General Motors to Invest $1 Billion in Brazil Operations (Money to Come from U.S. Rescue Program)

Latin America Tribune ^ | 12.08.08 | Russ Dallen

[Dr. Marten]

General Motors to Invest $1 Billion in Brazil Operations -- Money to Come from U.S. Rescue Program

By Russ Dallen
Latin American Herald Tribune staff

General Motors plans to invest $1 billion in Brazil to avoid the kind of problems the U.S. automaker is facing in its home market, said the beleaguered car maker.

According to the president of GM Brazil-Mercosur, Jaime Ardila, the funding will come from the package of financial aid that the manufacturer will receive from the U.S. government and will be used to "complete the renovation of the line of products up to 2012."

"It wouldn't be logical to withdraw the investment from where we're growing, and our goal is to protect investments in emerging markets," he said in a statement published by the business daily Gazeta Mercantil.

Meanwhile, he cut the company's revenue forecast for this year by 14% to $9.5 billion from $11 billion, as the economic crisis began to cause rapid slowdowns in sales.

GM already announced three programs of paid leave, and Ardila added that GM Brazil "is going to wait and see how the market behaves in order to know what decision to take" with regard to possible layoffs.

For Ardila, the injection in Brazil's automobile sector of 8 billion reais ($3.51 billion) recently announced by the federal and state governments of Sao Paulo "has already begun to revive sales," which fell by 12% in October.

The executive said that the company will operate a "conservative" scenario in 2009 with an estimated production of 2.6 million units, and another more "optimistic" that contemplates sales of 2.9 million.

This year sales will reach 2.85 million vehicles, which represents a growth of 15% over last year.

[Dr. Marten]

Isn’t that just nifty.
Maybe you could apply to replace the search function because it doesn’t work very well.

[Vn_survivor_67-68]

US Auto Aid Draft Bill: US Would Get Equity Warrants In Cos
Last update: 12/8/2008 4:16:46 PM

By Corey Boles
Of DOW JONES NEWSWIRES

WASHINGTON (Dow Jones)—The federal government would receive equity warrants equal to 20% of the emergency loans it is lending to the Big 3 auto makers to help them keep afloat, according to language in the bill seen by Dow Jones Newswires.

This would enable the taxpayer to potentially benefit if shares in the auto companies increased, the draft said, serving as protection of the public funds being used to prop up the ailing car makers.

The taxpayer would supersede all other creditors to the companies to be repaid once the companies’ financial fortunes turn around.

The loan program will be available to General Motors Corp. (GM), Ford Motor Co. (F) and Chrysler LLP.

The legislative language has been sent to the White House for its consideration, a senior House Democratic aide said.
The aide cautioned that the legislative wasn’t final, and could be changed after the White House review.

A White House source confirmed the legislation had been received, and said the Bush Administration had concerns with aspects of it.

House Speaker Nancy Pelosi, D-Calif., plans to hold a press conference at 4:15 p.m. EST (2115 GMT) to provide an update on the proposed legislation.

All executive compensation would be closely monitored by a “car czar” appointed by the White House to oversee the loan program. Additionally, no bonuses could be paid to the top 25 senior employees, and no golden parachutes of any kind can be paid to departing senior employees.

No dividends can be paid to investors in the three companies while money is owed to the taxpayer.

The terms of the package are similar to the loans made to the financial sector earlier in the fall. The duration of the loans would be for seven years, with an interest rate of 5% charged for the first five years, and 9% charged thereafter.
The “car czar” would be an individual with executive experience appointed with authority to carry out program. The president could appoint additional advisors.
The individual would be tasked with establishing appropriate procedures to ensure the plans submitted to Congress by the three car makers form a viable long-term restructuring plan. Progress of this restructuring must be reviewed within 45 days.
The companies must submit a long-term restructuring program by the end of the first quarter of 2009. The plans must include efforts to rationalize costs, capitalization and capacity in all aspects of the companies operations, the draft says. They must include proposals to restructure existing debt, including the conversion of debt-to-equity if appropriate, it said. The draft also stated the companies must provide information on how they would move toward a product mix and cost structure that would be competitive in the U.S. auto marketplace.

