posted
Hmmmm, go easy on this bailout. It seems that our government is going to have to follow suit just to compete (they say economically, I'm suspecting that its more to do with votes if they don't follow suit):
quote: While Ontario sources have suggested Ottawa contribute $4 billion in auto relief, McGuinty declined to name a specific price other than to say there should be "proportionality" with the U.S.
"The Bush administration has already come to the table with $25 billion in support and that's before the global economic crisis hit. Yesterday, Australia announced over $2 billion in support for its auto sector. There's a proposal before the European Union to the tune of some 40 billion euros," he said.
It wouldn't even be so obnoxious if it wasn't for the fact that the bailout is mostly for the American branch firms that screwed up by building only larger vehicles rather than Toyota or Honda. I wouldn't buy a car OR invest from these guys. And now both our governments are. Oy.
quote:Canada's prime minister said Monday he is open to providing aid to North America's struggling auto sector and will watch closely what the U.S. government does.
Prime Minister Stephen Harper said he was prepared to look at options that would help the auto sector. General Motors Corp., Chrysler and Ford Motor Co. all have large operations in Canada.
posted
I guess it would depend on the structure of the "bailout" and whether or not it was an actual bailout and not loans. Bailout to me is a poor catchall term for any government intervention. If they secure loan interest loans for Ford and GM, that would go a long way towards helping them, and they're very likely to get paid back. No one calls it a bailout when companies borrow money from banks, I don't know this would be any different. If they were getting no strings attached free money, then I'd be okay with the term.
But if the auto industry collapses, millions of jobs and tens of billions of dollars (in tax revenue) will be lost. Seems to me like it makes more sense to help them out now rather than watch in horror as they collapse because we refused to help out of a misguided principle. Some of what is going on isn't their fault. It's not like they are still blindly selling only SUVs and are eschewing smaller cars. They've discontinued larger car lines, downsized the factories that make them and ramped up smaller car production. They both have very good selling smaller brands with some truly great stuff in the pipeline that could lead to a real resurgence in American autos, but if they never get there, it will have been for nothing.
Posts: 21898 | Registered: Nov 2004
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quote: The $25 billion bailout loan to the automakers was signed by President Bush yesterday, and would allow the car producers to borrow money at about half the going market rate. (Nice terms if you can get them). The government already approved the $25 billion of loans to help the auto makers and their suppliers build more fuel-efficient vehicles in 2007 as part of an energy bill. The automakers — Chrysler, Ford Motor and General Motors — will not have to repay the loans for five years.
That to me is a bailout, the firms would collapse within a year without them and to prevent it they're getting loans far below market rate. The difference between the market rate and their rate is essentially free money.
I would also note that there is no chance of as you put it "the auto industry [collapsing]", there is no equivalent of subprime loans which were spread out among all the automakers. Rather, there is only a general downturn in sales. As a result, while there has been a drop in sales industry-wide, Honda and Toyota are still in the black for the year (whereas the American automakers are far into the red).
Thus, there is no risk of the auto industry collapsing, just these American firms. Foreign automakers are more than ready to take up the slack and are still expanding manufacturing operations in the US.
Posts: 7593 | Registered: Sep 2006
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posted
You're talking about the world auto industry as a whole, I was referring to the American auto industry specifically. From the point of view of the consumer, I'm sure it's all well and good that foreign competition can come in and take over the market entirely, but from the point of view of the government, there are a lot of other factors to weigh in terms of lost jobs, lost manufacturing capacity, loss of tax revenue, and really the further devastation such a shock would cause to an already damaged economy. The ripple effects could be highly disruptive.
I'm not sure how "sweet" the terms are of that particular deal. Much of the money is specifically earmarked for certain purposes, like research for MPG standards, which handicaps them to a certain degree. And while they are getting loans at far under market rates, it declines to mention that those market rates are ridiculously high. Ford I think I remember reading was paying something like 30% interest rate on multimillion dollar loans.
The deal reported in your link is a month and a half old, and from all the talk I hear now, never actually went into effect. Democrats in Congress are talking about loans as a part of a new stimulus package, but to date they haven't gotten any funds from that deal worked out.
