Should we have an auto bailout?

[logain]

The economy would worsen and the mortgage crisis will get even worse if the big 3 fail.

[TechnologyCoordinator]

The economy would worsen and the mortgage crisis will get even worse if the big 3 fail.

I really don't think all three would fail. If one would fail (and stop shipping product) the other two would immediately have much larger demand for their product and their sales volume would go up.

[SuperFly03]

I really don't think all three would fail. If one would fail (and stop shipping product) the other two would immediately have much larger demand for their product and their sales volume would go up.

*SF gets out his ginormous coffin*

Where are you Rick Wagoner?

[Sailer]

Agreed 100%. It's not the job of the US government to bail out automotive companies.

Fine, let them die. Then you can flood the unemployment lines with tens of thousands of laid off auto industry workers. Not just the UAW, understand, but those people who are not UAW. Do you work for Borg-Warner, making transmissions for GM and Ford? Your job is gone. Do you work for Phillips, making electronics for the cars? your job is gone. Do you work for any industry that supplies the American auto industry in any way? Your job is gone. Lets see, how many hundred thousand people can we put out of work?

Of course, these out of work people will then be unable to make the payments on the house, car, and whatever else for which they might have loans. That further loads the banks with defaults, thus bringing them down as well. Employees in a variety of industries and other commercial stores get laid off because there's fewer people who can buy something. And the unemployment lines get longer.

Welcome to 1929 and the followup of 1932. Lots of people out of work, unable to buy anything beyond the most basic necessities, and sometimes not even those. Few or no jobs to be had. You get to know the real meaning of hunger, cold in the winter and hot (no air conditioning) in the summer because you can't afford the bills. Oh yes, as this is a computer site, you probably won't be able to afford the latest tech stuff or games, if they're even being made. Its a wonderful life, isn't it?

[Gneisenau]

Fine, let them die. Then you can flood the unemployment lines with tens of thousands of laid off auto industry workers. Not just the UAW, understand, but those people who are not UAW. Do you work for Borg-Warner, making transmissions for GM and Ford? Your job is gone. Do you work for Phillips, making electronics for the cars? your job is gone. Do you work for any industry that supplies the American auto industry in any way? Your job is gone. Lets see, how many hundred thousand people can we put out of work?

Of course, these out of work people will then be unable to make the payments on the house, car, and whatever else for which they might have loans. That further loads the banks with defaults, thus bringing them down as well. Employees in a variety of industries and other commercial stores get laid off because there's fewer people who can buy something. And the unemployment lines get longer.

Welcome to 1929 and the followup of 1932. Lots of people out of work, unable to buy anything beyond the most basic necessities, and sometimes not even those. Few or no jobs to be had. You get to know the real meaning of hunger, cold in the winter and hot (no air conditioning) in the summer because you can't afford the bills. Oh yes, as this is a computer site, you probably won't be able to afford the latest tech stuff or games, if they're even being made. Its a wonderful life, isn't it?

You know, sometimes I wonder if humans in general don't need to live through something catastrophic once every generation or so, just to remember how to really live. (Not that I want to have to do it myself mind you.)
Failure of the auto industry would certainly suck huge, and wouldn't just push our economy over the edge, it would throw it over and stomp on the remains. For us living now it would be horrible, but maybe it would be better for the next generation in the long run.
Of course there's probably an even chance it would ultimately result in Armageddon as the world's economy followed us over the edge and people starting fighting for food and water again.

As our favorite submarine captain said "A little revolution now and then is a healthy thing, don't you think?"

[BaldEagle]

Does anyone find anything surprising in this?

Failure of auto industry could set off catastrophe: Financial News - Yahoo! Finance

I'll have to say I was stunned can you guess why?

If the industry failed, among the hardest-hit communities would be Lordstown, Ohio, a village of 3,600 people about 50 miles east of Cleveland that has been home to a GM factory since 1966.

If the plant closed, Lordstown would lose up to 70 percent of its budget, a scary scenario that proponents of a multibillion dollar bailout say would be repeated across the industrial Midwest.

"If they went completely under, obviously it would financially devastate us," said Michael Chaffee, a school teacher and Lordstown's part-time mayor. "It would be catastrophic for our whole area."

Without GM and nearby parts factories, he said, Lordstown's $4.2 million budget would take about a $3 million hit that would almost certainly require layoffs of police and drastic cuts in park programs.

Since nobody caught on let me explain my sticker shock. Does anyone know what their local Municipality spends per capita each year?

