The Chapter 11 argument has some appeal, because (a) that’s what everyone else has to do under these circumstances, so it’s not really fair to other struggling businesses to hand mountains of cash over to GM just because GM seems prepared to fail in a spectacular fashion; and (b) Chapter 11 is designed to allow companies to restructure, to shed burdensome liabilities, and to emerge hopefully as a leaner and more efficient operation — and this has actually worked in the past. However, a good point has been raised, namely, that for the business to continue operating in Chapter 11, someone has to be willing to supply what’s called “DIP financing” (DIP stands for debtor-in-possession, the technical term for a company that has filed Chapter 11 but is still in operation). And, this argument goes,
the same Wall Street meltdown that has dragged down the economy and GM sales has also dried up the DIP money GM would need to operate. That’s why many analysts and scholars believe GM would likely end up in Chapter 7 bankruptcy, which would entail total liquidation. The company would close its doors, immediately throwing more than 100,000 people out of work. And, according to experts, the damage would spread quickly.
Now, I absolutely agree that a Chapter 7 liquidation for GM is not an acceptable outcome. GM is, unfortunately, “too big to fail” on that kind of massive scale. So we either have to solve the DIP financing problem, or we have to hand cash to GM.
But isn’t there a sensible way to get around the credit freeze that otherwise might prevent GM from obtaining DIP financing? Why not allow GM to file Chapter 11, but with government-guaranteed DIP financing? If the loans are backed by the full faith and credit of the U.S., surely lenders would be more willing to participate, since then there’s no risk of losing their investment. One could even imagine the government as the last-resort DIP lender, if nothing else worked.
This approach does not resolve the “psychological” issues, namely, will anyone buy cars from a company that’s in Chapter 11? And those concerns are real. The question is whether they’re significant enough to warrant a radical government bailout (which, incidentally, at the moment seems to have little chance of making it throught the Senate before GM runs out of cash).
Finally, I ran across some interesting historical tidbits on the Chrysler bailout. It wasn’t just loan guarantees. It was, in fact, essentially a Chapter 11 filing by a different name. Here are some details (yes, it’s the Heritage Foundation, but the facts seem reliable).
In the past three years [1980-83], Chrysler has renegotiated its debts and restructured its organization in a way that greatly resembles a company going through Chapter 11 bankruptcy. Its creditors, like those of bankrupt firms, were forced to swallow sizeable losses.
This was the result of a clause in the Chrysler Corporation Loan Guarantee Act of 1979 that required creditors to make certain “concessions” to Chrysler. With this clause to exploit and with Treasury Department officials, including then-Secretary William Miller, pressuring its creditors, Chrysler was able to pay off more than $600 million in debts at just 30 cents on the dollar. In addition, the company was allowed to convert nearly $700 million in debts into a special class of preferred stock-paper relatively worthless in the financial markets because the shares earned no dividends and were to be unredeemable for several years. In early 1983, Chrysler reached a tentative agreement with its creditors to trade this preferred stock for Chrysler’s regularly traded common stock. However, the creditors still get the short end of the financial stick: the face value of the common stock to be received will almost certainly be less than the face value of the original debt.
Chrysler’s creditors are not alone in being socked by the company’s quasi-bankruptcy. The firm’s workers have paid an even greater price. Despite the fact that the loan guarantees were approved by Congress mainly to protect jobs at Chrysler, the company has sent home nearly half of its employees, cutting its white collar work force by 20,000 and laying off 42,600 of its hourly workers since the loan guarantees were signed into law.
Everyone should be clear on one thing: there is no guarantee that handing GM a big pile of cash is going to turn the company around. Doing so might just stave off the company’s inevitable collapse by — what, a few months? A couple of years, if we’re lucky? The problems at GM are profound and long-standing, and it’s not clear to me that tacking on a couple of “hey, why not build more hybrids” sorts of conditions onto a bailout is going to do the trick.
bob-neer says
Will allow GM to shed many of its labor contracts, I believe. That may be why there is less political appetite for it than one might imagine.
ryepower12 says
give a pile of cash to GM than, for example, see all of their pensions stripped as if they were never signed in good faith and credit to begin with.
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p>of course, that pile of cash would have to be given with stringent conditions on gas mileage, new technology, curtailing corporate exec pay and making sure these jobs stay in America. If GM and Ford can build efficient cars that do well all across the world, they can do them here, just probably not with the same people who are currently in charge. Get those people in Europe and Asia and bring them here; fire the no-nothing execs here who couldn’t market or target a car for the life of them, never mind exhibit any kind of long-term foresight.
<
p>I’m also going to file this sort of industry under “not ideal for the stock market” along with other low-margin, yet typically profitable, companies like newspapers, supermarkets and dunkin donuts. They don’t need to make 100% RoIs if they’re making decent money via a 5-15% return. That may not thrill wall street, but it pays the bills, the employees and will make plenty of owners very wealthy people. Wall Street, with these kinds of companies, really is poison.
tedf says
Ryan, don’t forget that the Pension Benefit Guaranty Corporation guarantees private pensions up to a set limit. Say an employee who has just retired at age 65 and is receiving a lifetime annuity. If the pension plan fails this year, his or her annuity is guaranteed up to $4,312.50 per month, or $51,750 per year. The amount guaranteed decreases for younger workers and for retirees who selected a joint-and-survivor annuity, but the bottom line is that for the working class, the combination of the government’s pension guarantee and social security provide a safety net for retirees. Higher-paid workers, of course, may lose a portion of their pensions to the extent they exceed PBGC limits, and if any of the automakers’ executives have socked meaningful amounts of money away in defined benefit plans covered by the government’s guarantee, they’re out of luck.
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p>So the sky will not fall on pensions–in the worst case, the government will assume much of GM’s liability.
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p>TedF
woburndem says
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p>You are correct Pensions will be largely protected but at what cost over the lifetime of the retiree
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p>5-10-15 $billion adding in the retires of the suppliers who’s companies are added to the Chapter 11 list.