Posts: 21898 | Registered: Nov 2004
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posted
I'm not talking about the world auto industry as a whole. I'm talking about the North American auto industry, but I'm including not just American-owned firms but firms with significant manufacturing and sales based in North America.
From the POV of the government, the total number of manufacturing jobs and manufacturing capacity should remain the same unless Japan starts replacing lost American capacity with imports directly from Japan. This is contrary to their current plans which is to expand here.
What would change is that the management would be based out of Japan rather than the states, but I'm not particularly upset about that because there are few ripple effects from them. In fact, I don't know why the Canadian government is so gung-ho on the idea (who cares whether we send money to Japan or the States?), but thats a side issue.
Market rates are not ridiculously high, they're simply *realistically* high. The market has judged (rightly) that loans to these auto companies are a high risk and thus demand a higher interest rate to compensate for the risk. Hell, I know *I* wouldn't invest in Ford for anything less than a 30% interest rate.
However, it is heartening to know that the deal has not gone in effect yet.
Posts: 7593 | Registered: Sep 2006
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posted
Even if such a transition were inevitable, and I'm not convinced that it is, there would still be enormous upheaval in the years it would take to changeover from an American to a Euro/Japanese dominated system. It would take years for Japan to ramp up production to the levels you're talking about for an actual transition to total foreign control. They can't just magically produce millions of new cars. They'd have to build dozens of new factories, and if the parts suppliers go out of business between now and then, they'd have to set up an expanded infrastructure for parts suppliers as well, to say nothing of the dealers who would also go out of business, etc etc.
I have no problem with the government stepping in to help the American auto industry, so long as the terms are right. If they still don't have their crap together in a decade, then I'd consider something else. I don't think they get nearly enough credit for the changes they've made in the last few years, and the increase in the quality of their products, while foreign automakers get far too much credit and not enough criticism.
Posts: 21898 | Registered: Nov 2004
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posted
I don't think the levels of manufacturing are as bad as you depict. Consider:
quote: Car sales are sinking, and there is no sign of a turnaround. In October, U.S. light vehicle sales (passenger cars and light trucks, such as sport utility vehicles and pickups) fell to an annualized rate of 10 million units. Sales will probably fall to fewer than 14 million for all of 2008.
It is hard to predict what will happen next year, but it is possible that annual sales will drop to 12 million or less. For reference, in 1999, the last great year for the industry--in both profits and sales--U.S. unit sales hit 16.9 million.
The sales side of the business is gloomy indeed, but what is making things worse is what is happening with U.S. production capacity. At the start of the last model year, we counted 20 million in car/truck assembly capacity in North America. This includes Canada and Mexico, but many of those vehicles come to the U.S.
Of the 20 million, the three Detroit companies had the capacity to build 12 million vehicles; the foreign companies, the "transplants," as we used to call them, 8 million units. This is just local production capacity. Last year, 2007, imports accounted for 23% of U.S. sales.
Just do the math, even at current projected sales levels (which may be too optimistic) there are only 14 million cars in sales. Imports shave that to 10.78 million cars that need to be manufactured in North America. There are already 8 million cars worth of capacity for the foreign firms. Thats a difference of only 2.78 million cars.
That means that foreign firms only need to expand operation by 35% assuming that US car operations go to 0. Of course that won't happen, there will be restructuring, if the price is low enough, there will be *some* buyer for the US capacity (if not a new player, then the foreign firms which need to boost capacity).
The problem doesn't sound all that daunting, especially since the estimates seem to be trending downwards rather than upwards.
Don't get me wrong, there will be lots of short-term upheaval, but the problem doesn't seem to be on the production end.
Posts: 7593 | Registered: Sep 2006
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posted
A bailout would be a horrible idea. The only thing that might beat US automobile companies into having some semblance of a working business model is bankruptcy.
That is, the collapse of the automobile manufacturers would only be the collapse of their financial structure. They'd continue to make cars, and be restructured in cooperation with their creditors and a bankruptcy court. And they're in a lot of very damaging, very stupid contracts, so that's a very good thing.
The way to help businesses that have been badly handled for quite some time in spite of (or rather, in large part because of) favorable gov't assistance is to allow the business the use of our Chapter 11 bankruptcy statutes. It isn't like there can't be US automobile manufacturers that pay decent wages and produce cars profitably. Several foreign companies have demonstrated that handily.
