And so it begins. The Wall Street Journal' s lead editorial makes it perfectly clear that Motown's plans to tap your taxes is well advanced. And guess what? It's a god damn conspiracy! "Earlier this month… the top dogs at Ford, GM and Chrysler had a meeting of the minds and decided that the way out of their current losing streak would be to ask the feds for a lifeline. They figure they'll need $40 billion or so to ride out their current troubles until they reach the promised land of hybrids, the Chevy Volt, and, who knows, maybe even profits. We've since heard that lobbyists for the car makers are taking their pitch for direct federal loans around Washington, with a goal of unveiling the plan after Labor Day — conveniently in the frenzy of the fall election campaign. They've briefed Congressman John Dingell, the dean of Michigan Democrats, as well as officials in the Bush White House… The plan is for the government to lend some $25 billion to auto makers in the first year at an interest rate of 4.5%, or about one-third what they're currently paying to borrow. What's more, the government would have the option of deferring any payment at all for up to five years." TTAC will have an editorial on this shortly.
93 Comments on “Bailout Watch 10: TTAC Called It– Wall Street Journal Reveals Motown’s $25b Bailout Plan...”
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Time to call my local reps and complain that we should not bail them out of their own mess they could have prevented.
I just read that article and TTAC did call it. I can’t tell you how angry this makes me as a taxpayer and business owner. These stupid, overpaid “executives” have run the companies into the ground and we are supposed to bail them out. I hope every American who pays taxes will be correctly angry and never buy another American branded automobile again, ever. I know I will not. I will sell my and my company’s vehicles so I can buy a foreign nameplate. Please no bleeding hearts over the poor union workers. The gravy train left the station and I don’t want to pay more taxes to help it try to return.
I am going to call and call and fax as much as possible to every politician in California to tell them say no to this bullshit.
The least that should happen in that case would be for the Boards and management to pay back the money they’ve mis-earned. It would not represent much compared to $40b, but as a taxpayer, it’d make me feel less ripped off.
If the domestics all go away so will TTAC
Think about it..
“Dear Congressman/woman/idiot/whatever,
Please do not piss away the tax dollars that you seize from me every freaking paycheck! I am all for supporting national defense, roads, schools, those less fortunate than myself, etc. Hell, I even understand and support tax credits for increased employment rolls and the tax revenue that those can bring. But you are out of your damn mind if you think that I will support sending MY money to support an uncompetitive and disinterested company such as GM! If the current management is removed and returns 95% of the money they’ve earned over the years, maybe we can talk. Short of that, leave me as a taxpayer out of it!”
By the way, if I am forced to become an owner of GM through this boneheaded idea do I get a free retro “29%” market share lapel pin?
Juniper :
August 22nd, 2008 at 12:38 pm
If the domestics all go away so will TTAC
Think about it..
No, just Bob Lutz. Thanfully his mouth (with foot firmly planted in it) will never go out of business.
If this happens, the goverment needs to fire at least 4-5 layers of mgmt at each because they are the morons that created or were part of this mess.
Toyota, Honda, Nissan, etc., etc., should receive funds too. GM and the other 2.7 had the same chance to succeed as the big 3.99999 from Japan; instead, they just succed. If anything,it could be a REWARD for Toyondassanzda’s performance!!!
The plus side of this is that by asking for so much they really may help the public see their incompetance.
Even worse, this estimate probaly includes the managers (part. at GM) far to rosey estimates of their future products performance.
The truth is, GM alone can probably eat all 25B by the next election in 4 years and still go down.
Brilliant.
hltguy & TexN-I’m with you.
Bunter
Much as it tastes like ashes to admit it, we need to keep the industry afloat or the economic impact will be ugly. There are a lot of jobs that depend on this industry, and if even a large fraction go, the shockwave will do a lot of damage.
Look at it this way, you’ll pay for this now , or you’ll pay later for outright welfare, law enforcement (nothing breeds crime like poverty) and trade issues.
Yes. That should be a big proviso attached to any baillout offer: serious structural change, up to and including senior management and oversight.
truthbetold37: When does any government “fire three of four layers of management”? Doesn’t happen, never will, one of the reasons the U.S. is going bankrupt.
