Mountainbike; Chapter 11 is defintely not the preferred route to go; a government pushed restructuring supported by tax dollars is the least disruptive. However, as others here have pointed out, the bond holders and the unions have essentialy dug in their heels thinking that no one will call their bluff.
Because the car industry and suppliers are such large employers, the survival is an important part of the US economic recovery. Therefore tax dollars will in the long run be well spent. Lee Iacocca’s rescue of Chrysler in the 80s only involved 7 banks and government guarantees. He had the cooperation of the unions to a large extent, since he gave them the stark choice of closing the doors or accepting his offer.
I agree with you that the powers of government should only be invoked in a genuine crisis, such as WW II and the Great Depression. We have a similar situation today involving 3 major firms (and their suppliers) of which 2 need a great deal of help. In any case the money going into the car firms is small compared to what has been pumped into the financial sector, with little chance of recovery.
If all the rest of US industry and business was booming and the car business was the only one in trouble, both the public and the government would likely want to adopt a more laisez-faire attitude and let the best survive, Darwinian style.
We could get going good on Winston. have you read Pat Buchanan’s book “Churchill, Hitler and the Unnecessary War”? He puts a spin of lifelong agression as being part of Churchills makeup.
The government should only be involved in the private sector in a legislative and judicial capacity to protect the innocent from the predatory and in the epecific interest of national security. And to legislate interstate commerce. The constitution says nothing about the executive branch taking over private enterprise in a genuine crisis or any other kind of crisis (with the exception of the War Powers Act).
The market for automobiles will be whatever size it will be regardless of whether or not there are fewer players. Artificially supporting inefficient players in that market serves no larger purpose. Allowing the market to decide who’s capable of competing in it and forcing those who aren’t to either find a way or drop out is, in the bigger picture and the longer run, the only true way to correction. The upper midwest will not die, it will change. Perhaps an efficient producer will assume those operations, perhaps those operations will have to become efficient.
Nothing in the constitution gives the federal government the right to be forcing their management visions on any organization in the private sector…and certainly not using tax dollars to do so. And as bad as GM’s CEO was, the government had no right to force him out.
I disagreed with Washington using tax dollars to back loans to Chrysler all those years ago. Iaccoa brought Chrysler back from bankruptcy, but once he left it went back to being essentially unsalvagable.
And wait until you all see the deficit this will create! Into the quadrillions we go! The loans will be trillions, the deficit will be incomprehensable.
Folks, what we’re seeing is not what the founding fathers anvisioned as a government. Usurping of states’ rights and of the rights of individuals (even to make huge mistakes) is what they tried to prevent. We declared ourselves independent from a monarchy, fought a war to firmly establish that, and now the founding fathers must be rolling over in their graves.
As JT said, the houses of congress are going to stand back and allow it to happen. If it works, they’ll all line up to take credit. If not, they’ll all point their fingers to assign blame.
Mark my words, we’ll regret the path we’ve gone down.
Pat Buchanan is regarded by most people outside the US and many inside the country as a dangerous isolationist and known for opening his mouth before putting his brain in gear. After a while many now regard him as a harmless windbag. However, I will read the book.
Having said all this, Churchill was, of course a child of the British Empire, and not highly regarded by those he walked all over. My friends in South Africa of Dutch descent regard him as an imperial opportunist.
However, no one, except Churchill, seriously tried to stop Hitler in the thirties; the so-called Peace Groups in the US lived in a make-believe isolationist world.
In retrospect, historians now list the major causes of World War II as the following:
The Treaty of Versailles and the punitive war restoration payments levied by the Allies, indirectly causing hyper inflation in Germany.
The Failure of the League of Nations to be an international force for peace, and stopping Hitler from “annexing” territories. Failure of the US to support the League made it a toothless organiztion.
Many unresolved border disputes; on the French-German border and on the Chech border. The League of nations could have been instrumental in solving these.
The aforementioned “peace mongers” who stuck their heads in the sand and hoped for the best.
