The Auto Bailout is beyond a waste

[Taverner]

Look, if we're just going to give the Big 3 the money, then just fucking do it, OK? We are wasting more time, more money, more energy discussing this incredibly stupid idea then we would have if we just stopped, took out the cash, and just left it on GM's doorstep in a paper bag.

The bailout won't do any good. It will take more than $25B to completely overhaul our auto industry. And that's what is needed. Look at plants in Japan, Korea, China - they all have current robotic technology. And guess what? Their workers make more than ours, markets adjusted.

Its not about, and has never been about greedy union workers. They took a knife in the back in the 80's during Reagan and never recovered. The UAW has been making concession after concession since then. They don't make $80 an hour, even the ones who got in before the 2-grade system. Today, you can expect something like $14-$20 an hour - and that's not exactly a living wage is it?

So honestly, I say we kiss off the money - just say bye bye - its not coming back, and neither are the big 3. Sure, maybe some genius will take the $25B, use it as collateral for a loan, get the right amount of money and then modernize our auto industry. Then take the remaining American cars and melt them down and make new cars. Make all those fucking space age dream cars that run on french fry oil. Outdo the Japanese Big 3, and make cars that EVERYONE wants. Cars that do 0-60 in 2 seconds at 100 mpg.

Should we give them more money? What - so they can come out with the new American dream car, a modified school bus that gets .24 MPG? But - - but it has a machine gun mounted on top!!!!

But don't expect a band aid to save the world.

[Idealism]

1. You should really read up on Automobiles and production

before you go making horrendous generalities about plants in Japan to be superior to plants in the US.

There are so many things wrong with your statement that I don't know where to begin, but it is obvious you bought into Senator Shelby's memo that they will somehow never return to profitability. Heckuva job

[Taverner]

2. Examples then

If you are so much more educated than me, then show me links

Until you show me proof that our plants are just as good as the Japanese Big 3 (and I'm not talking about contractors like NUMMI in Fremont)

[Idealism]

8. Well for one, the most technologically advanced plant in the world

is a Ford. Its in Brazil because of the high cost of labor in this country (which Japan isn't on par with). Simply put, it is http://www.detnews.com/apps/pbcs.dll/article?AID=/20070822/AUTO01/708220407/1148">vertical integration at lengths not seen before anywhere.

But this is in a foreign country, wah!! Alright, here is the Harbour Report on Manufacturing that ranks Chrysler workers tied with Toyota workers as the most efficient in North America (foreign plants, as well).

[Taverner]

13. You're just showing me what I already know - that US workers are (some of) the best

And I blame all that efficiency on the worker, not the technology.

[Idealism]

28. So wheres the problem here?

There are trade barriers that make it harder to GM, Ford, or Chrysler to sell into the 2nd and 3rd biggest auto markets on the planet. Tariffs on whole automobilies into China are around 22%, for car parts its 14%. For a whole car or part into the US it is 2%. Free trade at work...

Take into consideration legacy costs, which foreign makers hardly have any of. Honda has less than 2,000 retirees in the United States currently who receive benefits from them, GM has over 250,000 by themselves, Ford and Chrysler have a substiantial amount too. The fact is, Japanese car companies cannot retain profitability like this unless they don't employ many more workers in this country because in 70 years they will be having the same problem that the Big Three are having now. Even WITH all these problems however, if the government were to step in and pass universal health care, it would cut off about 20% of the compensation that Detroit would have to pay per worker per hour. Problem is fixed right there. I'm optimistic that we can accomplish health care, maybe not right away, but the entire world is in a recession and every country's auto makers need help and are going to get it. China, Japan, Germany, Sweden, France all have deals in the works to save their domestic industries in these hard times because they see the importance of manufacturing.

[Taverner]

33. The problem is that dickwad sitting in the comfy leather chair in the exec room

!

