American car manufacturers-who needs them?

[dave lackey]

Chrysler and GM are begging for another friggin' $21 BILLION !!!! Pretty soon, we're going to be talking about a LOT of money...
😡😡😡😡😡😡

I am so sick of corporations wanting bailouts!!!!!

Let them go away...better yet, run them off, there are plenty of Toyotas, Nissans and other car manufacturers out there that produce better products!

And I will be there with my M3 recording the headlines!!!!

What say you?

 

[fergus]

There is no sensible future in allowing companies to profit from unsustainable business models while 'things are good', and then bailing them out with tax-payers money when things are not so perfect anymore.

Economically speaking, let them fail. The shareholders, bankers, directors etc will all learn to be more careful with their money in the future.

A pity though for the workers, no fault of their own but they'll be out of a job.

 

[Andrew Sowerby]

I think it's a lesser-of-two-evils thing. To say that their demise won't make a difference because we can still buy Nissan et al. is a huge oversimplification. Anyway, time will tell if the bailout turned things around or just prelonged the inevitable.

 

[dave lackey]

There is no sensible future in allowing companies to profit from unsustainable business models while 'things are good', and then bailing them out with tax-payers money when things are not so perfect anymore.

Economically speaking, let them fail. The shareholders, bankers, directors etc will all learn to be more careful with their money in the future.

A pity though for the workers, no fault of their own but they'll be out of a job.

I am not concerned about the workers...I know many Chrysler employees who were bought out at about $70,000 each (a small fortune in most parts of the world), and when Nissan or Toyota picks up the slack in production, the workers will go to work for them! For those who are not bought out...yeah, I empathize with them to a certain extent...I have had no income for almost 6 months and my field of work will be dead for 2-5 years!

The "American Way" used to be that you had to earn your way through life...now it's begging your way into bailout from the government.

 

[dave lackey]

I think it's a lesser-of-two-evils thing. To say that their demise won't make a difference because we can still buy Nissan et al. is a huge oversimplification. Anyway, time will tell if the bailout turned things around or just prelonged the inevitable.

It doesn't take a genius to see how bailing out your teenager when he gets into credit card trouble is going down the wrong road...

Just because the corporate world is a lot more complex, the underlying principle is still there and we should all take note that this behavior from the American car companies was exactly the same in the 1970's! They never change except to ask for more money from the government to line their own pockets and WE, the American tax-paying public, continue to allow it!

So, who are the idiots? The government? The car companies? Or is it US?
Ouch!!! 🙄 Must be the wedgie I can everytime we get something shoved up our collective behinds....😛

 

[crawdiddy]

It doesn't take a genius to see how bailing out your teenager when he gets into credit card trouble is going down the wrong road...

Just because the corporate world is a lot more complex, the underlying principle is still there and we should all take note that this behavior from the American car companies was exactly the same in the 1970's! They never change except to ask for more money from the government to line their own pockets and WE, the American tax-paying public, continue to allow it!

So, who are the idiots? The government? The car companies? Or is it US?
Ouch!!! 🙄 Must be the wedgie I can everytime we get something shoved up our collective behinds....😛

And what about AIG? And CitiBanc? And all the other financial institutions? Should we let them fail also? Or just the companies who have blue-collar workers?

 

[bmattock]

First, it's a loan, not a gift. A loan, not a gift. A loan, not a gift. I repeat myself because people keep saying 'bailout' which is BS. A bailout is a gift. This is a loan. Repeat - this is a loan. One more time: this is a loan.

Second, this should not be a surprise. The amount requested previously was clearly stated as just the operating capital that was needed to get through the end of 2008. It did that. No one said that was the entire request, and no more would be requested after that. If you're surprised by the new request, you have not been paying attention.

Third, when the US car manufacturers go bankrupt, so do their suppliers - many already have. And they do not just supply to the US car industry, they supply to all the foreign car manufacturers that make cars in the US as well. US unemployment figures are bad - in Michigan they're much, much, worse. When that trickles out into the rest of the rust-belt that produces car parts and then companies that supply raw materials to car parts manufacturers, etc, you'll be looking at nationwide doubling of unemployment figures. We have been saying we're nowhere near Great Depression-level unemployment figures - this would put us not too far from those numbers.

Fourth, as you might have noticed. Toyota, which was previously not as affected as GM, Ford, or Chrysler, is also going to do layoffs and is now losing money too. Car sales are down. Chrysler workers won't be going to work for Toyota - Toyota is laying off, too. Did all the fired Kodak workers go to work for Fuji?

Fifth, the other governments around the world are either already or getting ready to support their sagging automotive industries as well. Japan has done it for years, when they were introducing cars to the US to compete with our vehicles. We Americans have typically let other governments prop up and support their industry to compete against our industry, in our country, while providing no such support for our industry - hardly fair and clearly biased towards foreign governments. We hate our own manufacturing base, and we punish them every chance we get by handicapping the race against them. Now they're on the ropes and we're deliriously happy. What is that about?

