UPDATE7: Auto deal dead for now, certain politicians and market not happy

CNBC is just reporting that some sort of agreement has been reached in the Senate. Announcement to be made this afternoon.

The network is reporting that the funding will come from the $25 billion that was originally allocated for retooling. Now that money, if the deal goes through, will go to allow the automakers to meet their financial obligations. As everyone knows, the automakers have been struggling, their CEOs testifying before Congress this past week, are saying the situation hasn't been this dire in decades.

Jerome York, adviser to former GM board member, Kirk Kekorian, told Bloomberg today that the company actually has weeks left, not months. This contrasts to what CEO, Rick Wagoner has said to Congress and the Press.

Also today, UAW President, Ron Gettelfinger held a press conference warning about what could transpire should any of the Detroit 3 declare bankruptcy. He alluded that if one goes, they all would, as the pressure of one of their collapses would be so great as to take the whole thing down. That if GM and Ford shuts down, that the replacement in loss of autos would come from imports.

News of a possible deal reversed the market's direction. Prior to the announcement, the market had been in another downswing. Now stocks are on the rebound. Automakers like GM are up 50%.

As more information comes to light, I will be updating this entry. When that press announcement hits this afternoon, expect updates very shortly.

From a Detroit Free Press piece today:

Before the Senate can consider an auto bailout, it will have to close debate on an extension of unemployment insurance, a move that requires 60 votes. If that succeeds, the industry aid could be offered as an amendment to the bill. Even if approved, it would still need to be passed by the House, which is scheduled to depart today.

“It may be necessary to come back after Thanksgiving,” Reid said this morning. “Everyone just stay tuned and we’ll do the best we can.”

UPDATE: Senators Levin, Voinavich, and Stabinow have come up with the deal. Announcement to be made 2:30 EST.

UPDATE 2: CNBC's auto journalist, Phil LeBoa now reports that the money is definantly coming from that fund that was used to retool the factories.

UPDATE 3: Bloomberg is reporting that Wagoner would resign if it seals the deal.


Nov. 19 (Bloomberg) -- General Motors Corp. Chief Executive Rick Wagoner said he would ``do what's right'' should he be asked to resign as a condition for the biggest U.S. automaker to receive federal aid.

UPDATE 4: CNBC is reporting that this deal is dead if it reaches the House. More to come as this develops.

UPDATE 5: Congressional leaders, Nancy Pelosi and Harry Reid are now speaking. Both Pelosi and Reid are now stating that the compromise deal that was earlier mentioned is a no go. Pelosi states that until the automakers prove they have a new business plan and/or show they are accountable and a viable business, that no loan or funding will be approved.

Reid is also now stating that there won't be any votes until possible after Thanksgiving holiday. That also that by then the automakers need to show they are a viable, echoing Pelosi's remarks. Both have remarked on a statement put out by Michigan's representatives, and that they feel for them.

Stenyhoyer is saying that they will be working on this over the weekend. Barney Frank is saying that things won't be rushed, also highlighting how the public were not that happy with the past relief deal they did with another industry (banking). That everything has to be done in a careful way and that the skepticism of any such deal must be dealt with.

Reid was asked about what is a definition of "viability." He states that Sen. Dodd and Frank will be "instrumental" in coming up with a program or plan. Reid concludes that they will do what they can but that the companies must do what they can to help themselves.

Bottomline, Congress wasn't convinced by the automakers. So until they can prove they can exist on their own, there won't be any cash in either direct subsidy or in a loan package.

UPDATE 6: Ohio and Michigan's representatives, particularly Carl Levin isn't happy about what the Congressional leaders said today but seem subdued. He too is asking for a viability plan. He's on the podium explaining their compromise plan. Basically, that a separate agency deals with the money and that it isn't part of TARP.

Rep. Kit Bond is saying that the compromise bill will be a life saver.

Sen. Debbie Stabenow is now promoting their bill. That it does indeed work with what Rep. Frank wanted. She is optimistic that leaders, including business ones, will get together, even if its in December. Stabenow is now saying that manufacturing is fundamental to our economy. That it's not just autos, and that there would be a ripple effect. She's now highlighting how the Canadians are now coming to help the auto companies, that the Europeans are being approached by their domestic car makers.

Senator Voinavich is saying how there are millions of Americans tied to the auto industry nervous. He's proud of the compromise bill, and particularly thanks Sen. Levin. Voinavich would like to know what happens after the automakers get the loan. He also repeats the calls for evidence of viability. That bankruptcy, while economically possible years ago, is not doable today. That if these automakers do go down, that the entire economy will be in a severe recession if not "go over the cliff." He's questioning what should be in a plan to be submitted to the congressional leadership, hinting that the leadership should be clear on this. Voinavich is disappointed that nothing was accomplished today, it would have been nice to have something for the people for Thanksgiving.

UPDATE 7: The market, following the news, has begun to go down. Presently, the S&P 500 is at 776 down 36 points, the Dow is 7768 down 232 points. Both GM and Ford are off their intra-day highs. Also, keep in mind, that concerns about Citigroup have also put pressure on the market.

