And so it begins. The Wall Street Journal' s lead editorial makes it perfectly clear that Motown's plans to tap your taxes is well advanced. And guess what? It's a god damn conspiracy! "Earlier this month… the top dogs at Ford, GM and Chrysler had a meeting of the minds and decided that the way out of their current losing streak would be to ask the feds for a lifeline. They figure they'll need $40 billion or so to ride out their current troubles until they reach the promised land of hybrids, the Chevy Volt, and, who knows, maybe even profits. We've since heard that lobbyists for the car makers are taking their pitch for direct federal loans around Washington, with a goal of unveiling the plan after Labor Day — conveniently in the frenzy of the fall election campaign. They've briefed Congressman John Dingell, the dean of Michigan Democrats, as well as officials in the Bush White House… The plan is for the government to lend some $25 billion to auto makers in the first year at an interest rate of 4.5%, or about one-third what they're currently paying to borrow. What's more, the government would have the option of deferring any payment at all for up to five years." TTAC will have an editorial on this shortly.
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Time to call my local reps and complain that we should not bail them out of their own mess they could have prevented.
I just read that article and TTAC did call it. I can’t tell you how angry this makes me as a taxpayer and business owner. These stupid, overpaid “executives” have run the companies into the ground and we are supposed to bail them out. I hope every American who pays taxes will be correctly angry and never buy another American branded automobile again, ever. I know I will not. I will sell my and my company’s vehicles so I can buy a foreign nameplate. Please no bleeding hearts over the poor union workers. The gravy train left the station and I don’t want to pay more taxes to help it try to return.
I am going to call and call and fax as much as possible to every politician in California to tell them say no to this bullshit.
The least that should happen in that case would be for the Boards and management to pay back the money they’ve mis-earned. It would not represent much compared to $40b, but as a taxpayer, it’d make me feel less ripped off.
If the domestics all go away so will TTAC
Think about it..
“Dear Congressman/woman/idiot/whatever,
Please do not piss away the tax dollars that you seize from me every freaking paycheck! I am all for supporting national defense, roads, schools, those less fortunate than myself, etc. Hell, I even understand and support tax credits for increased employment rolls and the tax revenue that those can bring. But you are out of your damn mind if you think that I will support sending MY money to support an uncompetitive and disinterested company such as GM! If the current management is removed and returns 95% of the money they’ve earned over the years, maybe we can talk. Short of that, leave me as a taxpayer out of it!”
By the way, if I am forced to become an owner of GM through this boneheaded idea do I get a free retro “29%” market share lapel pin?
Juniper :
August 22nd, 2008 at 12:38 pm
If the domestics all go away so will TTAC
Think about it..
No, just Bob Lutz. Thanfully his mouth (with foot firmly planted in it) will never go out of business.
If this happens, the goverment needs to fire at least 4-5 layers of mgmt at each because they are the morons that created or were part of this mess.
Toyota, Honda, Nissan, etc., etc., should receive funds too. GM and the other 2.7 had the same chance to succeed as the big 3.99999 from Japan; instead, they just succed. If anything,it could be a REWARD for Toyondassanzda’s performance!!!
The plus side of this is that by asking for so much they really may help the public see their incompetance.
Even worse, this estimate probaly includes the managers (part. at GM) far to rosey estimates of their future products performance.
The truth is, GM alone can probably eat all 25B by the next election in 4 years and still go down.
Brilliant.
hltguy & TexN-I’m with you.
Bunter
Time to call my local reps and complain that we should not bail them out of their own mess they could have prevented.
Much as it tastes like ashes to admit it, we need to keep the industry afloat or the economic impact will be ugly. There are a lot of jobs that depend on this industry, and if even a large fraction go, the shockwave will do a lot of damage.
Look at it this way, you’ll pay for this now , or you’ll pay later for outright welfare, law enforcement (nothing breeds crime like poverty) and trade issues.
If this happens, the goverment needs to fire at least 4-5 layers of mgmt at each because they are the morons that created or were part of this mess.
Yes. That should be a big proviso attached to any baillout offer: serious structural change, up to and including senior management and oversight.
truthbetold37: When does any government “fire three of four layers of management”? Doesn’t happen, never will, one of the reasons the U.S. is going bankrupt.
This is going to turn off most voters, so supporting it will be pretty dangerous. However, at the end of the day Michigan is one of the swing states, so they get to be first in line for handouts. Just another case for ditching the Electoral College for a popular vote.
If the two candidates take opposing views on this bail-out then I might become a single issue voter, but I doubt either of them will have the nerve to.
This Halloween I say the rest of us go to Michigan and have a Devil’s Night with the entire state, unless Canada is willing to take it off our hands on the cheap – the US could use the liquidity.
psarhjinian
The Big three employ less people now than Chrysler did in the early ’80s. They are a trivial part of the economy. If the big three fail they won’t dissapear, they will go Chapter 11 and get out of their oppressive dealership and union contracts. Chapter 11 is what they truly need to re-invent themselves, not welfare.
The big three have no loyalty to this country and will build/engineer cars wherever it is cheapest (i.e. GM building and engineering with Daewoo). There is no reason for this country to have any loyalty to them.
The worrying part is not the money because the sums are small in comparison to what we’ve wasted on the war in Iraq. (3 Trillion to date)
What is worrying is they may not file Ch 11. That makes it less likely they’ll get their houses in order.
The Big three employ less people now than Chrysler did in the early ’80s. They are a trivial part of the economy. If the big three fail they won’t dissapear, they will go Chapter 11 and get out of their oppressive dealership and union contracts. Chapter 11 is what they truly need to re-invent themselves, not welfare.
And Chapter 11 will lead to Chapter 7. You’d be crazy to think otherwise.
We might as vote John McCain in as he said he’s not bailing them out (of course he can always change his tune once elected…it’s not like we hold them to their promises). Obama wants to bail them out…mainly for the votes.
Billions and lives spent on Iraq or Billions for mismanaged U.S. companies. Which is the greater folly?
My gut tells me Iraq.
As much pain as it would cause the economy (and I live in Ohio, the second biggest car manufacturing state after Michigan), I would have to say no. The lack of liquidity is not the cause of Detroit’s problems, it is merely a symptom. As such, more money will not fix the problem, merely prolong the inevitible.
No, the real problems have been well documented, at least to readers of this site.
I’m not terribly offended by the idea of federal loans to the automakers (hell, I’m Canadian so this would be a sweet example of US tax dollars helping Canadian auto workers!) but I’m with psarjhinian: I wouldn’t lend a f*cking dime to GM if the current Board of Bystanders and Rabid Rick were still in charge.
I would have no trouble lending Ford some cash with Mullaly at the helm. I think there is some light at the end of their tunnel, and I’m confident a loan to Ford could be repaid.
As for Chrysler… Screw ’em. Best I can see their plan will decimate their N.A. manufacturing capability anyway, so why help that along. Especially if the point of a bailout is to keep the industry strong and preserve direct and indirect jobs.
no_slushbox: The Big three employ less people now than Chrysler did in the early ’80s. They are a trivial part of the economy.
It’s not just them directly, it’s their suppliers, the businesses in the towns surrounding plants and suppliers, and the companies that then service those industries. That’s a lot of spending power gone, and at a time when consumer confidence is low, credit thin on the ground and many businesses already teetering.
Let’s not forget all the chickensh_t investors that will move money around should something like this happen. The net effect at the market level wouldn’t be pleasant, either.
If this were 2003 or so, I’d say let them bomb. But not now, not when the North American economy is riding the razor’s edge of recession.
