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Should we bail out US auto industry?


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Poll: Bailout

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#1 Grizzly

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Posted 19 November 2008 - 04:48 PM

Dow closed at a 5 year low today. You bet its thanks to low confidence in the big 3.
It's pretty much bailout or chapter 11 bankruptcy.. Even with the 25 bil bailout, I think the companies would last a few months longer.. No point in delaying the inevitable. A shitload of jobs will be lost and we'll probably say goodbye to jeep, pontiac, saab, saturn, and cadillac :'(, but i've lost hope.

We've laid witness to a commonly occuring theme of denial in dying companies.. filing for bankruptcy now will only limit the damage. I think it's time we learn form our mistakes.

idk if I've yet heard a good argument for the bailout.. What do you guys think?


#2 redlion

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Posted 19 November 2008 - 05:21 PM

I just read a special report in the Economist about the bailout. Very enlightening stuff, considering it comes from the founders of our economic style, the Anglo-Saxon style. We fucked up debt allocation and securitization. I am only now learning what significance these terms have in the shadow economy, but its increasingly difficult for me to believe that our system of finance is what is best for a developed nation. Its an either or. Either, you have free markets that you don't bail out for anything, or you regulate and limit risky market measures like debt distribution over public holding (banks holding debts of forclosure ect on money backed by public stock holders). You can't have a middle ground, with investment banks doing there thing with implicit government backing. Thats a stupid safety net, because it removes the risk without limiting the consequences. Silly.

#3 travis

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Posted 19 November 2008 - 05:42 PM

Yes - if they crash, the economy is more fucked than it already is.

#4 Nick

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Posted 19 November 2008 - 08:02 PM

Oh yeah, let's bail out three corporations who's CEO's each flew a private jet to ask for their money. To quote a CNN reporter, "It's like a man showing up to a soup kitchen in a $5,000 suit."

No, don't bail them out. They don't deserve it.
A lack of cars will be good for the environment anyway. smile.gif

#5 pyke

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Posted 19 November 2008 - 10:00 PM

QUOTE (Urban @ Nov 20 2008, 12:02 AM) <{POST_SNAPBACK}>
Oh yeah, let's bail out three corporations who's CEO's each flew a private jet to ask for their money. To quote a CNN reporter, "It's like a man showing up to a soup kitchen in a $5,000 suit."

No, don't bail them out. They don't deserve it.
A lack of cars will be good for the environment anyway. smile.gif

And bad for pretty much everything else. tongue.gif

#6 Reaper

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Posted 20 November 2008 - 04:04 AM

I don't think we should bail them out. They won't make cars any more affordable, or lend to people that have worse credit...they are going to take that money and blow it on stupid shit. I heard where they were asking for the money and the CEOs of that company act JUST like politicians....having a big old speech for one question and not even answering the question. Yes lots of jobs would go down the drains and those are the people I want that money to help, only problem is thats not where the money is going to go. A radio jockey I listen to said it right...just give us American people a check that can only buy a new car (obviously not anything over 20k) and that will help the economy AND the car dealerships.

#7 nox

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Posted 20 November 2008 - 05:21 AM

there is a slippery slope here. you cant bail out everyone. in fact no one should be bailed out. the big three have been producing garbage for years/decades..throwing more money at them will accomplish nothing..GM has been functionally bankrupt for years..its time to pull the plug and yes it will be painful. if anything the money should be used to support new innovative companies like www.teslamotors, why should the taxpayer feel the brunt of bad business practice and failure to innovate?. these dinosaurs should be left to fend for themselves, maybe they will actually make the changes they need to. clearly chrystler hasnt learned from the last bailout.

its never been more to clear to me now that when we dig ourselves out of this economic mess that there has to be some serious though to limiting the size of corporations. the merger fever that went on for decades has resulted in big behemoth corporations that often are poorly run/slow to react/too bueraucratic/almost government like in culture. these entities also believe they will never be allowed to fail hence they never make any real effort to clean up their act because they know the government will always bail them out.

QUOTE (Reaper @ Nov 20 2008, 07:04 AM) <{POST_SNAPBACK}>
I don't think we should bail them out. They won't make cars any more affordable, or lend to people that have worse credit...they are going to take that money and blow it on stupid shit. I heard where they were asking for the money and the CEOs of that company act JUST like politicians....having a big old speech for one question and not even answering the question. Yes lots of jobs would go down the drains and those are the people I want that money to help, only problem is thats not where the money is going to go. A radio jockey I listen to said it right...just give us American people a check that can only buy a new car (obviously not anything over 20k) and that will help the economy AND the car dealerships.