This is going to turn off most voters, so supporting it will be pretty dangerous. However, at the end of the day Michigan is one of the swing states, so they get to be first in line for handouts. Just another case for ditching the Electoral College for a popular vote.
If the two candidates take opposing views on this bail-out then I might become a single issue voter, but I doubt either of them will have the nerve to.
This Halloween I say the rest of us go to Michigan and have a Devil’s Night with the entire state, unless Canada is willing to take it off our hands on the cheap – the US could use the liquidity.
psarhjinian
The Big three employ less people now than Chrysler did in the early ’80s. They are a trivial part of the economy. If the big three fail they won’t dissapear, they will go Chapter 11 and get out of their oppressive dealership and union contracts. Chapter 11 is what they truly need to re-invent themselves, not welfare.
The big three have no loyalty to this country and will build/engineer cars wherever it is cheapest (i.e. GM building and engineering with Daewoo). There is no reason for this country to have any loyalty to them.
The worrying part is not the money because the sums are small in comparison to what we’ve wasted on the war in Iraq. (3 Trillion to date)
What is worrying is they may not file Ch 11. That makes it less likely they’ll get their houses in order.
The Big three employ less people now than Chrysler did in the early ’80s. They are a trivial part of the economy. If the big three fail they won’t dissapear, they will go Chapter 11 and get out of their oppressive dealership and union contracts. Chapter 11 is what they truly need to re-invent themselves, not welfare.
And Chapter 11 will lead to Chapter 7. You’d be crazy to think otherwise.
We might as vote John McCain in as he said he’s not bailing them out (of course he can always change his tune once elected…it’s not like we hold them to their promises). Obama wants to bail them out…mainly for the votes.
Billions and lives spent on Iraq or Billions for mismanaged U.S. companies. Which is the greater folly?
My gut tells me Iraq.
As much pain as it would cause the economy (and I live in Ohio, the second biggest car manufacturing state after Michigan), I would have to say no. The lack of liquidity is not the cause of Detroit’s problems, it is merely a symptom. As such, more money will not fix the problem, merely prolong the inevitible.
No, the real problems have been well documented, at least to readers of this site.
I’m not terribly offended by the idea of federal loans to the automakers (hell, I’m Canadian so this would be a sweet example of US tax dollars helping Canadian auto workers!) but I’m with psarjhinian: I wouldn’t lend a f*cking dime to GM if the current Board of Bystanders and Rabid Rick were still in charge.
I would have no trouble lending Ford some cash with Mullaly at the helm. I think there is some light at the end of their tunnel, and I’m confident a loan to Ford could be repaid.
As for Chrysler… Screw ‘em. Best I can see their plan will decimate their N.A. manufacturing capability anyway, so why help that along. Especially if the point of a bailout is to keep the industry strong and preserve direct and indirect jobs.
It’s not just them directly, it’s their suppliers, the businesses in the towns surrounding plants and suppliers, and the companies that then service those industries. That’s a lot of spending power gone, and at a time when consumer confidence is low, credit thin on the ground and many businesses already teetering.
Let’s not forget all the chickensh_t investors that will move money around should something like this happen. The net effect at the market level wouldn’t be pleasant, either.
If this were 2003 or so, I’d say let them bomb. But not now, not when the North American economy is riding the razor’s edge of recession.
Again, though, this ought not to be blank cheque. There has to stipulations on how the money is to be spent, what plans need to be in place (real plans, not Rick Wagoner “Trust Me”-style plans) to turn things around and whom should be on-staff when this all happens.
Man this royally pisses me off. I want no part in paying for those a$$holes failures, I am already paying throught the nose for the product I bought from GM, do I get federal assistance for the financial damage it has cause to me, of course not I just have to take it in the ass and then have my money STOLEN from me.
Does anyone know if the Bill has already been writen and who is leading it, and what is the timeline on tryig to get this through Congress. Is this meant to pass before the end of the year or something for next year(think next year might be too late for Chrysler and GM). If it doesn’t pass by the end of this year with Congresses endless vacations the Bill will have to be started over next year and could take even more months to go through commitee voting and both houses, I don’t think these guys want to wait that long, leading me to believe the Big Losers need this before Congress closes up shop by the end of the year.
