Should the Government bail out the Auto Makers in the US?

[slingshot]

When you read the news, figures like 3 million jobs may be affected.  But this is IF all three US (Big Three) auto makers go under, not a single auto maker.  Folks will be layed off regardless.  If there is reduced demand for their products, they aren't going to build the cars.  So what does a bail out actually accomplish?  My take is the retiree pension fund which the union is totally mixed up with.  Chapter 11 may be the correct answer to the problem so the company or compaines can really look at their business and streamline the product line to match likely buying habits of US consumers.  I understand Chapter 11 would force a new union contract to be approved and significant concessions will be sought.  Do what most other companies are doing... move to 401K type plans.

Folks say they build a bad product.  I understand Ford has really improved their product line.  I was looking at cars a while back and Ford was the only manufacturer I would consider other than the foreign manufactures.  I didn't even bother visiting a GM dealership.  The only product that I might be interested in are their pickups and vans.  I bought a Ford product (van actually) which is amazing since I have owned exclusively Toyota products since 1980.  You could say that I have been a satisfied customer.  Toyota has never let me down.  So why would I even consider changing?  There lies the problem.....  US Car makers lost my business a long time ago.  It was the result of their not adjusting to a changing market at that time.  I honestly don't know if that is true any more and I guess I really don't care. 

[Manedwolf]

The basic reality is that the bailout to any of them would go right into the UAW retirement funds, not into retooling the companies. The unions would run off with the money from the taxpayers.

[Umber]

NO taxpayer money for the big three.  Let the bastids sink.

Umber

[Monkeyleg]

Shootinstudent, are people still voting for Obama? I suppose it's possible.

When the bailout was being discussed, I recall Obama being conspicuously vague. Can you point me to very specific comments he made?

Just so you don't think I'm one of those cold-hearted rich conservatives, here's a couple of points: I'm not rich; and my 90 year-old mother lives on my late father's GM pension. If the pension goes away, she's going to have a hard time.

I don't know what every single person here on APS does for a living, so I may be stepping on some toes when I ask if nobody finds it incredible that union members get such a fantastic deal. Work on a production line for X number of years, retire in your 50's if you like, and have a pension and health insurance the rest of your life. Same deal with government workers, especially cops (at least here in Milwaukee).

I'm sorry if I don't have sympathy for those folks. Life isn't fair. If GM employees lose their pensions, I don't want to pay for their retirement when I can't afford to retire myself. If my father's pension stops, my brothers and I will make sure our mother has money to live on.

[wmenorr67]

In a word, NO.  They did it to themselves.  Let them rot on the vine.

[slingshot]

One of the problems of this changing corporate environment is the little guy, (the production worker and the low to middle level management or professional types), who will not have a pension when they retire.  Frankly I'll probably have to work until the day I can't any more.  I won't have a GM pension available and all there is is social security and what little I have saved.  Then the stock market did several major flips in the last 10 years and there is not much saved now.  I think I may be typical of many in present day America.  The last two stock market adjustments have absolutely slaughtered any hopes of retiring ever unless I want to live in Section 8 housing, get food stamps and welfare.

[makattak]

One of the main reasons why Obama won:

-Crying foul when money might go to a pension fund for people who worked their whole lives, but not saying much when 700 billion shows up in the federal budget to bail out millionaire investment bankers and insurance industry executives.

It is probably necessary, but it's welfare.  Why is it such a crime when a bunch of retired workers get paychecks that will sustain them through retirement, but not so horribly marxist when the government gives out billions to aid failing corporations?

That question right there is why people are voting for a candidate like Obama.  It's simply not possible to pretend that either party opposes welfare; so given that, the majority of the population is obviously going to vote for welfare for the majority, which Obama seems to favor, as opposed to the welfare for Wall Street and select corporations that conservatives tend to champion.

Hmm... I seem to recall most people (especially here) being opposed to the Wall Street bailout as well.

In this case, it is such a crime because they need to take responsibility for their own actions. These workers, through their unions, are directly responsible for the situation the "Big Three" are in now.

I can see NO BETTER OPTION than to let those who caused this situation suffer the consequences.

If they wanted to have security for the rest of their lives, perhaps they should have aided the future profitability of the company rather than sucking every bit of life from it they could.

[slingshot]

If they wanted to have security for the rest of their lives, perhaps they should have aided the future profitability of the company rather than sucking every bit of life from it they could.

That is a good point.  The problem is that it may not have changed anything from today's perspective.  The legacy costs are the killer infection.  As a tax payer, I really don't want to pay for their retirement packages.  What is the result?  GM falls.  Folks loose their pensions and health benefits.  The whole economic scenario is going to make it so much easier for Obama to permanently alter health care in the USA.

