The Big 3 automakers' plan

[spazattak]

Is government providing a loan that could have been secured 2-3 years ago before the credit markets went tits up the same thing as “propping up a failing business”?

[Sinaijon]

@John_Mace

Let 'em fail. Protect the workers, if we feel we have to spend the money, but don’t prop up failing business.

Do you feel the same about the banks?

I don’t understand the vitriol from Congress directed at the automakers over 25 billion after they forked over hundreds of billions, no strings attached, to the banks.

And it’s not like Toyota or Honda is doing any better at the moment. The economy is tanking and nobody is buying cars. Not from GM (-41%), Not from Ford (-31%), and not from Toyota either (-34%).

[tagos]

@Sinaijon

Do you feel the same about the banks?

I don’t understand the vitriol from Congress directed at the automakers over 25 billion after they forked over hundreds of billions, no strings attached, to the banks.

And it’s not like Toyota or Honda is doing any better at the moment. The economy is tanking and nobody is buying cars. Not from GM (-41%), Not from Ford (-31%), and not from Toyota either (-34%).

Because when the Big 3 fail they don’t take the rest of the world economy with them. They are a boil. Easy to remove but painful. The bank problem is essentially a cancer that has spread through every part of the body.

The no-strings thing is just gutless.

[XT]

@Sinaijon

Do you feel the same about the banks?

Well, it’s the difference between losing a limb and sudden death I suppose. If the banks failed there was the potential to take down the whole house of cards. In which case we’d be packing it in on this whole civilization thingy and relearning the joys of hunting and gathering. If the Big 3 fail…well, that’s going to be painful for those people who work there, but essentially America will continue to chug along. SOMEONE will probably buy up or buy out at least some of those assets and put them to use (probably building cars). Even if, worst case, they all go completely under the effect on our economy won’t be nearly as bad as if the banks failed. Hell, even with those billions you talked about the system might STILL go tits up from that crisis.

I don’t understand the vitriol from Congress directed at the automakers over 25 billion after they forked over hundreds of billions, no strings attached, to the banks.

Because Congress is grandstanding of course. That was why there was so much emphasis on the stupid private jet thingy. My guess is that, after getting in the spot light and wringing out what PR they can from this, Congress will just give them their bailout (quietly).

The broader issue here though is that the banking system is critical to the US…if it goes we…all…go…down…together. And we (the US) will take everyone else down the drain with us. If the Big 3 fail…well, then a lot of people who manufacture cars will be out of work. While that’s rough on them, and it’s a political hit on both parties (increase in unemployment and such), it won’t destroy the US economy if it happens.

-XT

[gonzomax]

@xtisme

Let em eat cake!

-XT

Not what you said when Paulson came after a half a trillion to save banks.

[XT]

See the post preceding yours for an explanation. And honestly I’ve had a bit of a change of heart wrt the other bail out as well…I think it was probably a mistake now, especially how it’s been implemented.

-XT

[John_Mace]

@Sinaijon

Do you feel the same about the banks?

Yes, but…

I don’t understand the vitriol from Congress directed at the automakers over 25 billion after they forked over hundreds of billions, no strings attached, to the banks.

Smarter business people than me (eg, Warren Buffet) have defended actions to keep the banking industry afloat. I’m willing to recognize that banks are in a unique position, even if I don’t fully understand why. Still, I want to see the management of those banks shaken up, and I want to see salaries and bonuses slashed.

And it’s not like Toyota or Honda is doing any better at the moment. The economy is tanking and nobody is buying cars. Not from GM (-41%), Not from Ford (-31%), and not from Toyota either (-34%).

Exactly. But many industries are seeing dramatic retractions, not just autos. And these companies aren’t going to disappear if they fail-- their assets will be sold, and some other company will pick up their operations.

[Anaamika]

Jeez, let them burn! No one has given good reason to bail the automakers out. It’s a joke now, most of my friends/acquaintances/family would NEVER buy an American car, and would probably sell it if it’s given to them free. Warranted or not, that’s what it’s come to.