Population: 301,139,947 (July 2007 est.) CIA factbook

$4,517,099,205,000 if we gave every person a 15k check for a new car, i know you probably weren't thinking this through when you posted..but where the hell would that money come from? radio jockeys should stick to playing music smile.gif

#8 Raui

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Posted 20 November 2008 - 05:30 AM

Hell no, they don't deserve a bail out.

#9 Waser Lave

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Posted 20 November 2008 - 06:59 AM

Give the money to the people who lose their jobs/houses/families because of the incompetence and greed of the corporations.

#10 Tetiel

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Posted 20 November 2008 - 09:41 AM

We should not reward those who refuse to adapt to the changing American need

#11 Grizzly

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Posted 20 November 2008 - 02:14 PM

You're all speaking as if we're bailout of 3 CEOs lol. Sure, CEOs like to live lavishly and they'll take personal advantage of the bailouts to the best of their ability, but you should try to realize that that's not reason enough to let the auto industry die down.

#12 33724

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Posted 20 November 2008 - 02:16 PM

fileing for bankruptcy is not letting it die

#13 Grizzly

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Posted 20 November 2008 - 02:18 PM

QUOTE (33724 @ Nov 20 2008, 04:16 PM) <{POST_SNAPBACK}>
fileing for bankruptcy is not letting it die


Does losing 100s of thousands of jobs and more than half of american car companies sound close to death to you?
But that has nothing to do with my argument.
I don't even agree with the bailout, if you havn't understood yet.

#14 Reaper

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Posted 20 November 2008 - 04:02 PM

QUOTE (nox @ Nov 20 2008, 06:21 AM) <{POST_SNAPBACK}>
Population: 301,139,947 (July 2007 est.) CIA factbook

$4,517,099,205,000 if we gave every person a 15k check for a new car, i know you probably weren't thinking this through when you posted..but where the hell would that money come from? radio jockeys should stick to playing music smile.gif


Ok, but I'm not talking about people who are under 18, don't have licenses, and not EVERY person, but every married couple or single. I'm sure that would bring down that number considerably. There is a way they could pull it off...I just thought that would be a great idea...thats all. I never did the math, it would just be nice as hell to walk into a car dealership and pay vurtually nothing on a brand new car. We can all dream can't we? Why are you ruining my dream? ROFL

#15 Cory

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Posted 20 November 2008 - 04:19 PM

Absolutely not. Sure we need an overhaul in the car industry , but giving our cash to companies who can't maintain their own is just a silly idea. Instead we need to put investment into companies like Tesla Motors who actually show motivation and ability to push our car industries into the future.

#16 alybo

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Posted 20 November 2008 - 05:26 PM

I actually think we should make the big 3 and others take accountability for their actions. The money in the bailout is NOT going to solve the problem. The problem is with the companies' own production. If we give them 25 mil, we are simply delaying the inevitable - bankruptcy. And to be honest, I actually think that going bankrupt could help the auto industry. If they go bankrupt, they will be FORCED to reorganize their companies and actually produce automobiles the consumers will buy. If they start making cars with higher fuel efficiency and more reasonable prices, the car companies can begin competing again, and thus the economy will soar. At least in theory. I hope Congress doesn't vote to give them money. But then again, I don't see how the auto industry can come up with that great of in argument in less than a month. If we give them money, we're just letting them off the hook and taking more money away from the people!

Although, I do realize that several hardworking Americans could potentially lose their jobs from a bankruptcy, therefore worsening the economy. So it's a complicated decision. But still, they did this to themselves!

#17 Grizzly

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Posted 21 November 2008 - 11:44 AM

Surely we can put the blame on bad management, but don't you think the collapse of the financial systems had anything to do with this, just as it had caused the collapse of many financial service firms like Lehman brothers.

And if you've been reading the paper lately, you'll see economists explaining the current massive losses in wall street partly due to the fall of lehman brothers. Retail stores like wal-mart, target, saks 5th, louis vuitton, etc, are all taking a massive hit. The fall of one financial company is doing this, and had the government bailed them out this might not have been happening.

Kids that graduate from finance this year or the next arn't going to have jobs thanks to the fall of lehman brothers and the copious amounts of jobless people on wall street there are atm.

Imagine what will happen when the auto industry files for bankruptcy( the widespread effect it will have on the economy and the unemployment rate) before you reach such a simple conclusion.

#18 Ives

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Posted 21 November 2008 - 05:21 PM

I agree with what Gary Becker had to say. I hate to be reserved in my intellectual faculties, but it's an interesting article.

QUOTE
Bail Out the Big Three Auto Producers? Not a Good Idea-Becker


The big three American auto producers General Motors, Ford, and Chrysler, are in terrible financial shape. They have asked the government for a bailout, and the Democratic leadership in Congress is eager to give them one. The United Auto Workers union was a strong supporter of President-elect Obama and of Democratic candidates.

