I have not yet seen one good comprehensive reason why taxpayers should bail out the big 3 automakers.
These are giant, decades old corporations who have no clue how to go about their core businesses. That isn’t the sort of corporation that you hand money to. I saw Sen. Carl Levin on Meet the Press this weekend and frankly I don’t know how Tom Brokaw didn’t laugh in his face when he tried to make the case that Detroit is being innovative.
Not only are Japanese carmakers ahead of Detroit, they’ve lapped them several times. This has little do with unions, frankly, and everything with a corporate culture that can’t see 10 minutes into the future let alone years.
These companies lumbered into the tar pits. Unless they pull themselves out they don’t deserve to be given yet another stay of execution. While the immediate impact may be a disproportionately hard one to the economy, in the long term we’re all far better served to let them die and be replaced by a more innovative American auto industry, nostalgia be damned.
My guess is that the airline industry is among the next with a hat out after they experience a week holiday travel season.
They deserve even less aid than the automakers.
There’s this unspoken assumption that a massive bailout will save blue-collar jobs in the Detroit area. I honestly don’t see the connection. Like you say O-dub, GM has been poorly run for decades. A cash infusion only grants them another six months of life, and then we start all over again with a crap company, crap management, a crap brand, and let’s be honest — the crappiest of products.
Give the money to the workers in the form of educational vouchers, scholarships, and unemployment benefits so they can (hopefully) keep their houses until a better job comes along as they go back to school for some type of certification or degree.
The reason — largely unspoken — is to save union jobs (and, more importantly, union dues) for a little bit longer. The bailout won’t do a damned thing to actually help the automakers; it’s just postponing the inevitable.
What they need to do is go into bankruptcy and get their contracts and obligations renegotiated — especially the labor, retirement, and dealer franchise contracts. Otherwise, it’s just pouring more money down the toilet.
J.
What’s so bad about American cars?
I drove a 93 Dodge minivan for 4 years. Best car I ever had. Bought a used 96 Buick Regal in 1997, put 125,000 miles on it myself, and traded it in 2005 only because it was kinda ugly. My little 04 Chevy Cavalier now has 115,000 miles on it, and gets 33MPG. In town.
Well I drive an American car too, but the sales numbers don’t lie.
Someone had an article up saying essentially give the car makers a bridge loan while getting universal health care started. Taking much of worker’s health care costs off returns them to profitability.
I love how conservatives want GM, Ford, and Chrysler to “renegotiate their labor costs”. A big part of their labor cost is health care for workers and retirees. The fact that Japan and Korea have universal health care in their respective countries means that they can compete in price with US automakers.
Cons don’t want the government to provide health care. They don’t want companies to provide it either. Just get sick and die, that’s their motto.
There are a number of good reasons.
1)The Chrysler bailout a couple of decades ago ended up making money for the American taxpayer. This one will too.
2) It allows Obama to use it as an avenue to implement his healthcare agenda.
3) It will prevent an economic collapse in Michigan.
4) It’s good politics. It won’t take long for the Big 3 to restructure and get back on the right path. This will give Obama and the Democrats a major accomplishment they can point to in 2012 while simultaneously pointing out that the Republicans would have let the Big 3 fail.
Bruce, Japanese automakers in the US pay about 66% of the total labor costs to their American workers than the American companies. Or, if you prefer, the US automakers pay about 150% of what the Japanese makers do.
And I repeat, to their AMERICAN workers, not the workers in Japan and Korea.
The major difference: the American workers are unionized, the Japanese are not.
The American companies pay about $72/hour in labor costs for American workers. Japanese companies pay about $48/hour in labor costs for American workers.
The American companies are going broke. The Japanese ones are doing fine.
Toyota sells about as many cars in the US as GM. GM has five times the number of dealerships.
No, it’s not the only factor, but when you’re talking about companies hemorrhaging cash, these are certainly factors that play a huge role.
J.
Here’s one reason: one of the big things that’s been screwing our economy is that we have given up on manufacturing in the U.S., outsourcing it all in favor of easy money in the financial sector and reducing the American worker to service jobs, plus some IT and entertainment stuff. The auto industry is one of the few real bastions of serious manufacturing we’ve got left. Giving up on it would be a continuation of the process that has screwed us in the first place; it’d be more giving up on production, until the US doesn’t have much left to offer itself or the world.
So to JayTea it’s about busting the Unions. It’s the union workers fault that US carmakers were building cars (SUVs) that no one wanted. Damn those union grunts for concentrating on short term quarterly profits instead of on the long term health of their companies.
By the way, Toyota’s North American unit lost money in the second quarter too. Lazy ass workers.
