’)
So, let’s say you’ve gone through a rigorous hiring process and now you’re the CEO of one of the Big 3 automotive companies. What, in a rational world, do you do? You look at the finances, you match that up with market research and listen to what I assume is a bunch of supposedly smart guys and gals who are the best and brightest our big business schools have to offer.
Then there’s an economic slowdown and now you can’t make payroll in a month or so?
That’s the hallmark of a poorly run business, and no matter how big a part of our economy, one we simply cannot keep propping up. Its amazing that these guys, who pray at the altar of the free market and pump billions in to the RNC and the Chamber Of Commerce are now among the most socialist in the country. They want a handout that dwarfs almost everyone else.
It is far past time we allow the American auto industry to commit suicide, and ditto for other government-subsidized industries like airline travel. We’ll pick up the repercussions on the other end of this mess, and cut off their supply of addictive handouts.
Agreed.
Agreed. Chapter 11, all the way. Let the courts revamp the management, then oversee the revamping of their debts and obligations. If that don’t work, Chapter 7.
NO BAILOUT. NO LOANS, NO LOAN GUARANTEES unless they are accompanied with a huge restructuring — and that can only be done through a bankrupcty.
J.
A reverse stimulus is not what we need right now but I share your outrage at these bloated corporations who made bad decisions then want handouts.
I am more pissed at the 350 bill that Hank Paulson can not account for and when doe the average worker get his due?
Any money handed out should be in the form of unemployment benefits, education, and re-location vouchers for the blue collar workers. Giving it to GM, Ford, or Chrysler directly guarantees that the workers will see none of it.
We talked about this a few days ago, but it’s pretty clear to me now that a number of Republican free-market He-Men are going to start asking for a national health care system. Time for America to be a first-world nation.
They should tell the auto makers that they will bail them out, but they have two choices…
One, they can make fuel efficient cars that will to help improve the environment, improve the economy by lowering energy demand and therefore energy prices, and help national security by making the country less dependent on foreign oil.
Two, they go though chapter seven bankruptcy and government buys the factories and makes these cars themselves. After all, the government must have a fleet of thousands and thousands of cars for the various inspectors, government agencies, etc.
Tune in next week when Oliver looks around and asks: Hey, where the fuck did all the jobs go?
Wow it feels weird to see so much cooperation.
So whats the catch?
Sell them to China then. Put another 4% of our GDP into foreign hands. China would love to buy GM. Instant market share and an established brand.
Or we should do what JT wants and let them go bankrupt, which would essentially kill the companies, drive all the suppliers out of business, kill Michigan, maim Ohio, Indiana and Tennessee,and eventually allow all the foreign car companies close shop in the US and move operations to Mexico.
And again JT tells us what its about: busting the Unions. Take that SERFS.
Giving billions to GM =/ saving jobs. Not in the long-run at least.
Couple the loans with some reforms and oversight, sure it will save jobs. We just handed out over 1 trillion dollars to various financial institutions with few strings, no real oversight, and little benefit to the tax payers. Give the Auto makers some relief, that has real benefit now, and can pay big dividends in the long term to the economy and the environment.
We’re all a little bitter. JT’s crowd because they hate Unions. The left because the automakers have lobbied against change on many fronts.
If GM goes, Toyota and Honda will have little reason to maintain plants in the US, hello Mexico! More jobs. 8 million jobs lost and we really will have a total economic meltdown.
Giving billions to GM =/ saving jobs. Not in the long-run at least.
Agreed. Except the opening argument and repeated stupid mantra from all sides here isn’t about the metrics of a bailout or restructuring loan for GM. It’s bitching that “we should let GM fail.” Not “let’s figure out a long-term retooling plan.” Not “let’s pass European-parity mileage and emissions standards so the rest of the world can finally participate in the U.S. auto market.” Not “let’s establish universal health care which would solve a vast majority of the financial burdens of contract expenses with the U.S. automakers and make it a non-issue.” No, it’s just “let’s let one of the largest industries in the United States completely collapse because that will fix EVERYTHING.”
Which, honestly, is logic about as retarded as the people who said we should just nuke Iraq because that’ll get rid of all the terrorists. Stupid posturing from the left is still stupid posturing.
midder, that’s the capitalist way. But note that I said axe the management AND the union contracts. Start from scratch in both cases. Toss in the dealer franchise contracts, too — they are three of the biggest problems the Big 2.5 have right now.
