Think this is the first time a U.S. automaker that was stuck with a line of lower-quality gas guzzlers during an economic downturn at at time when the price of oil had spiked and consumers were demanding smaller, fuel efficient cars? Think again. This is pretty much the situation Chrysler faced in 1979. The government bailed out the company then, but clearly U.S. auto companies didn’t learn their lesson. Or maybe, they learned their lesson too well! Don’t worry about innovating for the future on the environmental and fuel economy fronts. Don’t even worry about producing cars that meet consumer desires. We’re too big to fail. So let’s make a quick buck with a line of heavy, expensive SUVs without worrying too much about what will happen when the market changes.
The financial sector is sui generis. Credit, which banks provide, really is the lifeblood of the economy, and the failure of the banks would have set off a catastrophe that more than justified emergency measures to get credit flowing again, even at the risk of moral hazard.
But automakers? Yes, they’re big employers. Yes, they’re important to our national self-image–the three regions of America these days seem to be “Main Street,” “Wall Street,” and “Detroit.” But they are not too big to fail. Let them go bankrupt. Let vulture investors pick over the carcasses, save what is valuable, and create new, dynamic firms without the enormous long-term liabilities the Big Three are carrying on their books. And let the public extend unemployment and other benefits to the workers who will lose jobs–extended unemployment is both the right thing to do and, incidentally, a particularly good way of stimulating the economy.
In my view, this is one area where the President-elect and the Democrats need to go back to the drawing board.
TedF
The loans the government gave to Chrysler were repaid in full, and the company continued for many years afterwards. Many citizens kept their jobs which otherwise might have gone overseas. I don’t think this is a completely straightforward call.
<
p>Remember that our economy is built in large part on psychology. Nothing has any “real” value: value is just what others are prepared to pay, and that depends in large part on what their expectations are for the future. Even the best capitalized bank has less than $1 in reserved for every $10 in obligations.
<
p>Consider what will happen if all three of the big auto companies go bust. People will freak out, I think. An already bad situation will become worse.
<
p>Allowing Lehman to go into bankruptcy (isn’t that what Chapter 11 is for?) seems in retrospect to have been a mistake, because it appears to have added significantly to the destabilization of the entire world economy.
<
p>Still, I agree that just saving a company here and there is not the way to reverse the economic problems we face.
<
p>The fundamental problem is that we need both recapitalization and new regulation, especially of the financial industry. The Bush administration, in typical incompetent fashion, is doing the first piecemeal and the second not at all.
I disagree with the conventional wisdom on Lehman. Yes, Lehman’s collapse was bad for market psychology, but it’s not good policy to aim to prop up market psychology to avoid a recession. We need to go through a recession to clean out the rot. We’re an economy centered around debt-financed consumption. That is in the process of stopping, which means the economy must contract. The real concern with Lehman was whether its collapse would cause the collapse of the financial firms that did business with Lehman, and that seems not to have happened.
<
p>The auto industry’s problem is not really a regulatory problem. Our automakers have waited for the government to mandate higher fuel efficiency standards before acting. Toyota and others didn’t wait, and they’re reaping the reward. So yes, the government should have acted a long time ago on this, but that didn’t stop foreign competitors from making investments that our domestic firms have failed to make.
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p>I’m not saying this because I’m some sort of free-market fundamentalist. I just want us to have a healthy auto industry that makes efficient cars that people will buy. Yes, Chrysler carried on after 1979 and paid back the Treasury, but is it really a better company today than it was then? Or did the government–at a profit, to be sure–just stave off the inevitable?
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p>TedF
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p>Regulations practically begged for the automakers to be in the situation they’re in.
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p>Gas was cheap because we didn’t tax it enough.
Safety requirements for trucks and SUVs were lower than for cars.
Fuel efficiency standards for trucks and SUVs were lower than for cars.
Tax writeoffs existed for trucks and SUVs that didn’t exist for cars.
Fed and state guidelines and requirements for everything from roadway width to parking lots created far too much room for trucks and SUVs to become ubiquitous.
