Auto Industry Bailout

[Hugh Conway]

ahhh Mitt. Long on attitude, short on specifics

[mkporwit]

And another one debunking some of the panicky numbers being tossed around by Rick Wagoner, Ron Gettelfinger and Bob Nardelli

 

http://www.nytimes.com/2008/11/19/business/economy/19jobs.html

[pc313]

I like the fact they showed up in Washington D.C. in private jets to ask for money!!

[j_b]

Because losing 3 million jobs and dismantling communitites isn't panicky enough?

[j_b]

Meanwhile the Chinese automakers are expecting a bailout: "This autumn, after six years of 20 percent or more annual growth, vehicle sales were flat or slightly negative, a shock to an industry that has borrowed heavily to build ever more factories for a market that had once seemed insatiable"

http://www.nytimes.com/2008/11/19/business/worldbusiness/19chinaauto.html?

[mkporwit]

Because losing 3 million jobs and dismantling communities isn't panicky enough?

 

The CAR is a lobbying group funded by the automakers, so that number isn't exactly unbiased. Even their own most recent study suggests that 40-60% of those jobs would be back within a couple of (admittedly very lean) years...

 

The whole bailout for the car industry thing is a three ring circus... and really shouldn't be necessary

1) GM is fucked. No way around that. They don't have the product, they don't have the money, they don't have the plan and they don't have the management team. Giving them even a dime would be throwing good money after bad. Chapter 11 would be sweet, sweet relief from the bloated dealer network, the horribly confused and mismanaged multiplicity of brands and the inflated cost structure.

 

2) Chrysler has a rich sugar daddy in Cerberus. Why should we be bailing out a super-rich hedge fund? If Cerberus is sincere in their assertions that they bought Chrysler to run it as a car company and not for a strip and flip then they can plow a few billion into it. Otherwise they fall into the same situation as GM, only doubly so.

 

3) Ford hocked the family silver and secured enough credit to hopefully weather the storm. They dumped the PAG while someone was still buying. They got an outsider to run the show and actually gave him the power to make changes. They have a plan, they have the product pipeline. They seem to be turning the corner all on their own power and do not appear to need a cash infusion with the same immediacy as their Detroit brethren.

 

Ergo, doing anything right now is a dog and pony show.

[prole]

And another one debunking some of the panicky numbers being tossed around by Rick Wagoner, Ron Gettelfinger and Bob Nardelli

http://www.nytimes.com/2008/11/19/business/economy/19jobs.html

 

Nice bit of puff pastry there. First time I've heard 14 million tossed around in my reading, I guess 1.5 to 3 million looks a-okay then. More reality-divorced theorizing about how foreign auto-makers will swoop in to inoculate the living dead and take over the productive capacity left behind after the liquidation. Why is it you can hunt pheasant these days within Detroit city limits? Which industries will be absorbing all the excess capital, human and otherwise? This one? No one on this board who's advocated letting the big-3 twist in the wind has even speculated as to what 1.5 million (much less 3 million) unemployed people would look like, where they're likely to go, what they're likely to do. How come?

[mkporwit]

And another one debunking some of the panicky numbers being tossed around by Rick Wagoner, Ron Gettelfinger and Bob Nardelli

http://www.nytimes.com/2008/11/19/business/economy/19jobs.html

 

Nice bit of puff pastry there. First time I've heard 14 million tossed around in my reading, I guess 1.5 to 3 million looks a-okay then. More reality-divorced theorizing about how foreign auto-makers will swoop in to inoculate the living dead and take over the productive capacity left behind after the liquidation. Why is it you can hunt pheasant these days within Detroit city limits? Which industries will be absorbing all the excess capital, human and otherwise? This one? No one on this board who's advocated letting the big-3 twist in the wind has even speculated as to what 1.5 million (much less 3 million) unemployed people would look like, where they're likely to go, what they're likely to do. How come?

