GM_Ford_Chrysler Bailout

Seems like we already bailed out Chrysler a while back. Do we really need to bail out the big three? Maybe they should look at what they are producing instead. The Big 3 only make money building trucks, so maybe they need to just scale back and build trucks. What's killing them is that thier passenger vehicles(cars) are not in demand. Imports completely dominate passenger vehicle sales. By not bailing them out, we could free them from their union since they are a major part of the problem. The Auto Workers Union supported the Democrats and now they are calling thier chips in. I say, let the chips fall where they may and hopefully they can come back with the right business plan. That is, building what people want to buy instead of what they want to build.P S...I think Chrysler builds great passenger vehicles. However, the domestic automakers have such a bad reputation for the cars they use to build that I'm not sure they can make a comeback.

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Originally Posted by Mr Booty

Seems like we already bailed out Chrysler a while back. Do we really need to bail out the big three? Maybe they should look at what they are producing instead. The Big 3 only make money building trucks, so maybe they need to just scale back and build trucks. What's killing them is that thier passenger vehicles(cars) are not in demand. Imports completely dominate passenger vehicle sales. By not bailing them out, we could free them from their union since they are a major part of the problem. The Auto Workers Union supported the Democrats and now they are calling thier chips in. I say, let the chips fall where they may and hopefully they can come back with the right business plan. That is, building what people want to buy instead of what they want to build.P S...I think Chrysler builds great passenger vehicles. However, the domestic automakers have such a bad reputation for the cars they use to build that I'm not sure they can make a comeback.

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Everyone seems to recognize what should happen except the Pols & Big 3 management. If they can prolong the agony they will just be able to buy bigger houses. Buzz posted a graph on wage costs for the Big Three which showed labor costs 50% higher than other manufacturers.

All being said, I like my Chevy Truck - the Duramax & the Allison Tranny. Would hate to see them discontinued. But on the other hand - when the aircraft industry went into the toilet in the early 70's there were no bailouts. & look at what they have done for the balance of payments.

But Bringing Home the Bacon seems to be of greater importance than the thought that it is unaffordable.

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Originally Posted by Mr Booty

The Big 3 only make money building trucks, so maybe they need to just scale back and build trucks. What's killing them is that thier passenger vehicles(cars) are not in demand.

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They cannot just manufacturer trucks. They are restricted by the CAFE standards. The CAFE standards are the sales weighted mean fuel economy of the current model year of cars and light trucks manufacturered for sale in the U.S. The key point is the light trucks. The "Big 3" sell a disproportionate number of light trucks to the agriculture sector. In order to meet the CAFE standards, the cars manufacturered by the "Big 3" have to be very light and grossly under powered relative to the imports.

Furthermore, sales will not fix the problem! There is an excellent article by Mr. Levine (a former airline excutive and a distinguished research scolar and senior lecturer at the NYU School of Law) on page 19 of the November 17, 2008 Wall Street Journal that explains the problems for the big three. These problems include such things as the UAW "Jobs Bank" which guarentee's almost full wages and benifits for workers that lose their jobs due to automation or plant closure, dealerships (almost 5 times as many as Toyota) that cannot be closed because of state laws, revenue bonds for municipalities, more retirees than current workers, property and facilities that are not and probably will not ever be used again, and the list goes on and on. The argument that the manufacturers will go out of business is nothing but a scare tactic because the Democrats are afraid of losing UAW votes. Airlines have gone through Chapter 11 and they are still with us. Why would the auto manufacturers be any different? The only thing that is going to save the big 3 is Chapter 11.

If government loans our money to the Big 3, it will have to continue loaning them money until they file for Chapter 11 and we will never see a penny of those loans repaid.

I understand how big the auto industry is, how many people would be effected if it failed. I can understand why the govt would want to stick their nose in it. The question I have is...What are they going to do with the money? They've had years to figure this out. Are they going to keep building sorry a$$ cars that no one wants. Keep their unions intack. If they are going to keep doing what they have been doing then I say hell no. If they don't have a game plan by now, they probably need to file and regroup. It's sad that a industry of that size couldn't keep up with the times. How many more failed businesses will the govt ask us to bail out. Nice to know that our greed and fear of hard times is going to destroy our kids future

I believe Congress should retire the debt of everyone that is a United States citizen. Since the left wants anyone that is here to be a citizen, Congress should retire his or her debt as well. Additionally, any company that is registered in the United States should have their debt retired. This debt retirement should be done with direct payments. Once done, the nation should/could start over.

If our congressional leaders believe they can run an industry better than the private sector, or they believe the industry isn’t being run “correctly’ they should take over the industry. Congress could use, as a model for taking over industries, Venezuelan leader Hugo Chavez’s method.

What do you think?

