Well, it figures that the Democrats would be completely wrong-headed about this. Pelosi is pushing a bailout package, but with conditions. Hey, cool. Maybe she’ll demand a restructuring of labor costs, huh?
Nope. The conditions are that the big three make their cars even more environmentally friendly, and that they invest even more money in ‘advanced technology’. In other words, she wants Congress to bail them out, but only if they make their cars even more expensive to produce.
Oh, and workers salaries and the UAW do not even get a mention. Can’t touch those. However, she also wants to limit executive compensation, as if that will make any difference.
Is there anyone in a position of leadership in the Congress who can do math? Or who understands even the rudiments of the market?
What about the unemployment that will result from giving billions and billions of dollars to the fools who run GM and Ford? Do you think that money grows on trees?
And of course, if you give them money now, they’ll come begging for more later.
I have a better idea; given money to Toyota to BUY GM and Ford. Toyota seems able to run a profitable company. Clearly, they’re a better investment.
So don’t waste money in Iraq and don’t give money to Paulson. I agree most of that money is pissed away, too, but that doesn’t change the fact that money given to GM is also pissed away. The fact that it’s LESS doesn’t mean it isn’t wasted. If I set a $100 bill on fire, would you say that setting a $20 bill on fire isn’t wasting $20 just because I wasted more when I burned the $100?
GM is a failure. Money given to them is money lost. When was the last time GM had a profitable quarter? If you give them money the only result is that they’ll go bankrupt in 2012, instead of 2009, and you’ll be out even more money because of the stupid bailout.
You seem to be under the mistaken impression that if GM is allowed to go belly up, all its workers instantly become unemployed. It cannopt be stressed enough: that is total baloney. Companies like GM do not simply die overnight. What would happen is the company would declare bankruptcy bust mostly continue operations, and it would be reorganized - broken up, or merged into another automaker, or the product lines and facilities would be bought out by the other automakers, hopefully the ones that actually make money.
If my little business dies will the government come help us? Not a chance, Vance. And yet little businesses die by the thousands every month; the jobs lost by small business closures EVERY YEAR exceed all the jobs that GM has ever had. Why aren’t you screaming for those businesses to be bailed out?
I think the point is that in bailing out the banks the banks can become solvent again and operate without a succession of bailouts. The automakers will just spend the money and be in the same position in a year or two at which point we’d have to bail them out again. That’s the difference as I understand it.
Don’t make the mistake of focusing only on the automakers themselves–it’s the suppliers that are the real losers. We don’t have any Big Three auto plants here in Portland, (although the port relies heavily on Toyota and Honda import work) but if GM, Chrysler and Ford go tits up there are at least five or six big local employers that will go with them and it will hurt the hell out of us.
Most of the bits and pieces that are assembled into cars in the plants come from all over the country, made by small and medium sized companies who have contracts with the automakers. It’s really astonishing how widespread it is–when I used to do courier work I was amazed at how many small shops were involved in making custom parts to go into Freightliner trucks–I’d pick up custom grills and side steps from a guy who made them to order in his garage shops, pick up cut to fit seat foam from another company, bring in all kinds of weird shit from all over the area, from companies you’d never realize had anything at all to do with making semi trucks.
Then there were the companies that serviced the forklifts, the lunch trucks that fed the workers, heck, when Freightliner idled a shift I had to get out of the courier business because their union didn’t allow them to use any outside freight handlers if they had idled union workers so my commission dropped like a rock to the point where I couldn’t afford to stay in the business. This was what happened in just one town which is not terribly invested in the auto business–multiply what we experienced by a shitload and spread it all over the country. I wouldn’t be so cavalier about shrugging and saying “aw, let 'em die” because quite frankly I don’t think too many people in this forum really know how invested we are in making those cars. It won’t just be GM–it’ll be a whole bunch of companies going over like dominoes and probably a lot of you will find out empirically just how reliant your jobs are on the Big Three.
Sure. For whatever my opinion on the subject is worth.
I’m not saying it’s correct, just that it’s the reasoning I’ve heard bandied about. The bank thing is a cash flow problem, the damage has already been done, subprime is over. With the automakers their business model is shite and they are being outcompeted by the newer brands. At this point Toyota is more American than Chevy as far as I can tell.
When it comes to small to medium American manufacturers that are suppliers to the auto industry, the Big Three are damned skippy the majority of the auto industry! Yeah, some of them might be able to score contracts to supply Toyota or Honda, but those supply lines are already being serviced by other companies and it’s pretty hard to break into an existing supply chain. Yes, in the global scale of things our automakers might not be the be all-end all (although you might be surprised at some of the “foreign” car companies that are wholly or in part manufactured by, owned by or made in partnership with, the Big Three) but for better or worse, many companies are heavily invested in them to stay alive. Losing a major auto supply contract can make the difference between solvency and bankruptcy, and at minimum it will ensure layoffs and higher unemployment all over the country. Let’s not even get started on what all the dealership personnel are going to do.
Right, but some of that will have to be bought up. The vacuum will create a big hole in the market just waiting to be filled and at the very least there will be a lot of gear to be bought up from the plants that go under. Buick for instance has it’s biggest market in China. Maybe a Chinese conglomerate will buy Buick and restructure it. Sure you can argue that this diminished America, but I’d say that not being able to run the companies properly is what truly diminishes America. Something has to be done.
