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Old 11-18-2008, 01:03 PM   #15
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I'm not sure I'd call what we're looking to do with the "big 3" as "subsidizing."

As a taxpayer, I'm not comfortable making loans to companies who seem to have very little ability to pay them back, either now or in the future. Get their "acts together?" These aren't teenagers who took the keys to the car for a joyride. They are businesses, and in the world of business, past success is often a predictor of future success. The "big 3" didn't suddenly find themselves in this situation, they've been making it for decades. Past failure is also a predictor of future failure, which is what's going to happen with these companies sooner or later.

In the free market you compete or die. Fifty billion now will turn into what? Another fifty next year? These companies have not shown that they're willing to do what is truly necessary to be competitive. Until they do, my position is as stated.

All of which is not to say that I have no compassion or caring for all those who would be affected. I just don't see light at the end of the tunnel for GM (for the other two, the light is very dim). Better to suffer the pain now than later, when we're all hundreds of billions of dollars poorer.

Just my .02.
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Old 11-18-2008, 01:10 PM   #16
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Lightbulb Another option?

No disrespect intended here either, but perhaps another option could be that some of the fat oil companies, the ones that rake in HUGE profits every year from our gas guzzlers, maybe they can float the big '2.5' a loan? Maybe they need to step up to the plate (to protect their own interests. Can they afford a Detroit meltdown?). But why should they risk their $$ when Uncle Sam beats them to it?
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Old 11-18-2008, 01:11 PM   #17
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Well everyone has their opinion. I hope you don't actually want more socialism.
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Old 11-18-2008, 01:23 PM   #18
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What I want is irrelevant. Like it or not, the government is going to get involved in a LOT of business as a result of this. Not to mention healthcare, etc. Call it Socialism, or whatever you want, the reality is what it is.

I say we take the subsidies we give big oil and spread that wealth around to those who really need it.

Let me say that if we do nothing, the pain that has been described will be totally unreal, the likes of which this country has only seen once. We're not talking some pain to absorb the loss of 1 in 10 jobs, we're talking pretty much a catastrophic blow to the manufacturing sector of the United States will will ripple throughout this economy and those overseas, possibly leading to a global depression (GM alone is global in many countries).

Again, there are only two options here. Pay now or pay later. If we pay now, we have a far better chance of coming out of this stronger and wiser. If not, we can say without question, the Made in America logos will be yet even harder to find, and if you want to talk major Socialism, think what the country would be like if the government is now bankrolling all these lost jobs (unemployment) and pensions...... to me, and may I'm not sane, but the first option of loaning the money and having a chance, is a far better thing than the alternative....again, maybe that's just me. I don't like big government like the next guy, but I like even less the fact that 1 in 10 US jobs would be lost, from the people assembling the vehicles to the suppliers many times removed from the plants.

That's not a pretty reality to me and if we have to pay either way, I say a fighting chance is better than turning tail and giving up. We're not talking about Wal-Mart folding or McDonald's. We're talking a significant portion of our manufacturing sector here folks. Not the $8/hr jobs, no health benefits like Wal-Mart that helps precipitate and exacerbate the shrinking manufacturing sector, we're talking about real jobs that put kids through school, food on the table for over 100,000 workers in this country. Are these folk just simply going to start to work at Wal-Mart......
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Old 11-18-2008, 01:32 PM   #19
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Here are some facts off the CNN site, and for the record I was way off, it's not 100k+ jobs, that would seem to be a pebble thrown into a lake....it's actually about 1.6 to 1.7 million jobs we'd have to pay unemployment on, let alone the domino effect of bankruptcies..... Food for thought......

How many jobs are at stake?
GM (GM, Fortune 500) has about 120,000 U.S. employees. Ford (F, Fortune 500) has about 80,000 and closely-held Chrysler LLC has about 66,000.
In addition, the three automakers have about 14,000 U.S. dealerships that between them employ another 740,000 workers.
The suppliers used by the Big Three also employ an estimated 610,000 people.
Add that up and you have more than 1.6 million jobs tied to the auto industry.


What happens if there's no bailout?
GM risks running out of money later this year or early in 2009 without a bailout.
GM burned through $6.9 billion during the third quarter, leaving it with only $16 billion on hand as of Sept. 30. But it needs $11 billion to $14 billion to continue normal operations.
Ford and Chrysler have more cash relative to their needs, mostly from money they borrowed prior to the current credit crunch.
But each of those automakers could also run out of cash during 2009 without federal assistance.


What happens if an automaker goes bankrupt?
There are two types of corporate bankruptcy under U.S. law.
Chapter 11 allows a company to continue to operate as it sheds debts and contracts it can not afford.
In Chapter 7 bankruptcy, the company goes out of business fairly rapidly as its assets are sold off to try to satisfy its creditors.


What are advantages of an automaker going into bankruptcy?
Some argue that bankruptcy judges will be able to force the automakers to shed brands and dealerships as well as get the Big Three out of labor contracts they can not afford.
Other U.S. industries, such as steel companies and airlines, have used bankruptcy in the past to return to profitability without putting federal dollars at risk.