<
p>
<
p>The government created a situation where it actively encouraged the American consumer to go for these gas hogs. Why did the American companies take the bait? A higher percentage of their customers worldwide are USian, so they had more to gain by taking the bait.
<
p>I think we should float the loans — but in return, they need to agree to (a) politically support tighter regulation for all automakers, and (b) sign a contract with the EPA et al agreeing to even tighter regulations for their particular company in between particular years [enough time to ramp up and then some time before they grow out of it].
Well, I agree with you that the government should have been creating additional incentives for better fuel economy. But the market was already creating its own incentives, as Toyota’s success shows. Why didn’t American manufacturers do anything about it?
<
p>I’ve already suggested one answer: moral hazard. They knew they’d be bailed out. Let me suggest another: the craziness that results when quarterly earnings in effect dictate the market’s verdict on a company’s long-term value, and the incentives management has to maximize short-term share prices. Does anyone know how Japanese firms manage to plan for the long term while our firms don’t? Are Japanese managers compensated differently?
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p>TedF
2. Because Americans make up a greater percentage of Big3 customers than Americans make up a percentage of Toyota customers, Toyota had less to gain by going the large vehicle route. Put another way, they had wiser Japanese consumers to guarantee a great market for small Toyotas.
<
p>As for the moral hazard, why on Earth do you think that “they knew they’d be bailed out?” Chrysler was 30 years ago, and it was gov’t backed loans which were paid back early. In the mean time, plenty of domestic industries have suffered large failures — airlines, steel, and cloth to name a few.
<
p>It takes a decade to take a car from concept to profit. You really think that the Big3 were planning on a Rust Belt Democrat being elected in 2008 amidst a sour economy with other structural failures so they could get their bailout? That’s the moral hazard America set up for them?
<
p>Methinks not.
We protected the domestic SUV market by classifying them as trucks. That one reason the U.S. manufacturers decided to produce them in such numbers: less competition.
If Chrysler had been allowed to fail, it may have served as a useful object lesson to the remaining two, plus the UAW, as to what would be their fate if they failed to get their costs under control.
<
p>It wasn’t, they didn’t, and now here we are.
<
p>On the other other other hand, would you be willing to buy a $25,000 car from a company that is bankrupt and may or may not be around for warranty problems or to manufacture replacement parts? It may be that Chapter 11 will kill the industry.
you can’t compare a chapter 11 filing for Lehman Bros. with one for an auto company because of this:
<
p>
<
p>The whole point of a GM bankruptcy would be to continue operating through the bankruptcy, with the breathing space provided by the bankruptcy laws, and emerge hopefully as a leaner and more efficient company. Maybe some jobs would be lost, but it shouldn’t have to be a total collapse. That was not the case with Lehman.
It would be a whole lots of jobs and other companies (suppliers) failing because they would not be paid. The government is goig to have to do a stimulus bill anyway. Providing GM with loans until they retool to keep people employed makes better sense and is more effective than trying to stimulate the economy soem other way to re-employ all the people who will lose their employment if GM files for Chapter 11. If the only reason people have for not helping GM out is it will “teach them a lesson,” then we should help them out. That kind of argument only has validity when the economy is otherwise doing okay.
That’s not necessarily true. A Chapter 11 debtor-in-possession can get permission from the bankruptcy court to pay post-petition expenses, both to employees and to suppliers, in order to keep the business operating. It’s true that debts incurred pre-petition will be held up, but that doesn’t necessarily mean that the suppliers will fail, as long as they keep supplying post-petition.
is very dangerous to businesses that sell big ticket products.
<
p>Even if, as you correctly note, the process is exactly what is needed.
<
p>A simple amendment to title 11, renaming chapter 11 “fashnoodlin” might help.
<
p>”GM filed fashnoodlin this morning…” sounds better than “GM filed bankruptcy…” to the guy about to drop $25 grand on a car.
