Wow! A communist!
One of the most thoughtful replies to this situation was presented as a letter to the editor in a local newspaper. The writer opined that the Big 3 should get help, more so than the financial sector. His argument was based on the fact that the auto industry actually creates something, while the financial industry simply makes money for itself. That sums up an opinion on which bailout to choose.
However, if the bailout is chosen (do we really have a say in the so-called “taxpayer loan” to the automakers?), a total restructuring of the executive and management teams is in order, in my humble opinion. Out with the bean counters and in with someone who has actual manufacturing, productivity, product quality and marketing skills (by marketing I mean the exercise of determining a market need and meeting or exceeding that need).
For too long, the auto industry has acted like the nearly defunct US steel industry. With a “too-Hell-with-what-the-customer-wants” attitude, the US auto industry execs and management have sounded their own death knell. Auto and truck buyers want a product that is durable, reliable, fuel-efficient, safe, and responsive. That description fits very few US-produced vehicles.
For too long automakers have relied on the high-margin gas pig SUV category to make a profit (how many SUV plants did GM shut down recently?). Honda, Toyota, and other “foreign” automakers can claim some, if not all, of the descriptors listed above.
The auto industry is one of the last bastions of actual industrial production that we have left in this country. In addition, it feeds many ancillary support businesses. If that industry fails, well, the ramifications of that have been well documented…
Each of us, as taxpayers and citizens, should have a stake in the outcome of our so-called taxpayer loan to the US auto industry. I’m not sure if a borderline Socialistic bailout of the industry is viable; however, if each of us “investors” was also a shareholder and had some say (now I’m waxing Utopian) in the way that industry performed, maybe the whole idea would make sense.
Dole out the financial industry bailout to taxpayers (transitioning into another idea) and to the auto industry. $700 billion meted out to 240 million taxpayers would stimulate the economy on its own, rather than plying the ailing financial industry with a Band-Aid ® for its gunshot wound. Then, we could turn our sights toward the ailing auto industry and as small-scale “captains of industry”, could completely redefine what the US automobile industry is and could be.
We shouldn’t bail them out, we should buy them up. With the price of the Big 3 autos stock currently low, it would probably be cheaper to take them over then to hand them the amount of money they are asking for. After all, if the loan goes bad, we get the company anyways. After they were bought up by the US, we run them, focusing on smaller, more fuel efficent cars and in 5 years or so, we do a IPO to turn them back into public companies. It’s basically what we did with Chrysler only on a bigger scale. It’s what we are doing with AIG.
Don’t be so what to cry socialism. So is giving them billions in loans that banks won’t lend to them. This is cheaper and we know what we are getting for the taxpayer’s money.
I say, these are private organizations called corporations. Each member of the corporaion is capapble of contributing to its own cause. I am a small business owner in SC. Most of my work is automotive. My work is suffering due to the recession. it has been like that all of 2008.
If I need a tool, part, catalog, piece of equipment, or an invoice. I have to reach into the owners pocket.
The CEO of GM is being paid 9 million annual salary. I think he can kick that back to his own company and still survive during the next year. If all GM employees would contribute to the bailout it can be done right away. if each union member donated 1 hr labor wages each week for one year, It may very well contribute to the survival of the company. If they wanted to contribute more than that, it would exponentiate the recovery time.
Bailing them out is not the answer. Bailing htemselves out is the best solution. if we bail them out, how will they recover? The Ceo will simply be receiving a salary increase for the bailout.
Why not bail me out too while the government is granting rewards for greed. Why not? Does bailing me out make sense? How will my customers benefit from a bailout? Maybe I could ride the gravy train and raise prices then.
No bailout of the big three. If they decide to go under. bailout with need to be neccessary to the little guys that will close because of management not wanting to invest in their own company. If they do not want to grow, let them close or get bought put by someone who wants to build instead of leech the system.
Somebody help me see another way.
I can’t disagreewith your reasoning; 61% of Americans surveyed did not favor a bailout either. Accepting wage cuts and benefit cuts on the part of ALL employees seems reasonable, as long as it is combined with the right kind of restructuring, which, unfortunately will also eliminate a lot of the jobs due to overcapacity and inefficiency.
Japanese companies have long practiced this. A worker’s income is a basic wage plus profit sharing; the bonuses are a large part of their income. When times get tough, they will still get their basic wage but the bonus is cut back or eliminated. That avoids a lot of layoffs and re-hires in a fluctuating business. Japanese prefer to keep their staffs intact, and will only lay off if it’s unavoidable.