The legacy costs is the primary issue here. GM has more retirees that they are paying for than current employees and the retiree benefits package is so generous that the retirees pay nearly nothing per month in health care cost. Detroit has retooled their plants, they are transforming their product line, but they can’t survive with the legacy costs.
This is a catch 22 situation. People forget that the foreign owned manufacturers are not subject to union laws and it allows for them to open plants here with significantly lower wages (ALTHOUGH, still excellent hourly wages) and not tied to the unions. It’ll be interesting what happens as there is no easy answer.
If a major car manufacturer files Chapter 11, the company is as good as gone. Who’s going to want to buy a car where the warranty is worthless? or where parts disappear? ….and if you own one of their cars currently and want to trade it in, it’ll nosedive in value. It’s a very complex chain reaction here.
“The major difference: the American workers are unionized, the Japanese are not.”
Sure, but Japanese (and Korean) auto workers, and Asian blue collar people in general, don’t need unions. Their pensions aren’t great, but they have government supplied health-care (just like Dick Cheney!).
So this is a telling moment for you Jay. OK, let’s bust the unions by giving them, and what most Americans want, nationalized health-care. Unions no longer have a reason for existence, to some extent. That doesn’t bother me too much. More importantly, America will provide a base-level standard of health-care for all of its citizens, thus making it a part of the first-world club.
So yeah, good points. Hmm. You’re usually a better troll than this. Drinking I assume?
Midder, I said it repeatedly: I was not talking about Japanese and Korean auto workers, but American auto workers who work for American, Japanese, and Korean companies here in the US.
And it isn’t about busting the unions; it’s about saving the companies, and saving SOME of the union jobs and SOME of the union benefits. Because you can be damned sure that if GM goes under, Toyota and Honda and Nissan and Hyundai might hire some of the workers, but the UAW will continue to be left out in the cold.
It’s a simple choice: you want a smaller piece of a smaller pie, or do you want to go hungry?
J.
Then its even simpler, nationalize healthcare and put America on the same footing as the rest of the industrialized world. Then change the American corporate culture that sacrifices long term corporate health for short term profits. Then we can continue to maintain our share of the pie.
Why loan packages to the so-called Big Three?
1) unlike the Wall St bailouts, money to GM, Ford, and Chrysler save actual jobs–the economy cannot withstand losing 600k-1m jobs up and down the automotive supply chain in the next twelve to eighteen months.
2) because the automakers have come a long way toward curing their institutional dysfunction, have a more promising product mix in the pipelines, and a loan can come with preconditions that will take us further toward fixing the problems caused by a focus on short-term goals.
3) because the automakers will have to file for Chapter 7 liquidation, rather than Chapter 11 restructuring, and then the assets go for pennies on the dollar to Chinese manufacturers.
The loan package makes sense. It’s worked before, and it’s money relatively well spent for the time being.
On a related topic: What was the first swing state McCain pulled operations out of? If you answered Michigan, then you know why Cornyn and Kyl want to f**k Michigan. It’s a two-fer: look the part of the fiscal conservative; exact political revenge.
Could it be that Japanese auto workers are not unionized for there is NO NEED FOR LABOR UNIONS IN NATIONS WITH NATIONALIZED HEALTHCARE? OH NOES!!eleventy1!!!
I see the bailout as trying to put a bandaid on an gangrenous leg. It isn’t going to do a bit of good in the long term and we’d all be better if they just chopped that leg off now and started planning for what comes next.
How many times do you idiots have to be told: auto workers in other countries ARE IRRELEVANT TO THIS DISCUSSION. This is strictly about American auto workers, both those who work for American companies and those who work for foreign auto makers WITHIN THE UNITED STATES.
God, sometimes I swear some of you are still drunk two weeks after the election…
J.
Because we don’t want to lose millions of jobs. The country would plunge into a depression.
Also, there’s a new UAW contract kicking in around 2011. It will bring labor costs down to around what the Japanese pay. This is a bridge to 2011.
I’m with Jay on this one – Toyota, Nissan, Hyundai, and Honda all run solid operations in American plants with American workers. They also do business with American suppliers and vendors. I don’t know the state of unionization in each of their American plants, but anytime they open one, they get a lot of applications for all sorts of jobs. Why should these American workers be penalized for making a car that American consumers choose to buy?
Yeah, I got it the first time, JT.
