Ahh, but this thread is about what the state should do with a nationalised company… Not discussing what Bill Gates should do with his private billions. And “The state should use taxpayer funds to build foreign in an attempt help wean us off foreign oil” is an incendiary, or at least highly controversial statement.
I think this is what you are missing when interpreting our reactions. You are thinking “Free lollipops and pony rides are a good thing” and we are asking “Is a government doing more harm than good giving away free lollipops and pony rides”.
No, it’s not. It’s like the state spending billions of dollars reanimating corpses and then putting them to work. See the difference?
Our misgivings are not that the government has reanimated the corpse. Our misgivings are:
Should the government have reanimated the corpse. Has it created amoral hazard? Has it achieved anything of public worth that the standard procedures for removing non-viable bodies would not have done? Has it been done for partisan political reasons? Is it massive pork barrelling?
Is a corpse reanimated by the government ever going to have a mind of its own, or will it be forever be a mindless slave devoted to partisan political tasks?
What will be the costs of putting the corpse to work? What will the upkeep of the corpse? Will the corpse ever earn enough to pay for the cost of the resurrection? I
If the corpse is put to work by the government then how will other workers compete with a corpse that doesn’t need to buy food or a place to sleep? And how will the government be able to pass legislation concerning working hours for example, when it has an animated corpse that make sit money by working day and night?
Hopefully you can see why those are the sorts of questions that people should be asking if the government starts resurrecting corpses. The complaints are not that they’re going to mess it up. The complaints are that they are going to kill or mutilate perfectly healthy live bodies by interfering in unpredictable ways with a working system.
Past history teaches us that government ownership of things like car factories invariably has negative consequences. If the government has any plans to do anything other than recover profits as facts as possible as sell the whole lot then it’s not likely to end well.
Free? Where did I say that? It’s costing us $50 BILLION and counting.
The notion that if GM fell its parts would be sold off for something like their value and re-employed in some capacity is one I have trouble believing. There are any number of abandoned factories, plants and even whole towns in the U.S… Gary Indiana was once a thriving city due to the mills; now it has so many abandoned buildings it was used to film footage for the History Channel show about the planet without people. Is there reason to believe that the parts for GM would be sold off to give more than nominal recompense to the creditors?
Huh? Did you really think that when the someone gives away something for free that it didn’t cost the giver anything? Do you believe that when government run clinics give away free condoms they got those for free? In case you really do think that, free doesn’t mean the giver got it without cost. It means the receiver gets it without cost. The giver invariably has to have paid for it, otherwise it’s not free, it’s accepting stolen goods.
In this case the state is giving away, amongst other things, free jobs. Lots of people are being paid to produce what that nobody wants. That has cost $50 BILLION to the state, but you surely don’t believe that the workers are each paying $50 BILLION?
I don’t know enough to comment. But then I’m not sure what point you want to make here. The question isn’t whether a bankrupt GM would have to sell a lot of assets at a loss. The question is whether nationalising the company is a better alternative.
Even if GM had to fire all its workers and sell all its assets for scrap and a can of magic beans it doesn’t follow that this is worse than nationalising it. It’s entirely conceivable that after increasing state debt, creating a massive moral hazard, bankrupting several competing private industries and pouring another $50 BILLION into the venture GM will still end up firing all its workers and selling all its assets for scrap and a can of magic beans.
That’s the essence of this part of the debate: is nationalisiation going to produce better results than bankruptcy. And it’s afr from clear to me that it is.
Only the parts that are capable of producing something that people want would be re-employed. The rest would either go to another use (e.g. a factory producing something that GM currently doesn’t) or be scrapped.
But if Government Motors tries to keep operating those parts that can’t produce something useful, what are the chances for GM’s long-term success?
Serious question here…are you going to make people buy the cars?
:eek: So, the idea is to make GM profitable, to make sure the workers all keep their jobs (and get good benefits), and of course to create magic affordable hybrids that are better than the (presumed) tripe that has been produced thus far…right?
Well, I’d insist that some provision be put in that would force people to buy them. THAT would meet all of the given requirements.
No, there’s no reason to believe that. In fact, there are reasons to believe that some assets would just go to waste and sit idle because no one would want them (your observations about abandoned factories and plants, for instance). If GM were forced into Chapter 7, some factories might just sit idle because no one would want to buy and retool them.
But this still doesn’t necessarily mean we should be trying to bail out GM. If these means of production are indeed excess capacity that no one want to acquire, producing goods that are providing little value to society (because no one wants to buy the production output at prices that cover production costs), it is relatively better to just to let the factory sit idle (or scrap it) rather than continue to book operating losses year after year to produce products that are not in demand. You might as well just take the money you’ve set aside to cover these expected losses and hand them out as unemployment checks instead.
If, on the other hand, these means of production are not excess, if there is likely to be genuine demand for the aggregate output of all the automakers, then a case can possibly be made for bailing GM out and then making sure they are producing the kinds of vehicles that are being demanded by consumers. It remains to be seen, however, whether real change can effectively be implemented at GM. They have had years to implement meaningful change and have not really done so to any meaningful degree up to this point.