[Idealism]

41. You have to look at records

Mulally has done a great job at Ford so far, he was handed the company in 2006 by Mr. William Clay Ford and they were deep into debt and hadn't made a profit in two years. Mulally cut costs all while improving quality and now they are on par with toyota and honda in that deparment. Nardelli at Chrysler wasn't a "car guy" CEO, Cerberus brought him in to cut costs so that (I think) they could sell the brand off if they got approval. He did cut costs, shaved a few billion off the company in operating costs per year, but I don't think the guy is fond of the job nor has any reason to stay now that he did what he was supposed to; hes a numbers guy after all. Wagoner, I'm not so sure of, he has resisted developing greener cars because of the cost expense (although the federal government won't help with the expense). All of these companies were doing alright until the global recession by the numbers of units sold though. Heres a bit of a report on one of those CEOs I compiled that may open your eyes a bit.

[LisaM]

65. I saw an ironic bumper sticker on a Prius over the weekend

It said, "Support Free Trade".

Given the huge concessions given to Japanese carmakers to enter this market (not to mention government subsidies that helped Toyota make the Prius), needless to say, I was livid.

And this is in SEATTLE - where Boeing has lived off government contracts for years - not to mention that the city was built on the backs of labor - try to get anyone to listen to you. This has turned into the kind of place that makes me understand why people use the term latte liberal.

[hendo]

16. that ford brazil plant is awesome

All US plants should adopt that model. Vertical integration is the future of the manufacturing industry. No more outsourcing components because outsourcing them means that you might not be able to meet deadlines and that you would have to keep more material on hand.

[Nederland]

58. Yes it is

Too bad union rules in the US prevent that adoption.

[hendo]

59. Yeah

it really is a shame. Thats one example of a union getting in the way of success.

The UAW should really stop their opposition to vertical integration. Maybe if they would have allowed vertically integrated factories, they could have saved a lot of American jobs.

[Royal Oak Rog]

3. So I should listen to your giberish

and just discount everything that I'm hearing from the guy I worked for the last 2 years to get to the presidency? Because he sure doesn't agree with your nonsense.

[Taverner]

4. So you think we can save big auto on $25 billion alone?

Honestly?

Is that what you're telling me?

:rofl:

Oh man, some of you folks make me laugh - thanks for the good one!

Oh and BTW...the guy we both worked for and elected still hasn't made a decision on the auto bailout. He knows it will be throwing sand into the Grand Canyon with a spork, but he's smart enough not to say that publicly.

[Royal Oak Rog]

6. Hey Einstein

Obama said he's commited to manufacuring in this country by the way of the automobile. I don't assume that 25 billion will be all that's needed, but I do assume that he's not lying to me. I also assume he has a much better handle on this thing then you could ever hope to.

[Taverner]

9. "commited to manufacuring in this country by the way of the automobile" doesn't mean

Handing the suits a big wad of cash and saying 'next!'

And Obama isn't doing that, like your oh-so-fucking intelligent plan does.

Hey - if you think the CEO's are so great at running our auto companies, why didn't you support their decisions during the last election (they all, every one, supported McCain - they know who signs their checks)

[Royal Oak Rog]

17. Now you're just flat out making things up

Obama never said he was against the bail out. What he did say is that the congress is doing what they should be doing, holding the big 3's feet to the fire before they get the bail out.

Also I'm not for the current CEO's of any of the big 3 , who I am for are the 5 million potential jobs that go up in smoke if somthing isn't done here.

Why don't you admit to what Obama is for? A manufacturing base in this country.

You talk more nonsense then I've heard in a long time.

[Taverner]

19. Jeez can you even fucking READ????

I never said Obama was against the bailout

I said he is moving cautiously and not making snap decisions

[hendo]

46. Isn't it fun

when someone tries to attack you before they even read what you wrote? Ah, the joys of the internet.

[Luciferous]

5. All of these bailouts are a waste nt

[Peacetrain]

12. I thought you said your Dad worked for Chrysler?

[Tierra_y_Libertad]

7. Detroit Fairy Tales - Financial Times (Germany)

http://watchingamerica.com/News/14596/detroit-fairy-tales/

The truth is, what would help the manufacturers most – a recovery in the automobile market – isn’t on the horizon. Industry experts are predicting further losses in 2009, both for domestic and foreign markets. A recovery isn’t even foreseen in 2010. During such crisis conditions, anyone depending on alternative power systems to save the industry is bound to be bitterly disappointed. Car manufacturers need at least three model generations to perfect such new technology to the point of mass acceptance. That was the historical case for the automatic transmission, for the new electronics of the 1990s, and it will not be any different for fuel cell and battery power now.

