bailing out the auto industry?

[markusk]

How do you feel about bailing out the auto industry? Is it a necessary evil or is the bailout only going to postpone the inevitable?

Personally, our family stopped buying US cars (we bought Fords exclusively for many decades) in the 1990s. Furthermore, I do not know anyone, friends or acquaintances, who own a Ford/GM/Chrysler. I think a bailout will only postpone the inevitable, and that the failure of one or more of the companies is necessary if the economy is to work properly.

Any thoughts?

[kork13]

Definitely just postponing the inevitable. They've been having issues of various sorts for years, and now it's all finally caught up with them. They've been doing things poorly, people do not trust their brands (Dodge esp.), and their foreign competition can offer better value.

I really hope this automaker bailout gets completely shut down. welcome to capitalism, Big 3. You make bad choices, make bad (or just not good) products, and don't do things right... well, yea--you're going to have to change the way you do business, and it's not up to the national government (and in turn, the taxpayer) to fix your mistakes.

[SuzukiRider]

Get it over with and may the smart managers, engineers, and assembly line workers start new companies that move us in the right direction. Just my two cents worth. Also, may the UAW Die along with them.

[segmond]

I am not too happy with it, but I think it should happen, but the top management should be replaced, and all the top guys should earn normally wages and not benefit from the bailout.

Look at what happened to the US economy after Lehman brother's went under, if the US auto industry goes under, the pain will be worse.

[Broken Arrow]

This is just my personal opinion, so please take it for what it's worth.

Bailing out the financials makes sense to me. They are the conduits of our financial ecosystem. Banks affects consumers like you and I, business (particularly small businesses), as well as other banks. They affect everybody and everything. Cutting them off is like cutting off your own circulatory system. To a large extent, we just can't do that.

Now, the auto industry? Eh, I'm scratching my head on that one. I hate to say it because I know there are a lot of families out there who depend on this industry for their livelihood but.... The government shouldn't get involved in this one.

And I equally hate to say this as well, but our economy can actually survive without a US made car? Many of us already drive a foreign one, even if it is built here. Plus, the auto industry has also shrunk considerably over the decades. It's not the powerhouse of innovation and industry that it once was. In other words, it's not a critical component of our economy....

But my biggest worry is this: Even if we provide a bailout for the auto industry, does the management of our US automakers know how to use that money effectively to turn the industry around and produce competitive products?

I know I have stated that they know how, but will they actually DO it? Ford is currently developing a F-150 off-road racing edition or something like that. Why? Where is their mind?

Will they finally realize that we need a long term vision and a diversified product line, and actually act on it? Or do they still see only the short-sighted bottom line, making only whatever seems profitable at this time?

And that comes down to my point: Even if they get the money, they would still need a compelling and diversified product line to sustain themselves into the future, and I just don't see one that's compelling enough right now. In fact, I have this awful feeling that the second this economy gets better, they'll go right back to their usual tricks of trucks, SUVs, and whatever else that just makes the bottom line.

[geojen]

I agree with BA. I saw on PBS an episode of frontline that talked about the state of the Big 3. They interviewed a VP from GM and asked her the tough questions:

1) Why is it that you need money to "innovate" from the taxpayers when other companies (i.e. Toyota) did it on their own, took the short term loss, and now are extremely profitable? She basically said, well, in the 90s we only looked at what would give us strong profits in the short term while our competitors took a more long-term view and invested in alternatives and fuel economy. Ummmm, yeah, we all know that is the problem. Why is it that you are trying to use that as an excuse for why you should get a bailout?

2) Why do you claim that you don't have the technology to produce more fuel efficient cars when you currently sell several models overseas that get 70+ miles to the gallon? Also, you sold an electric car in the 90s that you rounded up and crushed. What was that all about? She said that the cars had "reached the end of their life cycle." Well, if that is the case, I have a busted down pick-up at my farm that has definitely reached the end of its life cycle. Will GM come and dispose of it for me?

[LivingAlmostLarge]

Hell no. Until the unions want to negotiate. It's a bad idea. Just postponing the inevitable. They are demanding twice what a worker for toyota and honda demand. And unions used to be for good working conditions. Now it's just for lots of money.

[indycobra]

Im no financial expert on the matter but why is bailing out the financial sector acceptable but not the auto industry? I believe it was the financial institutions that are to blame for all of this not the automakers. They are just a victim of the poor economy created by greedy idiotic lenders. I agree, the US automakers have many problems and need change. I see it every day being in the industrial machine building industry. The difference between Japanese and US companies is night and day. To let the US automakers die would be suicide to this country in so many ways. God forbid we ever get into another large scale war but I believe it was the automakers that re-tooled to create the weapons that saved us all back in WW2. What happens if we find ourselves needing them again? Are the banks going to build the bombs?

[kork13]

No, the immense defense contracting industry that has built since WWII would build the bombs, as they currently are.

The difference is that the nation's entire economy is kept moving because of the liquidity (yes, the constant loaning of money) that the financial industry provides. Without that liquidity, as we have seen (thankfully to an only limited extent), companies across the entire (industry independent) economy started seizing up. Contrast that with what would happen if/when the top 3 auto companies were to fail... Yes, thousands of jobs could be jeopardized. However, the economy would survive without a constant stream of new american cars ready for eager consumers to drive off the lot.

