Your Thoughts on the Big 3 Bailout?

[bikdav]

I am just wondering, how do you feel about the government bailing out GM, Chrysler, and Ford? Personally, I am not comfortable with the bailout idea, because it was the auto makers that created their mess. Quality hasn't been what it should be and - according to what I've heard on the street - the vehicles choices that are being offered leave something to be desired by many. But still, what are your thoughts on this?

[Slider]

Lots of lookers, no posters...I'll dive in.

I'm not sure. The hit of letting them fail will be huge. Suppliers and pensions all disappear. If that happens, the Feds and the states pick up a lot of the pieces anyway, so no matter what, we pay.

I don't see how a car czar can do anything more than a set of bankruptcy judges, though. He won't have the power to shed debt, just to try to negotiate it, with no real authority. But, if he fails we do have the bankruptcy option to fall back on.

So I guess I am saying give the czar thing a try, since no matter what happens, the taxpayer picks up most of the debt in the end, one way or another.

Slider

[kernel crash]

I worked for a company that filed chapter 11. We all took a 7% pay cut. The company reorganized and came back stronger than ever. Within 3 years I was getting a profit sharing check for almost 20 thousand. So if done right this could work. But if you don't require them to make real changes, your wasting our money.

[Slappy]

Ditching the f'ing unions would be a good start.

[Slider]

Like anyone else in line, the unions will have to give some. But I don't think you can lay all the blame there. Ford says it can weather this thing, and it has the same union issues all the domestic manufacturers have. I put more of the blame on management, who couldn't see past the fat profits in Escalades and their kind.

There's a management/union balance in there somewhere. Without the unions, we'd never find it, but we'd still have the same problems.

Slider

[Slider]

Here's an interesting overview of some of the market dynamics. The Japanese manufacturers support the bailout, which is a surprise to me. Besides the damage to the suppliers they have in common with the domestic manufacturers, they think a failure here means a lot more opportunity for the Koreans and Indians, and a weaker economy overall in the near term. Something to consider, at least.

Slider

http://money.cnn.com/2008/12/15/news/companies/overseas_automakers/index.htm

[catbbq]

This is interesting. The big 3 are all customers of my company and I have been in Detroit almost full time since October helping 1 get a system up and running. Back on Dec 3 when congress was debating pretty hard about this, one of the big issues was the union wages. When I was in the company store getting coffee, I over heard one of the workers there complaining about it. The person said "they keep saying $50 an hour for the union, but that is total. They are only taking home about $35 an hour."

I was floored. Can you image taking home $70,000 a year, not counting overtime, for working a factory job in the midwest? I came from the midwest and wasn't making $70k as a software engineer. Of course that was 8 years ago.

[Enigma]

One stipulation should be that top brass may not resign, quit, retire, transfer, or otherwise leave their jobs; AND will receive NO pay and NO bonus until they return their company to profitable operation for FIVE consecutive quarters. In fact maybe those board members should be required to donate a percentage of the personal fortunes they've amassed over the last five years their companies have been circling the drain.

It's time to take a harsher line with those greedy self serving a$$holes that ran huge corporations aground.

[Shodan]

Lots of lookers, no posters...I'll dive in.

I'm not sure. The hit of letting them fail will be huge. Suppliers and pensions all disappear. If that happens, the Feds and the states pick up a lot of the pieces anyway, so no matter what, we pay.

I don't see how a car czar can do anything more than a set of bankruptcy judges, though. He won't have the power to shed debt, just to try to negotiate it, with no real authority. But, if he fails we do have the bankruptcy option to fall back on.

So I guess I am saying give the czar thing a try, since no matter what happens, the taxpayer picks up most of the debt in the end, one way or another.

Slider


I dissagree
how is the them going under going to be a hit against the ecomomy?
If they were actually producing vehicles AND selling them maybe, but they arent selling them! so , Is the bailout going to make the cars sell? no. all the bailout is , is welfare pure and simple. Your going to pay people to either do nothing or produce vehicle that have no demand.
Face it were in a recession , people arent buying anything. If you have 10 companies producing 100,000 vehicles and there is only enough demand for 20,000 vehicles guess what? someone is going out of business, the jobs are going anyway, the suppliers are going to have to cut production too.
thats the way it is and throwing money to keep a marginal company afloat isnt going to help the economy , its going to increase the deficit and prolong the inevitable

[Unbreakable]

Correct! Besides which, this is Chryslers 2nd trip down Welfare Lane. We should let them go down the chute and GM & Ford can scavenge their remains.

Let that be a lesson to the survivors: You get one chance with assistance. After that you're on your own.

[Slider]

So what happens to all the money currently owed by the maufacturers? Bankruptcy is about debt, and the amount we are talking about is huge. Letting any of the Big3 die means many, many asscoiated business, who are owed a lot of money, sink with them.

