The auto industry's $50b bailout plan should, by all accounts, be a fairly controversial issue. Detroit wants a re-do after chasing SUV profits off a cliff, but can't even guarantee that $50b will be enough. So why are industry pundits so unified in their support for the industry plan? To be fair, there is some opposition to the bailout plan among the chattering classes. Curiously it seems to be limited to John McCain, SUV-haters and everyone on Wall Street. Oh yeah, and TTAC. Meanwhile every buff-book columnist and "car-guy" commentator worth his junket airfare is parroting the same two basic arguments. First: it's not a bailout. Second: America, Fuck Yeah.
The "it's not a bailout" meme began when Jalopnik's Ray Wert went on CNBC's Street Signs and argued that the proposed plan was "just" loan guarantees. As in "not exactly the same as Bear Stearns." Within days of Wert's Clintonian parsing, Danny Howess of the Detroit News penned a column titled "Big 3's $50b Plea Is No Bailout".
Howes even lets an unnamed "industry executive with intimate knowledge of the policy discussions" make the crux of his argument. "We're not saying give us money. We're saying give us a reasonable cost of capital to invest in the United States. This is not a bailout."
In reality, the distinctions between Bear's "emergency line of credit," and the low-interest loans that Detroit is requesting are largely academic. Detroit is joining Bear, Fanny and Freddie in requesting that American taxpayers invest in their future when Wall Street won't.
Wall Street makes decisions on dollars and cents, but Washington runs on emotion and spectacle. A day late and several credit-ratings short, Detroit and its apologists fled for the last refuge of the scoundrel: blind Patriotism.
For Angus MacKenzie of Motor Trend, propping-up Detroit is nothing short of a matter of national security. "Think about it," writes MacKenzie. "If you know how to make a car, you know how to make a lot of other stuff — everything from air-conditioners to aircraft carriers." Later he dedicates an entire paragraph to straight-out assertion that "Manufacturing — auto manufacturing — is a strategically important business." In short, Detroit must be sheltered from competition, whatever the cost.
And with that, MacKenzie weaves Detroit's woes into the fabric of American economic decline. Like the subprime mortgage crisis, the downfall of America's "manufacturing– auto manufacturing" sector was the result of an economic "imbalance" he argues. Besides encouraging a blind investment in auto builders, this narrative also conveniently absolves Motown's CEOs of all responsibility for their situation.
This isn't overly surprising, as MacKenzie tends to side with Detroit wherever possible. After all, when times are bad, ad budgets get cut first. When Detroit does well, Motor Trend does well. But there's a big difference from reading MT fawning over sub-par Detroit iron and reading MT suggesting that taxpayers hand over $50b to the sub-prime auto business. Especially when we're told that if "even one" of the once-big three make it, "it will have been worth the investment. For America's sake."
Peter DeLorenzo of Autoextremist notoriety isn't afraid to call Detroit's predicament like it is. But when he's done admitting that even $40b worth of bailout is "mind numbing" and undeserved, he can't help but cop out.
Like MacKenzie, the specter of a general malaise– this time as a cultural decline– takes center stage in DeLorenzo's analysis. "We cannot come to the table in this new global economy only as… a people who have completely lost the ability to create or manufacture things… because once we lose that, then the day we lose touch with the basic fabric of our nation won't be far behind. "
But clearly we haven't lost our ability to create or manufacture things. After all, auto factories in America build competitive products for profitable companies every day. They just happen to have names like Toyota, Honda and BMW.
It's easy to equate giving Detroit money with helping America, but what exactly are we trying to save? These three companies which have struggled to make competitive products or turn a profit for decades. A $70m lobby gorging on federal pork, from the $1b PNGV boondoggle to the ethanol lunacy. The Chrysler Sebring.
The American "automotive sector" has not failed. Nor have Americans forgotten how to make stuff. The Big 2.8's plight is the simple, inevitable result of tragic mismanagement. Using tax money to enable them, promoting this policy, is not patriotic. It's a complete betrayal of the principles of hard work and fair competition, and the necessary balance of risk and reward, that made this country great.
So what if we don’t “own” the companies that build cars in this country? We don’t make televisions in this country either, and the world hasn’t blown up yet.
The fact of the matter is that Detroit has mismanaged itself into the ground, and it has been doing it for over thirty years. The companies can’t turn a profit, whether hobbled by legacy costs, poor product, bad leaders, etc. Giving them more money will only prolong the situation; their demise is inevitable at this point.
The Big Three are some of the last of the bloated companies left over from a bygone era where workers could be paid more than they are worth (a high schooler working an air gun is worth more than a college-educated powertrain engineer how?) and competitors were still crawling out of the WWII rubble. There is nothing to be gained from keeping them afloat.
Anybody that thinks a bailout is the answer should immediately go out and give a bum their life’s savings, because obviously they are deserving of it and need to be kept afloat even if they can’t manage their money.
I’ll even put the knife in and twist it: This bailout means that an American-owned company, run by Americans, staffed by Americans, with products designed and built by Americans, is inferior to companies run by foreigners.
Ed you have hit this one head on.
When Chrysler was bailed out in 1979, there was little other than Detroit car Mfg. in the U.S. Now, we have a healthy, robust other than big three mfg. base here in the U.S. So what this means to me is given no bailout we lose one or two of the big three. The remaining one becomes healhy and competes on it’s own.
As for the lost capacity, it just means that several more plants will be built by foreign nameplates to fill in the gap. The idea of importing the difference in lost Detroit production from their overseas plants won’t fly because of the exchange rates.
Also, when the air clears, a whole new (World) way of selling cars that last and have resale value will be sold at close to retail price. Yes, there may be less vehicles made, especially trucks which will never return to the prominence they once had.
It is just amazing to me that for more than 15 years the Detroit three have been dumping unprofitable cars on the American market in an effort to swamp the competitors.
The game is over with or without the bailout.
I would hope this (Federal loan) would not be used to keep overproducing and discounting more unwanted vehicles. If it was, then we might as well nationalize these three auto companies as uncle sam will be bailing on an annual basis.
Where is that thing about capitalism, that capital will go to the most efficient users and away from the inefficient who will disappear? That was only for lesser companies like Bethlehem Steel and American motors.
The big deal is that as we buy more and more from overseas companies and produce less for ourselves, we are transferring our wealth to other countries. It is easy to see that at all levels of society we are borrowing to meet our needs, whether it is at the Federal or state government level or in our own lives. We don’t generate enough wealth on our own to pay for what we consume, and the money we borrow is increasingly coming from other countries.
It may not happen for years, but as we become poorer and poorer, we become increasingly irrelevant in the world economy. It will get to the point where the lenders will say “enough” and our current way of life will collapse.
If I were a Japanese or German auto manufacturer, I would file a complaint with the WTO and start subsidising the hell out of my product on the basis of “what’s sauce for the goose is also sauce for the gander”.
