BlogHer - A Case For the Auto Industry Bailout - Comments

Unions

cheranct — Sat, 20 Dec 2008 11:17:32 -0600

The unions brought down the big three. Where else do laid
off workers get 95% of pay to play cards in a union hall or to sit in a bar
drinking beer. And working for the
company is not a right - it is a privilege. In this instance it is most
certainly an abused privilege.

Making it Personal

alyssaroyse — Fri, 05 Dec 2008 09:08:32 -0600

This is such an impossible situation. No doubt about. Screwed if we do, screwed if we don't.

That said, I am unequivocally opposed to this bailout, as i was to the banking bailout, and really, any big government programs that artificially manipulate costs and production within consumer markets.

It is easy to say, "this is about my cousin Joe," and make these issues personal. And it is certainly important that we don't forget that there are people involved.

But where is that same "making it personal" logic when we look at things like an educational system that is failing students and not giving them the skills they need to compete in a modern global economy. Sure, there are no layoffs connected to that this year, but there are in the next 10 or 20. Where is the "this is about my aunt Edna" logic when we don't support a healthcare system that is preventative and accessible in nature, preventing many catastrophic illnesses in the first place.

The decisions that our government makes should be about spending money efficiently in order to create a infrastructure that supports culture and commerce in our population. Public infrastructure - education, health care, transportation, justice, defense etc. They shouldn't be picking and choosing which private industries survive.

The simple truth is that the American auto industry is failing because it does not make products that the market can or wants to buy. Bad management. Bad unions. Bad planning. Bad business. Bad economy. And allowing them to continue doesn't help anyone. It just delays the inevitable.

IF the government gets involved, then MAYBE it should be to re-educate the workforce, to shore up pension plans of people who retired and are dependent on them, to extend medical benefits to the workers. But to save the companies? No.

It may be that an off-shoot of this economic crisis is that people stop spending money they don't have on things they don't need. And as much as it shocks our systems, that may be good. And if we are reframing our consumer habits going forward into a time of not only frugality but rational "eco" consumerism that has us buying durable goods less often and more conscientiously, then the market for ANY cars is going to go down. So artificially inflating supply of products (that no one is buying) isn't going to help anything.

It's a bad investment. Throwing good money after bad. There is no way to justify investing in a company that has a $2B market cap while carrying $62B in debt. Putting public government in private industry - another scary trend.

No bailouts. None. No. Companies have failed and industries have changed for as long as there has been business.

It sounds Draconian, I know. And it's scary as hell for a lot of people who are wondering "what next?" But avoiding that question isn't going to make the fundamental problems go away. And it's not a cost we can afford.

(And yes, I'm a democrat, FAR from socialist, totally anti-union, and REALLY hopeful that we are learning hard lessons that will bring us to a healthy, rational and secure future. And I'm as scared as the next person.)

____________

Alyssa Royse

Just Cause It: A Web Site To Save The World

Start Her Up: A Blog for Women Ent

In the eye of the storm

brittanymarie81 — Mon, 24 Nov 2008 07:24:53 -0600

Maybe I am biased. My family is the auto industry. My kids are the auto industry. My house is the auto industry. Our health insurance is the auto industry. And the same goes for my most family and friends. We are the auto industry. Those people you see on TV, the people in suits with their jets, THEY are not the auto industry. They will be just fine if the industry fails. Sure, it may feel crappy for a week or so, but they'll come through, with new jobs, no hits to their homes or health.

People need to look past those men in suits, to the literally, millions of people, of families, of homes that will be affected if this industry is not helped. Factories, suppliers, dealerships. Gone. Family businesses, local shops and resturants, gone. There are no other jobs where I live (NW Ohio/MI area). Factories are closed down, companies on indefinite hiring freezes, food banks are out of food.

What good will saving the banks and financial institutions do if millions of people don't have the money to use them, to invest in them? It's a cycle, you can;t have one without the other, and for a long time, this country has ignored that, letting the struggling blue collar sector die a slow, miserable death while jobs slowly crept out of the country, and no one seemed to take notice, until it started to have an effect on the white collar busniesses.

