The question presumes that A) Detroit’s ailing automakers ARE America’s automobile industry and B) using our tax money to protect Ford, GM and Chrysler from their own incompetence would benefit the U.S. car industry. Not true, on both counts. And by ignoring the flawed assumptions underpinning the argument for raiding the average American’s wallet, bailout proponents are misleading what they condescendingly call “Main Street.” To which I say no, no, and Hell no.
Clearly, unequivocally, the American auto industry does not consist of Ford, GM and Chrysler. In fact, these three Detroit-based companies COMBINED no longer control the lion’s share of the American automotive market. Foreign-owned manufacturers– the so-called transplants– account for over 50 percent of all new vehicle sales within the U.S. For better or worse, they constitute the core of the American automobile industry.
Feel free to debate amongst yourselves whether or not the fact that the transplants’ profits return to their home country is a crucial difference— just as long as you understand that Ford and GM’s North American divisions have been living off of their foreign ops’ profits for at least the last two years. And that this financial flow inwards is decades old.
And don’t forget another, equally salient detail: Detroit-based car companies are, right now, importing hundreds of thousands of cars and millions of parts from outside U.S. borders. For more than a decade, Ford, GM and Chrysler have been Hell bent on “saving” the American automobile industry by destroying it, sending U.S. manufacturing jobs to Canada, Mexico, South Korea, China and elsewhere.
Anyway, if we accept the idea that BMW, Mercedes, Toyota, Honda, Hyundai and Nissan’s American production facilities are a vital and yes, equal part of the American automotive scene, it raises an interesting and completely ignored question: is the federal bailout for Detroit good for the REST of the American automobile industry? Does it “save” them?
The surprising answer is yes. By supporting Detroit’s inefficiencies, a bailout would help maintain a suitably high “floor” for new car prices. So your tax subsidy to Detroit would protect the transplants’ profits, and by extension, their American workers.
On the downside, a federal bailout screws the consumer. It would help prop-up new car prices, stifling the kind of competition that leads to innovation, and increased value-for-money. As far as the non-Detroit-related taxpayer’s personal pocketbook is concerned, letting American-owned automakers fail is the best possible course of action. The American consumer would get a better product at a lower price, for no extra charge.
Sorry. I know: it’s about jobs, jobs, jobs. Inherent in the idea of “saving” the [strictly defined] American automobile industry is “saving” American automotive jobs, upon which the entire U.S. economy supposedly rests.
Again, you can discuss the “ripple effect” of a combined Ford, GM and Chrysler C11 on the wider U.S. economy without my interference. But however great the impact, it doesn’t alter the truth: the word “save” here means “subsidize,” to no appreciable end. I mean, is there any one amongst you who truly believes that injecting $25b of federal capital into Ford, GM and Chrysler will put them back on their feet, so that their workers and products can compete with non-Detroit automakers? If so, you simply haven’t been paying attention.
And once we’re doing a reality check, if saving the American automobile industry is a euphemism for “giving The Big 2.8 a bridging loan so they can get healthy and competitive at some point in the not to distant future,” we need to face facts: Ford, GM and Chrysler will have to shed jobs anyway. Bailout or no bailout, they’re too damn big for the U.S. car market, now that the new car “bubble” (which they created) has burst.
Enough of this misdirection. Let’s get down to brass tacks. The real question is this: is Detroit worth saving?
No, it’s not. Not in its current form. In this I refer you to General Motors Death Watch 1, wherein I proposed that GM should be parted out. I asserted that its current management should take a hike and its constituent brands reconstituted as independent car companies. (Or not.) In the last three years, I’ve seen nothing to dissuade me from this opinion. As for Ford, it too needs to shed brands and reinvent itself. Chrysler, well, Chrysler’s a basket case. Only Jeep may live on.
So yes, the American automobile industry is worth saving. Only it’s not in any real danger. The only part of the U.S. car biz that’s on the ropes is the Detroit contingent. And the only way to save that bit is to let it fail, so that it may be reborn. But no matter how you slice it, and sliced it will be, “bailing it out” is against the interests of the American taxpayer AND the American consumer who, after all, must foot the bill.