Collectively the unions may have caused the problem.  But the ones that really caused the problem from both industry and the union side will never suffer any financial consequences.  It will be the little guy who suffers as always.

 

[Headless Thompson Gunner]

If they wanted to have security for the rest of their lives, perhaps they should have aided the future profitability of the company rather than sucking every bit of life from it they could.

Actually, I think if these people wanted to have security for the rest of their lives, they should have saved some of their substantial income and built up a nest egg.

Counting on someone else to take care for you 30 years in the future is just plain foolish.

[Declaration Day]

I don't know what every single person here on APS does for a living, so I may be stepping on some toes when I ask if nobody finds it incredible that union members get such a fantastic deal. Work on a production line for X number of years, retire in your 50's if you like, and have a pension and health insurance the rest of your life.

I don't find it incredible, I think it's absolutely ludicrous.

UAW workers get white collar pay for unskilled (or semi-skilled) blue collar labor, plus benefits a professional athlete would be happy with.  Many of my now-retired family members had this deal; they graduated from high school and walked into lucrative jobs.  No college.  No capital investment.  No taking their work worries home with them as I do, being a struggling small business owner.  There's a part of me that envies them, but now we get to pay for the fairy tale they lived.

The bottom line is that the unions have to go.

GM is not primarily an auto manufacturer; they're a pension and health insurance company that happens to make cars.

[Headless Thompson Gunner]

One of the main reasons why Obama won:

-Crying foul when money might go to a pension fund for people who worked their whole lives, but not saying much when 700 billion shows up in the federal budget to bail out millionaire investment bankers and insurance industry executives.

It is probably necessary, but it's welfare.  Why is it such a crime when a bunch of retired workers get paychecks that will sustain them through retirement, but not so horribly marxist when the government gives out billions to aid failing corporations?

That question right there is why people are voting for a candidate like Obama.  It's simply not possible to pretend that either party opposes welfare; so given that, the majority of the population is obviously going to vote for welfare for the majority, which Obama seems to favor, as opposed to the welfare for Wall Street and select corporations that conservatives tend to champion.

Banks and automakers are both big capitalist corporations.  Bail out either, and it's the same situation as far as those eeevil wealthy executives go.  The executives of the bailed out company continue receiving their multimillion dollar bonuses, whether they make cars or make investments.

The difference is that the finance industry is vital to the national economy. Without it, we might enter the next great depression.  You can see why lawmakers might want to keep it alive, even if on life support.  You can't say that about the obsolete and inefficient domestic car manufacturers.

Regardless, failed companies in either industry need to be allowed to fail.  Despite all the talk about bailouts for big banks, all of the banks who've needed "bailouts" have in fact gone out of business.  Bear Sterns, Lehmans, Merril Lynch, AIG, WaMu, all down the line, these companies are taken over, closed down, or are in the process of being closed down.  The bailouts didn't keep these companies alive, they served only to keep the damage from their failures from spreading to other companies.

Will the failed automakers be closed down or taken over just like failed banks were?

[ilbob]

at this point anything the government does will almost certainly only prolong the pain and make things worse longer term.

doing nothing will be painful, but i just do not see there is anything government can do that will resolve any of the structural problems the industry has.

the way the market deals with companies that are badly run is that they go under and are replaced by better run companies.

[makattak]

at this point anything the government does will almost certainly only prolong the pain and make things worse longer term.

doing nothing will be painful, but i just do not see there is anything government can do that will resolve any of the structural problems the industry has.

the way the market deals with companies that are badly run is that they go under and are replaced by better run companies.

This is something I've tried to explain to many people.

The government can't create growth.

The government can't fix an economy. Even if they are the ones who screwed it up.

The best they can do is NOT screw up the economy.

[MicroBalrog]

The government can't fix an economy. Even if they are the ones who screwed it up.

Actually they can. Privatising and scaling back their activities.

[makattak]

Actually they can. Privatising and scaling back their activities.

Ok, this is true.

Perhaps I should have said, government cannot by positive action fix an economy. They can be negative action (i.e. stopping doing things).

[anygunanywhere]

Let the UAW fund the bailout from their PAC.

Anygunanywhere

[Monkeyleg]

Let's assume that GM has gone bankrupt. Does GM not have plants and machinery that another automaker might want to buy? For dimes on the dollar Toyota could produce Buicks and Chevrolets, but with better quality. It could be a smart move on their part.

