Should the US bailout the big three automakers?

[Brent Mills]

Saw this question posted elsewhere and thought it was a good one. Should US taxpayers do this?

[Ron61]

I would go for it if they put some agency in charge that would see that the money is used for that and not to reward the CEOs who seem to give themselves millions in bonuses and let the companies go.

Ron

[vector1]

right after they bail out the millions of taxpayers.

on the other hand, bail out the big three so they can continue to build sh*t that nobody wants. why prolong the agony.

i'm beginning to feel like one of the sheep already.

[1ntCobra]

Bailout is a bad term. Why isn't this just called a loan? It worked for Chysler back in the 80's.

A lot of the problem here is that banks have become cowards. They don't want to lend money, not to the auto companies and not to the consumer who wants to buy the cars.

Since the banks aren't loaning to the auto companies, how are they going to continue to operate?

Many people say that the Big 3 were just building the wrong type of cars? Well, you know that Americans were in love with the big gas guzzling SUVs and pickup trucks not very long ago. Now the American consumer wants nothing to do with what they loved so much. You don't just flip a switch and instantly change the plants from building big SUVs to econoboxes. It is a time consuming expensive process.

Just because the fickle American consumer does a 180 on what they want in a vehicle does not mean we should let the Big 3 fall apart when there is a credit crisis at the same time.

[Bobcat]

Absolutely not ! This would really be a bailout of the UAW .... and they are to a large degree the cause of the problems .Wonder why GM pays out $11,0000,000 / yr on their medical plan for Viagra ?? Part of the union negotiated benefits package . This would also be a payback to the unions for their support for the Democrats in the election . Chapter 11 would NOT cause the companies to close their doors . It would allow them to reorganize , void bad union contracts and evaluate their dealer network . The airlines kept going when they were in bankruptcy .
Where does it all end ?? Who is the next one in line with their hand out ??

[Bill Wells]

it is intended to be a loan . not a gift .

chrysler when they got their Govt LOAN, not only paid it off early, they paid a couple hundred milion in interest TO the govt as well .

The Big 3 , or small 3, or ex big 3, or whatever did not create the mortgage meltdown and financial crisis that is bringing the big 3 to its knees- with imports beginning to feal the heat of limited credit loan money available as well - like the other 3 are .

there are so many intertwined suppliers that if one of the 3 falls, they will all fall as the suppliers will go down one by one .

. AN INTERESTING ARTICLE IN YESTERDAYS DETROIT FREE PRESS NEWSPAPER :

MARK PHELAN

6 myths about the Detroit 3
BY MARK PHELAN • FREE PRESS COLUMNIST • November 17, 2008

The debate over aid to the Detroit-based automakers is awash with half-truths and misrepresentations that are endlessly repeated by everyone from members of Congress to journalists. Here are six myths about the companies and their vehicles, and the reality in each case.


Myth No. 1
Nobody buys their vehicles.

Reality

General Motors Corp., Ford Motor Co. and Chrysler LLC sold 8.5 million vehicles in the United States last year and millions more around the world. GM outsold Toyota by about 1.2 million vehicles in the United States last year and holds a U.S. lead over Toyota of about 560,000 so far this year. Globally, GM in 2007 remained the world's largest automaker, selling 9,369,524 vehicles worldwide -- about 3,000 more than Toyota.

Ford outsold Honda by about 850,000 and Nissan by more than 1.3 million vehicles in the United States last year.

Chrysler sold more vehicles here than Nissan and Hyundai combined in 2007 and so far this year.

Myth No. 2
They build unreliable junk.

Reality

The creaky, leaky vehicles of the 1980s and '90s are long gone. Consumer Reports recently found that "Ford's reliability is now on par with good Japanese automakers." The independent J.D. Power Initial Quality Study scored Buick, Cadillac, Chevrolet, Ford, GMC, Mercury, Pontiac and Lincoln brands' overall quality as high or higher than that of Acura, Audi, BMW, Honda, Nissan, Scion, Volkswagen and Volvo.