This “little” contribution to Rabid Ricks’ and Bob Lusts’ pension plans ain’t a certainty yet. Not by a long shot.
Very good op-ed. Thanks for deconstructing the load of bull presented in those magazines. “Strategically important”? Come on, it’s not WWII anymore. Military equipment is so specialized that it’s built by completely different companies than the D3.
If it happens, the Americans will forever have lost the right to make fun of European welfare states. At least in Europe, the state helps the people, not the companies for the sake of some misplaced patriotism. By the way, I wonder what all those commentators drive? They should at least put their money where their mouth is and support the D3 by buying their products.
I’ve just come back from Amsterdam (it was very nice there) and I was watching TV and it was a show about the credit crunch and banks going under. An economist said (quite rightly) that “We need a couple of big name banks to go under without a bail out, in order to send a message to other banks saying ‘Manage your businesses better! Don’t rely on the government!\'”.
Likewise, the same could be said here.
If one of the big 2.801 were to collaspe, then you can bet your arse that the remaining two would get their businesses in order, quick smart, now knowing that there’s no pot of gold coming from the government.
For example: Let’s say Chrysler (that’s the most likely to fail first) goes under. The government says “Nope! No bailout for you!”. GM and Ford now have no outs left (to borrow a poker term). The only route left is to bring the business back on line with the meagre budget they have left. Now Ford could probably do this, considering that they still have a reasonable cash stash left and OK management. But GM would up a certain creek without a certain implement. And if GM go under, it’ll go under GLOBALLY. Delphi filed when they did, so they could spin off other divisions from the bankruptcy filing. Now this cannot be done under new laws in place. So if GM file, they take Vauxhall/Opel and Holden, with them! Mind you, by the time this scenario comes to play, GM will have burnt the majority of their cash (through “one off charges”). So, I’m willing to take a bet here:
If this scenario does happen, you watch the Board of Directors give Rick Wagoner and other managers a vote of no confidence and install new managers quicker than you can say “Chapter 7″…..
This country has largely devolved to the point where the only thing of any importance is insuring continued obscene profits for the elite (e.g., “Wall Street”, CEOs, and entertainers), and placating the masses with bread and circuses (i.e., low, low Wal*Mart prices and spurious entertainment). That is what business cares about. That is what the majority of the population cares about.
Government is supposed to fill the gap in areas where no other solution is possible. The sad fact is, in today’s America, there appears to be no other solution to a loss in infrastructure (manufacturing included), inability to adequately guarantee the well being of the people (healthcare), and other problems that rightly should not be the domain of government. So in spite of your intent, the phrase that “the taxpayers are investing where Wall Street won’t” does not hit me as an obscene phrase in this climate.
The system has gone haywire, and no one cares about the ‘greater good’. You apologists who insist that a few thousand people working for Honda or Toyota in a plant in the US is just as good as having a strong domestically owned industry are deluding yourselves. Is living in a landlord’s apartment as good as owning your own property? To you . . . apparently yes. You only focus on the fact that there is a roof over your head. It is not the same.
Similarly, the fanatics that insist that our ‘free market’ should be left to decide all for us are equally deluded. You care for nothing other than your bread and circus. *YOU* are the ones who have ‘drunk the Kool Aide’!
Call it rabid paranoia if you want . . . I don’t want to live in a country that is dependent on the rest of the world for my food and my very life. Sure, maybe the world will continue to meet my needs, as long as it serves them. But I would prefer insurance against the possibility that anyone — anyone — in the world may decide to side against us and cut us off. That Honda plant down south does not do much good if they decide to pack up the machines and ship them back over the ocean, and shutter the building. I don’t want to live in (or leave to my children) a country with third-world status who needs to beg for sustenance by bargaining only raw materials to the ‘powers of the world’ in exchange for the basics of life. Screw that.
Back to greed, and bread and circuses. ‘Wall Street’ doesn’t care about what happens in this country or to the people, as long as they make a buck. The population doesn’t seem to care if their neighbor starves, or lives on the street, or dies for lack of care . . . as long as they can buy their $40 imported Wal*Mart DVD player on their credit card. Someone needs to do something to *try* and secure (or more likely, re-build) a future for this country. If it means a few investments in the place, I’m all for it.
From a 2005 editorial by Pat Buchanan:
“To the economic patriots of the Old Republic, trade policy was to be designed to benefit, first, the American worker. They wanted American families to have the highest standard of living on earth and U.S. industry to be superior to that of any and all nations. If this meant favoring American manufacturers with privileged access to U.S. markets and keeping foreign goods out with high tariffs, so be it.
“That U.S. manufacturing that once employed a third of our labor force now employs perhaps 10 percent does not matter. That the most self-sufficient nation in history, which produced 96 percent of all that it consumed, now depends on foreigners for a fourth of its steel, half its autos and machine tools, two-thirds of its textiles and apparel, and most of its cameras, bicycles, motorcycles, shoes, televisions, videotape machines, radios, etc. does not matter.
“That tens of thousands of foreign workers are brought in each year by U.S. employers to take high-tech jobs, that U.S. factories are shut down daily here while opening in China, that professional work is being outsourced to India, that we borrow $2 billion a day to finance consumption of foreign goods – none of this matters. The nation does not matter. The country does not matter. For we are all now in a Global Economy.”
A bailout surely is not the answer–and I work in the auto industry.
Keyser,
Your conclusion does not square with your posted editorial. Did you post it to mock Buchanan’s rhetoric? I’m no fan of the guy, but I can’t argue with his implied point . . .
RE: dkulmacz–
Not to mock– I like Pat.
Posted just to show that the problems are a result of all the self-serving decisions by gov’t and the the corporations who suckle on the taxpayer teet.
It is vital to protect American industries– but that needs to be done thru trade policies, not pick-pocketing the American tax payer.
That shareholders do not lynch-mob the incompetent Boards of Bystanders is an indication of just how apathetic much of America has become. Ref recent elections– When people give up hope in the system they don’t protest vote, they simply don’t vote.
So, what’s the difference between foreign companies having factories in the US, and american companies owning foreign comapanies and having factories abroad? Like GM owning Saab, Opel, Vauxhall? Or Ford having a stake in Mazda? If Honda having factories in the states is not the same as Ford having factories in the states, then, logically, the Big 2.8 should seize all their foreign operations and only make vechicles in the US and nowhere else? No?
Let’s face it, this is a global market. And that counts for all sides.
Wall Street makes decisions on dollars and cents, but Washington runs on emotion and spectacle. A day late and several credit-ratings short, Detroit and its apologists fled for the last refuge of the scoundrel: blind Patriotism.
For Angus MacKenzie of Motor Trend, propping-up Detroit is nothing short of a matter of national security. “Think about it,” writes MacKenzie. “If you know how to make a car, you know how to make a lot of other stuff — everything from air-conditioners to aircraft carriers.”