At the end of the proverbial day, a federal bailout for Ford, GM and Chrysler would simply prolong the automakers’– and their workers’– agony. Yes, there will be pain. Lots and lots of pain. But sometimes the more painful the mistake, the more important the lesson. This is one of those times. Detroit can not be saved from the reality that they’ve studiously, callously, stubbornly ignored. Nor should they be.
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Couldn’t agree more.
Pretty much nailed it. I think a lot of people here in Detroit are being hysterical about these events and they should be….however, it isn’t the end of the world, nor it is the end of Detroit. SE michigan will remain the US automotive powerhouse even if one of the Big 2.67 falls through. There are so many suppliers and solid college engineering programs geared towards R&D as well. I highly doubt many suppliers will be moving their main HQ/Design/RD facilities to the South or Cali anytime in the near future.
Dead on Robert. And although you waffle a bit on this part, I think this would be the absolute best scenario for America…
Break the brands into individual companies. And FORBID them from ever merging or selling to another auto company or “holding” company again.
At the same time, let’s eliminate the governments B.S. ability to eliminate new American auto company startups. Let’s have some good old free market competition again. That’s what will save the American auto industry.
I bet the worker in the photo is not getting $73.00 per hour and has a job bank to fall back on, or Viagra for life…..
Yup
Right on Robert.
If there is to be any hope at all for the long term future of successful manufacturing in North America (auto or otherwise), the need for new thinking, new deals and most importantly new management is critical. More money down the same old pipe will reward bad behavior and continue to fund CEO’s who make 200 – 400 time the salary of their average worker with no ramifications whatsoever (this is just wrong and the impotent BoD’s for these firms should be smacked silly).
And as derm81 suggests the actual impact may not be as bad as many predict. In an industry with massive overcapacity, there will be more than a few opportunities for a resurgence. This may turn out to be what stock analysts used to call a “market correction”.
Well said Robert. The rebirth can’t happen until we allow it to completely fail.
I think the media, certain politicians and certain union figures are blowing this way bigger than it is. I may take a little heat but maybe this is what needed to happen in order to finally shake up the Detroit boys. The news channels just want to keep your ass glued to the TV so they can make commercial revenue…
Amen.
I’m a big believer in what Paul Ingrassia of the Wall Street Journal espouses:
“In return for any direct government aid,” he wrote, “the board and the management [of G.M.] should go. Shareholders should lose their paltry remaining equity. And a government-appointed receiver — someone hard-nosed and nonpolitical — should have broad power to revamp G.M. with a viable business plan and return it to a private operation as soon as possible. That will mean tearing up existing contracts with unions, dealers and suppliers, closing some operations and selling others and downsizing the company … Giving G.M. a blank check — which the company and the United Auto Workers union badly want, and which Washington will be tempted to grant — would be an enormous mistake.”
Hard hitting and honest journalism – no ass kissing to MFGRs for money and exposure. This site is about the “truth” not special interests and bending it for one’s own personal or political gain.
Economics 101 – if a company cannot operate efficiently to compete it will never be able to do so again until they change their paradigm – and that cannot be done until new vested leadership with accountability and flexibility can be done – and they can only get that through CH 11. With Wagoner and his gang of miscreants nothing will actually be done besides coming back again and asking for billions more.
Hopefully profitable auto makers will step in and compete for the market share when one of the Detroit 2.5 fold. They will step up production and hire what is needed, they will not start a job bank or invite the UAW to the party. The connection between UAW and failure is clear. Not that Rick W is going to show on ToMoCo’s board any time soon.
All of this hand wringing over the domestic auto industry is pointless. Everything will be just fine. We are going to pay for everything with “Obama Dollars” And when we are through bailing out the Democrats contributors we can use them to fill in holes in our yards, and eventually you will be able to utilize Obama dollars to heat your home. Simple and easy.
I seem to have missed the UAW’s part in all this?
Providing GM was split into smaller companies with new management, how are they still going to compete against Honda, Toyota and others when they’ll still have the UAW around their necks (with the problems that they create and their corruption)? Unions are outdated with current workers rights laws and it’s time that they end so that America’s future auto industry can survive.
The bailout seems to be a bailout of the UAW, not Ford, GM and Chrysler. Is it any surprise that the UAW backs socialist politicians? (Note to R.F., this time I did not say anyone by name… wink wink).
