Detroit Bailout -- Do you support it?

[minnie61650]

I voted yes.

I think a lot of us are forgeting that about 10% of jobs are tied to the auto industry. At the present time the unemployment is 6.5% .

more than 14 million U.S. workers -- about 1 in 10 -- can draw a line from their job back to an auto factory or office worker, according to CAR.

Link to full article:

http://www.detnews.com/apps/pbcs.dll/article?AID=/20081103/AUTO01/811030343/1148/rss25

Add another 10% to that and our unemployment will be at 16.5 % .

With that number of people out of work there will be a lot less retail shopping.
More stores will go out of business and employees will be let go.

Less people will go to the movie theaters so some of those will close.
More people unemployed.

Less movies will be made...more people unemployed.

Less people will be able to go to WDW.

DVC will tank and owners will not be able to get 10 cents on the dollar when try to sell out.

Trickle down bankrupcy....that is what we are talking about.

JMHO

 

[Zippa D Doodah]

So we give them money now and what happens 10 years from now if no one still wants to buy their cars? Do we continue to subsidize and national another industry in this country? And with the unions saying "no" to the smallest cut back in salary or benefits, then let them go work at McDonalds.

That's exactly the problem... there is no good reason on earth to think anyone is going to want to buy their cars 5-10 years from now either. It's a failed business model. Pumping money into it may ease the pain for the short term, but ultimately it's just throwing money into a giant black hole to pad pockets of executives and union leaders

 

[CowboyCO]

I voted yes. Because of the millions of jobs and............

I read somewhere that the Dept of Defense has a lot at stake with the big 3 - who's going to manufacture our tanks, missiles. equipment - etc.

The Big Three don't make tanks, missiles. The Abrams is built by General Dynamics, not General Motors. Missiles are built by Lockheed-Martin, General Dynamics and Northrop Grumman.

Even the venerated Humvee is not built by GM, -- it is built by AM General.

Those millions of jobs would only be lost if the big three all went chapter 7. Even then, their assets would likely be bought by other companies to form new companies. Would jobs be lost? Yes, but jobs are already being lost. All we are doing by bailing them out is pouring money down a rabbit hole.

 

[Zippa D Doodah]

100% agree, I much rather bail out GM than AIG

While I may agree with that in theory, unfortunately we have already blithely given an ungodly amount of money to AIG which leaves little for GM.

 

[minnie61650]

I would be more for a bailout after they have gone through chapter 11, let them file and restructure everything including contracts and such. ...... Filing for chapter 11 is the only alternative I see to get everything back in line with todays market, just giving them money will not work, look at the airlines and now the banks. .....

From this article:

How Bankruptcy Would Wreck GM and Chrysler
August 22, 2008 11:06 AM ET | Rick Newman

http://www.usnews.com/blogs/flowchart/2008/8/22/how-bankruptcy-would-wreck-gm-and-chrysler.html

But for GM or Chrysler, declaring bankruptcy would be more like slashing their own tires. Customers would flee, consumers would be unsympathetic, and the government would probably do little to help. Here's why bankruptcy would be such a dire scenario for any one of the Detroit 3:

Buyers would bail. When airlines like United, Delta, and Northwest declared bankruptcy, most fliers stuck with them. That's because it was clear those airlines would stay in business at least long enough to honor their tickets. But it wouldn't work that way for an automaker. Most people who buy airline tickets plan to use them within weeks. But consumers spend way more on a car than an airline ticket, and commit to the product for years. It's kind of important that the company selling the product be around to make good on a 60,000-mile warranty, service the car, and supply parts.

Simply declaring bankruptcy would be a disaster for an automaker, even if the company seemed likely to ultimately survive. In a survey conducted by CNW Marketing Research, 80 percent of people close to buying a new car said they would abandon an automaker if it were to file for bankruptcy. Not surprisingly, the numbers were higher for the Detroit 3, and lower for most foreign makes. An automaker could forestall the doom somewhat by offering fire sale prices—but selling cars at a loss would only perpetuate underlying profitability problems. "In today's marketplace, bankruptcy for General Motors (or any major automaker) is a death knell," CNW concluded in a recent newsletter.

Bankruptcy wouldn't solve much. For airlines and other big companies that have successfully emerged from bankruptcy, Chapter 11 allowed them to cut costs and other expenses they were unable to address under normal operations. The airlines, for instance, were able to slash pensions and renegotiate rich labor contracts that were signed when the airlines were flush, but which they could no longer afford. That improved cash flow and helped them get back on their feet............

Bankruptcy might allow Chrysler or GM to offload some debt—but it wouldn't do anything to increase revenue, speed the arrival of must-have new products like slick compact cars and family-oriented crossovers, or fund technology breakthroughs like GM hopes the Chevy Volt plug-in hybrid will be..........