Essentially what the big 3 need is permanent subsidization, not a bailout. When you put it that way you’re asking for something wholly different. Do you want to subsidize poorly run companies in perpetuity with your tax dollars?
The same is true of many industries. Any large manufacturer has a long supply chain that could be disrupted if it went under. That’s not an excuse for protecting them. The rise of automated telephone switching put tens of thousands of people out of work. The rise of the automobile destroyed the buggy industry, but also the cottage industries around it - saddle makers, livery owners, etc. Huge disruptions took place.
This is what Capitalism is all about - it creates new industries, it destroys old ones. Those that can compete thrive, those that don’t go away and the resources devoted to them move onto other things that work. You HAVE to let that process work, no matter what the short-term pain may be, or in the long run you’re going to wind up with a stagnant economy and a declining standard of living.
The difference with the financial industry is that it involved the wheels of capitalism itself. That bailout didn’t happen to protect bankers, or homeowners, or the people who work in the finance industry. That bailout was necessary to stop the wheels of the economy from stopping altogether, having widespread systemic effects. And even that bailout may have been a bad idea (it’s sure looking that way now - leave it to government to screw it up, politicize it, and turn it into a giant goody-basket for vested interests).
But the failure of the big three will not destroy the economy. Even if the companies were shut down completely, there would be a fire-sale on the factories and tools and new industries would spring up out of the ashes. The workforce would go on to other things. My best guess is that at least one of the big three would go into Chapter 11 bankruptcy, and it would be restructured and continue operating or it would be bought out by another auto maker and operations would continue. Sure, there would be layoffs, and pay cuts, and non-competitive factories would close and the good ones would remain. But that’s what’s supposed to happen.
Ah you never miss the opportunity to let your ideology colour an evaluation.
Leaving aside "politicizing " government (hint mate, that’s government when it’s run by actual human beings, not as a Platonic ideal), the coordinated interventions in the financial system, the injections of equity in banks in EU land, UK, and the US seem to have actually stopped an escalating panic, and key indicators like inter-bank lending, activity in commercial paper markets, etc are all stabilised and many seem to be heading up. Given a global recession, this is nothing to sneeze at. It appears the domino effect of one bank after another being hit by panic and forced into failure was successfully headed off. For the time being.
Now the purist government haters, and oddly hard Left populists are complaining this did not magically lead to increased lending or eliminate the economic downturn the crisis triggered. Well, no magic wands in the world, but to have avoided a Depression era style global financial panic, which was clearly picking up steam in September, that is not bad, not bad at all.
Of course, all the past data indicate more money will be needed, but then past data on financial system collapses also rather strongly indicate that if you stand on principle or go for the Hard Left populist reaction, you tend to end up with financial system collapses shaving a quarter of your GDP off into the dustbin.
In any event, the interconnectedness of the auto industry would seem to suggest that your Reorganisation Bankruptcy, Chapter 11, with perhaps some Government guarantees around it, would actually be quite successful, as industry counterparts would have a strong interest in seeing it come through rather than see a liquidation.
I’m in favor of socialized of medicine for all kinds of reasons, but the money that pays for it doesn’t grow on trees either. In the end that money is still part of an employer’s costs. The exact deals differ from country to country. In some places it is an additional tax. In others like Germany people have insurance policies - just obligatory, tightly regulated and income-dependent. Sure, socialized medicine might handle some things more efficiently, but unless you assume that the foreign auto industry and its employees somehow game the system I don’t see where their huge advantage is.
Mr Stone btw pointed to an interesting discussion, the follow on post being of more relevance:
[blockquote]The financial industry is one of the most heavily regulated industries in the country, indeed, the world, and while we don’t know how to collectively get out of this crisis, we do know generally what we want the banks to look like at the end of it: less leverage, better risk management, and probably a better compensation system that calibrates earnings to multi-year and systemic performance. I don’t want the government to run the banking system for any number of reasons. But I do think that the government has a roughish idea of what a good bank should do.
What, by contrast, should we demand from GM in return for our largesse? I don’t think we have any legislators or regulators with the experience and flair to design new cars or oversee the marketing program, manage the dealer network or decide which lines to cut or gut rehab. We’ll have to depend on management to do this. And the management that will be in charge is going to be, in essence, the same management that screwed things up. [/blockquote]
From http://meganmcardle.theatlantic.com/archives/2008/11/keep_bailing.php
In terms of the contrast between financial industry and automotive, you get down to two core observations: besides the empirical fact taken away from multi examples over the past 30 years that a banking system going down tends to take the country down, and industrial failures rather tend to rebound, there is the issue of knowing what to do.
Certain posters essentially want to save GM so it can serve as an extremely well-paid public welfare facility. That would seem to be among the worst things to do. You need only look at what the UK did in these areas before Thatcher. Following such populist instincts is a great way to utterly wreck one’s industry.
Socialised medicine isn’t free. Regardless of whether they’re paying for private health insurance directly or paying their employees more so that they can pay for socialised healthcare via higher taxes, the car manufacturers have to cover the cost either way.
You could bail them out, but simultaneously break them up into companies “small enough to fail.” i.e. if Saturn succeeds but Dodge doesn’t… If GMAC gets through the credit crunch or the Chevrolet brand pulls through. Any manufactured owned dealers would be split off. etc.
You can’t blame only the UAW or only management. But together you’ve had dumb and dumber running the auto industry for 30 years.