And finally, how large is that Stimulus Package? And what percentage of that goes to car manufacturers? It's all a gift - not a loan - from the American taxpayer to whomever. And for what? To create jobs, ostensibly.

And that's a good thing, right, while a loan - at interest - to a segment of the market that keeps a huge portion of the population employed is a bad thing?

Right. We love us a nice give-away to create jobs, but we hate us a much smaller loan package to keep jobs. That makes sense. Oh, no, wait, I mean it makes no sense at all.

We will pony up 700 billion for banks who got us into this mess, and all we do when we find out they ordered up a bunch of new executive jets and paid billions in bonuses is say how naughty they are and cough up some more money for them. But let the automotive industry - which may have gotten itself in trouble, but certainly did not, oh I dunno, SINK THE FREAKING ECONOMY ride to Washington in a private jet and oh dear lord it's the freaking Apocalypse.

We bail out the criminals who did this too us, and refuse to help the industry that, while they did not do well, at least did not do this to us, and whose jobs could keep us from doubling our current unemployment percentage.

Yeah, that's some smart thinking, that there.

 

[dave lackey]

As usual, Bill, this retired professor of Urban Economics will again disagree with you. Enough said.

 

[bmattock]

As usual, Bill, this retired professor of Urban Economics will again disagree with you. Enough said.

Does the 'urban economics' discipline teach that loans are actually bailouts? Wow. Imagine my surprise.

I have a 30-year fixed-rate bailout on my house. I call it a mortgage, but I understand you call it a bailout, at taxpayer expense (it's a VA loan, er, I mean bailout). I guess I'm a bad guy, eh? Demanding those bailouts.

OK, so professor? Listen carefully. A loan is money given that is paid back over time, typically with interest. A 'bailout' is money that is given without the need to pay it back.

I can understand your confusion. So many college students take out 'Student Loans' and consider them to be 'free' money that they don't have to pay back. Being smart must be hard work, since it seems so difficult to understand these basic concepts.

If you continue to listen hard to my tuition, you may eventually learn you somethings.

 

[ebolton]

I agree with bmattock 100% on this.

There are strategic reasons to keep GM viable and in US hands.

If Chrysler went under, I think that would be a shame but easily survivable. GM is a different animal. If GM were to fall, their overseas units which do well would be sold to overseas buyers. Our trade deficit would be much worse.

And I don't think the industrial age is over. There seems to be the thinking that the US will do just fine concentrating on cutting edge technology, software, and finance, and industry and agriculture can go by the wayside. I don't think that is a smart move. We are dependant on other countries for everything from oil to the pistols we issue to American soldiers. We shouldn't need to depend on Japan and Korea for automotive technology.

We really need well regulated energy companies here operating under a coherent energy policy, so companies can target the market 3 years out. I think Ford, GM, and probably Chrysler could compete if they knew what their needs would be 3 years out. When gas is cheap, people buy big. When it is expensive, they buy small. For something as complex as a car, the design and production tooling cycles are long. The volatile market hurts them.

 

[Roger Hicks]

What annoys people, I suggest, is that modern capitalism is increasingly a one-way bet, with power concentrated in the hands of too few.

The one-way bet is that profits belong to the shareholders, and losses belong to the public. Also, a short-term gain generates a huge bonus, regardless of what it does in the long term. This is at its most obvious in banking, but exists elsewhere too.

As for over-concentration of power, when there were lots of small car companies, if one went bust, tough. The same was true of banks. This is the true 'creative destruction' of capitalism, and why capitalism succeeded.

Now that there are a few giants, they are too big to fail, and there are indeed good arguments for bailouts. First of all, the bailed-out company effectively pays part of the unemployment benefit: it's cheaper to bung millions or even billions at a big employer, who also buys from sub-contractors, than to put eeryone on the dole. Second, as others have pointed out, manufacturing does matter. Let it all go offshore and you are at the mercy of others, to say nothing of the fact that the market for many manufactured goods is volatile, it is a lot less volatile than the demand for certain services such as advertising and 'creative' investment banking.

To pretend that a loan is not a bailout is disingenuous. If I need (say) a $10,000 loan for 6 months to avoid bankruptcy, and I can't get it on commercial terms, a loan made to me just to avod bankruptcy is a bailout.

Cheers,

R.

 

[ebolton]

The distatefull thing with banking and finance is it seems ANY performance, gain or loss, any term, generates "huge bonus" for those at the top. Their "compensation" isn't really 'compensation' at that point. The word 'compensation' to me involves something you get in trade for something or some effort of value you give. These guys seem to be all get, and no give.

"Also, a short-term gain generates a huge bonus, regardless of what it does in the long term."

 

[bmattock]

What annoys peoplle, I suggest, is that modern capitalism is increasingly a one-way bet, with power concentrated in the hands of two few.

The one-way bet is that profits belong to the shareholders, and losses belong to the public. Also, a short-term gain generates a huge bonus, regardless of what it does in the long term. This is at its most obvious in banking, but exists elsewhere too.

