Shout Box

Who's Online
0 registered (), 16 Guests and 1 Spider online.
Key: Admin, Global Mod, Mod
Page 1 of 2 1 2 >
Topic Options
#41830 - 11/19/08 01:38 PM The Current Auto Bailout Debate
Daniel Online   content
veteran

Registered: 05/23/01
Posts: 1515
Anyone else with mixed feelings on this one?

I have no love for the auto companies. Those of us old enough to remember the late 70s have seen this movie before. The Big Three were warned that they should diversify their products, and they said they'd keep making big cars because that's what people wanted to buy. When consumer preferences changed, they had very little to sell and went into crisis mode. Sound familiar?

There's plenty of blame to go around. Bad management and overreaching unions have both done their parts. I've read (though I don't know if it's true) that Detroit couldn't have gone to smaller cars even if it wanted to because they just couldn't compete on price with foreign auto makers in that category. Since they couldn't make enough of a profit on smaller cars to make them viable, they had to make bigger ones. Still, it seems to me that the lack of innovation is astounding, both on the management and production level.

Yes, the government provided loans to Chrysler back in 1979 and made money on the deal. But there's a decent argument that the bailout did nothing to halt the long-term decline of the US auto industry, and that allowing Chrysler to go under might have spurred the remaining manufacturers to rethink and restructure their businesses so that they'd be in far more competitive positions today instead of continuing their disastrous business-as-usual model.

That being said, it seems to me that now would be a terrible time for car manufacturers to go into bankruptcy. The economy is bad enough and is going to get worse. More unemployment will feed into the cycle of lower consumer spending, lower sales, more layoffs, and more unemployment. How many jobs will be lost is under dispute; in addition to their own sizable number of workers, the auto industry points to the large numbers of jobs associated with their business and say that parts manufacturers, which operate on low margins, will close if they lose any single major customer. Others say people will continue to buy cars, just not as many US cars, so it's not as if all auto-related jobs will disappear.

My admittedly inexpert view is that the Big Three won't survive in the long run. So the question is whether using large sums of taxpayer money to help them limp along for the next few years, when hopefully the economy will be upswing, would cost us less as a nation than the effects of an industry bankruptcy that would make the present economic situation even worse. And I don't pretend to know the answer to that one.

Top
#41831 - 11/19/08 03:16 PM Re: The Current Auto Bailout Debate [Re: Daniel]
oenophore Online   confused
Carpal Tunnel

Registered: 09/24/01
Posts: 5962
Loc: 212 land
And I don't pretend to know the answer to that one.

As much as I’m itching to pontificate on this subject, the above sentence applies to me as well. I’ve recently read a book, one of whose sections describe how the UAW got so much from the US auto manufactures. It was basically ok until foreign competition, operating under a lighter burden, gradually sapped market share. Decades ago, I read John Delorean’s On a Clear Day You Can See General Motors. In that book he details how, as head of Chevrolet, he put more funds into inspection and decreased Chevrolet’s lemon percentage. By then, foreign brands were eating Chevy’s lunch and Delorean’s bosses insisted that he reduce spending on inspection in order to lower the price.
Many an observer, including UAW’s far-sighted Walter Reuther, said that the key to US competitiveness is to have government assumption of medical insurance, which almost all other industrial nations have and which burdens the US makers very heavily. It has been written that GM’s biggest vendor isn’t a steel or parts company but rather Blue Cross- Blue shield. It has also been noted that US auto makers support far more non-productive retirees than employees, while US-based foreign companies, relative newcomers, have far fewer retirees.
What to do? I read pros and cons about subsidized loans, loan guarantees, and suggestions that chapter 11 bankruptcy will allow makers to shed some costly burdens without totally upsetting things and get a fresh start. Again, I know no more than Daniel about how best to remedy things.
_________________________

Top
#41834 - 11/19/08 06:08 PM Re: The Current Auto Bailout Debate [Re: oenophore]
Mike Rawdon Offline

Carpal Tunnel

Registered: 11/29/99
Posts: 4275
Loc: Poughkeepsie
If keeping them afloat means they continue to feed American's self-destructive narcissism, while lobbying against every fuel economy and emissions improvement initiative, then I'm not that disappointed to see them go under. The US assembly plants of Mazda, Nissan, Toyota, Honda, BMW etc will add on a shift to fill in the volume, and the industry will continue to limp on. It sucks for the workers, yes, but buggy whips are still buggy whips.

Anyone remember "When mileage standards were adopted in the US, Honda hired 500 engineers, while GM hired 500 lawyers"?