First time poster here. Would it be a good idea for the American manufacturers to look into licensing some European or Asian vehicles and manufacturing those here rather than trying to design new models from scratch? Of course, the question remains whether they could last long enough to even do that, but wouldn’t the time horizon be cut significantly? A couple of examples off the top of my head are the Renault Clio and Fiat 500. They would be a heck of a lot better than the US small car offerings now. Maybe producing them here could keep some UAW guys employed until new cars can be brought online?
Airhen :
If GM, Ford and Chrysler (yeah right) go C11, they can renegotiate their union contracts. And all their other contracts, as well.
Take a look at GM’s Vauxhall lineup and tell me they wouldn’t look good in showrooms over here when gas hits $3 again. Couldn’t produce them over here at a profit though, $70\hr for labor is tough.
If only Chrysler would hurry up and die (CH7). That would mean more customers and more bail out bucks to go around to those who could (maybe) make some good out of it. At the very least it would shake things up a bit because with all 3 holding hands as they go down the tubes it is not looking too good.
I would like to call for a little humility in this discussion. As much as I respect RF’s opinion (else I wouldn’t be here right now) the truth is no one knows what would happen to this economy if one or all of the Detroit 3 imploded. Any historical examples that even come close are too disturbing to contemplate. There is simply no historical precedent for what is going on in this country now economically combined with the bankruptcy of the entire domestic auto industry. No historical precedent. We are entering (or are already in) a global recession. Just read that my state (IN) which is for the most part fiscally sound and enjoys a balanced budget, is almost out of unemployement funding. Four other states share this predicament.
I’m no Chicken Little, but read any business section and just try to find one single positive indicator.
Perhaps Chapter 11 would be the best medicine for Detroit in relatively stable times, but these times are far from that.
One thing we learned from the Great Depression was that it took massive gov’t spending (read WAR) to pull the economy out. Could we not concede that tough love might not be the answer, considering?
Robert, you’ve greatly over-simplified and completely skipped in other cases why Detroit automakers are where they are (for example, I see little rant about the UAW – and they are as culpable as Jacques Nasser). I’ll also ignore the protectionism and subsidies enacted in places like Japan, Korea and Europe that we’ve not done in the U.S. And, although 53% of sales might come from companies based abroad, the Detroit makers still employ far more than all of those manufactures combined. We’ve also ignored the hundreds of thousands of former UAW wokers with pensions and retirement health care at risk.
And while Ford, GM and Chrylser have outsourced some parts, the value added to their cars from American workers (manufacturing, parts, dev) was, I thought, about 2.5X what everyone else was last I checked (I can’t find the article off-hand, but I’ll look for it). The Detroit makers are still 70% of the U.S. industry.
The destruction of that 2.5X is what worries me. A destruction that large will take out the other 30%, including Toyota and Honda’s U.S. operations.
Is the American automobile industry worth saving? Yes.
You contend that the “American” industry is a larger portion run by Honda and Toyota, and I mostly agree. But those companies will lose billions and lay off thousands as well (and shift production overseas) if GM fails and takes out its major suppliers with it. When those losses come, the Japanese government will help them out both in the JDM and for their U.S. operations.
The U.S. government, in my opinion, should prevent the destruction of the industry by allowing GM (and maybe Chrysler) to fail softly. This isn’t an all or nothing – save it or let it burn – proposition the government should consider, and I wish your discourse would reflect that reality.
I’m not asking for a blind bailout; for cash to be handed off to GM to save an operation that, frankly, should not be allowed to exist. I’m asking that the government prevent something even worse from coming out of GM’s bankruptcy.
I don’t have a union(never did), but I think they continue to be lambasted excessively. Unions still have a place.
I am in a company in similar situation. We went pop after the tech bubble. We have had about fifteen rounds of layoffs since, losing about 70% of our staff. That is just the numbers. Much of the remaining has been relocated to China.
The company has unilaterally without so much as a consultation, cut our pensions, cut medical for pensioners. I think unions still have a place, so there could have at least been a discussion, but they can clearly go too far as well. But in the end the mistakes belong to management.
No bailout will be coming for us. But I don’t think one should. Government shouldn’t back bad management decisions based on short term thinking.
Government should only consider helping working stiffs have a soft landing. Maybe offer some innovation loans for companies with solid business plans, emerging from bankruptcy.