That’s just insufferable. For the record, I think a bailout is a small but necessary evil, needed to stave off a drop in employment and consumer spending power in the middle of what is, functionally, a recession.
And that’s ok. You want a healthy economy. There are WTO rules about how to do it, even.
But “national security”? Please. This is just playing to the sloping-forehead crowd that demands domestic drilling and ethanol because of “furrin’ oil”. Just out-and-out say it’s a subsidy, and that it’s in the interest of the country’s economic health, don’t wrap it in the flag to get the support of knee-jerk patriots.
Cars to aircraft carriers. Sheesh. What a cheap-shot play to the lowest common denominator. If GM, Ford and Chrysler out and out that one in ten jobs in this country is directly or indirectly tied to the auto industry and it’s satellites, and had toadies like Angus do the same, it’d be a lot more palatable.
Right now, they sound petulant and whiny, instead of forthright.
It appears that some of you have swallowed the bait and equate the possible rescucitation of the D2.8 with preserving jobs in the US.
I bet the only way GM/Ford/Chrysler will ever hope to be successful in the long run is to take the money and outsource the jobs overseas.
It’s a presidential election year and presidential pandering politics is what this is all about. More to the point, this is about Michigan’s 17 electoral votes up for grabs in November.
The D2.8 need to fail so that they can reinvent themselves and parse out the rotten core of management that’s lead them to their demise. Throwing money at them only delays the inevitable incompetence that will spend that money (likely on very nice bonuses and raises and favors for the BODs that have done nothing but collect their pensions and golf 5 days a week – they gotta rest and have a day trip to Paris on weekends!).
Nope I’ve voiced my opinion to all my elected representatives. I’d suggest TTAC try to get a more national audience – maybe an American Strike against American’s striking?
“Boy, the way Glenn Miller played. Songs that made the Hit Parade.
Guys like us, we had it made. Those were the days.
Didn’t need no welfare state. Everybody pulled his weight.
Gee, our old LaSalle ran great. Those were the days.”
Re: psarhjinian
“…the sloping-forehead crowd [Nothing respecting diverse viewpoints, huh?–VK]that demands domestic drilling and ethanol because of “furrin’ oil”.”
http://www.wnd.com/index.php?fa=PAGE.view&pageId=73452
Don’t blame the poor performance of the car companies to the worker salaries. Look at the bloated executive salaries. One small blip up in their stock and million dollar bonuses are flowing like antifreeze out of an old Ford. The executives are to blame for their current mess. Where are all of the profits they made in the past? That money should have been reinvested back into the companies to pay for increasing benefit costs instead it went to bonuses. All of the employees at these companies get benefits not just the union workers. The executives pissed away the money and the companies design and produce junk and try to cram it down American’s throat with their patriotism rant. They sold SUVs to America because their profit margin was so high, not because they were the right vehicle for the country. Advertisements did more to convince American to buy those gas wasting, dangerous POS. Advertising works, that why they put so much money into it. They are to blame for their own problems. Toyota and Honda are producing better cars in the US using US labor and they can sell them for more than US cars because they are better products. I say NO bailout. Let them fail.
Good point nudave.
I bet the only way GM/Ford/Chrysler will ever hope to be successful in the long run is to take the money and outsource the jobs overseas.
I know this is your point, but I want to expand on it: doing that would be worse than letting them fail. Now, instead of cost going to the local assembly of transplanted imports and the profits (a small slice of the overall price) going overseas, the whole cost of the vehicle leaves the country and only the profits stay.
This is, of course, much, much worse for the US and/or Canadian economy than buying domestically-assembled Civics and Camrys. Of course, you’ll never see the executives say this; they’d rather play the “buy American” card wherever possible.
If there’s to be a bailout, there should be specific stipulations:
* The jobs stay local. A bailout for GM should not fund the assembly of Astras in Antwerp or Cruzes in Bupyong. There must be strict targets for this, or the backing gets revoked.
* The management must present a comprehensive, approved plan for growth. No Rick Wagoner “Trust us, we have a plan” plans, but something real and concrete, like a Japanese-style 10/25/50-year strategy.
* Union concessions. No strike or stoppages for at least five years. To be fair, the companies can’t use this cooling off period as an excuse to be robber barons.
* New oversight. GM’s board needs gutting. Fords can stay, but needs some additional independence.
An economist said (quite rightly) that “We need a couple of big name banks to go under without a bail out, in order to send a message to other banks saying ‘Manage your businesses better!
That’s a great theory and it feels good to talk about giving them their comeuppance, but it’s ultimately naive.
There is no institutional sense of responsibility that governs corporate thinking. Nobody is going to use a bailout or lack thereof in order to learn great lessons that will passed on with reverence to the next generation of corporate leaders.
To think that bailouts or the lack thereof send a message is a sentiment that is totally disconnected with how businesses are run from day to day.
Take the current credit crunch as an example. There were plenty of lessons to be learned from the last one, but none of those lessons were applied. The obvious macroeconomic long-term problems were clear to everyone, but there were short-term profits to be made and everyone who could take those profits did so.
Bailouts aren’t about teaching lessons, because nobody is taking notes and prepping for an exam for this. Bailouts, if they are needed, should be done for the sake of the greater economy and economic stability.
Chrysler is small and in private hands, so it can be allowed to fail, it won’t hurt the rest of us too much. GM and Ford are another matter, as they are too large a chunk of the US economy to simply let die on the vine without potential repercussions for the rest of us. If the economy were stronger, their collapse would be manageable
We can all disagree on bailouts, but the dialog about them is all wrong. If they are to be done, they should be performed to protect the greater economic system, not to protect a few sector-specific jobs or because of a misguided definition of patriotism. If they are to be avoided, that shouldn’t be done due to libertarian econo-religion or being pissed off about SUV’s and the Vega.
Nor should they be necessarily structured in the way that the current management would want them. In the case of GM, giving them money without new management would be throwing good money after bad. The company has enormous potential, but not with the current managers at the helm.
“We’re not saying give us money. We’re saying give us a reasonable cost of capital to invest in the United States. This is not a bailout.”
Couldn’t everyone losing their home in the mortgage crisis say the same thing? Where’s their bailout? Are they less deserving somehow?
While the D3 (and their unions) may not be deserving, this may cost taxpayers a lot if they are not offered this form of “assistance” (gosh forbid that it’s called a bailout).
Unemployment benefits, welfare benefits, uncollectable receivables (suppliers and other related firms the D3 and their employees owe money to), lost tax revenue (state, local, federal), etc., etc.
If the loan guarantees work, then it’s like the Chrysler deal years ago – administrative costs only to the taxpayers. If they don’t work this is going to cost a LOT of money.