Take where I used to live:
Officials

Population 2,678 ( 2000 Census )
Municipal Budget $ 1,512,127

$565/person
Just a little smaller and 1/2 the per capita expense.

Where I grew up:
http://www.ci.waukesha.wi.us/Finance...mittal2007.pdf
Waukesha, Wisconsin - Wikipedia, the free encyclopedia

Population 64,826
Expenditures of 51,455,226

$793/person
20X the size and they still spend less per capita!!!

and at Lordstown:
Budget of 4,200,000
Population of 3600
$1167/person

Looks like they have a spend like a drunken sailor problem.....


Now let me share my rant from another post because it really belongs here:

The UAW is nearly entirely to blame for the current state of the US auto industry so letting them go under would be justice indeed. Factory workers make upwards of $30/hour or more than $60K per year, without overtime, (Why go to college when you can make that money as a HS graduate that can turn a bolt) and thousands of them sit idle at those wages reading or playing games 8 hours a day (the "labor pool") due to the union rules. They pay $0 for health care, boots, uniforms, get hundreds of dollars in tool credits, $1/hour to their 401K, $30K in relocation expenses if they move due to changing plants, Paid shutdown (and no it's not vacation), 17 holidays per year, and they have probably the most generous vacation schedule there ever was. So management was left to produce profitable vehicles and of course they choose to produce the largest and most expensive vehicles SUV's in huge numbers.
New Contract Protects UAW Jobs - UAW/GM Contract 2007

GM also agreed to a moratorium on outsourcing, a pledge to insource more than 3,000 UAW jobs and a commitment to hire 3,000 temporary workers as permanent GM employees.

On jobs we see -3000 +3000 =0 (Doesn't look to help GM's bottom line there)

The agreement will deliver more than $13,000 in economic gains for a typical UAW member, including a $3,000 signing bonus, two 3 percent lump sums and a 4 percent lump sum.

Along comes $4.00 GAS and guess what nobody wants an SUV that gets 17MPG when they can get a smaller import car at 30 mpg for less money.
Health care issue slows UAW-GM bargaining - Autos

GM, as well as Ford and Chrysler, are trying to cut what they say is about a $25 per hour labor cost gap with their Japanese competitors. Industry analysts say the costs must be reduced for the U.S. companies to survive.

Enough of ranting how the unions have screwed all the domestic automakers.

Now on the more practical side though much of the US GNP is tied to the auto industry so to simply allow it to collapse would wreck the economy and plunge us into a 1930's depression so we have basically two choices:

Option 1: A well planned and coordinated BK of all three auto makers could just bust the UAW for good and make them profitable again.
Option 2: A bail out of the big two/ maybe three (chrysler? maybe, maybe not after Damlier screwed them over BK may be their only out).

Cars sales have simply evaporated as people concerned about the economy retrench and put off new car purchases. Something has to be done on the demand side of the problem or any bail out will simply be unemployment on steroids. What they need to start with is a plan to provide incentives to buy new cars such as a tax credits and then make the banks sucking up federal money loan it back out again instead of hoarding it as they currently are doing.

White House to banks: Start lending now: Financial News - Yahoo! Finance

In short we have to hold our nose and bail them out or we'll probably get to try out a 1930's style depression.

[arisythila]

I say let them die..... Bye bye Ford, Chrysler, and GM

[BaldEagle]

*SF gets out his ginormous coffin*

Where are you Rick Wagoner?

Can you put the whole economy in there???

Oh never mind it should fit nicely after the contraction/collapse of the auto, electronics, steel, aluminum, tool and die, plastics, and rubber industries.

I say let them die..... Bye bye Ford, Chrysler, and GM

My heart is with you but the head says no they have to be saved or we tank the whole economy.

[TechnologyCoordinator]

The UAW is nearly entirely to blame for the current state of the US auto industry so letting them go under would be justice indeed. Factory workers make upwards of $30/hour or more than $60K per year, without overtime, (Why go to college when you can make that money as a HS graduate that can turn a bolt) and thousands of them sit idle at those wages reading or playing games 8 hours a day (the "labor pool") due to the union rules. They pay $0 for health care, boots, uniforms, get hundreds of dollars in tool credits, $1/hour to their 401K, $30K in relocation expenses if they move due to changing plants, Paid shutdown (and no it's not vacation), 17 holidays per year, and they have probably the most generous vacation schedule there ever was. So management was left to produce profitable vehicles and of course they choose to produce the largest and most expensive vehicles SUV's in huge numbers.
New Contract Protects UAW Jobs - UAW/GM Contract 2007

WOW, we fully agree. That hasn't happened much! And yes, I know Obama is for an auto-bailout, but I'll make you a bet he doesn't do one; because Bush will beat him to it.

