News Cut: November 18, 2008 Archive

The Big Three (or Two, or One)

Posted at 9:27 AM on November 18, 2008 by Than Tibbetts (18 Comments)
Filed under: Economy

Suppose the government "allows" one of Detroit's big automakers to fail — and at this point, it might happen, as it is still not clear Congress will pass a rescue plan.

What happens next?

GM appears to be the first in line to fall.

GM burned through $6.9 billion during the third quarter, leaving it with only $16 billion on hand as of Sept. 30. But it needs $11 billion to $14 billion to continue normal operations.

The basic bailout scenario is this: The government provides a large sum of cash to keep the companies afloat long enough for savings from renegotiated autoworkers contracts to kick in and slumping sales to rebound. Only one of those is a sure thing. (The NYTimes' story on the failed bailout of British automaker Leyland is also worth a read for some historical context.)

The prospects aren't good for an automaker that heads into Chapter 11 bankruptcy. Would you buy a new car from a company that had publicly declared its insolvency? Then again, who's buying cars from the Big Three when they've put their collective hands out and declared the virtual inevitability of their bottom lines bottoming out?

The CEOs of GM, Chrysler and Ford have been making a case that the auto industry is the linchpin of the American economy, and without a quick cash infusion, mass financial ruin is just beyond the horizon. For millions, it's a devastating scenario.

Nearly 2 million Americans get their health insurance directly from one of the Big Three automakers. Most of them would lose that coverage if their company goes out of business. A failure of one of the Big Three could also cause a string of bankruptcies among suppliers.

...

The Center for Automotive Research, a Michigan think tank that supports the bailout, estimates that between 1.4 million and 1.7 million jobs indirectly tied to the Big Three would be lost in the first year following widespread auto failures.

The question that many ask is -- how do you turn around a company in three months when it has lost $20 billion already this year?

So, let's suppose the Big Three's biggest battle now is ostensibly for the hearts and wallets of the American consumer. My perception of my (loosely defined) generation — I'm 24 — is that for the most part, what loyalty is left in our bunch is to whatever car is going to get us where we need to go.

I'm a two-time Honda Accord driver — one passed down from my parents and one purchased used with cash. If I had to buy a vehicle today, I would be more inclined to purchase a Honda as both vehicles have made it past 200,000 miles, with the current one pushing 250,000, but I'm not wedded to the brand.

So, do the Feds prop up the Big Three, or should they let the companies run their course and deal with the fallout? And would you buy a car called Ka?

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The $2 billion man, and other stories

Posted at 3:27 PM on November 18, 2008 by Than Tibbetts (4 Comments)
Filed under: News

• Ouch. Jerry Yang, CEO of Yahoo, announces he's leaving the company and its stock soars as much as 13 percent, putting more than $2 billion back onto its market valuation. (Of course, YHOO has lost half its value since Yang and Co. rebuffed Microsoft's merger overtures.)

• Speaking of billion-dollar men, Mark Cuban, maverick Mavericks owner, was charged with insider trading by the SEC for allegedly dumping his shares of Mamma.com using non-public information about an impending stock offering. Cuban seems to insinuate that the case is little more than a high-profile hit job. The fact that he's bankrolling a bailout watchdog site BailoutSleuth.com is unrelated, I'm sure.

• Somali pirates have hijacked seven ships in the last 12 days, including the 1,080-foot Saudi supertanker Sirius Star. Just what does a pirate do with a booty of $100 million in crude oil? Also, note the pirates' poor timing. A few months ago they would've had $200 million on their hands.

• Something I learned today: Cushing, Oklahoma, population 8,371, holds between 5 and 10 percent of the United States' crude oil supply.

• Countdown to The Recount: It starts tomorrow. The magic number is 215. How long will it go on?

• Following up on my previous post, Honda is opening a new factory in Greensburg, Ind. How would you like to be in human resources there?

When Honda announced it was hiring 900 employees, 33,000 people applied.

• On the other hand, a sure sign that we're in trouble: "big-time" layoffs at NASCAR.

• Google is hosting millions of photos from the LIFE archives going all the way back to the 1860s. Lots of fascinating photos of the evolution of human conflict from the Civil War, to World War I, etc.

• How lonely is this penguin? (And if you haven't bookmarked The Big Picture, you're missing out.)

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News Cut: Evening Brief

Posted at 6:30 PM on November 18, 2008 by Steve Mullis (0 Comments)
Filed under: News, Tech, Things that are puzzling

Another evening round-up of news and bits that might have fallen through the cracks or that you might have missed during your busy 9-to-5 day:

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Minnesota recount gets the 'Daily Show' bump

Posted at 8:35 PM on November 18, 2008 by Steve Mullis (5 Comments)
Filed under: Politics

Yes folks, our U.S. Senate recount has reached such epic proportions that it has received the Daily Show bump.

According to Stewart our new motto is: "Minnesota, crazier than you think."

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