Auto Bailout — Would Be Better to Burn The Money…
EmailCongress is debating cutting the Big Three Autos a check…something to tide them over through these tough times. General Motors is bleeding money…some 2 billion dollars a day. Bail them out or let them go bankrupt? That’s the billion dollar question. And its billions of your money.
One side says give them money — they’re too big to fail, too many jobs will be lost, the American economy will be hit hard, they need time to get fuel efficient cars to the market.
The flip side — let them fail, they brought this on themselves, pouring 25 billion into these failed models is a waste, bankruptcy protections will let them out of their incredibly expensive labor contracts.
There has been no shortage of pieces on this debate…this weekend in the Wall Street Journal, David Yermack from NYU Stern Business School chimed in: "The implications of this story for Washington policy makers are obvious. Investing in the major auto companies today would be throwing good money after bad. Many are suggesting that $25 billion of public money be immediately injected into the auto business in order to buy time for an even larger bailout to be organized. We would do better to set this money on fire rather than using it to keep these dying firms on life support, setting them up for even more money-losing investments in the future."
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Again, the car companies actually made the vehicles people wanted – Trucks, SUVs, V8′s. The problem is that we are dumb and they were dumb to only suit this need without having more fuel-efficient cars in the wings.
Do you really think we should outsource our manufacturing sector completely? Should China build our tanks too?
Posted by: MIguy | November 17, 2008, 12:19 pm 12:19 pm
Yes, we should bail out the top 4 US car companies, and in return, they need to bring their business into the present and future needs of our economy.
Posted by: becky (the real one) | November 17, 2008, 12:29 pm 12:29 pm
Here’s an idea!! Let the big three ask the oil and gas industry for some low interest loans instead of asking the federal government for the cash. Beacause of the Big 3, not our foreign auto makers, the oil and gas industry has made a killing! Also thanks to our federal government, the trucks and SUV’s that we love so much don’t get the gas mileage they are capable of. You can thank our government for not making them more fuel effiecient before now, because the technology has been there for years. Also make sure you thank the UAW, execs and CEO’s for doing such a fine job of running the Big 3 into the ground and making sure that every worker makes $100,000 a year. I enjoy my SUV and will continue to drive one. Needless to say the one I have is American made and has been nothing but a headache. I will continue to drive my SUV but rest assured, the next will not be GM, Ford or a Chrysler product. I do not agree with a Federal Bailout of the auto industry nor did I agree with bailing out the banking industry. Why should they not have to live like the rest of us in this country. On a BUDGET!!! I do not make a huge salary but I do make enough to get by. I have a new home that I just built. Oh and by the way, I didn’t borrow more than what I could afford. I have a SUV that is only 2 years old. I do have credit cards but make sure they don’t carry much of a balance. I also have a student loan that I will be paying until I am 40! But I am making it and still have a little extra to save and invest. So, you know what, it really isn’t hard to live within your means. Some of these with their hands out might just need to rethink their approach to how they do business.
Posted by: Kimmie | November 17, 2008, 12:33 pm 12:33 pm
DEFINITELY NO TO BAILOUT! For too long, these arrogant companies were king.Even though all their cars were graded lowest within the industry, no one cared, because they were to arrogant to make changes and invest in new technology. So the other foreign companies plodded on and are now rewarded. On top, these union workers were overpaid and entrenched in jobs that included numerous relatives and family members. Most of these workers did not even complete high school and were paid more than many professionals. How can any industry survive? Then to promise these same workers pensions, medical benefits for life and many other perks. They should all declare bankruptcy and reorganize so that they do not continue to suck the blood of other workers dry. If we have to do business in a different but efficient way, so be it. But we must never ever allow an industry to hoodwink us and dictate to us, the way we allowed the auto industry to,over the last decades.
