Chrysler and pretzels...

[Larry Gude (Premo)]

For five points, see if you can find the fun and interesting statement in this;

Sources: Chrysler Financial Refused Government Loan Over Limits on Executive Pay

[aps45819 (Premo)]

Chrysler and Chrysler Financial are separate companies. But both are owned largely by Cerberus, the secretive private equity firm. Daimler owns a 20 percent stake in each.

[Larry Gude (Premo)]

Originally Posted by aps45819

Chrysler and Chrysler Financial are separate companies. But both are owned largely by Cerberus, the secretive private equity firm. Daimler owns a 20 percent stake in each.

No.

A senior industry official with knowledge of the matter said Chrysler Financial turned down the new government loan because, with auto sales down in April, there has been even less need for financing, the industry official said.

The official said that if sales picked up, Chrysler Financial may seek additional government aid, even if it means agreeing to executive compensation limits.

[ylexot (Premo)]

Sales are a bad thing

[Larry Gude (Premo)]

Originally Posted by ylexot

Sales are a bad thing

Apparently so.

[Tilted]

It makes sense to me. They're saying that, because auto sales are slower, there isn't as much demand for loans, so they don't need extra capital to make those loans. If auto sales pick up, then they might need extra capital in order to make the loans necessary to facilitate those auto sales.

Chrysler Financial also provides loans to dealers to finance their vehicle inventories and capital projects. As it is, there is probably less demand for those funds as well.

If you aren't lending as much money, you don't need as much money to lend. What am I missing?

[Larry Gude (Premo)]

Originally Posted by Tilted

It makes sense to me. They're saying that, because auto sales are slower, there isn't as much demand for loans, so they don't need extra capital to make those loans. If auto sales pick up, then they might need extra capital in order to make the loans necessary to facilitate those auto sales.

Chrysler Financial also provides loans to dealers to finance their vehicle inventories and capital projects. As it is, there is probably less demand for those funds as well.

If you aren't lending as much money, you don't need as much money to lend. What am I missing?

So, now we're providing auto loans as well? We warrant them. Help pay for building them.

I was under the mistaken impression that we were helping auto companies with the gap between their legacy costs, their competitors and the current bad market.

What next? Get rid of the middleman and just directly loan people back the money that was just borrowed in the name from China?

In most business's I've ever been around, sales going up is when you DON'T need help.

[Tilted]

Originally Posted by Larry Gude

So, now we're providing auto loans as well? We warrant them. Help pay for building them.

I was under the mistaken impression that we were helping auto companies with the gap between their legacy costs, their competitors and the current bad market.

What next? Get rid of the middleman and just directly loan people back the money that was just borrowed in the name from China?

Yes, we've been giving money to GMAC and Chrysler Financial so that they could loan people money to buy cars that they couldn't afford. That's how we roll now.

Originally Posted by Larry Gude

In most business's I've ever been around, sales going up is when you DON'T need help.

Sometimes that's the case, but sometimes quite the opposite is the case - that is to say, when a business is doing well, that is precisely when they need help in the form of loans or capital injections.

When businesses start to prosper and see significant growth, often they need to borrow money to facilitate that growth - to buy raw materials needed for increased production, to hire new employees to do the work, to build new capital infrastructure to accommodate their increasing business activities. In the long term, they make more money and are more fiscally healthy, but in the near term they need more 'help' in the form of loans to get there.

If someone came to you and said that starting next year they wanted to make a deal to purchase 20X as many pansies as you normally grow in a season, would you need to borrow money to increase your production ability for next year? Your first thought might be, holy cow I'm gonna be rich - but your next thought might be, damn I'm gonna need to spend a lot of money building new stuff, hiring some help, and buying a lot more heating oil. Maybe you have the capital so that you wouldn't need a loan, but maybe you don't.

Anyway, that's still a little different than what we are talking about with Chrysler Financial. When they talk about increased sales, they aren't talking about increased sales for Chrysler Financial - they're talking about increased sales for a partner business - Chrysler LLC (or whatever it's being called now). Chrysler Financial can't really see increased sales (increased loan issuances) unless they can produce enough of their product (cash up front) to meet the new demand.

So, I think what was said makes sense. They wouldn't feel the beneficial fiscal effects of the increased business until down the road when they are getting returns on those new loans, but in order to get there they would need money to lend. (They might get some kickback from Chrysler for facilitating each sale, but even if they do, they have to have money to make the loans).

Chrysler Financial is no longer a subsidiary of Chrysler LLC, but rather a separate company. In reality, their fiscal problems contributed in some degree to Chrysler's falling sales, because they couldn't make the necessary loans to customers and dealers. And, as you can imagine, they've had problems finding affordable capital in the private markets.

[Larry Gude (Premo)]

Originally Posted by Tilted

Yes, we've been giving money to GMAC and Chrysler Financial so that they could loan people money to buy cars that they couldn't afford. That's how we roll now.