I think we need to start a public awareness plan and get more than just us in the know writing to our Congressional idiots. If we can get a majority of our states writing, calling, faxing emailing etc. and let them know this is completely unacceptable and they will not be reelected if they support something like this, it will die a quick death on the floor.
I don’t care who I piss off, fanboys, employees, family members or my coworkers but I will not stand by and let them get away with steaking more of my/our money.
Anyone with half a brain knows this will not force them to change and will just be money, OUR MONEY, tossed into the fire.
As tax payer’s we can’t keep bailing out every Company that needs help.In this case once again we reward bad Management.I am sorry but this is some screwed up shit.I made the choice about 3 years ago never to buy a Big 2.8 product again and this confirms I made the right choice,If we allow this to happen,what business will be next?It seems that the Airlines can’t get any Money from the Government, so why the auto makers? wait I know the answer!LOBBYISTS.This is truly over the top,and to say I am pissed off is being nice!
GM’s Rick Wagoner told Charlie Rose August 18th GM’s future is “very bright”.
If taxpayers involuntarily finance the Detroit-3 without management changes they will head in the same direction and waste the money.
No.
Chapter 11 is the best solution for them.
A bailout by the govt. is just forestalling the inevitable.
I think people need to stop comparing this to Iraq, whatever one’s position is on Iraq. One could say billions for GM or billions wasted on lousy public schools. The topic here is the bailout sought by mismanaged bureaucracies called Ford, GM and Chrysler. There is no justification to give these clowns $25 billion (and it will be giving as they will not pay it back, will be “forgiven” by the givernment yes spelled that was intentionally as that is what it is: GIVErnment, as so much money is, besides what the hell is the government going to repossess? A bankrupt company, thousands of Cobalts? what collateral? old factories in run down neighborhoods?)
Wasting money on a war or a lousy school is no jusitifcation for wasting money on overpaid, mismanaged companies.
So what if they and their suppliers go bankrupt?
Call me cruel, but capitalism is creative destruction and survival of the fittest. Candlemakers lost their jobs when the lightbulb was invented, and demand for horses collapsed with the invention of the car. Even current telephone companies are collapsing with consumers going to cell phones. So what?
We have a better product now and less money wasted on obsolete crap. Laid-off employees will just have to get new jobs. Big deal.
I’m sure Rick will get a nice $40M bonus out of his hard work getting our taxpayer dollars!
As for competition…we are rewarding an industry that is no longer competitive…only way they can regain it is not from our money but from crash and burn and rising from the ashes.
We have a better product now and less money wasted on obsolete crap. Laid-off employees will just have to get new jobs. Big deal.
Except there doesn’t seem to be anything rising to take the place of the auto industry. I suppose that Honda/Toyota, etc. may build new plants here to take care of the demand – to some extent, but I’m sure a lot of the demand will be met by imports (as opposed to transplants) As far as I can see, we’ll end up with lower total employment.
Let’s see, I run a profitable, honest business and receive no federal support. If I mismanage my company, lose lots of money, go into huge debt, give employees wages way above market average and plenty of benefits, and then pay myself huge buckets of cash that is protected from bankruptcy, can I also get free federal money?????
Adub : “Laid-off employees will just have to get new jobs. Big deal.”
It is a big deal. Most of those who will suffer the loss of job/career, potentially homes and families had little influence over the circumstances they find themselves in. Who is going to pay for retraining? Who is going to hire a glut of laid off workers? Who is going to pay for their relocation to other states? Where is the tax money to maintain public infrastructure going to come from?
Only the evecutive and board will be laughing all the way to the bank.
To “give” a huge chunk of taxpayer money to the auto companies that have squandered billions over the last few years in inappropriate and questionable decisions seems like a good solution to the problem. Sure, make every American an involuntary and uncompensated partner in companies whose futures are close to/already in bankruptcy.
What a great idea. Wish I had thought of that solution.
Americans could complain but look how good it has done in stopping the Iraq war.
Bend over it’s coming and it’s going to hurt bad.
Adub
OK, You are cruel.
Wait till your turn comes, then we will see how you feel. Don’t know what you do, but you may be involved and not even know it.
Without a bailout, yes, it will be ugly. But it probably has to get worse before it gets better.
