Let Detroit Go Bankrupt

[Anonymous]

Pointing the 'blame' to the GOP (or to the UAW for that matter) allows one to avoid facing the real problems, and that means the real problems will not be addressed and will not be solved.

The way I understood Jeff's post, he wasn't blaming the GOP for the current problems of the auto makers, but was arguing that the GOP has the motive of busting up the union as a reason for not supporting a bailout.

[jsteele]

Anonymous wrote:
Pointing the 'blame' to the GOP (or to the UAW for that matter) allows one to avoid facing the real problems, and that means the real problems will not be addressed and will not be solved.

There is no question that there are real problems that need to be addressed. I'm convinced that the leadership needs to go. Rick Wagoner makes $15.7 million a year. Alan Mulally makes $21.7 million. Both of them declined when asked if they would work for a dollar a year as part of a bailout plan. That's what Lee Iacocca did during Chrysler's earlier bailout.

Obviously, the product line-up is a real problem, but as a PP suggested, this is an opportunity to transition to greener cars.

What I am disputing is whether the necessary changes require chapter 11. A government-led bailout can be predicated on a plan for implementing the required changes. That would avoid C11. I also did not say that the GOP is to blame for the situation. What I am saying is that the GOP is taking advantage of the situation to smash the UAW. That's one opportunity that C11 offers. Everything else can be accomplished outside C11.

[Anonymous]

There's an article in the WSJ this morning about how the South could gain if Detroit goes bankrupt. The foreign auto manufacturers have more flexibility in adding and decreasing workers according to the economy; they are not tied down by unions. Four southern states were responsible for 24% of US production last year.

Maybe this provides an opportunity to create/evolve into a new business model.

Let Detroit go belly up. The dinosaurs went extinct for a reason.

[Anonymous]

Anonymous wrote:

Chapter 11 bankruptcy does not mean that the company totally goes away and everyone else get fired, yes, there will be some job loss and some loss of benefits and lower wages. There a lots of companies that go thru Chapter 11 and reemerge healthier and leaner.

Chapter 11 bankruptcy requires a particular kind of financing, and in the case of companies this big, tons and tons of it. The credit crunch has rendered this financing impossible to get and thus the Chapter 11 option is not really a possibility.

And it throws a good number of the parts suppliers into Chapter 11, too. Plus, who will buy a new car from someone who is in bankruptcy, since you can't count on the warranty?

I don't know the right answer here. But I am skeptical of Chapter 11 here, even though I was all for it for the airline industry.

[Anonymous]

Anonymous wrote:

Pointing the 'blame' to the GOP (or to the UAW for that matter) allows one to avoid facing the real problems, and that means the real problems will not be addressed and will not be solved.

The way I understood Jeff's post, he wasn't blaming the GOP for the current problems of the auto makers, but was arguing that the GOP has the motive of busting up the union as a reason for not supporting a bailout.

Correct me if I am wrong, but hasn't the GOP, with White House approval, floated a 'bail out' plan of their own - redirecting the $25B already approved in September? I think they are working in good faith, not trying to stonewall help to bust the union. There were Dem. Senators not supporting the Dem plan here.

[Anonymous]

Anonymous wrote:.Correct me if I am wrong, but hasn't the GOP, with White House approval, floated a 'bail out' plan of their own - redirecting the $25B already approved in September? I think they are working in good faith, not trying to stonewall help to bust the union. There were Dem. Senators not supporting the Dem plan here.

I don't understand the Dems' explanation for not supporting redirecting. They say the $25B was intended for modernization, but can't it be diverted for the more immediate need and then replaced when they are in control of the WH?

[Anonymous]

Both Repbulicans and Democrats have completely let us down with out of control spending. Am I the only one here who worries about passing down trillions of dollars in debt to my children and grandchildren? The U.S. is going broke, folks.

[jsteele]

Anonymous wrote:
I don't understand the Dems' explanation for not supporting redirecting. They say the $25B was intended for modernization, but can't it be diverted for the more immediate need and then replaced when they are in control of the WH?