I think the day of the auto worker unions has come and gone…or should go anyway. When they were formed there was a need to protect these workers, but now like so many other things there are government agencies to protect these workers (Wage, workers comp…). I cannot for the life of me figure out why somebody turning a nut on an assembly line should be making $30+/hr plus benefits that most would kill for. Nurses don’t make that kind of money, nor do most college graduates in a number of fields. Teachers make WAY less than that. In a competitive market, free of union demands for wages you would easily find someone to do the same job for $15/hr and be very happy with it. I owned a plastering and drywall company for many years and use to get union guys that would move down (Florida is a right to work state) and the going rate for a GOOD plaster was $15-17/hr at the time. These union guys would laugh at me and tell me they had to get at least $30/hr. Of course I would laugh right back and tell them to go find it in this state. Sorry but I spend many years slinging mud and was/am a very good journeyman, but there was no way that what I did was worth $30/hr. Add to this that if you did hire them (for normal wages) they wanted to ONLY plaster and NEVER pick up a shovel or help in any way with anything other than putting mud on the wall. In their minds they were only to do one job and if the labors were not keeping up they felt it was fine to sit around and wait.
Unions have been a way of life in some areas for so long that several generations have now been members and they really believe that the wages paid to them is FAIR market amounts when in the rest of the world they are not even close. Try telling someone working in the same job that his father was over paid to do that he makes too much money and to be comp they will have to take a pay cut (this does happen in non-union jobs sometimes)
As long as the auto makers continue to pay ridiculous wages to people they will continue to lose money and will never be competitive in the market.

This is not a bail out of the auto industry. This is a payoff to the Unions. Money down a rat hole to my way of thinking.

There can be endless discussions of why the U.S. auto industry is in such trouble. The answer lies not in one place but in many, from the decisions and makeup of management to the unions that control much of the workforce, and from the cost structure inherent in producing cars in the American economy to a simple systemic inability to produce outstanding vehicles. There might be varying degrees of truth to all or some of this, but the fact remains that each of the U.S. carmakers is on the verge of financial collapse.

This is what recessions are supposed to do. As in China and everywhere else, recessions reveal weak businesses and destroy them, freeing up resources for new enterprises. This recession has hit the auto industry hard, and it is unlikely that it is going to survive. The ultimate reason is the same one that destroyed the U.S. steel industry a generation ago: Given U.S. cost structures, producing commodity products is best left to countries with lower wage rates, while more expensive U.S. labor is deployed in more specialized products requiring greater expertise. Thus, there is still steel production in the United States, but it is specialty steel production, not commodity steel. Similarly, there will be specialty auto production in the United States, but commodity auto production will come from other countries.

That sounds easy, but the transition actually will be a bloodletting. Current employees of both the automakers and suppliers will be devastated. Institutions that have lent money to the automakers will suffer massive or total losses. Pensioners might lose pensions and health care benefits, and an entire region of the United States — the industrial Midwest — will be devastated. Something stronger will grow eventually, but not in time for many of the current employees, shareholders and creditors.

Here the economic answer, cull, meets the social answer, stabilize. Policymakers have a decision to make. If the automakers fail now, their drain on the economy will end; the pain will be shorter, if more intense; and new industries would emerge more quickly. But though their drain on the economy would end, the impact of the automakers’ failure on the economy would be seismic. Unemployment would surge, as would bankruptcies of many auto suppliers. Defaults on loans would hit the credit markets. In the Midwest, home prices would plummet and foreclosures would skyrocket. And heaven only knows what the impact on equity markets would be.

In the U.S. case, the healthful purgative of a recession could potentially put the patient in a coma. Few if any believe the U.S. auto industry can survive in its current form. But there is an emerging consensus in Washington that the auto industry must not be allowed to fail now. The argument for spending money on the auto industry is not to save it, but to postpone its failure until a less devastating and inconvenient time. In other words, fearing the social and political consequences of a recession working itself through to its logical conclusion, Washington — like Beijing — wants to spend money it probably won’t recover to postpone the failure. Indeed, governments around the world are considering what failures to tolerate, what failures to postpone, and how much to spend on the latter. General Motors is merely the American case in point.

Summed up quite well by STRATFOR on what decisions our new PREZ will have to make.

I just read an article that had a statement in it from a Toyota executive. He said that if one of the big 3 goes down that the suppliers will follow. If the suppliers go down, it will impact everyone's ability to manufacture cars in the USA, including theirs. That is a sobering thought.

I wonder how many vehicles on the road are under warranty, and what happens if the makers go into Bankruptcy? If they go through liquidation, will parts cease to be available? If they breakdown, what then? Have them towed to a junkyard? I guess then there will be used parts available...

Letting them fail along with the parts manufactures will create a vacuum in the industry and that vacuum will be filled by those who are not “stuck” with old methods. The companies that fill this void will have no choice except to overhaul the entire industry from top to bottom in order to succeed where the old school giants have failed.
I don’t believe that the Big 3 will be around in 10 years. Too much change is needed and they have been at it in the same way for so long they simply cannot change enough, soon enough to save themselves. Bailout or Bankruptcy, either way I don’t think they can survive for long. Either way it is like putting a band aid on a ruptured artery…it aint going to last long