Power rated the Chevrolet Malibu the highest-quality midsize sedan. Both the Malibu and Ford Fusion scored better than the Honda Accord and Toyota Camry.

Myth No. 3
They build gas-guzzlers.

Reality

All of the Detroit Three build midsize sedans the Environmental Protection Agency rates at 29-33 miles per gallon on the highway. The most fuel-efficient Chevrolet Malibu gets 33 m.p.g. on the highway, 2 m.p.g. better than the best Honda Accord. The most fuel-efficient Ford Focus has the same highway fuel economy ratings as the most efficient Toyota Corolla. The most fuel-efficient Chevrolet Cobalt has the same city fuel economy and better highway fuel economy than the most efficient non-hybrid Honda Civic. A recent study by Edmunds.com found that the Chevrolet Aveo subcompact is the least expensive car to buy and operate.

Myth No. 4
They already got a $25-billion bailout.

Reality

None of that money has been lent out and may not be for more than a year. In addition, it can, by law, be used only to invest in future vehicles and technology, so it has no effect on the shortage of operating cash the companies face because of the economic slowdown that's killing them now.

Myth No. 5
GM, Ford and Chrysler are idiots for investing in pickups and SUVs.

Reality

The domestic companies' lineup has been truck-heavy, but Toyota, Nissan, Mercedes-Benz and BMW have all spent billions of dollars on pickups and SUVs because trucks are a large and historically profitable part of the auto industry. The most fuel-efficient full-size pickups from GM, Ford and Chrysler all have higher EPA fuel economy ratings than Toyota and Nissan's full-size pickups.

Myth No. 6
They don't build hybrids.

Reality

The Detroit Three got into the hybrid business late, but Ford and GM each now offers more hybrid models than Honda or Nissan, with several more due to hit the road in early 2009.

Bill, from motown hoping it not to be a ghostown

note: edited to include the Detroit Free Press story

[392cobra]

"UAW leader: Workers will make no more concessions
By MARK WILLIAMS, AP Business Writer Mark Williams, Ap Business Writer – Sat Nov 15, 3:41 pm ET AP – COLUMBUS, Ohio –

Even as Detroit's Big Three teeter on collapse, United Auto Workers President Ron Gettelfinger said Saturday that workers will not make any more concessions and that getting the automakers back on their feet means figuring out a way to turn around the slumping economy."

Here the Unions are at the root cause of the Big 3's problems and their leader throws this out.

The current and past Union workers have no right to the taxpayers money for their real and imagined self worth.

They will not make any concessions but expect the U.S. Taxpayer to make concessions to them ?

I would like to see Chapter 11 put into play and let these azzholes see how unemployment works for them.

[RodKnock]

Originally Posted by Bobcat

Absolutely not ! This would really be a bailout of the UAW .... and they are to a large degree the cause of the problems .Wonder why GM pays out $11,0000,000 / yr on their medical plan for Viagra ?? Part of the union negotiated benefits package . This would also be a payback to the unions for their support for the Democrats in the election . Chapter 11 would NOT cause the companies to close their doors . It would allow them to reorganize , void bad union contracts and evaluate their dealer network . The airlines kept going when they were in bankruptcy .
Where does it all end ?? Who is the next one in line with their hand out ??

+25,000,000,000.

[Ron61]

Fred,


The current and past Union workers have no right to the taxpayers money for their real and imagined self worth.

They will not make any concessions but expect the U.S. Taxpayer to make concessions to them ?

I would like to see Chapter 11 put into play and let these azzholes see how unemployment works for them.

I couldn't agree more. Get rid of the dam union and you will have solved half the problem right there. Sorry to you union guys, but I spent years in the CWA as a steward and officer and I hated everything they stood for until I finally quit. I spent a year going over all of the by-laws to find a loop hole that would get me out of it and once out I wouldn't even talk to them about coming back in. They think they have to have at least $30 dollars an hour to stand around and maybe one out of 100 in the CWA could actually work on a computer a little. Most showed up, went to a break room, and left at the end of the day. I saw this from coast to coast and have no use for unions at all. Once I got out of the dam CWA my pay went to over $100 per hour.