Posted by: Karen | November 17, 2008, 12:39 pm 12:39 pm
Please—– the article claims GM is “bleeding $2billion/day—- The $25Billion will buy them an additional 2 weeks!!! Give me a break. Like they said above, you might as well burn the money. And I don’t agree with MIguy— letting them fail doesn’t mean the jobs go off shore. The foreign automakers are on US soil and doing it quite well. It’s just that the BIG3 just don’t get it. Never have in the past 40 years and with the current management and the UAW they never will. Change needs to be forced upon them as they have demonstrated repeatedly that they just don’t know how to get it done. Additionally, they only produced the products that a segment of the population wanted– the big a** 4X4s, trucks and SUVs. The majority of the population that wanted reliable and affordable passenger cars purchased foreign brands because the US brands just didn’t cut it. If the US manufacturers would have produced to the needs of the entire market, the foreign manufacturers would not be here!
Posted by: roscoe02 | November 17, 2008, 12:43 pm 12:43 pm
At the rate they are going ($2 billion per day spending habit), the industry will last less than two weeks.
What would the industry do different?
Shouldn’t the government have a detailed account HOW they would spend the $25 billion dollars?
I think the top people in power (CEO’s,etc.) should be fired WITH NO OR VERY VERY LITTLE SEVERANCE PAY – LESS THAN $5,000 EACH – THAT’S IT – NO MORE.
Obviously, they were living it up, and not looking towards the future. How can foreign manufacturers of cars be competitive and innovative, and they cannot or will not?
I say, fire everybody on top.
Re-organize.
Posted by: NO DEAL | November 17, 2008, 12:47 pm 12:47 pm
roscoe02: “Change needs to be forced upon them…”
Yup, sounds like a job that bankruptcy court was made to do. Going bankrupt does not mean going out of business. Send them down the well-worn path the airlines forged, let management and labor alike get the fat flayed off by the court and creditors, and hope they return as a company that can compete again.
Posted by: jhw539 | November 17, 2008, 12:52 pm 12:52 pm
I watched a special on this today. Millions of people will out of a job if they go down. Think about it, it is just not that company, it will be the tires… anything that goes into building a car. Plus, you have the sales men, the small car lots… on and on.
why should be let them go down when right now GM has a great economy car in the makings.
Posted by: becky (the real one) | November 17, 2008, 12:54 pm 12:54 pm
You guys think this recession is bad, if those companies go under we will be put into a deep depression. think about the number of people who will be out of work.
Posted by: becky (the real one) | November 17, 2008, 12:57 pm 12:57 pm
I listened to Bark “the Riddler” Frank’s justification for doing this and ALL the wonderful things that will be built into this little package. Oversight is a one of them….OVERSIGHT???…What a clown Frank is. There is ZERO oversight on this 700 Billion party, and now we want to keep handing out more & more with the “promise” of oversight.
To Mr. Frank:
Get the oversight in place on the FIRST bailouts BEFORE you screw things up any more!!!
Also Mr. Frank, EXACTLY what is the “exit strategy” for this problem. I do hope you are aware the 25 Billion your so ready to hand out is only going to keep these companies afloat for 2 maybe 3 months. NOTHING is going to change for them as far as their intake of money in the next 3 months. SO EXACTLY WHAT ARE YOU GOING TO DO FOR THEM IN 3 MONTHS WHEN COME BACK ASKING FOR MORE???? If you have not yet formulated an answer to that question, then you should be removed from this process completely. The country does not have the time or resources to wait for you to suddenly get “enlightened” !!!
As far as them paying it back, if they dont abide by your “rules”….another of your jokes…How can they pay it back, IF THEY NEED IT SO BADLY TO START WITH!!!!
Posted by: Mike_C | November 17, 2008, 1:02 pm 1:02 pm
GM’s burn rate is no where near $2 billion a day. This blog needs to retract that number. Per Business Week, it was $6.9 billion a YEAR. Still a heck of a lot but much much much less than $2 billion a day.
