Should the US bailout the big three automakers?

[mr bruce]

Take all them auto union members (and their families) (and all the other people working in businesses, and towns and citys, etc)and euthanize them, problem solved.

[Anthony]

Back to the subject.

Big three should be allowed to go broke, and then have the UAW with all of their wisdom and members buy out the assests and run the car making business themselves.

But that still does not get to the root of the problem which is our government. A bunch of self righteous , pompous polititions (lawyers) who think they know everything about everything, who actually created the mess in the first place by screwing around with the economy by playing with interest rates and creating a system encouraging bad loans and no way to hold people accountable for them. The polititions are the real problem, and the reason why the economy in general will always be prone to catastrophies.

[puppster]

I am really surprised by the attitude towards the industry that created the toys that so many on this forum love. The fact remains that the "Big 3" have been building trucks and SUV's to stay profitable. The margins in these vehicles kept us afloat while we were paying wages and legacy cost that the Japanese rivals didn't have to. The truth that so many don't want to believe is that is the "Big 3" stopped building trucks in the volumes that they did for the last decade, Toyota, Nissan and Honda would have. They are guilty of building full size trucks that deliver no better economy than the Americans. They just weren't as successful. Toyota spent Billions to build a new factory in Texas to try and compete, and were affected by the same economic factors as the domestic industry. I beleive the domestic auto industry is to blame for not being tougher when bargining with the UAW in past decades, but the people in charge now, have worked hard to start correcting the damage already done.

[Don]

Regarding the fees as mentioned below, nothing stated on the impact the fees would have on decreasing the sales of new cars.

"........idea of a fee levied on every foreign or domestic vehicle sold that could raise billions a year for automakers "

USA Today Friday Nov 21:

" Idea to aid carmakers: Fee on sales "
By Chris Woodyard, USA TODAY

" LOS ANGELES — Automotive titan Roger Penske thinks he's found a simple answer to bailing out Detroit's automakers — a restructuring fee that would be added to the price of every new car.

Instead of government loans to try to bridge General Motors (GM), Ford Motor (F) and Chrysler through their financial crisis, Penske said Thursday that he likes the idea of a fee levied on every foreign or domestic vehicle sold that could raise billions a year for automakers.

Proceeds from the fee — he suggested $200 or $500 per car — would help relieve automakers of their health and retirement burdens. It could also go to buying out underperforming auto dealers. Laws in many states prevent automakers from closing dealers outright.

"It would level the playing field," said Penske, CEO of one of the nation's largest automotive dealer groups, importer of the Smart microcar and auto racing legend, in an interview at the Los Angeles Auto Show. "It helps pay for some of these legacy costs."

Penske says he thinks the time is right because Congress has yet to figure out how to structure a bailout plan that garners widespread support.

He says the proposal comes from Tom Dekar, regional managing principal for the accounting firm Deloitte & Touche. Dekar said he only wants to float the idea as his personal view to enhance discussion to solve the crisis.

It was one of several that he says he devised after talking to Michigan Gov. Jennifer Granholm. The governor's spokeswoman, Liz Boyd, said she could not immediately reach her for comment.

The proposal would recognize automaking "as a strategic industry," Dekar said. "Everyone is beating up the Big Three." But he says the criticism is unfair because Detroit's trouble can be traced largely to taking care of their workers in the industry's heyday. Now the unionized workforces burden the Big Three with costs not shared by non-union plants of foreign rivals in the USA.

Penske says he thinks even foreign makers would line up behind a fee because they have already said the Big Three's survival is critical to their ability to maintain their base of key suppliers.

Initial reaction to the idea appears skeptical, however. Stephen Collins, president of the Automotive Trade Policy Council in Washington, says a new fee or tax won't be popular — a loan would "lower costs rather than raise taxes" on car buyers. "

[Dan40]

Originally Posted by 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

Very interesting! So the Big 3 have a problem, WHY?

Their stocks are in the dumper, WHY?

They made all those highly profitable pickemup trucks for years and they are now broke, WHY?

Dan

[CobraDan]

http://gmfactsandfiction.com/archives/

[mdmull]

If Roger Penske actually said he supported that idea, the fumes Have gotten to him. You can not be as successful as he has been & have a brain small enough to think adding a "fee" on each sale would help. Or can we count on BO to allow us a tax credit for the fee. If the politicos can find a way to make us pay for "saving" these companies but think someone else is doing so, they will. You will hear all kinds of new "ideas" and invented phrases in the next few months. Maybe they'll call the auto bailout bill " Saving Apple Pie & the American Way Act"

Pitchforks & torches I say!