If the United States wants to maintain at least a core vehicle manufacturing capability, the government has to remain in the background, patiently pay the bills and push through industry restructuring. Developing new technologies swallows up billions of dollars. Taxpayers must make that investment, even though Ford and GM may not sell their first electric vehicle for years. At the same time, the government has to offer incentives in the energy arena in order to build the necessary infrastructure. All of this takes time. If all goes well, the first electric production models might appear on the market in ten years or so.

In order for the Big Three to actually begin their taxpayer-financed restructuring, the UAW must also make big concessions. They have to make compromises that will result in production costs comparable to those of their foreign rivals in the Southern states before they can once again compete.

[hendo]

20. The problem with that is

that these are not new technologies. Electric cars have been around for almost 100 years. In fact the first electric car was built in denver in I think it was 1911.

And it a lot of the research into alternative fuels is not being done by the Big 3, but on college campuses and in private research institutions around the world.

[Tierra_y_Libertad]

36. I think the article is overly optimistic.

However, I do think it does point out what is going to be expected of us. That we continue to pay for a dying (if not dead) industry for a long time with no real hope of it ever being resurrected. The reason being that it is "too big to die".

I find the whole concept of bailing out the Big 3 to preserve them is an exercise in pissing in the wind. But, if we're going to have to dole out the money, they should, at least have the decency to tell us that it's a stopgap measure that they're pursuing because they haven't the foggiest notion of what else to do.

[hendo]

45. I know what we should do

break the big 3 down into their component brands and let them compete in the ultimate auto manufacturer death match. :)

That and they all need some serious restructuring. There is no way that the big 3 as they stand today can remain competitive.

[quiller4]

66. I think that the bridge loan ought to be granted

but that should be followed up by a Manhattan Project type effort to develop new propulsion technologies. The R&D ought to be government funded and offered to all three US automakers. We have a national interest in developing the new technologies. Let the government fund that.

I you read the current UAW contract you will discover that by the end of the contract, UAW workers will be on par with their rivals in the Southern states. News reports continue to overstate UAW earnings and understate wage and benefit expenses at the Southern plants. They also never mention the huge subsidies southern states granted the foreign companies that range from outright land grants to tax waivers.

Even though times are tight now there are consumers who want to buy new automobiles, have great credit ratings and still can't get financing. As soon as the credit market eases up a bit, these people will be buying autos.

[Peacetrain]

10. We bailed out the financials..we are making a loan to the car industry..

[Peacetrain]

11. Come to think of it.. why are we not bashing the bank owners,, and telling those tellers to take

a pay cut.

[Taverner]

15. How about threatening to nationalize the banks?

Japan did that once, when they were besieged by bailout requests. Suddenly, the banks proved to be financially viable! Surprise!

[hendo]

21. tellers in a lot of banks

make min wage.

[Peacetrain]

25. I was being sarcastic

:)

[hendo]

29. :)

indeed.

[Idealism]

30. If by minimum wage you mean $10/hour?

Thats what WaMu, BoA, and Wachovia tellers get here, at least thats what I was offered a year or so ago when interviewing with them

[hendo]

47. the tellers where i live make min wage

or at least thats what they paid me when I was a teller.

[Idealism]

49. They shorted you man lol

[hendo]

51. yeah

there is a reason why I don't work in the banking industry anymore :)

[Taverner]

14. Its free money day at the treasury! Now the Major Networks (TV) want bailout money

http://www.variety.com/article/VR1117996347.html?categoryid=1019&cs=1

[Tierra_y_Libertad]

18. A loan. To be paid back how, and when?

Based on what collateral?

[Peacetrain]

22. The same collateral that got Iaccoca the loan to upright Chrysler

[Tierra_y_Libertad]

24. Which is?

[Peacetrain]

26. Which is what

[Tierra_y_Libertad]

31. The collateral. Also, how, and when, will the "loan" be paid back to us?

i.e. When I bought a car I was required to have good credit which required collateral (i.e. my house). I was also required to sign a contract telling me how I was to pay back the loan and when the payoff was due.

