Auto Industry Bailout?

[Outshined]

Lawmakers looking at 25 billion to bailout the auto industry. Is that going to help or just prolong the problem?

 

 

Link

[dmarc117]

prolong....they need to revamp their bizness plan. uaw needs to go away.

[Azazello1313]

the president-elect wants double that figure.

 

here is a good article someone else linked me to the other day that pretty well sums up my thoughts.

[SuperCharger]

Prolong.

 

Their business plan is horrible. They need to fix it themselves or die just like any other business.

[CaP'N GRuNGe]

Nationalize them and start building tanks for our coming energy wars.

[Tommyknocker]

These bail outs are a joke. Let them sink or swim on their own, Would they bail me out? I'm sure not. This can only get worse with no end in sight for all these failing industries. Uck em fay , I say.

[Azazello1313]

another good op-ed

 

Bailout to Nowhere

 

By DAVID BROOKS

Published: November 14, 2008

 

Not so long ago, corporate giants with names like PanAm, ITT and Montgomery Ward roamed the earth. They faded and were replaced by new companies with names like Microsoft, Southwest Airlines and Target. The U.S. became famous for this pattern of decay and new growth. Over time, American government built a bigger safety net so workers could survive the vicissitudes of this creative destruction — with unemployment insurance and soon, one hopes, health care security. But the government has generally not interfered in the dynamic process itself, which is the source of the country’s prosperity.

 

But this, apparently, is about to change. Democrats from Barack Obama to Nancy Pelosi want to grant immortality to General Motors, Chrysler and Ford. They have decided to follow an earlier $25 billion loan with a $50 billion bailout, which would inevitably be followed by more billions later, because if these companies are not permitted to go bankrupt now, they never will be.

 

This is a different sort of endeavor than the $750 billion bailout of Wall Street. That money was used to save the financial system itself. It was used to save the capital markets on which the process of creative destruction depends.

 

Granting immortality to Detroit’s Big Three does not enhance creative destruction. It retards it. It crosses a line, a bright line. It is not about saving a system; there will still be cars made and sold in America. It is about saving politically powerful corporations. A Detroit bailout would set a precedent for every single politically connected corporation in America. There already is a long line of lobbyists bidding for federal money. If Detroit gets money, then everyone would have a case. After all, are the employees of Circuit City or the newspaper industry inferior to the employees of Chrysler?

 

It is all a reminder that the biggest threat to a healthy economy is not the socialists of campaign lore. It’s C.E.O.’s. It’s politically powerful crony capitalists who use their influence to create a stagnant corporate welfare state.

 

If ever the market has rendered a just verdict, it is the one rendered on G.M. and Chrysler. These companies are not innocent victims of this crisis. To read the expert literature on these companies is to read a long litany of miscalculation. Some experts mention the management blunders, some the union contracts and the legacy costs, some the years of poor car design and some the entrenched corporate cultures.

 

There seems to be no one who believes the companies are viable without radical change. A federal cash infusion will not infuse wisdom into management. It will not reduce labor costs. It will not attract talented new employees. As Megan McArdle of The Atlantic wittily put it, “Working for the Big Three magically combines vast corporate bureaucracy and job insecurity in one completely unattractive package.”

 

In short, a bailout will not solve anything — just postpone things. If this goes through, Big Three executives will make decisions knowing that whatever happens, Uncle Sam will bail them out — just like Fannie Mae and Freddie Mac. In the meantime, capital that could have gone to successful companies and programs will be directed toward companies with a history of using it badly.

 

The second part of Obama’s plan is the creation of an auto czar with vague duties. Other smart people have called for such a czar to reorganize the companies and force the companies to fully embrace green technology and other good things.

 

That would be great, but if Obama was such a fervent believer in the Chinese model of all-powerful technocrats, he should have mentioned it during the campaign. Are we really to believe there exists a czar omniscient, omnipotent and beneficent enough to know how to fix the Big Three? Who is this deity? Are we to believe that political influence will miraculously disappear, that the czar would have absolute power over unions, management, Congress and the White House? Please.

 

This is an excruciatingly hard call. A case could be made for keeping the Big Three afloat as a jobs program until the economy gets better and then letting them go bankrupt. But the most persuasive experts argue that bankruptcy is the least horrible option. Airline, steel and retail companies have gone through bankruptcy proceedings and adjusted. It would be a less politically tainted process. Government could use that $50 billion — and more — to help the workers who are going to be displaced no matter what.

 

But the larger principle is over the nature of America’s political system. Is this country going to slide into progressive corporatism, a merger of corporate and federal power that will inevitably stifle competition, empower corporate and federal bureaucrats and protect entrenched interests? Or is the U.S. going to stick with its historic model: Helping workers weather the storms of a dynamic economy, but preserving the dynamism that is the core of the country’s success.

Edited November 14, 2008 by Azazello1313

[BiggieFries]

another good op-ed

 

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Just use those. They work.