So let the flaming begin.

Ron

[decapello]

Originally Posted by 392cobra

"UAW leader: Workers will make no more concessions
By MARK WILLIAMS, AP Business Writer Mark Williams, Ap Business Writer – Sat Nov 15, 3:41 pm ET AP – COLUMBUS, Ohio –

Even as Detroit's Big Three teeter on collapse, United Auto Workers President Ron Gettelfinger said Saturday that workers will not make any more concessions and that getting the automakers back on their feet means figuring out a way to turn around the slumping economy."

Here the Unions are at the root cause of the Big 3's problems and their leader throws this out.

The current and past Union workers have no right to the taxpayers money for their real and imagined self worth.

They will not make any concessions but expect the U.S. Taxpayer to make concessions to them ?

I would like to see Chapter 11 put into play and let these azzholes see how unemployment works for them.

Amen to that.

[Jamo]

In a word (or a few)...NFW!!!!!!!

They are threatening to go through BK, which means they will use it to get out of the union contracts...that's why the Democrats are pushing this (to protect the unions).

Let them go through BK and/or obtain investment from other mfgs. I was against the Chrysler loan a few decades ago, and I truly don't care if they paid it back...it opened the door to the failures of our corporate world to come begging ever since. Saving that POS made money for a fellow Armenian (Kirkorian), lowered the quality of Mercedes Benz and now rests in the hands of a private investment firm...who did we save it for? Where do we stop...airlines, utilities, big retail corporations, etc.? Isn't Macy's as much a fixture as GMC?

We're going to end up with a collection of British Leylands...bad products and private welfare for union retirees.

And BTW...1ntCobra, nothing personal...WTF with blaming the "fickle American consumer?" Toyota and Nissan came to the big pickup/SUV party late and are soaking up their losses, so why should we help the morons in Detroit for their bad choice of products? Sh!t happens.

OK...who's next, MS for bringing out Vista?

[Don]

Source: New York Times.com

November 18, 2008
A British Lesson on Auto Bailouts

By NELSON D. SCHWARTZ
PARIS — A faltering auto giant whose brands are synonymous with the open road. Hundreds of thousands of unionized workers with powerful political backers. An urgent plea for the government to write a virtual blank check.

This is not the story of Ford and General Motors, but British Leyland, a car company that went through £11 billion of inflation-adjusted British taxpayer money, or $16.5 billion, in the ’70s and ’80s before going out of business. All that is left of the company now are memories of cars like the Triumph, and a painful lesson in the limited effectiveness of bailouts.

“It’s all too evocative,” said Leon Brittan, a top official in the government of Margaret Thatcher, the free-market-minded prime minister who nevertheless backed the rescue. “I’m not telling the U.S. what to do, but the lessons of the British experience is don’t throw good money after bad. British Leyland carried on for a few more years, but they’re not there now, are they?”

Other experts are sounding the same alarm. “The British Leyland experience is a relevant and cautionary one,” said John Casesa, a principal in the automotive consulting firm Casesa Shapiro Group in New York. “The government got in the business of trying to make a winner out of a structurally flawed company. That’s the risk in the U.S. as well.”

Though Continental automakers have fared better than British ones, Mr. Casesa argues that the long history of government support in Europe made companies like Renault and Fiat strong players in their home markets, but not worldwide.

“With the exception of BMW and Mercedes, European automakers haven’t been globally successful,” he said. “Nor have they been hugely profitable.”

That comparative history is receiving new attention as Congress turns its attention this week to the fate of Detroit.

The British Leyland bailout remains the classic example of a futile government intervention. The tight cooperation between governments and automakers on the Continent has produced happier results.

For half a century after World War II, the French government was the majority stakeholder in Renault, and Paris still holds a 15 percent stake in the company. In the 1980s, the company received a bailout equal to nearly 4 billion euros, or $5.1 billion in today’s money. Now it is highly profitable — at least compared with its American counterparts.