 

[Oreo Cookie]

I agree.

Just a note, though. It is far more than 1.2 million jobs on the line. CNN has been reporting on a study that estimates the consequences of just ONE of the Big 3 failing at a loss of 2.5 million jobs, 125 billion in personal income, and 50 billion in tax revenues in one year. Regardless of how you feel about the lost of US production capacity and the movement towards a "haves and have nots" service economy, there's no denying that our economy cannot absorb that kind of blow.

I agree. The bail-out doesn't sit well in my stomach, but I do think the consequences of not doing the bail-out are astronomical. The big three have to retool the way the do business, and develop fuel efficient and alternative engergy cars. Also, there needs to be pay adjustments, and the union has to give in also. 10% of the US work force will lose their jobs if the Big Three go under.

The great depression happened because the our government didn't act but ignored. The economy of Japan in 1990s collapsed because their government didn't act. I don't want to see another great depression.

 

[minnie61650]

GM has to attempt to restructure first. Good Grief, Charlie Brown, just how many of the same car do we need with different trim and name plates on them? They could save millions just by consolidating the brand into 2 or 3 different nameplates. Keep Cadillac, Chevy, and maybe Saturn. I could even see them keeping GMC, but only if they did away with the trucks in the other lines. It just doesn't make sense to me for them to have all those duplicate products out there.

I read that plans are to keep Cadillac, Chevy and Buick.

They ae thinking of discontinuing the Saturn, GMC and Sabb models.

Also they are trying to sell off the Hummer model:

From this article:

http://www.freep.com/article/20081108/BUSINESS01/811080331

The automaker is seeking buyers for its Hummer brand of SUVs, the ACDelco parts distribution division and a manufacturing plant in Strasbourg, France.

 

[Family Fun Mom]

I haven't read this whole thread. Sorry if any of this is a repeat.

I live near Detroit. Everyone I know works for the Big Three or for a support company of the Big Three. Everyone. It will have a horrible effect on this area if they fail. We'll cease to exist. I do not want to see that happen. I already know several people who are out of work. I don't want to see more. This will affect friends, family, and everyone in between.

But enough is enough. How can we continue to keep bailing these companies out? It has to stop somewhere.

I wish there were a better way. This is just terrible. All of it. Just terrible.

 

[minnie61650]

I agree. The bail-out doesn't sit well in my stomach, but I do think the consequences of not doing the bail-out are astronomical. The big three have to retool the way the do business, and develop fuel efficient and alternative engergy cars. Also, there needs to be pay adjustments, and the union has to give in also. 10% of the US work force will lose their jobs if the Big Three go under.

The great depression happened because the our government didn't act but ignored. The economy of Japan in 1990s collapsed because their government didn't act. I don't want to see another great depression.

I agree our country definately needs to bulid
fuel efficient and alternative cars.

Granholm pleads for fast action on assistance for automakers
By BRENT SNAVELY • FREE PRESS BUSINESS WRITER • November 12, 2008

Gov. Jennifer Granholm today urged quick action on a government assistance package for Detroit’s ailing automakers, saying the domestic automotive industry is central to the health of nation’s economy, but acknowledged that public opinion is against a bailout.


“There is a fundamental misunderstanding out there for the parts of the country that are not autocentric,” Granholm said, speaking in Troy this morning. “It is critical that the nation understand that this is not just a Michigan problem.”


Granholm pointed out that even Seattle-based Microsoft Corp., which makes software for Ford Motor Co.’s entertainment and communication product, called Sync, would be harmed by an automotive industry meltdown. She also pointed out that there assembly plants across the nation and thousands of suppliers that rely on the domestic automotive industry.


“All of these suppliers … would be deeply impacted and the ripple effect throughout this country would be horrible if this industry is allowed to fail,” Granholm said.


Granholm also argued that the domestic automotive industry can help to lead the way toward developing hybrid electric vehicles and related those efforts to the country’s goal of moving towards energy independence.


“The president-elect has a goal of putting 1 million hybrid electric vehicles on the road by 2015,” Granholm said. “Are we going to cede that territory to foreign competitors?


“This is a national security issue,” she said. “It is a critical national need to have energy solutions, battery solutions and energy storage solutions here, and to have the American automotive industry lead the nation in lessening the dependence on foreign oil and making us energy independent.” ......

Link:

http://www.freep.com/article/20081112/BUSINESS01/81112052/1014

 

[Zippa D Doodah]

Looks like the bailout isn't coming soon...

http://www.reuters.com/article/marketsNews/idINN1339368420081114?rpc=44

WASHINGTON, Nov 13 (Reuters) - A senior Democratic senator raised doubts on Thursday that an attempt to bail out U.S. automakers had enough support to clear Congress this year.

