Why Are They Even Discussing Bailing Out The Auto Manufacturers?

[Lee]

Fuck them, let them fail, that is the premise of business, they ran their companies in to the ground, let them suffer because of it.

That $25+ billion they are looking to get from the government can be put to much better use.

They dont even plan to change anything if they do get this bailout, it will be business as usual for them and in a few more years, they will want another bailout, and another bailout, and another.

Businesses fail every day, you dont see the government jumping in to offer these businesses bailouts.. Its crazy and i really do think that these auto companies should be allowed to fail, they never changed with the times despite numerous opportunities to do so.

Regards,

Lee

[basschick]

the number of people who will be laid off if the automakers failr would be devestating.

on the other hand, i hear that toyota u.s. is doing well and they're paying the same wages and rents as gm, ford, etc. maybe the u.s. automakers should try making cars people want to buy. it's easy for them to say that no one is buying cars, but they seem to be buying toyotas. of course, toyota makes cars that get awards from magazines and that most mechanics recommend as the mechanically best car you can drive in the under $50,000 range. but considering how long we've been making cars in the u.s., why don't we make more cars that are mechanically excellent and emotionally desirable?

[Lee]

Patti,

Just because employees will get laid off isnt a good enough reason.

The unions have been fighting for higher pay, better benefits, less hours, early retirement in the auto industry for years and if they dont get what they want, they strike.

From what i understand, foeign car manufacturers do have similar if not better benfits than GM also and as you said, they seem to be doing great, i really do think GM should be allowed to fail and not be bailed out, this stinks of really bad management and whilst it is unfortunate thousands of people will be laid off, i would rather than that have to keep bailing out these companies every few years.

Im totally with you on the types of car American companies are making, they have pretty much fucked themselves because they are laying in the same bed as the massive gas companies, if several years ago they were working on electric, hybrid and alternative fuel cars i really dont think they would be in this mess.

Regards,

Lee

[chadknowslaw]

Way back when (1980) when Chrysler was asking for a government loan, many of the same arguments were made as are being made today: let them fail, the business will go to other manufacturers, the free market works in sometimes painful ways.

However, then, as now, the cost of unemployed workers is greater than the cost of making loans to the manufacturers. The workforce in the auto industry, along with all of the dependent subsidiaries, cannot easily relocate if plant closings in one location result in hiring increases in others.

Bankruptcy for goods like autos is not like bankruptcy for things like cereal or even airlines. While most consumers have no problem buying a box of cereal from a company going out of business, or buying a ticket on an airline in bankruptcy protection, they know there is little risk from the financial troubles of the maker. Regardless if General Mills closes its doors, that cereal will be good to eat until the expiration date on the box. If Fly By Night Air goes out of business, that ticket will still most likely get the traveler somewhere on another airline or the travel will be completed before the airline stops flying. If General Motors closes its doors, warranty service and parts support in the years that vehicle is in service becomes very questionable. There are many more risks in buying a car from a bankrupt company than just about any other product. Anyone want to buy a Daewoo??

Ford GM and Chrysler all made bad decisions. They were flush with cash and instead of planning for building a diverse fleet, they concentrated on those products that made big bucks quickly. The Ford Excursion with its choice of V10 gas or huge V8 diesel sucked fuel, did not fit in most garages or parking spots but made thousands of dollars per vehicle. Chrysler took its engineering prowess for granted, designed some ugly middle-of the road cars and nearly ignored the low end of the market. Even Toyota and Nissan put their vehicles on high-fat diets, making them bigger and bigger. The compact Toyota and Nissan pickups are no longer compact, even the Honda Accord grew three sizes and can now be taken home with V6's and "road hugging weight". Fuel efficiency did not increase but power, weight and performance sure did. Part of that was due to building stronger, safer cars but fuel economy was never a big concern. A good example is the VW Rabbit. Back in the early 1980's a two-door Rabbit weighed in at under 2000 pounds. Today's Rabbit is over 3000 pounds. Sure it has airbags everywhere and doors that can withstand a side impact from a Suburban, but it only gets 30 MPG on the highway. Why not 40? or 45 MPG? I had a 1989 Lincoln Towncar that got 24 MPG on the highway. Why does this little car only get a few more than that big boat?