But throwing money at sinking colossus makes no sense. It is like sending in a fleet of speedboats with ropes to stop the sinking titanic. It will just sink the speedboats as well.
There has to be a reckoning and a thinning of the weak from the herd in Detroit.
br549:
Good post, but it seems you’ve equated tough love with not loaning the D3 money they would likely be unable to pay back.
As has been said before, lack of access to credit is a symptom. The core problem is that not enough consumers find GM products desirable.
Propping up companies that make products below consumer expectations benefits only those that got them in that position.
For sake of argument, let’s say the gov’t gives GM the $25, err, $50B bailout. The Feds remove the BOD and Ricky and his gang. What then? There is an enormous infrastructure in place that clearly has rewarded the wrong behaviors. How many thousands of people would need to be fired to make GM an innovation company, capable of producing desirable products in enough numbers to be viable? How long would it take to do this? How much would it cost? $200B? $300B? This reminds me of the prescription drug plan that was sold to the public as costing less than 1/2 of what it wound up costing us.
I understand it’s not all about money, but it kinda is at this point, no?
Has anyone else seen the news article about “why Steve Jobs should run GM”?
http://www.pcworld.com/article/153805/steve_jobs_gm.html?tk=rss_news
The “save Detroit” crowd doesn’t seem to understand that without Alan “Bubbles” Greenspan’s easy credit regime there’s no way we would have had the 16-17M vehicle market we’ve had during most of this decade. Axing 90% of GM’s and Chrysler’s combined production would go a long way towards creating a healthy auto industry that reinvests its capital and doesn’t rely on sales incentives. Regarding the unemployed: we could get creative and reemploy all those out of work autoworkers to rebuild our national rail system, local and transcontinental.
Robert,
I banished myself from TTAC to prevent control of my own opinions and thoughts.
I promise I will once again slip into the background after this submission.
But I thought you needed some support and extreme cudos for this latest effort.
You are damned right.
You are doing right.
But the trouble is, when a society begins it’s run towards self destruction, there is really nothing you can do.
You can and are fighting the good fight.
But it hurts to watch and for what?
Remember all the cries of THE END OF UNITED when UA filed for Capt 11.
I was begging them to do so.
Only then could they clean house, and they did.
Why now all this doom and gloom if GM is forced to do the same?
The reason is because they can.
And it works.
They can cry because it is now becoming apparent all you have to do is cry The Sky Is Falling and then watch the panic.
Its now not an embarrasment to fail, its the in-thing to do.
Its the only way you get what you want.
You are so right explaining this is the ONLY way for they to correct former contracts and release themselves from the shackles they, as did United, put on their own legs.
But regardless, its for nothing.
When people realize they can vote their own wealth, that they can vote a redistribution of wealth, its over.
Just take some xanex and a strong scotch…and relax.
I enjoyed you effort above.
Well, I just covered my short of 1,000 shares of GM stock. Not really due to potential profits in the short term as much as the far greater potential subsidization of the balance sheet.
If GM could cut half it’s NA divisions, recruit an effective management, redraw their contracts, and eliminate half their dealer network, they would definitely have the means to profitability. No doubt there. It would just take a few years and perhaps more than a fair share of luck
However if they do that by filing Chapter 11 I seriously doubt their long-term staying power as a company.
hltguy
I guess you are refering that this is the Egpytian Jeep plant? Not to mention, it is a better product, i.e. Wrangler, then what we get in the US. The J8 has Dana 60 axles, diesel engine, real metal bumpers, rugged steel wheels, etc.
One last point.
Its all about the shackles of labor contracts.
Without chapter 11, these can NEVER be addressed and fixed.
Give all the bailouts you want, without the fixing of retirees getting 2 thirds of their income and the greatest wlefare available, there is a bigger failure still to come.
Without chapter 11, a bailout is money flushed away.
To Turbobeetle.
Yeah, I read that(original at NYT) and it made sense right up till the end when he said call Steve Jobs.
I respect Jobs talent in his space, where he has decades of experience in what works and what doesn’t (he had a share of mistakes before his recent run of successes).
But he is not going to design a new GM saving car in a year.
If Jobs had a serious interest and spent ten years at it, he might become a visionary auto designer, but that isn’t going to happen.
