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It's not that they had "zero value."
It's that during a reorganization, companies still need funding and huge amounts of credit just to keep going and to pay their suppliers. Since the private sector was unwilling and/or unable to provide that funding, the companies would have needed to liquidate just to keep the bankruptcy going. This in turn would have sunk their suppliers, who wouldn't get paid. Those suppliers also make parts for Ford. There would have been a cascade effect on the entire industry.
And yes, brands with international recognition, long histories and profitable pasts certainly can fail, brands lost or turned into shadows of their pasts. Pan Am, Lehman Brothers, Woolworth's, Polaroid, Kodak....
Without the help, first from President Bush, then President Obama GM would likely be gone now.
General Motors is rejoining the club, the rarified air of the Standard & Poor's 500.
It's a dose of good news not only for GM's comeback story, but for stockholders who have seen a modest stock price bump from the milestone.
Standard & Poor's announced that GM, which reigned as the biggest company in the index from 1927 to 1958, will be back in after the close of trading on Thursday. The news is sure to buoy the mood at GM's stockholders' meeting the same day. And it will mark another milestone since GM filed for bankruptcy reorganization in 2009 and, as a result, was kicked out of the S&P 500 slot it had held since the index began in 1925.
The Detroit-based global automaker will rejoin at 130 among the 500 companies on the list ranked by the value of their shares available for trading, or float. It replaces Heinz, which is out because of its acquisition by Berkshire Hathaway. Financial services provider American International Group, which, like GM, received government assistance to stay in business during the recession, also will rejoin.
MORE: Treasury to sell 30 million shares of GM stock
GM shares closed at $34.96 Tuesday, up 1.6%. In the past year, it has ranged from $18.72 to $35.48.
"The GM team has been working very hard to earn the business of customers around the world and to win the confidence of investors, and rejoining the S&P 500 shows we're very much on track," said GM CEO Dan Akerson in a statement.
GM's return to top continues as it rejoins S&P 500
I still won't be buying one of their cars anytime soon.
When I bought my Lexus, I looked at a comparable Cadillac. It was smaller and cost $8,000 more, if I remember correctly. It also didn't have the same interior richness the Lexus had. I asked the salesman why there'd be such a difference in price between the two cars, and he said, "We have to protect the brand."
Really. Wonder how that's workin' out for them. I'll take my Lexus any day.
GM and Chrysler were not going to emerge from bankruptcy. They would have been liquidated, because no one in the private sector had any interest in saving those companies. As noted, they were trying for years to arrange a rescue, and the private sector offered no help whatsoever.
The unions had already made significant recessions. And contrary to your claims, GM and Chrysler are apparently bouncing back, and hiring people, both union and non-union.
Markets correct themselves, governments distort them.
GM and Chrysler were not going to emerge from bankruptcy. They would have been liquidated, because no one in the private sector had any interest in saving those companies. As noted, they were trying for years to arrange a rescue, and the private sector offered no help whatsoever.
Several people on this thread are claiming that the Big Three could have been saved by a normal private bankruptcy. It's a fantasy. If GM and Chrysler failed, all three would have ended up liquidating, tons of jobs would have been lost.
Ford would have picked up the slack. We'd have more people, in better jobs, making better cars, without having wasted so much taxpayer money.
Several people on this thread are claiming that the Big Three could have been saved by a normal private bankruptcy. It's a fantasy. If GM and Chrysler failed, all three would have ended up liquidating, tons of jobs would have been lost.
I guess you don't have any interest in commercial airlines, then.They frequently get bailed out. The only way they could survive would be to reduce flights, slash everything to the bone and significantly increase prices. And even that might not be enough.
S&L's also had to get bailed out, when those *cough* private sector banks mismanaged their funds and went belly up.
No, I'm pointing out that Japan and China do not let companies rise and fall on their own merits. They not only survive with massive government support, they actually thrive off of it.
Because the entire US economy would suffer if the Big Three went under and their employees were unemployed.
Seems screamingly obvious to me. A lot of Republicans are biased against Obama, and were before he even took office.
More to the point, do you see what I mean? BHO had no business experience whatsoever and yet feels qualified for the US Government to spend billions of taxpayer dollars on failed companies and then equip other start-ups with venture capital? This unequipped greenhorn has cost the taxpayers trillions of dollars and why he still gets anyone's support remains a mystery.See what I mean? :mrgreen:
At the risk of offending your delicate sensibilities:That's how it works in a free market.
Again: No, Ford would not have picked up the slack. Nor would the US auto industry spring back instantly, as though nothing happened. That's a fantasy.Ford would have picked up the slack.
At the risk of offending your delicate sensibilities:
• We do not live in a free market economy. Never have, never will.
Again: No, Ford would not have picked up the slack. Nor would the US auto industry spring back instantly, as though nothing happened. That's a fantasy.
• Ford didn't need a bailout, but were not in a strong position. They were just better prepared for the downturn and credit crunch.
• All the companies use the same suppliers. If GM dies, it's going to take out a huge wave of suppliers as well. That would have harmed Ford as well. And Toyota, and Honda, and....
• GM and Chrysler would have dumped their cars, which would further damage the market.
• There should be no question that Americans would collectively freak out if a Chinese company started buying up the charred remains of GM and Chrysler.
