enabled Cerberus to avoid becoming a bank holding company, which would have brought the company under greater federal oversight.

Under Treasury’s Troubled Asset Relief Program (TARP), GMAC received $5 billion in exchange for preferred stock and warrants. In addition, Treasury agreed to lend GM up to $1 billion so it could participate in a rights offering at GMAC as it reorganizes into a bank holding company.   In January GM made use of that loan, using $886 million to increase its ownership stake in GMAC to just under 60%.

According to Forbes, GMAC is the country’s fourth largest private U.S. company. Among all U.S. companies, Fortune lists GMAC as the country’s 78^th largest.  GMAC is the sponsor of one of college football’s annual bowl games. Fortune also ranks GMAC as among the biggest financial losers (based on 2007 financials) of the Fortune 500. Early this year GMAC posted a $7.46 billion profit after five straight quarters of posting a loss. In the fall of 2008, due to low cash reserves, GMAC was forced to choose between financing GM dealerships’ operating expenses and financing car loans for vehicle purchases. GMAC chose to support the dealerships and for a time did not write any car loans. The company has since resumed financing car loans. At least one analyst believes the U.S. auto industry might be better off if a company like GM were to declare bankruptcy.

?Financial Documents

2008 GMAC 10K (Annual Report)

2-02-2009 GMAC 8K

1-21-2009 GMAC 8K

1-16-2009 GM Purchases GMAC Shares 8K

9-30-08 GMAC 10Q

6-30-08 GMAC 10Q

3-31-08 GMAC 10Q

2007 GMAC 10K (Annual Report)

?Federal contracts

No federal contracts located (last accessed 03/04/2009).

?Lobbying reports (if any)

GMAC | Sidley Austin |

?Political Contributions

Center for Responsive Politics (last accessed 03/04/2009)

?Related Articles

March 4, 2009 February Light-Vehicle Sales Slip (Barron’s)

March 4, 2009 Suzuki dealer ends financing with GMAC (Huntsville Times)

March 3, 2009 Auto Sales: Worst February in 40 Years (BusinessWeek)

March 3, 2009 TALF’s Terms Bring Little Relief To Struggling Auto Makers (CNNMoney)

February 12, 2009 GM talking with China’s SAIC to raise cash (Reuters)

February 10, 2009 GM bankruptcy could speed restructuring - analyst (Reuters)

February 9, 2009 Fed Needs to Stop Approving (Goofy) Bank Holding Companies (Seeking Alpha)

February 9, 2009 GMAC steps back from the brink (Automotive News)

February 6, 2009 Can The TALF Save Detroit? (Forbes)

February 6, 2009 Fitch puts auto floorplan notes under review (MSNMoney/AP)

February 3, 2009 UPDATE 3-GMAC has $7.46 bln profit, main units still in red (Reuters)

February 3, 2009 GMAC posts profit, but main units lose money (Financial Post)

February 3, 2009 GMAC auto finance business loses $1.31 billion (Automotive News)

January 24, 2009 GM gets $884 million for GMAC restructuring plan (The Windsor Star)

January 23, 2009 GM Increases GMAC Stake to Near 60% (TheStreet.com)

January 2, 2009 U.S. throws GMAC $6 billion lifeline (CNNMoney.com)

December 31, 2008 Bailout Trims Cerberus’s GMAC Stake (Wall Street Journal)

December 29, 2008 GMAC Receives $5.0 Billion Investment from the U.S. Treasury (press release)

December 24, 2008 GMAC - Fed opens door to bailout funds (CNNMoney)

Information obtained from Taxpayers for Common Sense

Here is the request letter from GM followed by the response…Enjoy!

Dear Employees & Suppliers,
Congress and the current Administration will soon determine whether to provide immediate support to the domestic auto industry to help it through one of the most difficult economic times in our nation’s history. Your elected officials must hear from all of us now on why this support is critical to our continuing the progress we began prior to the global financial crisis………………….As an employee or supplier, you have a lot at stake and continue to be one of our most effective and passionate voices. I know GM can count on you to have your voice heard.

Thank you for your urgent action and ongoing support.