[TechnologyCoordinator]

Something has to be done on the demand side of the problem or any bail out will simply be unemployment on steroids. What they need to start with is a plan to provide incentives to buy new cars such as a tax credits and then make the banks sucking up federal money loan it back out again instead of hoarding it as they currently are doing.

I'm not sold on incentives for people, but if we do incentives I feel it should be only on cars that get X amount of MPG or better. For example, 36 mpg or better. Force the automakers to squeeze a few more MPG out and then we can start to solve three problems with the incentives. (Three problems: Climate Change\Oil Imports\ and sluggish auto sales)

[SuperFly03]

Option 1:Chapter 11: Sheds the UAW and reemerge competitive and profitable

Option 2:Chapter 7: Great Depression round 2.

Option 3:Bail them out and curtail the union.

America, you decide!

Personally, I prefer Option 1.

[TechnologyCoordinator]

Option 1:Chapter 11: Sheds the UAW and reemerge competitive and profitable

Option 2:Chapter 7: Great Depression round 2.

Option 3:Bail them out and curtail the union.

America, you decide!

Personally, I prefer Option 1.

I prefer 1, but I'll settle for 3.


I remember when the UAW walked out on American Axle because they wanted $30\hour for a $15\hour job.

Screw the UAW. The purpose of the UAW has been served.

[flasher702]

I reluctantly say bailout two with a takeover. Splitting the market against one less competitor should make the bailout more effective and chrystler deserves to go away anyway. We're in deep doo-doo if they fail. They *should* have failed years ago with the business plan they were running but we kept giving them concessions on gas mileage, taxes, subsidized consumer gas prices and let them get away with selling trucks (SUVs) as consumer vehicles (a couple big loopholes enabled that). In a free market Toyota and Honda would have DESTROYED them back when our economy was strong and it wouldn't have hurt us as people would just put on a new uniform and kept making cars in USA. If they go under now it will just mean mass unemployment.

In the future the unions will have to make large concessions and will have to spend equal amounts of effort keeping health care costs low along with the efforts they put into demanding cheap health care for their members. In the future we will need to ensure a free market where car companies are forced to compete and make products that are good for the consumer and the nation as whole. In the future if these US car manufacturing companies make the same mistakes and gross ethical blunders they've been getting away with for the past couple decades they WILL fail. But not today.

[Viperabyss]

For those who favors the bail out... not so fast .

http://www.nytimes.com/2008/11/14/bu...14auto.html?hp

WASHINGTON — The chairman of the Senate banking committee said on Thursday that he did not believe there would be enough Republican support for efforts to aid floundering automobile manufacturers, raising doubts about whether Congressional leaders will call the House into a lame-duck session next week.

“Right now, I don’t think there are the votes,” the chairman, Senator Christopher J. Dodd of Connecticut, said, adding that he personally was in favor of using money from the $700 billion financial rescue program to help General Motors, Ford and Chrysler. But Mr. Dodd said he did not believe such a bill would get through the Senate.

“I don’t know of a single Republican who’s willing to support,” Mr. Dodd said. “So I want to be careful about bringing up a proposition that might fail in light of the fact the authority exists, and under an Obama administration there seems to be a greater willingness to deal with the issue. So there are some political considerations to be made.”

So all of the big three have to try to survive the next two months.

[Cain]

Total waste of money, theres no point pumping money into an industry that can't compete. There will be short term pain but medium to long term you'll be better off.

I wish we weren't pissing away billions on it, I hope you guys don't.

[Viperabyss]

Even if we don't want to, people are still going to complain, and politicians have no choice but bail them out. Afterall, its tens of thousands to millions of workers we're talking about.

I have long lost my faith in the political system. The problem with democracy is that whoever has the louder voice wins, regardless of whether they're right or not (in which in most cases, wrong).

[CapnBFG]

When push came to shove Toyota was definitely positioned better in terms of historical vehicles (fuel economy of older established vehicles). However, Detroit responded with a phenomenal turn around on new more fuel efficient vehicles. Before this mess erupted it wasn't a close contest but again with the spike in prices causing a shift in demand, Ford and GM responded with new models faster than most could probably imagine. What Chrysler is doing is beyond me. Someone go stab them with a fork or something. The saying "hind sight is 20/20" is very applicable here. Sure now it looks like Toyota was smarter but over the past 15-20 years the Big 3 have sold more cars than Toyota could ever have wished to sell and there's a reason... they catered to the American market extremely well.