Especially on such a large scale. CNN:
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p>
<
p>I repeat my earlier point: a collapse of GM would have psychological consequences far beyond the immediate economic impact. This is not an easy call.
we could let them fail and do little to nothing to make them improve their practices… and potentially see millions of jobs lost…
<
p>or we could bail them out, pass very stringent laws increasing efficiencies and forcing them to go hybrid. We could help them research battery power and hopefully have them go plug-in hybrid. We could usher in a new generation of American cars that blow the competition away across the international market, growing jobs here instead of continually bleeding them.
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p>I get the whole notion that they should be held accountable. But just because we bail them out doesn’t mean we don’t hold them accountable. We could bail them out buy buying them out and do with them what we will, selling off separate pieces to maximize our profits as taxpayers from having to bail them out and increasing competition and jobs in the process. Then, when the industry’s in better shape, we could finally sell off the remaining pieces.
The feds have been putting money toward battery research for years To what end? Ford leased Toyota’s battery technology for their first generation hybrids.
<
p>Requiring American automakers to make hybrids will likely force them to purchase or lease technologies they themselves haven’t had the foresight to design.
<
p>Plenty of other American companies are already prepared to break into the market with affordable, American and efficient vehicles.
give them aid as well.
At what point should the government cease providing financial support to a company that produces poor performing, outdated items?
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p>I’m not suggesting we leave the laborers out to dry but I see no reason for the government to prop up any company that kept producing junk until it failed.
<
p>Now that they apparently have some hybrid technology of their own what do they do with it? They’re putting it into vehicles that all but one get less than 32 mpg.
<
p>The list, all of which will receive federal tax incentives btw, includes:
2009 Ford Escape Hybrid; 2-wheel drive and 4WD; 32 mpg and 28 mpg
2008 Ford Escape Hybrid; 2WD and $2,000 4WD; 32 mpg and 28 mpg
2009 Mercury Mariner Hybrid; 2WD and 4WD; 32 mpg and 28 mpg
2008 Mercury Mariner Hybrid; 2WD $2,200 4WD; 32 mpg and 28 mpg
2008 Mazda Tribute Hybrid; 2WD and $2,200 4WD; 32 mpg and 28 mpg
2008 Chevrolet Malibu Hybrid; 27 mpg
2008 GMC Yukon 1500 Hybrid; 2WD and 4WD; 21 mpg and 20 mpg
2007-08 Saturn Aura Green Line; 27 mpg
2008 Saturn Vue Green Line; 28 mpg
2007-08 Nissan Altima Hybrid; 34 mpg
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p>Is that a partial bailout being used to good measure?
Except that a car that gains 5 mpg from 20 mpg to 25 mpg burns 1 less gallon of gasoline every 100 miles (4 instead of 5). A car that gains 5 mpg from 45 mpg to 50 mpg burns 1/10th of a gallon of gasoline every 100 miles (2 instead of 2.1).
<
p>So, which car is it better to give a 5 mpg boost?
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p>I’d like to see a shift in mpg for all vehicles, but frankly boosting the ones at the bottom of the scale first saves the most fuel by as much as a factor of 10. The key is to raise gas prices simultaneously, so that over time if it cost $3000 to fuel your SUV for a year [15,000 miles at 15 mpg at $3.00] in 2008 it costs at least $3000 in 2008 dollars to do so in 2013, say 15,000 miles at 20 mpg at $4.00 per gallon, also $3000. This way the lowest performing vehicles do better but still the buyers have in incentive to downsize that SUV or truck if it doesn’t give them enough benefit.
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p>We’ll save the most gas in the short term by improving the efficiency of the guzzlers, not the sippers. But, we’ve got to raise the price of gas to keep the market pushing toward even higher fuel efficiency, as well as to encourage those who can to switch from SUVs and trucks to large cars, and from large cars to smaller cars.
This is the great misunderstanding about gas mileage, and you’ve explained it very well.
<
p>Miles per gallon is a misleading figure, leading many auto reviewers and most people in the public sphere to tragically misunderstand it.
<
p>Lets do another, similar comparison, to show why mileage gains are so confusing.
Suppose:
<
p>A Person owns SUV that gets 12 mpg.
<
p>To drive 100 miles, that person will use 8.3 gallons. (100 divided by 12).