[Randall]

prolong....they need to revamp their bizness plan. uaw needs to go away.

 

 

 

Yeah building gas guzzling monsters is the union's fault.

 

Everyone needs to give and really work to make this happen. No more tax dollars to boost CEO bonuses and boost stock prices.

 

Pensions need to be addressed too imo.

[Azazello1313]

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Just use those. They work.

 

sorry, didn't realize that. edited my post to include the whole editorial.

[cre8tiff]

prolong....they need to revamp their bizness plan. uaw needs to go away.

 

+1M

[dmarc117]

Yeah building gas guzzling monsters is the union's fault.

 

Everyone needs to give and really work to make this happen. No more tax dollars to boost CEO bonuses and boost stock prices.

 

Pensions need to be addressed too imo.

 

 

bad bizness on everyones part. management and union worker. the times of a hs graduate makin 45/hr to tighten a bolt are over. it sucks for those people but its the truth. management needs a pay cut too. they all do.

 

uaw is the main reason toyota has never built a plant in michigan. that is insane.

Edited November 14, 2008 by dmarc117

[caddyman]

Yeah building gas guzzling monsters is the union's fault.

 

Everyone needs to give and really work to make this happen. No more tax dollars to boost CEO bonuses and boost stock prices.

 

Pensions need to be addressed too imo.

So explain whoes fault it is that there is $1500 dollars of health benefits in every GM vehicle. In a Toyota there are $125 dollars of health benefits in every vehicle.

[CaP'N GRuNGe]

another good op-ed

 

Really good article.

[driveby]

one more

[policyvote]

The problem is that for the most part, Ford and GM have already made dramatic strides in terms of product, and they've also neogtiated contracts that gets the horrific burden of penions and health care off their back. The problem is that those contracts won't realize actual cost savings for another couple of years, and some of the hot new cars that will save these companies (Fiesta, Kuga, Cruze, Volt) are just around the corner--yet the companies might not weather this credit crisis long enough to get those models on the road.

 

Foriegn car companies don't have these burdens to overcome, plus they get a huge currency advantage with our flaccid dollar, PLUS (especially Japanese) companies already get extensive help from their own governments. My understanding is that a significant portion of the Prius drivetrain development costs were borne by the Japanese government, yet GM has to pin their entire future on building the Volt.

 

Peace

policy

[Azazello1313]

Foriegn car companies don't have these burdens to overcome, plus they get a huge currency advantage with our flaccid dollar

 

there's a lot that's glaringly wrong with your post, but this in particular stood out because you have it completely backwards. a weak dollar can only help US manufacturers trying to compete with foreign companies, particularly the auto manufacturers. a weak dollar makes US exports less expensive abroad, and it also makes foreign imports into the US more expensive.

[CaP'N GRuNGe]

there's a lot that's glaringly wrong with your post, but this in particular stood out because you have it completely backwards. a weak dollar can only help US manufacturers trying to compete with foreign companies, particularly the auto manufacturers. a weak dollar makes US exports less expensive abroad, and it also makes foreign imports into the US more expensive.

 

Another point is It doesn't matter how strong or weak the dollar is if we've negotiated crappy trade deals with foreign countries like China that allow their products to flow into our country like cheap beer down H8's throat on a Saturday night while we aren't allowed anywhere near that level of access.

[Azazello1313]

cruze, fiesta, kuga

 

yeah, these fugly P's of S are the dawn of the new day! we just need 50 billion taxpayer dollars to keep us afloat until these brilliant plans for the future can finally be realized!

 

I hope obama makes timc drive a cruze. that sight might almost be worth watching the end of capitalism as we know it.

[cre8tiff]

cruze, fiesta, kuga

 

yeah, these fugly P's of S are the dawn of the new day! we just need 50 billion taxpayer dollars to keep us afloat until these brilliant plans for the future can finally be realized!

 

I hope obama makes timc drive a cruze. that sight might almost be worth watching the end of capitalism as we know it.

 

I personally think TimC's time in hell will be spent behind the wheel of a Fiesta.

[policyvote]

there's a lot that's glaringly wrong with your post, but this in particular stood out because you have it completely backwards. a weak dollar can only help US manufacturers trying to compete with foreign companies, particularly the auto manufacturers. a weak dollar makes US exports less expensive abroad, and it also makes foreign imports into the US more expensive.

 

That all might be true if Japanese companies operated entirely in Japan, and American companies operated entirely in America, and every "imported" car was bought with US money off a Japanese lot and shipped over here, and every "exported" car was purchased with Yen and shipped to Japan. And as we know, all American cars have 100% domestic parts content, and the Big 2.8 of course also buy 100% American raw materials, like steel.

 

C'mon, man, US car companies are global manufacturing operations whose cash reserves--and most of their income--is in dollars. Moreover, the financial device that allows most of their customers to buy their products--loans--are increasingly difficult to come by. On top of that, the credit arms of these companies 'diversified' into mortgages a few years ago to maximize what was for quite a while the only cash cow Ford/GM/Chrysler had. Now these are all either millstones around the companies' necks or spun off to avoid the liability.