Today, G.M.’s German subsidiary, Opel, is appealing to Berlin for help, seeking more than 1 billion euros in credit guarantees, according to Carl-Peter Forster, G.M.’s European chief.

Monday, Chancellor Angela Merkel of Germany said her government would make a decision before Christmas.

“It’s not decided yet whether these loan guarantees will become necessary,” Mrs. Merkel told reporters in Berlin after meeting with Mr. Forster and other management and labor officials.

“If these guarantees become necessary, those funds should remain within Opel” in Germany, she added, echoing a concern some Americans have expressed that any United States bailout money go only to American automakers.

So far, Asian companies have not complained that such a bailout would amount to an anticompetitive subsidy. But José Manuel Barroso, president of the European Commission, said last week that he thought an aid package for Detroit could be “illegal” under World Trade Organization rules.

That has not stopped European automakers from seeking 40 billion euros in loans from the European Investment Bank, ostensibly to help develop cleaner cars.

For Garel Rhys, head of the Center for Automotive Industry Research at Cardiff University in Wales, the trajectory of General Motors is reminiscent of British Leyland not only because of the former’s decision to seek aid to avert bankruptcy, but also for its slow, seemingly inexorable loss of market share. “Both had a history of being the biggest in their market but couldn’t adapt as they lost sales,” he said. “They couldn’t get customers back.”

Historically, British Leyland’s roots stretched back further than Henry Ford’s Model T. The company controlled 36 percent of the British market well into the 1970s, with mass-market brands like Austin and Morris and premium lines like MG and Jaguar. But rising competition from Japanese and German automakers, shoddy workmanship and a breakdown in labor relations brought the company to near bankruptcy by 1975, Mr. Rhys said.

Michael Edwardes, who took over as British Leyland’s chief executive in November 1977, recalled that when he joined, no one even knew whether individual brands were profitable. “It was a farce — no one knew what the costs were,” he said.

As it turned out, every MG the company sold in the United States resulted in a loss of $2,000 for British Leyland.

Wildcat strikes consumed more than 32 million worker-hours in 1977, and the company became a symbol of labor strife, with some employees walking out the door with spark plugs in their coat pockets and engines in the trunks of their cars, Mr. Edwardes said.

Mr. Edwardes immediately began reducing the company’s work force of roughly 200,000 — to 104,000 within five years — and closing 19 factories. He appealed to the Thatcher government for aid, arguing the money was needed if British Leyland was going to be able to afford to lay off workers while investing in new models.

Eventually, the government put up £3.6 billion, equal to £11 billion in today’s money. But the rescue did not do much to preserve British Leyland’s labor force or market share in the long term.

By the time it received its last government infusion of cash in 1988, Mr. Rhys said, British Leyland’s market share had slumped to 15 percent. British Leyland evolved into MG Rover, which was eventually acquired by BMW, then spun off, finally going bankrupt in 2005.

According to Mr. Rhys, just 22,000 workers remain at British Leyland’s successor companies, about 10 percent of its work force in the mid-1970s.

“It was a very poor return,” he said. “We felt collectively and nationally that we got our fingers burnt, and this was always used as a reason to avoid bailouts, both by Labor and Conservative governments in Britain.”

Mr. Edwardes still defends the government aid, arguing it preserved parts of the company that remain in business now — like Jaguar and Land Rover, which were bought by Ford.

Jaguar never made a profit for Ford, however, and was sold with Land Rover to Tata Motors of India earlier this year. Ford recouped only about half of what it paid to acquire the two brands, and is estimated to have poured $10 billion into Jaguar.

Despite the British experience, the case of Renault, which combined fresh money and new management in the 1980s, showed that government bailouts can be beneficial.

The French government help for Renault also came amid increasing losses for the company. But Mr. Rhys said that unlike British Leyland, Renault was able to use the financing to create new car models that were ultimately successful. That, along with tough cost-cutting by a newly installed chairman, cleared the road to profitability by the time the government began privatizing Renault in the 1990s.