<
p>This person switches to a hybrid SUV that gets 20 mpg.
<
p>To drive 100 miles, this person will now use 5 gallons. (100 divided by 20).
<
p>Improving MPG by 8, at the lower end of the scale, saves 3.3 gallons of gasoline every 100 miles, 33 every 1000, and 330 every 10,000.
<
p>Suppose this same person wants to achieve similar savings in gasoline again, saving another 3.3 gallons/100 miles. What is the MPG improvement they will need [from 20 mpg]?
<
p>The answer: an improvement of 38 MPG… for a total of 58 MPG.
<
p>I’d make the argument that it’s easier to take all the vehicles that get 12 mpg and get them to 20 mpg, than to take all the ones that make 20 mpg and get them to 58 mpg.
<
p>But the way we currently talk about MPG makes it seems like no matter where you are on the MPG scale, it’s all the same. This absolutely destroys any real discussion and makes it extremely difficult to move forward. It’s time to get a better standard.
The democrats will bail out the automakers for one reason, as to not piss of the unions, their blindly lead voting machine.
<
p>I have no sympathy for the automakers, not management anyway. I do have sympathy for the workers. The leaders of the auto industry have been lobbying Washington for how long to keep mileage standards low???? They shot themselves in the foot by being greedy in the good times and not spending money on R&D for new fuel efficient technologies. They had a wakeup call during the gas crisis in the 70’s but they choose to be close minded and greedy, instead of spending some of that money to better position themselves for the future. They don’t deserve a penny of the taxpayers money, but they will get it.
If the big two/three fail, Michigan and Ohio are red states for the foreseeable future.
you would be supporting providing loans to GM. BTW, there were a lot of people buying those fuel guzzling SUVs that GM and others were making so I think there is plenty of blame to go around. Yes, I do think they should have been more forward thinking, but right now the government needs to make sure that the unemployment does not increase to levels that could cause a complete melt down.
Two points I disagree with:
<
p>You suggest letting GM etc. fail
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p>
<
p>My problem with this approach is that it benefits investors (who even with a down market I’m not so sympathetic to) at the cost of the current employees. Employees who have worked in a factory for years looking forward to being able to retire with a decent pension and healthcare, now get extended unemployment and get to go back to school, or take their old job for less pay, less benefits and less respect. I’m sorry, but I think that’s bad industrial policy.
<
p>The “enormous long-term liabilities” (i.e. the benefits of UAW membership) are not shared by the majority of Americans, so I understand the reaction that we shouldn’t subsidize them with taxpayer money. But this smacks of reducing inequality by making everyone less wealthy.
<
p>Any solution needs to preserve the benefits of the UAW contract. If that means we need to actually work on universal healthcare, pension reform (meaning everyone gets one) and more workplace democracy, then the country is better off.
<
p>My second point of disagreement is that I think people would feel differently if the business folks were talking about were in Massachusetts. If for some reason Partners Healthcare, State Street, Fidelity and Raytheon were all losing billions and at risk of failure, I think folks would want the government to step in rather than let unemployment rise to 10 or 15% and have the foreclosures rates that Lowell and Lawrence are suffering spread to Newton, Sudbury and Duxbury.
<
p>I agree with this in part. The automakers are exhibit A for single-payer health care. How can we expect our firms to compete abroad when the foreign competition doesn’t have to shoulder the health care costs of its workers? I also agree with the thrust of what you say about pension reform.
<
p>But I don’t think the UAW contract can be a sacred cow. We can prolong the days when an American worker makes $27 an hour for work that a Mexican worker will do for $2 an hour, but not forever. The sooner we create jobs that can command high wages in the global economy over the long term, the better off our workers will be.
<
p>TedF
isn’t treating the contract as a sacred cow. In fact, quite the opposite.
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p>
<
p>But what most fail to see in the US is that the answer isn’t $2/hour work for Americans, but $27/hour work for Mexicans. Free trade = bad. Fair trade = good. The rush to the bottom is bad policy all around; makes us lose jobs, keeps them poor and they lose jobs too, because some other, newer country will do those jobs for .20/hour.