[XT]

I’d take a corvette if someone offered it to me for free. Oh, and one of those Saturn roadsters too. And there are a few GM vehicles that I’d take if someone offered it to me free…hell, I’m sure there are plenty of ‘American Made’ (in theory) cars I’d take for free…or even be willing to pay a modest sum for.

-XT

[John_Mace]

Pretty much every construction guy I know (and I know a lot of them) drives a Chevy or GM truck. And the ones that don’t drive Ford or Dodge trucks. That’s a niche that they should be able to do well in.

Of course, given the state of the construction business these days, I don’t see a lot of them buying any new trucks in the near future…

[XT]

Found this article (well, it’s a commentary) on CNN…it’s interesting and has a different take on the questions in the thread:

IRVINE, California (CNN) – The Big Three automakers yesterday presented impressive plans to Congress that justified their need for bridge loans to help them regain their competitiveness in light of a vehicle market that has crashed into a wall.

Such loans won’t simply help support a vital portion of American industry, they will help prevent a much greater potential economic disaster. The commercial and strategic importance of the auto sector simply cannot be overestimated.

That being said, we are reminded of the old phrase, “Watch what you wish for; you might get it.” Because as we watched the chief executives of the Detroit automakers make their second trek to Washington to seek loans from the federal government that could stave off disaster, we have to ask the unexpected question, can the Big Three survive a federal bailout?

That question must be asked because the historical dynamic between the federal government and the domestic auto industry is a relationship that has been, at best, rocky and often openly antagonistic.

Jump back to 1975 and the institution of the Corporate Average Fuel Economy requirements designed to limit our reliance on foreign oil in the wake of the Arab oil embargo.

Instead of simply limiting foreign imports or adding federal taxes to fuel costs to give consumers an incentive to buy more fuel-efficient vehicles, the government instituted byzantine regulations that required American manufacturers to build (or at least market) fuel-efficient cars just so they could continue selling the cars and trucks they were already known for.

Since the United States had always been a country of “cheap gas,” (a tradition that continues, by the way) American car companies were not geared up to build small, fuel-efficient cars, but foreign manufacturers were. The result was that Americans were almost forcibly exposed to import vehicles, and many American consumers liked what they found.

The CAFÉ regulations accompanied by inexpensive gasoline were analogous to plopping consumers into the middle of a giant candy store and then forcing the candy manufacturers to somehow persuade a percentage of consumers to buy broccoli instead.

When all was said and done, the CAFÉ rules ended up giving a strong leg up to the Big Three’s import competitors, putting their market share on an upward curve that hasn’t ceased climbing.

At the urging of the U.S. government, the Japanese manufacturers adopted “voluntary” restraints on their exports of vehicles to the U.S. beginning in 1981. The goal was to give U.S. companies “breathing room” so they could catch up to the Japanese in producing small, fuel-efficient vehicles. (Sound familiar?)

Again, this might have seemed a worthy plan at the time, but it had several unintended consequences that ended up doing much more harm to the domestic manufacturers than good. In the short term it limited supply of popular Japanese-built vehicles, which resulted in windfall profits for the dealers of the top imports, helping those brands establish very strong dealer networks.

It influenced the import manufacturers to move up-market both by building more expensive vehicles and by establishing luxury brands like Acura, Lexus and Infiniti. And it gave strong impetus for the import manufacturers to build plants here in the United States.

Today a large percentage of the “import brand” share of the U.S. market – more than 50 percent of the total light-vehicles sold here – are vehicles built by Americans in foreign-managed factories on U.S. soil. Ironically, to counteract this, the Big Three automakers have increasingly moved production from the U.S. to lower-labor-cost countries like Mexico.

So what are the implications of this history lesson? The first takeaway is that a portion of the woes the domestic Big Three are suffering today are the result of current and past federal government policies, so it seems fair that they be accorded government assistance now in time of dire need.

If Congress acts to aid the ailing Big Three car manufacturers – and I strongly suggest it should – then it is equally important that the domestic carmakers be allowed the latitude to conduct their business based on the dictates of the American consumer, not the politicians.

Interesting, ehe? It’s certainly a different perspective.

-XT

[gonzomax]

@xtisme

See the post preceding yours for an explanation. And honestly I’ve had a bit of a change of heart wrt the other bail out as well…I think it was probably a mistake now, especially how it’s been implemented.