<
p>Again another reason for you pay now or you can pay later but one way or another we are going to have to pay for this meltdown!
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p>As Usual just my Opinions
dhammer says
If a pension fund is funded at less than 100% (which is likely given that they require cash in a down market and there’s no law requiring it be fully funded) then the PBGC only covers the portion funded – all benefits are negotiated down…
<
p>So a retiree who expects a $65 multiplier (65 x years of service) will have that multiplier reduced to an amount the fund can afford at the time it gets taken over.
<
p>Remember that old guy at the beginning of the Obama ad who talked about how he was promised a $1,500 a month pension but it got taken over and all he got was $300 or so a month? That guy’s pension was guaranteed for the $4,312.50 you talk about, but all his pension could afford was the $300.
tedf says
Dhammer, I don’t question what you say–I’m not an ERISA expert. But my understanding was that the PBGC would pay guaranteed benefits for underfunded plans and finance the payments by increase in PBGC premiums:
<
p>
<
p>One additional point noted in my link: the PBGC is not backed by the full faith and credit of the U.S. government. Well, neither were Fannie or Freddie. I suspect there’s little chance the government would allow the PBGC to fail.
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p>TedF
dhammer says
So, I was remembering what happened at Bethlehem steel, where the PBGC wound up cutting the benefits, largely due to the fact that benefits included healthcare elements.
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p>Here’s a link to that story… http://www.aflcio.org/aboutus/…
mike-from-norwell says
I am a pension actuary. PBGC is certainly sweating this one out as they don’t want to end up with all of the liability. That guaranty is true @ 65, but the amounts are adjusted downward for earlier commmencement. See here for the guarantees for 2009:
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p>http://www.pbgc.gov/workers-re…
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p>Further, any benefit increases added to the plan within the last 5 years are ignored. Given the richness of UAW pensions, there will indeed be many union folks getting a haircut in that circumstance.
centralmassdad says
So, even if they meet all of your stringent conditions, which they likely would not, then they would make a lovely alternative fuel or high gas mileage vehicle, all in America, that costs twice as much as a nicer, better vehicle, also made in America, by Honda or Toyota, or imported by Kia. Unless ou demand that they sell each of these cars at a loss.
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p>The reason GM doesn’t build the car you want them to build isn’t because they’re dumb or because they’re evil or because they just don’t want to. It is because they cannot build small cars profitably given their cost structure and labor agreements. Toyota and Honda haven’t done better than GM because they build small cars, they have done better because they treated the UAW like it carried plague. That gave them the flexibility to make Corollas when Corollas are in demand, and FourRunners when SUVs are in demand.
<
p>Any bailout of GM that does not allow them to shed the pension liability or “restructure” (i.e., break) their existing labor contracts would do nothing to address the costs that are presently sinking the industry. It would be a waste of money, and another bailout would be required in two years time. Better to just let the North American operations fail and close.
progressiveman says
GM has built small cars for years. Just not in the US. They have built them in Europe where the cost structure is higher. They have chosen to build cars that fit their conception of the market. Their conception has failed. How good was the management that paid dividends for years and used cash for stock buybacks knowing of the looming pension liabilities and post-retirement health care costs? Pretty bad. We aren’t being asked to bail out the workers. We are being asked to bailout the stockholders who got money for years that should have been banked to pay for GM’s contractural agreements.
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p>The pensions for auto workers today are very small, 30 years of service gets you $1590 per month. In the past those who took 30 and out retirement packages could be at $3170. Active workers wages are very modest comapred to days of old. The UAW has been doing givebacks to the auto industry for 30 years.
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p>I can assure you that no one here has the slightest clue about GM’s real finances. There is no visibility into their arrangements with dealers.
<
p>Why does GM support so many nameplates? GMC, Chevy, Buick, Pontiac, Hummer, Saturn, Cadillac plus foreign firms such as Opel and Vauxhall. How many does Toyota have?
<
p>Worldwide how many auto companies are financially healthy? Not many is the answer to that. Volkswagen on the verge of being purchased, Toyota profits down. A few years ago Nissan bailed out by the French, Mazda 50% owned by Ford.
<
p>Where was the demand (by the way) for salary restructuring of investment bankers and commercial bankers and insurance guys with AIG? There was none except for some quiet calls for less excess at the executive level. Why then for the auto industry? Because this is the chance for conservatives to screw unions and change power relationships.
woburndem says
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p>I have been posting here and on other blogs calling for reform of CEO compensation for years.
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p>Look back at my posts an you will see many and several more comments
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p>
joes says
to restructure both the operational approach as well as their products.
<
p>I am certainly of mixed feelings with respect to the bailout. On one hand, here is a company that actually produces something of value, and has developed into the critical mass that should be efficient in producing the products. Compare it to the Wall Street firms who actually produce nothing, yet are the first in line for the handouts.
<
p>But on the other hand, I noticed an ad in the paper yesterday, with a 10% discount off the price of a Cadillac cross-over, now selling for about $60K. Why should we subsidize a company with such a ridiculous product?
kbusch says
It seems to me as if we’re in this awful place where
I’m not sure how this riddle is solved. Maybe guaranteed DIP loans is the best we can hope for.
bostonshepherd says
Set aside the policy arguement of whether ANY gvt money show go to GM (and Ford and Chrysler.)
<
p>GM’s current organizational structure is untenable in the long-run. It is fatally saddled with legacy cost which make it unable to compete in the global economy.
<
p>Chpt 11 reorgainzation will allow GM to remove the obstacles to its survival, which are:
<
p>
<
p>David’s link on the Chrysler “bailout” is instructive. Chrysler had structural obligations that threatened to sink it, and renegotiating supplier payables at 30 cents on the dollar is exactly what GM now needs with its pension and health obligations, its fixed asset commitments, and its labor contracts.
<
p>Pension and retiree health funding after bankruptcy can be discussed in Congress, but without the protection of Chpt 11, GM cannot change. It can only be subsidized.