[CHANMADD]

The UAW is the major problem......it needs to go away!!! Let the "3" make cars and not be a pension fund. The billions of $ should go to health care and retirement for "US"
The big 3 need to change their model lineup and in a hurry....but they cannot do a U turn overnight! It takes time to change the assembly lines.
GM has many models that they sell in other parts of the world that they could and should sell here.. The large SUV's that we all see being driven by 100 pound girls..are a joke and responsible for more than being gas guzzlers. They are responsible for a lot of the potholes and uneven road surfaces that we see in our roads.
The Europeans drive small cars ...which we should... and not only would our National fuel consumption fall but so would our congested traffic conditions get better, because smaller cars would allow more lanes on existing freeways.
The license fees on vehicles should be based on the weight of the vehicles.
I say no bailout for anyone or any business. AIG has obviously not been run well ( just listen to the idiots that are in charge.Jeez ...How the hell did they get those jobs in the first place!!)

My theory is that the whole world is in a (morphing) stage... we are getting up to speed with life and how the Internet has so dramatically changed the way of doing business.Everything that we "traditionally" know has to change to get up to speed....its a natural progression. If we keep hanging on to stuff and ways of doing things that were founded in the 30's we are going to remain in a tailspin.
Also when I called my credit card company the other day I first spoke with an Indian guy....WTF....That is a job that should be an Amercans!!!! and now they all want a bail out!!! What BS!!
We have to start being selfish with our jobs and our money and stop giving in to the Do-gooders and treehuggers and start looking out for no.1! The U.S.A......our home!!!!
John

[Jamo]

Originally Posted by mr bruce

Take all them auto union members (and their families) (and all the other people working in businesses, and towns and citys, etc)and euthanize them, problem solved.

Just the UAW members would be fine...

Next...the assinine medical profession that wastes so much money on needless toys and tests and overcharges the hell out of everyone and drives the costs of healthcare up, which is a major portion of the cost of each car. {Meant as a retort to those with god-like tendencies}

[G.R.]

and the sheep keep electing worthless politicians, Dem or Repub, to "represent" them sometimes for decades, Stevens comes to mind...it has been getting worse for the last 40 years...and most of us "boomers" just sat back and were apathetic to what was going on around us, more interested in our self-gratifing lives.

We can blame whoever we want, the unions, the gov't, the Middle East, the banks, immigration, what have you for our current economic problems...

in reality we only have our own selves to blame because most Americans don't pay attention and when it comes time to go to the polls we blindly listen to the "spin" and vote back in Joe Schmuck " 'cuz he's been a politician for so many years he must know what he's doing" ... I admit I'm guilty of it....how about any of you?????....meanwhile ol' Joe's getting "fatter"...ever seen poor or middle class politicians after a few years in office?

And now we cry out in the wilderness of economic doom........

[Dan40]

Random thoughts.

The no longer BIG 3 want 25 Billion. The amounts each asked for total more than 25 Billion, but what's a few xtra Billions to us taxpayers?

An insurance giant got 85 Billion and threw a hellova party. Now they need more.

The financial industry needed 700 BILLION DOLLARS to stay in business. But the approved "EMERGENCY" bailout didn't work, but since the money is approved, lets use it some other way........What way?........Don't know yet.

Seems to me that businesses or industries that need that much money to stay in business ARE ALREADY OUT OF BUSINESS. The patient DIED already, stop the operation.

But the auto industry would cause 3 million to lose their jobs. A SCARE number I think, but we will accept it. Add on another 5 million out of work from the financial sector. 8 million out of work. Mexico might finish building the fence , but on their side of the border.

Lets double that, 16 million. Highest unemployment benefits I could find on the net, $510 a week [Mass.] So we have 16 million unemployed collecting $510 a week. They can collect for 26 weeks [I think] then there is a 13 week extension for a total of 39 weeks [9 months]. Lets double that too.
78 weeks [1.5 YEARS] X 16,000,000. claimants X $510 = <$700,000,000,000.00. [ Less than 700 Billion.] And the companies are gone so they cannot come back and ask for more.
Cheaper to let them go than to save them.


We did get a new oxymoron out of all this: "toxic ASSETS"

Dan

[Tony Radford]

What's the chance that when the dust settles, average citizens will see the ill of their past ways and become more frugal? Back to the WWII generation. Isn't this the first major spanking the baby boomer generation has experienced? I've been on the Dave Ramsey plan for the better part of the year and (assuming I'm still employed) should be debt free by the end of next year. I wish I had started the plan a year earlier so I'd be there already (and still have my roadster). When the mindless / reckless spending by the American consumer subsides (just about there), the retail industry will have to recede. Massive closing of businesses (that grew to facilitate our spending habits) has to shrink, right? As one adopts the philosophy of frugal living, supply and demand will force the inescapable alteration to our commercial landscape. How long does it take for the "system" to re-tool and begin absorbing the masses of unemployed? It all sounds like the end of the world, but it probably isn't. What are the plausable theories? I'm sure no "one" will lead the country to the light. It will just happen like always.