My anecdote on US carmaker quality: a friend who I totally respected worked in Detroit at the automakers. He said matter-of-factly that GM didn't care what happened once a vehicle was out of warrantee. The Japanese OTOH design vehicles to last more like 200k miles, at least IME. The domestics I've owed turned into money pits after 100k miles.

Top
#41836 - 11/19/08 06:51 PM Re: The Current Auto Bailout Debate [Re: Mike Rawdon]
pedestrian Offline
Pooh-Bah

Registered: 08/05/02
Posts: 2244
Loc: a heavily fortified bunker!
at the end of the day, I think this boils down to whether politicians really want to leave the outcome up to an "activist judge"; one who might end up pursuing a solution that satisfies no-one and who doesn't have any authority to, for example, provision the new loans that could be necessary merely to help these companies emerge from bankruptcy... no, with Obama's connections to Big Labor there will be a bailout. Initially, it will probably happen on Republicans terms, since it needs to happen before Dubya is out of office. Therefore, the "strings attached" to the existing $25B will be shortened or snipped off entirely.

Top
#41837 - 11/19/08 06:59 PM Re: The Current Auto Bailout Debate [Re: Mike Rawdon]
Daniel Online   content
veteran

Registered: 05/23/01
Posts: 1515
 Originally Posted By: Mike Rawdon
If keeping them afloat means they continue to feed American's self-destructive narcissism, while lobbying against every fuel economy and emissions improvement initiative, then I'm not that disappointed to see them go under.


I agree that it's not a good use of public money for the long term to subsidize enterprises that are bent (or doomed) to self-destruction.

But I have two caveats. First, not everyone agrees that these companies can't clean up their acts and regain competitiveness. I'm skeptical on that one and am willing to assume that they won't.

But even if that's true, it doesn't resolve the question as to whether spending the money just to delay their demise until the economy is in better shape might help us get through these times with less long-lasting damage.

Top
#41839 - 11/19/08 07:06 PM Re: The Current Auto Bailout Debate [Re: Daniel]
pda Offline
addict

Registered: 08/30/01
Posts: 621
Loc: Bergen County NJ
How about spending the money to create an Auto Industry Health Care system, and then they could take that cost off their books, both for employees and retirees. Eventually, that system could be a model for a nationalized health care system.

Doing it this way would level the playing field somewhat with the foreign companies.

Top
#41841 - 11/19/08 07:23 PM Re: The Current Auto Bailout Debate [Re: pda]
Daniel Online   content
veteran

Registered: 05/23/01
Posts: 1515
 Originally Posted By: pda
How about spending the money to create an Auto Industry Health Care system


Will that be self-sustaining? Where will the revenue come from?

Another alternative is to take the bailout money and just give it directly to workers who wind up out of a job so that the can the funds to survive until the economy turns around. The impact depends on whose numbers you believe on job losses. $25 billion divided by 250,000--about the number of GM employees--is a pretty good chunk of change ($100,000 per), and that's assuming they all lose their jobs. But if the ripple effect causes parts manufacturers to go under which causes the other manufacturers to go under, then direct aid to workers doesn't seem like it would help much unless a lot more money is put into the program.

Top
#41849 - 11/19/08 09:47 PM Re: The Current Auto Bailout Debate [Re: Daniel]
pda Offline
addict

Registered: 08/30/01
Posts: 621
Loc: Bergen County NJ
Well - if it really equates to 100k per person, then I would venture to say the $25B would fully fund the health care plan by itself for at least 10 years and probably more. After that, we'll all be covered by HilCare.

Top
#41860 - 11/20/08 01:35 PM Re: The Current Auto Bailout Debate [Re: pda]
RangerRob Offline
Carpal Tunnel

Registered: 06/06/00
Posts: 3764
Loc: Ulster County, NY
I usually never get involved in politics other than voting. This issue infuriates me so much that I felt I needed to contactmy congressperson and tell them exactly how I felt about this, which is what I did. This is insane, the same companies who lobby for unchecked and unchallenged free enterprise are the first ones to run to government for help when their poor business practices get them in trouble. Let them go under. Something better will take their place. In order to fix something, sometimes you have to go through more pain, but the end result will be healthier.

RR

Top
#41861 - 11/20/08 02:29 PM Re: The Current Auto Bailout Debate [Re: RangerRob]
Kent Offline
old hand

Registered: 01/21/00
Posts: 1038
Loc: The Bayards
Rob, you and Mitt Romney apparently think alike.

 Quote:
IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.


From his New York Times Op Ed Article

Top
Page 1 of 2 1 2 >


Moderator:  webmaster 
Sponsored