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

Steve,

Someone asked in some post somewhere here at CHB RR if anyone's opinion or view was ever changed by any of these discussions. My opinion and view was changed or at least altered slightly to consider other opinions or at least be open to them. The person in each case who accomplished this feat was you, and I want to thank you. I vividly remember years ago seeing a horse sweep its tail against some chicken cages loaded on a trailer. The chickens would go nuts and do what chickens do. I'm not a horse shrink, but I noticed that the horse not only seemed to do it deliberately, but also enjoyed doing it. Whenever I read your very clear, intelligent, reasoned, and common sense questioning of some referenced internet articles links, I wondered if I was reacting like one of those caged chickens. In some instances, I might have been, and I want to thank you for the education. I suspect that this is your purpose in posting. I hope that you're right about Whitney. I just don't know. For all practical purposes, I live in Alabama, and I do see these slave wages. I'm talking about the Wire Grass and not Huntsville where there is hi-tech and even ice skating rinks. Again, I hope that you're right. Based on what I've observed, Whitney's not that far off the mark regarding some areas.

Joe

No doubt about it, Joe, and the data cited from the EDPA bears it out. The average wage for a non-automotive industry worker in Alabama is less than half what an automotive industry worker makes. But the salient point is that Mr. Whitney was referring specifically to the automotive industry.

I observe a great irony here, in that some folks see the union automotive workers as being grossly overpaid and others lament the fate of automotive workers should they lose the protection of their unions. I think both extremes are . . . well, extreme. I think a $1300 weekly wage is a heck of a plum for a skilled worker in Alabama, and compares favorably with the union wages being payed in Michigan. Is that more money than these workers are "worth"? I'm enough of a Free Marketeer to believe that it is not, else they wouldn't be getting it.

BTW thanks for your very kind remarks about my resemblance to a horse's tail. You're right.

Well...well...well...

...it looks like the GM Execs are so embarassed by their corporate jet to DC begging for money fiasco that they've asked the FAA to Bar Public Tracking of Leased Corporate Jet .

Bad Exec! No bailout!

Steve,

My horse tail reference was directed at the alarmist articles and websites that deliberately get people worked up and enjoy doing so, and not to you. What I observed is that you insist that people provide reliable news sources in their posts and that you provide your own cites/stats refuting or at least questioning the alarmists' positions. I believe that you encourage people to think for themselves, form their own opinions, and not take everything that they read unquestioningly as true. Simply put: keep the conversation honest and not seize someone's opinion as your own without question, because it appeals to you emotionally or supports your beliefs on an issue(s). For example, recently a friend sent me a link, which worked him up into a frenzy and apparently supported his view. I merely reminded him that if some "expert" is warning about imminent "marshall law" that as a self professed expert, he should at least know how to spell martial law. I believe that some people- like that horse- put out these stories to get the "chickens" worked up, see how many buy it, and get a laugh in the process.

Joe

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Bankruptcy Key for Detroit Survival


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numan,

What do you think of Whitney's analysis(see above link)?

Joe

I suspect that they will go bankrupt, so why not the banks? They'll never repay that money, because the sums are too astronomical. I wonder if they even intend to try? The first $125 billion of the bailout went to buy preferred stock in Federal Reserve member banks so that they could pay themselves bonuses. These bonuses will amount to 85% of the 125 billion. So, what's the BFD loaning a measly 25 bil to Detroit? When the 19th century robber barons robbed, raped, pillaged, and screwed a whole lot of people, they at least left behind railroads. What's this bunch leaving behind?

I just heard on the TV news about declines in Auto sales... GM is down about 40%.... but Honda and Toyota are also down about 34%.... so I am guessing that there is more to these problems than the obvious mis-managment in detroit.

The same folks that don't have money for American cars also don't have money for Toyotas. There is a repo business here in my complex, almost daily another truckload of cars comes in for detailing and their trip to the auction. The banks are foreclosing on all makes and models. It's one of the few business' here that are thriving.

Ironically, I have tried three times to post to this thread today, and each time my post has been deleted (mechanically, not intentionally). So, with trepidation...

I agree with Greger's observation that "The same folks that don't have money for American cars also don't have money for Toyotas." We're in a recession, a deep and lasting one, and a deepening one. Watching the unemployment numbers double and double again is frightening, because those are consumers that will not have the wherewithal to buy products that they used to produce (kinda the anti-Henry Ford). Until we get paychecks in people's bank accounts purchasing will remain low (suppressing production), savings will remain low (inhibiting lending), and the cycle will continue. That is the background against which the bailout discussion has to be measured.

Beyond the automakers is a supply chain that employs MILLIONS of people - mostly within the United States (although less so than in the past). Yes, the managers of these corporations are responsible for abhorrent business practices and mismanagement of the worst order, but what is more important to the economy is that supply chain - and the employment chain it represents. I may have stated this before, but there are three reasons why I think a bailout - with rope-thick strings attached - can be workable and is necessary:

1) We need to maintain an industrial base within the United States to be able to respond to the mega-threats over the horizon. We're not going to be buying our tanks and trucks from overseas markets. It's a national security rationale.

2) We need to have a production base within the United States that employs people at reasonable wages. The idea that bankruptcy is the answer is just plain false - first it will destroy the market for the vehicles, and disrupt that entire production chain, but more importantly, it is a mechanism of right-wing corporatists to destroy the labor element of the production capacity. They want to divest the companies of the pension plans, health insurance and union-based wage structure and bankruptcy is the most expeditious method of dumping that, but it is not good for the economy as a whole, the shareholders, the workers, or virtually anyone but the management class. Instead, we need to focus on keeping employment and benefits within the United States.

3) The bailout will give the government the ability to exert influence over the companies directly for the benefit of the nation as a whole. Strings. Requiring higher fuel efficiency, requiring better environmental practices, requiring alternative fuel/electric vehicles all benefit the United States in general and will move the industry in that direction. They won't do it on their own, as has been thoroughly demonstrated, unless they are convinced that it will be to their economic advantage, which is why none of them has yet produced legitimate alternatives - fearing that it will put them at a competitive disadvantage. By using that influence equally on all of the manufacturers, that concern about competitive disadvantage disappears. It is a win-win situation. Free-marketers hate this element, but then, they tend not to like the real world very much anyway, preferring to be nostalgic about a never-existent and unworkable fantasy land where "the market" solves all ills. It's time for the government to exert some muscle for the general welfare.