Should the American auto companies be saved?

Also about the banks, no there aren't a lot of good solvent banks to go around. BofA and Citi get all the press but there are about 20-30 smaller banks around the country that are in trouble too. More importantly, the small banks need the larger banks. They don't act like individual firm but a network. For instance small banks get operating loans and sell asset to larger banks all the time. In addition Larger banks are market makers. Without there assets the system would get much tigher and it would lost 35% of the assets (just BofA and Citi). This would jack up interest rates maybe by a few points, and deepen the recession.

This is not about the American Auto Compnaies.

This is about American Auto Companies workers UNIONS!!

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Originally Posted by Nate_C

Letting the free market rain is fine but you have to accept the reality that another firm may not pop up in their place. We may loose it all together. There is a very large entry barrier to car manufacturing. Most large firms like that only pop up in the infancy of the industry when the competition is small and growth is large or when there is an isolated market like Japan after the war. This is for several reasons for this including:

1. Economies of scale: if you make 100 cars the cost will be 100,000 each, if you make 100,000 cars the cost is 20,000 each.
2. Need for a service infrastructure. Mechanics need to be trained and there needs to be a 3rd party parts system.
3. Brand and Name recognition need to be developed to compete.

So if you want to start a car company it would take what 5 Billion plus. It is very had to do this and very risky and likely no one would enter.

Ford will most likely make it. I would provide funding but only if Chrysler and GM merge. It is easier to keep them then to hope another industry will pop up and employ 500,000 people (GM + Parts and service networks). Honestly though. If you let Chrysler go bankrupt then give GM 10 Billion to fund ops and to acquire Chrysler, and with the economic hard times they really hammer out a good deal with the unions, and strip down the product lines to only the best ones, in ten years GM could be a very viable company. Also both companies have really closed the quality gap and have made strides in the design area.

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Believe me I am not talking about you and I starting a new auto company.
There are people, groups, corporations and the like out there that DO have BILLIONS to invest IF, it can be done in a way that will make them money in the long run.
Hummm Warren Buffett has put BILLIONS into the basically buying out a bank, I wonder why? Because he knows it will eventually make him money. Down here in S. W. Florida we led the nation in foreclosures on homes and now the homes sales are climbing because people with lots of money are paying cash for value priced houses. Once a vacuum is created it will be filled. IF there is a market for autos, and IF they can be manufactured and sold for a reasonable price, and IF the manufacture can make a profit the vacuum left by the big three will be filled. IF this cannot happen it will not be filled, but IF it cannot be done then what is the point of spending the taxpayers money to prop up an industry that is unsustainable in the current form? Let them fail and let private money take a stab at filling the vacuum.

Roadkill
I agree to an extent that unions are PART of the problem, but not the entire problem. Should the big three go under I do not believe you will ever see an auto industry with labor unions as they are today. Union demands are too much as they stand now for the big three to continue to exist. That said, I don’t think that simply doing away with the UAW is going to save Detroit. The industry is too fat from the top down and it has taken decades to get that way and it would take even longer to trim it down. It has become their normal way of doing business and they, like the union, cannot see that their excess is in the end their own death.

Many years ago there was a similar situation with a well known company making a good product. The company was called International Harvester - They took a long strike - caved & ceded to the unions demands. IH is no longer a market symbol. Any one with 1st hand knowledge care to provide the details.

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Originally Posted by Marvin S

Many years ago there was a similar situation with a well known company making a good product. The company was called International Harvester - They took a long strike - caved & ceded to the unions demands. IH is no longer a market symbol. Any one with 1st hand knowledge care to provide the details.

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Allis-Chalmers suffered the same fate.

The old man told the union that if they struck he would shut the company down.

They (union people)picketed for 2 years after the old man shut the company down!!

I don't know who was right or wrong, but I do know that noone won!!

Certainly not 'firsthand', unless my farmwork with several pieces of IH farm machinery counts.