I was against the financial bailout. I am not a fan of bailouts,period. But, it's done. It's been done. And now,one of the backbones of our country, of millions of families in this country, is failing, and it's unfair to pick and choose who's livlihood is worth more.

You may not feel the urgency unless you are here, feeling it, seeing it first hand. People losing their homes and local businesses, no food for their families, endless layoffs, no health insurance, but we need it. My family needs it. My home needs it. My kids need it.

Just wanted to offer up my perspective ont he issue, many of you may disagree, but for the people in my town, this is the reality.

www.barefootfoodie.com

Auto Industry Bailout Thoughts From AskPatty.com

Jody DeVere -- Ask Patty — Thu, 13 Nov 2008 12:00:28 -0600

Erin,

Great post and one close to my heart, business and my friends and business associates in the auto industry.

1. If one or more of the big three tanks all of their suppliers, dealerships and service suppliers will also take the dive with them. This will affect far more jobs than you can possibly imagine. The bail out will save many jobs.

2. The mainstream media has hurt consumer confidence badly by broadcasting the lie that only people with perfect credit scores can buy cars right now and this is not true. There are credit programs available perhaps with higher interest rates but available none the less for even credit challenged car buyers. It is consumer confidence that is hurting auto makers and dealerships ability to sell vehicles right now and dig themselves out of the crisis.

3. Treasury Secretary Henry Paulson on Wednesday called the auto makers
critical to the U.S. economy. But he said any financial aid for GM, Ford Motor
Co. and Chrysler LLC must be used for an aggressive restructuring of
the money-losing, unionized manufacturers. "Any solution has got to be
leading to long-term viability" for those companies, he said.

4. Freezing salaries of auto executives, ensuring taxpayer
money isn't used to pay dividends to shareholders, and "very possibly"
a requirement that new management and fiscal oversight be brought in.

Auto Makers need to reform their spending practices, reduce their product line and production until consumers come back into the car market again, negotiate wages new lower wages for auto workers with the UAW for sure to name a few of the issues to solve to become lean mean fighting machines once again to become the leaders of the auto industry.

Downstream car shoppers are still not happy with the car buying experience especially women car buyers overall and THIS needs to change. Auto Makers can build the amazing vehicles however car dealerships continue with their old school traditional high pressure adversarial sales tactics, impersonal customer service and in some cases just plain take advantage of unsuspecting consumers. Reputation management for car dealerships is on the line Big Time for the BIG Three car dealerships right now.

This is a HUGE time of opportunity for the Big THree auto makers and their car dealerships to re-evaluate their car selling and service business practices, marketing and advertsing programs and training philosophy and start addressing the needs of men and women car buyers where the rubber meets the road - At the dealerships where cars are sold and serviced!

Jody DeVere

President/CEO

www.askpatty.com

Jody DeVere
President
www.askpatty.com
www.carblabber.com

Auto Bailout

delacruztaylor — Wed, 12 Nov 2008 10:44:02 -0600

In a free market, when companies fail other step in & take over. Do you really trust the government to run a program that will actually work? How many examples do you need to see the government is about the worst when it comes to wasteful spending, corruption, & inadequcy, I really hope they let the american public vote on these issues, its obvious my local congress people aren't listening, I try to leave commments but i'm sure its just sent to there spam mail. I agree the government should create jobs, green jobs, with the way things are going the government is going to own anything, we are heading towards socialism. The older I get the more messed up I c the world is, I feel sorry for the people, but we always find a way to survive, if anything GM needs to be significantly downsized & sell there assets to another company. How much in taxes are you willing to pay?