Now look at it this way: Union benefits were hard fought. Since companies didn’t want to pay union benefits, they opened plants in the South, where they could get rubes to work for 2/3 of what they were worth. If it hadn’t have been for the UMW, those rubes would be working for minimum wage! They got 2/3 of the benefit of the Union’s fight just by sitting in squalor in Armpit, Tennessee until Honda opened a plant. They’re better off than they were as sharecroppers or textile-mill workers, but not as much as if they had unionized.
Detroit’s union jobs allowed for a family to be raised on one income. Because these rube workers are only getting paid at a 2/3 rate, Momma’s gotta work too. That means unsupervized kids, more teen pregnancies, crime, drugs, etc.
Make no mistake. If the UMW had been successful at unionizing auto plants in the South, they would still have been built. It would still make sense to make the cars in the US rather than importing them from Japan.
I meant UAW.
Sorry, I watched “Harlan County Wars” the other night, and now every time I hear the word “union” I think of Holly Hunter.
Then why are you talking about the workers at all J? The big 3 are screwed up because management chose to concentrate on the short term profitability of SUVs while ignoring calls to make more fuel efficient cars. Oops! The price of gas goes up, SUV sales plummet and now they are stuck trying to retool and catch up.
Foreign car companies experiienced a crunch too, especially US divisions, but they are more diversified thanks to their share of foreign markets that demand better fuel efficiency. They have the cars developed that people now want.
So yes, pouring money into the big three won’t help unless upper management learns to adapt and plan ahead. Screwing the workers won’t make Americans buy more Hummers.
OW: My guess is that the airline industry is among the next with a hat out after they experience a week holiday travel season.
Alas, the typos spell checkers won’t catch….
midder, the big 3 focused on SUVs not because they wanted to, but because that’s what consumers wanted. The proof? The sales figures.
On the other hand, hybrids are seriously subsidized by the government through tax breaks.
Oh, and anyone who thinks that the union contracts are NOT a major problem for the auto makers needs to Google up “job bank.” That is an insane practice, and for the unions to defend it… good god.
J.
My point exactly. It’s what they advertised it’s what they pushed and it made them a lot of short term profit, all the while fighting any sort of change. It wasn’t hard to figure sales would plummet if fuel prices went up, and here we are.
Now these dinosaurs are in trouble and the right thinks its a great opportunity to screw the workers. Not, you know solve some of the underlying problems the nation’s industrial base faces like health canre costs.
If GM goes bankrupt that will kill about 1 million American jobs. Can the economy handle that right now? We’ve dumped how much money into the banks so far? Over 1 trillion. And the banks took the money and gave out tons of bonus money, bought other banks, or they are sitting on it. And still the banks have shed thousands of jobs. For $25-50 billion or so in loans we can save over 1 million jobs and that would be a waste?
Jay Tea: midder, the big 3 focused on SUVs not because they wanted to, but because that’s what consumers wanted. The proof? The sales figures
And the big 3 could sale every car currently sitting on lots today. Every last one. Just lower the price on each to $100.
What? You’re saying that would be a really stupid things for the car companies to do? It would put them out of business? But really cheap cars is what the consumers want!
My bad. Apparently we now have affordable health insurance in the US. I just saw it on TV being sold by some guy who drew a beard on his face with a permanent marker. He yells alot and seems real excited, although I can’t tell if its over affordable health insurance or the opportunity to sell something other than toiler cleaners.
Well, problem solved.
“unlike the Wall St bailouts, money to GM, Ford, and Chrysler save actual jobs”
Prove it. We bail-out GM and co. now, I bet you in a year we come back to exactly the same situation.
Don’t give the money to GM, give government educational and rent vouchers to the workers themselves so they can re-train for another field.
And then we can give them plane tickets so they can fly to where those jobs are.
The US economy can’t afford the hit right now. Postponement is not the worst option.
“And then we can give them plane tickets so they can fly to where those jobs are.”
Given the alternatives, this sounds like a good idea as well. Let’s face it, Detroit and the Rust Belt aren’t great places to be. Why not offer some incentive packages (including re-location fees) to get people moving to where the retirees are going (West and Southwest)? Those areas need service and health industry workers, as well as construction workers.
There’s no perfect answer here. I’m simply of the mind that trying to prop up GM, and the greater Rust Belt in general, for another few years rather than face the obvious is a stupid waste of tax money.
Yes, people are going to end up having to make sacrifices, and that might include (god forbid) moving. Personally, I moved _abroad_ for a job opportunity. You make it sound like a huge deal (it kind of is) but at the same time it’s something many people do every day.
So you want to pay to retrain over 1 million workers to unnamed jobs and move them to the southwest so they can take care of retirees, who probably won’t be able to afford it after their pension funds and health care get sacrificed in the industrial bankruptcy frenzy.