The funds would be borrowed from a program created by Congress last year to lend money to the car makers to allow them to invest in cleaner technology.

More money will be appropriated by Congress to make sure that program can still go forward so that the auto makers are able to comply with tougher new emissions standards.
Any investment decisions of more than $25 million would have to be reviewed by the car czar.

Companies participating in the loan program would have to withdraw from any lawsuits challenging proposed state laws on emissions standards. All three of the Big 3 are currently involved in such legal challenges.

-By Corey Boles, Dow Jones Newswires; 202-862-6601; corey.boles@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today’s most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=TiIH7KXnja6Z6AMTM75w0w%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
December 08, 2008 16:16 ET (21:16 GMT)

[kabar]

GM is an international company. It makes cars all over the world, and unlike its US operation, they are profitable. All of this bailout money is fungible. GM is an American company when it is convenient for them to be. I wonder what percentage of their American cars are actually made in the USA.

[B4Ranch]

LOL— Harpo would welcome them with open arms.

[UCFRoadWarrior]

Only the most anti-American liberal free trade globalist could like this....handing out US tax dollars to ship jobs out of America

You get double the wealth redistribution than you would have with just an ordinary bailout...tax subsidies for a business....who takes that American wealth an re-distributes again overseas

[hermgem]

Sounds to me like diversification, or go there where producing is compatible with product sales prices that consumers are willing to accept.
It's a sound practice if viewed from the standpoint of survival.
Have yet to hear from GM’s unionized employees about sacrifices to keep GM alive and healthy.
As it stands, GM’s labor costs will only prolong the eventual fall after billions of taxpayer subsidies are scorched up.

[B4Ranch]

(more or less)

Most of the cars sold on the west coast are from Mexico.

[PGR88]

They are behaving purely rationally - they are going after profits where most easily obtained

- Building factories in Brazil to sell to that growing market
- Asking money from congress by threatening massive layoffs of unionized workers. It’s a hell of a lot easier way to get cash than selling cars in the USA!

[pepperhead]

GM is an international company. It makes cars all over the world, and unlike its US operation, they are profitable.

Excellent point about GM making money in other parts of the world. Not that I am for US money going to upgrade factories in Brazil but if you think about it if they make money there that money can help pay bloated union contracts in the US.

[Windflier]

In my opinion, the UAW has made them unprofitable, and are forcing them to put their operations in places where they can be profitable.

I watched the Teamsters do the same thing to my secure union job in the trucking industry 25 years ago. They killed the master freight business in the SoCal metro area, and forced all the big companies to pull up stakes.

[kabar]

but if you think about it if they make money there that money can help pay bloated union contracts in the US.

LOL. Of course, that is not exactly the kind of business model I would want a company to follow. Why spend money to prop up a losing portion of the business and deprive my stockholders of the profits? Or use scarce capital that could be better used to expand the business elsewhere.

[cll]

I’m just sayin’...

[TigersEye]

Doggone that is funny. In a laugh-to-keep-from-crying kind of way.

[Designer]

Your Q: "Who the hell is the US Government and GM trying to “save”?"

My answer: their own jobs, not yours or mine.

Q:"Do they expect us to go to Brazil and work?"

A: No, not at all. You see...the Brazilians will work cheaper, so no.

[metmom]

I’d still at least have a car for my money.

If my money is going to them, I’d like something for it.

[TigersEye]

I’m going to go out on a limb and bet that Brazil’s immigration laws (and enforcement) won’t allow many Americans to move there and take jobs even if you were willing to take the lower wages.

[B4Ranch]

“That is selfish, if I may say so”, said the Globalist supporter.

[ken21]

at least the brazilian workers do not vote in american elections.

/s

[jarofants]

Sounds to me like union auto workers wont have a job even if the government bails them out.

[From The Deer Stand]

Ford's state-of-the-art Brazil plant