Posts: 15770 | Registered: Dec 2001
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quote:It wouldn't even be so obnoxious if it wasn't for the fact that the bailout is mostly for the American branch firms that screwed up by building only larger vehicles rather than Toyota or Honda.
It has much more to do with the fact that american automakers are circumstantially screwed.
They can't be profitable due to legacy costs like pensions.
They also have to provide healthcare, something that foreign automakers usually have covered.
Posts: 15421 | Registered: Aug 2005
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posted
Samp: foreign auto company branches in the US don't have healthcare covered.
Pension costs are definitely a factor, though even significantly reducing them wouldn't be enough to make US automobile manufacturers profitable. Pensions would no doubt be one thing restructured in a bankruptcy. Other things would include the numerous competing brands many auto makers have (which are held in place by complicated franchising contracts) that compete against each other, grossly duplicating marketing dollars and the like.
Posts: 15770 | Registered: Dec 2001
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quote:Originally posted by Lyrhawn: Even if such a transition were inevitable, and I'm not convinced that it is, there would still be enormous upheaval in the years it would take to changeover from an American to a Euro/Japanese dominated system.
Piffle. The Detroit factories are fine, it's the labour contracts and management that need to go. The Japanese or Europeans would simply buy the factories - at excellent prices - and continue manufacturing where the Americans left off, retooling only enough to make their own brands instead of the ugly overpriced clunkers. Two years, tops. Besides which, there are any number of cars sitting about on dealer lots at the moment, unsold; the world can certainly afford a two-year 30% decline in car manufactures, we've got too many as it is.
Posts: 10645 | Registered: Jul 2004
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posted
I disagree with a bailout. Bailing out the financial industry was neccessary in order to clear up a logjam that would have seriously damaged the whole nation's economy. It wasn't done to prevent layoffs for finance workers. There is no equivalent threat from an auto industry collapse.
Posts: 8120 | Registered: Jul 2000
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posted
Corporate welfare is as bad as any other kind.
In fact, it might even be worse. It keeps businesses that SHOULD fail alive. It rewards bad planning and stupid decisions. In otherwords it gets in the way of the market's Invisible Hand.
Better, leaner, companies will arise out of this. Companies better able to compete.
Or we'll just all buy Japanese cars. That's fine too.
Posts: 7085 | Registered: Apr 2001
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Blayne Bradley
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indeed, let the Auto industry die, its unprofitable, Laissez-faire has failed the Japanese example of a "Prussian General Staff" for managing its economy should be followed.
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Oh dear. The whole point of laissez-faire is that it allows industries to die. The destruction of American auto-making is no more a failure of laissez-faire (not that the US has this in any meaningful sense anyway) than changes in evolutionary theory since Darwin are a failure of science.
Posts: 10645 | Registered: Jul 2004
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Blayne Bradley
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well laissez faire prevents any interventions, especially interventions to allow the euthanasia of dying industries and the convenient reallocation of resources.
Why should 30,000 auto workers go out of work? Can't they with maybe 6 months of training just as good for fabrication or something else or services?
Militerize the workforce! Give every worker an ID, when a business lays people off they get "transferred" to work somewhere else.
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When was the last time a government intervened to 'euthanise' an industry? Any industry? As for your 6 months of training, just what is preventing this from happening anyway? Surely the workers know better than some government bureaucrat what they would like to retrain for, or have the aptitude for!
Posts: 10645 | Registered: Jul 2004
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Blayne Bradley
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posted
Japan has an pangovernment agency organization (or did this was written in the 80's) that had executive and near total control over the japanese economy and its Zaibatsu's, according to Paul Kennedy the Japanese transition from "lower grade" manufacturing to "higher grade" manufacturing was accomplished through this method of reallocating of resources, retraining workers, outsourcing lower grade industries overseas, and intentionally killing off unproductive businesses and industries when they were deterimental to the economy.
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Pity they didn't kill their banks at the start of the nineties, then. But anyway, just what is your bitch here? The auto industry will go bust (assuming no bailout) in a perfectly laissez-faire way. Workers will then find new jobs and be retrained. I don't see where the government is needed for this. If anything the government has been propping up the corpse for the past 30 years, and needs to get out of that business, fast.