<
p>Let it die.
amberpaw says
Here are some good articles to start with:
<
p>”Could Bankruptcy Judges save Detroit – or your house?”
http://www.freep.com/article/2…
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p>”Shared Sacrifice is the way to sell auto bailout”
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p>http://m.freep.com/news.jsp?ke…
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p>”Further Give Backs Likely in any auto bailout”
http://www.freep.com/article/2…
8111603621014
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p>
<
p>As some of you know, I was born in Detroit. It is well known that the CEO structure of the “big three” and the plutocracy of those firms squelched fuel efficient energy and designs over the years, using extreme measures to do so.
<
p>While I support maintaining and growing manufacturing and heavy industry in the United States, under its current management, any “bailout” capitol is more likely to enrich the hereditary management aristocracy at the Big Three – unless there is all new management as a part of the bailout, perhaps with worker buy-in for any capitol infusion.
<
p>The UAW is not the boogeyman here – is is shrunken, has been doing give-backs every year for at least a decade, and without organized labor in some viable form the indigenous and foreign oligarchs and plutocrats simply create what were once called “wage slaves” and keep on looting.
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p>An “oligarch” is someone who controls an industry or capitol, not always in a public way, and basically treats that industry or capitol as a private, hereditary fief.
<
p>A “plutocrat” is a member of a hereditary, self-perpetuating class of capitol controllers who function as an elite for the benefit of their class only.
<
p>As my friend Ryan says so well, just my .02.
stomv says
screw the workers
<
p>Your bullets:
* bullet 1: screw the workers
* bullet 2: screw the workers
* bullet 3: screw the workers
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p>Labor is on the order of 10% of their costs according to a post with link on BMG in the past few days. Labor costs are costs, but they’re not killing GM.
<
p>What’s killing GM? Legacy labor costs. Business Week nails it. Check out this chart, of employees (thousands):
<
p>
1985 2003/04 change (%)
GM 811 324 -60%
Honda 54 132 145%
Toyota 80 264 231%
<
p>So GM is facing the same scenario the baby boomers create for the USA. Roughly speaking, one GM worker has to create enough wealth to pay the retirement benefits for 2.5 retirees. Over at Honda and Toyota, one worker has to create enough wealth to pay the retirement benefits for 0.4 retirees.
<
p>In my opinion, the best way to help GM? Take all the current retirees and put them on medicare. Hell, create some kind of Medicare-GM where they have lower rates/copays/whatever than other medicare folks.
<
p>It would (a) help to guarantee health care benefits to retirees even if GM files 11 or 7, (b) expand government run health care (which this liberal thinks is a good thing), (c) remove lots of big ugly obligations from GM which would allow them to be more nimble, and in exchange for all of this (d) GM would pay the USA some of it back in cars over time and (e) would agree to a 20 year window beginning in 2013 of exceeding CAFE by 1.5 mpg.
<
p>I don’t know if this would be enough, but it’s worth taking a look. Would the unions be happy? Probably not. But, guaranteeing health care benefits for the retirees even if GM fails would do wonders to help them agree. Of course, the number of GM retirees on the Medicare-GM plan would only decrease every year, until there’s almost none remaining in 40 years. What about pensions? I don’t know.
<
p>
<
p>Instead of giving GM cash, why not take some of their legacy debt off their hands while simultaneously ensuring that their retirees continue to have access to good health care?
woburndem says
Baby boomers getting older and retiring after not having enough kids to maintain the same work force and coupled with that the increasing need for HEalth care,
<
p>Ask your self did you need the same health care when you were in your 20’s as you do say in your 60’s can’t relate look at your parents. Health care costs are and have been one of the 900 pound gorillas in the USA work force cost equation for almost a decade and a half mainly as a result of the aging baby boomers.
<
p>Yet laying all of what is wrong with our economy or the Auto industry on health care is only one factor yet if we deal with this factor we maybe able to reduce the pressure on many of the other aspects of keeping american industry competitive.
<
p>How about Single Payer back in the dialogue, if we reduce Health care costs on the entire work force will we start the healing. My opinion is YES!
<
p>But then we need to look at SS and again the baby boomers! How about a means test? if you make under $20,000 you get full benefits $20,000-$50,000 adjusted benefits over $50,000 annually in retirement benefits you collect no SS. If your situation changes you can apply later (take a look at all those 401K’s that melted down last month want to bet they will get more SS under my suggestions then they would have? let’s also try to remember the Brain Wave George and Dick floated in their first term Private investment no SS just Stocks and Bonds wow could you see that bail out bill from old George if we bought into that one?
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p>No easy solutions but health care needs to be tamed I vote for that plan today
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p>As Usual just my opinions
nopolitician says
I think another way to look at this problem is that any business model that has to carry legacy costs is going to get killed someday by an upstart that does not have those same obligations.
<
p>Look at cities and towns — older cities that have lost population are getting killed because the taxes in those cities have to support both current and prior obligations, whereas other areas that have only recently grown only have to support only current obligations, so they can offer more current services.
<
p>Older companies — and cities — basically have to fight with one hand tied behind their backs to pay for their prior obligations.
<
p>This might be a good reason to universalize both healthcare and pensions. That would level the playing field.
<
p>Another opinion is to that this is the way newer, smaller companies can compete with larger older companies — by being nimble enough due to no legacy costs.
<
p>In my mind, the only reason we should even be entertaining the idea of a bailout is that not doing so puts millions out of work.
<
p>I think that the future solution is to limit the size of corporations so that they don’t get as big as GM, and so that domestic competition is not stifled the way it has been for decades (what’s the last car company that started here? Delorian?).
<
p>I know that economic thought is that we should only have a handful of producers in any mature industry, but is that prudent on a global scale when political boundaries still exist between countries?
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p>One can argue that interdependence makes it less likely that anyone will go to war with anyone else, but if we ever do get hostile with other countries we’re basically screwed because we are not self-sufficient as a nation with respect to goods and services.
