Automakers: about $35 Billion should do it, or 50B

[inteller]

quote:Originally posted by TheArtist

It may be 4%, but that includes a lot of companies manufacturing here in the US that arent GM, Ford or Chrysler. As in; Honda, Toyota, Nissa, etc. Also, parts of GM et. al. would likely be bought up. It would be far far cheaper to help pay for the employees who did lose their jobs similar wages and to go college for a few years, turn Detroit into a college town and build some large research centers and universities.

that is a great idea but unions would be totally against it as it would allow people to rise above trade jobs and get a serious career.  GM could have done that back in the 80s, but the unions made them create the jobs bank that paid people to go sit in a room and do nothing.  The unions up there don't want people educating themselves, because they need to lemmings to stay in their unions.

[cannon_fodder]

GM employs 74,000 hourly employees and about 39,000 staff in the US.  Ford employs about the same.  Chrysler far less.  Lets just give 300,000 as a nice number.  Lets say the spin off jobs are 3 times that.  Then lets add 100,000.  A million jobs. We are paying $50,000 per job.

More scary - it won't work.

As I have said over and over, they are not dying because of the economy.  It is a chronic mismanagement issue.  Float them a guaranteed loan until the year GDP rises 5%, it won't matter.  They are going to fail unless they do something SEVERE.  A huge Federal Loan is a discouragement to such action.

And to encourage alternative energy?  Are you serious? For 30 years they have known what was needed and desired.  For the last 6 years the demand has been unbelievable.  Heck, electric cars and hyrbids existed in the 1800's, they ignored them.  The US Auto makers are the primary hindrance to alternative fuels and to mass transit.  

Why should we reward them for their past mismanagement and hostility towards alternative fuels by bribing them now to participate?  Honda, Toyota, Tesla motors, and plenty of start ups I've never heard of are working diligently and working hard to make it happen.  Giving GM Billions to walk all over them would be a slap to their face personally and a major hurdle for the industry.  

Incompetence should not be rewarded.  In the long run supporting negative returning companies is worse for our economy than catastrophic failure.  A waste of capital, resources, and a hindrance to companies that are successful.
- - -

Wal-Mart and McDonalds together employ 2.5  MILLION people.  If either or both were to start paying burger flippers/check out ladies $45,000 a year fail, would we bail them out?  Doubtful.  It is a esoteric sense of connection to the American auto industry.  

For that matter, the United States of America may see our bond rating cut when we attempt to fund the ~$1,000,000,000,000.00 in bailouts and new liabilities we have already guaranteed. More poor decisions and increased liabilities certainly won't help that at all.

[guido911]

quote:Originally posted by cannon_fodder

GM employs 74,000 hourly employees and about 39,000 staff in the US.  Ford employs about the same.  Chrysler far less.  Lets just give 300,000 as a nice number.  Lets say the spin off jobs are 3 times that.  Then lets add 100,000.  A million jobs. We are paying $50,000 per job.

More scary - it won't work.

As I have said over and over, they are not dying because of the economy.  It is a chronic mismanagement issue.  Float them a guaranteed loan until the year GDP rises 5%, it won't matter.  They are going to fail unless they do something SEVERE.  A huge Federal Loan is a discouragement to such action.

And to encourage alternative energy?  Are you serious? For 30 years they have known what was needed and desired.  For the last 6 years the demand has been unbelievable.  Heck, electric cars and hyrbids existed in the 1800's, they ignored them.  The US Auto makers are the primary hindrance to alternative fuels and to mass transit.  

Why should we reward them for their past mismanagement and hostility towards alternative fuels by bribing them now to participate?  Honda, Toyota, Tesla motors, and plenty of start ups I've never heard of are working diligently and working hard to make it happen.  Giving GM Billions to walk all over them would be a slap to their face personally and a major hurdle for the industry.  