“Investors” = shareholders. The bankruptcy of GM has already been accounted for in its stock price, so “investors” have already lost their money.
<
p>As to Bob’s “no ‘real value'” silly talk, of course a bankrupt GM has “real value.” It has assembly lines, buildings, real estate, work-in-progress, inventory, technology, patents, and so on.
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p>Auto makers with legacy labor costs of $85 an hour need to seek protection in bankruptcy and be allowed to cast off the oppressive labor contracts that are killing them. Unless they are allowed to re-constitute themselves as leaner and meaner manufacturers, they will simply careen in and out of insolvency, irrespective of the proposed government largess.
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p>GM, Ford, Chrysler are not the only “US” automakers. There’s Nissan, Toyota, BMW, Hyundai, and Mercedes (probably missed some) all with multi-billion dollar plants in the US employing lots of autoworkers. At $35 an hour.
<
p>Get the difference?
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p>Most if not all of any the taxpayers’ money committed to GM or Ford will be lost, eventually. Why throw good money after bad?
<
p>Answer: to save UAW and Michigan from economic collapse.
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p>I say, let them collapse, then start over, as Joseph Schumpater suggests.
The current shareholder get nothing, but the folks who buy it get a great deal.
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p>GM’s market cap is around 2 billion today, it’d go for far more in liquidation, but with a gutted union contract, no retiree health insurance and job protections, workers get screwed.
<
p>There’s one reason the non union automakers pay UAW rates – to keep the union out. Gut the contract and there’s no pressure to keep wages high. The “market” wage for the Nissan plant in northern Mississippi is probably around $10 or $15 for a high end manufacturing job. There are two reasons Nissan pays $25 to $30:
1. When a UAW organizer shows up at a workers door, they’ve got a lot to lose in fighting for a union – they get paid twice what their neighbor makes – pay them less and they’ve got more reason to vote for the union.
2. Auto prices which are in large part set by GM and Ford, as two of the five market leaders, include much of their higher labor costs – so there’s money to pay workers more.
<
p>Take away the threat of a union contract and there will be more pressure to take the money going into wages and handing it over to shareholders.
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p>
I’d say instead, universal healthcare needs to be established to cut that $85 per hour cost and labor law needs to be reformed so the non union operators start having labor costs of $50 and $60 and hour.
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p>In 1993 Clinton formed the Partnership for a New Generation of Vehicles, which furthered much of the technology that made hybrids possible. In 2001, after Bush came into office the automakers pulled the plug and ran away from the technology to focus on SUVs. So I’m not suggesting that the current leadership of these companies should be held blameless (nor the UAW leadership who benefited) but I’ve got a real problem with solving these problems on the backs of workers.
If you let GM fail to be followed by Ford and then what is left of Chrysler forcing them into Chapter 11 I would suggest that the main benefit would be to break the Union Contracts to renegotiate the terms.
<
p>What terms would you suggest?
<
p>Lower Wages?
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p>Greater contribution to health care?
<
p>No or greatly reduced Pension plan?
<
p>Ok what do you do with the retirees that have been promised benefits?
<
p>How would you suggest you deal with the following?
<
p>Lower wages by 3Million US workers, in a region that is already experiencing the highest unemployment, Larger numbers of Mortgages going into Default as a result of pay cuts followed by Credit cards and on the heals of this Student loans and auto loans not being paid because you can’t get what they don’t have.
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p>Higher Health care costs will further reduce net pay on reduced wages could and likely will increase defaults further destabilizing banking in the US
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p>Ad in reduced Pensions means greater reliance on Social Security, which we already know is in trouble.
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p>Sounds like a winning economic policy so far.
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p>Lets ad in the retirees and suggest that we have 2-2.5 million that now will be relying on Medicaid exclusively because the Judge in the Chapter 11 felt the burden was to great to sustain because of the suppliers they owe money to. Medicaid the other government program in trouble. Lets throw in that the Pension plan must go into the Federal Program that the Airlines went into, oops that was almost bankrupt last report I saw but hey we have obligations so we have to pay it.