<
p>I think we need to take a more hands-on approach with our economy, break up companies that are too big to fail, create tax incentives for companies to be smaller rather than larger, and ensure that trade agreements in any sector don’t result in massive consolidation in any sectors to the point where there are just a handful of US companies in that sector, or worse yet, none.
dhammer says
The UAW and GM already agreed to a program like this in the last round of bargaining. GM was supposed to put $50 billion in a fund called a VEBA, which the union would administer and members would divert cost of living increases towards. The union would hold the obligation for retiree healthcare, not the company.
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p>http://www.kaisernetwork.org/D…
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p>
stomv says
not the base of the costs themselves. Am I not reading that right?
progressiveman says
In the last contract GM agreed to a lump some buyout of their responsibilities leaving the problem to the UAW. I am not sure where this arrangement stands with the drop in GM stock but I think it was mostly cash. So retiree health is not a big financial issue now.
dhammer says
They agreed to pay the money, but they haven’t yet, so a bankrupt or cashless GM can’t contribute and the money is gone. The UAW was in Washington asking for loan guarantees to ensure GM would have the money to pay into the VEBA.
woburndem says
You are so willing to throw out Labor contracts because of what the perks? Like which ones?
<
p>Pensions? so Grand dad and Grand ma wind up in the poor house or making a choice of MAc and CHeese and Tuna fish for diner again or life saving perscriptions?
<
p>How about the 40 something working making $60-70 thousand lets cut him to $35,000 so he can default on his mortgage and credit cards and forget his kids going to college?
<
p>But lets bail out AIG so the top execs can get their Christmas bonus or their $12,000 Pedi Cure how about bailing out JP Morgan or Chase????
<
p>Maybe you missed my post about the money $125 Billion from Hank (Wall Street Fairy Goodmother) Paulson $108 Billion being held for end of year bonuses. Do you really think this is a good sound fiscal policy? $108 Billion to keep 200-300 CEOs and senior staff in Caviar and Lobster for the holidays vs. $25 Billion to keep 3 million plus middle class families earning a living wage. Are you all that bitter to not see the forest from the trees or are you all related to CEO’s.
<
p>May I humbly suggest you read a book about the Great Depression? Here are just a few High points you should consider the market crash occurred on Oct 29, 1929 unemployment was at 3.7% that year In 1930 Unemployment rose to 8% in 1931 it doubled to 16%, FDR was elected in November, and in 1932 the height of the Great Depression, FDR sworn in March, 1932 unemployment reached 23%- 26% (depending on what stats you look at). The reason I am pointing to these figures is, their is I believe a direct correlation between 1929 and today since this is the only other Financial melt down in the last 100+ years to review. Loss of jobs and the social costs of those events were a key to both the depth and duration of the Great Depression in truth the NY stock market did not return to pre-1929 levels until 1952. So investments were lost for 14 years yet Jobs did not see a reduction until the peak of the war years 1941-1943 when we were seeing upwards of 500,000 men out of the work force and into the military annually, by 1943 we had lost almost a quarter of a million to the effects of the conflict, on the government payroll. With these facts how can you suggest that $700 Billion into the financial industry, in the hands of the buffoons who brought us to this point, with Credit Default swaps totally $60 Trillion on $10 Trillion of actual mortgage Bonds.
This is Criminal and if you think this is just capitalism. Hey listen closely I have a bridge for sale and man, what a deal I can offer you know, if you get in on the ground floor, huh huh huh, what do you think time is short??????!!!!!!!!!!!! I have 20 other, pidgeons, I mean clients lined up looking to jump on this deal
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p>Bailing out jobs is what we were forced todo inorder to claw our way out of the last Depression, saving jobs today maybe a key to avoiding the pain and loss of repeating that exercise. When will you speak up when it’s your job?
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p>As Uusual Just my Opinions
joes says
that have taken the wealth from the workers of this country and provided it to “managers” in excessive amounts when you read the following link:
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p>http://www.geocities.com/Capit…
amberpaw says
You are correct on all counts. Try not to have a coronary event though.
theopensociety says
So any comparison to what happened to Chrysler is really not relevant. This is about protecting jobs, plain and simple. If we had a great economy, I might feel differently, but we do not. The government needs to lend GM the money it needs to continue to operate so the suppliers to GM will not go out of business and hundreds of thousands of more people will not be out of work. Any one who is arguing against this, has their head in the sand about the economy.
david says
The end of the Carter era. Iranian revolution. Oil shocks. Stagflation. It wasn’t as bad as what we’re facing now, but it was pretty serious. Go read the link from 1979 — as I said in the post, it’s remarkable how closely it matches a lot of what we’re reading right now.
goldsteingonewild says
I saw this graph which claims Forbes 2006 as source.
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p>The average GM/Ford worker, counting both salaries and benefits, was earning $70+ per hour.
<
p>US Toyota was $48.
<
p>Average American worker was much lower.
<
p>If true, I’m sort of surprised by the notion of commenters that you essentially want lots of Americans who earn much less than this to have their taxes go to subsidize line-workers earning 6 figures.
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p>Doesn’t seem progressive to prop up guys (mostly) at that rate — paid for mostly by Americans earning much less than that.
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p>David’s got the bottom line totally right. Choice is simply when we want to accept the pain. Now (sucks) or later (sucks worse, b/c billions thrown into money pit).
dhammer says
The actual labor costs for Chrysler (opens a word document) in 2006 were $75.86. $20.14 (27%) of that were health care costs, which under FAS 106 need to include the future liability of health care costs. Toyota and the other non union operators, don’t offer health care for retirees, so their total labor costs are less.
<
p>What’s very important to note, however, is that GM’s labor costs won’t include retiree health insurance either if they put the $50 billion the UAW negotiated in the last contract in a VEBA which would put the burden on the UAW to administer.
<
p>It’s not surprising that CATO and Forbes are out there attacking the union as a cancer on these companies, but that line of reasoning doesn’t hold up.
rikoon says
But if the reported labor costs include future health care costs, they’re still costs, right?
