It wasn’t just GM whose future was at stake. The entire automotive industry was on the verge of being redefined with suppliers affected in such a way, that the ripple effect would have meant cutbacks and loss of jobs throughout. In total, I’ve heard estimates of over a million jobs being effected in short order.
Some may not like govt. intervention, but the insisting of restructuring and modernizing production and products along with union concessions that only the govt. can do has at least staved off the onslaught of Mahindra vehicles and Chinese take over of who knows what ever American brand names. The Japanese economy is as affected as ours. We use Chinese made transmissions in Ford Fusions while the Japanese use Chinese made motors in their Scions. This trend would have been escalated w/o the “bail out” to a level we can only guess.
IMO, it was going to get done and the conservatives in govt. were on board all the way. They just made sure they had the political cover of that “blame the liberals” talking points by doing the vote counting if things fell through.
The same disingenuous debate goes on now about the “tax increase on the wealthy”…and it’s affect on small business. The truth is; it promotes job creation by encouraging reinvestment of profits back into businesses before personal income tax from the net profit even becomes relevant. Both sides know it, it worked before but makes poor conservative debating points.
It’s really tough finding the real reasons for what happens in our industries when matters are over simplified. So let’s talk about “tea” instead of making quality education and health care a right for all that will allow us to compete in this global economy.
I’m of the opinion that the purpose of taxation is not for the money to be used to bail out a failed private enterprise. It’s a misuse of our money, probably not supported by tax law.
As to its impact on jobs, my belief is that the market is of a finite size, and if GM had gone under that market share would have been quickly filled by more efficient competitors. The resources necessry to fill that market share will, by the definition of “more efficient”, likely be somewhat less, but not leave the massive unemployment envisioned by those that promoted the bailout. As a matter of fact, even with the bailout, in order for GM to remain alive they’ve probably had to lay off as many employees as would have been the employment drop had they been allowed to fold. Those unable to compete on their own merits should be allowed to drop out and the market be shared by those that can. Intervention in this marketplace by the government does not make it more efficient or effective. The premise that the bailout saved jobs is probably false.
In short, I believe it was a misapplication of our tax dollars, probably really illegal, and did nothing to maintain either employment or the economy.
I think your original skepticism was correct. Gm should have been allowed to fail. I believe that the market would be exactly the same size, and the labor to support it be exactly the same, only the market shares of the other more efficient competitors would have each grown. The size of the pie is dictated by demand, not by the size of each piece.
And, again, I have serious issues with whether that was an appropriate and legal use of taxation.
We used to get by on 15" tires and our 4WD trucks could still plow snow.
Well, I guess I was ahead of the times. I had 17" wheels on my pickup truck and this was back in 1972. The truck was monstrous–had a 9 1/2 foot bed. (The truck was a 1950 Chevrolet 1 ton pickup that I bought for $120). It also had a fire breathing 90 horsepower stove bolt 6 that might push the truck up to 55 mph if I had a good tail wind.
Whether or not it’s a case of should have/shouldn’t have or legal/illegal it has been a success so far. GM is producing good quality, reliable cars that you don’t have to take out a second mortgage to buy or repair (are you listening Volvo, VW, Honda, Toyota owners?). GM sales are up and here’s a real kicker, they are selling more cars to China than in the US. Maybe GM will wind up bailing out the Federal government when the Chinese start calling in all those loans.
Well, you’ve got your pragmatists (like a lot of the people so far), and then you’ve got your ideologues.
At least you always stick to your guns MB - though I still think you gotta stop pretending that this would be the glorious Jeffersonian Republic if it weren’t for the state. The big corporation is what killed the dream. The big state came later. And as long as the current corporate form is allowed there will always be a need for the reps of the people to try to keep us from teetering over the edge. Get rid of the current corporate form and I’m right on that soapbox with you. But…deja vu…its been a while but I think we may have had this conversation before…
I believe GM would have survived, as sales were already gearing up for the Chinese market.
Sales in China are at 17million. Thats more than any sales in the USA in the history of automobiles.
I bought stock in Ford when it was $1.90 a share. Ford saw what was coming early on, took their lumps and recovered on their own.
Did I want to see GM and Chrysler disolve? Heck no. If we needed immediate war material,
the Big Three would be there as in the previous wars to produce .
I am listening, but every time I see the new Ford commercials, where the guy from the Discovery Channel’s show “Dirty Jobs” mentions Honda and Toyota, I resist the urge to make a Ford my next vehicle. Really, Ford is making great vehicles, and they have demonstrated they are running the company efficiently by not needing a bailout, but each time the guy in a Ford commercial mentions Honda and Toyota, they make me want to buy a Toyota or another Honda. Ford is clearly still overshadowed by Honda and Toyota. Otherwise, they wouldn’t be mentioning them by name in every Ford commercial. If Ford would just come out and mention their strengths, I would be sold on Ford, but when they mention other car makers, by name, they are doing themselves a disservice.
When I see GM find success in other countries, I wonder why they can’t find that same success in the U.S. It’s a shame we can’t buy some of their European models here in the U.S.
I’m happy to see GM is still in business and they now have an opportunity to build good cars again. I wasn’t a big fan of the GM bailout as GM had made their bed with too many poor decisions. No government can bail out every company. In this case as I recall democrats and a significant number of republicans voted approval for the bailout package.