Posted by: Paul | November 17, 2008, 1:03 pm 1:03 pm
becky (the real one): Why do you think that GM going banrupt would result in their entire workforce losing their jobs? How many jobs were lost when United (2002), Delta (2005), Northwest (2005), and US Airways (2002, 2004, eventually merged with America West) went bankrupt?
Chapter 11 is designed to help companies that could survive if only they could get out from under onerous past debts or contracts – better a live company that pays you back $0.50 on the dollar than a dead one that pays you back $0.10 on the dollar. GM should go into Chapter 11 and have their executives and labor contracts put under the power of a responsible adult for a while.
Posted by: jhw539 | November 17, 2008, 1:07 pm 1:07 pm
Becky,
Exactly what is going to change in 3 months ? These companies are not going to turn anything around in that time. There are no new cars coming off any otheir production lines that are going to somehow save them.
In 3 months, they are going to be back asking for more money….What then ? Where does it end?
Speaking of jobs….Citbank announced today they are laying off 52,000 people.
The auto industry is not the only one in hard times. As far as this affecting 1 out of every 10 jobs in the country goes, It great rhetoric, but is there any real evidence to back this up, or this just an nice phrase that the media is propogating?
Posted by: Mike_C | November 17, 2008, 1:09 pm 1:09 pm
bankruptcy protections will let them out of their incredibly expensive labor contracts.
***********************************
This is the crux of the Republican thought. It is all anti-union. Look what the the none union banking system did for us. We could have let them go to and would have let us do away with the incredible, expensive, selfish, egomaniacs, that have cost us so much.
Let’s be honest about this issue, one supports the wealthy money barons, the other protects some labor jobs. We need the Mfg. base in this country, period.
Let the Republicans eat cake.
Posted by: Thinking | November 17, 2008, 1:16 pm 1:16 pm
I can guarantee you whatever we give these automakers will NEVER be enough.
l. Fire those top execs who ran the companies to the ground.
2. Copy what foreign auto makers do.
THEY’RE SUCCESSFUL.
Before any money exchange hands, shake up the industry first. If you just give the money to the same tired people, they’ll be back at daddy government’s door begging for ‘more please’.
Most people are aware that ‘something’ has to be done’. That’s a given.
Just do it different this time.
Obama showed everybody what ‘community organizing’ can do . SO – let’s organize.
Write to the president and president-elect and your senators and house of representatives. Tell them what the American people expect. Do it soon.
Posted by: No deal until we shake it up | November 17, 2008, 1:19 pm 1:19 pm
jhw: bankruptcy means protection from your creditors (i.e. suppliers), not just reorganization. bankruptcy for the big 3 means bankruptcy for the suppliers too.
roscoe: where do you think tank parts come from? much from the automotive suppliers. unlike the foreign automakers, the big 3 are burdened by a pension for all their retirees. so, let them go bankrupt and see what happens to those pensions…
Posted by: MIguy | November 17, 2008, 1:20 pm 1:20 pm
This is the crux of the Republican thought. It is all anti-union. Look what the the none union banking system did for us. We could have let them go to and would have let us do away with the incredible, expensive, selfish, egomaniacs, that have cost us so much.
Hey Thinking,
Think on this….
This is exactly why unions have gone from something that once needed to something that is now obsolete!
Instead of hurling the usual political insults, why not ask the common sense question of HOW is the US auto industry going to change to be truely competitive on 25 Billion? That sum of money is going to get them about 3 months of time to turn it around. No one I know of on either side of the aisle beleives for one second they can do this. So what happens in 3 months? 25 Billion more?…50 B?…100B?
What happens when the next big industry starts to cry gimme, gimme???
In case you hadn’t noticed, that money is not coming from the government, its coming from us!
Posted by: Mike_C | November 17, 2008, 1:28 pm 1:28 pm
MIguy — no amount of money we throw at them will fix the problem. They need to be forced into bankruptcy— reorganize- minus their current management and UAW affiliations. Bankruptcy doesn’t mean they cease to exist. It is a forcible way to make them address the problems that they have repeatedly ignored. There will be a company or series of companies that come out of this mess. We just can’t continue to put billions of dollars down the same rat hole and expect a different result!