<
p>And if you lower the costs by paying the costs, then they were still costs, no?
<
p>Seems like the bottom line is still, GM and Ford and Chryler have higher costs than foreign auto companies by reason of the UAW contracts.
dhammer says
So while you’re right that they’re costs, it’s not accurate to say GM is spending six figures on an individuals compensation. Much of that individuals compensation is paying for retirees compensation.
<
p>But since they’re future costs, if you bail out GM and take them away, they become much more competitive compared to Toyota’s $48, which has no future costs, because they don’t provide retiree health insurance.
<
p>Which brings up another point for progressives. Since Toyota and Honda are vicious anti union companies who aren’t interested in their workers enough to provide health care to people who put 30 years or more into their plants, shouldn’t there be some outrage directed towards them?
<
p>I’ll be first in line to say that the big three are terrible, but Toyota is the Wal-Mart of the auto industry. Efficiency isn’t a virtue when it’s paid for with workers health and respect.
rikoon says
The only progressive argument is also the only reason a bailout is even on the table: it’s not just the GM and Ford laborers at risk.
<
p>Look locally just to start. Norton’s/St. Gobain in Worcester has an enormous abrasive business supplying domestic automotive assembly and related manufacturers; Circor, Analog Devices, Unifirst…these are all top 100 Mass companies, each with some significant relationship to the automotive sector.
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p>Imagine how many jobs will be impacted with a bankruptcy and not just the $70 GM UAW assembly worker.
woburndem says
Ok the discussion has taken us to Fact checking and here are some facts
<
p>
<
p>This is directly from the UAW web pages. I would point out that this does not include benefits. Yet I am sure that the majority can Identify with the per hour of their paycheck with out adding in the estimated costs of Benefits since most Companies do not reveal full costs or verifiable costs for these benefits.
<
p>doing some math:
<
p>27.81 x 40 hours= 1,112.40 Gross weekly Pay
<
p>1,112.40 x 52 weeks = $57844.80 Gross per year
<
p>Now take out 5% for Federal Tax 7.35% Social Security and Medicaid take out 5% health care costs,
<
p>And you wind up with $47,808.73 take out union dues and state taxes wow I bet they are running out and buying that new Jenn Air gas grill to put in the yard next to the built in swimming pool with the 15 foot artificial water fall.
<
p>Wow are they cleaning up at GM I wonder how many tip the chauffeur the full 15% tip in the morning.
<
p>Now lets take a look at this in another way how about how many employees to Retirees
<
p>
<
p>Well looks like we are talking a ratio of 1 active worker to 2 retirees. Any one know what the country average is?
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p>From the Social Security administration we have 3.3 workers 1 retiree significantly differant then the auto industry.
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p>So the question is what do you do with the men and women collecting pensions from the auto induastry.
<
p>but wait we may want to look at this
<
p>
<
p>Now have a look at this
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p>
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p>I would strongly suggest that when we peel back the layers of most American Business you do not find that the Average employee is making an income that they are buying the 54 foot Yacht in the Bahamas yet the CEO’s and their staffs are certainly in that economic category. I also would like to point out that the facts suggest this has been a growing problem for our Economy for over 3 decades and that year after year it has become worse. To the point that you and I are facing the grim reality that we are being saddled with the bill and this is leaving a bitter taste in our mouths. Why wouldn’t it we have not spent our lives in the Walnut paneled boardrooms jetting to Dubai for a weekend retreat. We live on Main Street we have a modest home 2 cars in the driveway if lucky a nice lawn, a warm house and meatloaf once a week for dinner. Unfortunately the promise of the gold ring if we reach high enough and we get lucky enough is what drives us day in and day out, what you and I fail to realize is that the chances of reaching that board room is like winning the Massachusetts Lottery.
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p>I don’t think we have any alternative but to bail out the Auto Industry and the hundreds of thousand of Main Street families just like yours and mine At the same time we need to have serious reform that calls a halt to the money grab by Top Execs looking to keep their cushy board rooms serving bottled water imported from France on the company jet. What we also need to do is stop the cost cutting that is building an inferior product just to keep us consuming more and more. Think about that one (another time). We need to do it because it is the right thing to do for the 700,000 fellow Americans that have believed everyday they went to work that maybe some day if they reach high enough they may snatch that gold ring. What they failed to see was each day the ring got further away and top execs sucked more and more capital from the very corporations they were incharge of making profitable. Let me pose one last question regarding other comments about product selection Like SUV’s and V8 Pickup trucks instead of small 35 MPG cars OK get ready here it comes WHO MADE THE DECISION TO BUILD THOSE MODELS INSTEAD OF THE 35MPG?????? I think it was the CEO (remeber Him Silver Spoon in the mouth) not the assembly worker punching a time clock. We have an opportunity lets not miss the chance Reform yes bail out yes we can have one with the other and YES lets get the Unions to have a Buy in so they have a say on that next SUV model over the 35 MPG.
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p>As Usual Just my Opinions
bostonshepherd says
You want me to pay in to support 700,000 non-working UAW retirees/survivors/spouses? Until they’re dead?
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p>I’m unwilling to do this. It appears most American taxpayers are too.
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p>Why don’t you make a donation to the VEBA and to the UAW pension fund out of your own pocket? Say, $10,000.
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p>I want to contribute … zero. I had nothing to do with GM and the UAW’s fiscal swamp which they’ve been creating for the past 25 years.
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p>No one is paying for my retirement savings or my retirement health care expenses. Why are you asking ME to pay for someone else’s when no one is paying for mine but me?
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p>It’s UNFAIR.
centralmassdad says
Do you control a large number of votes in Michigan and Ohio?
joes says
woburndem says
Citigroup to cut another 53,000 employees
Banking giant struggling to steady itself after suffering big losses
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p>http://www.msnbc.msn.com/id/27…
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p>Here it comes American Express showed the cracks 2 weeks ago here comes the Tidal wave of Credit Card Debt and the fall out. If you don’t think a depression is on the way then I hope you can swim really well.