With a bailout it will just be throwing good money after bad. The Wagoners of the world will still get their bonuses and golden parachutes. Only now it will be your money, not just stockholder’s money.
Free enterprise for you and me, socialism for the corporations. Just the way they like it.
They’re always willing to take the profits, but when the chips are down they come whining to Uncle Sam.
Hey, it’s either capitalism or it isn’t.
hltguy
“There is no justification to give these clowns $25 billion”
Assuming this proceeds, they will NOT be given 25 billion dollars. Your government would guarantee loans for them, the funds would come from banks and other sources of cash. Think of Uncle Sam as the loan co-signer. Just like the Chrysler loan guarantees granted back in Lee Iaccoa’s day.
The government would only get stuck if the companies defaulted. Any chance of that happening?
I run a profitable, honest business and receive no federal support. If I mismanage my company, lose lots of money, go into huge debt, give employees wages way above market average and plenty of benefits, and then pay myself huge buckets of cash that is protected from bankruptcy, can I also get free federal money?
No, because your business failure won’t impact that many people. The complete failure of GM or Ford would create a lot of harm to a lot of institutions at many levels.
There’s just no comparison. Excepting any political shenanigans, bailouts aren’t done for the sake of the recipients but for the sake of the donors. It’s a matter of not cutting off your nose to spite your face.
That being said, I seriously doubt that a plan of this sort will get much federal support. With the financial system in crisis, there simply isn’t enough money in the treasury to support it in the event that the loans default, and GM’s financial statements suggest strongly that GM would default very quickly.
This plan could ultimately backfire for GM. The federal government may end up doing a hybrid of the old Chrysler bailout with a twist of a Bear Stearns, by selling them to outside investors who will contribute new equity in an amount sufficient enough to effectively cover the federal loan guarantees.
In this scenario, the feds would protect themselves with at least some of the equity, and protect the lenders with their guaranties, so the risk ultimately goes back to the investors. The investors would be highly motivated to make this succeed, so Mr. Wagoner should probably prepare his resume, as his services will no longer be required.
Who is going to pay for retraining?
The individual will, it’s their responsibility.
Who is going to hire a glut of laid off workers?
That is how new industries get created, what happened to that training they just got.
Who is going to pay for their relocation to other states?
The individual will, it’s their responsibility.
Where is the tax money to maintain public infrastructure going to come from?
That can come from the $25billion we aren’t wasting on the Big 2.8 if it needs to, but I bet new businesses and the companies created from the ashes will pick up the slack.
Maybe you should quit thinking like we live in a socialist nanny state and remember that people need to take responsiblity for themselves.
If we quit propping up all these poorly run companies it would give a chance for the better run more competative ones to take their place.
When does any government “fire three of four layers of management”? Doesn’t happen, never will, one of the reasons the U.S. is going bankrupt.
That’s not the problem – you can look at your elected “un”conservatives who have reduced the income while increasing spending over the last 7 years. It’s not rocket science – they inherited the biggest surplus this nation had seen and within the first year reduced it to the largest deficit that just keeps on growing.
I’m not for bailing them out, but you can be damn sure, irregardless of what McCain has said, that he will be bailing them out and smiling the entire time. He can’t keep stories straight nor remember how many houses he and his wife own.
I say structure the payments thus:
$1M upfront to develop hybrids
$15B available to the first company to make a profit for one rolling 12 month period.
Oh the bleeding hearts let me see, If a small business with 10 people goes under, the impact on those people is less then a large Company that may have 10,000 goes under? we should just bail out every business that can’t make it on there own.This is not what free enterprise is about.
How about a massive federal infusion of newly-legalized immigrant labor to bail out the Big 2.8? The fed sure seems to have little problem with that kind of subsidy!
GM should prepare a charity solicitation package for all of their employees and they can all go door to door, soliciting tax free contributions to keep the lights on and the doors open in their plants so they can keep grinding out cars no one wants. They could get a big poster of Rick Wagoner with pleading puppy dog eyes, saying Give Money. If they are going to be a charity then they should have do like all the other charities, along with the salaries and perks of the principals available for all to see.
If they can raise the money they need more power to them.