[CobraDan]

Doctors' Opinions of The Financial Bailout Package

The Allergists voted to scratch it.

The Dermatologists advised not to make any rash moves.

The Gastroenterologists had sort of a gut feeling about it.

The Neurologists thought the administration had a lot of nerve.

The Obstetricians felt they were all laboring under a misconception.

The Ophthalmologists considered the idea shortsighted.

The Pathologists yelled, 'Over my dead body!'

while the Pediatricians said, 'Oh, grow up!'

The Psychiatrists thought the whole idea was madness.

The Radiologists could see right through it.

The Surgeons decided to wash their hands of the whole thing.

The Internists thought it was a bitter pill to swallow.

The Plastic Surgeons said, 'This puts a whole new face on the matter.'

The Podiatrists thought it was a step forward,

but the Urologists felt the scheme wouldn't hold water.

The Anesthesiologists thought the whole idea was a gas,

and the Cardiologists didn't have the heart to say no.

In the end, the Proctologists decided the decision was
best left up to the assholes in Washington .

[Ronbo]

When the American people are stupid enough to fall for the oil shortage, killer bees, hole in the ozone, global warming, el Nina (or what ever the hell that was), hell why not "the credit shortage".

Has it ever occurred to anyone that they could be using "Enron math" (well, the inverse of it anyway)???

GM's broke, ya right.

Amazing thing is GM shot themselves in the foot, now consumers are leery of buying a car from a company that could be gone as far as they know. They just made their future a lot more dismal.

[428street]

Hmmm...that's an interesting thought...It would not surprise me and actually something I just had a conversation about with my wife the other day...I said to her it would not surprise me if this entire issue (and we were taking specifically about the gas shortage issue) was choreographed by the powers that be..

The credit issue I think is an entire other issue...that was created by greed (banks) and idiotic Americans buying more then they can afford to keep up with their neighbors and again the banks letting them live on credit. I don't know much about the banking industry but I have to assume that the amount of interest paid over the years to these banks far outweighs any loses that might have taken recently.

Ever look at your amortization table when you took out your mortgage. It is sickening to see over a 30 year loan you basically pay out 2x more then the cost of your initial buying price. There is some serious profit in that business as far as I can see it.

On another note...and this just happened to me 2 days ago.

We put a bid on a job that at the time I did not know was what they call in CT as a prevailing wage job. This is/was a State bid which dictates what I have to pay my employee's every hour they work on this job. It was explained to me that this is done so the unions get a fair chance at this work! The labor rate and benefits I have to pay my guys if I get this job is $75 per hour. $45 for labor and $35 for benefits. This added about $70 an hour more I had to charge the customer over my normal rates to make the Union labor competitive. And yes, we are non-unuion. Seems like price fixing to me. And yes I know that it is my choice to bid on this work or not. This will be the last prevailing wage job I will bid on.

I assume there is a direct correlation between my experience with Union based wages and what is going on with the American Auto Industry.

[Bartruff1]

Should implies a value judgement and perhaps that is what you are asking but "should" really doesn't matter. We are going to bail them out.

[sdfletch]

i would prefer to talk about cobras.

[G.R.]

Originally Posted by Bartruff1

Should implies a value judgement and perhaps that is what you are asking but "should" really doesn't matter. We are going to bail them out.

Yep we (the taxpayers) will....but I want Stock in the Big 3 for my money. I don't want some dumocrat gov't clone managing my money...if I'm buying in I want a say so...that goes for the banks, the insurance companies and whatever all with their tin cups out.


Take back America's economic freedom...

[Don]

Selected comments, not the entire article:

Fuel-efficient caravan planned for automakers' next trip to D.C.

BY TOM WALSH and MARK PHELAN
FREE PRESS BUSINESS WRITERS


" A plan is taking shape for auto suppliers, dealers and the UAW to participate in a cavalcade of fuel-efficient American-brand vehicles to Washington, D.C., in December, when Congress reconsiders the industry's plea for quick action on low-interest loans.The aim is to put a populist face on the need for the American auto industry's survival and to build grassroots support for federal aid, in the wake of criticism that the Detroit Three chief executive officers and UAW President Ron Gettelfinger did not make a convincing case during two days of congressional hearings last week.