VerbalKint [Nothing respecting diverse viewpoints, huh?–VK]
http://www.wnd.com/index.php?fa=PAGE.view&pageId=73452
You’re right. That was harsh and I should clarify:
The energy issue is a consumption-exceeding-demand problem. Playing the “furrin’ oil” card is a red herring to distract from the real problem: demand is not sustainable. But it makes good copy among patriots because it allows what is essentially profiteering to be cloaked in the flag.
If the oil companies out-and-out said “we want the rights to drill because it’s cheap, easy and makes us lots of money” I’d be less annoyed by it because it’d be honest. Saying “it’s in the interests of national security” is a “Think Of The Children!” style emotional charger: it might be true to a degree (remember: oil is fungible), but it’s not true in spirit and it’s only getting said to appeal the base response of patriots.
It always cracks me up when the big three start playing the patriotist card. The auto industry is so global that the lines between what’s foreign and what’s domestic get quite blurred. Daewoo makes small cars for suzuki (japanese) and yes, chevrolet (the aveo). Daewoo makes it, chevy sticks a chevy badge on it and sells it as an american car. The best-selling car in Canada for a decade now is the civic. That car is built in Ontario, Canada by Canadians. And the sourcing of parts – don’t even get me started.
There is more lying and deception done with this whole patriotic crap that in government itself.
If they want me to see this as ‘an amercian product that needs to be saved’ then built all parts in North America, and assemble the parts 100% in NA, export to rest of the world.
Wall Street makes decisions on dollars and cents, but Washington runs on emotion and spectacle.
LOL. If you think Wall St. doesn’t run on emotion and spectacle, then you’re clearly smoking some crazy shit.
I find I am becoming increasingly wary of giving away my hard earned money for the various things the government sees fit to spend it on. Still, while I do not like the idea of a bailout, I believe it is necessary. The us auto industry does support a great deal of vendors, dealers, and supporting industries, and it pays taxes on its hundreds of billions of annual income. The overall effect on the economy of a collapse of GM and Ford would be measurable. I do think Chrysler should be allowed to fail. And I also think there must be conditions on this loan including the removal of GM’s entire management team and board and much of Ford’s as well (Not including Mullaly).
TTAC keeps writing that John McCain is opposed to automaker bailouts. This does not seem to be true.
DETROIT — Republican presidential candidate John McCain said Thursday he doesn’t believe General Motors Corp. needs a federal government bailout, but if conditions worsen enough for the auto maker, all options need to be considered.
http://online.wsj.com/article/SB121633808872963853.html?mod=googlenews_wsj
As with almost every issue (other than the need to keep other nations in line through belligerent threats and nuclear bombardment if threats don’t work), McCain’s willing to flip flop on this.
The tenor of this whole anti-bailout debate is troubling.
What it boils down to is that certain folks want to hold auto companies accountable for not having the ability to react quickly enough to changing economic realities and intransigent unions.
Let’s start in the early 1970s. The automobile industry management had an extremely confrontational relationship with labor. Wildcat strikes. Poor quality. Lack of pride in the product. Marijuana breaks for workers. Little serious foreign compettion. The US makers had a vast majority of the domestic market and were swimming in money.
Enter UAW contract negotiations. The Big 3 promised an inordinate amount of wages, benefits, and concessions to keep labor under control. Combine that with an extremely UAW-sympathetic NLRB and judicial system during that period. Contracts are renegotiated every few years. The vast majority of worker benefits were simply carried on from year to year. The Big 3 had zero leverage to radically alter this relationship. But no one cared because the money was flowing in.
This set the stage for disaster when world events, beyond the control of the U.S., affected fuel prices. Detroit had no product for the fuel-savers. Enter foreign competition. It’s now the early 1980s.
The Big 3 had a problem accepting the reality that small cars lacked profitability. Detroit is now in trouble — small cars will not fill the union coffers. Detroit still has no leverage over the unions. The 1990s were a temporary reprieve with high-profit trucks.
Enter the vast swarms of union retirees from the 1990s to the present, with high care costs skyrocketing. The unhealthy lifestyles involving too much fast-food and beer for many of the workers have come back to haunt them. Detroit now has to pick up the tab contractually. Detroit now cannot get out them. The U.S. ideal of promoting solely employer-funded health care is now creating a competitive disadvantage with the rest of the world, who generally has a nice symbiotic relationship among employers, employees, and the government.
But there is more. The UAW is now committed to picking apart the hand that feeds them. Guaranteeing product to obsolete facilities, continuing lavish benefits, etc.
It is not all about having better product. It’s part of it. But saying that Toyota and Honda have been able to do it ignores the economic realities faced by domestic and foreign companies on their respective home shores. Protected home markets, lower health care costs, a government that actively promotes universal health care, lack of legacy costs, etc. The Japanese started building autos in North America when the union movement started to ebb. Smart.
So here is the question. What could you have done to avoid the currrent situation? Before you let the U.S. car industry and all of its employees ffold, please take us back to the early 1970s — what could you have realistically done, without the benefit of hindsight.
The bailout is not so much about the failure of an industry, it has much to do with the failure of the United States.
After selling rustbuckets to Americans for 30 years, the Big 3 has decided to cut out the need for cars in general and just go after American money directly. Tell me what evokes any Patriotism from this sort of behaviour?
Why on Earth do Americans owe the Big 3 anything?
The market in America will need to be filled regardless of who does it. Skilled workers will just work for someone else.
And on the note of nationalism, if you view all human beings as equal you can not be a nationalist. Period. Because keeping a Japanese man employed comes to the same as keeping an American man employed. Picking one or the other is a de facto ranking of humans (i.e., Americans are better than Japanese).
Couldn’t everyone losing their home in the mortgage crisis say the same thing? Where’s their bailout? Are they less deserving somehow?
They’re not less deserving, but they’re less worthwhile from an economic standpoint. If a single homeowner fails, it’s the homeowner and their economic footprint is small. If a lot of them fail, all over the country, then you start hearing talks of relief programs, albeit with strings attached. That actually is happening now.
When a company that is they keystone of an economic relationship that employs something like ten to fourteen percent of the working population, then the automatic reaction should be “How do we mitigate the impact of this?” because if you do nothing, especially when you’re already mired in a recession, a hit like this would be bad
Re: psarhjinian:
No hard feeluns ;-)
Re: detroit1701 The tenor of this whole anti-bailout debate is troubling.
We need to keep in mind that management signed the contract w/ the UAW. They could have fought it, taken a short term loss–perhaps fairly substantial–and viewed the long term outcomes… which apparently they didn’t.
Also, I don’t disagree that current obligations a huge part of their woes, but if the 2.8 were producing vehicles folks could get excited about buying their financial position would be markedly better. If cars were flyin’ off the lots bank loans would be easier to obtain.
Every American now owes a foreigner $43,000. If you fight a useless war to try and secure an oil supply and then print money to pay for it, it’s not surprising that the chickens eventually come home to roost. However you’re into it now, so what’s another 50 billion between friends?