Toyota, Honda, Nissan and the rest are hurting too. Their sales are down but at least they have some decent smaller cars although financing even good customers is tougher than ever. Funds for leasing has dried up because it is so hard to determine the future value of vehicles in today's market. (Leases are based on the difference between the price of the car today and the selling price 2 or 3 years from now. In 2005 that was relatively easy to determine; today even the best actuaries have a hard time finding a value that can be relied upon).

Ford says it is about a year away from marketing some of its good vehicles currently sold in Europe. Those cars have to be tested and modified to meet US crash safety and emissions requirements, plus the cost of re-tooling North American assembly plants as building small cars in Europe and shipping them to North America is not cost-effective.

It takes the manufacturers 2-4 years to design, test, tool up an assembly plant and get a new vehicle to market. There are some good cars in the pipeline on tap for 2010 and 2011. If the manufacturers fail now, the cost of tens of thousands of unemployed auto workers, managers, parts distributors, delivery company employees, and suppliers would be greater than the cost of making loans (not give away money, but loans to be paid back). Closing manufacturing plants is not like closing the local Staples Office Supply; those workers cannot easily find work where they live and they cannot sell their homes. When a big employer in any town closes, retail suffers, restaurants suffer, construction, services, finance, gas stations, tire stores, even barbers see revenues decline.

I don't like seeing incompetence rewarded. However, if any of the automakers fail they will take thousands down with them. I also note that republicans generally oppose loaning automakers money and democrats support it. Auto manufacturing, steel mills, and support industries are concentrated in states that supported Obama. Go figure.

[chadknowslaw]

maybe the u.s. automakers should try making cars people want to buy. it's easy for them to say that no one is buying cars, but they seem to be buying toyotas.

Even Toyota is struggling, offering 0% financing on just about everything they make. The Prius is still selling, but Toyota is shutting down its plant in Texas that makes the big trucks and Sequoia SUV's. Even their so-called "small" Tacomas (they ain't that small anymore! The extended cab version weighs 3500 pounds and is 208 inches long -- a Lincoln Town Car is 215 inches from bumper to bumper and weighs 4400 pounds) are not selling. The Scion Xb got bigger. Toyota's compact Corolla weighs only about 2800 pounds and gets 35 MPG. Remember the Geo Metro? In 1994, 14 years of technical advances ago, that little thing got almost 50 MPG with a 1 liter engine.

In the last 2 crunches (1975+ and 1981+) foreign makers had small fuel efficient cars for sale next to gigantic American cruisers and beat the Big 3 all over the sales map. Now the "foreign" automakers build their cars in the US and they have big gas guzzlers sitting on their lots and assembly plants idling or running at half speed. It is not just the US based makers caught looking stupid.

[PornMadeMeRich]

maybe the u.s. automakers should try making cars people want to buy. it's easy for them to say that no one is buying cars ...

And that's what doesn't make sense. So they get bailed out, and still nobody buys their cars, then what ?

[Lee]

Way back when (1980) when Chrysler was asking for a government loan, many of the same arguments were made as are being made today: let them fail, the business will go to other manufacturers, the free market works in sometimes painful ways.

Case in point, they were already bailed out once, where did it get them, other than asking for more money from the government?

Most companies learn from past mistakes made in their sector, but not the auto industry it seems.... Are we going to have to keep bailing these companies out every 15-20 years? If so, how long do we keep doing this and at what cost?

Regards,

Lee

[chadknowslaw]

Case in point, they were already bailed out once, where did it get them, other than asking for more money from the government?

Most companies learn from past mistakes made in their sector, but not the auto industry it seems.... Are we going to have to keep bailing these companies out every 15-20 years? If so, how long do we keep doing this and at what cost?