All true.

Let me be clear I am not speaking at you BFG with this but to the market as a whole... don't you think it is a bit hypocritical to demand trucks after trucks, suvs on top of suvs for years and years and then one run up in gas prices and everyone turns their back on Detroit?

I'll answer anyway

Yes, it is. I don't think a shift of demand is the only thing to blame though. Sure, people were interested in SUVs, but management should have had the foresight to derail that trend years ago. I remember people complaining about gas prices 8 years ago. The prices weren't high enough to matter, but they were enough for people to whine, and that was hypocritical too. The execs failed to act on something that was clearly inevitable. We may not have expected the change to be so abrupt, but it's been a long time coming and they should have been better prepared. How could they have prepared for it? I don't know, but then I'm not a CEO and I'm not making obscene amount of money to think up such plans.

The UAW had its place and it was necessary at the birth of the auto industry due to the lack of labor laws at the time but now we have well documented and rigid labor laws to protect workers.

These days the UAW gets workers paid to sleep, because they have no work, they get their workers paid whose jobs were lost to automation, they get their workers paid $25/hr+ to put tires on a car or to bolt a joint to the frame. It's ludicrous. The UAW workers get paid way too much for the work they do. Period.

What needs to happen is the abolition of the union and workers wages set more inline with the skill set necessary to perform the job.

Agreed. That's how I feel about unions in general.

BTW (off topic)...back in high school, for my SATII writing test the given topic was "people often overestimate the importance of _______." I wrote about labor unions

Chrysler... oiy. They are turning upstream but their frames are just so large and heavy that they can't made a mid-sized sedan or even a fuel efficient large sedan. They have the looks down on some new cars... the Challenger and Charger come to mind but damn? 4200lb 2door coupe? Ouch!

The Charger doesn't really do anything for me. However, the new Challenger is amazing. Back when they announced it I was dead set that I would buy one after graduating from college. Now, two years later, the things that convinced me otherwise were gas prices and the fact that I need 4WD up here. Since the Big 3 didn't have anything comparable to my needs, Subaru got my money. It's actually kind of creepy, the number of Subarus I see driving around up here.

The UAW is nearly entirely to blame for the current state of the US auto industry so letting them go under would be justice indeed. Factory workers make upwards of $30/hour or more than $60K per year, without overtime, (Why go to college when you can make that money as a HS graduate that can turn a bolt) and thousands of them sit idle at those wages reading or playing games 8 hours a day (the "labor pool") due to the union rules. They pay $0 for health care, boots, uniforms, get hundreds of dollars in tool credits, $1/hour to their 401K, $30K in relocation expenses if they move due to changing plants, Paid shutdown (and no it's not vacation), 17 holidays per year, and they have probably the most generous vacation schedule there ever was. So management was left to produce profitable vehicles and of course they choose to produce the largest and most expensive vehicles SUV's in huge numbers.

Agreed. The UAW is BS.

Option 1:Chapter 11: Sheds the UAW and reemerge competitive and profitable

Option 2:Chapter 7: Great Depression round 2.

Option 3:Bail them out and curtail the union.

America, you decide!

Personally, I prefer Option 1.

I too prefer option 1. No matter what, the union needs to go.

I also think they need a change of management. And I think the execs need to shed some cash. They f***ed up, so they should have to pay out (not everything they have, but a lot). Perhaps let them keep their estates and other tangible assets but fire them and revoke all benefits and stock. Leave them in a position that they'll have to sell their stuff and change lifestyles to get by. Basically make sure they hurt by a degree proportional to that by which the typical employees are going to hurt. They should be screwed enough to go job hunting just like everyone else.

Okay, maybe that's a bit extrme. It would set a fine example for execs of other companies though.

[TechnologyCoordinator]

Wait a second...

This thread is somewhat about government and politics... Many of us have come out and absolutely trashed labor unions... Yet we all seem to be in agreement and there's been no flaming?

WOW.

You know it's bad when the forum members from Detroit\Michigan are saying "Screw the UAW".

[logain]

We all agree on the unions but not all agree over the bailout. Really it is actually seeming to be an actual federal loan more so than a bailout.

[SuperFly03]

I'm not sure Ford's management need to go. Call me biased but they have done a phenomenal job turning the company around. They have it funded through 09 and they have shed all their non-core brands.

Ford has their ducks in a row. Eliminate the union and you have a very profitable enterprise.