mkporwit Posted November 20, 2008 Share Posted November 20, 2008 You may find that the outcomes that result from so many people out of work living in densely populated areas in the current economic climate a bit more "dubious" than the "what's good for neoclassical economic abstractions must be good for America" idea you're running with. For what its worth, let me restate that I'm not running with some neoclassical economic abstraction, as you say. I'm not anti-bailout on principle. I'm anti-bailout for GM and Chrysler for reasons elucidated in prior posts. At their current burn rate, GM will plow through their share of the $25 billion in four months or so. The economy will still be fucked then, and four months isn't long enough to accomplish the type of restructuring needed to allow them to continue as a company. So they'll be back for more money. They need Chapter 11, and any aid to them should be directed so that they and their suppliers survive the ordeal. Why do the eight brands need four badge-engineered copies of the same crossover? Does Pontiac, historically their performance division, really need a penalty econonbox like the Aveo rebadged as the G3? What's up with the "Pontiac. We are car" slogan anyway? What happened to "We build excitement"? What's Saturn's raison d'etre, or Buick's? What do those lines stand for? Why drop the Chevy Cobalt, which at least was a base hit, in order to build the Cruze? What happened to iterative product development, which worked so well for the Asian transplants? Cadillac used to be the standard of the world -- do they really need to be moving downmarket and competing with Chevy/Buick? Anyone mentioning Caddy in the same sentence as Rolls Royce would now be laughed out of town. Heck, they can't even compete with the Lexus brand... and there's lots more stories of mismanagement, and that's just on the branding. Chrysler has Cerberus to turn to for cash. If Cerberus hangs them out to dry, Chrysler will go into Chapter 7, which will probably result in Jeep being sold -- the last figure I heard was about $2 billion, with Nissan/Renault probably buying the truck portion of Dodge, and someone picking up the minivan line. Everything else is a craptacular waste of money and likely won't fetch a dime. They're doing their best to kill the Jeep brand by diluting it with bizarre non-core vehicles and with the abomination that was the Jeep Commander. They should sell it before they devalue it further. Their cars are the worst of the D3, and there's nothing on the horizon. They mismanaged the minivan line to the point where they're number 3 in a market they created. Ford has a relatively solid cash position, a credible CEO, and a promising product mix not built on pie in the sky visions. We have time to ponder how to best help them. It does not need to be in this knee-jerk fashion. An AP article I read last night stated that there are ~250K employees directly working for the D3, another 750K employees working for parts suppliers and the like, and 1M working in dealerships and so on. The parts manufacturers like Delphi will show up with their own begging bowl about 30 seconds after the D3 get their money, so let's just look at the 250K direct employees. With a $25B bailout, that's 100K/employee. That will only last about 4 months... so we'd be paying 300K/employee/year? Wow, that's some salary... even accounting for the 750K other employees, say the parts manufacturers get $50B on top of the D3's $100B (which is my prediction for final cost of this), you're looking to spend 50K per employee over the next year or so... Of course all of this is going to be lost on you. You'll come back with your predictable "save jobs at all costs" chant, reminiscent of Helen Lovejoy's "Won't someone please think of the children". Quote Link to comment Share on other sites More sharing options...
Recycled Posted November 20, 2008 Share Posted November 20, 2008 Seems to me that Chapter 11 + enhanced unemployment/retraining benefits would be the best for everyone. The good parts of the Big 3 will keep running, the bad bits will be scrapped. The employees of the scrapped operations would get some slack to retrain or do whatever they want. A $50k training/unemployment payout to employees of scrapped operations (maybe 1/2 of total employment?) would "only" be about $6B/yr or so. That's peanuts compared with the costs of trying to prop up operations that will ultimately crumble anyway. Hell, Toyota or Honda might even buy up some good parts and run with them (though that's more likely under Chapter 7). Since they make cars with a higher % of US components than the Big 3, that can only be a good thing. Right? Quote Link to comment Share on other sites More sharing options...
Recycled Posted November 20, 2008 Share Posted November 20, 2008 An interesting aside: I've had many discussions with people over the years about the misguided patriotism of blindly "buying american." My argument is that the WORST thing you can do is to buy an inferior product because it is American. Detroit had a captive market for decades in that all government, rental and corporate fleets had formal or informal "buy American" policie, as did many well-meaning Americans. It didn't matter that imports had better fuel economy, were fun to drive, easy to park and had better options for the money. The end result of this captive market is crap like the K-cars, Pacers, Pinto/Vegas and even the pieces of shit that I have to rent from Alamo when I'm traveling. And people bought them because they thought it led to a strong US car industry. This undercut American competitiveness and opened the window to the continuous improvement and better product lines offered by foreign automakers. As soon as alternatives were available, people shifted fast. The shift in the US has been slower than some - look at how Russian cars fared when their market opened! In my view, our future is in building world-class products with attractive prices and selling them worldwide. Building crap, hiding behind subsidies, trade barriers and misguided "patriotism" is counterproductive, a waste of resources that could be put to better use and worst of all, is ultimately futile. Quote Link to comment Share on other sites More sharing options...