Regards,

Lee

Chrysler actually paid that loan off early, with interest. Then they got stupid again -- but ALL the manufacturers got stupid. They fought increases in fuel economy regulations. They built cars that the public wanted, however. Trust me -- if gas stayed at a buck a gallon and global warming had remained a theory in researchers minds, we would buy the biggest, baddest, fastest cars we could get. Americans honestly love big station wagons -- when fuel economy requirements kept us from buying them, the auto makers revised trucks into bigger station wagons with 4 wheel drive (now called SUV's and more 'hip' than a station wagon) and we snatched them up like Gucci handbags at a closeout sale.
All of the automakers built stuff that car buyers wanted to buy. Gas was cheap so we wanted cars that looked good, went fast, pulled our toys and protected us from our own accidents. The market changed so rapidly when gas prices increased that no manufacturer had the right mix. On top of that, financing ANY car or truck became more difficult.
GM and Ford have cars selling on other continents that could do well in the US. I rented a nice mid-sized sedan in Spain that had a 4 cylinder turbo diesel; it had plenty of power and got better than 50 MPG. Too bad US emissions regulations will not let it be sold here.
It is almost like having a child in college who has a degree but no job. If you don't give them a little money for their own place until they get on their feet, they will move back in with you and cost you even more.

[Maryflixxx]

I do agree with Chad.
My father's family comes from Windsor, ON which is dependent on the car industry. There is not a person in Windsor (population 100,000) whose job is not somehow connected with Chrysler, Ford or GM.
If those automakers close, then Windsor will become a ghost town in very short order, but where will they go?

Question to ask yourself is... is it cheaper to give the automakers $25 billion? or to pay the welfare and unemployment benefits to the millions of people whose jobs will disappear?

That said, giving even 1 penny to GM just burns my ass. What a useless, worthless, pointless auto-maker. Does anyone know how many lines they carry? How many cars they produce in the SAME CATEGORY but under different badges? It is ridiculous. They are a lesson in poor management, failing up and bad, bad design.

[GayTubeSimon]

Im really not big on the idea of private businesses being bailed out with tax money.

Instead of taking that money and using it to subsidize the paychecks of people in a changing industry, or the golden parachute for some CEO, why not use that money to re-train them, or subsidize them going back to college/university?

To use the old adage: 'Give a man a fish, and he eats for a day, teach him to fish, and he eats for life'

[Lee]

The problem is, this bailout (or low interest loan) for them isnt even going to work.

Sure, its going to let them pay some of their bills, its going to let them run more marketing campaigns, but its not going to get them any more customers.

If Americans cant afford to buy new vehicles, all that is going to happen is these auto manufacturers are going to spend the money to settle part of their debts and in a year or so, we'll be right back where we are now, with them asking for yet another bailout.

As Chad mentioned above, they have had concepts in development for years for new vehicles... If Americans cant afford to buy these vehicles, or get the credit to buy them, these companies are going to fail anyway.

Lets not put a band-aid on a severed limb and hope it heals itself, the auto industry needs major life saving surgery and $25 billion is no where near what that surgery is going to cost to have done.

Let the industry fail and let someone else step in to fill the void, its going to cause problems for a while but these problems will eventually be fixed, survival of the fittest....

Regards,

Lee

[DEVELISH]

Here every 7th employee is directly working in the automotive industry... many more are dependents on the employees spending their money in shops, stores, restaurants etc....

[basschick]

teach them to do what? at the moment, unemployment is at i think they said a 30 year high - and that's only counting the people who get unemployment. there are many people who were fired or have gone beyond the term of their unemployment who aren't counted and aren't employed.

on the other hand, i surely wouldn't just hand over money. i'd make them do what the rest of us would have to do for a loan - submit a business plan. it would show what they would plan to do to turn things around. it could then be negotiated by experts, to make sure they produce small, stylish cars of a reasonable price and phase out most or all of the hgher management, who have certainly shown they know fuck all about cars, marketing or what people want/can afford.

Im really not big on the idea of private businesses being bailed out with tax money.

Instead of taking that money and using it to subsidize the paychecks of people in a changing industry, or the golden parachute for some CEO, why not use that money to re-train them, or subsidize them going back to college/university?

To use the old adage: 'Give a man a fish, and he eats for a day, teach him to fish, and he eats for life'

[Alex_Manifest_M]

They produced the vehicles America wanted to buy. We can not let them fail expecting that 'someone' will step in and fill the void. The time and huge amounts of money required are not going to be available.

Or we can let them fail and no longer have any automobiles produced by US auto makers. Perhaps at some point we will zero mfg jobs available here in the US.

Loan them the money, have them pay it back. It is an investment well worth making.

[Lee]

Loan them the money, have them pay it back. It is an investment well worth making.

Alex,

That was said in the 80's when they got bailed out then too. Didnt seem to work so well the first time around, why does anyone think it will work this time?

Regards,

Lee