The first thing GM needs are some hard nosed business people to identify what the leaned out GM looks like. Which lines to cut etc. Once they have a serious business plan, then they can get to work designing the winning cars for each segment. Not just milking the Truck bubble.
BR549,
Reading your post, it seems you are afraid of the unknown. That’s all it is. When facing the unknown, we tend to go with faith. Not religious faith, per se, but faith in something.
It seems to me that lots of folks let the decision come down to whether they have more faith in government or the market. Everyone here knows where I stand on that.
However, I don’t think that the facts are necessarily on the table for most of us to see. As good a job as RF is doing on this subject, I haven’t yet seen many good prognostications of what post bankruptcy Detroit is supposed to look like. All too many people think that ALL the jobs are gone. That’s just fear speaking. There are all sorts of possibilities.
Don’t be overwhelmed by the numbers. The economy is a percentage game. Also, you often have to reach the bottom before you can really turn things around. The UAW won’t change or go away, and neither will the 2.8 management culture without a lot more pain. That’s just the way it is. You don’t loan money to an alcoholic. It’s worse than a waste of money.
jkross22 :
I think the proverbial elephant-in-the-room is the fact that there are economic factors outside the control of Detroit which are primarily the reason we are having this particular discussion. All 3 Detroit automakers have problems which have put them in a more vulnerable position than others at the present time. But no honest person would argue that all 3 have been adressing their shortcomings and were adapting to varying degrees. They just had not yet reached a level of improvement necessary to weather the current storm.
Let’s get real here. Detroit has been making strides (no honest person would disagree) and moreover was able to gain significant wage and legacy-cost concessions from the UAW last Fall. Not enough time has passed to reap the benefits from those concessions. One of their biggest issues, too many dealers, is a problem that comes with being in business for 100 years, and is reflective of state laws outside of their control entirely.
If we could take away the current crisis, for purposes of discussion, we would not be able to credibly write off Detroit as a hopeless case. Instead, we would look at incredible efficiency gains (often better than transplants) exciting product offerings and (in the case of Ford especially) impressive quality rankings.
Why don’t we all take a few deep breaths and back off the hyperbole somewhat. The global auto industry, pretty much excluding no one, is suffering. I, for one I guess, see no reason why Detroit cannot rebuild without C11 if given some limited life support.
A good point I heard on NPR this morning about why GM wants to avoid a bankruptcy is that almost always, the head management (including the CEO) gets axed because they’re usually seen as the reason for the mess to begin with. And Wagoner surely doesn’t want to lose that ridiculously-overpaid job, and most likely won’t get a golden-parachute if the feds Chpt. 11 the company.
My job isn’t dependent on the auto industry and I don’t live anywhere near Detroit, so it’s easy for me to say, f*** ‘em, let ‘em fail. But I can imagine there are many hundreds of thousands if not millions of people whose lives are directly tied to the fate of the big 2.8 who are praying for a bailout.
Letting the domestics fall on their ass may well be the best course of action in the long run, and it may happen regardless of whether or not they get a bailout, I have no idea. But with so many other major industries getting sucked down a fiduciary black hole, it’s gonna hurt, big time.
Excuse me all…
But what in hell does chapter 11 have to do with total failure?
I mean, let’s get real here.
Allowing for a chapter 11 clean up does not at all mean total failure OR the total loss of all those jobs.
You can have protection AND force inner changes…and emerge a better company.
If these so called employees do not accept changes, who the hell are they to cry for help.
This is rediculous!
So stop with all the doom and gloom.
Chapter 11 is a proven way to clean up.
To suggest otherwise is being disingenuous and adding to the total bullshit being shouted about.
Stop with all the false statements.
In the global market place, improvement and “strides” aren’t enough. You either succeed or you do not. It would be a wonderful world if we could afford to reward effort without it actually costing more pain, but it’s not.
Lastly, the idea that the loans can allow them to succeed is questionable. The idea that it was just the economy that killed them is wrong. Pneumonia kills millions because they are sick and dying already, not because pneumonia is a deadly scourge. There is rarely a company that simply goes under without some particular event marking the occasion.
The 2.8 NEED fundamental change that won’t come without management, labor, and government learning some hard lessons. Stealing money from the treasury to avoid the pain of doing the work is not a solution.
