Capitol Hill Blue Forums Political Issues Finance, the economy & Economics Bailing out the auto industry - yes or no?

"Exactly"!

"European,60mpg-type autos", trains,tracks,bridges,SOLAR "panels,sheets,roofing tiles"["hood ornaments"? and batteries that "accommodate THEM"?],ALGAE "eddibles and excrement","geo-thermal",windmills,"vegetables vs.shrubs" ...

"Brave New World"?

"The times,they are [SHOULD BE} a'changin'!"

I disagree. I vote YES! Bailout the Big 3. The question is: When are these bailouts going to end? They're an open invitation to the CEO's to line up for free money. It's the real economy vs. the financial economy and I'll vote for the real economy, because it benefits the average person. Why? Jobs. Why should we liquidate our industrial base to send it overseas to make more money for a select few while impoverishing Americans? No! In the 19th century, the Robber Barons robbed, pillaged, and stole, but at least we had a railway to show for it. Today's financial financial toilet paper benefits only a select arrogant few.

The cost of the first AIG bailout exceeded what the Big 3 are requesting. AIG's 2nd bailout will be $40B. As I understand it, Detroit's problems are due to the legacy costs and not current operating expenses. Bush is de-industrializing the country, possibly as a going away present to the financial institutions that own both parties and to punish the union employees who want a living wage. I realize that there are criminal elements in the big unions, but the excuse that it's the union workers fault is nonsense. Detroit is a dinosaur, like most entrenched bureaucracies. Instead of spending money for quality control, R&D, and innovation, they'll spend it on advertisement. The proof's in the pudding, which is why Detroit is losing. That can very easily be changed, but not with a business as usual attitude. Detroit doesn't like change and you don't have to look any further than what the Big 3 did to Tucker. It's time for change. Bring some new people in with ideas for today and tomorrow, and turn this country around. An economy is based on a "value added" concept, i.e. you take something from the ground and make something of it- DVD, computer, car, food, steel, etc- and sell it. We have the talent to turn it around, the only question is whether or not we have the will or more importantly the leadership with the will. President elect Obama's appointments answer that question by showing that the promised "change" is just business as usual.
Joe

What happens to GM, Ford, or Chrysler when they "fail"? Their Intellectual Property, facilities, subsidiary companies, etc. don't just get sucked into a black hole never to be seen again. Somebody (likely a Honda, Toyota, VW, etc.) would buy them, if only to break up the pieces to keep what they could use and sell off the rest. (I seem to recall reading that new auto sales are not the majority of GM's revenues!)

Sure, all of the current stock, option, and bond holders would suffer almost total loss. (That would include most of the top management, and well deserved!) But I suspect a lot of the brands would be resurrected by their new owners, and a lot of the employees would be hired to do that. (But maybe without union contracts, and maybe in a different state.) Also, a lot of the old company's suppliers would supply parts and equipment for the new versions.

American's would not stop buying cars just because the big three folded. They may stop because they are broke, and can't get financing! But sooner or later the economy will stabilize, people will go car shopping, and somebody will want to make some money by lending those folks the price of a new car or truck.

If the new owners of the GM, Ford, and Chrysler brands can supply vehicles that are price competitive, run efficiently on whatever fuels are available, and are well built, then they will succeed.

I'd would have liked to see the same controls placed on the bankers as will be placed on the Big 3 when Congress approves their bailout.

Joe

No.
We have laws to deal with this.

When companies that have grow "too large to fail" manage to fail anyway the problem is that no one can afford to buy them except other companies that are too large to fail. Literally millions of people rely on them for jobs or the services they provide.
We do indeed have laws, laws that will allow them to reorganize, restructure, possibly to split the giants into smaller and possibly profitable businesses. Bail out money for the giants is sure to be misused, pissed away and gone. Bail out a factory at a time. Retool it to turn out utilitarian, inexpensive, fuel efficient vehicles using available technology. Luxury, power, and speed are all the auto industry can think about, eliminate those maxims and replace them with comfort, reliability and efficiency and I think you might find success in American autos again.

This is a bit of a tough one. My ordinary instincts are to let Detroit founder. They have managed to adopt a totally screwed up business model that incorporates a total capitulation to the unions. Why haven't Toyota or Honda indicated that they are about to go bankrupt? They need radical changes and bankruptcy will bring that about (or they will be liquidated).

Would a bailout end up being any better? The necessary changes would obviously not come. All of the industry publications I have been reading indicate that GM needs to downsize on the order of around 40%. That won't happen absent a bankruptcy proceeding. They need to shed dealerships, brands, employees, and plants. In fact, it would almost make sense for them to give up the American market and focus on Europe, China, and India, where they appear to be cleaning the clocks of the Japanese. Whood of thunk that? Seems there still is some sort of cachet for an American automobile overseas.

But the prospect of bankruptcy at this point in time still seems scary to me. I think the only thing that allows me to promote the idea is that my line of work is very far removed from Detroit in every way. If I were living in the upper Midwest I do not think I would have written the preceding.

Toyota Overtakes GM In 2008 Chinese Sales

GM has 11.4% sales dive, falls farther behind Toyota

GM Says India Sales Will Fail to Meet Target on Rates

The times, they are a' changing, Ken.

They STILL don't get it...

ABC News

I say a big, fat, NO!! to the Detroit bailout. (...just as I did for the banking industry. In fact, I was correct about the banking industry. Not only did lending not free up for "main street" - the banking industry has made lending even tougher).

Detroit has spent millions in legal fees fighting the govenrment on "cafe" standards such as increasing fuel efficiency.

Detroit has fought California's tougher emissions standards. Let these aging and failing industries file for bankruptcy and emerge stronger for that effort - else we have Honda and Toyota making cars in this country already.