Incompetence should not be rewarded.  In the long run supporting negative returning companies is worse for our economy than catastrophic failure.  A waste of capital, resources, and a hindrance to companies that are successful.
- - -

Wal-Mart and McDonalds together employ 2.5  MILLION people.  If either or both were to start paying burger flippers/check out ladies $45,000 a year fail, would we bail them out?  Doubtful.  It is a esoteric sense of connection to the American auto industry.  

For that matter, the United States of America may see our bond rating cut when we attempt to fund the ~$1,000,000,000,000.00 in bailouts and new liabilities we have already guaranteed. More poor decisions and increased liabilities certainly won't help that at all.

Yeah, what he said!

[waterboy]

I don't want to interrupt a perfectly good, and logical rant CF, but here's some complicating factors. The type of labor required to produce cars is diminishing. Partly because of education, partly because the change in our workforce in the last few decades. These jobs used to be family heritage. Now no one wants these jobs, immigrants are leaving and the training is expensive so I'm guessing Detroit tries to maintain a trained work force with this job bank program. Its kind of like paying farmers not to plant crops.

I agree that Detroit needs a good dose of reality and that may mean bankruptcy. Knowing that economics is largely based on confidence (I understood what McCain was saying, he simply screwed up the PR negative of noting the strong underlying fundamentals of our economy), having a major industry affecting around 10% of employment in the country go belly up scares the bejeezus out of our leaders. There is a suspicion that this is not just a recession but perhaps a crisis that we don't quite understand yet that may spiral out of control.

If we go quasi-socialist and buy their mismanagement, at the very least the management of the big three, that has ignored what people wanted and instead focussed on convincing buyers that they needed 300hp, 18mpg guzzlers to stay up with the cake eaters in the suburbs, should be dismissed. Remember, our country came out pretty good when we purchased stock in Chrysler to help them out and ended up making lots of money besides helping the industry. That brought us Mini-Vans and (cough)SUV's.

Best thing to me would be to take that 50 billion and invest it in Tesla, then watch as private enterprize re-tools Detroit to produce a licensed whole new line of vehicles in a big way. Talk Inhofe, Obama administration into moving one of the production lines to OK where cheap labor is still available. That may add some blue to the next election.[]

[PonderInc]

I totally agree with CF.

It's crazy to give billions to the very companies that have been FIGHTING against energy efficient regulations/cars for years.  They enjoyed their short-term, big money gains from SUVs.  Heck, they created the SUV market.  (Not that many years ago, unless you lived in the Australian Outback or were filming the movie "Hatari," you didn't need an SUV!)

I think you could easily take the same billions of dollars and offer incentives to "green energy" start-up companies instead.  Let GM, et al, fail, as they should.  Invest the billions in green-based small businesses, education, research, transit, etc...and watch the jobs grow.  It wouldn't take long to see the effects of the investment.  The new jobs would be spread throughout the country, and it might just help solve the climate crisis and our foreign policy insanity (based as they are on auto/oil-dependency).

[Hometown]

Federal and State and City government picks winners and losers every day.  In reality we practice Keynesian economics and have throughout my lifetime.  Supply Side makes a great abstract argument but has nothing to do with what really goes on.  Read David Stockman's The Triumph of Politics.

[Radar]

quote:Originally posted by we vs us

Ok, so what about the gigantor workforce associated with Ford and GM?  What about the city of Detroit which relies almost exclusively on the American automotive industry to survive? Not to mention smaller towns scattered across the country that are host to GM and GM-related factories.  I know we're purists on this board about how capitalism should work, but what about the massive human costs associated with the collapse of any/all American automakers?  

In pretty much any hypothetical collapse of GM or Ford or even Chrysler, thousands of workers -- from the factory on up to the office parks -- would be idled during the middle of a nasty nasty recession.  With the credit environment the way it is, there'd be no guarantee of any of the other automakers picking up the slack.  At that point, who gets to pick up the slack?  The government, in the form of UI, food stamps, and any other safety net programs.  So the question really is, do we give money directly to the companies and hope that they turn themselves around, or do we wait for them to fail, and spend that money on helping the workers stay afloat until they get hired again?  