5 The stock market crash which, like the present crisis was caused by US freewheeling capitalism running amuck.
Finally, Hitler, a frustrated WW I veteran, discovering the true German sense of nationalism and racial superiority complex, and playing this to perfection. The humilation caused by the Versailles Treaty, very different from the very effective post WW II restoration of Germany with Marshall Aid, drove Germany into economic chaos, and the weak Weimar Republic led by an aging general was quickly pushed over.
In the final analysis Germans ,of course, bear the complete responsibility for this war by abdicating their democratic responsibilites. Hitler just played on German pride and prejudices in the midst of an economic crisis.
“5 The stock market crash which, like the present crisis was caused by US freewheeling capitalism running amuck.”
True, but don’t forget the greedy fools abroad that bought the bundled mortgages. These are not ordinary folk like us. They are professional investors who should have known better, as the US investment professionals should have. They have no excuses except their own greed and the greed of those they represented.
An excellent, thoughtful post. I’m not a Buchanan fan, either. I just wanted to make it clear that professionals have a fiduciary duty to their clients to avoid taking on too much risk. No matter the national origin, none of them deserve any sympathy.
Agree; I worked in Asia in the 1990s, just after the Asian meltdown which was an earlier version of what we just went through. Most of the people who lost their shirts did not think they did anything foolish or irresponsible. They bundled useless assets (mostly over priced real estate) with good ones, and many manufacturing companies were not worth investing in since they still had this toxic real estate stuff on their books.
My key point was that the sub-prime and credit meltdown mess started with US real estate, and over extended credit cards, and spread around the world from there.
where to start? 40 miles at 40 mph? 20 miles away and 20 miles back too short of a trip. Average 35 mph that means half the time you are exceeding 35mph having a maximum of 40 mpph average would fall to 25 mph due to start and stop traffic. Todays cars also have over 1000 pounds of required safety eguipment to haul not on the old Model Ts. Charge times of 8 hours hurt ease of use, people have more to do in their car than drive to work kids to school groceries visit grandma etc. Disposal of lead acid batteries already a problem, and plug in electric would cause an already costly product electricity to sky rocket and cause black outs plus our current delivery system is already over taxed we would need to update the grid across the country.
Get the automakers making good basic platforms with adeaquete basic drivetrains-not these sick pathetic base models a lot of makers offer now.And not a lot of detuned small (barely pull it engines-BPI) the upgrade engine shouldn’t be 10K more.The final options should be dealer installed( not a package) as little or as much as you want-More things standard and more things lasting more then one production run.Please do away with some of the superflous, tuatomer safety systems-design the car like a stockcar(those are pretty safe) if I could actually spec a CAR THE WAY I WANTED IT,I would be much more inclined to get a new one fairly frequently-Kevin
It’s cheaper to install the options at the factory. Are you willing to pay more for equipment installed at the dealer? You can order a car with exactly the options you want. All you have to do is ask. Now is not a good time to buy a car that way; many factories are shut down and dealers have too much stock. Wait for the new model year and you an order one just the way you like it. And since they don’t have to pay the manufacturer to store the car on their lot, you should be able to get it for barely over invoice, less most of the dealer holdback. You just have to be willing to wait for the next scheduled delivery to take full advantage of it.
As a person with a interest in history and I do have a special interest in 20th century history it is hard not to keep getting directed to WW2. Then it is hard not getting directed to WW1. It is hard to decide when to stop going backwards in history when looking for the causes of these two events.
What I have noticed is that the final chapters or even the second half of the book has not yet been written about the causes of these two events. More and more information is being revealed every year about the causes of WW1 and WW2 just like more indepth information on the conduct of all parties is being revealed
I find it interesting that the financial sector and the automotive sector have both become so entwined in the political arena that they’ve become an extension of it.
We used to talk about what the automobile manufacturers needed to do to prosper. Now we talk about the politics, about how entined our tax dollars should become in the industry, about what changes Washington should make make to the industry.
Nobody even discusses the financial community anymore. The feds have essentially taken that over.