Again, though, this ought not to be blank cheque. There has to stipulations on how the money is to be spent, what plans need to be in place (real plans, not Rick Wagoner “Trust Me”-style plans) to turn things around and whom should be on-staff when this all happens.
Man this royally pisses me off. I want no part in paying for those a$$holes failures, I am already paying throught the nose for the product I bought from GM, do I get federal assistance for the financial damage it has cause to me, of course not I just have to take it in the ass and then have my money STOLEN from me.
Does anyone know if the Bill has already been writen and who is leading it, and what is the timeline on tryig to get this through Congress. Is this meant to pass before the end of the year or something for next year(think next year might be too late for Chrysler and GM). If it doesn’t pass by the end of this year with Congresses endless vacations the Bill will have to be started over next year and could take even more months to go through commitee voting and both houses, I don’t think these guys want to wait that long, leading me to believe the Big Losers need this before Congress closes up shop by the end of the year.
I think we need to start a public awareness plan and get more than just us in the know writing to our Congressional idiots. If we can get a majority of our states writing, calling, faxing emailing etc. and let them know this is completely unacceptable and they will not be reelected if they support something like this, it will die a quick death on the floor.
I don’t care who I piss off, fanboys, employees, family members or my coworkers but I will not stand by and let them get away with steaking more of my/our money.
Anyone with half a brain knows this will not force them to change and will just be money, OUR MONEY, tossed into the fire.
As tax payer’s we can’t keep bailing out every Company that needs help.In this case once again we reward bad Management.I am sorry but this is some screwed up shit.I made the choice about 3 years ago never to buy a Big 2.8 product again and this confirms I made the right choice,If we allow this to happen,what business will be next?It seems that the Airlines can’t get any Money from the Government, so why the auto makers? wait I know the answer!LOBBYISTS.This is truly over the top,and to say I am pissed off is being nice!
GM’s Rick Wagoner told Charlie Rose August 18th GM’s future is “very bright”.
If taxpayers involuntarily finance the Detroit-3 without management changes they will head in the same direction and waste the money.
No.
Chapter 11 is the best solution for them.
A bailout by the govt. is just forestalling the inevitable.
I think people need to stop comparing this to Iraq, whatever one’s position is on Iraq. One could say billions for GM or billions wasted on lousy public schools. The topic here is the bailout sought by mismanaged bureaucracies called Ford, GM and Chrysler. There is no justification to give these clowns $25 billion (and it will be giving as they will not pay it back, will be “forgiven” by the givernment yes spelled that was intentionally as that is what it is: GIVErnment, as so much money is, besides what the hell is the government going to repossess? A bankrupt company, thousands of Cobalts? what collateral? old factories in run down neighborhoods?)
Wasting money on a war or a lousy school is no jusitifcation for wasting money on overpaid, mismanaged companies.
So what if they and their suppliers go bankrupt?
Call me cruel, but capitalism is creative destruction and survival of the fittest. Candlemakers lost their jobs when the lightbulb was invented, and demand for horses collapsed with the invention of the car. Even current telephone companies are collapsing with consumers going to cell phones. So what?
We have a better product now and less money wasted on obsolete crap. Laid-off employees will just have to get new jobs. Big deal.
I’m sure Rick will get a nice $40M bonus out of his hard work getting our taxpayer dollars!
As for competition…we are rewarding an industry that is no longer competitive…only way they can regain it is not from our money but from crash and burn and rising from the ashes.
We have a better product now and less money wasted on obsolete crap. Laid-off employees will just have to get new jobs. Big deal.
Except there doesn’t seem to be anything rising to take the place of the auto industry. I suppose that Honda/Toyota, etc. may build new plants here to take care of the demand – to some extent, but I’m sure a lot of the demand will be met by imports (as opposed to transplants) As far as I can see, we’ll end up with lower total employment.
Let’s see, I run a profitable, honest business and receive no federal support. If I mismanage my company, lose lots of money, go into huge debt, give employees wages way above market average and plenty of benefits, and then pay myself huge buckets of cash that is protected from bankruptcy, can I also get free federal money?????
Adub : “Laid-off employees will just have to get new jobs. Big deal.”
It is a big deal. Most of those who will suffer the loss of job/career, potentially homes and families had little influence over the circumstances they find themselves in. Who is going to pay for retraining? Who is going to hire a glut of laid off workers? Who is going to pay for their relocation to other states? Where is the tax money to maintain public infrastructure going to come from?
Only the evecutive and board will be laughing all the way to the bank.
To “give” a huge chunk of taxpayer money to the auto companies that have squandered billions over the last few years in inappropriate and questionable decisions seems like a good solution to the problem. Sure, make every American an involuntary and uncompensated partner in companies whose futures are close to/already in bankruptcy.
What a great idea. Wish I had thought of that solution.
Americans could complain but look how good it has done in stopping the Iraq war.
Bend over it’s coming and it’s going to hurt bad.
Adub
OK, You are cruel.
Wait till your turn comes, then we will see how you feel. Don’t know what you do, but you may be involved and not even know it.
Without a bailout, yes, it will be ugly. But it probably has to get worse before it gets better.
With a bailout it will just be throwing good money after bad. The Wagoners of the world will still get their bonuses and golden parachutes. Only now it will be your money, not just stockholder’s money.
Free enterprise for you and me, socialism for the corporations. Just the way they like it.
They’re always willing to take the profits, but when the chips are down they come whining to Uncle Sam.
Hey, it’s either capitalism or it isn’t.
hltguy
“There is no justification to give these clowns $25 billion”
Assuming this proceeds, they will NOT be given 25 billion dollars. Your government would guarantee loans for them, the funds would come from banks and other sources of cash. Think of Uncle Sam as the loan co-signer. Just like the Chrysler loan guarantees granted back in Lee Iaccoa’s day.
The government would only get stuck if the companies defaulted. Any chance of that happening?
I run a profitable, honest business and receive no federal support. If I mismanage my company, lose lots of money, go into huge debt, give employees wages way above market average and plenty of benefits, and then pay myself huge buckets of cash that is protected from bankruptcy, can I also get free federal money?
No, because your business failure won’t impact that many people. The complete failure of GM or Ford would create a lot of harm to a lot of institutions at many levels.
There’s just no comparison. Excepting any political shenanigans, bailouts aren’t done for the sake of the recipients but for the sake of the donors. It’s a matter of not cutting off your nose to spite your face.
That being said, I seriously doubt that a plan of this sort will get much federal support. With the financial system in crisis, there simply isn’t enough money in the treasury to support it in the event that the loans default, and GM’s financial statements suggest strongly that GM would default very quickly.
This plan could ultimately backfire for GM. The federal government may end up doing a hybrid of the old Chrysler bailout with a twist of a Bear Stearns, by selling them to outside investors who will contribute new equity in an amount sufficient enough to effectively cover the federal loan guarantees.
In this scenario, the feds would protect themselves with at least some of the equity, and protect the lenders with their guaranties, so the risk ultimately goes back to the investors. The investors would be highly motivated to make this succeed, so Mr. Wagoner should probably prepare his resume, as his services will no longer be required.
Who is going to pay for retraining?
The individual will, it’s their responsibility.
Who is going to hire a glut of laid off workers?
That is how new industries get created, what happened to that training they just got.
Who is going to pay for their relocation to other states?
The individual will, it’s their responsibility.
Where is the tax money to maintain public infrastructure going to come from?
That can come from the $25billion we aren’t wasting on the Big 2.8 if it needs to, but I bet new businesses and the companies created from the ashes will pick up the slack.