Besides, as we all know, under laissez-faire your cappies can build railroads much faster because they spend less money on it. Speaking of which, how is the anti-Georgian alliance going?
Posts: 10645 | Registered: Jul 2004
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Blayne Bradley
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posted
Italy is nearly convinced to join our cause, he doesn't like Georgia but is upset that we let him get so strong in the first place by letting him go Mongol. And half wants to half ally with Fasq to ruin the game and start over with less short sighted conversion practices.
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quote:It wouldn't even be so obnoxious if it wasn't for the fact that the bailout is mostly for the American branch firms that screwed up by building only larger vehicles rather than Toyota or Honda.
It has much more to do with the fact that american automakers are circumstantially screwed.
They can't be profitable due to legacy costs like pensions.
They also have to provide healthcare, something that foreign automakers usually have covered.
Sam, which page of the Republican handbook are you on?
Been to Texas much? The SUV's here are massive, ever seen the high end escalades? Ever seen the Armada? Remember the first 2 Hummers? Ever seen the big chevy trucks with the hemis?
Health care and pensions played a role, but no where near as large as the American Auto industry having to be ripped from the HUGE vehicle with 4 lcd screens model.
SUV's were there most 'profitable' because they were able to charge people an arm and a leg and two of their kids ears for all the vanity extras.
Blaming the worker is so july 2001.
Are we just going to keep giving the car companies more and more money til they are profitable? That. Sounds. Weird.
Let them fail. The new ones can rise, someday.
Posts: 262 | Registered: Oct 2008
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Militerize the workforce! Give every worker an ID, when a business lays people off they get "transferred" to work somewhere else.
Now boarding for Iraq and Afghanistan! Except for the 9.5-10 females 16 to 35, some of them will get 'special' training in Dubai.
I don't like Nancy Pelosi. I wish she'd step down and find another line of work, and she can take Barney Frank with her.
Posts: 262 | Registered: Oct 2008
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quote:Originally posted by Blayne Bradley: Italy is nearly convinced to join our cause, he doesn't like Georgia but is upset that we let him get so strong in the first place by letting him go Mongol. And half wants to half ally with Fasq to ruin the game and start over with less short sighted conversion practices.
Well, he's got a point, that's why I resigned, but at this point I think he needs to get over it and play the game as it lies. Georgia is hardly invincible; with Italy on-side we can in principle bring it up to 18 WE and watch it break apart from rebellion. Independent Persia anyone?
Posts: 10645 | Registered: Jul 2004
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posted
BB: and shortly after what you're reading was written, Japan's economy began one of the longest and most painful economic downturns since WW2. One that won't be anywhere near matched by the current crisis.
Japan's system was very bad, and it failed horribly.
Posts: 15770 | Registered: Dec 2001
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quote:Originally posted by fugu13: BB: and shortly after what you're reading was written, Japan's economy began one of the longest and most painful economic downturns since WW2. One that won't be anywhere near matched by the current crisis.
Japan's system was very bad, and it failed horribly.
Its in a recession yes, but who are you to say its worse then whats happening in the US? Japan's system allowed it to enjoy the most spectacular GDP growth rate in the developing world and to be for a time the worlds largest creditor nation.
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The details of Japan's system had very little to do with Japan's growth. They were in the right place at the right time with a well educated workforce that had industrial expertise and another country greatly interested in improving their economy. Additionally, they had a savings mentality, which contributed significantly to internal investment, and was a substantial part of their growth (and turned into a substantial part of their bust, surprise).
And it isn't just a recession, Japan had nearly two decades of serious economic troubles, and just when it seemed they might be climbing out of them starting a few years ago, this happens.
Not to mention that a lot of the improvement has yet to increase quality of life much. The only reason their employment rate looks so good is because they count people in non-contractual, part-time work as fully employed, and because the gov't "creates jobs" in the construction sector by doing useless road improvement projects.
Two decades of of a stagnant to dismal economy isn't a sign of a system that works.
Posts: 15770 | Registered: Dec 2001
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posted
So, the big push seems to be, if there is a bailout, all the employees will have to take a cut in pay and benefits.