Posted by: roscoe02 | November 17, 2008, 1:39 pm 1:39 pm
Here’s a thought—- Congress just approved $700Billion to the insurance companies and for the BANKS so that the BANKS could lend money to businesses to keep them afloat. How about The BIG3 walks down to the BANK and see if they can qualify for a loan—- from the BANK!!!!I bet the BANKS say SCREW YOU!!! We’re not in business to throw money down a RAT HOLE!
Posted by: roscoe02 | November 17, 2008, 1:54 pm 1:54 pm
Folks my wifes VW gets over 41 mpg on a small diesel engine and I would put this car up aginst any U.S. made vehicle, this said I drive a big F350 because of my work and have always driven U.S. but now that I have driven the VW I cannot support bailing out any of the big 3. I was aginst the first bailouts and if we continue handing out money we do not have then where does it stop? Obama was elected because of the Unions and now his buddy Pelosi is at the head of the line to bail em out and he gave up his regular day job before he had to vote on this issue. He also said he would not allow LOBBYIST in his work force HMMM???
At one time the Unions were a good thing but they too have succomb to GREED and it is time for them to reorganize and get with the program, chapter 11 is the best thing for them. P.S. What part of we are broke do none of these politicians understand???
Posted by: waldomountainman | November 17, 2008, 7:32 pm 7:32 pm
roscoe: they are not asking for a bailout, they are asking for a loan. again, bankruptcy of the automotives leads to bankruptcy of the suppliers. although it would be nice to eliminate the unions, they have become less the problem. as has been said before, GM isn’t a car company, they are a pension plan. so, what happens to the retirees of GM when they go bankrupt?
what would help the car companies more than any ‘bailout’ would be to assume control of their pension plans.
Posted by: MIguy | November 17, 2008, 7:38 pm 7:38 pm
It is absolutely incredulous that any nuts and bolt person can earn $71.00 an hour with benefits. Many professional people in the U.S. don’t make that kind of money. Is it any wonder that we just priced ourselves out of the market? with a failed business model? This did not happen overnight. This took many years to screw up, and here way are paying the piper. No way to bailout. Where is my bailout? Where is my handout? And those corporate corrupt thugs in the Board rooms need to go away also.
Posted by: bob | November 17, 2008, 10:01 pm 10:01 pm
I would give them the money but a LOT of conditions would have to be met. We outsource too much work as it is that is why there are no jobs here for quite a few people that used to have jobs. I would have the car industries start making more cars like the Prius and begin research on others. If we can help AIG that blatantly misused money and continued to do so – I am not saying that condones it, but at least the car industry supplied what the public wanted and to my knowledge does not abuse the money and it will keep jobs going for many – it is the one bailout that we should do. In effect none of the bailouts are constitutional. We are in bad shape and it would be worse if none of our cars are made in the states anymore.
Posted by: Deb | November 18, 2008, 9:49 am 9:49 am
WOW what a mess we are in. I am 50 and I thought I finally had a piece of the pie like my parents have. I owe 380 K on a home that is worth 250 K. My family or anybody else I know can’t even get a break to help them keep their home’s. Does any one know any body that has been helped out in this forecloser mess. Now the goverment wants to bail out the car bandits. The UAW should be ashamed that the forien auto makers make a far better product then they ever dreamed about. I loved my Toyota’s because they keep running with minamal to no repairs. I thought I should support the big three companys the last 10 years but I am sorely disapointed in the crap they produce, and don’t get me started on the thievery that goes on in there service departments. The rich keep getting helped by the rich while the rest of us bail them out. Let them file bankrubsuy and get rid of the UAW, that’s my plan.
Posted by: Guy Picard | November 18, 2008, 5:49 pm 5:49 pm