As for over-concentration of power, when there were lots of small car companies, if one went bust, tough. The same was true of banks. This is the true 'creative destruction' of capitalism, and why capitalism succeeded.

Now that there are a few giants, they are too big to fail, and there are indeed good arguments for bailouts. First of all, the bailed-out company effectively pays part of the unemployment benefit: it's cheaper to bung millions or even billions at a big employer, who also buys from sub-contractors, than to put eeryone on the dole. Second, as others have pointed out, manufacturing does matter. Let it all go offshore and you are at the mercy of others, to say nothing of the fact that the market for many manufactured goods is volatile, it is a lot less volatile than the demand for certain services such as advertising and 'creative' investment banking.

To pretend that a loan is not a bailout is disingenuous. If I need (say) a $10,000 loan for 6 months to avoid bankruptcy, and I can't get it on commercial terms, a loan made to me just to avod bankruptcy is a bailout.

Cheers,

R.

I actually agree with everything you said, Roger - except the bit about the loan being a bailout.

A loan may well 'bail out' the auto industry, but it is no giveaway, and that's what the term has been taken to mean. The banking 'bail out' is much more of a "Here's a big stack of cash, best of luck to you" giveaway.

I don't think it is disingenuous to insist on the use of the proper term, simply on the basis that the people who *are* using the term 'bailout' to apply to the auto-sector loans are those who would like it not to happen, and they use it as an emotionally-charged weasel-word to make it seem like some monstrous free money giveaway to the auto industry, when it isn't.

 

[splitimageview]

We will pony up 700 billion for banks who got us into this mess

Congress is ultimately who got us into this mess. And Fannie/Freddie, and the corrupt CEOs of each who cooked the books to line their own pockets, and the corrupt congressmen who looked the other way while taking contributions from said CEOs.

Not to mention those who threatened lawsuits and other intimidation (organizations who happened to have nutty acronyms) against banks who failed to give loans to those who couldn't pay them back.

All these people should be in the same place as the Enron/Tyco/Worldcom execs, whose shenanigans are trivial in comparison.

Loan or not, this isn't a bailout, rather, a socialist power grab.

Government does not create jobs, or economic growth, this is nonsense.

 

[splitimageview]

With regards to the auto industry, let them run their own businesses and the government should stop telling them how many miles per gallon their cars need to have.

If a company is too stupid to build products that customers want, then they deserve to fail.

 

[crawdiddy]

And I don't think the industrial age is over......We are dependant on other countries for everything from oil to the pistols we issue to American soldiers. We shouldn't need to depend on Japan and Korea for automotive technology.

I agree 100% with the above statements. If we give up Manufacturing, we might as well give up Engineering, Aeronautics, Information Technology, Network Technology, and so on.

What kind of nation will we be then? What will be the engine that runs our economy then? Our fine Financial Institutions?

 

[bmattock]

Congress is ultimately who got us into this mess. And Fannie/Freddie, and the corrupt CEOs of each who cooked the books to line their own pockets, and the corrupt congressmen who looked the other way while taking contributions from said CEOs.

Not to mention those who threatened lawsuits and other intimidation (organizations who happened to have nutty acronyms) against banks who failed to give loans to those who couldn't pay them back.

All these people should be in the same place as the Enron/Tyco/Worldcom execs, whose shenanigans are trivial in comparison.

Loan or not, this isn't a bailout, rather, a socialist power grab.

Government does not create jobs, or economic growth, this is nonsense.

OK, I won't disagree with you here. Honestly, I don't know, so I'm best off not commenting. What I intended to say was that the 700 Billion USD package to banks and brokerages is essentially a giveaway. Some equity swaps, playing 'make-believe' about what the equity is worth, some minor ownship stakes, but none of the money has to be explicitly paid back - ever.

The loans to the auto industry are in fact, loans. They are expected to be repaid with interest.

There is a difference. That's all.

 

[splitimageview]

Some equity swaps, playing 'make-believe' about what the equity is worth, some minor ownship stakes, but none of the money has to be explicitly paid back - ever.

Kinda reminds me of what caused the problem in the first place.

 

[crawdiddy]

Loan or not, this isn't a bailout, rather, a socialist power grab.

Government does not create jobs, or economic growth, this is nonsense.

"Government is not the solution to our problem. Government IS the problem." --Ronald Reagan

Perhaps you think the government should eliminate the military branches? And for god's sake, get rid of those pesky regulatory agencies, like the FDA, the SEC, FDIC, FAA. Oh yeah, we don't need the Police and Fire Departments either. Get rid of the Treasury Department, and the IRS. There should be no taxes. Each individual should pay for whatever services he or she needs. To hell with the common good. If you can't afford it, too bad for you.

Socialist power grab, huh? You mean like during the Great Depression?

 

[splitimageview]

As far as I know, none of those agencies create economic growth. Please correct me if I'm wrong.

Please don't stretch my words to say that none of those agencies have value. That is a different topic.