Also, as someone mentioned, the government can offer the money with as many strings attached as they want.  So, feasibly, they could mandate that GM funnel all the bailout money into alternative fuel vehicles, as a for instance.  Or whatever.  Point being, the gov doesn't HAVE to just dump truckloads of cash on GM and then walk away.  It can use it as a swift kick in the rear as well.

*NOTE: I don't like the fact that this rewards GM for sucking.  And I understand the slippery slope argument (why not Boeing?  why not McDonald's?).   And Paulson has shown zero appetite for making industries who take the federal bailout hit any benchmarks whatsoever.  So, yeah, I'm skeptical.  Still, there're compelling reasons for this to happen.

The city of Detroit?  Get a couple hundred bull-dozers, push it all into a big pile and set it on fire.  No loss there.

[Hometown]

Apparently you have never been to Cranbrook.

[cannon_fodder]

As I understand it, we had to take Detroit back as part of the terms to end the war of 1812. []  Sorry, sorry.  Detroit taught the rest of America not to marry one industry.  Tough luck.

[waterboy]

quote:Originally posted by cannon_fodder

As I understand it, we had to take Detroit back as part of the terms to end the war of 1812. []  Sorry, sorry.  Detroit taught the rest of America not to marry one industry.  Tough luck.

Apparently Oklahoma didn't learn the lesson.[] Or, as I suspect, we're slow learners. They married automobiles, we married oil.

[sauerkraut]

The unions hurt the big 3 alot. The car companies are doing OK overseas and even pulling in a nice profit there, but here at home it's another story. The union seems to be choking the car companies. They have something called a "Job Bank" where high senority workers go and sit and play cards or watch TV all day in the break room because there is no place to put them and they can't be layed off because of the union contract. So they sit in the lunch room doing nothing getting $30.00+ an hour and full bennies. That has been going on for 15 years. No company can be run like that. Then on top of that you got smothering government regulations and fuel mileage controls.

[cannon_fodder]

quote:Originally posted by waterboy

Originally posted by cannon_fodder
Apparently Oklahoma didn't learn the lesson.[] Or, as I suspect, we're slow learners. They married automobiles, we married oil.

Actually, we tried pretty hard to ween off of that tit.  Tulsa, in particular, saw the writing on the wall and tried to diversify.  We courted  telecom (WilTel, WorldCom), Financial services (CFS, BOK), and aviation (AA, Boeing, Nordam).  Unfortunately, for us all three of those industries hit road blocks after 9/11.  Just as oil was taking off.  There was enough oil left in Tulsa to come back to life but the city did little to spur that growth.

Anyway, it is generally recognized by areas that one industry running the show is bad.  Often not even for the industry.  If the big three didn't have every Michigan politician in their pocket perhaps they would of been forced to compete long ago (instead of dictating concessions for SUV drivers and the like).  It appears to me that intentionally or not, Tulsa made a move to other industries and the laws of probability slapped us none the less.

My suggestions for Tulsa, to segway a little bit, is to work on alternative energies.  It uses many of our strengths (heavy transportation), is a related industry that can use our labor skill set (engineers, welders, business deals, legal issues), and has the potential to boom.  If we can assert Tulsa as a leader in that area we would all benefit (think San Francisco courting those new fangles tech companies in the late 1980's early 1990's).

[cannon_fodder]

Summary from yesterdays hearings:

Super short - the UAW is the problem.

Longer:

1) UAW has monopoly power as the only union.  They have accumulated power and crashed the automaker.  Almost exclusively accounting for the cost discrepancy. The UAW has federal protection as a monopoly on auto unions.

