Bail Out Automakers ... or let 'em fall?

[MA-Caver]

Heard on NPR the other day about how they want to tap into (our) $700 Billion dollar package (which will swell to the Trillion dollar mark sometime soon) to help bail out the struggling Auto industry. Also found this

Democrats at work to tap bailout for automakers
http://news.yahoo.com/s/ap/20081113/ap_on_go_co/auto_bailout
By KEN THOMAS, Associated Press Writer Ken Thomas, Associated Press Writer – Thu Nov 13, 3:11 am ET
WASHINGTON – Congressional Democrats are marshaling support for a rescue package to pump $25 billion in emergency loans to U.S. automakers in exchange for a government ownership stake in Detroit's car companies.
Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, and Sen. Carl Levin, D-Mich., are developing legislation that would let the auto industry tap into the $700 billion Wall Street rescue money, approved by Congress last month, to fund their business operations.
General Motors Corp., Ford Motor Co. and Chrysler LLC are lobbying Congress to approve the aid, citing an economic downturn that has choked off auto sales, frozen credit and made them vulnerable. GM, the nation's largest automaker, posted a $2.5 billion quarterly loss Friday and has predicted it could run out of cash by the end of the year without government help.
"The reason why the autos are in this challenge is because of the meltdown in the financial market," said Michigan Gov. Jennifer Granholm. "They were on a restructuring path — yes, they were challenged — but this has utterly kicked them in the gut and is strangling them because they can't borrow money."
Bush is open to helping the industry, the White House says, but the administration has expressed reservations about using the bailout money beyond the financial sector.
Treasury Secretary Henry Paulson said Wednesday that the auto sector was "critical" but that the financial industry rescue was not designed for car companies. "Any solution has got to be leading to long-term viability" for auto companies, Paulson said.
Republicans in the Senate could play a key role in whether the rescue plan advances. Some Senate Republicans who opposed the Wall Street bailout before the election have expressed skepticism that the aid would lead to changes for the companies.

Had some thoughts about this... Sure the loss of the "big 3" would cost over 3 million jobs and that would be a bad thing for a lot of people.
But the money for the bank bail out is now in danger of being mismanaged by giving a portion to the auto industry which is not what we the tax payers have been promised. I mean, it's our money right?
Wonders if the collapse of the big 3 wouldn't be such a bad thing in the long term. They've been cranking out millions of cars for decades and it's fair to say, I think, that they've helped contribute to the problems of pollution and our seemingly insatiable desire for oil.
If the big 3 were to fail would another 3 or 5 rise up in their place? Maybe not quite as big but still creating jobs and making "greener" cars?
If the auto industry is bailed out, then who else? And will the bailout really help make changes in the way they do things?

Questions, questions, concerns and more questions.

 

[MJS]

We help out so many people already, may as well do it again. Personally, I'm not all that crazy about the 'greener' car idea, as they are not suitable for everyone, however, what I feel should be done is watching how the money is spent. I mean, is it really that necessary for the 'big shots' to be giving themselves huge bonuses? Are the lavish parties that we heard about with AIG necessary? Those are the cuts that should be made. Let the people have jobs. I'm sure the heads of all these motor companies are doing just fine without that extra (insert large figure here) pay raise.

 

[MA-Caver]

We help out so many people already, may as well do it again. Personally, I'm not all that crazy about the 'greener' car idea, as they are not suitable for everyone, however, what I feel should be done is watching how the money is spent. I mean, is it really that necessary for the 'big shots' to be giving themselves huge bonuses? Are the lavish parties that we heard about with AIG necessary? Those are the cuts that should be made. Let the people have jobs. I'm sure the heads of all these motor companies are doing just fine without that extra (insert large figure here) pay raise.

Agreed that there is greed rampant in many a huge corporations. Funny how they feel that they deserve it for all their hard work... that may be but who works harder... the CEO behind the desk or the man on the factory floor?

 

[zDom]

Let them fail.

Unless Congress wants to seize one of the shiny new cars and send it to me.