DPerkins: Great, the taxpayers will be co-signors on $25 billion in loans to poorly run companies, and per the article payments may not have to be paid for five years. I really hope you do not believe that such loans will be paid back by the companies, really? Like I said earlier, what does the taxpayers receive if the companies default, a parking lot full of Cobalts?
Pch101: I understand the difference, however the point was made that those in business, large or small, should not have to pick up the tab for those who can’t run their businesses properly. Just because more people “will be hurt” if GM or Ford goes under is not justification for tapxayers bailing them out. There are no guarantees in employment, if the company you work for goes under, then you have to seek another job. You say the feds would protect themselves with “equity”, what equity? GM and Ford owe far more than they are worth now, another $25 billion does not change that fact, or the fact that fewer people are buying their product. You can be assured the taxpayers will never see the money again.
“Wait till your turn comes, then we will see how you feel”
My time has come more than once, not because of a layoff, but various other exigencies. Not a lot of support, apparently I wasn’t a cause, just some nonunion shlub up against the wall.
It’s called creative destruction, there’s nothing to be gained by life support for failing businesses.
Autoworkers are not a protected species.
If a small business with 10 people goes under, the impact on those people is less then a large Company that may have 10,000 goes under?
Yep, that’s a statistical fact. It’s a bad aggravating to see that people such as Rick Wagoner have that much leverage to hold over our heads, but in fact, they do.
we should just bail out every business that can’t make it on there own.
No, we should only bail them out if their failure would cause us more harm than the cost of the bailout.
In this situation, it seems likely that GM would get a heavily structured bailout, that Ford will just get loan guaranties without all the strings attached, and Chrysler gets nothing and likes it.
This is not what free enterprise is about.
Free enterprise requires employment, a functioning credit system and a credible stock exchange. GM’s complete failure would put a bullet to all three.
A bailout would be our attempt at a bulletproof vest — for us, not for them. If it happens, I can only hope that the feds manage it well enough that a GM failure would blow back onto new investors, instead of on the taxpayer.
Ford is in better shape, and probably doesn’t need quite that much hand holding. Cerberus is going to have to suck it up and figure it out on their own.
This in response to the TTAC article about the American Auto Industry asking for loans from Washington:
It is a shame that the general public does not know the truth about cars in America and what the true cause of the problems are in Detroit. Everyone not associated has an opinion and they also have something else that everyone has and you know what it is. But the truth has been hidden for so long it is now time it comes to the forefront. You want to know what the real problems are in the American auto industry? It is spelled U N I O N or U A W! Yes, truly, there was a time when the union was needed by every person laboring within the auto industry but that need has long since been fulfilled and the unions had to do to something to make themselves appear to be needed so they fought the industry for years until they finally have reached the point where they are now killing the very industry that kept them alive. Look, people are working in the factories making $25 and hour to sweep and mop the floors. All the hourly work no more normally than about five hours a day if that much. I know when I left the industry they were only working four hours per day and that was just about plant wide. In addition, they have healthcare coverage that should be the envy of every American including prescription costs far below anything believable in this day and age. All of that has driven the auto industry into a position where they can no longer fight to survive against the foreign companies not affected by the unions and not having to face an eye opening amount of money paid out before one car rolls off the lines just to keep the union people working. Oh, I see. You think that is the fault of the auto industry and they should have told the union “No”. Well, you see the American auto industry companies are civic minded and patriotic. They know the effect of the union going on strike for six months or more and what it does to the country as a whole. If the American auto industry goes down, the country follows. What do you think is the problem in America today? It is all of you who believe you are going to turn your back on the American companies by buying the foreign cars and when you do that very thing, you ultimately take a vast amount of money outside of this country where it is lost to the country as a whole.
Unless you are economists, you probably do not understand the effect of the number of Americans today buying foreign cars whose true quality levels are no better than ours. There are billions of dollars spent every year in the auto industry as a whole for something called R&D. When the foreign companies spend this money for their cars, it is in their own country. When American auto industry companies spend this money, it is America. When parts are needed for American auto industry cars, they are mostly made in America whereas the foreign companies suppliers are in their own countries and not America. When you buy the foreign cars, the profit for those cars goes to the country of ownership for the company and so it leaves America. The foreign companies pay less in taxes than American companies and surely you do know where the tax money goes right?