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p>As Usual Just my Opinions
medfieldbluebob says
I feel like I’m watching a MASH episode. Or, CNN when the levees broke in New Orleans. Where does it end, who do we help?
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p>1. We are all in this together. An industry’s economic demise and despair (no matter how deserving you think it might be) affects us all. These people (and they are first and foremost people) buy other people’s goods and services. Lots of them. Maybe yours.
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p>2. This has been coming for years. The layoffs and givebacks, the sales and revenue declines, the urban decay and abandonment began in the 70’s. Maybe earlier.
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p>3. Yes, they drank the big car Kool-Aid.
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p>4. This is a cultural shock. The grief, shock, and sadness we saw on the faces in New Orleans we will see on faces in Flint, Pontiac, Lansing, Detroit, Warren, Livonia, Ypsilanti, Kokomo, Muncie, Anderson, Dearborn, River Rouge, Wyandotte, and on and on. Some us grew up there. Some of us still have family there, many of them employed/retired autoworkers or small business people dependent on the autoworkers. Pensions, wages, healthcare benefits, family businesses are on the line. These are real people.
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p>5. Healthcare reform. Pension reform. Look, every company and industry – if it lasts long enough and is successful enough, eventually gets into the same demographic trap: more people are retired than working. It happens to countries, like Japan. If you’re turning 80 your job prospects are a bit bleak, losing those pensions and benefits are a major economic catastrophe. Someday it’ll hit our current high tech industry. These benefits are a burden. A better system removes the burden from individual employers.
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p>6. This is the opportunity of this century to redo our economy and our transportation system to something greener and more sustainable, the green collar economy. That should be a major part of the bailout: the demise of the SUV and other gas guzzlers. Improvements in mass transit. Detroit’s manufacturing and engineering capacity is better off, for them and for us, making other things. They did a transition like this before, for World War II and back. They can do it again, or we find someone who can.
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p>Liberals are not the “screw you, I got mine” people. We believe that are all in this together, and that we must work together to make this a better world. For all of us. That’s the progress in progressive. This economy we’re in is gonna hurt a whole bunch of people. President Obama and his people need to triage the situation, save what we can, change and adapt what we can, transition the rest to something or somewhere else.
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p>You don’t know when it’ll be you their turning off the lights and locking the doors on. FDR, and subsequent Democrats, built a system of safety nets, that we all paid/pay for, to help people through times like this.
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p>We have a problem. Together we can fix this. We have nothing to fear, but fear itself.
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p>
amberpaw says
Just for starters. Turning around the economy means improving productivity, and producing something other than Wall Street glorified Ponzi schemes.
nomad943 says
Only in this netherworld we are living in, could a worthless entity like Goldman, on the dole for 700 billion taxpayer dollars, have the gaul to publicly lobby against aiding struggling auto makers and then lower the automakers credit ratings virtualy assuring that they will not be able to raise cash anywhere else.
A quick show of hand. How many of you think things would be different if the big three had the foresight to include a monopoly of zionists on their board of directors.
No soup for you … or the hundreds of thousands that rely on employment with you. We need that cash to bail out more hedge funds.
david says
your “zionists” remark is way, way over the line. Please avail yourself of this opportunity to retract it. Otherwise, your true colors are really scary.
nomad943 says
Just stating the facts. If you have a problem with them than maybe there is another reason for that than my stating them.
david says
do not exist. You’re saying, if I understand you correctly, that the auto makers would be in much better shape if a majority of their boards of directors were Jewish, or if they were “Zionists” (i.e. supported the State of Israel).
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p>Of course you have not a single shred of evidence for that scurrilous assertion. (Feel free to try to back it up — I’ll wager you can’t.)
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p>Please correct me if I’m misunderstanding what you’re saying.
nomad943 says
Geee, Maybe I should go to the NBC website and look it up.
Uhh … no, I sure wouldnt find anything there .. or from any of your other “acceptable*” media sources. {scratching head}
I could always link to some of those other sites … but that would then give you ammo with which to thump your chest and claim moral superiority based upon my citation source.
Why bother? We’re all just observers anyhow.
At least those of us awake enough to be observing.
Auto makers must go!
Hedge funds provide an invaluable service to our information and finace based economy and must be saved at all costs.
War is peace.
Security through surveilance.
All is well, you can go back to sleep.
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p>* acceptable:
Any of the remaining consolidated media outlets whos ownership network can be traced back to repetative reliable venues.
david says
You didn’t correct my interpretation of your position, so I gather I got it right. Instead, you refuse to back it up, because you “won’t find anything there.” Meaning, I suppose, that the Jews control the media too, and they’ll never report on what’s “really” going on. I’d love to know what “those other sites” are — the ones that back up your nonsense.
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p>So what’s your solution, nomad? Your final solution?
nomad943 says
I didnt realize that there actualy were people who didnt instinctively know that the media and finance sectors were largely, if not exclusivly, owned and operated by people of the Jewish ethneticity/religion/whatever.
It is usualy a given in conversations.
Try this list:
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p>http://www.radioislam.org/isla…
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p>It is likely to be from a less controversial source than many others (for example)
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p>http://jewwatch.com/jew-contro…
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p>So would you care to debate the validity of these names one at a time or as a whole?
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p>That said, you must have noticed a certain bias to the “news coverage” of the auto maker bailout proposal which is in stark contrasty to the “news coverage” of the MUST HAVE financial sector bailout?
Hmmm …
Nah, its just my imagination.
I will play Soduko and wait for next glorious sporting event to come onto my television.
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p>
centralmassdad says
Are flipping kidding?
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p>David, you and your co-conspirators should ban this guy, forthwith.
nomad943 says
Ban this.
So typical; Argue the source and not the content.
The thesis of the debate was questioning what source one might expect to provide this information in an environment where the media is so “concentrated”.
The concentration is documented and beyond debate.
However, for some odd reason, it is difficult to provide links using sources within the concentrated media that provide thsi instinctual knowledge.