A most elegant solution, of course is a federal gasoline tax, which could be banked and turned over to the companies to help them restructure. Elegant, but difficult to implement.
Has it occurred to anyone that if the bond market wasn’t so crowded with treasury bills for our deficit, the big three might be able to get their financing privately?
We are talking about loaning borrowed money here folks. We are borrowing it form China and lending it to poorly run businesses? What happens if one or more of the big three default on their loans? The big three should be able to raise money by selling bonds. Since they can’t, we are going to hurt the bond market even worse by financing their loans, and it will only create a domino effect.
Bailing out the big three will only make the problem worse.
It seems more logical to me, to extend Federal loan guaranteees to car buyers rather than to the car makers. The Big 3’s present problem started with dropping sales last spring and accelerating untill now, mainly due to banks etc. tightning their credits. I suppose Congress could simply ear-mark a portion of the funds proposed for assisting the financial sector to guarantee car loans which would have been OK’ed a year ago.
That way it’s the tax payers decision which car they want to buy with their money and the industry will have to reduce the overcapacity in accordance with a more direct form of democracy.
I have a question for the three CEOs… unfortunately, I don’t think I have any Rep. on the committee grilling them. Try this one: how much would it save them, and how much more competitive would they be, if the US provided a national healthcare system, and they didn’t have to pay the medical insurance industry billions?
mark "bail our American workers and industry, not the medical
insurance industry!"
Good question; a rough comparison is looking at Canadian autoworkers who get their basic health care (excluding dental, drugs, glasses) free from the government. That is worth about $12 per hour!! This is also free after they leave the company or retire. I’m told the total US package was $24 per hour before it was cut back. The current total wage, benefits and legacy costs are about $CAN78/hr for the Detroit 3 in Canada, compared to $49/hr for Toyota Canada. GM’s US total cost is about US$54/hr after all the adjustmens. So they are getting it down.
When the Canadian dollar was trading at $US1.10 , Canada had the world’s highest auto labor costs. Now that it is down to $US0.80, the total package is still $49/hr.
Toyota just opened an new plant in Canada to build the RAV4, while Honda has also expanded its plant there.
Labor cost is important, but assembly hours and parts costs per vehicle is also critical. In that area, Japanese companies also have the lead, by at least 25% fewer hours. That’s why Ford loses about $1200 per small car while Toyota makes about the same or more in profit per small car.
no, we shouldn’t reward the greedy SOBs, BUT …
if we don’t bail them out, we risk loosing one more manufacturing sector in the USA.
if bailing the creeps out forces them to rebirth the electric car and other alternative-fuel vehicles, and enable reconfiguration of the Union contracts, then at least we have kept this manufacturing here.
although, the bailout should come with a directive that all the top-level execs must commit harikari :>(
We shouldn’t bail them out. They should go bankrupt, and Honda, Toyota and Subaru would pick up their market share, (and their suppliers would make parts for Toyota, Honda and Subaru), just as they’ve been doing for the last 40 years.
However, we taxpayers (and our great-grandchildren) will bail them out for now, prolonging the dying process. We should let them die right now, but no politician has the guts to say so.
All bailouts of any stripe to any industry should come with the pricetag most likely to give pause:
Punitive, extreme goverment regulation against future greed. High marginal income tax rates for the duration of the payback. Lets hit the dealmakers where they live… right in the wallet.
I consider myself a pretty a-typical consumer. I love cars and have bought both domestic and foreign. In short, I think the companies should be ?bailed out? given the huge number of jobs on the line. However, there should be some stipulations on the part of GM, Ford and Chrysler. I?m no business expert but the money should be paid back to the taxpayers with some kind of ?profit sharing? once the companies get back on their feet. If the general public is flipping the bill, shouldn?t we get a return on our investment?
Also, I think my experience with GM is pretty typical. I bought a Saturn SL2 in 1999. I was very happy with my purchase and, indeed, felt part of the ?Saturn family.? In fact, I wrote to Saturn, after I purchased my car, and told them they weren?t doing enough in terms of marketing. I wanted to company to succeed but it seemed like (at the time) Volkswagen and Honda had all the cool ads. When I bought the Saturn, I truly liked the styling (in its price range) and, more importantly, it was rated well by consumer reports.
Well, in 2002, my partner and I adopted a son and were planning on adopting a second child so we needed a larger car. We wanted to buy and SUV since we needed something bigger and safer on the road. I assumed I?d buy the Saturn Vue, since I was so happy with my SL2, but, as it turned out, Consumer Reports gave it a poor reliability rating and, I have to say, it was pretty bare bones in terms of comfort and style. We compared our options and went with a Honda Element instead. The price was similar and the Honda had a much higher reliability rating.