Edward,
GREAT editorial.
PCH,
Bailouts have been used when prospects for survival existed. In GM’s present form, the numbers don’t support the argument of survival. They’re simply not earning enough revenue to offset their expenses.
This isn’t about teaching GM a lesson or punishing their utter incompetence. That’s just a nice side benefit.
“Giving” GM a bailout makes little financial sense. At best, it delays the inevitable, wasting billions in the process. It literally would be a bridge to nowhere.
In GM’s present form, the numbers don’t support the argument of survival.
With a revamped management team and a well assembled business plan, GM would not be in its present form.
I’ve already stated that giving GM money with no strings attached would be a bad idea. If you want to make that argument, you’re preaching to the choir and you should direct your attention to the no-strings-attached crowd, of which I am not a member.
That is not to say that GM cannot be fixed. The math is pretty straightforward: Successful automakers of GM’s size are worth more than $100 billion. GM is currently valued at less than $6 billion.
That is an awesome opportunity in the making for smart management, and it would absolutely foolhardy to pass that up if the right team is in place to take over. GM has the potential to be an enormously successful business, and it would be sheer madness to ignore that potential when the alternatives are much worse.
Detroit1701,
Money doesn’t solve GM’s problem – good products would. Poor management and leadership is not an argument for bailing out a rotting company that still has it’s head in the sand.
The anti-bailout tenor you see is a result of GM’s contempt for it’s customers that started decades ago. That sentiment is now being reflected back by it’s present and former customers.
Throwing money at GM, even with strings attached, does not solve the problem. Only Ch. 11 will really give them a chance unless it’s already too late for that.
It might be illustrative to post a graph showing the general trend of economy over the last, say, 30 years along with a graph of Debtroits market share/sales trend line.
Might just give us an idea if those companies REALLY are important to the economy overall.
Just a thought,
Bunter
A graph of the change in agricultural labor numbers between 1930 and 1980 would also illustrate how many jobs “lost” by an industry can be absorbed by a country this size.
I think the average attrition rate was over 500k per year. For 50 years.
The numbers we are talking about are peanuts to that.
Just sayin’
Bunter
It might be illustrative to post a graph showing the general trend of economy over the last, say, 30 years along with a graph of Debtroits market share/sales trend line.
Might just give us an idea if those companies REALLY are important to the economy overall.
I don’t believe that’s the issue here. What matters is the timing, the US is currently getting hit on all sides and can’t afford the markets to lose confidence in its major companies.
At this point, the US priority needs to be on preventing major institutions of all sorts, be they banks or whatever, from failing at this time. We can’t afford to have lenders or investors lose confidence in the US economy or its major companies at a critical juncture like this, which is in many respects the worst economy since the Great Depression and with more decline likely over the next several months or more.
If this all had happened a few years ago, it would be easy to let GM go, because the impact would have been absorbed easily elsewhere in the system. Right now, it would be a lot more difficult to digest, and the symbolism would be much worse.
Calling this bailout a $50B bailout is a little deceptive. If you look at it from a economic perspective it’s about 5% below fair market rates. So that puts the cost to US government at about $2.5 billion per yet for the duration of the loan. If the big 3 go under, the pention guarantee corp could be out for a lot more than $2.5 a year, not to mention lost tax revenues and the damage it will do on the US economy. If this bailout can save the automakers, it wouldn’t really even cost the government anything. A good chunk of the high interest rates charged on the automakers are a self fulfilling prophecy. It’s like the subprime mortgage issue. If those customers were given lower rates to begin with, fewer of them would have defaulted. If these loans make the automakers solvent then the 4.5% being charged is closer a fair rate. The big question needs to be asked now is whether the automaker’s issues now are purely liquidity related or is there no hope in the future for positive profits. I sincerely hope its the former and not the latter.
So I guess none of them will pay dividends until that 50 billion is paid back to the governemnt? And that none of that money will pay Ricks fourteen million salary?
@faster_than_rabbit: I think McCain put it absolutely right. In general I’m against bailouts, but it’s hard to live in a world of absolutes. Markets fail in the real world and sometimes (though it teaches companies a bad lesson) a good bailout is better for the country as a whole then allowing a company to fail. There’s no reason why people shouldn’t be allowed to change their mind.
The way GM supporter talk about the viability of a GM survival and/or bailout is just downright scary! As mentioned before a company of GMs size that is only worth 6 billion dollars in 2008 is FINISHED, DEAD, KAPUT, freakin roadkill!
I guess this is how the last of the Nazis tried to see their situation from down in the bunker in 1945. “there is always hope of a miracle”.
This bailout is just downright stupid! It is only allowing folks to postpone the inevitable. Rather play silly fantasy games based solely on hope and prayer, why dont we just deal with the reality and start making some serious plans for the future.
GM IS FUBAR! It is NOT (SO FREAKIN NOT) repairable in its current shape and form. THe dealer network is screwed up, the brands are screwed up the UAW contracts are screwed up, the product line-up is screwed up, etc, etc, etc.
Bailouts are for companies that are still viable but are having cash-flow problems. GM is not viable and it is not sellling nearly enough products to see viability anytime in the near future. GM is simply spinning wheels today and burning the last of the cash in the bank.
For what it is worth GM is relegated to a 5th or 4th place finish in the compact and mid-sized car market. Anyone the wishes to be honest with themselves knows that it will take about a decade for GM to break into the top 3 in terms of sales.
Unless GM can somehow cut off about a 20 to 25% of itself it cant survive in 4th place. So WTF is a relatively few biilions going to do for GM? Help pay-off shareholders?
With a revamped management team and a well assembled business plan, GM would not be in its present form.
These are two big if’s. I doubt many of us trust how this can be accomplished with the lobbyist community’s influence over those that would dictate the terms of a bailout.
Seems like those that are for the bailout believe GM can be saved. Are there any examples other than Chrysler in the auto industry where a “strings attached” bailout saved a company? I’m discounting them because their corporate culture and CEO had the intestinal fortitude to win. GM lacks leadership of the likes of Lido.
Arggh…
I’m having a senior moment. How do I turn on italics and turn them off?
Are there any examples other than Chrysler in the auto industry where a “strings attached” bailout saved a company?
We have a current example of a management-led turnaround in the form of Nissan. Strong management can make all the difference between success and failure. Ironically, GM has its own example of a turnaround, when Sloan saved it from failure.
A bailout could be appropriate if new management were to lead the company, and if the bailout package was tied to additional equity being invested by new partners who are associated with the new management.
The key would be to make sure that the new team is both qualified and has skin in the game from the onset — they would not only need to have something to gain if it works, but would also have to have something to lose if it fails.
It was a mistake to save Chrysler in 79, GM and Ford would be stronger today despite Roger Smith and Ford following GM like Montgomery Wards did with Sears all those years.
