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+--- Thread: Bailout the Big 3 or No? (/showthread.php?tid=7805)
Bailout the Big 3 or No? - G.Irish - 11-14-2008
Right now a $25 billion bailout package is being flaoted for GM, Ford, and Chrysler. The reasoning for this is that 2 million jobs are tied up with those three companies (including suppliers) and it would be a major blow to the country if they went bankrupt.
I feel that the reason those companies are hurting is because of mismanagement and because of that these companies need to fail and be restructured. If they all go bankrupt, sure, jobs will be lost, but I'm sure someone will buy the companies and reorganize. Allowing the US auto industry to continue on crutches on the taxpayer dime is not going to transform them into healthy companies in the foreseeable future. Let them fail, so someone else can figure out how to rebuild stronger companies. I doubt any of the big three would end up being gone for good.
- Kaan - 11-14-2008
Its going to be a rough time no matter how you shake it. The loss of jobs is going to put a strain on the states, but they need to truly hit the bottom before they can realize how the mismanagement has really hurt them.
But without the opening of credit again, its going to be hard for someone to resurect the labels. Unless bill gates wants a car company... I feel without the failures hitting in a "timely" manner... they will not be brought back in the near future.
Obviously, if they are brought back, you will see 1-2 platforms... they will go back to the fuel sipping days of the 70's probably... The cars will be "boring" probably, but they need to be for price point... and they will have to spend as much as they can on alternative fuels to compete. All of this while bringing a company back to life. Its a lot to ask.
This failure is going to hurt for a LONG time.
- REED - 11-14-2008
I couldn't agree with you more G.
- Ginger - 11-14-2008
I've said in a couple other arenas and I'll say it here: the big three aren't dying because of 'the crisis.'
The writing has been on the wall for ages. Standard & Poors cut GM bond ratings to 'Junk' in 2005, and you don't get there overnight, for starters. All three have compounded years of model lineups that nobody wants with product quality that can only muster competition for fresh Chinese upstarts; and they haven't done anything to fix the incredible resource drains that are nothing less than pervasive in their books. The extent to which they have made this problem for themselves is akin not only to digging one's own grave, but taking a bottle of Xanex, getting in the car, driving to the cemetary, and lying down next to the fresh hole. I have no sympathy: they dug their own hole and have been gutted by the UAW.
The fact that American automakers are being hit harder than of the others is no surprise, and I resent the idea that they are "too big to fail." There is no such thing as a free lunch, and throwing money at the front door of these guys doesn't mean that it isn't going out the back. It's silly to propose that tax payer dollars are flat out given to a company whose products the very same tax payers have said that they do not want. Not only will the damage to the economy still occur, but by throwing money at it, it will be worse... and eventually they will fail, anyway. The bailout mentality should have died with John Keynes.
Kaan inadvertantly raised a good point: the industry is going to have to retool for increased emissions regulations over the next decade. These companies can't keep themselves afloat on existing models. How are they going to finance millions of dollars worth of research and tooling changes? It certainly won't happen on credit...
The subprime lending crisis has turned in to an illiquidity crisis, and evidence is already coming in that the government cannot act as a catalyst or free pocket for lending (although I could have told you that last year). The money that's been pumped into various credit institutions has been saved, not lent, in fear that even it will not be available in the short term future. This shouldn't come as a surprise. A natural adjustment must be made to the ebb in this economic tide... it's going to hurt like hell, but dropping the bottom out and providing us with a parachute doesn't shorten the climb back up to the top. How long are we willing to suffer for this? Every time another bailout, funding, liquidity scheme, and takeover is approved we lengthen the amount of time that we'll be reeling. I think it's time we stop.
