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The Coming Auto Bailout

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It's interesting that the Democrats must be the ones stopping this.

Well, there are liberals who see these kinds of things as rewarding large corporations at the expense of everyone else. They would rather see the money go towards other things.

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Now the politicians are asking the auto companies for a "plan" that shows how they're going to become viable again.

As if any of those politicians are qualified to judge the merits of any "plan" put forward by the auto makers anyway. I suspect what will happen is that the auto makers will put forth a plan that will "convice" the Democratic members of the panel to approve a bailout. The viability plan will be nothing more than 'business as usual.'

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As if any of those politicians are qualified to judge the merits of any "plan" put forward by the auto makers anyway. I suspect what will happen is that the auto makers will put forth a plan that will "convice" the Democratic members of the panel to approve a bailout. The viability plan will be nothing more than 'business as usual.'

There is no need for any convincing. All the "convincing" took place with the two parties raising record amounts of contributions for the latest election campaign, from unions and companies alike: that taxpayer bailout is long bought and payed for, ready to be delivered.

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It seems that the Obama team is now considering some form of bankruptcy. It's pretty tentative and they're probably just examining their options, or floating trial balloons. Nevertheless, it is an option that might be better than simply giving the auto-companies cash. The devil will be in the details.

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naked Capitalism has an interesting persepctive on the bankruptcy. Again, the fundmental is that the banking system is not yet repaired. I might be able to get behind govt playing no other role than as DIP financier. Assuming that they placed no conditions on the money other than any financeer would, I might be ok with such a plan.

Forget all this "give us a plan and we'll give you the money" crap. Politicians trying to be businessmen is laughable.

http://www.nakedcapitalism.com/2008/11/ill...bankruptcy.html

I wish they'd do pre-pack for the financial system. They'd put Paulson to shame if they did.

Edited by KendallJ
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The political reality is that these dipshits in Congress will never support a prepackaged plan that screws their union supporters. The most likely scenario is that the Detroit 3 will come back with a set of silly plans for building a bunch of hybrids and electric vehicles and then they'll get their $25 billion. In 6 months we'll be back in the same place we are now.

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The political reality is that these dipshits in Congress will never support a prepackaged plan that screws their union supporters. The most likely scenario is that the Detroit 3 will come back with a set of silly plans for building a bunch of hybrids and electric vehicles and then they'll get their $25 billion. In 6 months we'll be back in the same place we are now.

They should just screw with 'em and say that they have a cold-fusion or perpetual energy powered vehicle in the works and all they need to complete it is a trillion bucks or so. :D

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You know the airlines never get a break. Maybe it's their turn. :D

I bet our economic problems will leave people depressed and less interested in playing practical jokes. Then the companies that manufacture rubber poo and fake vomit will need a bailout. The bailout won't work and our government will create a massive campaign to encourage youngsters to take whoopee cushions, stink bombs, and fireworks to school. They will say it's your civic duty to falsely accuse your peers of flatulence. :lol:

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If the automakers do come up with a plan for viability, let them propose it to the banks. If no bank would be willing to loan them the money, why should we?

Heh, ya the broke banks that just got the $700 billion from us? I'm certain they have the capacity for rational decision making regarding the auto companies plan.

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I would like to agree with K-Mac that the American auto makers do have the ability to innovate, and we see remnants of it pop up from time to time, but the cost of labor makes it difficult for them to make their innovations marketable, let alone profitable. While I myself drive a honda, my 2nd job for five years now has been with Ford, and they do have good thoughts: one you can see in the US is the Sync communication technology that's becoming an option in most of their new models. But a good example of how they have the ideas, but are struggling to implement them would be the Eco-netic Ford Fiesta:

http://www.greenenergytv.com/Watch.aspx?v=1815781484

What this newsbit doesn't mention is why it's not being released in the US: (1) they can't manufacture it profitably due to yes, UAW (it's made from relatively cheap materials, thus the cost of building them abroad and shipping them here is too much; yet, due to UAW, the relatively cheap cost of importing the components (such as the innovative diesel engine) is wiped out by the overwhelming cost of paying union workers to assemble those cheaply imported parts and (2) it's a diesel engine and while it's eco friendly in the mpg, environmentalists and their cronies in government don't like diesel engines and regulate the CRAP out of them. Something about emissions... They proposed building them in mexico, but that still won't work because of the regulations on diesel engines again, and if I remember correctly, regulations are even more strict when it involves imported diesel engines. Then they thought of building the car almost completely in mexico and then just having the engine installed here, but that still wouldn't work because of what you would have to pay ten union workers to do. (I say ten, because with unions it seems like there are always 10 workers to do the work of what would only require one). I hope they can figure something out, because it could give them a competitve edge, but as long as they've got the UAW holding them back it's unlikely.

Interestingly enough, pretty much all of the smaller, fuel efficient and innovative cars made by the US automakers are built in Mexico. Check it out: if the vin number of a car starts with a 3 or a 4, that tells you it was made in Mexico. SO stroll your local US car lot and check it out. In fact, many foreign car companies who sell their products in the US also have them manufactured in Mexico: icluding VW, Honda/Acura, and Toyota. That's the only way they can be profitable! There is no UAW in Mexico. THe only cars that are made here are the ones whose market price can offset (or used to offset, anyway) the cost of paying unionites to build it. Ford Examples: the F-series trucks, the Explorer and the Expedition. But in times when big, gas-guzzling, $40k + cars that union members build aren't selling well.... that's when the cost of labor really becomes a problem.