So one or two need to go within a year of so. I know McCain won’t support it despite what he says today. I know Obama will in some watered down version that will amount to temporary life-support.
Therefore, go McCain!
jkross22 I’m having a senior moment. How do I turn on italics and turn them off? < i > for italics on < /i > for italics off (Both without the spaces. It wouldn't display the codes when I left out the spaces– it just italicized my comment.)
The sooner implosion happens, the better for everyone in the long-run. Prolonging the pain with a bail-out is akin to pulling a scab off of a scar slowly; slowly enough that it just prolongs the wound. Rip that sucker off and get it over with.
America won’t lose it’s manufacturing base anytime soon, Americans build the best of anything in the “new economy.” And by “new” I mean the industries that have cropped up since the advent of the robber barons and unions of the early 20th century. Every business that was big then and therefore affected by the labor/management definition of elites vs. the proletariat forged in that age are not competitive. Look at the steel business, or trains and you see the same general malaise.
In industries that have cropped up since that time – electrification, aerospace, and the digital revolution – Americans are the world-standard. And Americans can obviously design and build some pretty fly rides…in a good business environment.
In a sense, WWII helped Japan and Germany in the context they were stuck completely reinventing their societies from scratch, a “clean slate” so to speak. The Americans and the British were not forced to do that, and the legacy industries from that age, including the car business, show the rot in both countries.
Sooner the old order is swept away the better; the trick for the Detroit 3 is to not remain perpetually in the old order so as not to be swept away with it. Subsidizing the current failure just prolongs the problem.
I posted this in another thread on this same subject, but I think it bears repeating:
There is a perspective that has not been voiced in this, or the other, thread about a possible Detroit bailout: the corrupting effect of such bailouts on the Federal government.
As we ask the Federal government to do more and more for us the temptation for corruption within the Federal government grows. This could be in the form of bribes, kickbacks, illegal campaign contributions, or other malfeasance. It becomes increasingly difficult for politicians to avoid temptation and thus they become entangled in legal (e.g., “pork”) and illegal activities that are unsavory to the average citizen. Note that this is not an “anti-government” position but rather strongly pro-government in the sense of good government.
I have read and taken to heart the position that a failed Detroit will cause economic havoc and I believe it to be essentially correct; however, I feel the threat to the Federal government of a bailout is worse for the country in the long run.
All voices in this debate seem to think the Federal government is immune to the affects of the bailout on its own proper functioning. This is not the case. Enablers are not immune. Be careful of what you wish for!
I am against the loan guarantee or bail out, whatever it is being called or actual is or will be.
Here’s why:
It is the past. Many of the arguments for the loan guarantee/bailout are based on preserving the past. “We had a great auto industry and now it is in trouble and we have to save it”.
Why do we have to save the past? Should we save the past?
Will clinging to the past drag us down – yes it will.
Religious groups compete for members by encouraging their members to have large families.
We have suburbs around almost all our cities.
China’s air doesn’t stay in China.
New Orleans chemical company pollution doesn’t stay in New Orleans.
Carolina pig farm manure doesn’t stay in the Carolinas.
Dirt from burning oil doesn’t stay in our cars and trucks.
Using ICE’s that only get 20% to 30% efficiency.
Building cheap houses with poor quality materials because of poor standards.
Car manufacturers sell through dealers.
Tying up capital and raw materials to make things just because we made them in the past.
This has been our past (feel free to add to the list) but it will not be our future. With 7 billion people on earth many of these things can’t be our future.
Who says the average American has a right to live better than the average person in India? But clinging to a leaky life raft (our past) isn’t the way to stay ahead. The average person in India is desperately trying to not to live in her past.
If I go to the bank for a loan for my business, they want to see my plan on how it’s going to be used so they know they’ll get their money back. If this is the tenth plan I’ve had to do in 3 years, none of which worked, do you think my friendly loan manager will say “hey, let’s give this one a go”.
There’s 3 major hurdles that I see 1/ these guys have to have credible plans to use the cash to turn round, and 2/ someone in govt has to be able to assess them, judge them credible and get Congress on board. Oh, and 3/ convince Japan, Korea, China and Germany that this is not a subsidy and therefore complies with WTO rules.
To answer my own points: 1/ how many plans have C/F/GM had in the last 5 years (seems to be constant ‘rightsizing’ for them), so why do we think this one will work? 2/ someone in govt prepared to state that this time it’ll work, and it won’t be sabotaged by all the politicos wanting the plant/supplier in their district protected 3/ Maybe Japan will play the game, and possibly Germany and Korea – but China… really?
I really watch what’s happening to these companies with sadness … great powerhouses of the American dream now having the begging bowl out. I know we can’t live in the past, but it’s sad that these once great and innovative companies can’t seem to get themselves in shape to be part of the future. Maybe we’re just seeing evolution in action “adapt or perish”.
PCH101-
While I can see your point that all times are not equal I do think if we start making exceptions on short term thinking we will create bigger problems.
That is, GM going down now will hurt now.
I suspect bailing them out now will hurt more later.
My thoughts.
Take care.
Bunter
While I can see your point that all times are not equal I do think if we start making exceptions on short term thinking we will create bigger problems.
I believe that this wrongly presumes that GM cannot be turned around, by anyone, under any circumstances.
I see GM as a golden opportunity to make a killing IF it is in the right hands. But that requires getting new hands. It’s a big job, and Rick Wagoner is not up to it.
I agree with several points that Pch made, and I’d like to expand on some of them.
First, the language of this discussion is all wrong. It sounds like a lot of people took econ 101, learned about the invisible hand, laissez faire, and then took no more classes.
The auto industry is huge -even if it is a shell of it’s formerly much larger self- and it’s collapse would take us from the current recession into a full blown depression. That would not be good for most of us. Personal bankruptcy attorneys otoh would have a bonanza.
We need to do this for the overall economic health of the nation.
Second, we don’t really know how the “bailout” will be structured. As far as I can see it’s a low interest loan. If the D3 turn around, then it really isn’t going to cost us taxpayers anything.
(And if they don’t turn around, the depression my cost you your job.)
Third, these companies can be turned around, but not by the current management teams (Ford being a possible – but by no means certain- exception) We absolutely must have new management teams at GM/Chrysler and maybe even Ford, otherwise this is just throwing money down the drain. I will oppose whatever plan that may come together if we are just going to give money to the same bozos who’ve been running the show.
As an aside – and I don’t think this is a crucial point right now, but it’s come up – one cannot simply say it isn’t WWII anymore. In 1939 the D3 were making precious little in the way of war materiel. It was highly specialized back then as well. But from ’42-’45 the D3 cranked out a lot of materiel, which was instrumental in winning the war. Not to take away from our allies, but US production was vital in the allied victory. So, it’s not so far fetched to say that the manufacturing capability of these companies may, someday, be strategically important.