2) Average wage with benni's of factory workers,  Toyota:  $35.  GM:  $78

Now, pretend you need to hire an accountant.  If you pay your line the equivalent of $150,000 a year what do you have to offer to get someone to take a white collar job?

3)  GM to all questions:  

We are too awesome to fail.  If we fail, "tidal wave will crash over the United States" and the 4 horsemen will ride, etc.  we can't declare chapter 11, if you tell us to we will liquidate and you'' be sorry.

Question:  what if XYZ, what about incompetence, what about...  
Answer: Our company is well run and we have made good decisions... blah blah tough economic times.

4) Chrysler:  We will repay this LOAN.  We have retooled and are as efficient as Toyota or anyone else.
Question:  Then why do you still suck? (actually closer to why still lose $$$ and why if you are confident in repayment can't you tap credit markets?)
Answer: We are highly confident we can repay this loan.

5) Union rep:

Question: What concessions is the union willing to make?
Answer: Is everyone in the bailout required to make concessions?  You just hate unions.  This is union busting.

Question: (anything you want)
Answer: You hate unions.  Unions are America's workers.  American workers are America.  You hate America.

6) Common themes:

Bankruptcy won't work.
Repaying the money is guaranteed.
Management doesn't need to change.
The economy is killing them.
More important than anyone else so need bailout.
Too important to fail.
Union contracts are just fine, not a problem (did I mention $78 an hour?).
No labor concessions needed.

7) The plan as proposed:

Another $25,000,000,000.00 loan (or enough cash to burn in about 4 months).

No bonuses for people making more than $200,000 a year.

No dividends.

Loan takes first priority on repayment (read: no more capital from other sources).

My March 1st, 2009 they have to come up with a plan to show that they will have a plan to be viable companies.  Then they will probably get another $50 - $100,000,000,000.00 to burn.

Yay!

[cannon_fodder]

Mitt Romney has an EXCELLENT article in the WSJ today:

quote:IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won't go overnight, but its demise will be virtually guaranteed.

Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.

. . .

http://www.nytimes.com/2008/11/19/opinion/19romney.html?_r=2&oref=slogin

If we give them the money, make Mitt part of the package.

[waterboy]

I grow tired of the anti labor rap. Its unfair comparisons. The big three are still paying benefits to workers that produced cars in the 1960's. Before Toyota imported cars to this country and made with vastly cheaper Japanese labor at the time. Japanes steel mills that we rebuilt after WWII also provided better quality, cheaper steel. Those costs are averaged into the labor/benefits cost you noted. Also, corporate America has to carry the cost of health benefits (if they want a productive workforce) because unlike the rest of the world we don't have any form of universal government funded healthcare. Toyota does.

Stop focussing on labor as an enemy and note other factors, like the following. Toyota has about 1500 dealer outlets to accomplish sales of about 40% of the American market. GM has to carry over 8000 dealerships to accomplish the same market share. Thats because the states bent over for dealer lobbyists and made it legally difficult for GM to close any unprofitable dealerships. GM foolishly set up dealerships for each of its duplicative brands (Olds,Buick,Pontiac,Chevy,Cadillac,Saturn,GMC,)back in the early sixties and now has to service these losers at extremely high cost. Ford and Chrysler have the same problems though Ford has (unsuccessfully)tried to institute company stores to change the equation.

I saw this happen in the oil industry in the seventies. Gas stations were getting old and unprofitable. Local long time lessees didn't want to invest in rebuilding. Cities Service simply stopped providing fuel to its unprofitable dealers and jobbers till they closed on their own. They then bought the locations and converted them to modern efficient stations. It was heartless but effective. The big three can't do that.

I'm not sure what the best response is. Bankruptcy would certainly alleviate the dealership problem and give the big three a chance to really put it to the UAW as you suggest they should, but I am reminded of a quote by Chauncey Gardiner played by Peter Sellars in "Being There"- "You should only prune the garden when the garden is growing in the spring or when the garden is dead".