It?s too bad GM dropped the ball with Saturn. I still own my SL2 (in addition to the Honda) and will regret the day when I have to trade it in. When it comes time, I?ll try to go domestic, but, in terms of value, safety and reliability, I?m going to go with the best?domestic or foreign.
I’m all in favor of letting them go under. It’s amazing to find out that there is already a $25 billion government fund to provide money to help the Big Three retool to make more fuel efficient cars. (Uh… shouldn’t they be working on that WITHOUT a big handout from us? Honda did. Toyota did. Nissan did…)
HOWEVER… the tricky part about letting them go bankrupt is that they get to tear up their union contracts and start over. Now maybe those contracts are fair and maybe they aren’t, but management DID sign them with their eyes wide open. Letting the big three go under could wind up being the biggest union-busting move ever.
I would urge the Big Three to stop making lousy cars (or at least stop making so many of them) and diversify in to other fields. Why can’t GM be making wind turbines? The businesses aren’t that different – engineers, metal workers, big plants needed… How about light rail and subway cars? (So Kawasaki can stop winning all the contracts…)
Finally, the best reason I keep hearing to fork over all of that tax-payer cash is to save blue-collar jobs. Why not spend the money on the WORKERS (job retraining, unemployment benefits, tuition, relocation) instead of giving it to the management that has so obviously botched the job? Or take that $25 billion - $34 billion, dedicate it to mass transit infrastructure, and let the Big Three fight for a piece of the action just like everyone else.
G
No, do not bail out a failing company that has shown that it does not listen to its consumers!
Instead of a bail out - buy the company (nationalize it) and rebuild America as a 21 century country. Via a JFK style Project Apollo (http://history.nasa.gov/moondec.html). But instead of sending the Big 3 CEOs to the moon (which is not a bad idea if there is no return ticket - this project would be a vision of rebuilding America with out the CAR, a city of public transit, one with electric motors and real light rail personal trams. Think Jetsons transportation can really happen.
Call on Obama’s new admin. to have that type of VISION, create the challenge and a NASA like deptartment to retool the big 3 (as nationalized companies) into the WPA workforce to make it happen. Leave the automobile to the past! Invision a new future and strive for change.
David
The answer is YES. We literally can not afford to not provide the Detroit 3 with the loans they are requesting.
For those of us living in Detroit, listening and watching the commentary out there on the Detroit 3 leaves us wondering what planet those come from. The GM, Ford, and Chrysler the media and blogers are talking about comes out of mythology, and reflects a lot of bias based in emotions and group think, not facts. The real companies today are very competitive on cost, quality, and fuel, economy (look at the data from JD Power, the EPA, etc) GM and Ford, in particular, have some of the most fuel efficient and high quality cars in the market for the segments they serve, and together they have more fuel efficient models than the top three Japanese brands combined (check the EPA data on this).
The domestic companies are not in trouble because of anything they have done, or not done. The problem is that the Wall Street cowboys tanked the economy and the car market has crashed. Car companies around the world are hurting, and they are all asking their governments for help as well.
The real reason why the Federal government should provide loans to the Detroit 3 (and that is not a bail out by the way), is because if the domestic industry fails it will be an economic disaster for all of us. This is the opinion of almost all economists who have looked at the issue (except the far right ideological idiot economists). A collapse of the domestic industry will result in 3 to 5 million job losses in 2009. That is not just direct automotive jobs; it includes jobs in every state in the union and impacting nearly every segment of the economy. This includes many jobs people would not think of being car related, as the collapse ripples through the economy. This is why the Democratic leadership in DC has decided to fight for the loans. They know that letting the Detroit 3 fail would lead to economic disaster for the entire country. But, it is not just job loses. A default on the Detroit 3’s debt would cause an instant disaster for the financial sector that would kill what little credit there is out there, taking even more jobs. A collapse of the Detroit 3 would also tank the stock market further, decimating peoples? savings, 401 ks, IRAs, etc. Pensions would become shaky. And, needless to say, all of this economic dislocation will greatly increase the number of foreclosures in the US. In short, a collapse of the Detroit 3 would very quickly translate into economic disaster for all of us, and will result in a long and very painful recession.