 

Well, according to the Bureau of Labor statistics, the US economy lost 2.8 million jobs between October of 2007 and October of 2008. That translated into an unemployment increase of 1.7 percent, for a grand total of 6.5 percent. Y So another 3 million would bump our unemployment up to, oh, 8.4 percent or thereabouts, right? That's still quite a bit lower than the 10.8 percent peak in November of 1978. While not pretty, that's not nearly the catastrophe that you're making it out to be.

 

What's your solution, prole? Given them money? Then in three months when they've blown through that give them more money? The $700 billion bailout has already repeatedly shown that decisions made in haste have all sorts of unintended, nasty consequences. I wasn't for that bailout, and I'm not for this one either.

 

GM especially should be left to twist in the wind. The management of the company ran it into the ground, all this time denying that they had any sort of problem. The shareholders did not hold management accountable. Over the last few years that killer product was always a few months away, always with disappointing results. Remember when the GM900 trucks were supposed to be the savior? How about the crossovers? And now the Volt? Please...

[j_b]

Well, according to the Bureau of Labor statistics, the US economy lost 2.8 million jobs between October of 2007 and October of 2008. That translated into an unemployment increase of 1.7 percent, for a grand total of 6.5 percent. Y So another 3 million would bump our unemployment up to, oh, 8.4 percent or thereabouts, right? That's still quite a bit lower than the 10.8 percent peak in November of 1978. While not pretty, that's not nearly the catastrophe that you're making it out to be.

 

The official unemployment rate is not only unreliable but it is not comparable to that of 1978. In 1984 Reagan started counting the military among the employed to increase the size of the denominator and decrease the rate of unemployment, while Clinton redefined the unemployed by ignoring those not looking for a job in more than 4 weeks (the discouraged) and those underemployed who wish to work more but can't find more hours. Real unemployment is well over 10% already.

 

I don't have a ready solution w.r.t. the bailout of automakers but it seems that America can ill afford losing more quality manufacturing jobs and that any bailout should have serious strings attached.

 

Also, 1% of all retirees get a pension from the auto-industry. Let's not forget the public probably will assume most of the cost of these pensions if automakers go into bankruptcy.

 

 

Edited November 20, 2008 by j_b

[Hugh Conway]

Well, according to the Bureau of Labor statistics, the US economy lost 2.8 million jobs between October of 2007 and October of 2008. That translated into an unemployment increase of 1.7 percent, for a grand total of 6.5 percent. Y So another 3 million would bump our unemployment up to, oh, 8.4 percent or thereabouts, right? That's still quite a bit lower than the 10.8 percent peak in November of 1978. While not pretty, that's not nearly the catastrophe that you're making it out to be.

 

Given the number of other industries laying off employees, namely ALL OF THEM, I'd say 10 is well within reach.

 

What's your solution, prole? Given them money? Then in three months when they've blown through that give them more money? The $700 billion bailout has already repeatedly shown that decisions made in haste have all sorts of unintended, nasty consequences. I wasn't for that bailout, and I'm not for this one either.

 

We can depend on Detroit to defend the country. Wall Street? Well, not so much.

[pc313]

I got good news and bad news!

 

The good news is we've been raped!!

 

The bad news is it was anal sex!!!

 

[mkporwit]

Given the number of other industries laying off employees, namely ALL OF THEM, I'd say 10 is well within reach.

Yes, but a lot of those industries are not clamoring for a bailout ('cause they'd be laughed out of Washington, most likely). Why should the auto makers get one, especially given that Chrysler and GM have no plan going forward and Ford is really only doing a "me too" right now? Any bailout given to them does not address the structural inefficiencies that encumber the industry that can only be shed via a Chapter 11.

 

We can depend on Detroit to defend the country. Wall Street? Well, not so much.

Well, no. Detroit could be counted on to defend the country in the past. It is not at all clear to me that any future wars we would be involved in would require the same type of industrial capacity that our effort in WWII did. I would suspect that it would come to a nuclear exchange long before we were stretched that far.

