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Post by echnaton on Dec 4, 2008 15:22:08 GMT -4
Because Ford would be expected to buy up the failed company's assets in order to preserve production capacity and intellectual property, and to relieve the failed company's creditors.
I doubt that GM or Chrysler will go into liquidation. If they are relieved of their interest burden, debt repayment and excessive production capacity, they could be thriving profitable companies again.
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Post by JayUtah on Dec 4, 2008 19:30:31 GMT -4
I doubt that GM or Chrysler will go into liquidation. If they are relieved of their interest burden, debt repayment and excessive production capacity, they could be thriving profitable companies again.
Agreed: I don't think liquidation is the only outcome. But I was answering the question that presumed a liquidation-level event. That is, if a company failed, why would Ford want to have cash on hand?
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Post by jaydeehess on Dec 4, 2008 19:41:52 GMT -4
IMHO, no one is "worth" tens of millions of dollars in compensation. Not movie or TV 'stars' or sports players or top flight execs.
The reality, I know, is that if one wants those persons who can perform those tasks at the highest possible level AND the business can support them, then they will be, will have to be, paid extravagently. Otherwise another production company, team or business will.
I just hope that the days of having an MBA being a ticket to riches almost in and of itself, is at an end. At least when those same people come with palm extended to governments for ,basically , high end welfare cheques.
If they can turn Ford et al around then , when the debts are paid, let them have their extravagence back. Until then, with gov't bail out money, they are civil servants and should be at the very least , as accountable as I was while employed by the Gov't of Canada.
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Post by Joe Durnavich on Dec 5, 2008 9:54:04 GMT -4
There's a good parallel here to the mortgage problem...But that prospective buyer will still need to have the cash to pay the creditors' price. The worst outcome would be for the property to crumble to ruin. Everyone loses.
Focusing on just the house crumbling that is readily visible in the example, yes, that's true. But you have to look at that which is not seen as well. If nobody wants to buy the house at the price it is at, then everyone who has evaluated the matter has decided that his or her money is better invested elsewhere. Perhaps there is a surplus of houses in this neighborhood. If we force the taxpayers to loan the money for the house, then we will divert money from areas people value more to the house, which people value less.
You cannot easily predict what society will have to give up to keep the house viable. Somewhere out there, people may lose jobs, small businesses may fail, an office may not purchase a new copier/fax/printer, a carpenter may not repair a power saw, a student may have not get a loans for more classes, a house may not be built in a neighborhood that has a housing shortage.
The tens of billions of dollars we may loan to the automakers will have tens of billions in losses elsewhere in the economy somewhere down the road. Perhaps more. Many businesses will not grow, will go out of business, or will never form because of the bailouts. We will see GM refit a plant, hire more workers, buy fancier jets for the executives, but we will never see the things that never get to happen. Bailouts will always appear to be the more attractive option.
If the market is left to its own devices, the price of the house and the price of the automakers assets will fall until investors see them as worthwhile investments. But don't be surprised if the house is razed to build yet another strip mall with a laundromat and a nail salon.
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Jason
Pluto
May all your hits be crits
Posts: 5,579
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Post by Jason on Dec 5, 2008 11:58:27 GMT -4
IMHO, no one is "worth" tens of millions of dollars in compensation. Not movie or TV 'stars' or sports players or top flight execs. The reality, I know, is that if one wants those persons who can perform those tasks at the highest possible level AND the business can support them, then they will be, will have to be, paid extravagently. Otherwise another production company, team or business will. I think the markets should be allowed to set compensation. If that means that exceptionally talented athletes, actors, and CEOs make millions why get upset? It's not like they stuff that money in a mattress and sit on it - they put it to work. It's not a zero-sum game.
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Post by echnaton on Dec 5, 2008 13:25:27 GMT -4
I doubt that GM or Chrysler will go into liquidation. If they are relieved of their interest burden, debt repayment and excessive production capacity, they could be thriving profitable companies again.Agreed: I don't think liquidation is the only outcome. But I was answering the question that presumed a liquidation-level event. That is, if a company failed, why would Ford want to have cash on hand? I see. I was interpreting "failure" as bankruptcy. Or a failure to meet financial obligations.