Why is America SO willing to cut an employee's wage and benefits, but if you mess with executive's benefits, it is socialism?
Posts: 262 | Registered: Oct 2008
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If it will make you feel better, I think the Big Three should probably have paid their executives a lot less, and I'm fine with the bankruptcy court modifying their contracts to reduce bonuses and the like, too.
Posts: 15770 | Registered: Dec 2001
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posted
To be fair, the Big Three aren't over and above what any other Fortune 500 company pays their CEOs. I think they ALL make too much money, but the Big Three aren't especially heinous, and Mulally at Ford actually turned the company around when they fired Ford from the CEO spot, so heck, maybe he actually deserves it. Maybe not. Maybe Wagoner did the best he could with what he had, and maybe not. In the end it wasn't CEO pay that got them where they are. It's a drop in the bucket.
But then, I think if any of them slip into bankruptcy, it won't be an issue, since they'll quickly cease to exist as anything but a tiny shadow of what they once were, if that.
Posts: 21898 | Registered: Nov 2004
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posted
My rep (Jim McDermott, D-WA) was on NPR today. He talked about banning bonuses for employees making over $200k a year as a condition for the bailout. He seemed quite adamant that he would not vote for it otherwise (there were other strings attached that he was equally insistent upon).
Posts: 2907 | Registered: Nov 2005
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posted
I'm in favor of some of the strings being bandied about. Automatically firing the CEOs of all of the big three is a poor idea I think. It seems like one of those things they want to do because it looks good, rather than being a really good look into the decisions made. I also think they're ignoring what the Big Three HAVE done in the last couple years to change. They didn't just go willy nilly into the mess they're currently in, they were already in transition before this current financial crisis hit, and it's that crisis that has them in a bind.
Many of the criticisms you most often hear tossed at them aren't really fair. Quality problems? Consumer reports has Ford as equal to any asian carmaker, and GM is almost there with huge improvements of its own. Not enough hybrids? GM sells more hybrid models than Toyota or Honda, and Ford's Escape hybrid is the second best selling hybrid in the country despite the fact that these aren't particularly profitable cars and are less than 3% of the car market. Not enough small cars? Ford is a small car leader in Europe and elsewhere overseas. I'm not as familiar with GM's small cars, but they have some nice ones too. They've never brought them to America because before very recently, small cars weren't where the money was. They don't cost much less than larger cars to make, but are sold for far less, and SUVs were BOOMING in the 90's and early 00's. But faced with changing times, they've moved up small car production, plan to bring small cars from Europe to America, and have cut larger vehicles from development and from their sales lineup. They've also made big deals with the UAW to cut huge costs in healthcare, retirement and pension benefits to former employees that most asian companies don't have to deal with at all.
That doesn't look to me like a Big Three that is still plodding through the same course as they were in the 90's. Not acknowledging the changes they made and saying their whole system sucks and they haven't tried to change says to me that the people saying that shouldn't be in charge of the terms of the deal, since they clearly don't understand some of what has been going on recently.
I also think that allowing any single company for the Big Three to go into bankruptcy could be a death blow to the industry as a whole, with ripple effects that hurt even foreign automakers in terms of domestic production of foreign cars and local auto suppliers that will go out of business.
Posts: 21898 | Registered: Nov 2004
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quote:I also think that allowing any single company for the Big Three to go into bankruptcy could be a death blow to the industry as a whole, with ripple effects that hurt even foreign automakers in terms of domestic production of foreign cars and local auto suppliers that will go out of business.
Ok, but so what? You say this like it's a bad thing. Why shouldn't our capacity to produce cars readjust to fit our capacity for using them?
Posts: 10645 | Registered: Jul 2004
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posted
Dan_raven's #1 rule of politics, which is forgotten only at your peril.
quote:People can not be created nor destroyed without resulting to sex or death.
Where does this fit here?
quote:Workers will then find new jobs and be retrained.
Big deal, after all they are only Union workers, over paid, lazy, useless, semi-socialists who are a drain on the economy. I'm sure if they really tried they could find new jobs with new training in a few months.
Do you realize how many there are?
300,000.
Then add all the parts manufacturers who supply the auto industry. They can't just sell to the Japanese/European companies. Those companies already have suppliers.