Maybe you should quit thinking like we live in a socialist nanny state and remember that people need to take responsiblity for themselves.
If we quit propping up all these poorly run companies it would give a chance for the better run more competative ones to take their place.
When does any government “fire three of four layers of management”? Doesn’t happen, never will, one of the reasons the U.S. is going bankrupt.
That’s not the problem – you can look at your elected “un”conservatives who have reduced the income while increasing spending over the last 7 years. It’s not rocket science – they inherited the biggest surplus this nation had seen and within the first year reduced it to the largest deficit that just keeps on growing.
I’m not for bailing them out, but you can be damn sure, irregardless of what McCain has said, that he will be bailing them out and smiling the entire time. He can’t keep stories straight nor remember how many houses he and his wife own.
I say structure the payments thus:
$1M upfront to develop hybrids
$15B available to the first company to make a profit for one rolling 12 month period.
Oh the bleeding hearts let me see, If a small business with 10 people goes under, the impact on those people is less then a large Company that may have 10,000 goes under? we should just bail out every business that can’t make it on there own.This is not what free enterprise is about.
How about a massive federal infusion of newly-legalized immigrant labor to bail out the Big 2.8? The fed sure seems to have little problem with that kind of subsidy!
GM should prepare a charity solicitation package for all of their employees and they can all go door to door, soliciting tax free contributions to keep the lights on and the doors open in their plants so they can keep grinding out cars no one wants. They could get a big poster of Rick Wagoner with pleading puppy dog eyes, saying Give Money. If they are going to be a charity then they should have do like all the other charities, along with the salaries and perks of the principals available for all to see.
If they can raise the money they need more power to them.
DPerkins: Great, the taxpayers will be co-signors on $25 billion in loans to poorly run companies, and per the article payments may not have to be paid for five years. I really hope you do not believe that such loans will be paid back by the companies, really? Like I said earlier, what does the taxpayers receive if the companies default, a parking lot full of Cobalts?
Pch101: I understand the difference, however the point was made that those in business, large or small, should not have to pick up the tab for those who can’t run their businesses properly. Just because more people “will be hurt” if GM or Ford goes under is not justification for tapxayers bailing them out. There are no guarantees in employment, if the company you work for goes under, then you have to seek another job. You say the feds would protect themselves with “equity”, what equity? GM and Ford owe far more than they are worth now, another $25 billion does not change that fact, or the fact that fewer people are buying their product. You can be assured the taxpayers will never see the money again.
“Wait till your turn comes, then we will see how you feel”
My time has come more than once, not because of a layoff, but various other exigencies. Not a lot of support, apparently I wasn’t a cause, just some nonunion shlub up against the wall.
It’s called creative destruction, there’s nothing to be gained by life support for failing businesses.
Autoworkers are not a protected species.
If a small business with 10 people goes under, the impact on those people is less then a large Company that may have 10,000 goes under?
Yep, that’s a statistical fact. It’s a bad aggravating to see that people such as Rick Wagoner have that much leverage to hold over our heads, but in fact, they do.
we should just bail out every business that can’t make it on there own.
No, we should only bail them out if their failure would cause us more harm than the cost of the bailout.
In this situation, it seems likely that GM would get a heavily structured bailout, that Ford will just get loan guaranties without all the strings attached, and Chrysler gets nothing and likes it.
This is not what free enterprise is about.
Free enterprise requires employment, a functioning credit system and a credible stock exchange. GM’s complete failure would put a bullet to all three.
A bailout would be our attempt at a bulletproof vest — for us, not for them. If it happens, I can only hope that the feds manage it well enough that a GM failure would blow back onto new investors, instead of on the taxpayer.
Ford is in better shape, and probably doesn’t need quite that much hand holding. Cerberus is going to have to suck it up and figure it out on their own.
This in response to the TTAC article about the American Auto Industry asking for loans from Washington:
It is a shame that the general public does not know the truth about cars in America and what the true cause of the problems are in Detroit. Everyone not associated has an opinion and they also have something else that everyone has and you know what it is. But the truth has been hidden for so long it is now time it comes to the forefront. You want to know what the real problems are in the American auto industry? It is spelled U N I O N or U A W! Yes, truly, there was a time when the union was needed by every person laboring within the auto industry but that need has long since been fulfilled and the unions had to do to something to make themselves appear to be needed so they fought the industry for years until they finally have reached the point where they are now killing the very industry that kept them alive. Look, people are working in the factories making $25 and hour to sweep and mop the floors. All the hourly work no more normally than about five hours a day if that much. I know when I left the industry they were only working four hours per day and that was just about plant wide. In addition, they have healthcare coverage that should be the envy of every American including prescription costs far below anything believable in this day and age. All of that has driven the auto industry into a position where they can no longer fight to survive against the foreign companies not affected by the unions and not having to face an eye opening amount of money paid out before one car rolls off the lines just to keep the union people working. Oh, I see. You think that is the fault of the auto industry and they should have told the union “No”. Well, you see the American auto industry companies are civic minded and patriotic. They know the effect of the union going on strike for six months or more and what it does to the country as a whole. If the American auto industry goes down, the country follows. What do you think is the problem in America today? It is all of you who believe you are going to turn your back on the American companies by buying the foreign cars and when you do that very thing, you ultimately take a vast amount of money outside of this country where it is lost to the country as a whole.
Unless you are economists, you probably do not understand the effect of the number of Americans today buying foreign cars whose true quality levels are no better than ours. There are billions of dollars spent every year in the auto industry as a whole for something called R&D. When the foreign companies spend this money for their cars, it is in their own country. When American auto industry companies spend this money, it is America. When parts are needed for American auto industry cars, they are mostly made in America whereas the foreign companies suppliers are in their own countries and not America. When you buy the foreign cars, the profit for those cars goes to the country of ownership for the company and so it leaves America. The foreign companies pay less in taxes than American companies and surely you do know where the tax money goes right?
If you had spent 30 years in the auto industry as I have, you would have seen all of this with your own eyes and would have experienced it and you know the American companies have done everything possible to keep on top of things and stay on top of the market share. So, now we have reached a point wherein the unions are driving the American companies out of business which is why you see so often in the paper headlines like “Company X and the UAW sign agreement” instead of “UAW threatens strike”.
So the day has now come where the powerful American auto industry has become so weakened they are on their knees begging for help from Washington. Why not? Washington opened the door for the foreign companies to bring their products into our country plus you, the America car buyer have turned your backs on the American companies and are buying the foreign products which cripples the American companies even more who are fighting to survive while having the union strapped to their backs. How many of you know how vital the American auto industry was during WWII? It was the American auto industry that shut down making cars and trucks and made military equipment that allowed this country to survive and win this terrible war. Let us suppose that the American auto industry goes completely under. The very first thing that happens is hundreds of thousands of your fellow Americans lose their wages plus all the retirees that spent decades in the industry lose their retirement pensions. Just think about that for a moment and put yourself in their shoes. You have worked in this industry for 30 years or longer giving them all your blood, sweat and tears. Believe me, if you were a salaried employee without union backing, you gave your blood, sweat and tears. I have seen years go by where no one was allowed to take more than one day of vacation at a time due to the workloads on us. So finally you reach the point where you can now retire. You have been retired for 10 years receiving your monthly pension checks you were promised and you also put money toward and you also get your social security checks once a month. Then suddenly the auto industry in this country shuts their doors because they just cannot survive any longer against all the costs put on them by the union plus all their fellow Americans who turned their backs on the American industry and finally they are gone. When that happens, so goes the penions every month and what little healthcare insurance we have left. Now we have to buy our own only we can no longer afford to buy it because it cost about $600 a month to replace what we had and we are only making $1,500 a month on social security. We have other expenses to pay like $200 in gas to drive to the kids to see our grandkids and another $200 to get back home. And, believe me when I tell you by the time you retire after 30 years in the auto industry, you have been under so much stress for so long it has eaten your body away and all you do is go to doctors and these doctors want $100 every time they see you for 15 minutes.
