The Case AGAINST Bailing Out GM/Chrysler

[Otto]

Originally Posted by Matt Herring

Otto -

I'd love to see those guidelines be in place should a bailout occur but what most everyday citizens don't realize is that almost half of the money given to these companies would go to covering employee costs and not for research/development/technology....When a private company is given government/taxpayer money it's a recipe for destruction. Some call it socialism. It will happen...and 5, 10, 20 years from now we'll find out just how corrupt this whole deal is.

He who pays the piper calls the tune. Any taxpayer bailout of Detroit should be specifically contingent on modernization and improvement of Detroit products, starting with better fuel economy as an adjunct to national security. Everybody on this website knows that major improvements can be had for cheap, starting with better aerodynamics and properly inflated tires.

In recent weeks, we've seen how even a slight decrease in fuel demand can trigger a major decrease in fuel price. (I know that it's not quite that simple, as other factors have also contributed to downward fuel prices.) Lower fuel prices are tantamount to a major economic stimulus, and also keep the wolf from the airlines' door. Yours and mine, too.

Fact is, no country can survive (esp. in first world status, let alone superpower status) without a stout industrial base, industrial skillsets, and proper financing. Detroit has screwed the pooch with sloppy design and execution. We all know that. Surely, Detroit knows that, too. It should not take much persuasion to get them to clean up their act, for everybody's sake in addition to their own sake. Strings attached to a bailout seems the perfect timing and opportunity to effectuate such much needed change.

[Otto]

Oh, and another thing: Part of any bailout should be cancellation of any tax or other advantages for owning/driving a gas hog like an SUV. Detroit lobbied (aka bribed) Congress to allow SUVs to be categorized as trucks, sidestepping safety and fuel economy guidelines. Voila, a whole new slew of gas guzzlers was born, subsidized by the taxpayers directly and indirectly.

So, any bailout should also explicitly stipulate that any such tax advantages weigh exclusively in favor of better fuel economy and safety, with correspondingly stout tax penalties for wastefulness.

[Matt Herring]

I'm all for guidelines overseeing those who receive taxpayer money to save/help/run their operations. However, government intervention in private business is not a recipe for success...I submit to you the words of our Founding Fathers...

"The essence of Government is power; and power, lodged as it must be in human hands, will ever be liable to abuse." - James Madison

"A wise and frugal government, which shall restrain men from injuring one another, which shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government, and this is necessary to close the circle of our felicity." - Thomas Jefferson, First Inaugural Address.

"The only maxim of a free government ought to be to trust no man living with power to endanger the public liberty." - John Adams

[trebuchet03]

Originally Posted by Duffman

We are seeing a shock to the market, your statement will not hold in the long run.

From BBC NEWS | Business | The decline of Detroit

Wish I had a bigger graph.... It's now 2008 - it doesn't take much for an analyst to say, "the rate of SUV sales is negative." 2+ years ago, this was evident in addition to other indicators such as higher fuel costs and lower purchasing power (not so much to the degree of today, but not as optimal as in 2001, for example)....

Light Trucks vs. Cars


And because I prefer the ends of my graphs to point right and up


I don't disagree with you with respect to long run trends... But an inability to adapt to short and mid term conditions results in never actually making it long term. I'm sure the dinosaurs could exist in today's environment (at least, the movie Jurassic Park tells me so ) Hopefully, the US automakers won't fizzle out too....


Henry Ford's Model

• Build a quality product
• Keep prices low
• Welfare Capitalism
• Employee benefits for "healthy" lifestyle
• Maintain low employee turnover
• etc. - we can ignore his thoughts on the hiring of women and blacks o.0

Somehow, we lost sight of this... There's no excuse, today, for some of the vehicles coming off the line with terrible quality (be it American or otherwise). Testing is time and money - warranty repairs is time, money and scarred reputation (more time and money) :/

[Duffman]

Treb,
If I cared enough to do the digging (which I dont), I am sure I could find graphs that correlate sales of gas guzzlers tanked and sales of fuel efficient ones jumped after the first and second oil shocks (the death of the big block muscle car supports this). The fact that SUVs became so prevelent shows that people dont look back more than about 5 years and have learned nothing. I think the chev suburban will exist 5 years from now if GM survives as a company.

[Formula413]

Today I heard someone suggest an interesting take on bailing out the auto industry: have the government buy all the big 3's stock and sell it to the employees.

[SuperTrooper]

Originally Posted by Formula413

Today I heard someone suggest an interesting take on bailing out the auto industry: have the government buy all the big 3's stock and sell it to the employees.

I fail to see how this helps... Maybe you could explain?

[trebuchet03]

Originally Posted by Duffman

Treb,
If I cared enough to do the digging (which I dont), I am sure I could find graphs that correlate sales of gas guzzlers tanked and sales of fuel efficient ones jumped after the first and second oil shocks (the death of the big block muscle car supports this). The fact that SUVs became so prevelent shows that people dont look back more than about 5 years and have learned nothing. I think the chev suburban will exist 5 years from now if GM survives as a company.

Again, I'm not disagreeing with you - long term, things should be up (this holds true for almost everything). But again, if you can't survive the bad times now, you're not going to make it to the next period of growth.

And I also agree about the Suburban being around 5 years from now if GM survives. If you die because you didn't adapt to short and midterm problems - you're dead, there's no long term forecast.

But I'll stand by what I said before.... Starting four years ago - buyers progressively decided against the $30K cash cow SUV/Light trucks. Inversely, they decided to start buying cars.

The problems we have now are a result of what's going on now and decisions made in the recent past... GM et. al. aren't having their problems because sales figures for $30K vehicles in 2015 are good

[Formula413]

Originally Posted by SuperTrooper

I fail to see how this helps... Maybe you could explain?

The employees would become the management. As the shareholders they could hire their own board of directors and choose people who would move the company in a more sustainable direction. Not to mention that instead of the give and take of management fighting for higher profits vs unions fighting for higher wages the employee's wages would be directly tied to profits. They would have a direct stake in the success of the company.

[Big Dave]

There seems to be this assumption that somebody else could manage GM, Ford, and Chrysler and do better. I'd like to know who this might be.

In the late 90s a bunch of fugitves from Proctor & Gamble (very profitable) tried to run GM and didn't do well. If GM hadn't gotten Bob Lutz, we wouldn't be talking about GM now. GM would be defunct.

Certainly nobody in government is up to the job. I offer Fannie Mae and Amtrak as evidence.

If you cannot ditch the legacy costs, contradictory and delaying regulations, mad-dog litigation and state franchise laws, it may be mission impossible.