 

The fact is that "foriegn" car companies have been heavily investing in US manufacturing and infrastructure for years, while US companies have been busy shipping jobs to Mexico and elsewhere. For example, GM's new premium small car, the Cruze, is being manufactured in Ohio, then sold in Korea and Europe next year--but the US release was just pushed back to MY 2011, because they simply can't afford to build enough of them fast enough. A weak dollar is making it cheaper for the foreign automakers to compete on US turf with US-built vehicles, and harder for domestics to effectively globalize (for example, GM is doing wonderfully in China, where Buick has caught on as a premium brand, but they can't maximize this because they have no damn money--in fact, there's been talk that the US operations are going to start skimming cash off the Chinese operations just to keep the lights on).

 

I know that for the coastal states, the domestic auto industry is a quaint relic--"Eh I had a domestic car in 1992 and it was a pile. Let 'em go under!"--but I've lived in Michigan my whole life, and I can't imagine the disaster that the collapse of any of these companies would spell for our already-on-the-rocks-economy.

 

Peace

policy

[Furd]

The Big Three are a total clusterf*ck. They make bad cars. Sure, you can go on about how their quality has improved. But what else do you have? Too many divisions. Too many models. Godawful styling. Even the more expensive models, for the most part, look and feel cheap. They make too many of them, so they have to give them away. Then they market their cars as being cheap. Like Pontiac's G8 - its the least expensive car with more than 300 hp, or some such. That makes me want to run out and buy one.

 

Last year, I rented a car out in Arizona. I thought that I got "stuck" with a Hyundai Sonata. I was wrong. That thing is a great car. Good engine. Good transmission. Good brakes. Nice interior. It looked pretty good, and was fun to drive. I'd buy one if I were looking for a car in that segment.

 

I don't know who to the blame. There's lots of it to go around. Putting a lot of money into those organizations seems like pouring money down a hole.

 

I am a car enthusiast. I would be happy to buy an American car, if they made something good. Two of my law partners traded in their Lexus - one for a Cadillac CTS one for a Lincoln MKZ. They're kinda luxury and kinda sporty, but neither. The kind of cars that you settle for.

 

They're like the Detroit Lions - they pretty much need to start from scratch. Someone needs to figure out the best way to do that.

[policyvote]

yeah, these fugly P's of S are the dawn of the new day!

 

Nice try.

 

The ACTUAL Cruze

 

If you don't like the look of the new Fiesta or Kuga, that's your business, but they're both award-winning rides on sale in Europe now, and due to make their way over here for MY2011. The Fiesta is exactly the premium small car (think Honda Fit) nobody thought an American company could build, and the Kuga is everything the Edge was supposed to be but wasn't; a stylish midsize crossover that's a pleasure to drive and neither overly trucky nor overly vannish.

 

Peace

policy

Edited November 14, 2008 by policyvote

[policyvote]

The Big Three are a total clusterf*ck. They make bad cars. Sure, you can go on about how their quality has improved. But what else do you have? Too many divisions. Too many models. Godawful styling. Even the more expensive models, for the most part, look and feel cheap. They make too many of them, so they have to give them away.

 

A big chunk of this is the ENORMOUS dealer network that was built up in the 60s and 70s . . . each dealership wants a full line of vehicles, so models get pointlessly repeated, and brands get diluted. Look at Pontiac: GM has successfully restored legitimate passion and perfomance in that brand with the Solstice and G8, both of which are outstandingly built, good looking, legitimate performers.

 

Oh, but all the Mom & Pop Pontiac/Buick/GMC dealers don't have a fuel-sipping subcompact to sell, so they rebadge the heinous Chevy Aveo (itself a rebadged Daewoo Clusterfudge) as the new "Pontiac G3". It reeks. It's awful. It's totally repellent. And it's standing right there in the showroom next to the Solstice and G8, tinkling all over what little brand cache GM might have built up.

 

Peace

policy

Edited November 14, 2008 by policyvote

[Jimmy Neutron]

The Big Three are a total clusterf*ck. They make bad cars. Sure, you can go on about how their quality has improved. But what else do you have? Too many divisions. Too many models. Godawful styling. Even the more expensive models, for the most part, look and feel cheap. They make too many of them, so they have to give them away. Then they market their cars as being cheap. Like Pontiac's G8 - its the least expensive car with more than 300 hp, or some such. That makes me want to run out and buy one.

 

There is truth here. My wife and I have been shopping for a new ride for her over the last few months. I really wanted to buy American. We looked at the Flex, Explorer, Aspen/Durango, Pacifica, Acadia (loved this one) and Journey. While they have made strides in quality - you just don't get the value per dollar you can with imports. She opted for an Acura MDX and loves it.