GM's Letter to Car Owners Reeks of Desperation

by: Thomas Hawk November 19, 2008 | about stocks: GM    
Thomas Hawk

Thomas Hawk

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My wife got the email below a few hours ago from General Motors' (GM) Troy A. Clarke, Group Vice President and President GM North America.

I assume that we got this letter because we own a GM car. The email reeks of desperation to me. GM says in their letter that they don't want a bailout from Congress, that they only want a $25 billion loan.

Whether or not GM ends up in Chapter 11 or not, it seems to me to be in poor taste for GM to try to use my personal information they possess for the purposes of political lobbying.

What do you think? Should the U.S. bail out, er, I mean "loan", the automakers another $25 billion? If so, who else deserves a bailout as well? The homebuilders have asked for one. Nobody's building homes anymore. What about the newspaper business? They're in deep trouble right now because people aren't subscribing or buying newspapers like they used to. Should the U.S. government bail out the newspapers as well?

Anyways, it's a complicated situation. Email received today below:

Dear Thomas Hawk,

You made the right choice when you put your confidence in General Motors, and we appreciate your past support. I want to assure you that we are making our best vehicles ever, and we have exciting plans for the future. But we need your help now. Simply put, we need you to join us to let Congress know that a bridge loan to help U.S. automakers also helps strengthen the U.S. economy and preserve millions of American jobs.

Despite what you may be hearing, we are not asking Congress for a bailout but rather a loan that will be repaid.

The U.S. economy is at a crossroads due to the worldwide credit crisis, and all Americans are feeling the effects of the worst economic downturn in 75 years. Despite our successful efforts to restructure, reduce costs and enhance liquidity, U.S. auto sales rely on access to credit, which is all but frozen through traditional channels.

The consequences of the domestic auto industry collapsing would far exceed the $25 billion loan needed to bridge the current crisis. According to a recent study by the Center for Automotive Research:

• One in 10 American jobs depends on U.S. automakers
• Nearly 3 million jobs are at immediate risk
• U.S. personal income could be reduced by $150 billion
• The tax revenue lost over 3 years would be more than $156 billion

Discussions are now underway in Washington, D.C., concerning loans to support U.S. carmakers. I am asking for your support in this vital effort by contacting your state representatives.

Please take a few minutes to go to www.gmfactsandfiction.com, where we have made it easy for you to contact your U.S. senators and representatives. Just click on the "I'm a Concerned American" link under the "Mobilize Now" section, and enter your name and ZIP code to send a personalized e-mail stating your support for the U.S. automotive industry.

Let me assure you that General Motors has made dramatic improvements over the last 10 years. In fact, we are leading the industry with award-winning vehicles like the Chevrolet Malibu, Cadillac CTS, Buick Enclave, Pontiac G8, GMC Acadia, Chevy Tahoe Hybrid, Saturn AURA and more. We offer 18 models with an EPA estimated 30 MPG highway or better — more than Toyota or Honda. GM has 6 hybrids in market and 3 more by mid-2009. GM has closed the quality gap with the imports, and today we are putting our best quality vehicles on the road.

Please share this information with friends and family using the link on the site.

Thank you for helping keep our economy viable.

Sincerely,

Troy Clarke

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This article has 7 comments:

  •  
    Nov 19 07:28 AM
    Don't think GM will be able to pay back any loan
    with all those heavy baggages on its back.
    Chapter 11 is the best solution.
    Reply | Link to Comment
  •  
    Nov 19 07:32 AM
    The Big 3 auto "bailout" is a direct effect of the decades of "Bail-Ins" that state and local governments have provided primarily to transplant auto companies. Significant growth in taxpayer subsidized new auto manufacturing capacity – in the name of jobs – has demonstrated the consequences of an incoherent national industrial policy over the last 25 years. Because the United States are not united, we are in a race to the bottom, by shifting automotive jobs from state to state.

    Perhaps other governments, like China, may be more interested than our government in assisting the american OEMs. A failed american auto industry puts the job loss burden back into local, state, and national government unemployment and healthcare plans. That seems like more unwise economic hubris.
    Reply | Link to Comment
  •  
    Nov 19 08:14 AM
    Your comment regarding "another" $25B - When was the money given to the automakers? It was "approved" a year ago but has never been distributed. Write responsibly.
    Reply | Link to Comment
  •  
    Nov 19 08:44 AM
    I agree with posters here. GM is still a grossly mismanaged company. Their brands and distribution strategies are completely out of line with their market share. The company is fully or over leveraged. Taking on additional $25 in loans is only going to make it worse. Their management has been slow to address the cost strucuture. Bankruptcy will be a better option to address most of their structural issues faster than the loan. It only needs to be government backed bankruptcy to keep them viable in the bankruptcy. Management and Unions have wasted interest in resisting bankruptcy.
    Reply | Link to Comment
  •  
    Nov 19 04:24 PM
    Sorry. My gut feeling has always been that GM and American-made autos are good for the American economy. I back them 100 percent on this loan. If Congress won't lend them the money, maybe the alcohol, firearms and tobacco industries can.
    Reply | Link to Comment
  •  
    Nov 19 05:29 PM
    GM should just file BK, get reorganized, drop selling cars in the USA, concentrate on the rest of the world (Europe, China, ect.). Just admit GM can't make it work in the USA.
    Reply | Link to Comment
  •  
    Nov 19 10:03 PM
    It's not a loan unless it gets paid back...and when you loan to a risky borrower
    it may not get paid back. So let's call it what it is; a bailout!

    I think GM and other American car companies make ok products. That's not the
    problem. The problem is that their cost structure is too high. This is because of
    union contracts and legacy retirement benefits.

    Put simply, these companies are just not competitive in the market place.

    Much better to let them declare bankruptcy, shed the unions and operate like
    the foreign companies do in the US.

    And by the way, we can't afford to bail them out. We have to use that money
    to bail out the states that will soon be in front of congress pleading their case
    and defending their years of inefficiency and overspending.

    Reality bites, doesn't it???
    Reply | Link to Comment
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