Do you deny the validity of any of this or do you merly wish to tirade about the source providing the text, the content of which we already know, wether or not others choose to print it.
Of course this would likely be beyond your comprehensive ability so by all means, enjoy being led by the nose.
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p>Here boy! Here’s a nice bone for you.
But first you have to roll over! 🙂
mr-lynne says
… your assertions. You’re failure to do so means you cede by default. Absent any sourcing, the assertion is inflammatory. Not a tough call anymore.
david says
tedf says
It’s times like this that I wish there really were a Zionist Occupation Government, so that I could call the ZOG Hotline and have someone send the black helicopters to pick up our benighted friend and send him to an undisclosed location somewhere for re-education.
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p>TedF
woburndem says
Wow I think you’ve gone around the bend
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p>also
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p>
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p>Consider seeking Medical attnetion, the stain of the current situation and the issues seem to have removed your ability to contribute in some meaning full way and have reduced your comments to illogical assertions that are truely insulting and provide no contribution to the discussion.
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p>Best of Luck to you and the real hope you get well soon
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p>As Usual Just my Opinions
tedf says
Here’s an earlier Nomad post that maybe gives a clue as to his true colors.
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p>TedF
nomad943 says
Such a wonderful memory, and timely too.
Did you happen to catch the news yesterday?
looks like my earlier obervation must have been entirely correct, there was no choice in the choice we were offered. They were both the same.
And how exactly was this “choice” advanced to us as actualy having meaning?
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p>”If elections could change anything there would be a law passed to prevent them from occuring”.
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p>
toda says
Antisemitism must be crushed immediately. America cannot tolerate the hatred espoused by people in blogs, public places and schools.
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p>In Europe progressive governments have banned antisemitism as well as Halocaust denial and provided strong sentencing for offenders. Time for Massachusetts and America to follow.
david says
I just bumped it up because the topic is timely. The comment you’re reacting to is several months old, and its author is no longer with us.
woburndem says
Says? Yet I hope no one is overly surprised to see that Wall Street is continuing its behavior, that has presented us with the problems we are now faced with, of complicating further our economic situation.
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p>Some day we will look at this bowl of Spaghetti and see clearly the start and the finish of the bowl it took Economists Decades to accurately understand the dynamics of the Great Depression.
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p>Yet we do have a few key clues as to this Fiscal meltdown
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p>Please do not start pointing fingers and say that’s why or that’s why or how about this if anything has been true about Economics in History it is usually a series of bad decisions that lead us down these paths so please read on.
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p>How about Loans that required no income verification, not very wise but not limited to sub Prime mortgages. Do any of you remember that as you entered college in the last 20 years the Credit card offers you received in the mail or at a table in the student union? Cheap money no restrictions just a virgin credit rating and bang you had more money then you could have dreamed of it was like hitting the lottery until the bill came through. How about School loans no real test of income potential just a college saying yes we want this student and you got $2,500 a semester then $5,000 and you decided to do your masters and you got another 10,000-20,000 in loans so you cam e out with a history degree and a masters with $45,000 in school loans and your first job was teaching in a middle school at $25,000 a year and a school loan payment of $684.00 per month LOL prudent smart loans NOT! But the bankers were making a nice profit on writing them tapping into mom and dad to pay off that now in default Credit Card which yes they called us about and those school loans what choice did we have but to help out. So the Bankers tapped into the cash cows or so they thought buy-offering money to anyone willing to sign on the dotted line.
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p>Now lets go down the road of Sub Prime lending and the run up in Prices and a person with little or no income to verify because they said they made X so they got $400,000 on a house that the Loan Agent was pressuring the appraiser to come in at $450,000 to make the loan a AAA rated vehicle and they locked you in to a 5 year ARM at 4.75% with a lifetime cap of 18.99% and in the fine print the first adjustment could be to the maximum if the LIBOR rose above 2.5%. With these kinds of terms is it any wonder why prices skyrocketed as almost anyone including a 10 year old who could sign on the dotted line was given a Mortgage sight un seen. The mortgage companies made the sale got the commission and sold the bundle as good as cash which the banks went out to market for them and give them new money to loan. So price escalation and defaults were a direct product of the actions of the watch dogs on Wall Street. What a lending side show they created in the last 15 years.
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p>Lets not stop here you just found the beginning of the spaghetti let’s start unwinding the ball. The rating agencies and the Commercial banks like Standard and Poors Bear Sterns, Jp, Chase, Lehmen etc. etc. … were over the moon with all of this new (here’s another Key point) AAA rated paper to sell and make commissions all money going into the bottom line and allowing them to share the wealth among the top hogs at the corporate trough and any young Turk who were sharp enough and slimy enough to set new sales records and suck in new investors. Then the investor, believing that Wall Streeter’s were the gate keepers to all that was good and true in the investment world bought these Mortgage bundles as if they were buying gold and silver bars. They would believe anything in order to achieve the same success and assume a bigger Pile then the next investor. To many lured by these promises of huge returns some 10-15% over short terms ran to have the opportunity to be the first in the door when a new offering was placed on the table and for many new investors that were also attracted by the opportunity to amass huge fortunes with no risk were also beating down the doors to buy any thing Wall Street had to sell with the “good as Cash” label and high return promise. Maybe we are beginning to see the stupidity that was washing over the entire system. It is my belief in now just writing this out in a logical order that “Truth is certainly stranger then fiction” yet I digress.