If you had spent 30 years in the auto industry as I have, you would have seen all of this with your own eyes and would have experienced it and you know the American companies have done everything possible to keep on top of things and stay on top of the market share. So, now we have reached a point wherein the unions are driving the American companies out of business which is why you see so often in the paper headlines like “Company X and the UAW sign agreement” instead of “UAW threatens strike”.
So the day has now come where the powerful American auto industry has become so weakened they are on their knees begging for help from Washington. Why not? Washington opened the door for the foreign companies to bring their products into our country plus you, the America car buyer have turned your backs on the American companies and are buying the foreign products which cripples the American companies even more who are fighting to survive while having the union strapped to their backs. How many of you know how vital the American auto industry was during WWII? It was the American auto industry that shut down making cars and trucks and made military equipment that allowed this country to survive and win this terrible war. Let us suppose that the American auto industry goes completely under. The very first thing that happens is hundreds of thousands of your fellow Americans lose their wages plus all the retirees that spent decades in the industry lose their retirement pensions. Just think about that for a moment and put yourself in their shoes. You have worked in this industry for 30 years or longer giving them all your blood, sweat and tears. Believe me, if you were a salaried employee without union backing, you gave your blood, sweat and tears. I have seen years go by where no one was allowed to take more than one day of vacation at a time due to the workloads on us. So finally you reach the point where you can now retire. You have been retired for 10 years receiving your monthly pension checks you were promised and you also put money toward and you also get your social security checks once a month. Then suddenly the auto industry in this country shuts their doors because they just cannot survive any longer against all the costs put on them by the union plus all their fellow Americans who turned their backs on the American industry and finally they are gone. When that happens, so goes the penions every month and what little healthcare insurance we have left. Now we have to buy our own only we can no longer afford to buy it because it cost about $600 a month to replace what we had and we are only making $1,500 a month on social security. We have other expenses to pay like $200 in gas to drive to the kids to see our grandkids and another $200 to get back home. And, believe me when I tell you by the time you retire after 30 years in the auto industry, you have been under so much stress for so long it has eaten your body away and all you do is go to doctors and these doctors want $100 every time they see you for 15 minutes.
So sit back and laugh because you know what; what goes around comes around so as you sit back and laugh at the American auto industry and turn your backs on the companies that helped make this a healthy and wealthy country for all who live here, when those companies go away, it will not be the foreign companies who step up and take care of you because they have their own to take care of rather than YOU who they do not care about except when it is time for you to buy your new vehicle. So when you walk into that showroom, take a moment and think about how many people you are depriving when you buy that foreign car rather than stepping up and helping the companies from your own country who have done so much to further this country that you live in and all the people who will suffer just because YOU purchased a foreign car! It is used to be in this country that we were concerned with all, with everyone and everyone’s welfare but now we just worry about our selves and what we want rather than what we need to do. This is little feeling of community ownership any more because everyone is out for themselves rather than for the whole good of the whole country. This is sad and believe me, you will pay for it. You may have it made now, but the more you deprive others by your actions of doing things that are essentially you turning your back on others to help out by buying an American vehicle, the more you will suffer somewhere down the road. You all need to think about this long and hard before you laugh and turn against any more help for Americans, American companies and the country of America! Let me tell you one more thing: Japan swore they were the bitter enemy of America and that eventually they would overcome us! They also said if they could not beat us in the field of battle, they would beat us economically and you help them to defeat your country every time you buy one of their products! I sincerely hope you have as good of a life as I have had but I seriously doubt that you will because I firmly believe when the American auto industry goes down because of so many Americans buying foreign products when it is proven and evidenced by JD Powers that American cars are the equal of any foreign car you will eventually suffer because when the hundreds of thousands of Americans can no longer buy anything because they have lost it all when these companies closed their doors, your company will be in trouble and hundreds of thousands of you will also lose your jobs and income because it all trickles down.
AWESOME
All right, I am not a Big 3 fanboy, dont own a domestic car, but I do however live in the Detroit Area. Things have been so bad in Southeast Michigan for so long, (not for me so much, but a large portion of the population is associated with the auto industry in some way), this is really the shot in the arm the region needed.