The question is how to best manage the reorganization of the manufacturers: Shed the debt via bankruptcy, or fund them through the lean times until they can get back on their feet and pay the debt. It'a about how to ease the effect, and manage it, of the huge dollar volumes we are talking about.

BTW - Chrysler repaid the loans that the Feds guaranteed last time around. Bad example.

Slider

[Shodan]

So what happens to all the money currently owed by the maufacturers? Bankruptcy is about debt, and the amount we are talking about is huge. Letting any of the Big3 die means many, many asscoiated business, who are owed a lot of money, sink with them.

The question is how to best manage the reorganization of the manufacturers: Shed the debt via bankruptcy, or fund them through the lean times until they can get back on their feet and pay the debt. It'a about how to ease the effect, and manage it, of the huge dollar volumes we are talking about.

BTW - Chrysler repaid the loans that the Feds guaranteed last time around. Bad example.

Slider


If youre worried about the big 3s associates why not just bail them out? instead of handing $$ to the big losers? at least then the people getting the money are getting it for materials allready sold, not the auto makers who want it for cars that havent been built and wont be bought

[Slider]

That would truly be giving money away, unlike the approach of providing federally guaranteed loans to the manufacturers. If the car makers fail, there is no one to buy the products and services the suppliers offer, so they'd have no chance of paying back any money we, as taxpayers, guarantee.

The Chrysler loan guarantees from 30 years ago is a really good example. Using the money, under Iacocca, they developed the K Car line and had many profitable years. Jobs, suppliers and the taxpayers all were protected. The same can happen again.

Slider

[bikdav]

So, this is not the first time for Chrysler. I didn't know that. I do remember the K - cars when they came out. I was in high school back then and wondering why Chrysler made (what I thought was) such a poor move. But, then again, I was raised around big V8 horse power. So much for my understanding.

[Shodan]

That would truly be giving money away, unlike the approach of providing federally guaranteed loans to the manufacturers. If the car makers fail, there is no one to buy the products and services the suppliers offer, so they'd have no chance of paying back any money we, as taxpayers, guarantee.

The Chrysler loan guarantees from 30 years ago is a really good example. Using the money, under Iacocca, they developed the K Car line and had many profitable years. Jobs, suppliers and the taxpayers all were protected. The same can happen again.

Slider

and what are they going to do with the federally guaranteed loans that will make them profitable and able to pay them back?

let me ask you a question, what would it take to make you buy a vehicle from the 3 tomorrow?
Right now no one is buying cars unless they have to. Giving money to them isnt going to change that, lowering interest rates didnt either, hell you can buy a car right now with no money down and 0% interest, no one is buying, Toyota just had their first loss since the 40s
Chrysler is a good example, they got bailed out, they had the all best selling mini van, they had the Ram pickup, PT Cruiser all huge sellers and immensely profitable . but guess what , they still screwed it up and now here they are broke again, only now , they arent even a public company , they are privately owned so we should bail out private companies now too? their own parent company wont bail them out , why should we?
will there be jobs lost? sure will, either way some of these companies are going under and doesnt make sense to prop them up with our taxpayer money
the bottom line is , there is not enough demand to sustain as many car makers as there are

[Slider]

We are not talking about tomorrow and, like every recession we've ever faced, this one will pass, too. The point is that it will take longer if we let key components of the economy, like the auto industry, fail. Recreating the contribution that GM or Chrysler makes will take far longer than salvaging the existing infrastructure.

Could we wait and pick over the bones to recast an entire industry? Sure. Does it make sense? Not quite so sure on that one.

Slider

[MTBME]

the bottom line is , there is not enough demand to sustain as many car makers as there are

Actually this latest economic downturn notwithstanding, the rising standard of living in countries like China and India should drive more people into the car buying business. The big 3 are building and selling cars overseas (diesels) that are affordable and get up to 50 miles to the gallon. They can't sell them here because the environmentalist over here won't let them. So how does that help the big 3 to compete. I don't have a problem with buying foreign cars especially if there made here. These foreign car companies are supplying good paying jobs to many Americans. As long as the big 3 stay married to their union contracts, both past and present, they will forever be playing catch-up. That spells trouble for us taxpayers. (The best American car I ever bought was a 1968 Camero Rally Sport with a 300 hp 327 with a 4 barrel carburetor. There still repairing the roads to this day that I tore up in Lowell with that monster.

[catbbq]

Gotta agree with slider on this one. Unlike the banking industry, actually producing something through manufacturing is a key to a prosperous society, at least so far. You can't create wealth through services, it takes big iron. And the reach of the auto industry is huge. The number of mom and pop tier 1 and tier 2 suppliers is staggering. Hopefully this down turn will give them the chance to diversify their offers off just automotive.