I hope they do not get the money... even though I am an employee of one. I am quite confident FOrd won't " close shop" but they may have to declare bankruptcy eventually, although they would be the last of the big three to have to do so. GM is in much worse shape and faces a more immediate threat. But if bankruptcy is what it takes to possibly restructure the labor used to make American cars.... well, that's the solution these companies really need. Does that mean a lot of union members will lose their jobs? Yes, but maybe it's high time we stop paying someone over $50k (well, probably over $100k if you include benefits) to wipe down a car as it comes off an assembly line. Building and maintaining a machine to do just that woule probably cost less. Maybe then these companies could use that money to pay someone what that job is worth and make a profit, or, better yet hire a brilliant engineer who can FULLY automate the whole system. Once that's done, you could use that same engineer to tweak the technology in the cars and make them even better.

Edited by 4reason
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Has anyone seen the GM doomsday video, predicting an economic catastrophe if they don't get a bailout?

The wretched parasites that would resort to such repugnant scare tactics and emotional blackmail deserve to fail. This revolting display reveals the culture of complacency, entitlement and parasitism that plagues the Big Three.

At the risk of echoing a line from the upcoming movie The Watchmen, GM is crying out for our help, and we should answer "No."

The Big Three have sown the wind. Let them reap the whirlwind.

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A beautiful glimpse of what auto manufacturers (specifically Ford) could be capable of if only there were no unions...

http://info.detnews.com/video/index.cfm?id=1189

Having mini assembly lines for vendor components of the vehicle within the plant? Brilliant! Ford won't cease to exist; they may cease to manufacture cars here.... but they won't cease to exist.

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Ford won't cease to exist; they may cease to manufacture cars here.... but they won't cease to exist.

This would be the best case scenario, we'd still have Ford, and they could produce their product elsewhere where the union workers aren't looting all the profits. I'd rather see the company make money and prosper more than most of it's workers who are losers who got lucky getting their job because they know the "right people", which is how most get their jobs here.

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Ford is now trying it's hardest to kowtow to the governments sneers and denunciations.

http://hosted.ap.org/dynamic/stories/M/MEL...EMPLATE=DEFAULT

Mulally said he'd work for $1 per year if his firm had to take any government loan money. The company's plan also says it will cancel all management employees' 2009 bonuses, scrap merit increases for its North American salaried employees next year, and sell its five corporate aircraft.

It's just utterly pathetic.

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Why prop up a failing company when quite frankly they just need to go bankrupt?

GM has clearly shown that they can't stabilize their business so why give them billions to burn through? The fact of the matter is the executives of this company are using the mantel of "all those poor workers" losing their jobs to allow them to keep their jobs.

How many poor workers are there??? Because on average 4.5 million workers quit or are fired in a month but 4.6 million workers start a new job in a month.

Edited by dadmonson
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Mulally said he'd work for $1 per year if his firm had to take any government loan money.

And if this were to happen, he would be woefully overpaid. Getting into such bad shape, for one, and then asking for my money as stolen by the government, for two, means this guy should be unemployed.

You want my money, you earn it by producing a car I wouldn't be ashamed to be seen in. You'll also gain points with me by telling the unions to pound sand.

edit: last sentence added.

Edited by Steve D'Ippolito
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The auto bail out may not happen at all, because the unions and the environmentalists are at each others throats. I don't think the bail out ought to happen,and I liked the Ayn Rand Center's answer, more freedom to the automakers as in less regulations all around. But the environmentalists want there to be "green cars" made as a criteria for the bail out. Yes, we are heading for a command economy, which will be very bad, and the companies will have to do whatever the public screams for -- i.e. no frills -- or else. Rather sickening.

The United Auto Workers, along with Detroit's Big Three, are pushing for an infusion of emergency loans for the carmakers' immediate needs — even if that means diverting $25 billion that had been set aside for creating cleaner vehicles. Environmentalists balk at that notion, saying the money is sacrosanct and insisting that any new help be tied to strict requirements for greener cars.

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Environmentalists balk at that notion, saying the money is sacrosanct and insisting that any new help be tied to strict requirements for greener cars.

I love that. What if Americans don't want to buy "green cars"? Where does that leave the auto manufacturers?

Now the 3 auto companies are asking for $34 billion and people at GM are openly talking about bankruptcy before the end of the year. Given the way they are burning cash, I doubt that $34 billion would be enough.

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They don't want to fail. They want to be nationalized.

If they borrowed money from a bank, and they failed anyway, the bank would come in and restructure. If they borrow money from the government and fail, the government now has an excuse to nationalize them to run them 'more efficiently'. Then they don't have to maintain a profit margin, because the government will be there with a bandaid everytime they fall.

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Unfortunately, it seems the auto makers are willing to do just about anything to eat from the public trough; including government mandated restructuring and probably more regulations. This will probably become yet another cry that capitalism has failed when, in fact, it was regulations that led to the automakers being in such dire straights. If all of our major manufacturers become bureaucrats, our economic future isn't going to be very bright. The entrepreneur spirit isn't dead in the United States, but when it comes to the regulations once one gets to be major, it is effectively on life support.

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Here's another reason why the auto companies believe that they need a bailout to begin with. A former co-worker of mine got a temp job at a GM plant maybe three months ago, which he got by "knowing" the right people. I suppose he was a decent worker (he was okay here) so they quickly made him an actual employee. Now, less than three months after being originally hired as a temp they are offering him a 70 grand buy-out! Hmm, I wonder why these companies are going broke again? lol

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Looks like the automakers are going to get a short-term loan from the Federal government. The article didn't say what concessions the automakers would have to make, but leading Democrats want the money paid back in weeks. If they can actually pay it back in weeks, I wonder why they need the loan of billions in the first place? So, maybe they will be saved for a few months of operating expenses. I still like the free market solutions of ARC better.

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