Hugh Conway Posted November 20, 2008 Share Posted November 20, 2008 You're twisting my words. All I'm arguing for is that we should not rush to ape the knee-jerk reactions of other countries. We may yet decide on some sort of bailout, but it shouldn't be "because the Chinese are doing it". Besides, so far all we've heard is the chinese car manufacturers asking for money, not the Chinese government saying it will help them. The Big 3 are in competition with those other carmakers receiving a bailout! Who do you think will emerge stronger? Quote Link to comment Share on other sites More sharing options...
billcoe Posted November 20, 2008 Share Posted November 20, 2008 GM (Buick) sells more made in China cars than any Japanese Mfg. Does GM get your Chinese government bailout or just Chery? Do you have a link Hugh or did this come to you in a dream last night? Quote Link to comment Share on other sites More sharing options...
Hugh Conway Posted November 20, 2008 Share Posted November 20, 2008 GM (Buick) sells more made in China cars than any Japanese Mfg. I thought they made cars nobody wants to buy? China bailout http://www.nytimes.com/2008/11/19/business/worldbusiness/19chinaauto.html Quote Link to comment Share on other sites More sharing options...
billcoe Posted November 20, 2008 Share Posted November 20, 2008 Thanks for the link: here's mine. Link May be dated (2006), I was in China in 2007 I think, and GM was still the largest then I'm pretty sure. Buicks everywhere. Not like our Buicks, but more like Toyotas. Quote Link to comment Share on other sites More sharing options...
billcoe Posted November 20, 2008 Share Posted November 20, 2008 OK, I need to revise my thinking for 2008, #1 no longer. link Quote Link to comment Share on other sites More sharing options...
mkporwit Posted November 20, 2008 Share Posted November 20, 2008 The Big 3 are in competition with those other carmakers receiving a bailout! Who do you think will emerge stronger? That will depend on the conditions attached to that bailout, whenever it happens. You're still assuming that the continued existence of the American car industry is a binary proposition -- either they exist in their current state, or they cease to exist. I'm hoping for some evolution. GM should emerge a stronger company at the end of all of this. They'll no longer be the alpha dog, which is OK, but they'll continue to be a large player on the worldwide car stage. The path to that happy future goes through Chapter 11, not through continued enabling of their broken operations. Quote Link to comment Share on other sites More sharing options...
crackers Posted November 20, 2008 Share Posted November 20, 2008 ... the pensions are transferred to the Pension Guarantee Corporation at pennies on the dollar, the US government then provides bridge financing and gets seniority on any payout. The UAW could be given a preferred position in the shares of the new company so that they have a chance of recouping some of what they gave up, but they'll probably have to kiss their current benefits goodbye and settle for something a little more realistic. Too bad the US Government insures those pensions and associated health benefits, huh? The bill for paying for it in the event of the big three failing is more than the mooted bail out monies...and somehow, I just can't see the house of representatives voting to terminate the PBGC or the FDIC... Thanks for the humor everbody, please carry on... btw, retooling means throwing out or selling as scrap old tools to buy new ones...it's kinda expensive. Quote Link to comment Share on other sites More sharing options...
JayB Posted November 20, 2008 Share Posted November 20, 2008 ... the pensions are transferred to the Pension Guarantee Corporation at pennies on the dollar, the US government then provides bridge financing and gets seniority on any payout. The UAW could be given a preferred position in the shares of the new company so that they have a chance of recouping some of what they gave up, but they'll probably have to kiss their current benefits goodbye and settle for something a little more realistic. Too bad the US Government insures those pensions and associated health benefits, huh? The bill for paying for it in the event of the big three failing is more than the mooted bail out monies...and somehow, I just can't see the house of representatives voting to terminate the PBGC or the FDIC... Thanks for the humor everbody, please carry on... btw, retooling means throwing out or selling as scrap old tools to buy new ones...it's kinda expensive. The unstated major premise here seems to be that $25-$50 billion will prevent, rather than merely forestall, their bankruptcy. Quote Link to comment Share on other sites More sharing options...
KaskadskyjKozak Posted November 20, 2008 Share Posted November 20, 2008 The unstated major premise here seems to be that $25-$50 billion will prevent, rather than merely forestall, their bankruptcy. The last US auto bailout (1.5 billion, >4 billion in today's dollars) worked for almost 30 years... Quote Link to comment Share on other sites More sharing options...
mkporwit Posted November 20, 2008 Share Posted November 20, 2008 The unstated major premise here seems to be that $25-$50 billion will prevent, rather than merely forestall, their bankruptcy. The last US auto bailout (1.5 billion, >4 billion in today's dollars) worked for almost 30 years... Yeah, but that was for one company, not all of them, and it had a leader that at least had a vision rather than merely desperation in their eyes. On a related note, here's everybody's favorite leftie indie filmmaker, friend of the average working Joe, Michael Moore on the bailout... on CNN Quote Link to comment Share on other sites More sharing options...