J.I. Case company, (which had the ugliest tractors ever made, and not a 'complete' line of machinery) bought out the farm machinery lines, and Transtar took over the truck manufacturing, if memory serves me correctly.

BUT, way before that, what happened to the Oliver brand...or the Minneapolis Moline machinery line? I drove daily past the Moline factory just off East Lake street in Minneapolis when I was going to school there in the late 50's. When I returned from the service, they were being shut down? Don't recall much hulabaloo back then. Just another form of the buggy whip eh?

When you think of ALL the various automobile brands that the nation has had in the past that have eventually failed, it's not hard to imagine the current brands doing likewise. I doubt a GM bankrupcy would totally kill all their models...might consolidate several, along with the various dealerships.

For the past 25 years, I've driven either Suburbans or Yukon XLs...never noticed any difference in them. Why both? Dealerships is my guess. But I think that form of SUV will be around, manufactured by some company, even if it isn't the current GM. What will suffer is the freedom of selection we Americans have always had; less competition with fewer availabilities. Just another form of less freedom for the public.

UB

I think you have to look at the issue on a much larger scale. What is the cost of failure vs the cost of the bailout? Remember if the car companies go down, they will take a lot of parts companies and their employees with them. The falling demand for steel will take the US steel makers out and there go employees on unemployment. No steel or copper, the mines here go down and Great Lakes shipping vanishes. More unemployment benefits. Eventually you get a whole bunch of folks on the dole when the unemployment runs out.

It ain't so easy to start a car company. Where are Delorean, Bricklin, Tucker, Kaiser -Fraser, etc. these days?

The car industry has become the backbone of the economy. You can say let them go down to get at the "no brain" management or the "greedy" unions, but, then you gut the wealth of America with it and destroy the country for good. Your next combat vehicle maybe made in China.

Let's not be dollar wise and pound foolish here.

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Originally Posted by Lush Lumbago

I think you have to look at the issue on a much larger scale. What is the cost of failure vs the cost of the bailout? Remember if the car companies go down, they will take a lot of parts companies and their employees with them. The falling demand for steel will take the US steel makers out and there go employees on unemployment. No steel or copper, the mines here go down and Great Lakes shipping vanishes. More unemployment benefits. Eventually you get a whole bunch of folks on the dole when the unemployment runs out.

It ain't so easy to start a car company. Where are Delorean, Bricklin, Tucker, Kaiser -Fraser, etc. these days?

The car industry has become the backbone of the economy. You can say let them go down to get at the "no brain" management or the "greedy" unions, but, then you gut the wealth of America with it and destroy the country for good. Your next combat vehicle maybe made in China.

Let's not be dollar wise and pound foolish here.

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If you believe bailing them out will actually save them. More likely it will only prolong their death. I guess a slow death may spread out the inevitable and make it less painful that dieing quickly. I also don’t think that bankruptcy will put GM out of business, just force them to become better. Bailing them out just aint going to do it in my opinion. As far as the other industries, well if it is as you say “the backbone of the economy” then we are in trouble if these industries that are attached to the auto industry continue to “do business as usual” because I am just guessing that at some point the auto industry may not be around at all, and defiantly not as the internal combustion manufacturing industry it is now (not that I don’t love me some big V8’s, just saying it is going to be forced to go away at some point).

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Originally Posted by badbullgator

As far as the other industries, well if it is as you say “the backbone of the economy” then we are in trouble if these industries that are attached to the auto industry continue to “do business as usual”

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The mining business is changing all the time. There are the new iron nugget processes being installed that provide nearly pure iron from the mines. But you can't sell when the market tanks. There goes the investment.


The economy of the UP is sort of isolated. I don't know about where you live, but if we lose the mines there isn't much else here except pulp logging. You can't support 300,000 people on that.

If the worst happens, don't count on doing any deer hunting here. Mama will have the bugger baked up in pasties before we leave camp. So will my neighbors.

Yes, bring back the Studebaker.