So sit back and laugh because you know what; what goes around comes around so as you sit back and laugh at the American auto industry and turn your backs on the companies that helped make this a healthy and wealthy country for all who live here, when those companies go away, it will not be the foreign companies who step up and take care of you because they have their own to take care of rather than YOU who they do not care about except when it is time for you to buy your new vehicle. So when you walk into that showroom, take a moment and think about how many people you are depriving when you buy that foreign car rather than stepping up and helping the companies from your own country who have done so much to further this country that you live in and all the people who will suffer just because YOU purchased a foreign car! It is used to be in this country that we were concerned with all, with everyone and everyone’s welfare but now we just worry about our selves and what we want rather than what we need to do. This is little feeling of community ownership any more because everyone is out for themselves rather than for the whole good of the whole country. This is sad and believe me, you will pay for it. You may have it made now, but the more you deprive others by your actions of doing things that are essentially you turning your back on others to help out by buying an American vehicle, the more you will suffer somewhere down the road. You all need to think about this long and hard before you laugh and turn against any more help for Americans, American companies and the country of America! Let me tell you one more thing: Japan swore they were the bitter enemy of America and that eventually they would overcome us! They also said if they could not beat us in the field of battle, they would beat us economically and you help them to defeat your country every time you buy one of their products! I sincerely hope you have as good of a life as I have had but I seriously doubt that you will because I firmly believe when the American auto industry goes down because of so many Americans buying foreign products when it is proven and evidenced by JD Powers that American cars are the equal of any foreign car you will eventually suffer because when the hundreds of thousands of Americans can no longer buy anything because they have lost it all when these companies closed their doors, your company will be in trouble and hundreds of thousands of you will also lose your jobs and income because it all trickles down.
AWESOME
All right, I am not a Big 3 fanboy, dont own a domestic car, but I do however live in the Detroit Area. Things have been so bad in Southeast Michigan for so long, (not for me so much, but a large portion of the population is associated with the auto industry in some way), this is really the shot in the arm the region needed.
All you guys screaming about misuse of tax dollars….PLLLLLLEASE. There isnt a congressional district in the Country that hasnt gotten its fair share of pork. Instead of a bridge to nowhere, the big dig, rebuilding an unsustainable city devastated by natural disaster, etc., Detroit gets low interest loans. Who knows, the loans may even get paid back.
People in Michigan, Ohio, Indiana and any other auto industry heavy regions pay taxes as well. Shouldn’t they get their fair share of Pork? What makes one group more deserving than the next?
The way I see it, we had this coming. I know many of you and this publication take great joy in the demise of Detroit, but there are actually lots of people effected by Detroit’s downturn. I am not talking about a bump in the road of life, I am talking about tire shredding, rim bending potholes. Is it really such a bad thing to try to rescue American industry? Or American lives?
I am sure any one of us can think of a hundred things the government spends money on that is more wasteful and less noble. You guys arent the only people who pay taxes, so dont sound so outraged, your handout from Uncle Sam will be coming in short order if it hasnt arrived already. Right now, its Detroit’s turn.
Pch101: Free Enterprise also requires the masses have spending money to buy the products and service to keep the free enterprise system afloat and growing (for more job creation, more tax revenue etc.) Spending tax money to support inefficient, poorly managed businesses does not create more jobs or add to the tax base. The fact is if GM goes under, other companies can sell cars and those displaced by GM can seek employment with the other car companies. The more our government pisses away on billions in bailouts, the less money the masses will have to spend, thus the negative impact on the “free” enterprise system.
All the massive bailouts, loan guarantees and direct taxpayer subsidies in the housing, steel, airline and ethanol industries have done wonders haven’t they.
however the point was made that those in business, large or small, should not have to pick up the tab for those who can’t run their businesses properly.
This is not a religion with a Ten Commandments of moral rights and wrongs, but a matter of self-preservation.
Most of us couldn’t care less about Rick Wagoner keeping his job, pension and company car. However, the financial system and government do care about this the risk posed by this one company tanking the party for everybody else.
Bailouts are few and far between. For the most part, the bailout system consists of Chapter 11 bankruptcy, which allows for a fresh start. But in this particular case, that cure would be worse than the disease, hence the motivation to go with the exception (bailout) instead of the rule (bankruptcy protection.)
You say te feds would protect themselves with “equity”, what equity?
As I noted above, I doubt that the federal government would guarantee loans to GM unless it also called for new outside investors to contribute new cash to the company.
Believe it or not, there are people in the government who aren’t stupid. The feds will look at GM’s operations and balance sheet, understand that the operations are in trouble, and tie up the deal with conditions prior to contributing their money (or more accurately, their guarantees.)
Government money more often than not comes with strings attached. They can and do pay attention to see whether others will be absorbing a piece of the pain. They might prove me wrong, but I doubt that GM would get anything more than a nominal package unless there is new money being contributed from another source.
So how will Europe (the worlds largest economic block) respond to a US bail out? It could fine the European arms of GM and Ford or put tarrifs on US products. Or maybe Europe will nationalise GM and Ford Europe and auction them to the highest bidder. Bailing out GM, Ford and Chrysler may not be that simple.
Mr Indy: Great we bailout the inefficient auto industries. I seriously doubt they have done everything then could for the past thirty years to stay on top, please. Yep, write that’s it patriotic to buy the products of GM and Ford to support the retirees of those companies while those very companies are offshoring the manufacturing of their product as fast as they can. Let’s see, where is the Ford Focus built? Oh, Mexico, that’s right. How about the Fusion? the Astra?
Let me ask you this, where do we all go when the U.S. itself can’t pay its own obligations? We are all screwed then. Have you noted the current deficits are government is running? Who is going to pay for Social Security, MediCare etc. You have spent thirty years in the auto field, I have spent twenty years in the medical field and I can tell you Medicare is not going to last much more than decad or so more, it is going bankrupt quicky and the baby boomers have not really hit the system yet. Why, because of hugely wasteful spending and an ever expanding sets of rules and bureaucracy, and the sheer number of sould hitting the sytem, legal or otherwise.
So, bottom line, the union members of the auto companies have had a long, good ride, as have the highly paid management of the corporations. The public owes them no loyalty. The customer spent their money and bought the product and now the public is turning its back on the product being offered. That is not the taxpayers responsibility.
I’d bail them out only if they get rid of the UAW.
And by the way, the difference between that low interest rate and the ‘normal’ rate is being made up by the taxpayers, and that assumes they don’t default on the loans. Forget it.
Gamper,
I understand what you’re saying, and I believe that you’ve hit upon a big part of the problem. At the national level, the U.S. political system is based on taking money from one group and distributing to another group. If your representative isn’t actively involved in this process, then you are getting screwed! Think about the bridge to nowhere in Alaska, various “studies” that everyone knows the answer to before they’re even conducted, the building of military bases, etc. The breadth and depth of the pork involved in our political process is sickening. The time to stop is now. Also, I was born and raised in Ohio and my Dad was a union steelworker, so I am not unsympathetic to the non-executive workers who are the true victims in this mess.
So how will Europe (the worlds largest economic block) respond to a US bail out?