I'd really, REALLY like one of those new Dodge Challengers ... but I can't possibly afford one.

Maybe I should go finance one and then have the gov't bail ME out.

 

[Bob Hubbard]

Here's a thought.
Give them the bail out, but cap management pay at $200,000 / yr as a condition.
They can vote on taking a pay cut, or going under.

 

[Carol]

I think the idea of a company trying to vote themselves revenue instead of earning it is repulsive...especially when the Big 3 is not willing to change the situations that got them in to trouble to begin with.

No, I don't want to see the Big 3 fail. But there is no guarantee that throwing billions of dollars at thtem will have the outcome everyone is expecting.

There is no guarantee that Detroit will make cars that people want to buy. Mandating more fuel-efficient cars will not cause that to happen, either.

Bank bailout money is being used for executive junkets and big banks eating up little banks. There is no guarantee that tossing money to the automakers will create, or even save, American jobs. There's nothing stopping them from beefing up production in their factories in China, India, or Mexico, or using the funds to buy a greater share in foreign auto groups.

The idea of revenue stakes for repayment (repayment based only on profit0 would mean that the automakers aren't given any incentive to be profitable.

The big 3 make automobiles, yes? Doesn't the government use automobiles?

I'd be willing to bail them out if the Big 3 stepped forward and made some radical changes to help themselves out of trouble. And if repayment was not based on profitablity but rather based on autos the government is already buying anyway.

 

[Bob Hubbard]

The CEO of GM makes $2+ million a year.
Limit him to $200,000, and do the same for anyone in the executive branch that makes more than $200k.

that aughta free up a billion or so in liquid operating funds.

Why should my tax dollard go to keep him in his million dollar home and 5k suit when I don't have either myself. If they aren't willing to cut back to save the company, then, let
them
burn.

 

[crushing]

If it were only the major automakers that would fail, I would say let them fail, but because of the many parts suppliers and the corresponding millions of jobs that depend on the major automakers continued business, that has me leaning towards helping the "Big Three" stay in business.

Spend some money to keep people working and maybe stimulate the economy. Neo-WPA?

 

[Xue Sheng]

Chrysler was bailed out before... look where they are now.

However I do believe that was one of the few times that the feds actually got their money back with interest. But then that was when Lee Iacocca was in charge.

The Big 3 need to reorganize, but this is nothing new. Over 20 years ago they were told that. They were also told if they didn't they would have big financial issues in the years to come. Neither the Big 3 nor the UAW wanted to change so basically all a bailout will do is give them an extension on their impending doom.

Who knows, could be long enough for the current CEOs to retire and move to their islands in the Caribbean they will likely use the bailout money to buy.

 

[elder999]

If it were only the major automakers that would fail, I would say let them fail, but because of the many parts suppliers and the corresponding millions of jobs that depend on the major automakers continued business, that has me leaning towards helping the "Big Three" stay in business.

Spend some money to keep people working and maybe stimulate the economy. Neo-WPA?

What he said. Any "bail out" should be structured as a loan, and with Chrysler like conditions-pay cuts, streamlining, and tied to making products that the market wants, and the country needs, with Japanese maker quality, instead of cheaply constructed gas-hogs.

 

[Carol]

If it were only the major automakers that would fail, I would say let them fail, but because of the many parts suppliers and the corresponding millions of jobs that depend on the major automakers continued business, that has me leaning towards helping the "Big Three" stay in business.

Spend some money to keep people working and maybe stimulate the economy. Neo-WPA?

But there is no guarantee that those jobs will be saved even with the bailout. They could use that money to beef up their factories in Mexico and buy in to one of the Chinese car manufacturers thats trying to break in to the U.S. market (they're coming, folks, like it or not...), reap the profts, and the U.S. worker (and all the folks that depend on that production) would still be screwed.