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p>Next lets look at the Captains of Wall Street yes the CEO’s and Boards that were beginning to get cold feet the pace was taxing their ability to keep up with the speed in which money was coming and going from the system and so they need to secure a level of comfort in their board rooms so they felt like and could say with little worry of telling a lie that everything was doing just fine and dandy so the Credit Default Swap was born. This is where some of the knots are beginning to appear in our Spaghetti bowl so it will be a challenge to get through this. But basically a Credit Default Swap was an insurance policy written by an insurance company (AIG the head writer) where the Captains got them to write a policy to cover the original bonds with a promise that if you had a lose they would cover it. They paid a premium for the policy sort of like what you pay on your car or home and this made the captains happy and confident that their boardrooms were secure again. AIG and the others being good companies got the Rating Agencies (remember them ) to rate the policies as (another Key Fact) AAA investment vehicles and so some banks Began to trade the policies as if they had some value beyond an Insurance policy. Sort of like you buying your neighbors homeowners policy from them for 50% of the original cost but you would collect 100% if their house burned down. It now appears that these were written so often that we now have 60 Trillion outstanding in Credit Default Swaps on 10 Trillion of Loans got that 6-1 wow that’s like taking a $1 bill old George Washington and swapping it for $6 with your best friend. As the sub prime began to collapse people began to try and cash in this is why Lehman collapsed see they held the insurance and collected the 10% fee for writing the default swap as did AIG and when they had to pay off 100% well you can see those numbers don’t work for $1 in fee they now owed $10 oops same is true of AIG and 90% of Wall Street. You continue to wonder why we are in such a state. Yet we bailed out these Captains of Capitalism to the tune of $700 Billion dollars because if we did not they would have owed remember $60 Trillion which would have put all of Wall Street a majority of insurers and a host of Investors into the poor farm for life and left ZERO Capital anywhere in t he USA not to mention the value of a home would likely fall to zero dollars because no one could afford to buy a home unless it was worth Zero Dollars this would have been true of our entire Economic System a true collapse.
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p>One other factor that should not be overlooked is the fact that no one can deny. As a economy we have all seen a shift from a product produce or manufacturer to a service driven economy one of the last areas where we hold the key position in the World is in capital markets and banking to lose this last area of world dominance we would be faced with being little more then a third world collapsing economic center in the World the lifestyle and standards would be shot and not only would the Board Room Captains be living in a two bedroom Cape on Main street but most of us would be left to a tent in a field and hunting in the local woods.
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p>What a tale yet fact is stranger then fiction especially when the facts are true and accurate. There are several finer points in the economic model that still await examination that will be included after they see more of the light shed on them and we continue to unravel which is why the story is not complete. This is certainly the reason why the Bail Out can not be declared a success or failure in the short term it has succeeded in stopping for now the run on banks and insurance companies is not a done deal if this is the solution or just a
well placed bandage. Also you have to understand that the money other countries have put up to cover their own banks were to write off much of the worthless paper they were holding from Wall Street so when you take the following Bail Out, Federal Reserve, Foreign Countries Like England, Dumping cash into the system to write off this paper house we are likely to see upwards of 10 Trillion dollars of world dollars lost and replaced by the Printing press We still have by some counts as much as $50 Trillion of paper still in the system that appears to be so knotted up in trying to figure out what it is actually insuring that the flow of cashing in and out has slowed. Couple this with the value of Zero on the trading and you have investors hoping and praying they return value sometime soon.
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p>I hope you can read and understand this Economics 2008 explanation and after seeing it in one place you will realize that the bail out of 3 Million workers for 25 Billion is a drop in the bucket. For once maybe a smart move to stop the run on mortgage defaults credit card Defaults Etc Etc Etc…. by keeping these people working and producing a product for our country and economy. DO NOT place me into the column that says with out conditions I think the CEO’s should be discharged as soon as the first dollar is sent and that the boards should be replaced with new never before board members who have proven a vision for the future with Alternative, High Mileage, quality products for the future not the same gas guzzling people movers we see on the backed up highways today.
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p>As is usual these days Long and just my Opinions and my apologies
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p>
tedf says
You gave this a 6. Why?
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p>TedF
woburndem says
somervilletom says
I think we should aggressively protect the workers of GM and Chrysler (and the network of businesses and individuals who surround them).
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p>I think the companies, and most specifically the executives, directors, creditors, and major stockholders, should take it on the chin.
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p>These companies made insanely self-destructive, outrageously self-serving decisions for DECADES. They made their beds — in fact, they defecated in them. Let them now sleep in those beds. The executives can wash out their own laundry, thank you very much.
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p>We should not repeat the mistake of that the UK made with British Leyland. Anybody ever try to own or drive a seventies-era British Leyland product (I’m remembering the TR-7)? It would seem that the TR-7 was, in fact, the “shape of things to come.”
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p>The workers need our help and protection. The companies need to be put out of their misery.
edgarthearmenian says
No doubt that the executives and white collars deserve nothing, but Obama has already sent the message, via the dismissal of the GM CEO, that the administration is serious about restructuring in everyone’s interest.
somervilletom says
The companies are already brain-dead, it’s time to pull the plug on the taxpayer-funded life-support system.
mcrd says
Who cares about well found economics if there are votes involved.
john-beresford-tipton says
The automobile business is overcrowded. As with televisions, personal computers and a host of other items, the market is culling the weakest, either in quality or management abilities. This situation was predicted as far as in the ’60s, when Japanese automobiles first came to the US market. With the American automobile manufacturers you have a group of people with an ingrained belief that they are the be all and end all of business. They surround themselves with yes-people and have shown no signs of change. They are the dinosaurs, thrashing about in a time of global change that they cannot tolerate.
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p>Now we have people clamoring to bailout the dying businesses. Whether they get the bailout (the last one I read for GM dropped 1/3 of workers, 5 factories and expanded into Brazil amounting to $172,000/worker), bankruptcy will eventually come. Politicians might just as well pass a law against asteroids hitting Detroit. So, should we give them billions before bankruptcy. Will politicians send good money after bad? (Now, have they ever done anything like that before? ;o) )
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p>Bankruptcy is a legal, not political, form of resolution. It has many advantages. The judge has many options and is usually on the side of the bankrupt to resolve the issue. It is true that corporate bonuses and union benefits may be redone, but bankruptcy is inevitable.
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p>Those that know business will remember this would not be the first time, nor the second that General Motors went bankrupt. The last time (I think it was the third) DuPont bailed them out and set up an effective business plan, which is why DuPont maintained such a big stake in GM.
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p>