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Comments

Thanks JV

I just don't get why the financial institutions get absurd amounts of money, who are completely responsible for this mess, dug their own graves, lobbied for it, yet the big 3 can't get part of that TARP and such a much smaller amount as well.

They need to retool.

Here's another thing, GM especially but all three have been busy outsourcing, building plants in China and India like crazy, massive capital expenditures to do that.

Now why that hasn't come up in these discussions and Congress doesn't demand that all funds are for US jobs, US cars, US trucks and so on is beyond me.

Now a word and they are spending billions building factories, facilities, including outsourcing R&D.

At least they will get something, they can't go under but this is just a mess how these things are going on.

Thanks for posting this and keeping on the update, it's incredibly important on what happens, I sure want to know.

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updates

It's kind of late for this post but a reminder when you change the blog title, you break the link to the post.

On EP the blog title is the link so when you change it, you break it.

UPDATE in the beginning of the text won't break it and you can also change the publication time to make it top in the blog roll if new information, new updates are added.

I know manfrommiddletown wants a permanent link once a post is first submitted but if I do that I break this, which search engines love this technique and posts gets higher visibility in page rankings and in aggregators.

I'll have to think about this technical dilemma but for now, tis the way it is!

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hrmm

Ok, well let me work on a new title and stick with it. I don't care too much for the one up there now.

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yeah this is different from DK

but blog posts (diaries) on DK also go to the black hole of never read again due to how they set up their site. Post have a real shelf life of about 48 hours where as we pick up readers over time.

Many of the posts are not truly time dependent, a lot of in depth analysis, some history and so on so and I want to keep that feature, yet everybody is running into a wall on this problem here so I'll see if I can do some sort of technical permalink also through a secondary aliasing.

(that's technical crud for I'll see if I can do both so you don't have to have an engineering degree to write up your stuff!)

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oh crap

I changed the title after you just told me about the link thing. Sorry RO, while updating, it skipped my mind.

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hold on

I think I may have found a solution so you don't need to worry. If I do, I'll post in the admin so nobody has to worry about this crap and can update their titles if and when they damn please.

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This is bullshit

They can give away $125 Billion to AIG and they can't give $25 billion to three major manufacturers?

This is pure bullshit! WTF is wrong with these people, is this just battle of the corporate lobbyists on who controls DC and thus gets to rob the taxpayer?

I'd much rather have GM rob the taxpayer than Bear Sterns, AIG and Goldman Sachs for GM will have a major effect on the middle class, workers.

God @&*)$@&!!!

Maybe it's time to write our representatives.

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So Dec. 8 is the magic date

That's what I'm hearing so far as the due date for the automakers to come up with a plan to prove they "deserve" the money. Otherwise they may have to wait until Congress re-convenes in late January. I'll tell you, if they don't make the sale then I suspect one of the three will declare Chapter 11.

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who should vs. who does

That's kind of stupid, what should happen is some experts should tell GM what they are going to do to get the money versus let them tell Congress what they are going to do.

This is turning into a topic upon which I have a good post to write up on.

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bloomberg story

Bloomberg is saying the deal is stalled until next month, lame duck.

God this is pathetic. While the financial sector just raked it in, their stock is still completely, well, it looks like it's collapsing.

The only thrill I have is that when Citigroup announced 50k people fired, instead of the usual Wall Street reward for that, their stock tanked.

That's another question about stock prices going to these lows, sometimes more low that assets, cash on hand, what kind of private equity takeover adventures does that lead to?

I don't think we've seen such lows in quite some time so probably need to go back to historical data.

To me, this all looks like implosion and those Congress critters are playing some serious games instead of objectively analyzing, separate from influence, where the US taxpayer money would be most effective.

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Just got off the phone with

Just got off the phone with my brother-in-law in Phoenix. I've been talking to him a lot lately about all this. He was a salesman, and a damn good one at that, for a dealership. It's funny in a way, as his career there parallels the fortunes of the automakers. In the early 90s he made book selling small and compact cars. He ended the decade, actually 2002, selling Hummers and SUVs. You know they say that the Detroit 3 don't make cares people buy, but tell that didn't see true in the late 90s-early 2000s. He made enough selling Hummers alone to buy a new house in Gilbert. Well, he's out of work from the dealership due to illness but keeps tabs with his pals there. He told me that sales have been dead on every line but some sedans. That one of the sales managers there were talking about stopping purchases of 2009s. That to me sounded big.

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bankruptcy

Absolutely. due to availability of parts and then cost of parts, information about repairs, warranties, resale value and all of it, I cannot imagine most people buying cars when they believe the entire line and company would be stopped.

That does sound huge. But pushing the $40k and over SUV thing was pretty damn stupid in my opinion.

I happen to love trucks, want that clearance, torque and then want good 4WD but I didn't want a friggin' tank that gets 6 mi to the gal. and even in smaller trucks that can pull a small boat, it's the type of consumer truck farmers use every day and in the NW, people use them extensively because of the weather and outdoors and you plain can't find that many options. Same with SUVs, which are pretty practical but when it came to smaller ones with reasonable gas mileage that make much more sense to more consumers...once again, just can't find them. They might be shit in quality or you couldn't get the features you want in a smaller class of these.

i.e. if you wanted versatility, quality, features you had to buy a gas guzzling tank.

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