Let Detroit Go Bankrupt

[Anonymous]

I am a registered democrat (moderate) and a ardent Obama supporter, but I tend to agree with Romney in this op-ed piece about the request for a bailout for the auto industry. I get that Obama has some "favors" due to the big labor unions, but I hope that he does not rush to throw money at the industry.

What do you all think.

Here is the link to the piece: http://www.nytimes.com/2008/11/19/opinion/19romney.html?hp


P.S. I own GM stock and I still think there should not get a bailout.

[jsteele]

Romney makes a number of good points, but misses a couple of big issues:

1) everyone keeps complaining about union benefits and suggesting they should just be cut. But, you really can't just leave UAW members without healthcare and retirement and expect it not to result in larger problems down the road. The most effective means of dealing with the healthcare costs is via a national healthcare plan. Car manufacturers in Canada and Germany don't pay healthcare benefits (at least directly) because of the socialized medicine in those countries.

2) Chapter 11 for the Big 3 is not a magic bullet. First of all, their creditors are not simply people with piles of money. In many, if not most, they are other businesses who cannot afford to go without the money owed them. There could be a domino effect as the suppliers go belly up as a result of the Big 3's chapter 11. Also, how many people will be wiling to buy a car from a bankrupt manufacturer? Who wants to take the risk that years down the road the company won't exist or that the model will be discontinued. Who wants to risk their resale value going to nothing?

One thing about which Romney is correct is that a lot can be learned from his father's experience at AMC. George Romney turned things around by cutting popular car lines (such as the Hudson -- think of Doc Hudson in "Cars") and focusing exclusively on small cars. Those weren't easy decisions to make, but proved correct.

[Anonymous]

I agree with the OP in that Detroit doesn't deserve the bailout $$ and should be allowed to wallow in their own pity. To me, they've dug their own grave (see previous postings) and, hey, it's a free market and they made some bad choices.

I know, I know, I know...I get it - 3 million jobs are on the line, the bailout $$ is going to payroll (through maybe the end of March 2009, then what?), this is for the common good, blah blah blah, but I don't think it is a compelling arguement. After all, don't we all have sob stories?

I was more convinced to agree with bailing out the banks because that was "a big picture" -type thing (loans, mortgages, credibility, economy all over - not just in Detroit). Detroit, to me, is just a blip on the radar. Their potential downfall isn't as threatening as a few months ago when the banks/economy were faltering.

If this bailout does go through...will it be a precedent for other big industries - railroad/metro, the airlines, farmers, textile workers, etc. to seek hand-outs too?

[Anonymous]

Anonymous wrote:I agree with the OP in that Detroit doesn't deserve the bailout $$ and should be allowed to wallow in their own pity. To me, they've dug their own grave (see previous postings) and, hey, it's a free market and they made some bad choices.

I know, I know, I know...I get it - 3 million jobs are on the line, the bailout $$ is going to payroll (through maybe the end of March 2009, then what?), this is for the common good, blah blah blah, but I don't think it is a compelling arguement. After all, don't we all have sob stories?

I was more convinced to agree with bailing out the banks because that was "a big picture" -type thing (loans, mortgages, credibility, economy all over - not just in Detroit). Detroit, to me, is just a blip on the radar. Their potential downfall isn't as threatening as a few months ago when the banks/economy were faltering.

If this bailout does go through...will it be a precedent for other big industries - railroad/metro, the airlines, farmers, textile workers, etc. to seek hand-outs too?

Wow, Detroit may be a blip on the radar; but 3 million unemployed workers across the nation IS NOT. Do you have any idea what this will mean for our country? The ramifications are not at all limited to Michigan and Ohio. I'm not saying a bailout is the right answer, but things are going to get really ugly if the GM, Ford and Chrysler go under.

[Anonymous]

Yup.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I agree with the OP in that Detroit doesn't deserve the bailout $$ and should be allowed to wallow in their own pity. To me, they've dug their own grave (see previous postings) and, hey, it's a free market and they made some bad choices.

I know, I know, I know...I get it - 3 million jobs are on the line, the bailout $$ is going to payroll (through maybe the end of March 2009, then what?), this is for the common good, blah blah blah, but I don't think it is a compelling arguement. After all, don't we all have sob stories?

I was more convinced to agree with bailing out the banks because that was "a big picture" -type thing (loans, mortgages, credibility, economy all over - not just in Detroit). Detroit, to me, is just a blip on the radar. Their potential downfall isn't as threatening as a few months ago when the banks/economy were faltering.

If this bailout does go through...will it be a precedent for other big industries - railroad/metro, the airlines, farmers, textile workers, etc. to seek hand-outs too?

Wow, Detroit may be a blip on the radar; but 3 million unemployed workers across the nation IS NOT. Do you have any idea what this will mean for our country? The ramifications are not at all limited to Michigan and Ohio. I'm not saying a bailout is the right answer, but things are going to get really ugly if the GM, Ford and Chrysler go under.