Their business model is no longer sustainable. It hasn’t been for some time. And a loan will just extend the prolonged death throes.
Strowbridge, your proposal is about the only thing worse than the current model — government micromanagement and trying to dictate to customers what they WILL buy, and not offering them what they want. That’s why they made big SUVs for so long — people kept buying them. They should have been ready for that market to collapse — it was in no way sustainable, and the gas price shock proved it — but for them to not ride it (and collect the profits) as long as they could would have been grossly negligent.
The bailout would just let them continue the same old BS that’s got them in their current jam for a little longer — with OUR money.
Thanks, but no thanks.
J.
Then you will be happy if China buys them out.
OT, but why is it all these DC superheroes have “wards”? Isn’t that creepy in a nambla sort of way?
midderpidge,
If “China” (are you thinking of a corporation or a direct buy by the PRC government? China ain’t as communist as you’ve been told) wants the Big Three, it’s welcome to them. I have no problem with foreign investment in American companies so long as the foreign owners have to follow the same laws as U.S. owners would. Why is it so scary to you for there to be foreign ownership of U.S. brands?
Unless the government gets involved, in this economic climate and due to the particular issues involved in the auto industry, a bankruptcy is going to be Ch. 7, not 11. Ch. 11 depends on your creditors’ willingness to extend the credit a little further — this is the wrong environment to expect credit to be given to companies with poor track records. (See Linens & Things and other companies, which normally would have done Ch. 11, but are now liquidating entirely.)
Furthermore, consumers will be reluctant to purchase a big-ticket, long-term item such as a car from a company that is in bankruptcy. I have heard the argument that lots of companies, like the airlines or Kmart, have gone through bankruptcy and still have customers, but this ignores that a car is the biggest purchase people make aside from their homes and educations. Would you buy a house from a construction company that seemed likely to be insolvent soon? Would you go to a college that might lose its accreditation before you graduate? If I buy a TV from Circuit City right now, it’s a bit of a risk, but when the TV breaks I’d probably replace it entirely rather than put a lot of money into parts and labor. In contrast, most people keep cars for at least 5 years. (Even the wealthy people I know will buy an expensive car like a Mercedes or BMW and keep it long enough to require several servicings and at least one major repair.)
If the government is willing to put its guarantees behind a bankrupt automaker, the creditors will be more likely to keep the credit going for a while longer, and the consumers will be more likely to trust that the car is a safe purchase. Without such guarantees, however, I think GM may disappear altogether. (I’m much less optimistic than midderpidge about a Chinese knight swooping in to rescue it.)
I saw in a film a few years ago that the federal government offered an enormous tax deduction for buying a particular SUV but no deduction at all for buying an electric car. In fact… here it is. Has to be over 6,000 pounds. Way to encourage responsible oil usage, fellas!
There are a ton of flat-out lies and bullshit being passed around.
The GOP never dreamed it would get to kill a massive part of organized labor and have an entire region of the country completely collapse on the Democratic parties watch to boot, but that is just the opportunity that has arisen for the Limbaugh/Coulter wing of the GOP.
A 25 billion dollar loan, with strings attached mandating the auto industry stay the fuck out of monkeying with healthcare reform and making them go green or else, could save hundreds of billions of dollars in social spending over the next 10 years alone.
10 to 12 million jobs lost, boom!, 200 to 1 trillion dollars in emergency social spending to deal with the collapse’s impact on the region, the UAW dead and Wal-Mart the biggest employer in the region, Michigan in full economic collapse and millions of voters ripe for being in play in the next round of the Culture War.
The GOP, and the media pundits who are all clamoring for Obama and the Congress to let the auto industry die will be damning us and running against the Democratic Party as the party that ‘Let Michigan Die’ or ‘Let Detroit Die’ for a generation if the auto industry is allowed to die.
The auto industry is 4% of our GDP.
If it goes, thats several years added on to the economic crisis that we face.
And probably Bobby Jindal in 2012 running as Ronnie Reagan on a white horse to “save” America.
Direct or corporate buy backed by China. That’s instant market share, name brand overcoming bad or nonexistent Chinese branding, and a leap in industrial technology and capacity for China.
I think the problem might be those really smart guys and gals from the best business schools. Maybe it the big three had been run by real car guy instead of these pirates perhaps the problem might not be so bad.