 

Also, and this came as a surprise to me, less than 50% of automotive workers now work for the Detroit Three. Apparently the transplants have established an even larger industrial base here than I thought... so should push really come to shove we're probably better of repurposing Toyota's modern Tundra factory in Texas than some of GM's antiquated facilities.

[STP]

Hang onto your hats, folks. The government is losing control.

 

Paulson, Democrats Clash on Bailout for Homeowners (Update2) --Bloomberg

 

[video:youtube]46MEqEgdLTg

[Hugh Conway]

Given the number of other industries laying off employees, namely ALL OF THEM, I'd say 10 is well within reach.

Yes, but a lot of those industries are not clamoring for a bailout ('cause they'd be laughed out of Washington, most likely). Why should the auto makers get one, especially given that Chrysler and GM have no plan going forward and Ford is really only doing a "me too" right now? Any bailout given to them does not address the structural inefficiencies that encumber the industry that can only be shed via a Chapter 11.

 

We can depend on Detroit to defend the country. Wall Street? Well, not so much.

Well, no. Detroit could be counted on to defend the country in the past. It is not at all clear to me that any future wars we would be involved in would require the same type of industrial capacity that our effort in WWII did. I would suspect that it would come to a nuclear exchange long before we were stretched that far.

 

Also, and this came as a surprise to me, less than 50% of automotive workers now work for the Detroit Three. Apparently the transplants have established an even larger industrial base here than I thought... so should push really come to shove we're probably better of repurposing Toyota's modern Tundra factory in Texas than some of GM's antiquated facilities.

 

 

10 times the public debate for 1/20th the cash, 10 times the jobs and 10 times the strategic importance.

 

Ahhh, America.

[mkporwit]

10 times the public debate for 1/20th the cash, 10 times the jobs and 10 times the strategic importance.

 

Ahhh, America.

 

I won't argue with you that the hasty $700 billion was a good idea. It was a hasty decision with unintended consequences. However, that does not mean that we should spend still more money on something that will likely have a dubious outcome.

 

Still, what you're saying is effectively a cop out along the lines of well, we gave to those wall street types, so we should give to the car guys as well, and that's fundamentally a pretty piss-poor argument.

[Hugh Conway]

Still, what you're saying is effectively a cop out along the lines of well, we gave to those wall street types, so we should give to the car guys as well, and that's fundamentally a pretty piss-poor argument.

 

We're better off with the banking industry, the best poised to profit from highly leveraged risk, believing they are the only industry in America too big to fail? We are better off diverting even more talent in America to the random roll of the dice of capital allocation?

 

To remain competitive America needs a diverse economy; China is currently poised to bailout their own automakers. Any wonder which will emerge stronger? We're cutting off our leg to save our nose!

[mkporwit]

We're better off with the banking industry, the best poised to profit from highly leveraged risk, believing they are the only industry in America too big to fail? We are better off diverting even more talent in America to the random roll of the dice of capital allocation?

 

No, we'd be best off if no industry thought they were too big to fail. However, saying that America would be better off with TWO industries that think they're too big to fail rather than with just one is unconvincing.

 

To remain competitive America needs a diverse economy; China is currently poised to bailout their own automakers. Any wonder which will emerge stronger? We're cutting off our leg to save our nose!

 

What the Chinese are doing is in some sense their own affair. They run their economy a little different than we do and we shouldn't really aspire to be like them in that respect. Germany will probably bail out their own automakers if need be, and that's their prerogative.

 

Of course I agree that America needs a strong, diverse economy, however a Chapter 11 by GM is not the same as liquidation of the entire car industry. Where I think you and I differ is I don't subscribe to the worst-case scenario that a failure of one drags all three down into a certain Chapter 7, whereas you seem to be buying into that.