but you can't discount the workers

Erin Kotecki Vest — Wed, 12 Nov 2008 10:32:02 -0600

Millions of jobs - an entire industry. It can't just 'fail'-

Politics & News Contributing Editor
Queen of Spain

Auto Bailout

delacruztaylor — Wed, 12 Nov 2008 10:11:14 -0600

Why is it these companies send jobs to other countries if the wages aren't inflated? The global economy has changed the way the world works, jobs are being moved & need to be replaced by other industries. These auto companies don't care about the U.S. all they care about is making money, increasing money for shareholders, & ridiculous salaires for there CEO's and higher management. Why reward that sort of behavior? All bailouts due is delay the inevitable crash & make the crash worse, the stock market is currently correcting itself of its previous overvaluement, thats exactly what the economy needs to do, the american ideals of buy buy buy, & pay later need to come to an end, or at least diminished. GM had a electric car about 10 yrs ago, go c "who killed the electric car" & you c what type of company your dealing with, i know its going to be biased, but it still has good points

those companies agreed to those contracts

Erin Kotecki Vest — Wed, 12 Nov 2008 09:56:28 -0600

I have to say I don't really buy the argument the union salaries are inflated- mainly because management had to agree to those contracts.

And these people will NOT find other jobs, not easily anyway. Of those that have been laid off, the majority are still looking for work. There ARE NO JOBS to be FOUND. Whta needs to happen is new, green jobs need to be created as part of the deal.

Politics & News Contributing Editor
Queen of Spain

Auto Bailout

delacruztaylor — Wed, 12 Nov 2008 09:47:30 -0600

Did any one take economics in college or highschool, what ever happened to a free market. Half the reason these companies are failing is they can't afford to pay the uninon workers inflated salary. These people are making over $30 an hour with benefits which is sorry to say, is over compensation. Why keep companies alive that are failing when other companies in the industry are doing fine (Toyota). GM & Ford continued to make inferior products & try to hold on to an SUV market that has disappeared. These people will find other jobs, that won't be paid as well, but at least my tax dollars won't be used to subsidize poorly run buisnesses, has anyone seen lately the average cost per tax payer of the national debt, its getting ridiculous, stop wasteful spending, the reason companies are tanking right now, is american can no longer afford the luxuries we used to have, I saw that the medium income for a typically family is down $200 from ten years ago, we all now inflation has greatly increased prices of 10 yrs ago, its all basic economics people.

Bailout with Conditions

Erin Kotecki Vest — Tue, 11 Nov 2008 22:36:31 -0600

Kady that's exactly why I favor a the bailout with conditions for creating that 'buy american' environment again. (one of the articles I read was discussing a 'bridge loan' which maybe you can expand on)

If, and this is where your expert nature helps me so very much sometimes, bankruptcy were structured in a way that keeps the automaker alive with a (using your example) New Ford forging ahead in the midwest then so be it. But what worries me is they can't do it alone and they can't do it without oversight, since they've clearly mismanaged in the past.

I feel, at least with a bailout with conditions, we could have a say and a stake in what they are creating.

Queen of Spain

bailouts are wasteful

loadedkady — Tue, 11 Nov 2008 22:12:04 -0600

Erin,

I am against a bailout of the auto industry, but before you think I'm all heartless and sh*t, let me explain first that I've been largely against the bailout of the financial industries too (with the exception, possibly of Freddie and Fannie, but that's really b/c of the international ramifications of letting those fail).

Let me also explain why *I* am against the bailouts.

I do not have Meagan fiercely libertarian streak, so I'm not going down the road of survival of the fittest. However, I do think that in this particular economic environment, bailouts have had a string of devastatingly bad unintended consequences, and that we will see the same if the auto industry is bailed out.

For example, in terms of the banking sector, I believe that the bailout has been pretty moronically managed (problem #1 of bailous - they have to managed, generally by the government, which tends to be even more clueless than industry). The credit crunch that Kim mentions in her post, well, what you won't hear is that the Fed's bottomless pit of a lending program (to date, over $3 trillion lent out to financial sector, including the $700 TARP) has had the short term effect of freezing credit even more than when the banks were just floundering around on their own. Why? Well, why would any bank borrow from another bank when (1) they can get substantially better rates from the government and (2) there might be a better bailout deal coming any day now?

The problem with the current bailout schemes that we've seen is that they've largely been about throwing money at the problem, rather than a process based evaluation of what is at the heart of the crisis.

