Auto bailout.

[Anonymous]

Can someone explain it to me in simple words? To me, it is throwing cash at an extremely lame industry. What incentive do they have to "change".

[Anonymous]

Diane Rehm just had a panel discussing this topic yesterday. One of the main concerns if Detroit does get gov't money, is when will it stop? That is, what prevents other industries from bellying up to the bar, so to speak?

On the other side, Detroit has been restructuring itself in the past few years, and been making progress to streamline their operations and lower their costs. (I don't have figures.) Then this crisis hit. Not only would the Big Three suffer, but all of its suppliers, starting at the beginning of the chain (e.g., steel, rubber, parts manufacturers, etc.). So the job and productivity losses would be huge. Some call for Chapter 11 for the company. Others point out that no one would buy a car from a bankrupt company.

Many argue that the U.S. needs a robust auto industry and with the right amount of time, money and incentives, we, the U.S. could be the leader in hybrid and/or electric vehicles. (Saving Detroit might play into Obama's idea of creating green-collar jobs.)

On the other hand, many point out that we do have a thriving auto industry in the Southeast. Toyota and Honda among the foreign car companies who are doing just fine down there.

Again, I don't have the figures, but those are some of the arguments being bandied about.

[Anonymous]

The NPR discussion outlined many other related industries that will likely fail if Chrysler goes under. Auto parts manufacturers, for example, have set overhead rates based on the so-called "big three" all being in business. If one of them goes under, suppliers will start to struggle, and so on. I think the main argument is that a bailout of auto industry isn't just a bailout of the auto industry, but the hundreds of related industries as well.

Another point that was made on NPR is that when Chrysler was bailed out in the (I think) late 1970s, it actually repaid their government loan 7 years early, with a profit to the taxpayers of over $500 million. I don't think it is as simple as "throwing cash" to the industry. There are guarantees that will be sought by the government in return.

Signed,

A former Michiganian

[Anonymous]

Anonymous wrote:The NPR discussion outlined many other related industries that will likely fail if Chrysler goes under. Auto parts manufacturers, for example, have set overhead rates based on the so-called "big three" all being in business. If one of them goes under, suppliers will start to struggle, and so on. I think the main argument is that a bailout of auto industry isn't just a bailout of the auto industry, but the hundreds of related industries as well.

Another point that was made on NPR is that when Chrysler was bailed out in the (I think) late 1970s, it actually repaid their government loan 7 years early, with a profit to the taxpayers of over $500 million. I don't think it is as simple as "throwing cash" to the industry. There are guarantees that will be sought by the government in return.

Signed,

A former Michiganian

Interesting, y'all seem much more tolerant of the government bailing out the auto industry ( Obama's plan), than you were about the government bailing out individual citizens faced with imminent foreclosure on their mortgages (proposed by McCain). Which plan is actually more humanitarian?

[Anonymous]

If they were allowed to go bankrupt how could we keep buying crappily-made, enviromentally destructive SUVs? Who would spend a fortune lobbying the government not to raise fuel efficiency standards?

I am a liberal but bailing out this bunch of reprobates makes me ashamed of having voted democrat. If we really imagine that supporting failing companies is the best way of supporting high-paying jobs in the US then we need to take some Econ 101.

[Anonymous]

Anonymous wrote:Can someone explain it to me in simple words? To me, it is throwing cash at an extremely lame industry. What incentive do they have to "change".

Totally agree and I think you do understand, no help needed here. Until or unless UAW contracts, pension and health care rules can be changed, when you throw federal money at Detroit all you hear is a big sucking sound as it goes down the drain.

They may not be able to be saved honestly. There is no political will to permit the structural changes needed to allow the US automakers to compete with foreign automakers in the US (ironically Ford and GM do very well abroad, freed from some of the structural restrictions here in the US).

[Anonymous]

The American auto industry fought tooth & nail about making their cars more fuel efficient barely 1 1/2 years ago. One of the car companies has $14 billion liability for pensions through 2010. So the $25 billion loan will not be going to stimulate the auto industry economy.

Why can't auto industry vendors modify their parts/product lines for the auto companies that were ahead of the curve and are doing well with fuel efficient cars and hybrids? Now those are and will continue to be in demand. I say, let the big 3 go bankrupt, restructure with new forward thinking, younger management with new products for the 21st century.

After the original $700 billion bailout for Wall Street, the line has already gotten longer for handouts. Soon, the telecom comanies will come with hat in hand to get handouts. Telco companies also have significant multi-billion dollar contracts with numerous vendors: Motorola, Lucent, ...

NO. NO. NO. The auto industry needs to modernize and that includes getting new upper management and boards. Don't let a bunch of 70 yo stodgy men keep making the same decisions.

[Anonymous]

Anonymous wrote:

Anonymous wrote:The NPR discussion outlined many other related industries that will likely fail if Chrysler goes under. Auto parts manufacturers, for example, have set overhead rates based on the so-called "big three" all being in business. If one of them goes under, suppliers will start to struggle, and so on. I think the main argument is that a bailout of auto industry isn't just a bailout of the auto industry, but the hundreds of related industries as well.

Another point that was made on NPR is that when Chrysler was bailed out in the (I think) late 1970s, it actually repaid their government loan 7 years early, with a profit to the taxpayers of over $500 million. I don't think it is as simple as "throwing cash" to the industry. There are guarantees that will be sought by the government in return.