They won’t. If anything, they’ll welcome it because another hit to the US financial system will make things that much worse for them and their markets.
It funny to see the supporters of this bail-out say it is the correct thing to do yet they can NOT tell us how or if it is going to work. It’s like they, along with GM is simply saying just give us the (your) money and then we will figure it out!
What a bunch of BS. The simply truth is GM is F$%ked and 25 billion is not going to fix a damn thing. GM WILL NEVER HAVE THE MARKETSHARE THAT THE CURRENT COMPANY NEEDS TO MAKE A PROFIT!
GM is a prime candidate for Chapter 11. LIKE IT OR NOT. This company needs to be broken and than rebuilt to a much smaller size so it can sell the few porfitable products that is does make. Whether you autoworker want to accept the fact or NOT many of you are going to LOSE your jobs (PLAN FOR THE FUTURE). Come home from la la land already, far too many of you are doing nothing but assembling car and trucks that are NOT going to sell. In a nutshell you guys are going to work but really aint doing sh*t!
For every 10 workers building Tahoes on the line today 5 of you guy/gals are NOT needed anymore. Your Union is blowing out of your a$$es by BSing you into thinking you future is remotely secure at GM.
LISTEN TO THE CUSTOMERS! We are NOT coming back!
We are happy with those other products and have NO NEED for a GM product again, END OF STORY, PERIOD!
GM is doing nothig but wasting money today. Every quarterly lose that GM continues to make will only hurt what is left of your pension fund. If you guys were smart you pull your money out NOW.
That is not the taxpayers responsibility.
The taxpayer also pays for it if the US markets get nailed with news like this.
You act as if the failure of GM comes at no price to anybody except their employees and suppliers. Personally, I wish that was true, but unfortunately it isn’t.
None of the options are free of cost to the taxpayer. All of the options suck big time for the public.
It’s a shame that these companies didn’t do a better job without dragging the rest of us into it. But they did drag us into it, and here we are. Toss that big GM ball-and-chain into the sea, and you’re going to find yourself in saltwater. The paddling won’t be easy.
Canada is willing to take it off our hands on the cheap – the US could use the liquidity.
No thanks. We struggled for years to get our debt and deficit under control and it’s not pretty – as the US will shortly discover. Throw this 40 billion on top of the existing record debts and deficits. Yikes.
I reckon this is a done deal though. They bailed out failed lenders, they will bail out the car companies. Hide your money in the mattress if you can.
I wonder, what is the threshold for being allowed to go under and being able to turn government funds on like a tap? Whatever that threshold is, I want to be over it.
tstag
The EU can’t say anything. You do know VW, one of their largest, is 20-25% owned by various governments from a previous bailout by them.
Fair share of Pork = Zero.
Advantage to Bail Out = Zero.
Justice in Bail Out = Zero.
There isn’t a lot of justice in chapter 11 either, but I guess it’s preferable to a bail out.
How about some of the pro bailout people go look up a list of large chapter 11 companies doing business today. Start with just about every airline. The unions get right back in the system as well, so it really doesn’t change a lot.
Want to save Michigan? Make it a right to work state with laws against preferential employment contract clauses (IOW, the unions can’t demand they get same or better deal as anyone else). Manufacturing will flood back to the state to get the otherwise wonderful workforce.
A couple points:
– Those justifying this bailout by citing the money wasted in Iraq and other pork projects are forgetting the adage I learned in pre-school: two wrongs don’t make a right (ok, so it’s not terribly sophisticated…)
– Those making the point that the damage to the economy caused by one (or all) of the D3 going C11 certainly have a point…in the short-term. What of the damage caused by repeatedly rewarding failure? I wish the government (the Fed in particular) would not take the position that forestalling a recession is a cause worthy of any and all action (bailouts, devaluing the currency, etc.). Recessions and layoffs are part of a market economy. I’m too young to have yet been affected, but twice growing up my father (a brilliant man with multiple degrees) was laid off. It sucks. I truly feel terrible for every family that is thusly burdened. Unfortunately the alternative is demonstrably worse.
Americans are spoiled, short-sighted, and greedy. That’s the long and short of it.
Citizens of other countries who are mass-producers of cars generally recognize the benefit of purchasing automobiles fabricated by their own companies. How much of the Japanese home market does Japan own? How much does Korea own of its own market? EU? China? Why is that?
The U.S. has been content to shed most traditional manufacturing (textiles, electronics, steel, consumer appliances, even certain agricultural products, etc.), and we all came up for “rational reasons” to support it — clothing was too “low-skilled” for our market, steel was “too expensive,” etc.. What has been happening is the gradual erosion of all traditional industries to be replaced by the financial, medical, construction, public sector, and marketing industries. In other words, we are becoming the U.K.
Now that we have come to a crossroads and must decide whether we should let the U.S. car industry go under (like everything else has), a sizable portion says let it go. Unbelieveable. Chapter 11 for GM would be disastrous in the short and long term, for many of the reasons people have cited above.
One of the prime (if not flawed) reasons for allowing free trade, and turning our backs to unfair trade practices of other countries, is that if the rest of the world gets richer, so will we. Raise the standard of living in Mexico and China, and they will start buying our higher-end goods. Well, until they start “copying” our high-end goods. Those who constantly attack U.S. companies for complaining about unfair trade practices have no clue whatsoever. None. Unless you deal in global trade or work for the U.S.T.R., your opinion is meaningless.
Be careful what you wish for, everyone.
Some food for thought:
The making of the big 3 was the downfall of the US auto-industry. Since the last of the (independent) players AMC was killed the US auto-industry has been in steady decline!
For a country that was supposedly built on competition and the free-market we destroyed our own auto-industry because of greed. Market oligaries do NOT work and by reducing the biggest market inthe world to only 3 key players is what broke our industry.
3 giant companies producing millions upon millions of what was essentially the exact same crap drove far too many people (WITH THE FINANCIAL MEANS TO BE SELECTIVE) to try those other products designed and built with a different (and what many considered better) design philosophy.
What really killed Detroit is that when Americans became feed-up with Domestic cars all 3 domestic makers were making horrible car collectively. The accepted wisdom was that all Domestic cars were junk, NOT just GM or Ford or Chysler, BUT ALL!
HOW DID 3 OF THE LARGEST US COMPANIES IN HISTORY IN ONE INDUSTRY ALL SCREW THE POOCH AT THE SAME TIME? The domestic fanboy really need to think about this tonight over some beer!
How the hell did this happen when at least 7 Japanese, 4 German, 2 French, 3 Italian, and 3 British auto makers were all “up and running” in the USA ready to supply and service the wealthy US market?
Or auto industry is were it is today because of a REAL AND JUST reputation for being all around shitty! One bad Plymouth sold to a customer not only killed Plymouth as a future choice but all of Chylser which than was extend to all domestics. On the otherhand a bad Toyota shared no relation to a Nissan product so if my Toyota sucked I simply brought a Datsun, or Mazda.
I wish the government (the Fed in particular) would not take the position that forestalling a recession is a cause worthy of any and all action (bailouts, devaluing the currency, etc.).
There was a one Herbert Hoover who agreed with you. His lack of a proactive policy led to a little party called the Great Depression.
None of us like crime or gun violence. But the time to take your principled stand against it is not when there are three guys pointing guns at your head, demanding your money or your life. Principles are nice, but they don’t do you much good if you wind up dead.
In this case, we can take on the little guy (Chrysler), but we need to listen to the other two. Fortunately, the thin man (Ford) should actually be able to make good on the deal, while the slob in the corner (GM) can be dealt with if there are enough strings attached.