The Health Care Bill was a different story and the Democrats pretty much rammed that through to passage with little to no republican support. That may have been a mistake, but the republicans had years to deal with health care and did nothing. It was an opportunity to do something that needed to be done and a bill finally passed. Now the republicans want to dismantle it. The Tea Party and republicans can tear it apart, but what are they proposing to do about health care? Reverting to the old system is just what the insurance industry wants which is where all the money came from funding the anti health care ads in the last election.
As a democrat who voted for Obama I fault him for raising America’s expectations too high. We hear about the huge deficit, but doesn’t anyone remember how the deficit grew under GW Bush? Obama inherited that debt load. Jobs were being lost and the economy was still heading south when Obama took over. You don’t rebuild a nations (or the world’s for that matter) economy overnight. You first stop the bleeding and then nurse the economy back to health. That is happening, but not fast enough due to the unrealistic expectations of “do for me now” American voters.
If more Americans think Sarah Palin and the Tea Party are the answer then they will vote them into the White House. By then the economy will be improving and she can and will take full credit for the turnaround.
Whitey, thats because American cars have to be “Americanized”. whatever that means.
And I’m not referring to environmental or safety issues. I think its the huge " up in your in face grilles" or alot of plastic bulges in the body. Anyone care to figure it out?
I totally agree about healthcare. While people were having their legitimate healthcare claims rejected, and weren’t being covered for preexisting conditions, the Republicans controlled both houses of Congress and the Whitehouse, but they sat on their hands and did nothing to solve these problems. If they had just solved those two problems, they could have avoided Obamacare all together. Add a little fiscal discipline to the mix, and I don’t think Republicans would have lost control of Congress or the Whitehouse. Unfortunately, for some reason, Republicans simply refuse to solve any of America’s problems. They would rather spend all of your tax dollars solving Iraq’s problems.
It’s true, we’ve had the conversation before. And we’ve both stayed true to our beliefs. Only I see those that believe in the markeplace’s ability to solve the problems of poorly operating companies as being the pragmatists and those that believe that the feds by using tax dollars to bail those companies out under their (feds) guidance as being the idealogs.
MB - this is part of what I am trying to say. The corporate form as we have it kills the marketplace. This Adam Smithy thing about markets solving all problems is completely dreamy. It doesn’t work with huge multinational companies that are bigger in size and monetary clout than most nations on the globe. Its not just a big fair competition flea market out there. The world that you want simply does not exist and it is not because of the state!
IMHO the government does far more harm to the economy by trying to manipulate it artificially than would be done by letting it correct itself. I include in my definition of artificial manipulation not only bailouts but also subsidies and manipulation with tax codes.
And in this case there’s a bigger issue: what actually happened was that we used tax dollars to buy controlling shares of a bankrupt company at an inflated value to keep it in businesss despite its inability to compete. Is this a legitimate use of tax dollars? Under NH state law it would not have been an allowable use of state tax revenues, and I have to suspect that it’s not a legitimate use of federal tax dollars either.
I think we’re going to have to simply agree that we disagree on this point. Neither of us is likely to change our views.
Both government intervention and business non-intervention have their drawbacks. Government efforts are inefficient and won’t really solve the market problems, no matter what they are. But letting the market run unfettered is extremely harsh medicine. I’m sure that you recall the story of Standard Oil. Rockefeller made loans to his competitors while relentlessly decreasing his costs to produce oil. He know that there was no chance that the others could compete with him and that they would end up turning over their companies to him. He got their businesses at a bargain price, and it was legal. It’s not legal now. Do you want to live in that world?
I am looking at 2-5 years for a final verdict to be reached. By then most people will have forgotten it completely. Many will think the bailout refers to water removal from the GM underground mail room.
The White House has stated that a stock price of 29 dollars means success and the current stock is a shade over 33.
Just 2 short months ago the Bailout Czar stated that GM’s stock price has to hit 133 for the government to even have a hint of being paid back.
The week following this statement a number of GM officers dumped their stock.
I see them as two seperate situations.
These banks and financial institutions should absolutely have been allowed to fail. They so-called experts at these institutions were told by the TRUE experts that they would fail if they did exactly what they did. For instance, these credit default swaps, they were TOLD by the very person that wrote the software that the way they invested in these would lose all their money eventually.. basically, that "20% default rate over 100 years" doesn't mean 0.2% defaults a year, it meant conditions would set up so most of the defaults would happen at once, which is exactly what happened. FDIC backs people's bank accounts, and some $$$ could have covered what FDIC did not so people wouldn't lose out, just the company. Then the competent financial institutions (which, believe it or not, there are plenty of) would have filled the "vacuum" left by these big incompetent institutions. I could make money on the stock market too if I got a cash bailout every time I screwed up, and the very fact I'm given money causes the market to rebound!
On the other hand, the restructuring of GM mainly got them out from under untenable UAW contracts -- they've been saying they were unsustainable for like 30 years, but the UAW did not believe it and GM had no way to get out of it. They make pretty good cars, as much as people enjoy hating on GM they do a lot of R&D to keep things modern*, and they should have good financials now that they have a more reasonable arrangement with the UAW.
*The big research I’m interested in now is on HCCI – Homogenous Charge Combustion Ignition. It basically uses high compression to autoignite gasonline like a diesel, but instead of the result being ping, knock, and possible engine damage, it’s precisely computer controlled so the result is ultra-lean mixtures and a ~30% gas mileage improvement. (And, you could apply that 30% improvement to hybrids and such as well.)