Signed,

A former Michiganian

Interesting, y'all seem much more tolerant of the government bailing out the auto industry ( Obama's plan), than you were about the government bailing out individual citizens faced with imminent foreclosure on their mortgages (proposed by McCain). Which plan is actually more humanitarian?

US citizens need jobs. US auto makers did not produce vehicles that kept up with market demand. Our last vehicle purchase was foreign and was based on comparisons and most important multiple test drives. I almost drove everything in certain sizes at each dealership on route 7 in Tysons.

There are various reasons for foreclosure and bailouts should be for individuals who would have qualified for the original loan amount based on income etc but chose an ARM that reset at an absurd rate. Primary residence only and ability to pay the original principal on the loan. I guess it could be called retrospective underwriting. So I believe a balanced approach is needed where there is relief in several areas. The lack of accountability for the billions is alarming.

[Anonymous]

I could not believe it when Ford put out that Expedition, what a gas guzzler. They did not have to shove that junk at us. They are acting irresposibly and there seems to be no end to what they will expect from tax payers.
Let them squirm, maybe we just need one car company.

[Anonymous]

The NPR discussion outlined many other related industries that will likely fail if Chrysler goes under. Auto parts manufacturers, for example, have set overhead rates based on the so-called "big three" all being in business. If one of them goes under, suppliers will start to struggle, and so on. I think the main argument is that a bailout of auto industry isn't just a bailout of the auto industry, but the hundreds of related industries as well.

Another point that was made on NPR is that when Chrysler was bailed out in the (I think) late 1970s, it actually repaid their government loan 7 years early, with a profit to the taxpayers of over $500 million. I don't think it is as simple as "throwing cash" to the industry. There are guarantees that will be sought by the government in return.

Signed,

A former Michiganian


Interesting, y'all seem much more tolerant of the government bailing out the auto industry ( Obama's plan), than you were about the government bailing out individual citizens faced with imminent foreclosure on their mortgages (proposed by McCain). Which plan is actually more humanitarian?

Easy there, tiger. The only thing my post actually did was raise two counter-points to a statement the OP made - and they very clearly were not my personal conclusions, but those of the experts on the NPR panel. I personally don't think that any argument based on the assumption that an entire state of people thinks the same way is very persuasive (assuming that is who you meant by "y'all").

[Anonymous]

My question is...who will be next - first the banks, now the American car industry

...oh wait, let me guess - Metro followed by Amtrak (again) and then maybe the airlines (after the holidays of course when their statistics can show that ridership "fell"), and an increase in subsidies to farmers.

...could I get a bailout too? My small business is on tough times too.

[Anonymous]

Anonymous wrote:My question is...who will be next - first the banks, now the American car industry

...oh wait, let me guess - Metro followed by Amtrak (again) and then maybe the airlines (after the holidays of course when their statistics can show that ridership "fell"), and an increase in subsidies to farmers.

...could I get a bailout too? My small business is on tough times too.

Me too. I'm going to be laid-off.

Chrysler should have learned in 1982 what not to do. Apparently, they didn't learn their lesson and are hoping to get bailed out again.

I am a Dem, but really, believe it is survival of the smarter, fitter, and more adaptable when it comes to business. I love the header of the following article.

GOP to Detroit: Drop Dead

http://www.businessweek.com/lifestyle/content/nov2008/bw20081113_047971.htm?chan=top+news_top+news+index+-+temp_top+story

[Anonymous]

From my "American consumer/ joe plumber" point of view, the MI auto industry is just a dollar short and a day late.

They were too sluggish to get going with better fuel efficency (and even then it still took a big shove from Congress and high oil prices to "convince" the American auto makers to rethink their designs) while Toyato and Honda are reeling out hybrid minivans (of all things).
I heard there was a 2 year waiting list at some dealerships for the Prius - made by Toyota, by the way.
Don't remember reading about a waitlist for the H2.

The unions are border-line crazy (greedy) too.

[Anonymous]

The unions are border-line crazy (greedy) too.

In what way? In my (admittedly limited) knowledge of the topic, the unions have given up quite a bit in terms of health care, pension benefits, etc. in recent contract negotiations.

[jsteele]

A couple of points:

1) The Republican opposition to a bailout is most likely driven by a desire to see the UAW smashed. Chapter 11 by the Big 3 (Bit 2 1/2?) would give them a chance to tear of the union contracts;

2) The three companies are not in the same situation, though the collapse of one may have a domino affect on the others. GM is critically in need of reorganization. Ford is not in that bad of shape. Chrysler, on the other hand, is probably hopeless. So, a solution cannot be one size fits all.

My suggestion, GM should only be offered a bailout if it first presents a radical restructuring plan which would include merging divisions and dropping some lines (e.g. Hummer). GM's product line sucks. My suggestion is that they license some European designs and begin manufacturing those here until they can bring their own new products on line. For instance, they can produce Fiat 500s, Renault Clios, and even Vaxhalls (which GM already owns). The government should support this type of transition since its win-win.

Ford probably needs minimal support to deal with the ramifications of GM's restructuring.

Chrysler should be given words of encouragement and nothing more. The company is owned by an equity investment firm that has plenty of money. Sorry, guys. You win some, you lose some.

Government aid should also be available for the companies further down the food chain that would suffer due to a GM chapter 11 or restructuring.

Under no circumstances should a single penny be offered to allow the companies to continue business as usual. But, a properly designed bailout would be beneficial to all of us.