On the one hand, $25b is a paltry sum for the govt of the US. On the other, that’s a shame. It’s a monstrous beast, sucking up money, spitting out pork. I truly wish there was a way of starving the US govt of money so it withered a lot. Free market, free trade, free people.
Of course, that’s not how things are. The way things are, if you have grandchildren you may as well tell them that the politicians have spent all the money they will ever make, as well as their children’s money. “But it was always for a good reason.”
I’d rather see $25b in small business loans, retraining programs, etc. than see the 2.8 get a single dime of tax money.
Yes, it will suck for the economy if/when they go out of business. For a while. Personally, I believe America is more resilient than that, that Americans are tougher than that, and we would come back bigger and better than ever.
@ PCH101
Actually Herbert Hoover made the Depression worse by agreeing to the Smoot-Hawley Tariff Act. Doing nothing would have been better. The worst year of the Depression was probably 1937, i.e. well into the New Deal.
There are not 3 players in the auto business in this country. There is only 1. UAW.
I’ll go for the 25B if we compromise by forbidding any future union lobbying, and remove the right of federal workers to unionize or bargain collectively, and create federal right to work legislation. After all, what good is private property if you can’t sell your labor?
Yep, I’m a cruel guy.
I’m so heartless I don’t believe in lifetime employment, or government bailouts to keep the factories humming hust so little Johnnie can have a nice house and a plasma tv financed with taxpayer dollars. I guess I got that way after being laid off… (sniff sniff) NOT.
The world doesn’t owe anybody a job, and I’ve met many smart people who were so lazy they now work as bus drivers. If people can’t be troubled to better their lives, well, f’em. They are lucky this isn’t a hundred years ago. Lazy SOBs would have starved to death back then.
As for the impact on the economy… Say the Big Three all go belly up. We’ll have lost Focus production in Mexico, Aveo production in South Korea, Impalas in Canada, and Dodges made in Kreplachistan. Big deal. Every other auto company will rush to fill the void, and with a weak dollar, it’ll be cheaper to build cars in the U.S. than anywhere (except Zimbabwe and Venezuela, but nationalization would be a risk there).
Of course, nobody will build cars in Detroit or Ohio or anywhere else. See, the UAW contract attaches to the factory, and nobody will touch those places with a ten foot electric cattle prod. So we’ll have to write those places off (we already have, been to Detroit lately?). But in the end, better cars will be built and people will have jobs. This too will pass.
People might be afraid for their jobs, but it isn’t the government’s job to take care of you. People might as well ask the government to wave it’s magic fairy wand and patch up their marriage, housebreak their dog, and wipe their rear-ends.
Citizens of other countries who are mass-producers of cars generally recognize the benefit of purchasing automobiles fabricated by their own companies. How much of the Japanese home market does Japan own? How much does Korea own of its own market? EU? China? Why is that?
What is the differnce between the USA during the fall of our domestic auto-industry and China and KOrea during the RISE of their auto-industries?
Quite simply the USA was the wealthiest auto market in the world during that time and continues to be to this day YET (A BIG YET) the domestic players were PERSONALLY too greedy to satify that market’s demand for QUALITY products.
THIS IS PLAIN AND SIMPLE!
GM, FORD, Chysler, along with the UAW shot themselves in the foot by keep quality low in exchange for fatter paychecks, big bounses, and large dividends to shareholders.
As Malcolm X once said; “the chickens will come home to roost!”
Man, Im 38 years old and as long as I can remember the only arguments coming out of the Detroit camp have been nothing but negative.
Rather that fight the good fight and build better cars. The dometics tried to shame folks into buying domestic cars by digging up 40-50 year old history about how Japan attacked Pearl Harbor.
As if that arguement would gain traction with anyone that is NOT a good ole boy!
Pch101:
Keep in mind that the Fed’s (conscious) decision to devalue the dollar was a major factor in the increase in oil prices which are (though below their local maximum) putting tremendous pressure on the economy. As painful as C11 for the D3 will be the economy will recover. After all, even the Great Depression was a finite phenomenon (albeit one that required a massive war to end).
I wonder what the conservative talk show hosts who heavily advertise for GM will say when the Congress votes to give these “loans.”
This is gonna be interesting, that’s for sure.
EDIT: Yes, I too will call my congressmen and senators to tell them that I don’t want to foot the bill for irresponsible management of a private company.
Besides, we’re probably gonna need a couple of factories to make tanks and planes for what I believe are the upcoming water and oil conflicts with Russia, North Korea, and China.
I don’t know who came up with this, but it was not me.
“Too big to fail, while the individual is too small to bail”.
The economic engine that is “detroit” is arthritic, due to years of lame management. Labor somehow manages to make BMW, MB and Acura without poor quality scores.
The short answer is it must be dirt cheap to make a car, and to go broke it is due to years of problem solving for today only.
If the banks won’t touch them, then my tax dollars should not either. Bankruptcy is a part of capitalism (unless you are a little guy…see the Bankruptcy Bill of a few years back-Cap One and Amex get their money back, even if you don’t)
here’s a suggestion pch101, why not pool your money with the other supporters of the bailout and buy stocks in GM & Ford. I’m led to believe they are quite cheap at present.
the fact that its unconstitutional for the US Government to dole out money like this should be the first complaint people have( yes I know the constitution is a dead letter when it comes to restricting what the government can and can’t do) but like, you know, whatever.
Mr Indy….
Wow…. I hate to break it to you, but welcome to the real America. And you aren’t getting sympathy from me about your pension and medical benefits taking a hit.
The reality is that at least you have some. Your pension is insured (really partially insured since there are limits). That is more than most of us will ever get. If GM fails, then you will get something.
Ditto for your medical benefits. I’m sorry it sucks, but it sucks for most of us. And like your pension, at least you get more than most Americans.
And blaming us consumers for your problems… that’s low. The sad fact is that your company has lost customers because they sold them crap and they treated them like crap. They lied to us again and again about getting better. So you act surprised when customers gave up?
Any business will tell you that is easier and cheaper to keep a customer than to find a new one. You’ve taken your customers for granted for too long, and you lost them. It is simply going to take decades to win then back. Too bad.
Trust me… no one is taking glee in seeing this. But don’t demand that I accept an inferior product from a company that treats me with contempt. Would you accept the same from any service or product you bought?
In short, your little rant beautifully illustrates the closed minded entitlement attitude that is killing Detroit. I want no part of it.
Personally, I believe America is more resilient than that, that Americans are tougher than that, and we would come back bigger and better than ever.
I agree. You sent a couple pieces of machinery all the way to Mars and they landed at exactly the right place at the right time, and are still wandering around gathering info. I don’t know what is holding America back but you should be kicking ass not asking for handouts.
After footing the bill for investment banks and mortgage companies, what’s a few billion between friends?
Yes this bailout will probably come to pass, but it ultimately will change nothing except buy Detroit maybe 2 years time.
What will change? Will management or the management culture change? Will Toyota and Honda suddenly become irrelevant? Are the people not buying Detroit products going to suddenly start buying domestic?
Simply go back two years and see what number the GM Death watch was at 2 years ago and add the diffence to the current GM death watch count. Its still coming but it will just take a little longer, we may be up to GM Death Watch 300 or 400 by then but its still coming.
It will be interesting to see what the reaction will be when Cerberus takes the money and later sells Chrysler to a foreign company.
PCH,
The unwillingness of our government, citizens and institutions to make the really tough decisions is how we got into the subprime mess and why the D2.33 are where they are.