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p>Now consider the loans car, credit card, personal loans the retirees have and with a cut they can’t pay so they walk away from them.
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p>Sound Economic policy don’t you think.
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p>Look the facts are that it is not that the Auto Industry is to big to fail to go into Chapter 11 it is what the out come will be and it’s impact on the current financial melt down. Get real we have not and the Administration and their boy Hank have so far done nothing but made sure the top 9 banks will be able to pay bonuses next month of the $125 Billion Hammer’n Hank has thrown around 108 Billion of those banks reserves have been ear marked for end of year bonuses. Get real we bail out the CEO and his management team at AIG, Bear Sterns, etc… and they throw a party on the public’s dime and you think throwing an auto worker under the bus who is making $60-70,000 a year please include Sub contractors when you figure average wage is a solid economic policy decision with everything else which is happening. I think you need to re examine your logic on this one.
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p>OK so know what should we do for our loans/bail out ok fair question.
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p>First we require the Ceo and his team CFO ect,… of all three companies to take a pay cut to 10 times the average wage earner in the industry and No Bonus, No Golden Parachute just the chance to participate in the companies Pension fund. The boards of directors GONE! We the people are now the board till they get their feet back on the ground. Appoint an Undersecretary of the Treasury to oversee decisions instead. Next everything on the drawing board that is not a 20% increase in fuel mileage is scrapped bring in the shredder and recycle the paper pulp, next we retool the US factories to construct some of the highly successful high mileage vehicles they are all selling over seas and we set a new course that we turn out designs in the next 18 months that exceed all current mileage requirements lets say 25 City and 40 Highway for a fleet average.
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p>This keeps Joe the autoworker, Mike the steel worker, Sam the electronics worker, Tom the mechanic etc etc etc still paying their bills making a living and surviving this mild depression. Pay raises in the future will be only cost of living for the region in which they work in.
<
p>Well?
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p>As Usual Just my Opinions
Yes, the first act of the righteous proletariat will be to expel and, if necessary imprison, all capitalist running dogs from management and the board of directors. Just as Lenin predicted, heads will roll!
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p>Wise commissars, hand picked by the Motherland’s highest leaders, shall instead secure the people’s interest by expropriating the assets of these dens of capitalist oppression and by installing loyal state workers of pure heart to run them.
<
p>The People’s Compensation Commission, in its infallible wisdom, will of course decide how much pay is fair.
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p>But fear not, Comrade Woburn. All the proletariat shall taste the fruits of our comrade workers’ endless toil.
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p>Our beloved commissars shall also choose for all the people the models of horseless carriages for us to drive, and which features we need. Only they know what is best for us!
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p>Motorized windows? Bah! They are a bourgeoisie luxury. Instead, you shall have manual windows, for they help strengthen the workers’ arms for in preparation of the extra toil to come building our workers paradise.
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p>Production of carriages shall be limited, of course, to prevent too many of them from polluting the air and melting the polar caps.
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p>But fear not, Comrade Woburn, we will be sure to add your name to the wait list as soon as the next Five Year Plan is implemented.
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p>Arise, workers of America, unite!
You know that you are now on the official party list you may expect a Homeland security letter to be delivered to your employer, Wife and Children. We will seize your computers looking for any links to criminal activity and we will tie you to terrorists in your neighborhood for plotting to not clean up your leaves causing a fire hazard and air quality issue. Plan on a trip to a warmer climate.
<
p>No Seriously BostonShepard we are at a true crossroads with this economy. It is very fragile and if and I will repeat if (because I have no crystal ball) the worst happens the down turn could make 1929’s collapse and the 1932 start of the Depression look like happy days. Our systems although we like to believe are stronger today then they were back then we are finding out that this is just not true. True is you will not lose money you have because Uncle Sam and the Fed Promise to keep printing till everyone gets theirs back. This is not an economic policy, really it is not. The risk of plunging this economy into a deep depression possibly even a collapse is true. What is also true is the safety net programs like Medicaid, Food Stamps, Fuel Assistance and Unemployment are also at the breaking point so choose your poison pay to keep every one working and moving forward or pay them to look for a job until one grows on its own.
