"Since December, GM and Chrysler have received $9.4 billion and $4 billion, respectively, to help them survive plummeting auto sales and mammoth debts. GM may be eligible for another $4 billion, while Chrysler is expected to ask for an additional $3 billion. Without government aid, both companies are at risk for bankruptcy. "
Do you think these plans are enough to make these businesses functional? Do you think the government should give them more money? Is their going bankrupt inevitable?
It really would suck if GM and Chrysler go out of business. It would really suck if all those factory workers lost their jobs. It would suck for the entire towns whose economies revolve around plants remaining operational. It would suck for parts suppliers and distributors whose livelihood and business model is set up upon GM and Chrysler buying their products. It sucks in this economy where losing your job very well means not finding a new one.
The whole thing sucks and GM and Chrysler failing will not so much ripple as rumble like a 6.2 earthquake across the US economic landscape.
You know what sucks more?
Giving billions to GM and Chrysler after already giving them billions with no end in sight. Their businesses are losing money. In this economy, with their business practices, giving them money will merely delay the horrific inevitable. So we’ll have everything sucky described above and the US taxpayer will be $20 billion poorer because of it.
I think the difference is that the banks all made some really really (really really really) horrifically terrible decisions that got them (and us) into this mess. But at their core, the businesses are sound.
The car companies made a series of really bad decisions (admittedly not as bad or in such grand of scale as the banks). But at their core, the businesses are unsound.
Throw money at the banks to alleviate their poor decisions and they’ll keep plugging away.
Throw money at the car companies and, without them changing their ways, it’s just money down the drain.
I’m not agreeing with either bailout, but to me this seems to be the thought process.
I think the difference is that if the banks went ker-blooey, it would be like an earthquake registering 10.5 on the reichter scale, and would totally destroy the economy.
But if the car companies went ker-blooey, it would be a earthquake at level 7.8. Destructive but survivable.
The difference is that most people thought the banks were humming along just fine until one day they announced, “We’re gonna go under!” while just about everyone was expecting at least one of the Big Three to go under since about the mid-90s.
Since, it seemed, at first, that the banks were victims of Forces Beyond Their Control[sup]TM[/sup] people were somewhat okay with the government handing the money over, then, as it started trickling out that the bankers basically knew they were building a house of cards, but didn’t give a shit, people began to wonder WTF the government was doing handing all that money out. This meant that when the car makers showed up hat in hand, folks were like, “Hey! You jackasses have been in trouble for years! Why the hell should we help you? Giving money to the banks hasn’t fixed anything, so why should we believe that giving money to you will change something?”
The Japanese car makers have already said that they don’t want the Big Three to die, since they share many of the same suppliers, and if the Big Three go under, many of those suppliers will go with them. As unpleasant as it might sound, we need to keep propping GM and Chrysler up until the economy begins to turn around. At that point, if they’re not viable (or close to being viable), we should let 'em die.
Of course, it’s now been announced that GM says $18 billion isn’t enough. They want $30 billion.
If you think it’ll stop there, you’re crazy. They’ll be back for more, and you can be damned sure Richard Wagoner will find a reason to keep at least one private jet. On retainer, perhaps.
Here’s my perspective, and it’s somewhat related to my ongoing thread about the Auto Show. I don’t think there’s anything inherently unsound about the U.S. Auto Industry. While banking and credit are critical to the US economy they aren’t businesses that create anything or export anything. The key to the US remaining the preeminent economic force in the world is for us to continue as a manufacturing power and a strong exporter of durable goods to developing nations. If we stop making cars and import everything our trade deficit will become massive and I think that’s bad for our economic future.
The issues with the Auto industry are not that they can’t or don’t make great products at good prices. The issues are that they simply haven’t. The management has been so epically bad and their creative ideas so bankrupt for so long that consumer confidence is at a low. They are starting to make better products and their reliability is on par with the big Asian companies now. GM is doing better artistically while Chrysler still is an embarrassment, but none of these problems are permanent.
There are other issues, most notably legacy costs and union pressure, but those can be remedied and the hard economic times and renegotiations are helping that along somewhat. If the Auto companies are propped up the odds of them remaining viable and powerful in the long term is possible, and so long as their problems are repairable then I think it’s in the nations bets interest to do so.
If Universal Health Care and some type of retraction of the Unions took hold then many of the real issues of the Big 3 would disappear. They could continue to make cars and they could improve their products and public perception. I think it’s wise to help them to do that, and we shouldn’t sit back and watch the Big 3 collapse if the biggest issues they have are the requirement to overpay their workers and their being gouged by the insurance and health care industries as they support their huge group of retirees.
Note that in the case of Spain and France (as well as Italy and Japan which are not mentioned in the article) the money would not be going to a US car maker, but to a domestic car maker like Seat, Fiat, etc. There’s an Indonesian car maker being bailed out as well, now that I think about it.
Does anyone have a feel for whether the car companies are actually going to be given the extra money they are asking for. The money is flowing so fast right now: stimulous, bailouts, homeowner help…
Can we possibly afford to bailout the auto makers as well?
Well hell, so are most other auto companies. Including the much-vaunted Asian makers. Most of GM’s brands, for example, are doing about as well as they can be expected (and about as well as most other car companies) in this economic situation, but they are also carrying the almost-dead-weight of brands like Pontiac and Saturn.
It is very possible for GM to turn things around. Chrysler, though, is in a different situation.
I am not certain I agree. Precisely, in fact, because any viable GM brands have to carry Pontiac and Saturn, etc. That does not seem like much of a counter-argument, since GM for some ungodly reason keeps messing with those brands and then refusing to drop them.
The US Auto makers have 65% of the US Auto Market. Ford does especially well in Europe and GM is very competitive. In the 80s they were something like 90% but a loss of market share doesn’t equal “can’t sell shit”.
These companies are in trouble because of their legacy costs. The deals with the unions and sky rocketing health care costs have made their balance sheets unrealistic. Their market share has faltered because they’ve made poor products in the past, but that does not mean they aren’t viable. The vast majority of the Big 3s problems are a result of things beyond their control.