When other business find a state to be inhospitable for continued business, they relocate to another state. Perhaps the Big 3 should shake the hand of the UAW president and say "Congratulations, you won", liquidate what they have and own up on all those union bennies that they owe, let that mess be history. America is full of entrepreneurs, that will leave a fresh landscape for someone to regroup manufacturing in right-to-work states and build financial plans that reflect a more realistic future.

 

[MA-Caver]

Really love the feed back that's going on here... :uhyeah:

As it stands right now one of the other repercussions if the big 3 fail, crash-n-burn or whatever your favorite metaphor is :lol: that foreign automakers come in and take over. In my town there's a huge buzz going on because Volkswagen is building a plant and while thousands of new jobs are being created ... well.. it's still not an American company. No offense to VW because they do have the capacity to make very good cars (loved their OLD beetles -- suckers went anywhere and everywhere), but all the profits go back overseas. There are several Japanese plants in my state as well. Again, good vehicles but once again not American.
Seems that the quality and the feeling of security for the American made isn't there anymore. It's there but... you just ... don't feel it. That could be in part influenced by the knowledge that the CEO's and boards of the big 3 are just raking it in hands over fist... that thought doesn't leave a good feeling.
Here are more news stories about the topic...

Auto Bailout Is a Lemon for Taxpayers

Washington Post | Oct 29, 08 11:35 AM CDT

(Newser) - Automakers just got a $25 billion loan from Uncle Sam, but now here GM and Chrysler are again, hat in hand, asking for another $10 billion to facilitate their merger. But the “deal is a lemon,” writes Steven Pearlstein in the Washington Post . Yes, the economy would suffer if GM and Chrysler fail, but even after a bailout the companies would have to shrink 25% and slash around 40,000 jobs. More »

• The Big Debate: Bailout or Bankruptcy?
  
  4 hours, 20 minutes ago
  

  

  The water is coming in fast at General Motors, and Washington is readying its bailing buckets. But simply giving GM money won’t keep America’s biggest automaker afloat. GM needs massive restructuring, and many believe bankruptcy court is the place to do it, says the New York Times, reviewing the argument that is dominating Washington. “The bankruptcy word scares people,” says one investor. “It’s simply a system.” GM would likely emerge from that system stronger, with a more viable cost structure, as several airlines have.
  More »

 

[zDom]

Hmm I think my boss should boost his reporters' salaries up to $200,000/year, boost his own salary up to $2 million, then have a bailout for newspapers.

(After which we can celebrate with a huge party! Bahamas sound nice...)

After all, we are the "Fourth Institution."

 

[Bob Hubbard]

http://www.howtobuyamerican.com/content/db/b-db-autos.shtml

Well, buy Ford.

Oh wait. They build in Canada and Mexico and import the finished product.

Buy GM?

Ooh....same problem.
2006 Chevrolet Build locations
Chevrolet Avalanche :Mexico
Chevrolet Aveo :South Korea
Chevrolet Equinox :Canada
Chevrolet HHR :Mexico
Chevrolet Impala :Canada
Chevrolet Monte Carlo :Canada
Chevrolet Suburban :Mexico, USA

Here's a novel idea.
Buy a car built in America, by American labor, preferably using primarily American made Parts.

http://newcarbuyingguide.com/index.php/news/main/event=viewCat/1127

But then again, I'm not going to pay good money for a gas guzzler that is low reliability and high maintenance just so GM can give it's incompetent execs a big bonus.

My family switched to Toyotas after decades of buying Ford. Why?
Reliability, Affordability, High Fuel Efficiency and Low Maintenance.

If GM or Ford could put out cars that met those requirements, we'll happily switch back.

 

[Phoenix44]

I agree 100% with MA-Caver. If the US automakers went under, of course other companies would fill the void: foreign automakers who take their profits home.

But if the taxpayer is going to do anything to shore up US automakers, then we should be able to dictate some terms. Plug-in electrics, plug-in hybrids and flex-fuel autos. Executive salary should be capped. And there should be limits on what they can use the funds for--forget about seminars in vacation resorts.

