Auto makers bailout – Open Forum

Apparently, no one likes my suggestion to sell Obama gear to bail out the (Sorta) Big Three automakers, so Congress is debating giving billions to them.

This week, Congress will consider whether to cough up billions of dollars to bail out the troubled companies.
There are loud advocates with strong arguments on both sides.
Proponents of a bailout say that the industry is a victim of the global financial crisis. Wall Street has been bailed out, so why not Detroit?
They say millions of jobs could be lost and more than $100 billion in wages sliced out of an already-fragile U.S. economy.
“It would be a travesty for the irresponsible, reckless behavior of Wall Street to result in the sweeping away of the American automobile industry,” said Mike Jackson, CEO of Autonation, the nation’s largest auto dealership group. “If indeed it came to bankruptcy, it’s going to make what happened with Lehman Brothers and all the consequences of that a nice day.”
On the other side are those who feel just as strongly that the automakers’ problems are their own doing, born of bad business decisions, uncompetitive labor agreements and vehicles that Americans have decided are second-rate.

In my very small sampling of friends, radio DJs, and Internet blogs, the verdict appears to be running against a bailout. Youngstown, Ohio’s Hot 101 radio station is running their own auto bailout promo, giving away a car, since the Washington DC version doesn’t help anyone except execs (at least that’s what the promo suggests).
What say you?

21 thoughts on “Auto makers bailout – Open Forum”

  1. Ok so they will get the bailout money. So now it is our responsibility as taxpayers not to buy from any of these 3. We may have to pay the taxes but we surely do not have to buy their products. The employees will suffer but it was their union that caused their injuries. I dont see Toyota, Nissan, or Honda asking for a bailout. Why? They build quality vehicles to last and do not sell junk. Well Honda did sell the Passport. Still buy Toyota and Nissan and show the government and the automakers, whose greed caused their downfall, taxpayers should get a vote on matters like these. Sorry I do support buying US products but will not buy from thieves.

  2. Unions have outlived their usefulness, get rid of the UAW, build autos like the Japanese do, and the problems of the automakers will be solved. Union presidents and vice presidents make over $200,000 per year with benefits, other union reps make over $100,000 per year, and there are many of them.
    Get rid of many government restrictions on safety that automakers have to employ in order to sell autos, employ only those common sense safety restrictions. Auto makers have the technology to make autos that get over 50 miles to the gallon, force them to stop building cars that get less gas mileage in 5 years. Stop their dependence on foreign oil.

  3. Evan

    If the car worker’s job was based on consumers’ overstretched buying power, it wasn’t solid growth anyway. This was bound to happen sooner or later.

    I couldn’t have said it better myself. We had shopping malls full of people spending money they hadn’t earned living in homes they couldn’t afford. Business built stores to handle this capacity but the capacity wasn’t real. The entire economy was a bubble waiting to burst.

  4. The first industry that went down in this crissis was the construction industry. The problem is most of the people who work in this industry are contractors so the unemployment index wasn’t affected too much. However millions were lay off or lost their small business. No bail out for them?

  5. Drowssap,
    You can look at it this way: what happened until now was unfounded optimism. There was too much securitization per cash flow in the market and too much paper money relative to goods and assets (the dollar was floating around global markets). Now it’s readjustment time. If the car worker’s job was based on consumers’ overstretched buying power, it wasn’t solid growth anyway. This was bound to happen sooner or later. The subprime credit crisis was the last drop, that made the whole thing topple. The system was rotten long before that. Now it’s gonna be about finding the ground under our feet again.

  6. But what about performance and cost to consumer over the life of the vehicle? That’sone of the reasons their sales are down.

    Here’s a blog about it. Alot of this is still in progress. It’s part of their plan to turn around, they were in the middle of reorganizing everything, but then their sales fell 40% Almost any company will have issues if 40% of their revenue just completely vanishes.
    Essentially, once this works out, if they can avoid bankruptcy, they’ll be right at the same cost per car as japanese companies.

  8. General Motors starts begging for your money video
    The sad thing is that every part of this video is accurate. If the Big 3 go down we all get hurt.
    The banks, insurance companies and auto industry are all so big that the government won’t let them fail no matter how badly they manage their assets.

  9. Warren

    I recall this level of pessimism during the Carter years, but in my lifetime of 50+ years, that is the only comparable time I can recall. We came out of it but it was very painful.

    The national mood of pessimism is probably deserved.
    A) Consumer credit has dried up. In the future demand will be driven by wages, not home equity loans. Thats good but the adjustment is going to be painful for business.
    B) Virtually every industry is shedding workers at the same time. During most recessions some states/industries go up while others go down. This elasticity minimizes the impact on the average worker. Not this time. When a worker loses his job he has nowhere to go.
    C) We are entering a negative feedback loop. A workers loses his job, he stops shopping, this causes another worker to lose his job, etc. etc.
    This might be the big one and if Obama runs the printing presses we might wipe out the dollar at the same time.
    Holy smokes I must admit I’m negative.

  10. Warren

    Ah, D, you are so sunny!

    You are right.
    I thought about this all last week. I always get really negative when I think about politics or the economy.
    I need a hobby before I give myself a heart condition. 😎

  11. @Drowssap: Ah, D, you are so sunny! Alas, you are prob correct, or at least moving in the accurate direction. I recall this level of pessimism during the Carter years, but in my lifetime of 50+ years, that is the only comparable time I can recall. We came out of it but it was very painful.

  12. A note, the UAW has taken control of the pension, they are running it as a fund. All new employees for GM for the UAW will get 401k’s, which in the long run reduces GM’s costs by 40% because they don’t have to worry about any of that stuff anymore. I’m surprised more isn’t in the media about this.

  13. The bailoutters seem to miss one point.
    If the government bails out the Big 3 they will STILL be forced to slash their workforces in half. Layoffs will ripple through the economy by the hundreds of thousand or even millions. There is no need to make cars when people aren’t buying them.

  14. I want a car with HIGH quality control built into the manufacturing and it gets equivalent or higher gas mileage than a foreign automaker. That’s not too much to ask and I will buy any one of the big three. They have the technology, they can do it.
    They have simply refused.

  15. The Chrysler bailout came and went without too much damage to capitalism. I wonder in the orgy of bailing out, that this program would look the same as Chrysler.

  16. The big three are asking for loans, not free money. The government will get it back with interest, just like any bank would. The US auto industry is salvageable. If the government doesn’t do something, the government will lose about 300B in tax revenue from the industry over the next 3-4years. Therefore, it is in the best interest to at least make an attempt, because if we do nothing, we will lose 300B, period, never mind 10million jobs and who knows what that will do to the market. I would suspect if the big 3 failed, we’d lose another trillion out of the economy, because it’s another domino effect.

  17. Where does this bailout madness stop? Where is accountability? It costs GM $71/hour to employ a worker; it costs Toyota $47. The UAW and Washington have both created this mess, IMHO, and now it’s the taxpayers who are going to bail them out. I feel for the workers, sure, but without some serious concessions by the UAW (holding my breath on that happening, aren’t you?), I can’t get behind this.

  18. I do believe if all three of the big 3 failed, we’d lose somewhere around 10million jobs. They make up a measurable number of the GDP. 2-4% or so if I recall correctly.

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