Sometimes that's the case, but sometimes quite the opposite is the case - that is to say, when a business is doing well, that is precisely when they need help in the form of loans or capital injections.

When businesses start to prosper and see significant growth, often they need to borrow money to facilitate that growth - to buy raw materials needed for increased production, to hire new employees to do the work, to build new capital infrastructure to accommodate their increasing business activities. In the long term, they make more money and are more fiscally healthy, but in the near term they need more 'help' in the form of loans to get there.

If someone came to you and said that starting next year they wanted to make a deal to purchase 20X as many pansies as you normally grow in a season, would you need to borrow money to increase your production ability for next year? From the federal government, no. Your first thought might be, holy cow I'm gonna be rich - but your next thought might be, damn I'm gonna need to spend a lot of money building new stuff, hiring some help, and buying a lot more heating oil. Maybe you have the capital so that you wouldn't need a loan, but maybe you don't.

Anyway, that's still a little different than what we are talking about with Chrysler Financial. When they talk about increased sales, they aren't talking about increased sales for Chrysler Financial - they're talking about increased sales for a partner business - Chrysler LLC (or whatever it's being called now). Chrysler Financial can't really see increased sales (increased loan issuances) unless they can produce enough of their product (cash up front) to meet the new demand.

So, I think what was said makes sense. They wouldn't feel the beneficial fiscal effects of the increased business until down the road when they are getting returns on those new loans, but in order to get there they would need money to lend. (They might get some kickback from Chrysler for facilitating each sale, but even if they do, they have to have money to make the loans).

Chrysler Financial is no longer a subsidiary of Chrysler LLC, but rather a separate company. In reality, their fiscal problems contributed in some degree to Chrysler's falling sales, because they couldn't make the necessary loans to customers and dealers. And, as you can imagine, they've had problems finding affordable capital in the private markets.

A couple of points; I do not think it common knowledge to the American people that we are not only loaning money to these fine folks to pay salaries and to pay for parts and to keep the lights on but ALSO to cover the financing of the cars for new buyers.

It is one thing when a company has an opportunity to, as you suggested, serve new demand. In the course of normal business a bank or vendors or even the customer themselves would be a reasonable and rational source of capital to facilitate the opportunity.

When a company needs to not only borrow money to keep the lights on, pay salaries and pay for parts but to ALSO borrow money to give TO the customer so that they can then buy the product, it is far past the end.

If Chrysler and GM need money for everything and can not get it from anyone associated with the business (the people best suited to gauge the risk/reward) it is over. These companies are dead. This is not a bail out. This is full life support for the brain dead. There is no there there. They need this much capitalization to just carry on, there is no rationale that says they can ever even pay this money back.

[Tilted]

Originally Posted by Larry Gude

A couple of points; I do not think it common knowledge to the American people that we are not only loaning money to these fine folks to pay salaries and to pay for parts and to keep the lights on but ALSO to cover the financing of the cars for new buyers.

It is one thing when a company has an opportunity to, as you suggested, serve new demand. In the course of normal business a bank or vendors or even the customer themselves would be a reasonable and rational source of capital to facilitate the opportunity.

When a company needs to not only borrow money to keep the lights on, pay salaries and pay for parts but to ALSO borrow money to give TO the customer so that they can then buy the product, it is far past the end.

If Chrysler and GM need money for everything and can not get it from anyone associated with the business (the people best suited to gauge the risk/reward) it is over. These companies are dead. This is not a bail out. This is full life support for the brain dead. There is no there there. They need this much capitalization to just carry on, there is no rationale that says they can ever even pay this money back.

Oh, I agree - I never meant to suggest that we should be loaning them the money. Just saying why I think the comments from industry officials as to why Chrysler Financial doesn't need more money now but may later, makes sense. It doesn't mean they aren't low on lend-able capital - just that they don't have any business anyway so it doesn't matter if they are low on lend-able capital.

You may be right - the public may not realize the extent of what we are doing with these bailouts. I posted a thread a couple of months ago when the government first started giving money to GMAC so that they could make loans. The next day, they started offering their 0% auto loan promotions again. We are loaning them money, so they can loan people money to buy cars that they can't afford and don't want. Hmmm....

We are gonna make Detroit work, damn it - even if the the rest of the Universe has made up its mind that it shouldn't. Don't forget, we are also loaning money to there parts producers, to make sure that they can continue to supply the parts needed to build the cars that people don't want and can't afford, but that someone is going to loan them money for, so that they can pretend that they can afford them.

Edit: I meant to add - when we agreed to loan GMAC money, they apparently didn't qualify to get it. They needed to get some of their debt holders to convert debt to equity in GMAC, so that they would qualify. They tried and tried, but had no luck. Finally, the government basically said, 'Oh yeah, you guys qualify anyway - no biggie - here's the money.' The private sector knew how bad an investment they were, and didn't want to have anything to do with owning part of them.