We are talking about millions of people entering the job market.
And what can they train for? Computer jobs? Those have gone to India. Other manufacturing jobs? Those have gone to China.
How about in the new green-tech industries. Turn our car plants into wind-mill and nuclear reactor factories. Retooling and retraining for these high-tech jobs should be easy.
But many of those car people are in their 40s, 50s, 60s. Who is going to pay to train them and only get a few years worth of work out of them?
And how many can these new industries digest before they are full?
And how will those millions eat, and pay their mortgages, and pay for their kids education and buy Orson Scott Card books and magazines?
Who pays to move 20,000 workers from Detroit with all its problems, to Tennessee which gives out tax abatements to the foreign car companies? Its cheaper for Toyota to build a large new plant in the middle of Georgia and hire a bunch of teenagers to train, than it would be to transport, train, and relocate the masses in Michigan. Add some TIFF from the state and there is no going back.
So all these workers, these people who are written off in the above debate with the simple phrase, "can get new jobs" are expected to disappear from the picture.
They won't.
But they don't seem to be important. What everyone from President Bush to the nightly news commentator is busy doing is seeking economic justice.
Find fault.
Make them pay.
Then, somehow, everything will be right in the world.
This brings up Dan_Raven's #2 Rule of Politics. "True Justice is pure and divine. Human justice is relative and destructive."
or
"All laying blame does is excuse you from having to do anything about the problem."
Who's fault is this mess? UAW? CEO? SUV Owners? The Oil Companies? The Mortgage Companies? Greedy middle men? Who cares.
Don't bother me with fault or blame. Fix the problem.
Posts: 1941 | Registered: Feb 2003
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quote:I also think that allowing any single company for the Big Three to go into bankruptcy could be a death blow to the industry as a whole, with ripple effects that hurt even foreign automakers in terms of domestic production of foreign cars and local auto suppliers that will go out of business.
Ok, but so what? You say this like it's a bad thing. Why shouldn't our capacity to produce cars readjust to fit our capacity for using them?
It's in the process of doing so right now. Their capacity to produce SHOULD readjust to meet our capacity to consume, and it's a process that is currently playing out, but Ford for example is doing just fine, whereas GM could be bankrupt in months. If GM falls, all three of the Big three could fall because of ripple effects. So should Ford, a company which actually has turned itself around, fail because a whole different company wasn't so quick on the uptake? Besides, going from millions of cars to zero cars isn't readjustment, it's overkill.
But regardless of anything involving fairness, there are other considerations. The failure of the Big Three would be a massive, massive burden on the Federal government. Doesn't it make more sense to loan them a little now, to be paid back later, rather than let them fail and pay out billions more just to stand on principle?
This is an ounce of prevention situation.
Posts: 21898 | Registered: Nov 2004
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quote:We are talking about millions of people entering the job market.
Well? This happens every six months or so, recession or boom. People go into and out of the labour market all the time; when unemployment doesn't change from one month to the next, that actually means that roughly 100k people lost their jobs, and a different 100k found new ones.
quote:So should Ford, a company which actually has turned itself around, fail because a whole different company wasn't so quick on the uptake?
No, but why do you think this will happen? 'Ripple effects' sounds like magic thinking to me; what is the exact mechanism? Besides this, if they're in such a position that reducing the amount of competition they've got can kill them off, then I don't see how you can call them recovered.
Posts: 10645 | Registered: Jul 2004
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Because if GM falls, then their parts suppliers likely will as well, and if those parts suppliers, and THEIR suppliers all go out of business, then Ford has no parts to build their cars with, and they suffer as well. It's not about reducing competition, it's about the destruction of the means with which they build their cars. It has nothing to do with competition, it's an entirely different mechanism. And I wouldn't say they are totally recovered, but if things continued at the current status quo, I think they are well on their way towards recovery. Pulling the rug out from under them like that would doom any company, not just an automanufacturer, and it has nothing to do with supply and demand or competition for that particular company.
It's the speed with which it's happening that's the problem, not the eventual outcome.
quote:Well? This happens every six months or so, recession or boom. People go into and out of the labour market all the time; when unemployment doesn't change from one month to the next, that actually means that roughly 100k people lost their jobs, and a different 100k found new ones.