We need to do this for the overall economic health of the nation.
Do we really or could this money be invested in other industries in the USA that are actually growing and NOT shrinking. Folks need to make a living BUT nothing says that it must come from making cars.
Do we really or could this money be invested in other industries in the USA that are actually growing and NOT shrinking. Folks need to make a living BUT nothing says that it must come from making cars.
That’s true, it doesn’t have to be from cars. But there is no reason to make low interest loans to industries already growing.
It doesn’t appear that any industry is growing enough to take up all the slack of a dying auto industry.
There is nothing that says the US has to make cars, but reality says that most of us will have to drive them for the foreseeable future. There is a need for the product. Why not have the jobs that go with making them?
GM once said they weren’t an American company, just “a global company that happened to be headquartered in America.” So let them get their bailout globally.
John
Ever see the movie “Tucker” ?.
This is all karmic payback.
I still don’t think I understand what the bailout is for, exactly. If we want more people driving fuel-efficient cars, why don’t we just give more consumer tax-breaks? If we want Detroit to succeed, why not sit back and allow them restructure in Ch. 11, or in the case of Chrysler, fail?
I’m admitedly not a fan of any of the government-intrusion options. If it has to happen, I’d say some form of regime change has got to be a condition. Bear Stearns got a “real” bailout, but two of their hedge fund managers also went to jail. Something tells me the D3 execs aren’t going to face that level of scrutiny.
I’m also not arguing dogmatic non-intervention here. Detroit is starting the bidding with low interest loans for retooling, and justifying it as “not a bailout.” That’s not going to fly. Detroit needs to come back with a different offer.
Random idea.. what if instead of giving them money to jointly invent a new wheel… what if the united states designed the wheel and the not as big 2.8 paid royalities for it? I’m guessing this violages some American laws with government owned patents or something but maybe not? At least if the car companies failed the investment would still belong to the tax payers
I still don’t think I understand what the bailout is for, exactly. If we want more people driving fuel-efficient cars, why don’t we just give more consumer tax-breaks? If we want Detroit to succeed, why not sit back and allow them restructure in Ch. 11, or in the case of Chrysler, fail?
That one of the big worries about this – they’ll use their low interest loans in lieu of filing Ch 11. They need to do it in conjunction with Ch 11.
Perhaps I’m really stupid. Why can’t the government give the automakers the loan guarantees but make them accountable to the American people? Let’s put a few regular joes on the board. Let’s get rid of current management or at least put realistic goals upon them with time tables if we do. If they take our money, we should have a say just like any other investor would do.
Of course I also asked a similar question of the unions. Why don’t you tie their bonuses to your workers getting bonuses? If they get one, the workers should too, dammit! If only I were in the place of Buzz
I think no one is really raising a ruckus about this because of the basic math behind it:
$50B / 250M people = $200 per person
Kind of a small sum, really.
And no, I’m not a domestic automotive supporter and do think they should be left to go bankrupt. And I live in Detroit and work for a supplier. To hell with the consequences, let’s hit the reset button and see what’s left because these three couldn’t manage their way out of a paper bag.
netrun not an attack on you but I would rather use my $200 at a Blackjack table, chances are better I will see a return on my investment. I wont even put more money into the POS GM I have right now, why would I want to throw money down the rat hole that is that company, I’m tired of wasting money on them and their cars.
I don’t like nationalizations, and usually don’t support the government giving money to big corporations. But…
1) In other countries, the government has helped the companies when times went tough. Example Fiat. They didn’t gave money directly, but changed the policies, through subsidizing car scrapage so people was attracted to buy a lot of new cars. Main winner in Italy: Fiat.
2) Any government helping any domestic company is not a sin per-se. It can be done in name of a “higher good”.
3) Nobody can deny, that there’s a huge amount of jobs in play. And a lot of companies that depend directly or indirectly from the D3 too. If they fail, it will create a hole in the economy everyone will feel.
I support this bailout. And I have said so every opportunity I have had. Why:
You need and deserve to have a domestic auto industry. And that is very different than transplant manufacturing or assembling cars there. In the end, the USA will be the owner of the technology. The other way, is a foreign company.
I live this everyday, and believe it, it’s not nice.
If you lose your manufacturing, but even worse, your engineering base, you steadily and slowly approach 3rd world country level. Again, is NOT nice to be here (3rd world).
Maybe (big one) they don’t deserve the help.
But they must be helped. But not for “free”. There must be conditions. Strong ones.
Current management has to go. This is a MUST.
Product plans have to be presented, and their competitiveness demonstrated.
Using the flag/patriotism to support the effort is not correct. Using their mistakes to bash it isn’t either.
$50B? That sounds like real money.
What’s the best way to spend that?
I propose it should be a $2000 tax credit for 25 MILLION hybrid or plug-in hybrid vehicles. Now THAT would do something for the country (as in radically improving fuel economy).
Maybe wiser spending than plugging the bottomless pit of failing car makers.
This article is short sighted and totally devoid of any sense of history.
Does the terms ‘chaebol’ or ‘keiretsu’ mean anything to you? The reason for Asia’s current success is Asia’s notorious record of dumping products in other markets at below their cost, propped-up by a combination of tax dollars, sordid nationalized holding schemes, loan guarantees, and other types of government assistance that are generally prohibited by US law, regulations, and tax code, or just plain offensive to most people in the West (including a good number of business people). Add in national HC, free university these countries present employers with and rabid overt nationalism/racism these countries have the USA is at an enormous competitive disadvantage. A measly 50 billion, or about 1 month in Iraq, is a small pittance to pay.
SK and Japanese reformers are still unwinding this sordid 40 year-old labrynth of mutual government-cheabol/keiretsu cooperation formed for the goal not to compete with foreign companies, but to destroy foreign companies in their own markets. And SK has never been held accountable or compensated the countries they have deliberately harmed. They are still spinning it domestically with great success as SK products winning fair-and-square in foreign markets because their products were “superior”.
Superior a monkey’s ass. We were deluged for some 10+ years with cheap Asian garbage before products from Korea and other Asian countries began to meet any standard of quality, reliability, or even safety for that matter, while our domestic companies were forced down a slippery slope of cost-slashing and product cheapening just to compete with cut-throat foreign pricing (facilitated by illegal dumping practices, of course). The domestic fall-out from this has still not fully settled.
someone asked what is the difference between Toyota having a plant here in Us and Gm having a plant say in Korea Daewoo for example , or Ford`s stakes in Mazda. You see, money goes, where the engineering goes, not the name. If Toyota builds a factory in US they transfer wealth to Japan, because they transfer revenues mostly to Japan, and they decide how much to pour again back in uS. When Gm has a Daewoo plant in Korea that later is renamed in Chevys, still the engineering is done by korean based company, and taxes and revenues mostly stay in Korea. The same way profits from Opel stay mostly in germany, because the highest costs and also profits go into engineering, meaning german part. I need to pay that german engineer 40 $ an hour and if i don`t it will be hard to find a good, fast replacement. Why should I pay in US an obese mouthpiece 40 bucks an hour who calls himself a manager or sales dealer? I don`t. because even paying 14 bucks an hour I will always find a couchpotato ready to run a dealer`s lot or shuffle papers in ad business for cars. This is the difference. You either work with your brains or your hands. Never mind your kisser. You can use it for your girlfriend, not for economy or my engineering empire.