As Republicans amplified their concerns about a bailout, Senate Banking Committee Chairman Christopher Dodd raised the biggest red flag for fellow Democrats trying to craft a $25 billion rescue and pass it during a post-election session set to start next week.

"Right now, I don't think there are the votes," Dodd of Connecticut told reporters about prospects in the Senate. "I want to be careful of bringing up a proposition that might fail," he said.

Although Dodd said "we ought to do something" and personally backed using money from the ongoing $700 billion financial services rescue program to help Detroit, he was skeptical that enough Republicans would support a bailout.

Senate Majority Leader Harry Reid, a Nevada Democrat, also cautioned that success of a bailout rests with Senate Republicans and the White House. With their slim majority, Democrats cannot force a measure through the Senate or trump a White House veto.

The White House opposes the approach being taken by congressional Democrats but has not threatened to block any bailout. Bush administration officials have said they would consider other steps Congress can take to help General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz), Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz) and Chrysler LLC.

Dodd said there have been "legitimate issues raised" about how to help. He plans to hold a hearing next Tuesday, and a House of Representatives Financial Services Committee hearing is set for Wednesday.

House Financial Services Chairman Barney Frank, a Massachusetts Democrat, is trying to write a bill that would amend the financial services rescue package to include $25 billion for carmakers.

The government would likely take an equity stake in the firms and Congress would impose stiff conditions.

CONCESSIONS FROM AUTOMAKERS

In a letter to automaker chief executives on Thursday, the senior Republican on the Senate Finance Committee recommended specific concessions from the automakers.

"They should take every step possible, including cutting executive salaries and bonuses, and exhaust all alternatives before coming to the taxpayers for tens of billions of dollars in help," Charles Grassley of Iowa said.

The stakes for action in Washington rose earlier in the day when Goldman Sachs suspended its rating on GM and said the automaker needs at least $22 billion in aid. Goldman also said it would be difficult for Chrysler to survive without help.

House lawmakers are not formally scheduled to meet next week and Republicans on Thursday voiced greater skepticism about the rescue approach and Detroit's long-term viability.

Senior Republicans are open to considering changes in terms of the $25 billion in federal loans approved in September to help automakers retool factories and make more fuel efficient vehicles. They do not, however, favor extracting more money from the Treasury Department's rescue program.

"Spending billions of additional federal tax dollars with no promises to reform the root causes crippling automakers' competitiveness around the world is neither fair to taxpayers nor sound fiscal policy," House Republican leader John Boehner of Ohio said in a statement.

The administration is also encouraging lawmakers to expedite the retooling loans, which automakers have said are loaded with requirements and cannot help them survive their worst-ever financial crisis.

Democratic Sen. Charles Schumer of New York, chairman of the Joint Economic Committee, expects some Republican support for a bailout but he did not know if it would be enough for congressional passage.

Explaining the White House opposition to using Treasury bailout money, Commerce Secretary Carlos Gutierrez said in an interview with Reuters that a number of other industries have also knocked on that agency's door asking for help.

"Where do you draw the line?" Gutierrez asked

 

[TLSnell1981]

Although Dodd said "we ought to do something" and personally backed using money from the ongoing $700 billion financial services rescue program to help Detroit.

I still say,"where there's a will...there's a way". The dems aren't going to let this go without a fight.

 

[speedyf]

I vote no until they do some kind of re-organization.

What is the difference between the "Big 3" and all the foreign companies that have plants in the U.S. We lived near the Nissan plant in Smyrna, TN for a long time.

Why do these foregin companies operate at a profit while the "Big 3" are always posting a loss? I'm sure it is some combination of the union and the millions given to upper management. But still...GM posted a 38.7 Billon Dollar loss in 2007. You are going to tell me that a $40 million or $50 million or even a $100 million bonus or salary for a CEO is even going to make a dent in that $38.7 BILLION loss. So, if they fire the CEO who makes $100 million per year, then the company only had a $38.6 BILLION loss? At the same time, Toyota posts a $16.4 BILLION PROFIT. There has to be something more than a CEO's bloated salary that is causing a $50 BILLION difference between GM and Toyota.

I don't know what it is...but, I would venture to guess that someone could look at both companies and figure it out and restructure GM to compete with Toyota on an even playing field somehow. If someone would do that, I would gladly be for sending money their way knowing that they will eventually come out of this with a profit. Until then, I will support the hard working people of Kentucky by buying Toyota.

Speed

 

[Yen Sid]

I vote no until they do some kind of re-organization.

What is the difference between the "Big 3" and all the foreign companies that have plants in the U.S. We lived near the Nissan plant in Smyrna, TN for a long time.