When was the last time 2 million people all entered the labor market at the same time in the US? And how well did that turn out in the short term? A lot of them actually will find jobs if Obama's green revolution takes off, and Michigan is well positioned in that instance, but if that doesn't materialize, then you have a large middle aged workforce with no other skills in a very tough, very skilled market.
Posts: 21898 | Registered: Nov 2004
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ughh I have no idea whether or not detroit is a hopeless cause.
if SUV's hadn't have been so profitable they would have been in this position a number of years ago and it might have been milder overall. who knows! a bailout might re-energize them, or it might perpetuate the circumstances, allowing legacy costs/UAW to make the companies fundamentally unable to compete profitably.
or bankruptcy might be the only not-silly option! and that might either restructure the company to profitability, or enhance the Death Curve and expedite detroit's demise!
there might be no way to deal with this that is not extremely painful in the long run!
quote:Originally posted by Darth_Mauve: Do you realize how many there are?
300,000.
Citigroup laid off 52,000 employees yesterday. They've been bailed out. A bailout is no guarantee that all 300,000, if your numbers are correct, will be saved.
quote:And how will those millions eat, and pay their mortgages, and pay for their kids education and buy Orson Scott Card books and magazines?
How the heck did people laid off during the dot-com crash eat, pay mortgages, and pay for their children's education?
Where was the bailout then? I certainly know people that could have used it.
Your argument would be compelling if GM was the ministry of EI or welfare, but GM is a company and its role is to make cars and make money doing it. It failed. Its time for new and better companies to take its place.
quote:Originally posted by Lyrhawn: ... So should Ford, a company which actually has turned itself around, fail because a whole different company wasn't so quick on the uptake? Besides, going from millions of cars to zero cars isn't readjustment, it's overkill.
What is this "should" and what role does it play in a free market? If a company, even Ford, fails to anticipate the future and puts in place policies that kill it, and other companies that have anticipated the problem replace it, thats what happens. "Should" doesn't really enter into it.
The only reason the term is even on the table is because the US government is busy with its new socialist policies.
Besides, you're also arguing against a straw man. The choice isn't between between millions and cars and zero. As I've already pointed out, the math works out so that non-American owned factories in the US already have the capacity to produce the majority of car demand in the States, especially when combined with imports.
All we're really talking about is the fraction of the market still under the control of American-owned automakers and it is dubious that under bankruptcy proceedings and restructuring that all of that would really "to zero."
I may also point out that by some estimates, the bailout will only delay the collapse of GM by a year. This isn't a choice between thousands of jobs and no jobs, this is a choice between taking a chance that we may be able to save some fraction of American-owned automaking jobs and possibly have the exactly same problem a year down the road, and simply letting them collapse and restructure themselves which may or may not lead to more jobs in the long run.
Posts: 7593 | Registered: Sep 2006
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quote:When was the last time 2 million people all entered the labor market at the same time in the US?
That would be 2001, the dotcom crash. Worked out fairly well, really.
quote:Because if GM falls, then their parts suppliers likely will as well, and if those parts suppliers, and THEIR suppliers all go out of business, then Ford has no parts to build their cars with, and they suffer as well.
Ridiculous. There are lots of car-parts suppliers; they won't all go out of business at the same time. The ones that survive the first few months will be in a better position to bargain with Ford. Really, now, this is the sort of adjustment that free markets are genuinely good at. They've got their flaws, but this is not one of them. Step back and let the market sort itself out.
Posts: 10645 | Registered: Jul 2004
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quote: Where was the bailout then? I certainly know people that could have used it.
There actually WAS one, in a way. Unemployment insurance was extended twice, at a fair amount of federal expense. (Good thing, too, since it took me nine months to find work.)
Posts: 37449 | Registered: May 1999
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quote:Originally posted by Samprimary: ughh I have no idea whether or not detroit is a hopeless cause.
if SUV's hadn't have been so profitable they would have been in this position a number of years ago and it might have been milder overall. who knows! a bailout might re-energize them, or it might perpetuate the circumstances, allowing legacy costs/UAW to make the companies fundamentally unable to compete profitably.
or bankruptcy might be the only not-silly option! and that might either restructure the company to profitability, or enhance the Death Curve and expedite detroit's demise!
there might be no way to deal with this that is not extremely painful in the long run!
fantastic!