E.g. Why Asian automakers want a federal bailout of U.S. industry - Dec. 15, 2008
There is every reason they would be seriously harmed, as many of their suppliers would have gone out of business; GM and Chrysler would have flooded the market with cheap cars during its death throes; confidence would be seriously shaken, etc etc.Foreign money had already owned Chrysler at one time or another and there is nu reason to believe that Ford would have gone under.
Nice try. The point is that the private sector is not capable of saving critical industries every single time, and that sometimes government intervention is necessary -- and works.Right. I don't have any interest in commercial airlines as that is not the topic.
Toyota has been in business since 1937; Honda in 1948. Both would have outlasted GM and Chrysler without the bailout.Then they will eventually fail.
The collapse of 2 of the largest companies certainly does not "happen all the time." And in this case, it would affect lots of other businesses that affect the entire industry.Other auto manufacturers would have to hire more people to take up the slack. It happens all the time in business.
Plenty of people with "business experience" and an understanding of economics supported the bailout. McCain also did not have any "business experience."BHO had no business experience whatsoever....
There is every reason they would be seriously harmed, as many of their suppliers would have gone out of business; GM and Chrysler would have flooded the market with cheap cars during its death throes; confidence would be seriously shaken, etc etc.
Of course not because not all businesses are worth saving. If it was profitable then of course investors would get involved. If it is losing money then the taxpayers (aka unwilling investors) have their money being used by the whims of politicians. Do you understand the precedence this creates?Nice try. The point is that the private sector is not capable of saving critical industries every single time, and that sometimes government intervention is necessary -- and works.
Toyota has been in business since 1937; Honda in 1948. Both would have outlasted GM and Chrysler without the bailout.
Check to see who owns Toyota. In fact you can buy shares in the company. Same with Honda.And what company will not "eventually fail?" How many more decades will Toyota remain one of the largest auto manufacturers in the world, before they fail and you can blame the failure on government support? :mrgreen:
The platitudes that "government interference doesn't work" is factually and historically inaccurate.
The collapse of 2 of the largest companies certainly does not "happen all the time." And in this case, it would affect lots of other businesses that affect the entire industry.
They may have supported it from an ideological point of view but if it was a viable business it wouldn't need a 'bailout'.Plenty of people with "business experience" and an understanding of economics supported the bailout. McCain also did not have any "business experience."
Romney does have experience, and also ignorance. In his "Romney to Detroit: Drop Dead" editorial, he failed to recognize that the UAW had already made concessions before the bailout; he did not acknowledge that foreign competitors get huge financial backing from their governments; he simultaneously says that "management and the unions need to stop fighting," while insisting that the employees slash their wages, benefits and retirement. Nice.
Are you suggesting that all GM and Chrysler had to do was offer a few models, and they would be fine? Do you not understand that they did not have sufficient cash to reorganize in that fashion, and that credit was not available?Why would they have gone out of business? All they had to do was adapt their business to changing times, and businesses do that regularly. In fact if they don't do it they will soon be out of business anyway.
It doesn't "create a precedent."Of course not because not all businesses are worth saving. If it was profitable then of course investors would get involved. If it is losing money then the taxpayers (aka unwilling investors) have their money being used by the whims of politicians. Do you understand the precedence this creates?
I think you are completely misunderstanding both what I'm saying, and the reality of the situations.If that's the case then all automobile manufacturers should be run by governments and thus be assured of success. But are you quite certain Honda and Toyota are owned and run by the Japanese government? Perhaps you are thinking of the old Skoda and Trabant. They were government owned.
Uh. You're saying that if GM and Chrysler had failed, other companies would have picked up the slack, and that this happens "all the time."I did not say that the collapse of the two largest companies happens all the timer. That's why you must use quotes.
You're just as ideologically driven as anyone else. You do understand that, right?They may have supported it from an ideological point of view but if it was a viable business it wouldn't need a 'bailout'.
Are you suggesting that all GM and Chrysler had to do was offer a few models, and they would be fine? Do you not understand that they did not have sufficient cash to reorganize in that fashion, and that credit was not available?
It doesn't "create a precedent."
Again, the US has bailed out major industries before, notably airlines and rail. The government has not subsequently bailed out other businesses that were going south, such as Borders, Kodak, Polaroid or Hostess.
I think you are completely misunderstanding both what I'm saying, and the reality of the situations.
I am NOT saying that governments should own major companies on a regular basis. I am NOT saying that Honda and Toyota are "owned" by the Japanese government. The term was "massive support," not "nationalization."
I'm pointing out that the auto manufacturers around the world receive a variety of government assistance and support. Doing so has not meant their immediate doom; it's been a benefit.
To put it another way: Toyota and Honda have huge competitive advantages over US auto makers, because they have major backing from their governments. At best, this bailout levels the playing field a tiny bit.
Uh. You're saying that if GM and Chrysler had failed, other companies would have picked up the slack, and that this happens "all the time."
This would not be the case here, because the survivors would also be harmed. Suppliers to all auto companies would go broke, and GM and Chrysler would swamp the market for a few years with cheap cars that they hadn't sold. In addition, foreign car manufacturers would pick up a nice slice.
You're just as ideologically driven as anyone else. You do understand that, right?
GM and Chrysler were not going to emerge from bankruptcy. They would have been liquidated, because no one in the private sector had any interest in saving those companies. As noted, they were trying for years to arrange a rescue, and the private sector offered no help whatsoever.
The unions had already made significant recessions. And contrary to your claims, GM and Chrysler are apparently bouncing back, and hiring people, both union and non-union.
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