These companies have lost tens of billions of dollars during the past few years, and they will shortly run out of cash. GM's shares have lost almost all their value, and Ford has not done much better. Cerberus Capital, a private equity company, owns Chrysler, and it has lost most of what it invested in the company. For this reason Cerberus is trying get out of the automobile manufacturing business. All three companies were heavily into producing trucks and SUV's when the sharp run up in gas prices induced consumers to shift away from these gas-guzzlers and toward smaller and more fuel-efficient cars. Moreover, what money GM had been making came mainly not from car production but from its automobile credit business, (GMAC). This company would borrow from banks to lend to consumers who needed help in financing their GM car purchases. The financial crisis has dried up the money available to auto financing companies, and hence eliminated the major source of their profits.

If GM is not bailed out, the company claims it will be forced into bankruptcy within a few months, and Ford's situation is only slightly better. GM is blitzing Congress, President Bush, and President -elect Obama with pleas for a bailout, followed by a warning that bankruptcy will also hurt auto suppliers throughout the nation that depend on GM's business. GM is also claiming that bankruptcy will put major financial pressure on the Pension Benefit Guaranty Corp, the federal agency that insures benefits to retirees in the auto industry as well as to million of other workers.

Nevertheless, I believe bankruptcy is better than a bailout for American consumers and taxpayers. The main problem with American auto companies is that during the good times of the 1970s, 1980s and 1990s, they made overly generous settlements with the United Auto workers (UAW) on wages, pensions, and health benefits. Only a couple of years ago, GM was paying $5 billion per year in health benefits to retirees and current employees because their plans had wide health coverage with minimal co-payments and deductibility on health claims by present and retired employees. In those days, the UAW was one of the most powerful unions in the US, and it bargained aggressively with the auto manufacturers, carrying out strikes when its demands were not met. When the American auto industry began to face tough competition from Japanese and German carmakers, they were saddled with excessive pay to their workers, and vastly excessive pensions and health benefits to their current and retired workers.

It is not that cars cannot be produced profitably with American workers: the American plants of Toyota and other Japanese companies, and of German auto manufacturers, have been profitable for many years. The foreign companies have achieved this mainly by setting up their factories in Southern and border states where they could avoid the UAW, and thereby introduce efficient methods of production. Their workers have been paid well but not excessively, and these companies have kept their pension and health obligations under control while still maintaining good morale among their employees. In recent years GM and the other American manufacturers have chipped away at their generous fringe benefits, but their health and retirement benefits still considerably exceed those received by American auto workers employed by foreign companies. As a result of lower costs, better management, and less hindrance from work rules imposed by the UAW, about 1/3 of all cars produced in the US now come from foreign owned plants.

Bankruptcy would help GM and Ford become more competitive by abrogating significant parts of their labor contracts with the UAW. One of the greatest needs would be sizable reduction in their health costs through sharp increases in the deductibility and co-payments, and a reduced coverage of medical procedures. Bankruptcy should also help bring the wage rates of GM and Ford in line with those of foreign producers in the US. Some of their pension liabilities may be shifted onto the Pension Benefit Guarantee Corp, but even that would be preferable to an overall bailout.

A good analogy is what happened to United Airlines. By entering bankruptcy it was able to reduce its inflated cost structure by breaking contracts it had with the pilots union and other employee unions. It exited bankruptcy a slimmer and more efficient airline. Whether it is able to compete effectively in the long run is still not certain, but it is in much better shape to compete than before it entered bankruptcy.

Bankruptcy may also force out the current management of GM and Ford. I do not know for certain whether they have competent management- GM surely did not have top management for much of its recent history. I do believe, however, that when a coach of a team loses a few games, he might legitimately explain that by injuries, bad luck, or even bad officiating. These excuses become lame when he consistently loses many games, and the correct and common practice is then to fire the coach. The same considerations apply to top management. When a company consistently does badly while some of its competitors (like Toyota) are doing well, its time to fire the management team, and see if another team can do better.

Is GM "too big" to fail? I do not believe the company is too big to go into a reorganization-which is what bankruptcy would involve. Such reorganization would abrogate its untenable labor contracts, and give it a chance to survive in long run. A bailout, by contrast, would simply postpone the needed reforms in these labor contracts, the business model of GM, and its management.


#19 Hawk

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Posted 21 November 2008 - 11:00 PM

No.

If foreign car companies can make cars at a given price, why can't American cars compete? I blame the management and unions. A bailout will not help with those two issues- All it will do is delay the inevitable. Let them fall.

#20 redlion

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Posted 21 November 2008 - 11:50 PM

QUOTE (Freak @ Nov 21 2008, 02:44 PM) <{POST_SNAPBACK}>
Surely we can put the blame on bad management, but don't you think the collapse of the financial systems had anything to do with this, just as it had caused the collapse of many financial service firms like Lehman brothers.