So, how are the big 3 going to pay back the loan, and when can we expect full repayment?

[Peacetrain]

34. The CEO;s first born..

[Peacetrain]

35. or corporate bonds... google is a wonderful thing

[Tierra_y_Libertad]

38. Which will pay us back how and when?

And, if they default on our loans to them how do we get our money back?

[Peacetrain]

43. got to wall street journal.. in search type restructuring

n GM's conference call Tuesday, Mr. Henderson said GM is seeking $12 billion in loans and an additional credit line of $6 billion.

In return, GM would be open to giving taxpayers warrants for company stock, a senior position among its creditors, and a promise to pay the money back around 2012. Mr. Henderson said GM believes its North American operations can break even by that year.

[Tierra_y_Libertad]

48. Around 2012? Based on his promise?

He "believes" that GM can break even by that year?

If that is the case, and his credit is that good, why is he not applying to banks for the loan? And, if he is, why aren't they making the loans?

I have no doubt that the Big 3 will be "bailed out", not to save them, or in a vain hope that the taxpayers will be paid back, but because the politicians have to be seen as keeping them alive and because, in fact, they are "too big to fail".

What I would like is for them to admit that we'll be paying for it for a very long time with no hope that they will ever achieve anything more than a small (if any)part of the market.

[Taverner]

39. Did Chrysler pay us back then?

[Peacetrain]

42. yes they paid back all the loans

[hendo]

50. Iaccoca was far more trustworthy than the hacks that are in charge now. NT

[Selatius]

37. I think the collateral should be the firms themselves, everything. The equipment, buildings, etc.

If they default, the federal government will own it, and it should then turn it over to the workers, who will run the firms the way they see fit.

[Tierra_y_Libertad]

40. The trouble with is that is the certainty of the default.

We are going to have to give them anywhere from $15 - 35 Billion that they certain to default on.

While I like the idea of worker ownership, I don't like the idea of blackmailing us into handing out corporate welfare to attain it.

[Selatius]

44. See, that's my only hang-up as well.

In a normal situation, when a person goes to a bank for a loan, the person puts up collateral, something he owns. If the person defaults, the bank seizes the collateral and can auction it to recoup the losses. Usually, there is still an amount owed even after the auction. Some banks choose to continue to require the person to pay the difference, while others will simply write it off as a loss.

If GM, Ford, or Chrysler were three people, very few banks would even think about giving them a loan. They would be allowed to fail. Unfortunately, if you employed a million people and your firm failed, a million people would be laid off. A city like Detroit and surrounding cities would be devastated.

[Tierra_y_Libertad]

52. I agree. They will get the "loans". But, they're for paying for a funeral not a resurrection.

The Big 3, are indeed, "too big to fail" because of the devastation to an already devastated economy. What I find insulting is the illusion that giving them money is actually going to restore the Big 3 as viable contenders in the industry.

[Selatius]

53. Unfortunately, unless they sack the leadership as a condition for the loans, I think they will fail.

The problem is insulated, entrenched management and a corporate culture that, for some reason, is broken or even averse to change and creativity.

[Tierra_y_Libertad]

55. Agreed. But, the real problem is a worldwide recession brought on by the bosses.

The corporations, especially the financial corporations, focused only on quick profit and ignored the consequences of massive debt.

The fatal fact for the Big 3 and their satellites is that nobody has the money to pay for their products, and won't have the money for a long time to come.

The credit cards that we the people, and now the corporations and government(s) have been living on are maxed out.

As I see it, time and a lot of misery, are what will finally end this. Hopefully, this disaster won't compound into wars as it has throughout history.

[hendo]

23. based upon all the worthless autos that they can't sell

and all of the factories that they are about to abandon.

[LanternWaste]

27. This is one of those things...

This is one of those things that I'm not at all sure of either way. It may help, it may not. It may save the Big 3, it may not.

This was, for all intents, the same answer I gave during the AIG/Financial Industry bailout, and I'm still not sure one way or the other.

I've certainly heard some convincing arguments (not many at DU though, we seemed to have gotten somewhat dogmatic about it) from both sides of the aisle, but the best I can do is remain somewhat agnostic about the answer-- if for no other reason than I barely understand the problems.