Troy Clarke
President General Motors North America
++++++++++++++++++++++++++++++++++++++++++++++
Response from:
Gregory Knox, Pres.
Knox Machinery Company
Franklin, Ohio

Gentlemen:

In response to your request to contact legislators and ask for a bailout for the Big Three automakers please consider the following, and please pass my thoughts on to Troy Clarke, President of General Motors North America.

Politicians and Management of the Big 3 are both infected with the same entitlement mentality that has spread like cancerous germs in UAW halls for the last countless decades, and whose plague is now sweeping this nation, awaiting our new “messiah”, Pres-elect Obama, to wave his magic wand and make all our problems go away, while at the same time allowing our once great nation to keep “living the dream”… Believe me folks, The dream is over!

This dream where we can ignore the consumer for years while management myopically focuses on its personal rewards packages at the same time that our factories have been filled with the worlds most overpaid, arrogant, ignorant and laziest entitlement minded “laborers” without paying the price for these atrocities…this dream where you still think the masses will line up to buy our products for ever and ever.

Don’t even think about telling me I’m wrong. Don’t accuse me of not knowing of what I speak. I have called on Ford, GM, Chrysler, TRW, Delphi, Kelsey Hayes, American Axle and countless other automotive OEM’s throughout the Midwest during the past 30 years and what I’ve seen over those years in these union shops can only be described as disgusting.

Troy Clarke, President of General Motors North America, states: “There is widespread sentiment throughout this country, and our government, and especially via the news media, that the current crisis is completely the result of bad management which it certainly is not.”

You’re right Mr. Clarke, it’s not JUST management…how about the electricians who walk around the plants like lords in feudal times, making people wait on them for countless hours while they drag ass…so they can come in on the weekend and make double and triple time…for a job they easily could have done within their normal 40 hour work week. How about the line workers who threaten newbies with all kinds of scare tactics…for putting out too many parts on a shift…and for being too productive (We certainly must not expose those lazy bums who have been getting overpaid for decades for their horrific underproduction, must we??!)

Do you folks really not know about this stuff? How about this great sentiment abridged from Mr. Clarke’s sad plea: “over the last few years …we have closed the quality and efficiency gaps with our competitors.” What the hell has Detroit been doing for the last 40 years?! Did we really JUST wake up to the gaps in quality and efficiency between us and them? The K car vs. the Accord? The Pinto vs. the Civic?!? Do I need to go on? What a joke!

We are living through the inevitable outcome of the actions of the United States auto industry for decades. It’s time to pay for your sins, Detroit.

I attended an economic summit last week wher e brilliant economist, Alan Beaulieu, from the Institute of Trend Research, surprised the crowd when he said he would not have given the banks a penny of “bailout money”. “Yes, he said, this would cause short term problems,” but despite what people like politicians and corporate magnates would have us believe, the sun would in fact rise the next day… and the following very important thing would happen…where there had been greedy and sloppy banks, new efficient ones would pop up…that is how a free market system works…it does work…if we would only let it work…”

But for some nondescript reason we are now deciding that the rest of the world is right and that capitalism doesn’t work - that we need the government to step in and “save us”…Save us my ass, Hell - we’re nationalizing…and unfortunately too many of our once fine nation’s citizens don’t even have a clue that this is what is really happening…But, they sure can tell you the stats on their favorite sports teams…yeah - THAT’S really important, isn’t it…

Does it ever occur to ANYONE that the “competition” has been producing vehicles, EXTREMELY PROFITABLY, for decades in this country?… How can that be??? Let’s see… Fuel efficient… Listening to customers… Investing in the proper tooling and automation for the long haul…

Not being too complacent or arrogant to listen to Dr. W. Edwards Deming four decades ago when he taught that by adopting appropriate principles of management, organizations could increase quality and simultaneously reduce costs. Ever increased productivity through quality and intelligent planning… Treating vendors like strategic partners, rather than like “the enemy”… Efficient front and back offices… Non union environment…

Again, I could go on and on, but I really wouldn’t be telling anyone anything they really don’t already know down deep in their hearts.

I have six children, so I am not unfamiliar with the concept of wanting someone to bail you out of a mess that you have gotten yourself into - my children do this on a weekly, if not daily basis, as I did when I was their age. I do for them what my parents did for me (one of their greatest gifts, by the way) - I make them stand on their own two feet and accept the consequences of their actions and work through it. Radical concept, huh… Am I there for them in the wings? Of course - but only until such time as they need to be fully on their own as adults.