Realistically, there is not one shred of evidence that would lead a rational person to believe loaning GM $25B or $50B or $100B will turn the company around. Nothing.
Your position that having GM go under would further devastate an already shaky economy makes sense. Having GM default on a loan the size they’re discussing would be even more damaging considering it’s not conceivable that said loan can right the GM ship.
GM’s fate has been set for some time – we’re just now understanding the scope of damage.
Such arrogant raping of the American taxpayers. Our nation has become a land of fools and thieves. There simply is no rationale nor intelligence to this. If GM, Ford and Chrysler simple went away, the US economy would burp and move on. It would be cheaper for all of us if they did just ‘go away’. The maxim of ‘the more money you throw at it, the bigger the problem becomes and the greater the waste’ not only applies to education but certainly to the US automotive industry. Now Rick Wagoner will have super double insurance on his retirement of great wealth. Traitors I say, traitors.
The unwillingness of our government, citizens and institutions to make the really tough decisions is how we got into the subprime mess and why the D2.33 are where they are.
And this denial applies to far more than the subprime issue and with much broader consequences. Our education system is a disaster with effects that will be felt for 50 years even if we fix it today. We’ve trashed our manufacturing capacity and lost skills that won’t be replaced. And the effects of climate change will absolutely trump everything.
Meanwhile back at the ranch large parts of our electorate are keenly focused on issues like prayer in schools and gay marriage and lapel pins. And what are the specific numbers? Eight (?) percent see race as the PRIMARY factor in selecting a president and another 17% (?) see it a as a major factor. And those are just the ones who admit it. A few weeks ago I saw an old interview with Merl Haggard (the singer who recorded “Okie from Muskogee” in the 60’s) comment that “this used to be a great country”. Even he gets it, but most people still don’t. Go ahead and give GM the $50 billion and whatever else they want. It won’t make much difference.
NickR: You sent a couple pieces of machinery all the way to Mars and they landed at exactly the right place at the right time, and are still wandering around gathering info.
Irony alert: it was the evil government that financed that. “Even worse” is that the government kept spending money on Mars, even in the face of repeated failures.
Billions of bucks here too.
jkross2: Having GM default on a loan the size they’re discussing would be even more damaging considering it’s not conceivable that said loan can right the GM ship.
Going further on the space probe notion: the entire Mars Observer program cost about a billion 1993 bucks.
From a simple mission perspective, it was a complete loss: it simply disappeared before it entered orbit around Mars.
Economically, though, it wasn’t much of a problem, since most of the people and machinery that went into its production are still here on Earth.
The same kind of argument can be made for any kind of government “bailout”. Simple risk/benefit: we can give GM $25 billion bucks. If the company proceeds to succeed, you win. If, however, the company fails anyways, the failure is only slightly worse than if we simply let it die today. A failed GM-with-Volt is better than a failed GM-without-Volt (this is just one example).
here’s a suggestion pch101, why not pool your money with the other supporters of the bailout and buy stocks in GM & Ford.
If this GM bailout/sell off were to occur as I think that it may, then the current stockholders are going to get creamed. It will be the new investors who make the money, not the current ones. It will be big money players (the investment banks and overseas investors) who profit from this, not the every day citizen who is watching his 401k evaporate.
Realistically, there is not one shred of evidence that would lead a rational person to believe loaning GM $25B or $50B or $100B will turn the company around. Nothing.
That’s wrong. In the right hands and with the appropriate deal structure, GM could be a successful company and worth a fortune.
With the current management team and some of the associated baggage, staying on the current course, it’s going to fail. With new leadership and additional funds put into the right places, it could work.
If my prediction turns out to be true (and I’m not giving this 100% odds), then a GM bailout would not just include guarantees but would also add new management and new investors who put more money into the company. We won’t have Wagoner to kick around anymore, and you’d end up with a leaner, meaner GM with focus and a realistic approach to rebuilding the business.
MdF,
You are confusing yourself with the wrong facts.
First, space exploration like we have been doing at NASA is a proper place for government because the market simply would not do it, the risks demanded so much regulation as to make it a governmnent driven enterprise anyway, and there have been large military applications and implications.
The free market is now getting involved in orbital flight, and it’s time for NASA to stop doing that, and help regulate it. Otherwise, 50 years from now, we will be trying to figure out how to get back to mars again, just like the moon.
Also, Nasa couldn’t do squat without contractors.
Second, the point of having a market is that the cost benefit is incalculable. If we could manage the economy, we wouldn’t have a free market. The truth is that managing the economy always backfires.
Landcrusher: The truth is that managing the economy always backfires.
I don’t understand this blind adherence to pure ideology — this is the framework of religion, for hell’s sake. Further, I’m not even sure how it is consistent with your claim that NASA is “the proper place for government because the market simply would not do it”. I mean, if the market won’t do “GM” then why can’t the government? Especially if the consequences of simply standing back and watching all of them implode, and sucking in a significant chunk of the economy with it?
If the “large military applications and implications” of space are sufficient for an argument for NASA, then why can’t the pretty obvious bad effects of an automotive implosion in the US economy be a sufficient ground for some support?
Basically, the cost is negligible compared to the consequences of failure: call the cost of GM+Ford+Chrysler failing is X, and 25 billion is much less than X, then it makes sense to spend the 25 billion to possibly avoid the significantly larger X.
This assumes of course that 25 billion is available, that X is worth the while avoiding (compared to other disasters currenting unfolding), and so on. And as pch101 says, this this shouldn’t be some kind of blank check for GM either; deep structural changes would be part of the deal.
Free market ideology is fine and good, and I would be on your side and say “hands off” … but if it is at odds with common sense, when the outcome is plain and obvious, I suggest application of common sense. Do you need to drop a glass on the floor to figure out if it breaks?
First, space exploration like we have been doing at NASA is a proper place for government because the market simply would not do it, the risks demanded so much regulation as to make it a governmnent driven enterprise anyway,
You could make the same argument about health care.
It comes down to “I want the government to spend money on X because I support it, but spending money on Y is socialism/corporatism” where X is defense, space exploration, resource management and such if you bat right; healthcare, education, environmental management, etc if you bat left. Reverse those for Y.
Guys,
I love how you scream ideology, but fail to bring up an exception to the rule, mdf.
Auto’s are not a national security issue, we get our military vehicles from other placecompanies. Besides that, we have the transplants. Ford’s truck factory was building Germany’s trucks in WWII right? Also, failing a bail out, we will still AT LEAST two of the three we have now. They may go through bankruptcy, but they will be there. A bad economy IS bad for security which is why we should NOT try to manage it. Capitalism demands a possible downside to function, socialism guarantees no upside as it’s goal is the status quo. Western socialism will die whenever we stop guaranteeing their security, they will move towards freedom or fail.
Healthcare gets really complicated, but no, it’s not the same, psar. It only demands a lot of regulation because there cannot be a free market in all types of healthcare. If your choice is buy or die, that is not a market choice. That is why you NEED government involvement.
However, there can be a free market in the vast majority of healthcare. Tax and insurance legislation are responsible for much of the healthcare ills we have today. I have lived, and nearly died, with socialized medicine. It’s not a better deal.
I will give up space exploration from the budget easily. However, if you want it, the market is likely not going to provide it for you for decades. NASA, or some government body will still need to study the militarily important stuff. We can’t have other countries grabbing the ultimate high ground.
It’s not ideology to support military spending. You can argue about the amount, but only nuts think we can get by without military spending. I suppose Georgia is wishing they had more to spend on military needs right now. Sort of too late though. You are going to have a hell of a time finding me supporting spending in a way that is partisan. I almost always side on the side of less spending. We could likely spend a lot less on military items if we could somehow make the Congress vote on procurement without knowing what district the stuff will be built in.