What are your predictions?

[Anonymous]

I don't know what to think. Michael Scherer of Time writes about Romney's op-ed in a Swampland blog entry, and he makes some good points:

http://swampland.blogs.time.com/2008/11/19/mitt-romney-for-auto-industry-czar/

[Anonymous]

Well, if you add 3 million unemployed, uninsured Americans to the mix, that's a huge burden on unemployment, on our ER's and hospitals which will care for those uninsured people, on other social services. Hmm..what else, crime tends to increase in areas where unemployment is high. Can't pay the rent or mortgage because you don't have a job ...foreclosures go up, homelessness increases. Other industries will suffer as a result too -- no jobs or money means less spending...so retailers and other service industries will suffer...and that could mean more lay-offs. To me, those things are pretty ugly.
And unless the U.S. comes up with another industry where these former auto-workers can find employment, I don't see a solution.
Look at the post on Wise County, Va. to see how ugly things can get when an industry goes kaput (in that case, coal).

[Anonymous]

I don't think Romney or anyone else is suggesting that we allow the automobile industry to died, just that the industry need to be "reorganized". 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. Giving a $25 billion loan to the industry is only delaying the inevitable unless the federal government is willing to keeping making loans. The industry was in trouble long before the credit crisis and really need a new business model.

[Anonymous]

Truly, I wish the govt' would go seriously socialist on this one. Take over the companies, re-engineer them to produce green vehicles, solve our foreign oil dependency, pollution problem, and budget deficits in one fell swoop.

It's a rare opportunity for us, the taxpayer/investor, to pick up these companies cheap and solve so many problems at the same time.

I'd rather bail out the car cos than the rich wall street guys.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I agree with the OP in that Detroit doesn't deserve the bailout $$ and should be allowed to wallow in their own pity. To me, they've dug their own grave (see previous postings) and, hey, it's a free market and they made some bad choices.

I know, I know, I know...I get it - 3 million jobs are on the line, the bailout $$ is going to payroll (through maybe the end of March 2009, then what?), this is for the common good, blah blah blah, but I don't think it is a compelling arguement. After all, don't we all have sob stories?

I was more convinced to agree with bailing out the banks because that was "a big picture" -type thing (loans, mortgages, credibility, economy all over - not just in Detroit). Detroit, to me, is just a blip on the radar. Their potential downfall isn't as threatening as a few months ago when the banks/economy were faltering.

If this bailout does go through...will it be a precedent for other big industries - railroad/metro, the airlines, farmers, textile workers, etc. to seek hand-outs too?

Wow, Detroit may be a blip on the radar; but 3 million unemployed workers across the nation IS NOT. Do you have any idea what this will mean for our country? The ramifications are not at all limited to Michigan and Ohio. I'm not saying a bailout is the right answer, but things are going to get really ugly if the GM, Ford and Chrysler go under.

What are your predictions?

New poster. I would predict 14 percent unemployment.

[Anonymous]

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.

[Anonymous]

Anonymous wrote: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.

Perhaps that is a way to get agreement in Washington to help: Let the government supply the financing for the bankruptcy. They get punished, but it is not turned into an execution by the credit crunch.

[jsteele]

Anonymous wrote:
Perhaps that is a way to get agreement in Washington to help: Let the government supply the financing for the bankruptcy. They get punished, but it is not turned into an execution by the credit crunch.

If the government is going to provide financing, what is the advantage of Chapter 11? C11 provides protection from creditors and allows the companies to tear up their union contracts. I keep saying that it is the unions that are the targets here. If you are the Republicans and you have an opportunity to smash one of the Dems main constituencies, would you pass that up?

There are great dangers in chapter 11. Rather than trying to address those problems, the government should finance a restructuring of GM and bridge loans for Ford. Cerberus is on its own with Chrysler as far as I'm concerned. They can finance themselves. All of this can be done without chapter 11 and without playing into the Republican agenda of killing the UAW.

[Anonymous]

jsteele wrote:without playing into the Republican agenda of killing the UAW.

Is every problem a symptom of the 'vast right-wing conspiracy'? Come on - the Republicans have no more and no less to do with the problems faced by the auto industry than the Democrats. Plenty of Republicans own GM, Ford and Chrysler dealerships, small companies that provide parts, transportation, etc. to the auto industry. This is an equal opportunity disaster - and I still don't think the bailout is right. It merely delays the inevitable and pours good money after bad. These companies have assets - all these factories may be temporarily idle, and a few of the older less efficient ones permanently, but there will be buyers - maybe even a completely new deep-pocket group of investors. The UAW is only one part of the problem - try cars people don't want to buy at prices they feel are not a good value, too many dealerships that cannot just be wiped away, etc. Time to let them fail and start over.

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.