I don’t want to oversimplify a complex situation, but there certainly are unmistakable parallels here between the proper role of parenting and government. Detroit and the United States need to pay for their sins. Bad news people - it’s coming whether we like it or not. The newly elected Messiah really doesn’t have a magic wand big enough to “make it all go away.” I laughed as I heard Obama “reeling it back in” almost immediately after the final vote count was tallied…”we really might not do it in a year…or in four…” Where the Hell was that kind of talk when he was RUNNING for office?

Stop trying to put off the inevitable folks … That house in Florida really isn’t worth $750,000… People who jump across a border really don’t deserve free health care benefits… That job driving that forklift for the Big 3 really isn’t worth $85,000 a year… We really shouldn’t allow Wal-Mart to stock their shelves with products acquired from a country that unfairly manipulates their currency and has the most atrocious human rights infractions on the face of the globe…

That couple whose combined income is less than $50,000 really shouldn’t be living in that $485,000 home… Let the market correct itself folks - it will. Yes it will be painful, but it’s gonna’ be painful either way, and the bright side of my proposal is that on the other side of it all, is a nation that appreciates what it has…and doesn’t live beyond its means…and gets back to basics…and redevelops the patriotic work ethic that made it the greatest nation in the history of the world…and probably turns back to God.

Sorry - don’t cut my head off, I’m just the messenger sharing with you the “bad news”. I hope you take it to heart.

Gregory J. Knox, President
Knox Machinery, Inc.
Franklin, Ohio 45005


http://www.snopes.com/politics/soapbox/knox.asp

General Motors Corporation (GM) is a U.S.-based automobile manufacturer, founded in 1908 and headquartered in Detroit, Michigan. GM is the world’s second largest automaker. It manufactures its vehicles in 34 countries around the globe, and sells and services vehicles in 140 countries. The company employs approximately 252,000 people. The company sells cars under the Chevrolet, Buick, Saab, GMC, Pontiac, Cadillac, Hummer, and Saturn, Opel, Vauxhall, Isuzu, Holden, and Daewoo brands. The company also has nearly 7,000 auto dealers in the U.S.

In addition, General Motors holds a 49% share in GMAC Financial Services. GMAC was previously a wholly-owned subsidiary of GM, until 2006 when it sold a majority share to Cerberus Capital Management for $14 billion.

General Motors has received $14.3 billion in Troubled Asset Relief Program (TARP) funds. This includes an $864 million loan, and stock exchanges of $4 billion on December 31, 2008, $5.4 billion on January 21, 2009, and $4 billion on February 17, 2009.

The company’s restructuring plan, which was required as a condition of the receipt of federal bailout dollars, indicates that General Motors will need as much as $16.6 billion additional federal dollars to return the company to solvency.

Information was obtained from Taxpayers for Common Sense.

Some interesting articles from Clark Howard’s website:

Warranties, resale value are concerns for select GM owners

If you’re an owner of a Hummer, Saturn, Pontiac or Saab, you may be worried about news that GM is considering phasing out these four brands.  Read the full story.

How long will financial difficulties last? (Part 2)

Last September, Clark made a prediction that our nation would have to endure financial difficulties for another 7 to 12 years. That figure is now more like 6 to 11 years since we’ve moved into 2009.  Read the full story.

Texas businessman accused of $8 billion Ponzi scheme

More and more Ponzi schemes are coming to light in the wake of Bernie Madoff. In the latest example, Texas businessman R. Allen Stanford allegedly stole $8 billion through the sale of CDs that were supposed to be ultra-safe and have higher returns than what you could get elsewhere.   Read the full story.

Ad campaigns reflect new, leaner economic times

A couple of ads recently caught Clark’s eye because they really sum up the change in attitude in America during these troubling economic times.  Read the full story.

Universal cell phone charger coming by 2012

Clark’s HLN producer Scott is a bona fide Blackberry addict. When his Blackberry started running out of power the other day, he had to scramble to look for a compatible charger. He found someone who had just switched over from the Blackberry to an iPhone, but she still had her old charger on her desk.   Read the full story.

Some interesting articles to read: