Should the US bail out US auto manufacturers?

[runawayjim]

Then let the auto makers do what any other company does and file for bankruptcy and go into re-org. Or let them get loans from banks rather than directly from the taxpayers. Isn't that why we bailed out the banks to begin with? The auto-makers are publicly traded companies. Let the stockholders hold upper management liable.

I don't care how many jobs are lost. It'd hurt the economy, but we would definitely bounce back with some creative thinking. We made it out of previous depressions and recessions, why should this one be any different? Simple handouts are not the answer. The number of people who would be out of work is far less than the 3 million we're hearing about. Foreign cars need parts, too. There will be a need for more foreign cars if American cars no longer exist.

[monsoon]

......

I don't care how many jobs are lost. It'd hurt the economy, but we would definitely bounce back with some creative thinking. We made it out of previous depressions and recessions, why should this one be any different? ....

[runawayjim]

This isn't a simple recession and there hasn't been a depression since th 1930s. My grandparents who lived through the 1930s would be surprised that anyone today would wish that on themselves.

[Gard]

Where is this 3 million, or 2 million that I've also seen in the media, coming from? Not questioning you, specifically because I've seen this tossed out a lot, but do millions work manufacturing cars in the US? Or does this include everything from manufacturing to shipping to sales to mechanics? If it does all of those people won't be out of work if the auto manufacturers fail. Mechanics will still have to work on the existing cars. Someone crusing around in their Chevy for years will need Mr. Goodwrench around. People in general will still want and buy cars regardless of who builds them so the sales folks will likely just work for another company. Parts will still be needed so they'll be manufactured then sold by someone.

[Charlotte_native]

The 2-3 million doesn't include mechanics, it includes those employed by the automakers; from the administrative staff (don't forget, a company's staff doesn't end at the factory, there are a large number of people in there HQ that would loose their jobs too) to the factories, as well as there parts suppliers.

[suburban george3]

I just googled 'How many auto workers are employed in the US'. This came from an article I found 'Detroit automakers employ four times more hourly workers, 250,000...'. If this is the case, where are the other 2,750,000 employees?

[runawayjim]

These numbers of 2-3 million jobs are including supplier jobs, dealership jobs in sales and service, companies involved in car transport, etc. They are not just the numbers of those employed at the big 3. They are estimating that many jobs may be impacted if the big 3 go under.

[Gard]

Not trying to argue the point, but I never would have suspected that Ford, GM, and Chrysler employed a million people each. That number is just astounding and I have trouble believing it. Are there published numbers of how many people each employ?

I just googled 'How many auto workers are employed in the US'. This came from an article I found 'Detroit automakers employ four times more hourly workers, 250,000...'. If this is the case, where are the other 2,750,000 employees?

[sean]

They(big3) aren't really in need of capital; they have loads of fixed capital and tons of stock. The problem is almost nobody is buying their cars! So flush them with a bunch of paper promises and then what?

[suburban george3]

But do the estimates take into consideration that the foreign automakers will now have a greater ability to sell cars here, needing more employees here?

[runawayjim]

However, if parts suppliers go under, the SAME parts suppliers that the big 3 use as well there could be slow-downs and stoppages at foreign car plants as well. Some of the execs at the Japanese Auto makers fear that a collapse of teh Big 3 would completely evaporate demand for automobiles in the U.S. No Asian car manufacturer can survive off their home market, the U.S. is where they make the bulk of their profits.

[Charlotte_native]

Just as George said and I said in my previous post, these are jobs in total, which includes their suppliers, marketing companies and every other company that is touched by the big 3. There is no guarantee that these jobs would be recreated either. The foreign companies could just as easy setup shop in Mexico or other nearby countries. They could also decide that they have plenty of capacity to keep up with demand and hire few, if any additional workers at all.

Anyways, its looking increasingly slim that the government will let them go under. Merger talks between GM and Chrysler appear to have been started up again and the government is pushing for an "organized bankruptcy."

[monsoon]

.....

It would really be nice to know how many jobs are truly at stake right now -- not just the total number of people who have American car related jobs, but those that would be gone if new manufacturing ended. Bet it is FAR less than millions.

[Neo]

I'm sure everyone has heard by now that Crysler and GM have $17.4B coming their way. I'm actually on the fence again, leaning towards the bailout. The reason being are the concessions that must be made and the deadline for turning the company around. Unless I'm misunderstanding the terms, both Crysler and GM have until March 31st to become financially viable according to the Obama administration, else they will have the brakes released and they will be allowed to enter bankruptcy. With this option, the government will be first in line to recoup the funds given to them (I'm assuming the $17.4B in its entirety) before any other creditors.

