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Should the US bail out US auto manufacturers?


Neo

Are you for a bail out of US auto manufacturers?  

39 members have voted

  1. 1. Are you for a bail out of US auto manufacturers?

    • Yes
      7
    • No
      26
    • Undecided
      6


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I know this has been addressed in another thread, but I feel it is warranted its own thread.

I have been slightly leaning towards a bail out of the two largest US auto manufacturers, most notably GM since it seems to be in the most trouble at the moment. The ramifications for either of these companies going belly up are beyond significant and thus I have been in favor of handing them buckets (small buckets) to help with the flood coming their way.

I was for this until I read this today:

"All three CEOs - Rick Wagoner of GM, Alan Mulally of Ford, and Robert Nardelli of Chrysler - exercised their perks Tuesday by flying in corporate jets to DC. Wagoner flew in GM's $36 million luxury aircraft to tell members of Congress that the company is burning through cash, asking for $10-12 billion for GM alone.

"We want to continue the vital role we've played for Americans for the past 100 years, but we can't do it alone," Wagoner told the Senate Banking Committee.

While Wagoner testified, his G4 private jet was parked at Dulles airport. It is one of eight luxury jets in the GM fleet that continues to ferry executives around the world despite the company's dire financial straits."

I'm pressed to figure out how this is different than if I rolled up to the local bank in a Lamborghini and asked for a loan because I was in severe financial troubles and would lose it all if I didn't get the loan.

If a company wants to stop the bleeding then you obviously have to STOP THE BLEEDING before attempting to repair what caused the bleeding in the first place. A little band aid isn't going to do much if you cut an artery.

I am now on the fence and leaning towards supporting a complete death wish for GM. Yes the ramifications would be felt far and wide and likely be something that we've never seen, but I simply can't get behind a company that has this kind of 'leadership' or whatever you want to call it.

If the US bails these guys out then one of the stipulations IMO needs to be a complete gutting of the company. No, not all of the issues at GM and Ford are their fault and I've argued this before when I was for the bail out. Companies around the world need to accept the ramifications of their poor decision making however, and not expect a free handout from the government should they make a bad decision.

Thoughts?

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The big 3's talking points feature the notion that they aren't asking for a bailout, rather they just want a loan. I say fine, go ask for a loan from the banks which we just gave 700+ Billion$ of taxpayer backing. I'd like to see their (the big 3) operations face the same scrutiny that I encounter when I seek a loan.

Where's my bailout!?

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I say no.

If GM really wishes to stop the hurting, it needs to take a look at itself and its customers and produce what they want. No longer should they be producing fuel inefficient vehicles. No longer should they be building unreliable junk. They should stand up to their employees, like with the airline industry a few years back, and restructure everything so these people can keep their jobs and operations going.

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I'm for it if they play by a new set of rules, specifically becoming leaders again in the automotive industry rather than has-beens. We should be pushing for standards more stringent than Europe as far as safety, reliability and most of all fuel consumption. The bailout should come with such strings attached such as 50% of all vehicles sold (light trucks included) must surpass 35 mpg by 2015 and 90% by 2020, and at least 25% of all models offered should be completely alternative energy by 2020 and affordable to 50% of the population.

This are achievable goals that these companies claim aren't achievable. I say, the government should seize the companies as part of the bailout, and allow them to return to independent publically traded companies in 2020 after these metrics are met. There could be plenty of financial incentives spread across the entire labor pool to ensure that workers work to meet these goals.

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GM & Ford have shifted significant amount of assembly work to Canada and Mexico. Why are they not in those capitals asking for bailouts? The United States is in this position now because irresponsible CEOs have like these have shifted tens of millions of middle class jobs to foreign countries all under the excuse that globalization is good for the public. We see the results of that policy now and the only people that globalization has served is to make a small segment of the population very rich.

I say no without significant routing of the existing management at these places.

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FORK NOW

yeah thats about as eloquent as I can get right now, but without going into a rediculously detailed post, it is best left as F-NO

Mind you I work in the finance industry, and I like to think I am a pertty smart guy some times, but the american auto industry needs to re invent itself. it will never do that with continued government cash infusions.

let it die and be reborn

have faith in Americas ability to adapt and let the weak animals die at the watering hole.

again.

NO!!!

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Those CEO's can all go to hell! Sell your jets and multiple houses, then maybe you could be taken serious. As someone else said, this would just be delaying the inevitable. I believe these companies have gotten so large they have lost their accountability. Let them go under, then set up smaller divisions to take care of the void. The infrastructure is already in place, there must be a way to make it work for the public and the workers.