The proposal took shape Friday after Tim Leuliette, chairman and CEO of Dura Automotive, a Rochester Hills-based supplier, broached the idea to Rick Wagoner, Alan Mulally and Bob Nardelli, the CEOs of General Motors Corp., Ford Motor Co. and Chrysler LLC. Other supplier executives and auto dealers were quickly engaged in the discussion.

"We want to help dispel the myths" about the Detroit Three, Sean McGuire, Dura vice president of marketing, said Sunday. "It's important to show that these are truly high-tech companies that produce a variety of alternate-fuel and high fuel-efficiency vehicles."

Ford, GM, Chrysler and UAW representatives expressed support for the idea Sunday.

"The UAW thinks it's great that so many people understand the importance of good American jobs and know the value and quality of American vehicles," spokesman Roger Kerson said.

The goal is to bring together a group of 100 or more auto industry leaders and local officials for a rally in Hart Plaza in support of the loans. A cavalcade of hybrids and other fuel-efficient vehicles made by GM, Chrysler and Ford then would head to Washington, with stops along the way for rallies and news conferences. If the CEOs and Gettelfinger present Congress with a specific recovery plan as requested by Dec. 2 and appear for more testimony on Dec. 8, the cavalcade probably would begin on Sunday, Dec. 7.

But the date and the specifics are still under discussion. "

[khansmith]

I thought this was a good piece that speaks to this topic

Source: NY Times
OP-ED CONTRIBUTOR
Let Detroit Go Bankrupt

By MITT ROMNEY
Boston

IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.

Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.

I love cars, American cars. I was born in Detroit, the son of an auto chief executive. In 1954, my dad, George Romney, was tapped to run American Motors when its president suddenly died. The company itself was on life support — banks were threatening to deal it a death blow. The stock collapsed. I watched Dad work to turn the company around — and years later at business school, they were still talking about it. From the lessons of that turnaround, and from my own experiences, I have several prescriptions for Detroit’s automakers.

First, their huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota. Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers.

That extra burden is estimated to be more than $2,000 per car. Think what that means: Ford, for example, needs to cut $2,000 worth of features and quality out of its Taurus to compete with Toyota’s Avalon. Of course the Avalon feels like a better product — it has $2,000 more put into it. Considering this disadvantage, Detroit has done a remarkable job of designing and engineering its cars. But if this cost penalty persists, any bailout will only delay the inevitable.

Second, management as is must go. New faces should be recruited from unrelated industries — from companies widely respected for excellence in marketing, innovation, creativity and labor relations.

The new management must work with labor leaders to see that the enmity between labor and management comes to an end. This division is a holdover from the early years of the last century, when unions brought workers job security and better wages and benefits. But as Walter Reuther, the former head of the United Automobile Workers, said to my father, “Getting more and more pay for less and less work is a dead-end street.”

You don’t have to look far for industries with unions that went down that road. Companies in the 21st century cannot perpetuate the destructive labor relations of the 20th. This will mean a new direction for the U.A.W., profit sharing or stock grants to all employees and a change in Big Three management culture.

The need for collaboration will mean accepting sanity in salaries and perks. At American Motors, my dad cut his pay and that of his executive team, he bought stock in the company, and he went out to factories to talk to workers directly. Get rid of the planes, the executive dining rooms — all the symbols that breed resentment among the hundreds of thousands who will also be sacrificing to keep the companies afloat.

Investments must be made for the future. No more focus on quarterly earnings or the kind of short-term stock appreciation that means quick riches for executives with options. Manage with an eye on cash flow, balance sheets and long-term appreciation. Invest in truly competitive products and innovative technologies — especially fuel-saving designs — that may not arrive for years. Starving research and development is like eating the seed corn.

Just as important to the future of American carmakers is the sales force. When sales are down, you don’t want to lose the only people who can get them to grow. So don’t fire the best dealers, and don’t crush them with new financial or performance demands they can’t meet.

It is not wrong to ask for government help, but the automakers should come up with a win-win proposition. I believe the federal government should invest substantially more in basic research — on new energy sources, fuel-economy technology, materials science and the like — that will ultimately benefit the automotive industry, along with many others. I believe Washington should raise energy research spending to $20 billion a year, from the $4 billion that is spent today. The research could be done at universities, at research labs and even through public-private collaboration. The federal government should also rectify the imbedded tax penalties that favor foreign carmakers.

But don’t ask Washington to give shareholders and bondholders a free pass — they bet on management and they lost.

The American auto industry is vital to our national interest as an employer and as a hub for manufacturing. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs. It would permit the companies to shed excess labor, pension and real estate costs. The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.

In a managed bankruptcy, the federal government would propel newly competitive and viable automakers, rather than seal their fate with a bailout check.

Mitt Romney, the former governor of Massachusetts, was a candidate for this year’s Republican presidential nomination.