And if you've been reading the paper lately, you'll see economists explaining the current massive losses in wall street partly due to the fall of lehman brothers. Retail stores like wal-mart, target, saks 5th, louis vuitton, etc, are all taking a massive hit. The fall of one financial company is doing this, and had the government bailed them out this might not have been happening.

Kids that graduate from finance this year or the next arn't going to have jobs thanks to the fall of lehman brothers and the copious amounts of jobless people on wall street there are atm.

Imagine what will happen when the auto industry files for bankruptcy( the widespread effect it will have on the economy and the unemployment rate) before you reach such a simple conclusion.

Not just the lehman brothers though. All the investment banks have gone. They weren't 'free' from regulation, so they're fucking up. Now they're transitioning to commercial banks like Morgan Stanley did.

The unemployment rate will suck, but at least the companies will survive. Whats to stop the big three from asking for more money down the road? If they already know they can get it in a relatively small depression, they can get it during any crisis. Stupid precedent to set. Everything will want to be partially nationalized.

#21 nox

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Posted 22 November 2008 - 09:08 AM

QUOTE (Reaper @ Nov 20 2008, 07:02 PM) <{POST_SNAPBACK}>
Ok, but I'm not talking about people who are under 18, don't have licenses, and not EVERY person, but every married couple or single. I'm sure that would bring down that number considerably. There is a way they could pull it off...I just thought that would be a great idea...thats all. I never did the math, it would just be nice as hell to walk into a car dealership and pay vurtually nothing on a brand new car. We can all dream can't we? Why are you ruining my dream? ROFL

you said every person so i used that lol why not take advantage of your stupidity tongue.gif

#22 33724

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Posted 22 November 2008 - 10:39 AM

hell no....let it burn



I am TurdFerguson and I approve this message. thumbsup.gif

QUOTE (Freak @ Nov 20 2008, 05:14 PM) <{POST_SNAPBACK}>
You're all speaking as if we're bailout of 3 CEOs lol. Sure, CEOs like to live lavishly and they'll take personal advantage of the bailouts to the best of their ability, but you should try to realize that that's not reason enough to let the auto industry die down.



Going bankrupt wont make them fire "100's of thousands" of jobs. It actually is the best thing for them to do. When Ford CEO made 40million in dividends, GM 20million and Chrysler 6million with the economic status it has been, THEY decided their own fate and shouldnt be bailed out.

#23 Grizzly

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Posted 22 November 2008 - 05:58 PM

QUOTE (33724 @ Nov 22 2008, 12:39 PM) <{POST_SNAPBACK}>
hell no....let it burn



I am TurdFerguson and I approve this message. thumbsup.gif




Going bankrupt wont make them fire "100's of thousands" of jobs. It actually is the best thing for them to do. When Ford CEO made 40million in dividends, GM 20million and Chrysler 6million with the economic status it has been, THEY decided their own fate and shouldnt be bailed out.


...Trust me, when they file for bankruptcy.. there will be jobs lost.. it's definite and you can't argue with that....
Bankruptcy will lead the companies to merge. And most of the current brands like Saab, Pontiac, and Saturn will be lost along with the employees these companies hire. Now that's if they file for chapter 11 bankruptcy. Depending on the decision of our government and the response by the industry, their companies may eventually fall into chapter 7 bankruptcy - liquidation, which doesn't leave such an offer available and even more jobs will be lost.

QUOTE (redlion @ Nov 22 2008, 01:50 AM) <{POST_SNAPBACK}>
Not just the lehman brothers though. All the investment banks have gone. They weren't 'free' from regulation, so they're fucking up. Now they're transitioning to commercial banks like Morgan Stanley did.

The unemployment rate will suck, but at least the companies will survive. Whats to stop the big three from asking for more money down the road? If they already know they can get it in a relatively small depression, they can get it during any crisis. Stupid precedent to set. Everything will want to be partially nationalized.


Lehman Brothers was forced to file for bankruptcy and was bought out by barclays because it could not survive, just like Bear Stearns was bought out. The government did bail out many other firms like Morgan Stanley. True, they are merging because the environment has changed now, but that doesn't mean they have "gone". They're still alive and pretty healthy.

None of you guys know what your talking about do you? tongue.gif



#24 ktakeito

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Posted 22 November 2008 - 10:58 PM

If the us can pay 700 billion dollars to the stock market to dig themselves out of a hole than they can help the big 3 out of a hole that the people at wall street caused.

#25 Reaper

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Posted 23 November 2008 - 10:52 AM

QUOTE (nox @ Nov 22 2008, 09:08 AM) <{POST_SNAPBACK}>
you said every person so i used that lol why not take advantage of your stupidity tongue.gif


You have every right too tongue.gif lol I haven't been myself lately sad.gif


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