If Washington does go ahead and help Detroit, Mr. Edwardes said, it is crucial that the government overhaul the management of the Big Three. “Throwing money at them isn’t enough,” he said. “They need money and they need new management. They need both, not one or the other.”

[RodgerH]

Here's an interesting video. Pay attention to the last few words of the narrative.

http://info.detnews.com/video/index.cfm?id=1189

Rodger

[G.R.]

NO WAY,NO HOW! Their damned CEO's and corporate robbers and the unions got them into this mess. Why should they expect the Gov't (the taxpayers)to fix their problems. If theyhave to go Chapter 11, then cancel the multi-million dollar bonuses to the top cadre and get rid of them replacing them with people that can get things accomplished, then ****can the unions, re-engineer their product offering, cut down on the waste...maybe then we'll see a resurgence of American industrial power.

Unions, IMO, have outlived their usefulness, at one time back in the '20's they helped the worker... today they are power hungry and a monolithic force in our political scene. The union bosses and in some cases stewards always get paid if they go on strike, not so the worker bees.

I've e-mailed our CO state legislators and governor on this issue as well as our senators and congress men and women....for all the good it'll do

[428street]

For the life of me I don't understand why this is even a consideration.

The problem (one of them) in this country is VERY FEW people and/or business take any responsibility for what they do, how they live their lives and how they run their businesses. This goes for consumer to fortune 100.

Most people and businesses are way over credit (i.e., buying things they can't afford) so why should we have to pay for all their mistakes.

We as a country need to take a serious look at how we run our lives and our businesses and re-adjust.

Stop worrying about what your neighbor has and live were you can afford to, buy the car you can afford to pay, etc.

How did people live before the advent of "the credit card," leasing, non-income verification loans.

This makes me sick to my stomach.

[Ron AZ]

I have read all of these 'post' and find myself in agreement with almost everything that is posted. I have heard for years how the UAW contracts was 'killing' the automobile industry, I believe that time is upon us. 'The GOLDEN GOOSE IS ABOUT DEAD". The UAW needs to go.... along with all those large bonuses and costly retirements of top level executives.

I believe we need to help the auto industry and that will require a lot of CHANGES, which I also believe no one is willing to do, especially the UAW.

I enjoyed the video of the ford plant in Argentina, especially the last comment the commentator makes.

[jhv48]

The Democrats (that the vast majority of you all voted into power) will make sure that the Unions don't suffer, and that the big three get a much needed infusion of capital. Is McCain starting to look a little better to you yet?

Almost guaranteed to be a bailout of some sort or another.

It's British Leyland all over again. Those that don't learn by history are doomed to repeat it!

[428street]

I see this as less of a political issue and more of a "way of life" that consumers and business people have come accustom to in this great Country we live in...

Think about it...If we only bought what we could afford (had the money in the bank for), ate only what we could eat reasonably at one sitting and treated people like human beings...we would not be in a credit crisis, obesity would not be rampant and there would not be as much hate and dis-trust in your community as we have now.

[Jamo]

Originally Posted by 428street

I see this as less of a political issue and more of a "way of life" that consumers and business people have come accustom to in this great Country we live in...

Think about it...If we only bought what we could afford (had the money in the bank for), ate only what we could eat reasonably at one sitting and treated people like human beings...we would not be in a credit crisis, obesity would not be rampant and there would not be as much hate and dis-trust in your community as we have now.

I don't know how in the he!! you connected all of those dots, but what the heck...good message anyway.

Personally, I eat what I can reasonably eat at one sitting.

Whether you attest to some mantra or just know enough to understand basic economics, it's an assinine concept to bail these basturds out.

[WarrenG]

The "Big 3" and their unions have had 30 years to get it right and haven't done a thing. Let 'em go thru Chapter 11. There's no way they're going to close shop and if it means a few less union workers all the better! Maybe the ones sitting on their arse all day will finally have to go work for a living!