For example, (again, back to the financial sector) one of the scariest parts of the financial crisis has been the complete lack of transparency in the CDS (credit default swap) market. The problem has been that nobody knows exactly who is on the sides of the various CDS contracts, nor how much the contracts are for. So the money has been spent to prop up the underlying securities that the CDS are meant to guarantee, which only works until the next month, when all the underlying securities fall in price again.

I feel the same way about the auto industry. The problem is not that there isn't enough money. The problem is that the big three gave up on making cars that (most) people actually want to buy. Giving them money would just buy them a few more months of making more cars that (most) people don't want to buy.

Again, not based on anything but my quickly jotted down thoughts, Ford, for example, has enough cash to operate for 7 months before it will be insolvent. Rather than waiting around for them to be technically insolvent, the government could actually change the bankruptcy code to allow them to file chapter 11 right now. They could also have emergency bankruptcy provisions put in place to allow Ford's debtors (most of whom are probably parts suppliers who are in just as dire straights as Ford is) and Ford to work out ways to revamp the industry. Suspending the company in Chapter 11 would also allow its workers to retrain themselves to whatever direction the New Ford might decide to go in. Think of what 7 months of cash could do in this environment.

I'm fundamentally against corporate bailouts b/c I think too little of the money gets to the middle and lower class Americans. You can bet that if the gov't gives the big 3 large sums of cash, there will still be layoffs, while Management will still collect their bonuses (that is what is happening at Goldman Sachs et al right now). Think about what $3 trillion dollars can pay for in terms of: unemployment benefits, retraining facilities, or even government JOBS.

Sorry for the long comment. It's a bit rambling, but I hope it makes some sense.

Kady

I blog at Momocrats and Wonkess

but what about all those jobs?

Erin Kotecki Vest — Tue, 11 Nov 2008 21:34:26 -0600

I understand the need for the bank bailouts to work, but what about all those jobs? I mean you can't just let the American auto industry go under.

Politics & News Contributing Editor
Queen of Spain

Bailout if for the banks...

ComicBookGoddess — Tue, 11 Nov 2008 21:06:31 -0600

The bailout needs to work on the banks, first, or the rest of it won't do any good. :(

The real problem is that the bank to bank lending market is crashed. The banks would usually lend reserve - that part of the money they have that they have to keep and not loan - to each other, going to the Federal Reserve to borrow only if they were ready to admit to the world that they were in trouble.

The problem is, the banks aren't lending to each other. And if they won't lend to each other, they sure as hell don't want to lend to regular people.

If the banks won't lend to regular people, well then, most regular people CAN'T buy cars. So it won't much matter if the auto manufacturers can keep making them.

The bailout should stay for the banks, but they must restructure it to enforce banks that get help actually lend money to people and industry.

Kim, the ComicBookGoddess of Geek Pantheon and Your Moment of Kim

www.geekpantheon.com

A Case For the Auto Industry Bailout

Erin Kotecki Vest — Tue, 11 Nov 2008 20:34:03 -0600

I'm no economist. I don't play one on tv either. But I've watched the government try ways to shore up this economy and so far, none of it has affected me personally.

I did get that stimulus check, which we used to pay off bills (like we were going to go SHOPPING????) however the recent Wall Street bailout hasn't made it to my pocketbook. By the looks of how things are going, won't be inching near my checking account either.

Yesterday came word President-Elect Obama discussed an auto industry bailout in his meeting with President Bush. Today House Speaker Nancy Pelosi called on leaders to work with the Bush Administration to "craft legislation to provide emergency and limited financial assistance to the automobile industry under the Emergency Economic Stabilization Act."

My ears perked up and my heart started to race. This is one economic issue I do know a bit about. Not because I understand how it all works, but because I was born and raised in the 'burbs of Detroit.

Again, I'm not econ wonk by any stretch. But I know what I see.

My hometown needs jobs. People I know and love need plants to stay open, parts to keep on the shelves, and suppliers to stay in business. When a plant goes down an entire town goes down. Detroit isn't one of your 'least favorite cities to visit' for no reason.