This immediate economic reason for supporting the Detroit 3 does not even start getting into the longer term economic problems that would be tipped off following a failure of the Detroit 3 caused by Wall Street’s sins. Nor does it get into the impact an absence of the Detroit 3 would have on vehicle prices (up) and wages (down) for everybody in the US. People should not be so quick to express uninformed opinions here, especially given the very serious outcomes that would result from a failure of the domestic industry. Once they have the facts, then they can talk.
Good post Ray! When Saturn first started up I had high hopes; I recommended the car to two colleagues. Both had head gasket problems. I stopped even suggesting Saturns when their engineering budget was cut to the bone by GM. You’re right another half-baked product like so many GM propduced in the past. You are lucky to have had a good one.
I don’t agree that we should bail them out, but if they don’t get some help, I really feel the economy will suffer alot more. They have created problems over the years they are now being faced with and because bankruptcy would affect so many more people indirectly other than just the Detroit 3, I do believe the right thing to do would be to help them with extreme guidleines that must be met.
It has been years since I’ve purchased an American made vehicle. I wish that wasen’t the case. I would love to support my country by buying their products but quite honestly, I do not feel their quality is where it should be with todays competition. This won’t be the end. Even if GM, Ford, and Crysler get the money, how are they going to sell vehicles ? How are they going to repay the loan ? I wouldn’t think that consumers will be storming the showrooms any time soon. The bailout is a bandaid. Top executive cuts and pay decreases should be a start. These people get to fat and to happy too quickly and they forget the small people that really make a difference, just like any other cooperation. Next, drop the lines that aren’t selling. Yes, gas prices have dropped considerably lately but they will not stay that way. Who’s going to be buying Hummers when gas again jumps to $4+ a gallon ?
I’m sure I’m not seeing something here, but would it be possible to disperse x amount of money to each tax payer ? I’m not talking about another $2,000, but a substantial amount that would allow Americans to pay off their mortgages, car loans, credit cards, etc. Let Americans decide individually what should be done with the economy. If Americans want their money to go to Ford, for example, than they can go buy one.
Derek
As an Australian who has lived in Seattle and Socal for the last three years I find reading the replies, that typically nobody has addressed the international repercussions of the potential bailouts. Can I raise four points for your consideration.
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GM, Ford and Chrysler are not the only car manufacturers in the U.S. When I bought my BMW X5 in Australia, it had to be imported from South Carolina. Since the problems are mostly caused by the lack of finance which affects everyone. Why should some US manufacturers get preference over others at the expense of their employees?
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Giving money to manufacturers is like subsidizing the farmers who grow unwanted crops. It is protectionism and it skews the market away from efficient productive companies. How can President Obama tour the world demanding free trade while he props up local manufacturers.
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All of the big 3 have a presence in almost every country of the world. If you give them money they will use it to serve the best interests of their shareholders. What is to say that does not mean investing it all in a car plant in China or to prop up Volvo, Sweden or Opel, Germany or Holden, Australia.
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The quality and reliability of these cars is not the issue but their viability in a particular market. Remember these three also make Saab, Volvo, Jaguar, Holden, Vauxhall, Opel and many more fine cars worldwide.
I suggest we bailout not the manufacturers but the consumers. Credit is the problem so why not offer a tax break against a new car purchase? The govt could have its influence by offering better breaks on more efficient cars or smaller cars or cars that run on batteries or whatever. GM, Ford, Chrysler would quickly rise to the bait. I realize that to many it is anathema to follow a path already trodden by the French but I think it makes sense. What do you think?
P.S. The Pontiac G8 is an Aussie Holden. Oy, Oy, Oy.
Detroit is a very insular place; so insular, in fact that it’s hard to see how the real world works!
Agree that the Detroit 3 have made substantial gains in productivity, quality and some cost improvement. The gap is still too wide, however, and the product mix not suited to today’s tastes. Toyota is also suffering a sales decline, but is not asking for money since their cost base is superior and their cars more suited to market needs.
In another post we state that Ford loses $1200 or so on every compact car they make in North America, while Toyota and Honda, etc. make good money since their manufacturing processes and labor costs are more favorable. At this time the US labor cost is $54 per hour while Toyota’s is just over $40. Vehicle assembly hours are also substantially less for Japanese manufacturers. Warranty costs have come down but are still much higher for US firms. In Canada, the US firms’ cost is $78/hr while Toyota’s is $49!!
I agree that US firms are competitive on pickup trucks and not much else.
Agree that for the Detroit 3 this is the PERFECT STORM; wrong product mix, high costs, financial meltdown on Wall Street and tight credit for purchasers.
Draw your own conclusions.