 

Look, it cost GM something like 2 billion dollars to put Oldsmobile down, and that was, what, 7 years ago? They have eight more brands, of which most (probably six) should be taken out behind the barn and shot because they're beyond saving. They have an unsustainable cost structure which can be remedied by one of two ways -- either Chapter 11 or GM once again owning 50% of the US car market. Which one is more realistic?

 

They should take their medicine now -- file for Chapter 11, the current management and board is run out of town on a rail, the VEBA gets renegotiated, 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.

 

And they should stop bragging about the Volt.

[billcoe]

We are better off diverting even more talent in America to the random roll of the dice of capital allocation?

 

To remain competitive America needs a diverse economy; China is currently poised to bailout their own automakers. Any wonder which will emerge stronger? We're cutting off our leg to save our nose!

 

Well, you always can invest YOUR OWN GD MONEY if you think it's such a gd good idea Hugh! Have at it! I fully support your right to put your money where your mouth is.

 

Go ahead.

[prole]

However, that does not mean that we should spend still more money on something that will likely have a dubious outcome.

 

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.

[Hugh Conway]

What the Chinese are doing is in some sense their own affair. They run their economy a little different than we do and we shouldn't really aspire to be like them in that respect. Germany will probably bail out their own automakers if need be, and that's their prerogative.

 

Ah - ignorant American isolationism at it's best!

 

"War in Europe doesn't concern us" "We have nothing to fear from Japanese expansion"

[mkporwit]

What the Chinese are doing is in some sense their own affair. They run their economy a little different than we do and we shouldn't really aspire to be like them in that respect. Germany will probably bail out their own automakers if need be, and that's their prerogative.

 

Ah - ignorant American isolationism at it's best!

 

"War in Europe doesn't concern us" "We have nothing to fear from Japanese expansion"

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.

[mkporwit]

However, that does not mean that we should spend still more money on something that will likely have a dubious outcome.

 

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.

 

Maybe, maybe not. What's your plan? The rust belt didn't just spring up overnight -- Detroit's woes have been building for 30 years, briefly interrupted by the golden era of the SUV. That's a lot of years of piss-poor planning by the car companies, various economic development councils, the state governments and the generation or more of workers that have come along since things started heading downhill.

 

I'm facing the possibility of getting laid off in the very near future, where the fuck will my bailout be? I won't have Paulson, Bernanke, Levin, Stabenow or Frank riding in to save my bacon.

[JayB]

However, that does not mean that we should spend still more money on something that will likely have a dubious outcome.

 

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.

 

Quite interesting, this newfound disdain for abstraction. What has sustained the average historical materialist for the past 150 years if not economic abstractions? Never seemed to be terribly good for producing food, clothing, or any other output that required coordinating supply and demand, allocating scarce resources that have many alternatives, etc - but you've long sense abandoned your efforts to defend those ideas, or the regimes that attempted to implement them, so let's turn from the abstract to the concrete.

 

Simple question: which country [on this planet, populated with real people, defined by real geographic borders] most closely approximates your ideal society? Once you've tethered your ideals to reality, we can confine the discussion to the concrete differences between the country that most closely embodies all of your ideals, and the country that's most at odds with them. I assume that the US will fall into the latter category. If not, please correct me.

 

 

 

[JayB]

Some concrete figures:

 

http://www.dol.gov/asp/media/reports/chartbook/2008-01/index.htm

 

My evil homonym might find a set of stats that's less susceptible to manipulation than official employment figures in there as well.

[billcoe]

 

Simple question: which country [on this planet, populated with real people, defined by real geographic borders] most closely approximates your ideal society? Once you've tethered your ideals to reality, we can confine the discussion to the concrete differences between the country that most closely embodies all of your ideals, and the country that's most at odds with them. ....

 

I wouldn't hold your breath waiting for an answer.

 

Interesting in that when I was in college I use to ask the communists who were rabidly anti-American/pro-socialism the very same question. They really wanted to trash what we had and start fresh so that paradise could finally be achieved. However, once they were asked this very question, the whole conversation tended to go downhill and end fairly quickly.