- ScottyB - 11-14-2008
i've had to re-write my post about 5 times, because i'm feeling so many different ways about it. before i even go on, the bottom line is that this situation sucks. rock + hard place, for sure.
first of all, they are getting loans, not getting "bailed out" persay.
i think 2 million jobs potentially lost is an understatement. i think anywhere from 3 to 5 million is going to be closer to it, even if GM goes bankrupt and restructures. those workers can't get a job elsewhere either, nobody is hiring. so now you have a huge influx of cash normally going back into the economy that isn't going there anymore. plus the hundred of thousands of inevitable foreclosures on houses. suppliers will shut down, dealerships will go under. entire towns are going to dissapear.
one of the big problems i have personally with this situation is the massive burden of the UAW and CAFE. CAFE really pisses me off because combined with their bullshit mandating of the industry, and a sudden 40-50% hike in fuel costs, GM just can't keep up. CAFE needs to be repealed or totally revamped to be more relevant and something needs to be worked out with the unions or just eliminate them. it sucks when you can't shut a line down because you are forced to pay someone in the meantime for just sitting there...so they might as well just build a car that will further bloat the inventory.
GM is bloated. no doubt about it. they need a massive restructuring and some fat trimmed off. but, i think to let them fail is a mistake. there are alot of circumstances at work that make it less than a black and white situation where "if you make a crappy product you deserve to fail", so i think the slippery slope argument of helping out anyone who is doing poorly is less valid here. also consider they've been part of our national history for over 100 years, through WWII and many other crisis. i think GM has the potential to recover and continue down the recent path of making some really good products.
if GM completely dies, i don't think it's coming back. there is too huge of an infrastructure to rebuild from the ground up.
- Evan - 11-14-2008
the best thing that could happen would be for them to go bankrupt, and get out of the crippling union pensions and healthcare that is taking $5k out of every car before its even sold.
- Ginger - 11-14-2008
ScottyB Wrote:CAFE needs to be repealed or totally revamped to be more relevant and something needs to be worked out with the unions or just eliminate them.
At least we agree on a couple points
- ScottyB - 11-14-2008
Ginger Wrote:ScottyB Wrote:At least we agree on a couple points
yerp!
i think you brought up alot of solid points yourself. thinking about it more after reading some of them, maybe it is the right thing to let it go it's course. i guess i'm a bit romantic and want to see a national symbol live on regardless.
- Steve85 - 11-14-2008
Would the job losses be that great if the company continued operations under bankruptcy protection? They have pretty much ground to a halt as it is already. And as pointed in the cnn article linked in the GM thread, they are offering a lot of buyouts and just around the corner from saving billions a year.
Quote:CAFE needs to be repealed or totally revamped to be more relevant and something needs to be worked out with the unions or just eliminate them.
Quote:the best thing that could happen would be for them to go bankrupt, and get out of the crippling union pensions and healthcare that is taking $5k out of every car before its even sold.I need to look into it further but according to folks on GM model sites, they are profitable in virtually every market outside the US.
EDIT: Well...not a perfect score...
Business Week Wrote:GM's headlong charge for growth overseas has been a bright spot for the company. But the profits are dwarfed by GM's other problems. GM made almost $500 million in the fourth quarter in growth markets such as Asia and Latin America, but a $215 million loss in Europe makes overseas growth a less exciting story.Just wondering out loud if the proponents of this possibly owe the unions a favor for recent assistance in political battles? ehh..maybe I'm being too cynical.
- PDenbigh - 11-14-2008
I agree a lot with what Evan posted. It is indisputable that all three have made some big mistakes, perhaps the biggest being complacency. The UAW and the vice they keep on the big three, though, is bordering on criminal. To avoid thread topic derailment (inevitable perhaps?) I won't go into union crap here, but the gist of my perspective is that they are a bunch of overpaid, unmotivated, thieves.
Moving on, I think that bankruptcy is going to be the best option. It will give them a real shock of reality that "Woah, you mean we AREN'T too big to fail!?!?" If we give them money I'm afraid that they'll just keep making the same mistakes. Look at AIG for example, what a mistake!!!
