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

And BTW, if I were to insist on any change that the automakers must make it would be that every single part of every single new car was mined, milled, and manufactured right here in the USA.
*spits on floor and salutes the flag* What happened to American Steel?

Honda is a top brand for many environmentally inclined people. They make superb engines (both 4 and 6 cyl) that are powerful, fuel efficient, low polluters and last a very long while. And virtually all that technology came from their very successful racing programs.

I think what's truly bugging me about the whole bailout thing is the kind of comments I heard on the news on Friday - "Well, the economic situation got a lot worse this week. Don't get us wrong, we absolutely had to have the finance bailout, because things would have a got a Whole Lot Worse, but in fact, it didn't really make anything any better and in essence, we're still majorly f***ed."

If it's bad, and it's going to get worse, and a bailout probably isn't going to make much difference...I'm still not sure what good it would do.

Keep people in jobs for an extra six months, jobs they're going to lose in the end anyway? If Detroit was unable to sell cars before the credit crunch hit, do we really think they can turn it around in a severe recession?

I dunno. We're at page 14 and I honestly can't say I've come down solidly on one side or the other. Guess I'm think-headed.

Isn't that kind of comparing apples to oranges? I mean, how many starting positions are there for tool and die makers at that salary level compared to starting positions for engineers at their corresponding salary level? And what is the comparative commitment in terms of training? Can a person get into the union as a tool and die maker right out of high school and make that kind of money?

I think that if Greger's assessments are correct we will be looking at bankruptcy in the near future for some or all three of the big carmakers.
I do not however, believe that this will be the end.
There is no way something as large as General Motors will simply sink quietly into the sand, never to return.

Supporting my belief is the fact that the Chinese automakers, who recently asked for their own bailout, are currently discussing ways that they could acquire GM, as reported in HuffPo.

Is America ready for the first of what will surely be a series of Chinese acquisitions, or more accurately, TAKEOVERS?

Doesn't matter...they own tons of our debt and they're going to take payment on that debt one way or the other, and if they do get GM, or they get one or all three of the big carmakers, their ascension as the world's next superpower is all but assured.

Shen Shen,

Jeff H in TX

Okay, can I ask why we can rush right away to give yet another bank(Citigroup) 20 billion dollars, yet we dither around and make demands on three companies asking for 30 billion dollars? Specifically referring to the Congress-critters on this - as far as I know, none of them are raising any red flags over the damn bank loans that they are handing out like candy on Halloween. But the auto companies come and they all start hemming and hawing about how the companies can change this and the unions need to give in to corporate pressure. Oh, and then they'll think about it.

Good point, erinys. Goes to show who they think is holding the straight flush and who has a mere three of a kind.

Actually, they are very different entities and because of that present very different risks to the economy. Citi, if it were to go bankrupt, would put at risk not only their own business and the loans they hold, but would be the breach of the dike that would unravel the whole financial system.

Remember that the current world financial system is very fragile and based on a great deal of interconnectedness and trust among players in the system. One major part of it fails and the pyramid of cards could fall in a heap.

Any or even all of the big 3 going into bankruptcy would be quite different. Placing a business into BK doesn't have the effect of stopping the business. some major corporations have operated in BK for years and years and have actually increased their business and strength over time during the process.

The loans to Citi give the government a substantial ownership and decision making interest in their operations. Doing the same for GM, as an example, would be much more problematic. Adding a government agency to the mix of figuring out how to pull the auto makers into profitability does not sound to me like a good idea. There are just too many fingers in the pie under that scenario and likely important decisions would be even harder to make.

That being said, loans with strings and specific requirements to auto makers may be warranted. I am concerned, as I think we all are, with the overall debt-building going on.

We have added $700B in the current bailout package, Obama is apparently going to ask for an additional $700B stimulus package, and it is likely that will not be the end of it.

Now if we could just rapidly scale back the defense budget, maybe we could find a way through all this.

And a contrary opinion:

New York Times Op-Ed

The more I look at this issue the more I think that this is not a bailout for the auto industry but a bailout for 1 company: GM.

Let's look at the other 2 companies:

1) Chrysler - already one foot in bankrupcy and if it is not bought out by GM it won't survive no matter how many loans it gets.

2) Ford - has enough cash reserves, stronger demand for it's brand than GM and is more efficient than GM. Will probably survive this downturn without bailout and will benefit greatly if GM and Chrysler fail.

So you turn this "bailout for US auto industry" into "bailout for GM". Are you still willing to sign that check now?