Not only do the profits and higher engineering wages go back to Japan (insert Asian nation-as the case may be)the Japanese firms have a distinct preference to buy their needed machinery and other inputs from other Japanese firms due to Keiretsu growing those firms and further displacing ours.
Americans are extremely short-sighted and selfish nature has been our doom while Japanese would rather die than buy our rice at 4x less than theirs let alone one of our cars or a part from delphi.
tooclose- you are right. How many japanese precision components are stamped on american industrial tools and robots? ZERO. And it is not only Keiretsu, it is their relentless pursuit to perfection. Us is gone from precision machinery building. Do you see a pattern here similar to Detroit? One that can not manage constructing workbenches at ,say` Giddings&Lewis or CincinnattiMilacron are very likely to be handicapped at anything else dealing with precision engineering, like cars.That is why zero US companies have bankrupted in apparel or food industry, for simply there are no precision engineering parts. look even at Microsoft, if they are so capable with all their market captalization, how come all they are able to stamp physically are computer mouses and keyboards. Oh, right, they have xbox with those tremendous finishing gaps around buttons etc.Do esn`t it look strange?
Americans are extremely short-sighted and selfish nature has been our doom while Japanese would rather die than buy our rice at 4x less than theirs let alone one of our cars or a part from delphi.
Our rice sucks. It’s no mystery that the Japanese won’t buy it – it’s barely fit for pigs. Thai jasmine rice is better than Japanese rice, but Japanese rice is better than American. You can’t blame the customer for prefering quality.
You see, money goes, where the engineering goes, not the name.
You frequently restate this point. Which would be interesting, except that it is false.
Let’s take Toyota as an example. The company’s R&D expenditures during FY 2007 totaled 5% of the company’s total expenses. Which means that 95% of the company’s expenses were not related to this at all.
Not only do the profits and higher engineering wages go back to Japan…
This is false. Company profits will ultimately be reinvested somewhere in the business.
For a car company, reinvestment will largely take the form of new plant and equipment. If you want to follow the money, watch where a car company builds its new factories, and that’s where you will find the profits are going.
The car companies that are investing in US facilities are the foreign transplants, not the Big 2.8. The US companies are trying to expand outside the US, not within it.
The irony here is that we will be looking to foreign companies to provide American jobs, while the American companies will be investing their money in exporting work.
Pch101- if you are right why do you need to borrow 3bn dollars a day from China and japan? just use the money earned at transplants. Why do you have an external debt of 12tn by now? Just use the transplant cash infusion. How `bout 44 tn social security mother of all black holes. Just use ….. how bout 700bn negative trade balance? How `bout Toyotas market captalization that is 20fold times bigger than Big 3 combined? Out of toyotas 24bn profits 5% make 1.2bn, which is a lie, because Toyota invested in new model overhaul 15bn.
Yea sure PHC there’s an equalibrium (they have to give us our money back somehow) thats why every man womed and child here owes ~50k to rich bond holders mostly foreigners and the Forune 500 gets more foreign owned by the day. Not really the side I like being on, paying life long rents instead of getting them. Begging like a third world outpost for the rich multinationals to please open up a factory in USA.
I am pretty dismayed some of you are begrudging some of our biggest companies and largest employers the 50B loan. It’s bad enough you have no problem putting food on someones table in Japan or Germany instead of you own countryman’s buying their cars. Short sighted as that is nothing compared to the fallout should big 3 cease to exist.
Let’s contrast your sentiment with Korea’s citizens back in the late ’90s financial crisis brought about for the reasons I spoke about earlier. As the house of cards came down from the IMF cuts, debt ratios these companies held, government running out of loans money etc – Not only did they view it as a Western assault on Korean industry , the Korean citizenry, in reply to a call to arms from Kun-hee Lee – to support the won and thus their Chaebols – exchanged their personal gold for the country’s increasingly worthless currency. The response was so overwhelming that over 50,000 Koreans turned in items from wedding rings to even gold metals saving the Chaebols which have since gone to do overtake giants like Sony (samsung), commercial ship building and LCD and memory production among others things.
I hope this type of unity is where Obama gets us to.
if you are right why do you need to borrow 3bn dollars a day from China and japan?
The US runs a massive trade deficit because much of its energy is imported, plus it finds it cheaper to import manufactured goods than it does to make them. The primary differential between building something in the US and building in China, etc. is the difference in wage rates.
While I have concerns about the trade deficit, engineering is the last thing on this planet that is going to fix it. If the engineers are cheaper and just as good in India than they are in Indiana, then naturally, companies are going to try to find ways to hire more of the Indians.
Businesses such as Apple and HP have come to represent what American business is all about — creative and marketing talent managed in the US, with engineering resources dispersed in the US and elsewhere, and with manufacturing in low-cost producers such as China.
Begging like a third world outpost for the rich multinationals to please open up a factory in USA.
Then you should be upset with the Big 2.8 for using its profits to hire fewer Americans. Unless you are just looking for excuses to be anti-Asian for the sake of it, of course.
pch101- uhhh, difference in wages in China is what it is about? Why is Intel having facilities in japan? Gm having engineering units in Australia, sweden? Why is Toyota having plants in US? You live in illussion that US manufacturers are offshoring, but they are actually dying or selling their names to Asian companies.General Electric hasn`t offshored its consumer appliance business, they are simply rebadging french Thompson, and now Samsung refrigerators, that are engineered there.
And US borrows 3bn a day because having meaningless industries they can`t tax enough money to sustain this economy running. How on earth we are going to tax in excess of 3 trillion dollars for all departments if economy ir running on selling sishkebabs , one dollar stores and reselling houses? Import oil? Check your government what percentage on every single gallon they charge as a tax.
Jurisb, I don’t really know what to say, other than the fact that you have an odd, fictional view of the US economy and how it operates.
It’s pretty simple — stuff made in Asia costs less to make than it does to make the same stuff in the US. Early on, US manufacturers failed because of their inability to compete while keeping their operations in the United States. But over time, they have learned the offshoring game and have exported labor costs to lower cost markets in order to reduce their expenses and keep prices low. There’s a reason why there are more US factories in Mexico, China and India than there used to be, and it’s not because of the beaches.
The US has increased its trade deficit because it feeds economic growth to have cheap goods available for sale. This is not an engineering issue.