My understanding is that the Dems want the money to come from the $700 billion financial bailout. The Republicans suggested redirecting $25 billion from the DOE. The DOE money was mean to incentivize fuel efficient vehicles. If it is converted to immediate use, the strings attached to it will be removed. I imagine that your idea of replenishing the funds is not workable since they probably can't redirect $25 billion from the $700 billion to the DOE. So, it would have to be an additional $25 billion. At any rate, it is questionable how much Republican support there really was for the "Republican" plan. Top Congressional Republicans were speaking out against it.

I understand that Reid and Pelosi just told the Big 3 execs to come back to DC on Dec. 2 and present restructuring plans. A bailout will be considered based on the quality of the plans. This seems pretty reasonable, though given the performance of the company CEOs at this week's hearing, I don't have a lot of hope for them to get much together in two weeks.

[Anonymous]

Anonymous wrote:
There's an article in the WSJ this morning about how the South could gain if Detroit goes bankrupt. The foreign auto manufacturers have more flexibility in adding and decreasing workers according to the economy; they are not tied down by unions. Four southern states were responsible for 24% of US production last year.

Maybe this provides an opportunity to create/evolve into a new business model.

Let Detroit go belly up. The dinosaurs went extinct for a reason.

Yeah, an asteroid hit them!

*Not* defending the automakers, just pointing out that maybe the dinosaurs didn't die because they didn't change with the times -- well, I guess you could call dying out because the environment was overwhelmed by an asteroid impact a matter of not changing with the times but it would be like saying people who were impoverished by Hurricane Katrina were just really inflexible and not prepared for change.

But I know what you mean.

[Anonymous]

well said pp

[Anonymous]

Anonymous wrote:

Anonymous wrote:
There's an article in the WSJ this morning about how the South could gain if Detroit goes bankrupt. The foreign auto manufacturers have more flexibility in adding and decreasing workers according to the economy; they are not tied down by unions. Four southern states were responsible for 24% of US production last year.

Maybe this provides an opportunity to create/evolve into a new business model.

Let Detroit go belly up. The dinosaurs went extinct for a reason.

Yeah, an asteroid hit them!

*Not* defending the automakers, just pointing out that maybe the dinosaurs didn't die because they didn't change with the times -- well, I guess you could call dying out because the environment was overwhelmed by an asteroid impact a matter of not changing with the times but it would be like saying people who were impoverished by Hurricane Katrina were just really inflexible and not prepared for change.

But I know what you mean.

I don't think you can compare Katrina survivors with over indulged auto executives flying around on their corporate jets shaking around their tin cups on Capitol Hill. Moreover, the fate that the big 3 face is not induced by an act of nature.

[Anonymous]

I agree with some of the concerns about bailing out Detroit, I really do. I was also less than impressed with the auto execs showing up on their private jets to lament their dire financial straits. And I do get that many of the problems Detroit has were brought on themselves.

What I don't get is why we bailed out Citi group, AIG, and other financial institutions without the bat of an eyelash, when the articles I've read suggest that the auto industry going under would be an equally significant blow to the economy. Though I'm sure there are many deeper issues involved that I don't fully understand, I can't shake the feeling that there is more concern with saving white collar jobs than blue collar jobs.

[Anonymous]

Well, if we bail out the auto industry, there are already others in line behind them. Now the homebuilders want a handout. Where does this stop?

If we can socialize debt, we need to revisit socializing the benefits.

[Anonymous]

The government loans to Chrysler as part of the 1980 bailout were repaid, with interest, ahead of schedule. To whatever extent government loans means socializing debt, in this case the benefits *are* socialized.

[Anonymous]

Anonymous wrote:The government loans to Chrysler as part of the 1980 bailout were repaid, with interest, ahead of schedule. To whatever extent government loans means socializing debt, in this case the benefits *are* socialized.

How do you know that after lending $25 billion per month or quarter that the auto industry will be solvent enough to repay the loans this time? They just got a $25 billion loan 2-3 months ago and then a month later, they requested another $25 billion. They didn't even have a plan of what they'd do with the money or have strategies on improving their position until Congress requested one. It seems like these loans are just working capital lines of credit rather than showing that they're going to use it to implement a different strategy, to cut fat, ... corporate jets, insane executive bonuses ...

By socializing benefits, I was referring to providing more affordable health insurance for the poor and middle class, better health & childcare services for the working poor, ... Whether you believe it or not, the middle class is the backbone of the economy in this country and countries around the world.