Environmentalism vs. Unions vs. American Workers vs. The Market vs. Management vs. Quality vs. etc. Too many variables, too many unknowns, too many macro-economic issues for me to get even close to a beginning on what the problems are and how to solve them.

But lately, at least on DU, it seems to have gotten to the point in which one is either Anti-American or Anti-Quality-- and both of those answers seem a bit too simplistic for a problem of this magnitude, even for me. :P

[hendo]

32. I am anti-

throwing good money after bad.

[Idealism]

54. I hate that statement

It makes it sound like the Wall Street bailout was "good money spent" or some nonsense. Fact is that theres 1000 times more scrutiny being put on the automakers than on the wall street and the double standard is appauling

[hendo]

56. the Wall Street bailout was not "good money spent" either. NT

[PVnRT]

57. $20 an hour isn't a living wage?

That's over $40 large a year, more than my wife with an M.S. in chemistry makes teaching high school.

[hendo]

60. Not to mention

that your wife probably works longer hours and is not eligible for overtime.

[Regret My New Name]

64. Teachers get screwed...

I agree that $20/hr is a living wage though... Although, I'd think your wife would get more.

[endarkenment]

67. And your family would be hard put to live on that

were it not for your income. So no, it is not a living wage. It is now the hazy distant past, but when I was growing up, middle class families did well on one income. Now we struggle on two. Basically they've cut our pay in half.

[Greyhound]

61. The way the issue is being discussed and the plans considered make me lean

toward your view.

The industry and it's jobs can not only be saved but grown, the problem lies in that the plans we get to choose from are designed to save the stock holders, not the jobs or workers.

In adversity, there is always opportunity.

[Taverner]

62. There's always a Bull market somewhere

Only, it may be in repossession companies soon...

[tammywammy]

63. Study: Automakers' failure would cost U.S. more than aid

Study: Automakers' failure would cost U.S. more than aid

DETROIT -- The collapse of two Detroit automakers would cost the United States government at least four times as much as loans to keep them alive, a new study says.

Taxpayers will wind up paying $66 billion if two of the Detroit 3 sink into bankruptcy and then go out of business, according to the report released today by the Anderson Economic Group, a consulting firm, and BBK, a business advisory company.

The firms compared the costs of bankruptcy with federal bridge loans aimed at keeping General Motors, Ford Motor Co. and Chrysler LLC running until they can retool and lower costs.

"The reality is that if the government doesn't provide support now, it will eventually provide it later,'' said Kriss Andrews, managing director of BBK's automotive practice. "It would be far better for the government to come in now under controlled circumstances to resolve the problem than in an uncontrolled circumstance."

The report was released as White House and Congressional negotiators iron out their differences on a $17 billion short-term loan package. White House Press Secretary Dana Perino told reporters that a deal will "very likely" take shape today.

GM and Chrysler say they need a combined $11 billion to avoid running out of cash by Jan. 1. Ford believes it has enough cash on hand to ride out the recession but wants a government-backed $9 billion line of credit in case the market worsens. The figures are part of a combined $34 billion request made by the three companies in survival plans submitted to Congress last week.

BBK, of suburban Detroit, and Anderson projected $16.4 billion in taxpayer costs stemming from a $30 billion government bridge loan.

A bankruptcy by two of the Detroit 3 would result in a near immediate halt of all automotive and components manufacturing in the United States and would cost taxpayers $66 billion in two years.

Andrews said federal and state governments would pay for a Detroit automaker bankruptcy through lost tax revenues, lower property values in cities with auto plants, dealerships that are forced to close and increased unemployment payments. Also, the federal government would be forced to honor retirees' pensions.

Patrick Anderson, CEO of the Anderson Economic Group in Lansing, Mich., estimates the failure of two of the Detroit 3 would put 1.8 million people out of work.

Bankruptcy would cost automakers at least $5 billion in fees, plus another $1 billion for lawyers, Anderson said. In addition, consumers would steer clear of automakers in bankruptcy, making liquidation more likely.

"Bankruptcy judges have a lot of power," Anderson said. "But they don't have the power to tell people who to buy a car from."

http://www.autonews.com/article/20081208/ANA02/812080288/1128