It's not simply a matter of being "green." Its a matter of national security and economics. I don't care how much Drill-Baby-Drilling you do in this country, we simply do not have enough domestic oil to meet our insatiable demand, which means we'll continue to rely on the middle east for our fix. That means palling around with terrorists like the Saudis, or "liberating" countries that don't want us there. This hurts our economy and our national security. The sooner we get away from oil, the sooner we make the middle east irrelevent and the safer we are.

If I applied for a business loan, the bank would want to see my business plan to see if it made sense. Do you think I'd get a $5 million loan if I was going to pay myself a salary of a million? Or if I sought funds from an investment firm, do you think they'd agree to it if I was building a gas guzzling product that no one wants?

IF we offer funds to automakers, we need to demand that they do what's right for the nation. Otherwise, go ahead and fail.

 

[Xue Sheng]

Apparently if you are talking cars these days to be considered made in America it no longer means 100% American. It now means 75% (¾) American

Cars made in America. To be eligible at least 75% of the parts have to be domestic

2006

1. Ford F-Series
2. Chevrolet Silverado
3. Toyota Camry**, Camry Solara
4. Ford E-Series
5. Chevrolet Cobalt
6. Ford Explorer,
7. Chevrolet Malibu, Malibu Maxx K
8. Ford Escape**
9. Toyota Sienna
10. Chevrolet TrailBlazer

2007

1. Ford F-150
2. Toyota Camry
3. Chevrolet Silverado 1500
4. Chevrolet Cobalt
5. Ford Focus
6. Toyota Sienna
7. Chevrolet Malibu,
8. Pontiac G6 Orion
9. Ford Escape
10. Toyota Tundra

2008

4. Toyota Tundra
9. Toyota Sienna

Ford Focus carries a DPC rating now of 65%,
Dodge Ram was not eligible because its domestic parts content is less than 75%

 

[theletch1]

Shayna, they bought their ticket. They knew the risk. I say, let 'em crash. (rep to who ever can ID the movie that line is from)

The bail out for any organization here in America is a simple reward for failure. American auto makers haven't made a car that could truly compete with the Japanese in years. Instead of attempting to compete with the success of the Japanese automakers they've attempted to shove huge motors down the throats of Americans and played off of the "it's gotta be bigger", "it's gotta be beefier" attitude that too many of us have. It's been a fundamental failure to see what the consumer was going to want in the future coupled with ridiculous agreements with labor unions that's driven them to this point.

 

[Xue Sheng]

Shayna, they bought their ticket. They knew the risk. I say, let 'em crash. (rep to who ever can ID the movie that line is from)

The bail out for any organization here in America is a simple reward for failure. American auto makers haven't made a car that could truly compete with the Japanese in years. Instead of attempting to compete with the success of the Japanese automakers they've attempted to shove huge motors down the throats of Americans and played off of the "it's gotta be bigger", "it's gotta be beefier" attitude that too many of us have. It's been a fundamental failure to see what the consumer was going to want in the future coupled with ridiculous agreements with labor unions that's driven them to this point.

Well you could always go buy a Ford Escape Hybrid...no.... wait...that's a Mazda :uhyeah:

 

[elder999]

If I applied for a business loan, the bank would want to see my business plan to see if it made sense. Do you think I'd get a $5 million loan if I was going to pay myself a salary of a million? Or if I sought funds from an investment firm, do you think they'd agree to it if I was building a gas guzzling product that no one wants?

IF we offer funds to automakers, we need to demand that they do what's right for the nation. Otherwise, go ahead and fail.

This is precisely what was done for Chrysler, and the U.S. actually made a profit when it was all said and done. If we're going to bail them out, it needs to be a structured loan, with goals and conditions like you layed out in the rest of your post: the kind of cars America needs, made in America with American labor.


Oh, yeah, and hang Bill Ford.Or stone him. Maybe a firing squad. :lol:

 

[crushing]

Shayna, they bought their ticket. They knew the risk. I say, let 'em crash. (rep to who ever can ID the movie that line is from)

It looks like I picked the wrong week to stop sniffing glue!

Airplane!