Mr. Indy refers to JD Powers to make the case that american cars are as good as the foreign makes.
I think we should be specific since the ratings I usually hear about are the initial quality ratings. Initial quality is the number of goofs on a product when delivered. i.e. the car won’t start on the dealer’s lot when I first pick it up. Reliability is a whole other issue. That is the car not starting five years later. The American manufacturers aren’t bragging nearly a much about reliability. For me that is a more important measure of how “good” a car is.
Landcrusher,
I think that depends on where you experienced it. Socialized medicine can be a good thing when it’s done well, as in Western Europe. It’s done less well in Canada and the UK, primarily because it’s started to drift down the nickel-and-diming path that eventually results in the administration of the service getting more money than the service itself.
Finally, you hit the American model, which is only slightly better than nothing at all. ***
Interestingly, you could do the same with military operations as many propose to do with health care or education: you could (and there’s historical cases of this) subcontract military operations (not just R&D) to private agencies. Ostensibly, individual organizations could offer operational savings by funding their own troops and equipment, which governments or corporations could hire. Certainly, they could do so for less than the black-hole-for-dollars that is defense.
Of course, there’s a word that describes this, and that word is “mercenary”. It’s a word with some ugly connotations.
Of course, the reason you don’t outsource military operations is that, if the for-profit motive becomes a problem, the ugliness of the situation is immediate. With health care it’s only poor people getting sick and dying, not troops demanding protection money–which is acceptable for reasons I find disturbing.
Now, we can pay the military for security, we can pay the health care or education systems for well-being and edification, why not pay off GM (with stipulations noted above) to ensure economic prosperity? I would think that–especially in a country with as weak a social safety net as the US–the individual economic health would be very important. And it’s the economic well-being of a lot of people who would be affected if an automaker and it’s suppliers fall down.
Again, for you, this is ideology, and you’ve got your point. I’ll confess that in many ways it is for me, too. As an avowed leftist, I really dislike corporatism, but I have to be pragmatic and, well, I really dislike not having an income, too. I live in a town where a lot of people work directly or indirectly for General Motors, and in a province where the economy is very dependent on automakers and their dependents.
*** I’m reminded of an American friend of my wife’s who required an amputation because of hemming, hawing and stalling on the part of her insurance company, the hospital and Medicare eventually saw her develop gangrene. In Canada, she’d probably still have her arm; in Sweden or Germany, she’d certainly have. In the US, she would have if she was rich.
Maybe your story is a counterpoint, but, overall, the WHO QoL scores for the US versus the rest of the G8 bear out the virtues of socialized medicine.
Landcrusher: I love how you scream ideology, but fail to bring up an exception to the rule, mdf.
I guess I can repeat it again:
“call the cost of GM+Ford+Chrysler failing is X, and 25 billion is much less than X, then it makes sense to spend the 25 billion to possibly avoid the significantly larger X.”
(You can re-read it again for other context.)
Now as far as I am concerned, this is true whether you go to sleep reciting the catechism of the free market, or you are memorizing Marx.
mdf,
If it is so true, why don’t you have an exception that actually worked? Not one you think will be true, one that actually was. I can tell you now that it won’t work because what you never know, no matter how well an intervention seemed to work, was whether or not the intervention destroyed the chances for a better outcome. In most cases though, economists will say of most interventions like bail outs, that they really didn’t work. At least not in the long run. PCH101 and I went round and round on the first Chrysler bail out/ loan guaranty. My point was that first, it obviously didn’t work, chrysler is back in trouble in less than 20 years. Second, it’s completely possible we would either have two stronger domestics now (for any number of reasons) had we not backed the loans, or even a new third player that rose from chrysler’s ashes without many of it’s faults. He made good points for the other side, but I was not convinced.
psar,
The problem your amputee friend has can easily be compounded under socialized medicine. In her case, her insurer was most not likely not chosen by her. It was likely chosen by an employer from a list of companies approved by the state not for quality, but for meeting requirements for coverage that may or may not have been something your friend wanted to pay for. Under socialized medicine where you have a single system, you are forced to live with whatever mistakes are in the system at the time.
If you are rich, you can always get out of it. What’s wrong with that? Should people be discouraged from success and frugality by keeping them from spending money on healthcare (as if that were really possible anyway)? In socialized systems, the powerful, influential, and well connected get preferential treatment rather than the rich who may have to go outside the system or country to get the care they desire.
Let’s say we can save your life for three million dollars with a 5% chance of success. Otherwise, you are terminal and no chance. Socialized systems simply say no, or they budget for a few per year for reasons of science. But extremely wealthy people will often just do it. This furthers the science and eventually the price comes down and the success rate goes up. What’s wrong with that? It furthers the science for everyone’s benefit, much more quickly than the a socialized system that may or may not try the procedure at all.
As far as mercenaries go, it’s a tough call. There are situations where contractors have cost advantages, as well as superior flexibility. Overall though, it doesn’t work well. It’s more cost effective to use soldiers who take low pay in cash, and large pay in pride.
The black hole for military dollars you describe is largely due to congressional oversight costing more than it is worth. Anyone involved will admit this. When the Bradley was proposed, it only got funded because the contractor strategically sourced parts from key congressional districts. Not based on value, based on congressional district. Congress is loathe to change the system, as are any of the players because their primary competitive edge is not value or quality or innovation but ability to work with the procurement system. The incentives are all wrong, but a wholly free market won’t meet all the needs. It will not be easy to fix.
When did we get more focused on protecting a certain amount of jobs as opposed to creating and building wealth? I’m just going to say once again that America is on the road to socialism. If McCain gets elected a couple months from now, we’ll keep walking down that road, but if Obama does, we’ll run towards it full speed ahead. It sickens me that so many are quick to dismiss capitalism, which has done so much for America the past century, when it doesn’t work out the way they want. It’s indicative of our short-term can’t-see-past-the-nose-on-our-face thinking.
When did we get more focused on protecting a certain amount of jobs as opposed to creating and building wealth?
Except for politicians in Michigan and the Rust Belt, this would not be about jobs. This would be about preserving the capital markets and the banking system from further erosion.
If this had occurred during the economic boom of the 1990’s, we could wring our hands for a bit before saying “Thanks GM, it’s been nice knowing ya, now don’t let the door hit you in the ass on the way out.”
However, we are now in the midst of the greatest retraction of the credit markets since the Great Depression. These conditions are not business as usual, but a uniquely difficult time that, if mismanaged, could put the US economy into a very deep toilet. The decisions undertaken during the next couple of years will be critical to the entire future of the country.
A high profile blow out of this sort could present a stiff blow to Wall Street, because it could be perceived as a symbol of the failure of the American corporate system and the stock exchanges that support it. In the worst case scenario, it could spark a flight of capital away from the US as money seeks safer places to play.
Maybe that won’t happen, nobody knows for certain how this would go down. But do you really want to find out? GM is a Dow 30 component, so it is not a trivial matter.
Again, it’s not an either-or. I doubt that a GM bailout would occur without strings attached, because GM generates major operating losses that suggest that the loans would default in no time, something that even Washington wouldn’t want to have happen with their money. If there is a bailout, it probably won’t help the current GM management. (Personally, I sure hope that they dislike it, because they need to go yesterday.)
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.
I’m pretty sure a bailout is coming but my main fear is that unfortunately there will be no strings attached and that the current management and culture will remain intact and in charge.