The Big Three made out pretty good after the last negotiating round with the UAW which allowed them to hire in new workers at much much lower rates, and combined with the buyouts of older workers has allowed them to cut down on labor costs. Combine that with the VEBA and you have billions in savings already realized just in the last couple years, but it's something that was structured to give them even greater benefits long term. That and plant closings are really bringing down their costs.
There's a serious concern from many that they won't be able to restructure in Chapter 11 the way that most people in this thread are assuming, and that based on the credit market, they'll be forced into Chapter 7, where all their assets will be liquidated. Besides, no one buys from a bankrupt autodealer. If the current credit crunch hadn't come along, they likely would have been able to squeek by long enough to allow some of the cost savings measures they've put in place in the last couple years to kick in. GM was planning on making it to 2010 when they'd get increased savings from those measures, and two or three new car models are set to come out, including the Chevy Volt, which they've invested heavily in and expect big returns from. The Volt by the way is exactly the car that everyone has been telling them to build for a decade or more, and even the Asian automakers refuse to do it. Ford has a couple great cars down the road too, in the Verve and the next generation Focus (the current generation is the best selling American car), to say nothing of a well feted Chevy Malibu.
I think a loan with strings attached is a worthwhile investment for the government. If they don't, and the Big Three fail, they'll end up losing more money anyway. It's worth a try. In that vein, it's worked before, with Chrysler, and the loans were paid back.
And I'll admit flat out that I'm saying this as someone with half a dozen family members working for the Big Three, and another dozen or so friends, and as someone who works in the area who'd like to keep my job. People forget what KoM apparently thinks are voodoo ripple effects, but when you put thousands of people out of work in a single location, local businesses suffer, and we're already suffering here in Michigan worse than anyone else in the nation. When that many people lose their jobs, unemployment rolls swell, forcing billions of dollars out of the government, to say nothing of the extreme strain, if not disastrously so that this would put on the government who'd be on the line for all the lost pensions. But that much income being lost in a state that is already in the trouble we're in would hurt even more, and a lot of people who have absolutely nothing to do with the auto industry will lose their jobs when an already fraying state economy fractures a little more. Given the loss in tax revenue, the state will have to cut back even more, and the governor has already cut billions in wasteful spending. There's nothing left to cut except correctional facilities, essential services, and education, which means either less cops on the streets, more criminals being let out, and/or higher tuition costs (or teachers being laid off) for students. I'm not saying Michigan's pity party should sadface the nation into giving GM and Chrysler the loans they want, I'm saying they did most of the things that people are bitching at them to do still and don't get the credit for it, and that loaning them the money now is far more worth it in the long run than letting them fail and picking up the tab for it. That's the economic angle, but there's maybe a hint of a moral angle, and certainly a political one.
Why not just take us out back and shoot us?
Posts: 21898 | Registered: Nov 2004
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posted
Anecdotally, my father stayed with American cars until very recently; after his latest Cheverolet started giving him grief after a relatively short time of ownership, he threw in the towel.
It is worth noting that, according to JD Powers, reliability of the Ford and Chevy brands has been increasing, and now ranks higher than Mazda, Subaru, and Mitsubishi... But they still aren't as high as Honda or Toyota.
I think there's been a certain problem for a while that the demand for new cars has been artificially high. A new car is a luxury, one that many people now recognize as such. And while there have been improvements, significant new technology and the long-awaited enhancements in fuel economy aren't things that come up on a year-by-year basis.
Honestly, I also think that what's been manufactured has been short-sighted; it's hard to feel a lot of pity for the SUV glut. I really think the demand for those vehicles was as much a matter of marketing as any real need or niche to be filled.
But I don't think letting the Big Three disintegrate would be good for the economy. And I have to disagree with comparing it to the Internet Bubble. It's the difference between laying off a lot of college graduates, many of whom are on their first job anyway, and laying off long-employed tradesmen who don't necessarily have advanced degrees and may have lifestyles (including families and mortgages) that simply don't absorb employment shocks.
Posts: 3826 | Registered: May 2005
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