Any government bailout package should include oversight that encourages fuel efficiency and forward looking management practices. Make no mistake, the main reason Republicans are in favor of automakers heading into bankruptcy is so that they union contracts can be voided. This has nothing to do with letting the free markets work, and everything to do with breaking the unions. That is not to say that the unions may need to make further concessions to help keep the big three afloat, and layoffs are inevitable, but GM heading into bankruptcy is no way to reassure Americans that purchasing GM products is wise. I’m no fan of corporate welfare, but letting GM go under (even if temporarily) will be lying tying an anchor to a drowning man.
make that “like tying an anchor”
I agree with the Left Handed Man.
Jay Tea: but for them to not ride it (and collect the profits) as long as they could would have been grossly negligent
Which is more of the short-term thinking that has led to the current problem. Far, far better to look ahead and see that fuel prices will rise and the SUV market will shrink. This didn’t require any great Nostradamus level of foresight. Or at least plan for the possibility.
And forgo some of those profits today in return lower profits over a longer period of time.
Which is better: make $1000 a month for one year and kill the company, or $700 a month and keep the company going for several years? Jay Tea says it’s better to take the $12,000 bucks and run, cause anything else would be grossly negligent.
PBS used to run a special series on the auto industry. There was an interview with a critic/analyst/industry expert (can’t remember his name). He wasn’t a big-three executive (maybe a former executive) but seemed as “car guy” as they come. His position was essentially, Americans like big flashy cars, we’re gonna build big flashy cars, and screw anyone who doesn’t like it.
This is a complicated issue, to put it mildly. But the fact is, Toyota developed the Prius, and the Big 3 didn’t. As a very conservative friend pointed out, we can give GM all the money in the world, and they can build all the damn cars they want, but if no one wants to buy them…
QiB: I think that “wards” are just a subset of superhero sidekicks that are (almost always) required.
We don’t want any more blue collar Americans (say, making less than 40K a year, like me) losing jobs.
But nobody has answered me this yet: how does bailing out the Big 3 at the corporate level save jobs in the long-term? Put a band-aid on the sucking chest wound, and maybe you keep those jobs for another year.
Give money to the workers to keep their mortgage payments up and to go back to school and get, off the top of my head, nursing and health-care certifications and degrees, which are high demand in the States right now with the Boomers retiring. Help these people adjust to the fact that the world, including America, thinks Ford/GM/Chrysler cars are shit. Because they are.
Giving any more money to the top-end of these companies is just a waste of cash. My cash, your cash, everyone’s cash.
Government can help here by providing opportunities for people to transition into better occupational fields. Government can hurt here by pretending that America still needs to make cars when the Japanese, the Koreans, and eventually the Chinese and the Indians will make a better product.
There is nowhere to shift the workers to. We have 500,000 new jobless claims every week now.
We all seem to agree that the US autoworkers dug their own graves. The problem is they would bury millions of US jobs with them at a time when the economy can’t absorb or withstand the loss.
“There is nowhere to shift the workers to. We have 500,000 new jobless claims every week now.”
Jobless claims are a sign that people have lost their jobs and haven’t immediately found new ones. That doesn’t mean that there are no jobs in the country in any sector; it means that there are not jobs in the unemployed person’s neighborhood for which he has the necessary skill set. If there is a sector in which we’re still granting H1 visas and other skilled-work immigration passes, then that’s a sector into which we should be shifting domestic workers. Jaim has the right idea here.
Incidentally, Jay Tea is right that people wanted to buy SUVs when gas prices were low, and that the normal mode of thinking for a manufacturer is to build more of what consumers are demanding. To that degree, I think some blame should be assigned to our government for not exploring the creation of a gas tax that would keep gas prices at a consistently high level, so that both manufacturers and consumers could make decisions based on a reasonably constant price for this essential input. This also might impede the development of more exurbs and sprawl and make our mode of life more efficient overall.
Wow, I am surprised by some of the comments here. Detroit, just like several other sectors are in tatters right now by the economic crisis. The auto industry experienced a triple whammy in very short succession, but first let’s look at some very important related facts we have all experienced under our present administration:
* After 9/11, Bush used his bully pulpit to encourage consumption
* Wages over the past 8 years have been stagnant, so we utilized our only capital to leverage ourselves to feel like we were making more, i.e. home equity loans/refinancing
* This created the housing bubble
* Wall Street’s greed allowed the Credit Default Swap market to grow to 3.5 times our GDP and firms leveraged themselves to the tune of 50 to 1
* With this leverage, a few foreclosures (less than 1.5% of all mortgages held) collapsed the entire financial market.