I agree. There is no denying that the death of the Detroit automakers in their current form is inevitable and is going to be massively painful. As nice as the soft landing RobertSD proposes sounds, I have seen nothing to convince me that, given more money, Detroit or some government beurocrat will indeed make changes. Unfortunately they will continue with the current model until they absolutely can not. Meanwhile our tax dollars will go down the rat hole with the bank bailout and the multitude of other bailouts ushered in by the precidents set. The sad fact is that capitalism doesn’t mean great times and fairness for all, and neither does socialism.
Chapter 11 is a proven way to clean up.
Give me an example of a producer of big-ticket ($20-$40K) warranted items filing Chapter 11 and coming out successful on the other side. One example. Let me put it another way. Would you buy a car from a bankrupt automaker?
Robert-
You’re wrong about the market-share.
GM, Ford, and Chrysler control around 53% of the market, which increases to 55% when Mazda is included.
Foreign makes have not yet sustained a share beyond that 50% mark.
Out of curiosity, what percentage of cars sold in America are made in America? It seems like many of the best-selling cars are built here, so the number could be high.. To simplify, by “made” and “built”, I mean assembled. We could get into part content, but I doubt that level of detail would be useful.
I’ve proposed my solution elsewhere: Give away the useful assets of GM to another company that will capitalize its recovery, made the deal doable with federal loan guarantees — not cash, just guarantees — and Chapter 7 (liquidate) what’s left.
That would solve a lot of problems. The taxpayer doesn’t get stuck with the bill, the company gets new competent management that knows something about automotive manufacturing, a fair number of the workers will get to keep their jobs (although not all of their benefits), and the liabilities would go away.
The victims would be the union contracts, bondholders, shareholders and bankers who lent them money.
(I would bailout Ford, with the right strings attached. Unlike GM, the management is competent, they just need cash and time to revitalize the product line and consolidate their production. Also unlike GM, a few hits can save Ford.)
That being said, I think that it needs to be accepted by the hardcore bailout crowd that the days of Detroit dominance and massive employment are dead. The jobs that are being cut will not be replaced.
A viable Detroit will also be much smaller than it is today. Toyota is destined to be the country’s largest automaker, and the realists need to suck it up and accept that Toyota won, fair and square, and not because of some conspiracy involving currency manipulation, Consumer Reports and whatever other nonsense you want to dream up. They are a well managed company, and they’ve earned every bit of their success.
I would add one area in which I agree with the commentator Phil Ressler — the Big 2.8 need to get the hell out of Dodge, i.e. Michigan. They are absolutely out of touch with their customers, in part because they are in that backward looking nostalgic quagmire that is southeastern Michigan. Relocate their management to Orange County, California, the Silicon Valley or somewhere else where they can see their future customers at work and play.
This whiny self-deception from the Detroit boosters has to stop. These companies cannot win until they realize that there is a competitive marketplace that demands quality, service and respect, and deserves to get it. Had they owned up to their failures years ago, they would still be ahead, but they’re too busy with their hand wringing to accept the rules of the free market.
The carmaking industry has always been brutal. I’m reading David Halberstam’s book The Reckoning. It looks in depth at the struggles of Ford and Nissan over the years, until 1986 when the book was published.
That history tells me that no matter what happens with GM, Ford and Chrysler, cars will continue to be made and sold. I don’t see the Magnas, the Borg-Warners, and the other suppliers falling in the same hole as the Big Three. But there will be a shakeout, bailout or no. And it will be painful.
Those more perceptive in the car industry have seen this meltdown unfolding for a while now. Carlos Ghosn said in a Wall Street Journal interview a year or so ago that the Big Three would not survive long. Whether two of them would survive, one of them, or none of them, he did not know.
But Ghosn predicted that the United States carmaking industry was in for a shakeout. And he was right.
as getacargetacheck said the sales volumes of the past arent coming back. Thats what GM and others dont get. The impulse buying with 72 month notes is gone. People may have finally woken up. All retail is getting a reality check. People dont need to buy all that stuff. The sales of the past was a bubble just like the mortage mess artificially drove up real estate prices. They need a reality check and start producing vehicles after they are sold. Do we really need to have dealers with 200 trucks on the lot?