crackers Posted November 20, 2008 Share Posted November 20, 2008 Too bad the US Government insures those pensions and associated health benefits, huh? The bill for paying for it in the event of the big three failing is more than the mooted bail out monies...and somehow, I just can't see the house of representatives voting to terminate the PBGC or the FDIC... Thanks for the humor everbody, please carry on... btw, retooling means throwing out or selling as scrap old tools to buy new ones...it's kinda expensive. The unstated major premise here seems to be that $25-$50 billion will prevent, rather than merely forestall, their bankruptcy. I had no premise. Sorry. That's y'all's premise. If I was going to offer one, it might be something like "my gedanken experiment suggest to me that it might be cheaper to pay $25 billion now for companies that fail slowly over a long period of time rather than all at once right now". But I'm not offering any premise... i'm just looking for hovercatz on flyin carpetz. Quote Link to comment Share on other sites More sharing options...
prole Posted November 21, 2008 Author Share Posted November 21, 2008 On a related note, here's everybody's favorite leftie indie filmmaker, friend of the average working Joe, Michael Moore on the bailout... on CNN Sanest voice on the issue I've heard yet... Larry King: Why (do you have) mixed feelings? Moore: Well, because we can't let all these people lose their jobs because of the bad decisions, the stupid decisions made by the management of these auto companies. I think what has to happen here is that Congress needs to pass some legislation, and our president-elect needs to do what Roosevelt did. When Roosevelt came in and when World War II faced the country, Roosevelt said to General Motors and Ford, you're not going to build cars anymore. You're going to build airplanes and tanks and guns and the things that we need for this war because we have a national crisis. General Motors had to do what Roosevelt told them they had to do. King: What do you want them to do now? Moore: President-Elect Obama has to say to them, yes, we're going to use this money to save these jobs, but we're not going to build these gas-guzzling, unsafe vehicles any longer. We're going to put the companies into some sort of receivership and we, the government, are going to hold the reigns on these companies. They're to build mass transit. They're to build hybrid cars. They're to build cars that use little or no gasoline. iReport.com: New emissions standards, other improvements needed advertisement We're facing a national crisis, not just an economic crisis, but a crisis of the polar ice caps are melting. There's only so much oil left under the Earth. We're going to run out of that, if not in our children's time, our grandchildren's time. There's got to be a plan set out to find other ways to transport ourselves in other ways than using fossil fuels. Quote Link to comment Share on other sites More sharing options...
Hugh Conway Posted November 21, 2008 Share Posted November 21, 2008 I had no premise. Sorry. That's y'all's premise. If I was going to offer one, it might be something like "my gedanken experiment suggest to me that it might be cheaper to pay $25 billion now for companies that fail slowly over a long period of time rather than all at once right now". But I'm not offering any premise... i'm just looking for hovercatz on flyin carpetz. you forgot the counterpremise - that every industry simultaneously imploding will be a Good ThingTM This bailout has a stated purpose and a stated goal. There's much to be said for that. Quote Link to comment Share on other sites More sharing options...
bradleym Posted November 22, 2008 Share Posted November 22, 2008 the times evaluates the question of whether bankruptcy or government intervention would be best for the automakers. Tough intervention or bankruptcy? no one wants to see all those workers thrown out of jobs, or the shuttering of all that industrial capacity, but neither can we allow everything to continue as is, from union contracts to unnecessary dealerships to stupid, inefficient vehicles. It looks right now as though we're on the path to government intervention, but can that ensure the necessary changes? whatever happens, it will be grubby. Quote Link to comment Share on other sites More sharing options...
STP Posted November 22, 2008 Share Posted November 22, 2008 The unstated major premise here seems to be that $25-$50 billion will prevent, rather than merely forestall, their bankruptcy. The last US auto bailout (1.5 billion, >4 billion in today's dollars) worked for almost 30 years... Yeah, but that was for one company, not all of them, and it had a leader that at least had a vision rather than merely desperation in their eyes. GM, Ford Executives Say No To $1 Salary In Exchange For Government Aid Quote Link to comment Share on other sites More sharing options...
mkporwit Posted November 23, 2008 Share Posted November 23, 2008 This bailout has a stated purpose and a stated goal. There's much to be said for that. A stated purpose and goal without any clue of what it will take to get to that goal is no goal at all. That's about as much as can be said about that. Quote Link to comment Share on other sites More sharing options...
mkporwit Posted November 23, 2008 Share Posted November 23, 2008 GM, Ford Executives Say No To $1 Salary In Exchange For Government Aid Wagoner has always been completely clueless and does not understand the value of making this symbolic gesture... Ford isn't anywhere nearly as badly fucked as the other companies. Mullaly said during the hearings that they don't need the money now and might never need it, so he doesn't see why he should give anything up... And Nardelli realizes that Chrysler is fucked and will do anything to get Cerberus bailed out and off the hook. Quote Link to comment Share on other sites More sharing options...
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