-XT

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Heres a GAO criticism of the financial bailout. No transparency, exec salaries not regulated,and the money not used for the purposes intended. It is shameful and wrong.
The auto industries are crucial in my opinion. Ten percent of the jobs in the country ride on this bailout. in a crippled economy ,we would be doing ourselves serious damage. It would make all the indicators worse.
I suspect a lot of the hatred is people jumping at a chance to cripple unions. Shooting yourself in the foot is bad policy. Ask Plaxico.

[villa]

@Duckster

[ul]

[li] Congress shall have no authority to reduce these requirements unless any changes subsequently pass with a 3/4th majority of each House.[/li][/ul]

I could never get on board with one Congress limiting the powers of future Congresses in this manner.

[Tuckerfan]

[url=“Bloomberg Politics - Bloomberg”]GM and Chrysler say if they don’t get help, they’ll be dead before 2010.[/urk]

While President-elect Barack Obama has said he favors an industry rescue, GM and Chrysler said yesterday they won’t be operating through his January inauguration without the money stalled by a deadlock in Congress. Democrats want to use the $700 billion bank-bailout fund, and Republicans favor tapping an Energy Department loan program.

One in ten jobs in the US are tied to the auto industry. Kill the car makers and the unemployment rate jumps by 10% overnight.

[XT]

@Tuckerfan

One in ten jobs in the US are tied to the auto industry. Kill the car makers and the unemployment rate jumps by 10% overnight.

:dubious: I’m skeptical of this claim, frankly. Even if it’s true though, having the Big 3 go bankrupt isn’t going to put everyone directly or indirectly associated with the auto industry out of work simultaneously. I don’t even think all of those directly involved in just the manufacturing would lose their jobs (though a large percentage of them probably would)…and this doesn’t get into the resellers, parts distributers, advertisers, etc, which probably make up a large percentage of that 10% figure being bandied about. Those factories and products aren’t just going to sit there unused…SOMEONE is going to snap them up eventually.

-XT

[Tuckerfan]

@xtisme

:dubious: I’m skeptical of this claim, frankly. Even if it’s true though, having the Big 3 go bankrupt isn’t going to put everyone directly or indirectly associated with the auto industry out of work simultaneously. I don’t even think all of those directly involved in just the manufacturing would lose their jobs (though a large percentage of them probably would)…and this doesn’t get into the resellers, parts distributers, advertisers, etc, which probably make up a large percentage of that 10% figure being bandied about. Those factories and products aren’t just going to sit there unused…SOMEONE is going to snap them up eventually.

-XT

Not if we’re in a Depression, they won’t. Many of the abandoned auto plants in Michigan are still sitting empty (Packard’s factory was still standing empty, last I heard, and they’ve been gone for longer than 50 years now), and our economy is presently in much better shape than it was during the Great Depression.

[XT]

If we are in another Great Depression then the failure of the auto industry will be the least of our worries. Well, ok…maybe not the least of them. But we’ll be up to our asses in alligators at that point.

I don’t think another Great Depression (or even a Not So Great Depression) is likely though. Just a really nasty recession…perhaps even worse than the one we had after the dot com bust.

-XT

[Duckster]

@villa

I could never get on board with one Congress limiting the powers of future Congresses in this manner.

My point with that last comment is Congress does what it does to get along. It rarely does anything for the greatest good and the longest haul.

[gonzomax]

Restaurants,bars.theaters charities and stores deal with auto industry workers. They would feel the impact. We are having economic trouble with bankruptcies, private and corporate, unemployment and foreclosures. Is there anyone who thinks if the big 3 go down they will not get worse? I see a lot of blue collar bigotry .
To the pleasure of many on the dope, unions have been making concessions for years. Thet said they will make more. Every little point this board whines about is being dealt with.

[villa]

@Duckster

My point with that last comment is Congress does what it does to get along. It rarely does anything for the greatest good and the longest haul.

No I understand why you want it. But I just can’t support your method there. We have a very simple way of ensuring Congress acts in the greatest good, and that is not voting for Representatives who don’t.

Binding future Congresses is suspect to me. I am not even sure if it is constitutional.