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Post by smlbstcbr on Dec 5, 2008 14:00:18 GMT -4
I think that what Honda announced today about their F1 division should be taken on account:
Fukui, president of Honda, said this pullout is a message that Honda eyes new era of motor industry and copes with its demanding task. hinting that financial situation is not the main reason for pullout.
he went on to say, oil and material prices are going down at the moment, but it's only temporary, and motor companies are required to dump its traditional, obsolete way of building cars, and urgently adopt completely new philosophy/technology that doesnt rely on oil and takes high materials price/lack of availability of raw materials into serious consideration. hinting F1 is no longer viable and relevant for new era of motor and challenge towards it.
his perception is that now is the transition period for the history of the motor industry, from the past 100 years into the next 100 years.
Fukui explained that the biggest reason for withdrawal is to shift/concentrate/redistribute its resources fully to development of new technology/product. global recession/credit crunch is merely a trigger. he insisted that Honda aims, 3 years, 5 years from now, to be able to show the result and be praised for this (highly regrettable but brave) decision of withdrawal and creations of new value.
he apologized deeply, with a grave look, to fans, Brawn and all the great engineers/staffs, and Button and all the drivers.
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Post by Joe Durnavich on Dec 5, 2008 20:14:15 GMT -4
IMHO, no one is "worth" tens of millions of dollars in compensation. Not movie or TV 'stars' or sports players or top flight execs.
The salaries of entertainment and sports stars sounds extravagant perhaps because you treat it as if you were paying, say, Tiger Woods his entire yearly income of whatever tens of millions of dollars it is. That is likely far, far more value than you grant to most anyone else, and it doesn't seem as if you should rank a sports figure so highly.
But you don't pay that sum. You may value Woods just enough to sit through a few commercials on TV and maybe to buy some of the products advertised, a very tiny percentage of which goes to Woods. His customers, his viewers, then, value him very little, perhaps just mere cents or a few dollars. Woods just happens to serve a great number of customers.
For comparison, you may be willing to pay a doctor $100 for a single visit (if you live in the States). The doctor doesn't serve as many customers as Woods does, so the yearly income is a great deal less, but you value the doctor far more than you value Tiger Woods.
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Post by Data Cable on Dec 6, 2008 5:53:40 GMT -4
The doctor doesn't serve as many customers as Woods does More to the point, the doctor has to provide customized services to his/her customers individually. The doctor can't simply perform one task and reproduce it ad-nauseam, as is the case with mass-produced entertainment.
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Post by JayUtah on Dec 8, 2008 1:20:21 GMT -4
I like how the prospective bailout seems to be shaping up. Aid will be contingent on companies taking qualitative steps to improve their business practices.
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Post by echnaton on Dec 8, 2008 9:48:04 GMT -4
Merrill Lynch auto industry analyst John Murphy published this on Friday
and
Government funding proposals do not address the large bond maturities this summer. If GM is not able to repay this debt, no interim funding is going to help the company. GM burned $7 billion in cash in the third quarter and has about $16 billion left to draw on.
The bond covenant issue mentioned is the government stepping in to the company as a creditor in a first lien position, taking precedence above secured creditors. Basically telling all lenders that the government can take away any and all security to loans they make to troubled companies. That is rather chilling to debt markets.
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Post by Joe Durnavich on Dec 8, 2008 20:27:46 GMT -4
Aid will be contingent on companies taking qualitative steps to improve their business practices.
In the old days, we used to let looming failure be the incentive to improve business practices.
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Post by Joe Durnavich on Dec 8, 2008 20:37:14 GMT -4
Basically telling all lenders that the government can take away any and all security to loans they make to troubled companies. That is rather chilling to debt markets.
Chilling, indeed. The Rule of Law is supposed to afford some predictability of the government's actions toward particular types of situations.
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Post by JayUtah on Dec 10, 2008 12:07:27 GMT -4
In the old days, we used to let looming failure be the incentive to improve business practices.
Oh, so that's what I'm doing wrong. I'm working with a friend to capitalize a new space-related business, and our business plan doesn't have as its last step: "7. Beg Congress for bailout." Maybe we'll have better luck if we put that in.
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Post by echnaton on Dec 10, 2008 12:53:55 GMT -4
But does the business plan have an item, "Persuade DARPA to support research?"
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