Good point; WW II was not started by some sinister backroom activity. It was blatant military aggression, as was WW I. However, WW II could have been prevented if the the various countries had united against German militarism, and the League of Nations had been more forceful.
Items 1 to 4 in my previous post were major contributors, whose absence would have prevented that war.
Word War I was a complete upset of the old order of the Ottoman Empire, the Kaiser’s Germany and the creation of a number of new countries. It was also the final straw that saw the sun set on the British Empire.
The miraculous rise of Germany (West) after WW II was partly due to the generous US Marshall Aid , and the occupation of Germany to avert Russian agression and expansion. The Germans quickly learned which side their bread was buttered on and sided with the occupying allies who allowed them to quickly rebuild their economy. The poor East Germans suffered under the Russian boot till 1982.
Now back to the future, I just finished reading a very good book on what the future holds for the US and the rest of the world. The title is “The Post-American World”. It deals with the developing rest of the world (China, India, Brazil, etc.) and the new role the US will play in a “multi-Polar” world.
It has been said the those who do not study the past are bound to repeat it. I spend most of my time working on the future, rather than the past. But I find it necessary to look back at business decisions that were good and bad in order to learn from them.
“Nobody even discusses the financial community anymore. The feds have essentially taken that over.”
I don’t buy that. The bankers still seem to award bonuses and expect us to foot the bill. Just today I read an article that said Fanny Mae and Freddie Mac will pay out over $100 million in bonuses in 2009. They are required to report the proposed payments, but do you think that Treasury will stop them? I doubt it. Whether FNMA and FHLMC retain their employees isn’t a particularly compelling reason to pay these bonuses. Where else are they going to work? What other business pays hundreds of millions of dollars to their staff during such dire circumstances and expects to survive? I suggest that we email our US representatives and give them a few good reasons why these economic destroyers do not deserve bonuses, whether they are “part” of their pay package or not.
"The miraculous rise of Germany (West) after WW II was partly due to the generous US Marshall Aid , and the occupation of Germany to avert Russian agression and expansion. The Germans quickly learned which side their bread was buttered on and sided with the occupying allies who allowed them to quickly rebuild their economy. The poor East Germans suffered under the Russian boot till 1982. "
Not only that but, if you remember the old movie, “The Mouse that Roared” any nation defeated or saved by the US in war became an economic power. The US bled our oil supply during WW2 for the ENTIRE allied war effort as we were the only nation with reserves available. We saved the middle east from Germany’s Rommel with the idea that they and the rest of the free world would supplement our depleted energy supply for generations to come. Otherwise, Saudias would have German as a second language. It’s too bad real history isn’t now taught in the middle east.
Thank you OPEC…I’m a little disappointed that Europe doesn’t continually mention their dept. to us…but, “What have you done to us lately?” seems to be their motto.
When I travel in Europe, I find the Germans, Belgians and the Dutch actually quite thankful for the allied (US, Canadian, Australian,etc.)liberation and postwar support. The French on the other hand, have been brainwashed into believing that De Gaulle liberated France. It was just Eisenhower’s generosity to let De Gaulle march into Paris ahead of the US army. The French owe General Patton more than they owe DeGaulle.
My wife got an email the other day about an American who landed at the Paris Airport and had trouble finding his passport. The young customs officer was impatient and asked him: “Monsieur, don’t you know you need a passport to enter France? Have not been here before?” The American quietly looked him in the eye and said:“Yes I have been here before, in 1944, but when I landed in France there was no one to show my passport to”
Never been able to do that-only could get packages.Yes I would pay more,to get what I want.Try to spec a new farm truck&see what you get.Those days of specing or special ordering seem to be gone(at least for what I drive,the last time I tried to get a LSD-was told it required the power package which added several thousand dollars on the price-Kevin
Has AIG stopped making credit default swaps? Has anybody stopped making credit default swaps?. The finance section of AIG is the problem. AIG worlds largest INSURANCE company. If AIG did not have to pay out on the financial insurance obligations it took on (with taxpayer money)it would still be a private company.