Yes, there have been serious flaws with the Big Three for many, many years from management to unions to everything in between. However the Big Three has kept my mid-west going for generations and they need help.

Again.

Many of you don't think they deserve help. Certainly not your tax dollars. Let them fall into bankruptcy with their crappy cars and their poor management like any business should when it stinks, right?

Megan McArdle at the Atlantic seems to think so. She writes,

"People don't want to buy their cars. People have not wanted to buy their cars for years. The only category in which they excel is the one in which foreign automakers barely compete because of gas taxes: light trucks. Without light trucks, they die. Even if people did want to buy their cars, they couldn't survive their legacy costs, which are vastly higher than what their competitors pay *in the United States*. The Big Three union model is simply not sustainable. That "massive" renegotiation didn't fix their problems; it merely staved off the date of the projected bankruptcy. That's why the stock has been heading south pretty steadily for nearly a decade, as has GM's credit rating, which hit junk long before the credit crisis. Perhaps you have seen something that all the investors, analysts, and creditors missed. But the company seems to me to have been in trouble for a long long time, and its turnaround strategy based on waiting for the price of oil to drop so it wouldn't lose so much money on light trucks."

As an OWNER of a Chrysler (yes, some of us DO buy American, Megan)I would contend that JD Powers shows American cars totally competitive with their foreign counterparts. The past several years have seen more than an effort to transform the American auto industry quality and the proof is in the ratings.

However Megan is joined by many others, like Betsy who writes,

"We should not be rewarding the Big Three's shoddy management. If we continue down this road, where will we stop? Are we going to be bailing out every large company that makes bad decisions and then goes under? Is Circuit City next? Will the only companies that we don't bail out be the small mom and pop businesses that are small enough to fail?"

And even if you are angry about the hole Detroit has dug itself into, consider what Laurie David writes,

"These companies invited their impending destiny, and some have argued they ought to face the consequences of the market without federal intervention. But the fact is that America can't afford to lose the millions of jobs Detroit provides and the opportunity to lead on a manufacturing product that will see explosive foreign sales in the near future, especially in China and India."

So where does that leave us? Agreement that GM, Chrysler, and Ford have done a crappy job and everyone is to blame. Fine. How do we fix it?

Sending these companies packing is not an option in my book. The American Industrial complex is one steeped in innovation and inspiration AND THE LIVELIHOOD OF MY FAMILY AND FRIENDS.

This is not like Circuit City closing down, or some Mom and Pop shop going under so please spare me those 'then who's next' comparisons. Think of it more like the airlines, or like the recent bank and mortgage companies. It's an entire INDUSTRY that is the heartbeat of the mid-west and beyond.

For those thinking I'm just playing partisan politics here, I should be very clear- yes I grew up union, yes I am a Democrat, but I don't give two flying flips who is squeaking who's wheels or paying back for votes. I want jobs, and I want them now. If the GOP had a plan to help my family and friends, I'd be behind it and considering it just as much as any Pelosi backed bailout measure.

I can't stress it enough- this is not about politics. This is about my cousin not seeing her husband for weeks on end because he's had to take a job in another state. This is about my high school friends back in school working on another degree because their jobs no longer exist. This is about everyone that's left and moved to Arizona or California or Florida.

I don't want to see a hand-out for these companies either, so don't mistake me for some 'socialist.' (insert eyeroll here)

I agree with David, "Congress should set strict guidelines to ensure that Detroit moves as quickly as possible to get clean cars into American driveways where they can help power a new smart grid like the one Al Gore described in Sunday's New York Times. Congress should also open the process beyond the Big 3, offering financial support to smaller entrepreneurial carmakers for large-scale production of their innovative all-electric and plug-in hybrid prototypes which lack financing to move from the concept contests and into dealer showrooms and consumer hands.

It's past time for Detroit to get serious about regaining America's once-proud role as a leader in automotive engineering. Congress must hold the automakers accountable in any bailout to ensure that our clean car 'future' starts now."

...and now can't come soon enough for me and mine.

Erin Kotecki Vest also Queen of Spain blog

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