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billbenson
12-13-2008, 05:22 PM
I've gone back and forth with a friend on the bailout. I've done some searches and its hard to find figures I would quote as being accurate, but the big 3 have much higher loaded costs per worker than imports. CNN.com had an article that showed the import cars that are assembled here ie Toyota, Honda, etc., actually had more of the cars built here than the big three. A lot of assembly for the big 3 is done in Mexico and parts come from China. According to the CNN article, dramatically more than the imports. The imports were more american than the american cars.

Its hard to tell what info on this is accurate and what isn't. It strikes me that people will still buy cars if the big 3 fail. The skilled workers can still go and work for Toyota if they want. Retirees will hurt,

I don't see these companies being successful without getting their costs in line with the imports. I'm not an economist, but this whole thing strikes me as delaying the inevitable. If the government is going to subsidize jobs, do it with retraining in viable companies. Working for Toyota isn't sending jobs overseas!

Just tossing this out for comment.

Marcomguy
12-13-2008, 06:41 PM
That's a reasonable scenario. People will still buy cars, and workers can still find jobs with manufacturers like Toyota and Kia ... IF those manufacturers need that many workers. Most likely they won't, even if people start buying cars in pre-recession numbers.

It will also take the other car factories several months to ramp up production to meet new demand. Any way you cut it, in the short term there will be a lot of unemployment in the auto and related industries.

Next, if all the Detroit workers find jobs at other carmakers' plants, you can bet the UAW will out there trying to unionize them. And they will succeed.

I'm not sure it's high costs alone that are hampering Detroit's progress. Sometimes it's their space-cadet decision-making. Take, for example, the saga of the Ford Taurus. When it was introduced, it was a breakthrough car. In the early 1990s, it became the best-selling car in America. There was even a high-performance SHO model with a Yamaha V6, then a V8, which was the object of much lust.

And then Ford totally dropped the ball. They didn't invest in it. They let it slide. The Camry and the Accord took the top spots. In 2006, Ford discontinued the Taurus. Discontinued a car that 10 years previously had sold more units than any other nameplate!

Now Ford is trying to rebadge the Five Hundred as a Taurus, and nobody's buying it. They're buying Accords and Civics and Camrys instead.

So bb, you may be right, and throwing money at the problem isn't going to fix it. Delaying the inevitable, as you say, especially if management continues to do things the way it has.

vangogh
12-13-2008, 06:43 PM
I think the idea of buying American changed a long time ago. It's hard to know what the right thing to do here is. If the big 3 are running unsuccessful businesses shouldn't they be allowed to fail so another company that can be successful can rise in its place. On the other hand listening to economists it sounds as though failure of the big 3 could throw us deeper into a recession.

Remipub
12-13-2008, 07:39 PM
Personally, I seriously doubt the big 3 would disappear without the benefit of the bail out. It's their easy way out - allows them to continue with business as usual with their fingers crossed that somehow things will be different -- which they wont.

When the government failed to bailout some of the airlines, they filed for bankruptcy and were forced to change the way they did business. Yes, there were consolidations, union contracts had to be renegotiated, wages were reduced and jobs were lost. But this is better than artificially pumping up an industry with bail out money. We consumers are expected to live within our means - the auto makers should do the same. The foreign automakers should be a model for the big 3. I know the unions would put up a fit if Detroit tried to emulate the (more successful) imports, but it's a matter of survival. Change or go extinct - stop asking for handouts.

(IMHO)

Vivid Color Zack
12-13-2008, 07:41 PM
The UAW has pretty much sucked these corporations dry. Look at the employee benefits/retirement packages and see how good a job they did for their members. Personally I think too good. If a parasite kills the host, the parasite dies too.

I don't like the idea of a bailout when they're not going to provide solid plans to do things differently. They're still going to make sub par cars in terms of reliability and I don't think that should merit being saved when they obviously can't handle themselves.

http://www.boingboing.net/images/x_2008/youwouldntbuyour.jpg

orion_joel
12-13-2008, 08:12 PM
if you think pumping up an industry with bailout money is bad, then you should take a look at the Australian Government trying to pump up a whole economy with bailout money. half of which is misplaced and the other half of which is being handed out the wrong way.

Australia is sitting at the top end of the reserve banks inflation rate comfort zone, and we are going into the biggest spending time of the year, with interest rates cut for the 4the time straight, taking almost 3% off the cash rate that time. The lowest petrol prices with have seen in probably more then a year, and mid AU$8.4 billion in handouts, to pensioners, carers and $1,000 for every eligible child.

Steve B
12-14-2008, 01:47 AM
Failure is an important part of capitalism. Of course, in the short run it will hurt a lot of people and will further the recession. But, long term, the failure of the weak is vital to the future in my opinion. The circus performers are always more careful when working without a net. I like the examples above.

mr.ro
12-14-2008, 03:10 PM
I agree that they need to rethink how they are making their cars. if it wasn't for the fact that the big three are connected to so many other small businesses to run their operations, I would say let them swim or sink. we are expected to run our companies in whatever state the economy is in without any bailout money from the government so it is only fair that they shall do the same.