I think the next 20 years of the automobile market will be comprised of lost of smaller manufactures such as Tesla, Ariel, Aptera, Carbon, Hybrid Tech, etc. Being small turns into a real advantage in this incredibly fast changing transportation market. As technology and trends settle down, the companies will start merging and combining and a totally new "big three" will evolve. ALL of the current big manufactures are too cumbersome to actually make something that's going to be the future of transportation. At best, they'll copy the technology of the smaller companies (see Dodge's "new EV" and compare it to the Tesla Roadster for an example).
It is going to have a profound impact on the nation and it will be a very scary few years. Unfortunately the general public seems to be too ignorant or resistant to change to realize that this has been coming for a long time. So, whereas we had the chance to lessen our dependency on that industry slowly and safely, now we're going to have to ween ourselves cold-turkey.
- Steve85 - 11-14-2008
Can you imagine your tax dollars going to the continuation of this type of crap..
http://wsjclassroom.com/archive/06may/auto2_jobsbank.htm
Are you F'n kidding me Wrote:Mr. Mellon, 55, joined GM in 1972, following his grandfather and his father. Through the 1980s and 1990s, Mr. Mellon held jobs designing electronic systems for vehicle prototypes. In 2000, GM merged two engineering divisions, and he wasn't needed anymore.
Since then, except for a period in 2001 when he worked on a military-truck project, GM has paid him his full salary for not working. That is currently $31 an hour, or about $64,500 a year, plus health care and other benefits.
- Mike - 11-14-2008
you run a business in to the ground, you lose.
you buy a house you cannot afford, you lose.
lately, the opposite has been true... and i'm tired of it.
- WRXtranceformed - 11-14-2008
Fuck unions and fuck bailing out CARMAKERS who can't run their businesses properly.
- WRXtranceformed - 11-19-2008
Lol...."standard safety procedure."
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- PDenbigh - 11-19-2008
The media needs to give the private Jet thing a rest. The amount of money spent on that probably equates to about 5 minutes expense that the companies spend on union workers that are not even currently working.
- PDenbigh - 11-19-2008
I've been thinking about this a lot and I'm really in limbo about my answer.
Let me ask a question - would YOU buy a car from a bankrupt company? Bankruptcy for an airline is one thing. They rent you a seat for 6 hours. Bankruptcy is quite another for a company that provides the second largest investment you will likely make in your lives. What about service after the sale? Parts availability? Etc? The auto industry makes up approx 17% of our nations GDP. I'm just not sure, especially right now, that letting that go down the drain is such a smart economic move on a global scale.
They bailed out the financial industry that doesn't even sell a product and was even more mismanaged than the auto industry. Those that are saying "Oh, they were making the wrong type of cars" are for the large part incorrect. There was a very good REASON that the Big 3 were focusing on trucks and SUVs - they were SELLING. All the big foreign manufactures jumped on the bandwagon too - Titan, Tundra, whatever that Honda thing is, not to be cool, but because that's where the money was. The F150 was the best selling VEHICLE in the world for 23 years. Maybe they didn't have as diverse of a lineup, but to say that they were selling the "wrong" type of car is, well, wrong!
Ultimately, I'd like to see a bailout that forced Union contract rewriting, but we can't have it all.
- HAULN-SS - 11-20-2008
I caught the tail end of Larry king talking to michael moore about this...what a couple of clowns. Larry Included.
- JackoliciousLegs - 11-21-2008
<!-- m --><a class="postlink" href="http://videocafe.crooksandliars.com/media/play/qt/6821/24169">http://videocafe.crooksandliars.com/med ... 6821/24169</a><!-- m --> just the first 30 seconds...
- Steve85 - 11-21-2008
It's actually beyond comprehension that a member of Congress would challenge a corporations spending habits. It takes a real politician to be able to do it with a straight face.
http://www.newser.com/story/39509/times-square-debt-ticker-runs-out-of-numbers.html
- Ginger - 11-21-2008
Steve85 Wrote:It's actually beyond comprehension that a member of Congress would challenge a corporations spending habits.
Probably just about as beyond comprehension that they be bailed out of their own mismanagement...