Yeah, this was all done on Bush’s watch.
Now combine the above with the triple whammy over the past 12 months:
* Oil prices explode from speculation and emerging markets
* Housing market collapses due to all the reasons above, which leads to…
* Credit dries up!
Because of this triple whammy, the auto industry has completely bottomed out. Sure, we can blame them for being short sighted and having extreme legacy costs, but be aware that Honda/Toyota/Mazda and the rest are also experiencing major problems as well. They are probably tapping their respective banks for bridge loans as well.
I am so sick of hearing how a chapter 11 will be good for the industry: Who the hell is going to buy a car from a company in any form of bankruptcy!?! And the comparisions to airlines and consumer product company’s does not wash. When you but a car you are buying that car for at least 4 – 5 years and the company standing behind that car for just as long.
Lastly, something that has not been said but needs to: We still need to build tanks and transportation vehicles. I for one, do not want a foreign auto/truck maker being the only one to make our ground vehicles for the military. Remember how you felt when you hard that Airbus was awarded the fat air refueling contract? How would you feel if Hyundai was awarded the next generation of Bradley Assault vehicles?
So get off you high horse of condemnation and support a bridge loan (a freakin loan people) to our auto industry.
Jaim: But nobody has answered me this yet: how does bailing out the Big 3 at the corporate level save jobs in the long-term?
Give money to the workers to keep their mortgage payments up and to go back to school and …
I’ve had the same question, and have yet to see a convincing answer. I haven’t really seen anyone put forth the argument that we should bail out the auto companies because we have to have an American auto industry. Rather the justification most often given is that it will hurt the workers who lose their jobs. If that is so, then doesn’t it make a lot more sense to provide assistance to those workers more directly?
The trickle-down theory hasn’t worked for economics, why expect it to work for employment? Bailing out a failing business won’t solve the actual concern (unemployed workers).
Also, what constitutes an “American auto industry”? If it means autos being produced in America, we’ll still have one without the Big Three, because Mercedes, Toyota, Honda et al. have U.S. production. Toyota is opening a new plant in Mississippi. If it means a company that started in the U.S., why is that important?
Incidentally, I was listening to The Economist podcast about the BRIC auto industry (Brazil-Russia-India-China) and it sounds like America companies actually have been pretty successful overseas. Dealbook’s suggestion that the Big Three slim down their portfolios said for GM to keep Buick based almost entirely on its success in China. I wonder what will happen to those plants?
“they are three of the biggest problems the Big 2.5 have right now.”
Are you on crack?
They are selling shitty cars with bad fuel mileage that no one wants. That’s their biggest problem.
(It doesn’t help that they spend so much money on worker and retiree health care. The government could do that, and do it cheaper.)
Quaker:
OT, but why is it all these DC superheroes have “wards”? Isn’t that creepy in a nambla sort of way?
Marvel has had a few “wards” over the years (Captain America and Bucky Barnes; Captain Marvel/The Hulk and Rick Jones, etc.) but rarely (if ever) referred to them as “wards.”
Also note how many “wards” Bruce Wayne has had: there’ve been at least FOUR Robins. (The fourth, a girl, was unauthorized by Wayne, and IIRC she was KIA.)
BTW, that Green Lantern/Green Arrow series from the early 1970s was groundbreaking for its treatment of social issues. The stories are collected in the “Hard Traveling Heroes” trade paperbacks which are worth checking out. Note that the comic cover has a stamp of approval from the Comics Code Authority…a few years earlier, the CCA refused to approve several issues of “Amazing Spider-Man” that dealt with drugs.
If you want a pretty amazing discussion of Superhero “wards,” check out The Amazing Adventures of Kavalier and Clay by Michael Chabon.
Let the companies die, they have been on life support for too long. It is ridiculous that they came asking for money on three separate private jets. These CEOs do not get it, they do not seem to understand that the American people are tired of propping up their badly run companies churning out crappy cars.
Let them die so that they can be replaced with better companies with an interest in, you know, creating a better product.
Correction: Rick Jones was not actually a “ward” of Captain Marvel, but a somewhat unwilling alter-ego…
I wonder how many “let ‘em die” adherents know anything about the auto industry?
Look– Ford was profitable in the first quarter.
Most of what you think know about the Detroit auto industry and its product just simply ain’t so.