Granted they have way more employees than we do and families to feed, that should only make them think harder about what type of cars they are putting out. I would buy an big 3 car in a heartbeat if it wasn't for the fact that they can not last and break down often. I switched from a ford to a toyota and have never been pleased more.

KristineS
12-14-2008, 04:15 PM
I'm torn on this one.

On one hand my father is a retired GM employee. He was middle management, not a line worker, but he did get a nice retirement package and if the big 3 go under it will impact him. I also live in Michigan, which is a state that is already hurting. Losing the car makers would be a really big blow at least for the short term. I'm not sure how much more damage this state can take.

On the other hand, I don't advocate the philosophy the government seems to have with handing out money right now. It appears they're just handing it out with no conditions and no restrictions and no knowledge of how the money will be used or the problems will be fixed.

The definition of insanity is doing the same things and hoping for a different result. If we really want to fix the problems we have, we have to do things differently, and not just throw money around. I'm not sure the current bailouts are designed to do that.

Blessed
12-14-2008, 06:14 PM
The definition of insanity is doing the same things and hoping for a different result. If we really want to fix the problems we have, we have to do things differently, and not just throw money around. I'm not sure the current bailouts are designed to do that.

This is how I feel about the current government bailout situation as well... good money after bad - giving us the same end result, just delaying it a bit.

orion_joel
12-14-2008, 07:32 PM
Maybe the biggest thing i see from government bailouts in any form or for any business is just what has been stated how is it going to change anything.

If you have a company that costs $10m per day to operate and at the present time is only making $9m per day in profit, Giving a $1m shortfall per day. Now if the government bails them out for $100m, they are sitting good for a whole 100 days. What is the point they either fail now or fail in three months.

What i think needs to be attached to any government bailout option is for a company to show cause in needing the money, and over a defined period show definite improvements in profitability. So really either of the options

A. Decrease costs in line with or below that of profitability
B. Increase profitability to meet costs

The biggest thing is that which ever way they try to go they are going to hit a roadblock, which unintentionally i would think for the most part is going to cause grief anyway. Decreasing costs almost inevitably means cutting staff, maybe they should consider cutting away some of the top heavy management structure that they have in many companies. Or maybe scaling back the R&D for a year. The problem is this i think is where some of these companies the future so they decide these are things they need to keep.

Improving profitability is just as difficult especially when they are seeing declining sales, however cutting back on the costs side will automatically increase profitability.

seolman
12-16-2008, 12:35 AM
I can't justify loaning my highly leveraged neighbor $100 to pay some kid $30 an hour to mow his lawn and I wouldn't expect anyone to loan me money unless I could show a reasonable ability to pay it back. Why would anyone want to loan billions to Detroit carmakers so they can overpay UAW workers to crank out lower quality cars less people want to buy?

I remember waiting in line to buy gas in the 1970's and the car companies saying "They want economy cars? OK, tell 'em we have economy cars". Americans saw through the lies then and Japanese cars began taking over the US market. Detroit eventually made some design changes but never lost it's arrogance and here they are with their hands out asking for help from the very ones they treated like peons all these years. The only ones I feel sorry for are the good honest blue collar workers the Union and the Car Companies have swindled all these years.

Hondas, Toyotas and other great quality cars are now made in the US. You are still buying US made products when you buy these.

Watchdog
12-20-2008, 03:44 PM
The Auto industry has been telling the gov. to stay out of their business for years and now they want the bailout...it's too bad that many good folks will loose, but again not the ones sitting on the top - Go figure.

Evan
12-20-2008, 06:26 PM
I've always firmly believed that less government intervention is best -- in both personally and business matters. President Ford was very true when he stated, "A government big enough to give you everything you want, is strong enough to take everything you have." Yet businesses, especially large ones, continue to make mistakes at the expense of shareholders and other stakeholders (vendors, employees, private investors, etc). It baffles me that these executives continue to be paid such lavish salaries for their mistakes and that the board of directors continue to let these "leaders" run the company to the ground. This is why we continue to have government keeping their paws in regulating businesses. "Less" regulation can only work to an extent.

While bailing out individual businesses would be improper, I find it hard not to support some type of intervention to prevent an industry from collapsing. Our financial industry is the backbone of America and many countries depend on this. It's failure would have a huge ripple through the world, and I think would truly challenge Americas independence. The auto industry, however, was established in America and we have an interest in keeping it alive. The number of jobs that would be lost would be tremendous. The ripple effect of this would be significant and probably bring us into a depression that will headline the Obama administration throughout his term in office.

I acknowledge that these jobs should be lost if these businesses don't change their practices. Many people need to make concessions. Management needs to pay themselves more reasonably for their piss-poor performance. Employees need to take a pay cut from their lavish paychecks if they're interested in keeping their jobs, or risk unemployment. Vendors and banks need to renegotiate terms if needed to make sure they get paid but not cause these businesses to go under.

Nontraditional problems don't call for traditional solutions, so these changes need outside the box thinking. And quite frankly the traditional business practices of today won't really fix the current situation.

We'll see what ends up happening with this bailout. I'd hope that the government can end up "winning" on this and actually profit from it. People should be skeptical -- certainly. But we'll all find out soon enough.