[indycobra]

Maybe some of the weapons are still built in the US but much of it is built overseas contracted to the lowest bidder. Another brilliant move by our leaders.

Like I said before the auto industry has its problems but it doesnt compare to the problems of the financial industry. Giving money to them is the same as handing out money to criminals.

[kork13]

Originally Posted by indycobra

Maybe some of the weapons are still built in the US but much of it is built overseas contracted to the lowest bidder. Another brilliant move by our leaders.

Actually, that's not very accurate.... Essentially all of our weapons are home-grown.. missiles/bombs, aircraft, guns, bullets, body armor, tanks, uniforms, and the list goes on. That's all mandated by federal law to be produced domestically. One of the few exceptions is the Atlas V rocket booster, which currently uses Russian rocket engines. To mitigate this, we also have the all-American Delta IV rockets. ... haha but once again, we've taken a tangent! lol, we're too good at this...

Originally Posted by indycobra

Like I said before the auto industry has its problems but it doesnt compare to the problems of the financial industry. Giving money to them is the same as handing out money to criminals.

Again, I personally think you're equating the significance of two different industries. Regardless of how screwed up the financial industry may or may not be, that doesn't validate giving money to another screwed up industry... Didn't Mom always teach "two wrongs don't make a right"??

[Maismom]

Why should we help them for the mess they created? Since when we started to reward bad business model?

[GrimJack]

The auto industry mess is not just the fault of the industry - the government was complicit in how it structured the CAFE standards and tax breaks. There was a tax break for up to $100,000 purchase for 'business' vehicles and the CAFE standards defined what a truck was. All those SUVs, hummers and so on were built on truck frames so were considered trucks - the big 3 were making up to $30,000 on EACH vehicle sold and the tax breaks were about that much for the buyer. And at $1.50 a gallon, gas was so cheap that we bought those pigs.

The big three were no less nor no more incompetent than the financial institutions and everyone conspired in their crash also.

[asianpear]

If there is not demand for a product, then the company should fail. GM is a company that is not meeting the needs of the consumers by designing and marketing fuel efficient or sensibly priced vehicles (as opposed to their competitors). GM leaving the industry will only make room for more sustainable and technologically advanced companies to come in and not only succeed, but make the nation a better place with regards to emissions and pricing. Competition is the only way to improve a market.
Also: None of the CEO's took public flights back to California. EVERY SINGLE ONE FLEW HOME IN THEIR PRIVATE JET. If that doesn't show fault to be on the CEO's, then I don't know what does.

[KB24]

Although I don't like to see my tax money go towards bailing out these companies that have screwed up, my heart goes out to those that are losing their jobs.

[jIM_Ohio]

The demand for cars will shift to who can provide them. This country depends on transportation- so maybe the laid off autoworkers start driving buses, cabs or similar. The same way the housing crunch has increased demand for renting.

People will still need to move around even if GM and Ford go out of business.

[mommyof4]

I'm really torn on this. I want to say "yes" to the bailout, because my BIL worked for GM for years, and I'm afraid his pension is on the line if they fold. Plus, I have some GM stock in my portfolio, so what would happen to that? I know, personal, selfish reasons, but I know there a 10s of thousands of folks like my BIL out there who will be in a whole world of financial hurt if GM folds.

[jIM_Ohio]

The people are only in for financial hurt if they squandered the large wages they were making. I could make twice the wage I make now if I chose to take the offer Ford gave me when I accepted my current job. I probably would not have banked the pay difference, but most automotive employess are GROSSLY overpaid.

[GrimJack]

Originally Posted by asianpear

If there is not demand for a product, then the company should fail. GM is a company that is not meeting the needs of the consumers by designing and marketing fuel efficient or sensibly priced vehicles (as opposed to their competitors). GM leaving the industry will only make room for more sustainable and technologically advanced companies to come in and not only succeed, but make the nation a better place with regards to emissions and pricing. Competition is the only way to improve a market.
Also: None of the CEO's took public flights back to California. EVERY SINGLE ONE FLEW HOME IN THEIR PRIVATE JET. If that doesn't show fault to be on the CEO's, then I don't know what does.

That's just it - there was demand for those vehicles for decades and making up to $30k per vehicle is pretty serious incentive to make them. The only thing that made the vehicles anathema was a really bizarre spike in gas prices - I would never have bought one of those pigs but a lot of people did.

Do you think any of those financial wizards that show up in DC looking for their handouts fly commercial? Picking on the CEOs for what all the CEOs do is grandstanding.

We have already lost a million jobs in this recession, if we let the Big3 crash and burn - it will probably be another million jobs lost (following the chain from plant to barber shop to restaurant to grocery store and so on down the line).

[GrimJack]

Originally Posted by jIM_Ohio

The people are only in for financial hurt if they squandered the large wages they were making. I could make twice the wage I make now if I chose to take the offer Ford gave me when I accepted my current job. I probably would not have banked the pay difference, but most automotive employess are GROSSLY overpaid.

Nah, this is just not true. These are just blue-collar workers who put in an honest day's work; I do no know where the idea comes from that they are overpaid - these are the people who created the middle class. The average UAW wage is $28.00 per hour - this works out to a little more than $56k per year straight time. Where is the large wage? How can you consider this GROSSLY overpaid? If you have a different source for your data than mine, please post your source.