Executives will also no longer be able to use their private corporate jets and a reduction in pay. I think this sends a strong signal, either fix it or deal with the problems on your own. This will be a last chance to Crysler and GM. I have a hunch that if they don't end up merging and reducing several of their models and subsidiaries that one of them (likely Crysler) will not come back from this.

[Gard]

^

Update to what Neo said...GM and Chrysler have officially signed onto the deal for the money. I see their merger as a very real scenario right now. In the event it happens, I can see most of Chrysler's brands being scrapped. To be honest, I couldn't even tell you what they even produce anymore, thats how few of them I see on the road these days. The only thing I know that will likely survive is Jeep. With the strings I'm seeing attached to this money, I'm leaning towards supporting it, especially considering that the taxpayers will be the first in line to collect if they should fail.

On a side note, a rep of GM is saying on tv that they alone have 5,000 suppliers. Now imagine what would happen if they went under and took all those suppliers with them...

[Charlotte_native]

I can tell you that in the area where you live, the Charlotte metro, there are approximately 60,000 people working in manufacturing plants that serve the big 3 ranging from an area that spans Pageland, SC to Statesville, NC. You want to put all all these people out of work? These companies are laying off people now. Lots of them. I will also tell you that if your desire to see these places shut down, that you are going to see a reduction in the other industries in Charlotte that exist to serve these plants including banking, insurance, trucking, energy, etc. Bankers are not bankers when there is no money in the bank. How much money does Volkswagen, Honda, and Toyota have on deposit in Charlotte banks?

I am especially flabbergasted by cries of Americans to see American companies put out of business. This has to be a uniquely American trait as I don't know of any other country on earth that eats its own to prove a point and to make a small segment richer beyond most peoples dreams.

[Charlotte_native]

Executives will also no longer be able to use their private corporate jets and a reduction in pay. I think this sends a strong signal, either fix it or deal with the problems on your own. This will be a last chance to Crysler and GM. I have a hunch that if they don't end up merging and reducing several of their models and subsidiaries that one of them (likely Crysler) will not come back from this.

[Gard]

Toyota is reporting that its going to have its first operating loss for the entire year since 1941. As as result, they are suspending all current and planned plant construction projects in the US (including one underway in Mississippi) at least until the economic crisis is over. Some of the plans may be scrapped all together after they review them. If anyone is counting on the Japanese ones to replace those lost in the event the big 3 go down, it doesn't look like thats going to happen.

[sean]

... so we go even further in debt and bail them out. Who's going to buy their cars? Their lots are full right now and they can't give their products away. They get flushed with newly printed paper, then what? Produce more vehicles that aren't selling?

Its hard to have much confidence in this scenario or this whole bailout era. Rebuild the passenger rail system: put lots of people back to work, requires no new technology, is a step toward lessening our dependence on foreign energy.

[Gard]

Was reading this afternoon that sales of trucks and SUVs has rebounded and surpassed that of cars once again. The reasons cited was winter weather (for their 4x4 capabilities), excellent deals on them right now and really low gas prices. This, combined with their ramping down of truck and SUV production, should help keep the big 3 alive by getting the extra inventory off their books and not replacing much of what was sold. They also found that hybrid sales have plummeted with the gas prices.

[runawayjim]

Was reading this afternoon that sales of trucks and SUVs has rebounded and surpassed that of cars once again. The reasons cited was winter weather (for their 4x4 capabilities), excellent deals on them right now and really low gas prices. This, combined with their ramping down of truck and SUV production, should help keep the big 3 alive by getting the extra inventory off their books and not replacing much of what was sold. They also found that hybrid sales have plummeted with the gas prices.

[suburban george3]

I just don't understand why people think they need a truck or SUV when a car or wagon with AWD is actually better in the snow than 4WD and they're safer than most SUV's or trucks.

I'd consider American if they made a good AWD wagon, but they don't seem to be into wagons, just SUV's and smaller crossovers.

[runawayjim]

I agree, unless you're going WAY off road you don't need it, and in most areas modern traction control, available on most American cars, will get you thru most issues.

I was caught in an ice storm last week in my Malibu with traction control, I slipped just a bit once while Cherokees, Tahoes, and Tundras were all over the place and off the road.

[Charlotte_native]

I generally see more SUV's on the side of the road in snow storms than cars. It's not because they suck in the snow, it's because the people driving them think they're invincible in them.

[Gard]

Well GMAC is doing the right thing with the money they just got. They are making the money available for auto loans, effective immediately and lowered the minimum credit score needed to get a auto loan from 720 to 620.