Consumers can buy any car they like, as long as they’re CAFE compliant. As long as GM doesn’t get any inside information on upcoming CAFE standards then fair is fair.
If people can’t buy a 14 mpg-I-hate-my-country-and-need-to-compensate-for-micropenis-mobile legally you think they’re just going to walk? There’s a limited supply of used terrorist-financiers available to be grandfathered in. Eventually they break down.
Good thing too. Our dependence on foreign oil is quite damaging to our economy. Why should be able to screw their fellow Americans for vanity?
Why the resistant to not being able to waste dino-juice?
I personally have been unclear on this part of it and have read portrayed several ways. Are the warrants all shares created at the point the warrants are exercised or do they come out of shares that would, up to that point, be held by the Feds? The difference obviously is substantial for calculating the current potential value of the bonds (some of which many small investors hold both directly and indirectly) and what is the “strike price” - or breakeven new GM value price - for the Feds investment in the company.
Hah. CAFE standards. A wonderful example of government screwing consumers and auto companies alike, while providing only minimal improvement to overall economy. The traditional standards killed off efficient models like small station wagons and led to behemoths like minivans and SUVs that could be counted as trucks under the standard. Even vehicles like the PT Cruiser, treated as a car by all normal rules, was classified as a truck by CAFE.
Worse, the tension in CAFE between emissions and mileage wasn’t resolved, and still isn’t - this kept many high-mileage cars sold in Europe and Asia out of the country altogether, and still accounts to the relative scarcity of passenger diesel vehicles here.
And frankly I want the freedom to buy a performance car if I desire to own one - Germans and Italians seem to have retained that right, so I don’t see why I should give it up. If it means I have to pay higher gas taxes I will gladly do so and make economic decisions as I go.
So, as a voter, take some responsibility in your government and give them reason to fix it. Turbo diesels sound wonderful, and it’s a shame.
Even if it means a good chunk of our money is shipped over seas to bank roll terrorists, and your choice further screws the whole planet with unnecessary greenhouse gases?
Does your right to a high performance car outweigh future generation’s right to a nonfucked up planet?
So the rest of us should be forced to subsidize your choices through higher gas taxes?
Interestingly, this doesn’t seem to be as much of a problem as it might seem - people buy lots of GM cars (GM’s market share is recently reported at 19 percent!)
Source: Toyota’s Market Share Could Top GMs By 2010
I don’t know much about the auto business, but it’s amazing that they can have a 19% market share and yet be selling their cars so unprofitably that they go bankrupt. WTF?
If your cost per car is more than your competitor’s then your margin of profit would have to be less to stay in business. It wouldn’t take much of a down turn in the economy to back inventory up which means you’re paying people to make parking lot art. The artisans still get a paycheck but the business loses money.
They’ve been artificially propping up their market share by selling their vehicles at a (significant) loss.
I’m in two minds about this.
One, I don’t believe GM will ever be profitable again.
Two, what would be the net effect of 200,000 people all showing up to work on a Tuesday morning to find their plants padlocked?
The complete shutdown of GM would have been an immeasurable financial shock. Moreover, I don’t believe the line that GM’s assets would have been bought up and kick-started by other private investors. For one thing, other private investors are still reeling from the economic crisis. Secondly, you’ve all decided that there’s no way that the government will turn GM around- so what makes you think private investors would?
GM’s manufacturing facilities are effectively worthless without the GM dealer network and brands.
Yeah – I’m just expressing surprise that they didn’t figure out they had to stop doing that sooner or later before they go out of business. Silly GM Executives.
Well, in order to do that they’d have had to increase their prices or decrease their production costs. The first would have killed their sales, natch; the latter is what they were trying to do, but failed.
They’ve also been losing market share for decades. 19% is pretty bad when GM had 50% of the US market after WWII and were recently surpassed worldwide as the largest automaker by Toyota.
GM’s IPO looms. Seems like a good time to visit some of the predictions from this thread. From Kramer calling the Obama administration investment a jobs program that only made sense because it saved on unemployment benefits for a while … to the various less than sanguine posters who assumed this would be a “black hole” that would suck more and more cash from the Feds, to saying that “mass layoffs are the only way that GM is going to survive”, to "this will not end well " … and so on. Oh and a few voices like squink’s who acknowledged that it was the least poor option.
And now, not even 17 months later, the administration is recovering some of that investment, and is on path to perhaps even break even or make something on the deal. GM’s IPO is having institutional investors beating paths to their door.
(And I am thrilled that I bought a few shares GM bonds at pennies on the dollar as old GM was folding. They’ve increased in value almost four-fold so far.)
Anyone care to revisit their statements from 17 months ago?
This is why GM should have gone Chapter 11 (Bankruptcy). Had it done that, it could have broken its ruinous UAW contracts.
Ultimately, the whole bailout of GM was mostly about getting UAW votes for the Democratic party-which was achieved.
As for the future, GM faces competition from profitable rivals (Toyota, Honda, Hyundai)-and unless it can get its costs under control, it wil be back looking for more money