@RobertSD,
Have you read anything about economics? Try en easy one “Freakonomics” by Steven D. Levitt and Stephen J. Dubner. Then you can try something by David Ricardo.
The basic principal of protectionism that it is punishing the population of a country where protectionism is enacted. The consumer is forced to pay higher price. Why do you wish to punish US consumer, who is already punished by taxation? If South Korea is willing to punish it’s citizenry and it is OK with their citizenry – God bless them! It has not been OK with Americans, that is the fundamental basis for our brand of capitalism and relative prosperity.
There’s really no difference between a bailout and a bankruptcy.
In fact, bankruptcy is just another form of government bailout. And people know it.
Difference is, the government pays your bills in a bailout; in a bankruptcy they tell the creditors to sit and spin. It’s all bankruptcy, its all bailouts. To the debtor the difference is purely symbolic.
Do you think that GM can get its shit together with 50 billion dollars, and all the government pressure to avoid killing dealers and massive layoffs that would come with those bucks?
Whichever B word you chose, GM is going to have the fight of its life to get back on track. It’s going to be uphill either way.
American Leyland, stay away from me
American Leyland, GM let me be
Don’t come hanging around my door
I don’t wanna see your face no more
I got more important things to do
Than spend my time growing poor with you
Now union, I said stay away,
American Leyland, listen what I say.
Ch11 could work if instead of a cash bailout the government were to guarantee warranties. On the downside, that would remove incentive on the part of bankrupt automakers to minimize warranty costs if the gov’t paid the bills.
This whiny self-deception from the Detroit boosters has to stop.
The bailout is gonna happen, so this whole conversation is merely academic. However, self-deception comes in many forms. Many who believed in creative financial instruments of a very free market/unregulated nature had their worldviews upended. Ask Mr. Greenspan, or better yet, read the transcripts of his testimony at a recent Congressional hearing.
And think about that while you comfort yourselves in the “knowledge” that the market will fix what ails Detroit, and that we’ll all be the better for it.
br549:
As a supporter of the bailout, how much would you say it will take to turn GM around?
No doubt the D3 products are improving. That’s not enough. They need best of class products (i.e. more than one) to take from their competitors to be viable. The Malibu made all sorts of promises on that, as did the Solstice. What cars do the D3 make that are best in class?
“If we could take away the current crisis, for purposes of discussion, we would not be able to credibly write off Detroit as a hopeless case.”
Again, so what. GM’s been heading this direction for a REALLY long time. This didn’t start when SUV sales stopped. Sure, if Lutz could wave his magic wand (that came out all wrong) and make the credit mess go away, GM still doesn’t have best of class products and still has an unsustainable cost structure.
I feel there are two issues that have yet to be thouroughly debated. And I do not for a second wish to turn this into a political debate. Now that Obama, Reid, and Pelosi are in charge of the country, I see two areas that may potentially work at cross purposes. First, card check will likely result in unionization of the “foreign” automakers and somewhat level the playing field from a cost standpoint. Of course these foreign automakers may decide to bring manufacturing back home but I doubt they have the capacity to do that. Second, if a bailout comes with strings attached, the environmentalist contingent will likely require an much higher CAFE or a quota of small cars. How successful have the domestic 2.8 been against the foreign small cars? To be honest, my crystal ball is very dim regarding these two issues and I would like everyone’s thoughts on these.
br549
In my reply,
I left the best example and that being United Airlines.
This was huge.
And the whole while prior to and during all I heard was BAIL OUT NOW!
Move yourself over to another airlines.
Your mileage was good as gone…ETC, ETC.
What happened?
Nothing…other than an emerging and healthier company with better balance sheets and contracts.
And the empoyees all gave in to the reorganization.
This is a proven capitalistic option.
I fly over 70,000 miles a year.
And I kept getting onto UA planes with their grumpy, bitching stewardeses and laughed at their remarks.
Bitching all the way to a better deal.
Yes, I would buy a car from a bankrupt company…IF I loved the car and just as much as if I would buy from one hurting as they are.
In fact, I was one of those who purchased the new MKS…a Ford.
Reality suggests otherwise. It’s not that long ago that GM insisted hybrids were a fad, and had invested almost all of their R&D in a new line of awfully big SUVs.
They’re still likely spending more in R&D on trucks than on cars. Anybody think otherwise?