Unions have done in the US automakers. They've also destroyed the economies of states like Wisconsin where we're now running a $5 billion budget deficit, yet the teachers and state workers through their unions continue to get phenomenal benefits and pension packages that are draining the state's economy.

[De Selby]

Overall profits and share prices are certainly important...but then again so is the retirement and ability to survive of a few hundred thousand voters.

The selective outrage is what doesn't make sense to me: A massive welfare package that will increase corporate profits and share prices is a necessary evil, some subdued criticism....but a welfare package that might actually end up paying some "blue collar workers" the "white collar wages" that they were contractually promised is the worst case of marxism since Stalin.

I've been saying for a while that corporate welfare is welfare, and eventually the electorate will just decide it should get in on more of the welfare train too.  Now that millions of people are underwater on their houses, wages are declining, and unemployment is up, combined with the fact that the corporate welfare package hasn't saved all the private funds (which the UAW workers wouldn't be living on now anyway, given the condition of the market, had they saved instead of had contracted pensions)...look at which party, and which ideology, is winning the elections.

When it's painfully obvious that both the right and the left support welfare, the welfare plan that gives money to more individual voters is going to be the one that wins, regardless of the tooth gnashing about how only people who help corporations make a profit should get money, how unfair union contracts are, etc etc.  That is a basic political and economic reality: If the government is in the business of handing out money in the billions, you'd better believe that sooner or later the voters are going to smarten up and vote for money-direct, rather than money to a few corporations.

[taurusowner]

Absolutely not.  Half of creative destruction is destruction.  If US automakers cannot compete, they need to get out of the way and let in someone who can.

[doczinn]

Allowing unions to create "union shops" where the automakers are not allowed to hire anyone other than union members is a major contributor to the problem

That's it in a nutshell. The government gave the unions an artificial advantage over the corporations, so YES, they created this mess.

However, they can't fix it, only obligate us (the taxpayers) to fix it. I say let the companies go bankrupt.

Then again, I also say they have a right to replace workers who will not work, regardless of the reason.

The government can't fix an economy. Even if they are the ones who screwed it up.

The best they can do is NOT screw up the economy.

QFT.

[Gewehr98]

In yesterday's USA Today newspaper, GM took out a full-page ad begging for the bailout, and listing off what would happen to America if they didn't get the cash influx. 

Two pages over, there was a similar full-page ad from the head of the Automotive Dealer's Association, again begging for the bailout, and warning of dire consequences were that bailout not to happen. 

Of course, the former ad didn't say word one about scaling back union wages, executive salaries and bonuses, etc.

Some excerpts:

"The Auto Industry Matters...Telling It Like It Is."

    * 1 out of 10 people in America is employed in a service related to the U.S. auto industry.
    * 3 million jobs would be lost in year 1, and another 2.5 million in the next two years.
    * Personal income would drop by $150.7 Billion.
    * $156.4 Billion over 3 years in lost taxes.
    * Domestic auto production (including by int'l producers) would fall to zero due to supplier bankruptcies.

And a flashy video, too:

http://www.youtube.com/watch?v=72cHfOKoA1c

[RaspberrySurprise]

Should they? Hell NO, but they will anyways.

[Nitrogen]

At worst, we should give them a loan under the most common terms given by GMAC: 8-15% interest, require them to take out insurance on the business with the US Taxpayer as the beneficiary, etc.

Seriously, though, no.  THAT'S socialism.  It's bad enough we have stakes in banks.

Bankruptcy is probably the best thing for those automakers; as it'll let them renegotiate some disastrous union contracts, and other agreements that are, err, bankrupting them.  Hopefully, they'll take some lessons from far more successful automakers and mend their ways.

I doubt it.

A bailout will only reward poor decisions.

If we're going to be socialists, i'd much rather grab a successful industry that can make money, or at least be turned arouind.

[Monkeyleg]

In another post I mentioned Harley Davidson's recovery in the early 1980's. The company was already bankrupt, it's just that the bank didn't know it.

One thing that helped save Harley was concessions by the workers, who realized they'd be out of jobs if the company folded.

The Big Three haven't even received the $25 billion yet, and they're already talking about more. Absent any radical changes in the way the companies operate, if we give them the money now we'll be giving them more until they go under. Better they get it over with now.

[thebaldguy]

Corporate Welfare/Socialism does not work; these and many other companies have received billions over the years.

They have no incentive to do a good job when help is just around the corner.

If you are blaming the unions for auto industry problems, don't forget to blame the management as well. They took billions from companies they ran into the ground.

I know a few folks that run small businesses. They would like to be bailed out as well.

Democrats AND Republicans are both responsible for dispensing corporate welfare. They are to blame as well.