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As much as I'd like to let these fat cats go under. I would not want that to happen at the cost of millions of jobs. So I say yes to the bail out. But under the condition that the existing management and CEO's get booted out and replace by an interim body who's mission it is to restructure the companies and that the UAW take a pay cut. A non union worker doing the same job at a toyota plant down south makes half of what a UAW worker makes at Ford or GM in Detroit.

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I got laid off from a company last month, a place that had about 300-400 employees and privately owned. Can the government take it over so me and all my former co-workers get our jobs back?

Oh wait, we're not important enough.

If you give one company special favor, you need to do it for them all. And since we have no capacity for the government to control everything...

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someone has already offered to buy out Opel.

And GM said no way to the offer (I believe it was a little over $1B). If GM is at all serious about needing money so badly then they would at least attempt a negotiation on this. Of course, at the current rate, GM would burn through $1B in what, a couple of weeks?

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GM's issue with Opel is that Opel is basically designing and building cars for Saturn now. The experiment with Saturn was killed years ago by internal management looking to protect their own fiefdoms, and now it is just a shell of itself. GM does need to sell cars here with the fuel mileage and quality of what Opel/Vauxhall sell in Europe, but so far they have not done it except thru Saturn. At this point I don't see where GM can afford to keep both Saturn and Chevy, as they are mostly redundant, so one needs to go. GM needs to also get rid of Buick, Pontiac, Hummer, Saab, and decide they need to decide between Chevy trucks and GMC trucks. That kind of redundancy is killing them. It needs these reductions so can focus on building up a core care industry again. Will they do it? No, not with the current management.

Ford has the same issue. They should immediately get rid of Mercury. It's another redundancy they don't need. They also have an issue with Volvo and Lincoln. One needs to go.

Chrysler can not and should not be saved in my opinion. Maybe Jeep could be spun off as there might be something to salvage there, but this is a lost company that has no direction, no future, no nothing. Cerebus bought this company from Mercedes with the idea they could save it by loading it down with the same Detroit management idiots that have have been responsible for the industry's decline. It was a stupid idea.

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Many of the folks employed by the Big 3 and their suppliers could be employed in re-manufacturing and the re-building of the passenger rail road system in the US. I find this idea really compelling as it would be an investment in the future health of our society and it would contribute to lessening our dependency on foreign oil. Unfortunately, I haven't heard peep of this idea from our Gov, the smartest guys in the room, or these jet-set clown CEOs!

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I'm kind of up in the air, because it is a pretty complex issue. Originally, my response was no, just as it was for the bank bailouts, because I feel that you make your bed, you should lie down in it. But there are a lot of things going on here. Basically, they are trying to make it to 2010 when the new contracts with the UAW kick in. This puts the pesions on the UAW and allows for lower pay for new workers.

Chrysler is in pretty bad shape, and I don't think the bailout would help. They're product is heavily truck and SUV based. Even with the bailout, they may not make it.

GM is iffy. They have a lot of good car based products and the best trucks/SUVs in the business. I think they could make it with a bailout.

Ford is in good shape. Lots of good products with more on the way. I think they could make it without a bailout as they have enough cash on hand to make it to 2010.

The problem with bankruptcy is GM can't get banks to loan them money now, imagine anyone would do it after they went Chapter 11. Same deal with Chrysler.

Chrysler may be the key here. When it goes bankrupt, the parts suppliers will lose maybe 15% of their business. That'd cause a lot of them to go under. Since these guys supply all of the big 3, Ford and GM may not be able to get parts to make their cars.

As for selling Opel, I think GM Europe is the only division that is actually making money.

As for closing Pontiac, or Buick...well, that cost 1-2 billion and a LOT of lawsuits to close down. Might be a good idea later, but now they need the cash.

As much as I hate it, I'd say a loan to get them through a few years might be a good gamble, but it will still be a gamble.

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As much as I hate it, I'd say a loan to get them through a few years might be a good gamble, but it will still be a gamble.

Imagine the size of the loan needed to get them through a few years though. Considering GM burned through ~$6B the last quarter, it would only take a year to burn through $25B at their current rate. Of course the hope is that they would slow down that burn and become profitable again as soon as possible, however I don't see that happening for quite some time.

GM has a great deal of redundancy and a slew of automobiles that no one wants anymore due to the gas scare we're just coming out of and the inability for people to get a loan for a new car. Not to mention the retooling that would be needed and time to produce new automobiles with greatly improved MPG standards.

GM has been insistent on producing things like Hummers while folks in South Africa are producing an all electric car with a range of 250 miles that will be available in 2010.