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p>As far as setting regs on the Auto Industry show me one reason why not show me how a decision they have made has in any way prepared them or us for the future even with out the financial collapse. I also believe that the CEO’s of the banks are taking money from the original bail out should also have to submit to the same conditions. What makes them qualified or worth the faith and money they have received to this point when they have allowed the scheme to continue. Ultimately the bad guys may be the former heads of JP Morgan who cam up with the idea 2 decades ago of drawing up insurance derivatives to hedge their bets on investments and then to the brain child who decided hey we can bundle and sell these and take a commission ( he no longer works for Lehman Bros) How about AIG for writing multiple insurance policies on the same mortgages over and over and now whining they are broke and can not pay off on the insurance they wrote. Why save them? And not the Auto’s?
<
p>Best to you comrade
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p>As Usual just my opinions
If I were a GM Exec I’d be against filing chapter 11 too. Rick Wagoner might not receive his $14.4 million paycheck (salary of a measly $2.2 million but hooray for $12.2m in bonuses!), for example.
Some details of the concessions from last fall’s UAW negotiations are here. In particular:
<
p>
<
p>
<
p>With these and other concessions, I’ve already heard that the UAW is going to hold fast against anything further as part of a bail-out deal (but that could change, of course).
<
p>The real issue, as some others have pointed out (emphasis mine):
<
p>
<
p>Any bail-out has to address the product mix. Otherwise it’s just throwing money away.
<
p>My whole issue with letting the companies just go bankrupt is what it does to the workers and the domino effect of that. While you can lay a little of the fault at their feet, this fish rotted from the head.
<
p>Finally, I recommend Thomas Friedman’s column from this week’s NY Times.
<
p>Full disclosure: I grew up in the Detroit ‘burbs and still have several relatives working in the industry. I did a stint at GM as a college co-op.
No Fed money had to change hands. Chrysler paid off the loans about two years early. This time the well is dry.
<
p>The only reason that the politicians and looking to bail out the Big Three rather than just let them file for bankruptcy protection is that the auto unions don’t want their retirements messed with. Lots of politicians are on union payrolls.
<
p>The bankruptcy would change the benefit rules whereas the bailout would leave things pretty much as the present status quo. When you have to pay the same for materials as your competition and you charge 10% more for similar vehicles because you have to pay employee bennies, well, customers are going to go for the best value for the price, and that isn’t you.
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p>With a bailout, we can look forward to Big Three bankruptcy in five years. The bailout just postpones the inevitable.
for a bailout.
The Michigan auto manufacturers, as opposed to Toyota, Nissan, BMW, MB, and Hyundai (did I miss any?), are finished. It is IMPOSSIBLE to make them competitive on the world market given the MASSIVE burden of retiree health and pension obligations and the resulting cost legacy.
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p>Repeat — they can not be made competitive in the global market. Each dollar contributed to them from here on out will NEVER BE RECOVERED no matter how airtight a deal the Feds make. Gone forever.
<
p>Please, let these dinosaurs die a natural death. Tata Motors or some other entity will purchase the remnants and move on from there.
<
p>The Big Three, RIP.
For years I heard the saying, “What is good for GM is good for America”.
Since we never had any GM operations in New England outside of a minor facility that used to be in Framingham, I doubted the validity of the saying.
But what I found out as the years went by, is that EVERY place that I worked for had the automakers as one of their primary customers. From plastic pellets to gears, washers and widgets … if it wasnt GM than it was orders from Ford that kept them afloat.
But this was 20 years ago, when we actualy had a manufacturing base in this country.
My impression of GM today is that they assemble chinese imported parts as skids somewhere in canada or mexico and then these are shipped to the midwest for final assembly.
I am not saying that the BK of these companies would be a good thing, but I wonder if it would actualy change anything if bad management at GM was replaced by more competent management at Toyota or whomever filled the vacumn in auto production.
Its never a good thing to reward incompetance.