All you guys screaming about misuse of tax dollars….PLLLLLLEASE. There isnt a congressional district in the Country that hasnt gotten its fair share of pork. Instead of a bridge to nowhere, the big dig, rebuilding an unsustainable city devastated by natural disaster, etc., Detroit gets low interest loans. Who knows, the loans may even get paid back.
People in Michigan, Ohio, Indiana and any other auto industry heavy regions pay taxes as well. Shouldn’t they get their fair share of Pork? What makes one group more deserving than the next?
The way I see it, we had this coming. I know many of you and this publication take great joy in the demise of Detroit, but there are actually lots of people effected by Detroit’s downturn. I am not talking about a bump in the road of life, I am talking about tire shredding, rim bending potholes. Is it really such a bad thing to try to rescue American industry? Or American lives?
I am sure any one of us can think of a hundred things the government spends money on that is more wasteful and less noble. You guys arent the only people who pay taxes, so dont sound so outraged, your handout from Uncle Sam will be coming in short order if it hasnt arrived already. Right now, its Detroit’s turn.
Pch101: Free Enterprise also requires the masses have spending money to buy the products and service to keep the free enterprise system afloat and growing (for more job creation, more tax revenue etc.) Spending tax money to support inefficient, poorly managed businesses does not create more jobs or add to the tax base. The fact is if GM goes under, other companies can sell cars and those displaced by GM can seek employment with the other car companies. The more our government pisses away on billions in bailouts, the less money the masses will have to spend, thus the negative impact on the “free” enterprise system.
All the massive bailouts, loan guarantees and direct taxpayer subsidies in the housing, steel, airline and ethanol industries have done wonders haven’t they.
however the point was made that those in business, large or small, should not have to pick up the tab for those who can’t run their businesses properly.
This is not a religion with a Ten Commandments of moral rights and wrongs, but a matter of self-preservation.
Most of us couldn’t care less about Rick Wagoner keeping his job, pension and company car. However, the financial system and government do care about this the risk posed by this one company tanking the party for everybody else.
Bailouts are few and far between. For the most part, the bailout system consists of Chapter 11 bankruptcy, which allows for a fresh start. But in this particular case, that cure would be worse than the disease, hence the motivation to go with the exception (bailout) instead of the rule (bankruptcy protection.)
You say te feds would protect themselves with “equity”, what equity?
As I noted above, I doubt that the federal government would guarantee loans to GM unless it also called for new outside investors to contribute new cash to the company.
Believe it or not, there are people in the government who aren’t stupid. The feds will look at GM’s operations and balance sheet, understand that the operations are in trouble, and tie up the deal with conditions prior to contributing their money (or more accurately, their guarantees.)
Government money more often than not comes with strings attached. They can and do pay attention to see whether others will be absorbing a piece of the pain. They might prove me wrong, but I doubt that GM would get anything more than a nominal package unless there is new money being contributed from another source.
So how will Europe (the worlds largest economic block) respond to a US bail out? It could fine the European arms of GM and Ford or put tarrifs on US products. Or maybe Europe will nationalise GM and Ford Europe and auction them to the highest bidder. Bailing out GM, Ford and Chrysler may not be that simple.
Mr Indy: Great we bailout the inefficient auto industries. I seriously doubt they have done everything then could for the past thirty years to stay on top, please. Yep, write that’s it patriotic to buy the products of GM and Ford to support the retirees of those companies while those very companies are offshoring the manufacturing of their product as fast as they can. Let’s see, where is the Ford Focus built? Oh, Mexico, that’s right. How about the Fusion? the Astra?
Let me ask you this, where do we all go when the U.S. itself can’t pay its own obligations? We are all screwed then. Have you noted the current deficits are government is running? Who is going to pay for Social Security, MediCare etc. You have spent thirty years in the auto field, I have spent twenty years in the medical field and I can tell you Medicare is not going to last much more than decad or so more, it is going bankrupt quicky and the baby boomers have not really hit the system yet. Why, because of hugely wasteful spending and an ever expanding sets of rules and bureaucracy, and the sheer number of sould hitting the sytem, legal or otherwise.
So, bottom line, the union members of the auto companies have had a long, good ride, as have the highly paid management of the corporations. The public owes them no loyalty. The customer spent their money and bought the product and now the public is turning its back on the product being offered. That is not the taxpayers responsibility.