Why do these foregin companies operate at a profit while the "Big 3" are always posting a loss? I'm sure it is some combination of the union and the millions given to upper management. But still...GM posted a 38.7 Billon Dollar loss in 2007. You are going to tell me that a $40 million or $50 million or even a $100 million bonus or salary for a CEO is even going to make a dent in that $38.7 BILLION loss. So, if they fire the CEO who makes $100 million per year, then the company only had a $38.6 BILLION loss? At the same time, Toyota posts a $16.4 BILLION PROFIT. There has to be something more than a CEO's bloated salary that is causing a $50 BILLION difference between GM and Toyota.

I don't know what it is...but, I would venture to guess that someone could look at both companies and figure it out and restructure GM to compete with Toyota on an even playing field somehow. If someone would do that, I would gladly be for sending money their way knowing that they will eventually come out of this with a profit. Until then, I will support the hard working people of Kentucky by buying Toyota.

Speed

The reason we can't compete with the foriegn cars is because the likes of Toyota have a universal healthcare system so the health insurance of the employees is not built into every single car, and I don't think they make a lot less then the American auotworkers, I think their pay is pretty close.

 

[ford family]

The reason we can't compete with the foriegn cars is because the likes of Toyota have a universal healthcare system so the health insurance of the employees is not built into every single car, and I don't think they make a lot less then the American auotworkers, I think their pay is pretty close.

So you think Toyota buyers elsewhere in the world are subsidising the American buyer?
Makes no sense to me.
More logical reasoning for their success is not being unionised and not being in Detroit. Far cheaper on a greenfield site without historical baggage with the location or with the employees.
Oh, and their cars are good!

ford family

 

[mickeysgal]

It is with much reluctance that I agree for a bailout due to how intricately the auto industry is tied to our economy. However, I think the government must start exhibiting some tough love. Stop catering to the unions. Heck, I would even support the dismantling of the union. They've had too much of a stranglehold on this industry. Strong stipulations in the restructure, create a payback schedule, performance goals, etc.

 

[speedyf]

So you think Toyota buyers elsewhere in the world are subsidising the American buyer?
Makes no sense to me.
More logical reasoning for their success is not being unionised and not being in Detroit. Far cheaper on a greenfield site without historical baggage with the location or with the employees.
Oh, and their cars are good!

ford family

I agree. I remember the state of Tennessee giving Nissan acres and acres of land and I'm sure other concessions to open their plant. The state knew it would make this back tenfold from tax revenues by the jobs created by the plant and it's subsidiaries.

Most of these foreign cars manufacturers have one if not more plants in the U.S. GM actually has a plant in Mexico that exports Surburbans and other vehicles back into the U.S.

http://www.gm.com/corporate/about/global_operations/north_america/mexi.jsp

Also....
http://media.ford.com/plant_display.cfm?plant_id=98

So...when you buy a vehicle...which company is actually selling you the "American Made" vehicle?

Speed

 

[speedyf]

It is with much reluctance that I agree for a bailout due to how intricately the auto industry is tied to our economy. However, I think the government must start exhibiting some tough love. Stop catering to the unions. Heck, I would even support the dismantling of the union. They've had too much of a stranglehold on this industry. Strong stipulations in the restructure, create a payback schedule, performance goals, etc.

That won't happen....the Dems won't let it happen since the unions are some of the Dems strongest supporters. It really doesn't matter what we want anyway, Washington will make it look like they are doing all kinds of investigations and giving all kind of stipulations, but at the end of the day....the money will be given out with no strings attached.

If we are going to give away all this money, can't we at least get a statement of our Social Security that shows that we own stock in all these companies? (kinda like my 401k statement). At least I could track where all my tax money is going that way....

Speed

 

[leahjade]

[Not to mention, what will happen to the non-US auto makers that are doing well
right now. They use the same suppliers that GM, Ford, and Chrysler use.
Without the volume coming from them, what will that do for the prices that
Honda, Toyota, etc will see going forward? If the supplier is even around. Can
they absorb the shockwave too?
/QUOTE]

Honda and Toyota will be fine - in fact, they will be absorbing all the business that the big 3 are losing so the suppliers will do the same amount of business only with different companies.

 

[leahjade]

That won't happen....the Dems won't let it happen since the unions are some of the Dems strongest supporters

You're right -this is definitely payback to the unions for their votes. We will all be paying for these votes!

 

[Not so Dumbo]

Most of these foreign cars manufacturers have one if not more plants in the U.S. GM actually has a plant in Mexico that exports Surburbans and other vehicles back into the U.S.

http://www.gm.com/corporate/about/global_operations/north_america/mexi.jsp

Also....
http://media.ford.com/plant_display.cfm?plant_id=98

So...when you buy a vehicle...which company is actually selling you the "American Made" vehicle?

Speed

Good question. It's been like that for years.
When I worked for an auto supplier(before they moved to Mexico too) we used to ship Subaru Legacy parts to Indiana, Chevy Impala parts to Canada, and Dodge Durango parts to Mexico.