Yes, GM has some fuel efficient lines, but amazingly they (like many others) have put almost all of their eggs in one basket...cars and trucks that have poor fuel efficiency and are gigantic.

...and don't tell me that the quality of GM products are at the same level as Toyota and Honda (as I've heard in recent debates). Take a look at the piss poor ratings of Pontiacs for example.

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Anybody on here who remembers me probably knows I have a thing for American cars. But my sympathy doesn't extend to a bailout. GM is finally brining some more appealing cars to market, but they have to find a way to fend off the unions which are sucking them dry. With labour costing them somehting like $74/hour including legacy costs, GM (as well as Ford) has been selling economy cars at a loss for a long, long time. Now with 35mpg CAFE standards coming up, GM will have to rely even more heavily on economy cars. They need to figure out how to straighten the mess out, and do it with the UAW.

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When that happens, Ford and GM seeing some of their suppliers going under, wouldn't they then seek to purchase these parts from surviving suppliers? Wouldn't those suppliers see business pick up as a result, even to the point that they hire former employees of their defunct competitors? Basic economics holds that if your competitor fails you'll see your own business pick up. For that matter, wouldn't GM and Ford themselves see an increase in business as the consumers who would have purchased Chrysler products now have to look elsewhere?

People act like the failure of even one of the big 3 failing would be a fatal blow to the economy, but I just don't see it. What we are seeing is economic Darwinism at work. Strong companies survive; weak ones don't. However, as long as there is demand for an industry's product, the chance of a complete collapse of the industry is near zero.

The worst-case scenario is that the big 3 all go out of business. There are no more "American" cars. There will still be an auto industry in this country as foreign makers fill the void, employing American workers in plants in this country building foreign marques out of parts from suppliers both foreign and domestic, and selling them at dealerships across America. The fact that the corporate headquarters are in Tokyo or Frankfurt instead of Detroit makes little difference except to the fat cats at the top.

I drive a Chrysler, while my significant other drives a Hyundai. Both are made of parts manufactured all over the world. The Chrysler was assembled in Mexico, while the Hyundai was built in Alabama. Which is the "American" car?

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The Big 3 absolutely need to be given a federal loan.

If this was a robust economy and individuals were not choosing the Big 3 autos than I would be more willing to grudgingly accept their demise as the economic system working as it should, rewarding good businesses with profits and punishing mismanaged businesses with failure. However, due to the dire economic condition the US is in due to the "ponzi scheme"-like economic policy we allowed our financial institutions and presidential administrations (both Clinton and Bush) get away with fostering we are in no condition to allow all 3 of the US automakers to potentially fail at once.

We are currently at 6.5% unemployment, with that number almost assurdly heading to 7.5 to 8% in the near-term without one or all of the Big 3 failing. Now consider if we allow more than one US auto manufacturer to fail, we are talking 2-3 million direct auto jobs, supplier jobs, and tertiary jobs being lost throughout the US, albeit heavily concentrated in the midwest region. Few of us are old enough to remember double digit unemployment, but that would put us there at the same time our financial system, and larger consumer-driven economy, is precariously close to a substantial further economic downturn as the economic conditions worsen as the recession starts to take full effect and deepens in scope globally.

A steady and managed dismemberment of the excess compacity, product lines, suppliers, and workforce over the next couple of years via a radical restructuring of all 3 firms is the best way to ease the national economy through the process of the Big 3 transition into leaner more efficient firms that sell competative products the US consumer wants to purchase. Their cost competativeness will be greatly enhanced when the UAW takes over a substantial portion of the Big 3's "legacy costs" in 2010, which will put the US auto firms in a reasonable labor cost setting compared to their newer less "legacy cost" hindered foreign competitors. Even with federal assistance it is likely Chrysler will be forced to merge with another auto manufacturer (GM?), leaving us with the Big 2.

So in my estimation the Big 3 for now are too big and too vital to the national economy's health to fail.

Side-note: The current congressional mandate for written restructuring plans is absolutely the appropriate way to insure we actually save the Big 3. The unfortunate thing is that Congressional leaders did not mandate this before the CEOs came before Congress this week, which would have expedited the possiblity of the a loan being extended and taken economic anxiety of the issue out of an already panic ridden stock market.

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FWIW, GM did jumpstart the US economy after 9/11 with their 'Keep America Rolling' campaign, with its 0% loans. I think that really helped out a lot at a bad time. Maybe its time for the US to return the favor by helping out a little.

Riral King's side note is 100% correct.

I'll be the first to admit that the Big 3 have issues, but they are turning around (except Chrysler; does anyone at Cerberus know what they are doing?) and I think if they can make it to 2010, they'll be in good shape.

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