What are the arguments against a Chapter 11 bankruptcy?
Given the current credit crunch, many experts question whether automakers would be able to get necessary financing from lenders to help them during the reorganization process.
There are also doubts whether consumers would buy new vehicles from a bankrupt automaker due to concerns over their resale value and warranty. In effect, an automaker that files for Chapter 11 could eventually wind up going out of business anyway.


What are some of the other broader economic impacts if an automaker goes out of business?
Nearly 2 million Americans get their health insurance directly from one of the Big Three automakers. Most of them would lose that coverage if their company goes out of business. A failure of one of the Big Three could also cause a string of bankruptcies among suppliers.
And beyond the job losses at the automakers, dealerships and suppliers, media companies that generate a lot of revenue from auto advertising as well as retailers in towns where plants are located could also have to cut many jobs. The Center for Automotive Research, a Michigan think tank that supports the bailout, estimates that between 1.4 million and 1.7 million jobs indirectly tied to the Big Three would be lost in the first year following widespread auto failures.
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Old 11-18-2008, 01:35 PM   #20
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GM, as it exists now, is going to die. I'm sorry, that's just the way it is, and I'm no happier about it than anyone else (the small amount of worthless GM stock in my portfolio is proof enough).

I also don't have a crystal ball or ouija board, and therefore can't say with certainly what will happen either way. But GM does have assets (hard and soft) which are valuable and some which are not. Bankruptcy could allow them to sell some, keep others and, perhaps, even emerge leaner and more competitive.

If the argument is made that bankruptcy will end in GM not being able to get loans to restructure, etc., then I say let the government step in at that point and provide backing (funds) for GM to continue in whatever shape it can be competitive. If that means selling off brands like Hummer, Pontiac and Buick and only continuing to manufacture GMC, Chevrolet, Cadillac and Saturn, so be it.

I'm not against helping them, but if we're going to shovel money down a hole, let's pick the shallowest hole.
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Old 11-18-2008, 01:37 PM   #21
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Exxon made 11 billion ... in the 1st quarter of this year alone.

Float the car boys a loan and maybe the guvamint can lower your tax rate a little.

Whaddya say?
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Old 11-18-2008, 01:40 PM   #22
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Quote:
Originally Posted by Silvertwinkie View Post
A narrow and singular vision. Again, the big 2.5 are not asking for a handout. Just loan guarantees and if need be the gov will get stock.

The bottom line is this, you can either agree to float loans to the big 2.5 or you can pay the enormous price that the unemployment, heathcare/pension will cost.

Either way, you're going to pay. The second option (picking up the unemployment, etc costs) are going to cost us far, far more, and put at least 100k or more folks out of a job (far beyond what the big 2.5 directly employ), further shrinking the already contracting job markets here.

If we are going to pay either way (which don't kid yourself, we would be), then I vote that we loan them the money, they get their acts together and we keep 1 out of 10 jobs in this country on our shores.

I think looking at this any other way is frankly shortsighted and a knee jerk reaction (no disrespect intended). There are really only two options and doing nothing is not one of them.......

I might feel differently if we hadn't already lost a boat load of jobs to outsourcing overseas. At this point, we've outsourced about as much as we can, and letting 1 out of 10 jobs evaporate just isn't in any of the compaines or the country's (meaning you and I) best interest.

PS- If you don't think other countries subsidize their business, guess again. Japan, China, etc all subsidize various industries. Why? It's in their best interest to do so. If you think Socialism isn't already here in this country, guess again, cause my feeling is the next few years, we're gonna see a LOT more of it.
Yours is the logical fallacy of the false dilemma. This is not simply a choice between "loans" and potential unemployment, health care and retirement costs. There is no assurance that loans will do anything except prolong the inevitable. GM may well absorb all of the money and then fail leaving everyone with essentially the same costs... only later. If a highly paid union worker loses his or her job, he or she is going to be forced to look for another job. The only beneficiary of a highly paid, subsidized job is the person holding the job; it's the taxpayers left holding the bag.

Yes, most countries subsidize industries. Why? Concentrated benefits and diffused costs. For a wonderful example, see the U.S. sugar industry. Everyone pays more for sugar so a handful of companies can make windfall profits... and those windfall profits are used, in part, to buy political support to ensure those price supports and tariffs remain in place. Again, this subsidization benefits a few at a cost to many.

As for job losses, until recently the U.S. enjoyed record levels of employment. While jobs have been lost; others have been created. Between 1993 and 2002, 310 million jobs were lost but 328 million jobs were created. In a modern economy, the needs for labor will constantly change. In general, mature companies like GM do not generate job growth. It's small business that do. Giving GM or other large companies bailout money (call them loans if you wish), only moves resources away from the stronger sectors of the economy.

With all due respect to the folks on this thread, some of the best and brightest economists in the world are having a tough time making heads or tails out of recent events. Frankly, no one knows what's going to happen. The basic idea of capitalism, however, is that we trust individual consumers and businesses to make decisions about where and how to invest resources and the free market sorts out the winners and losers. When the government comes in, what it's doing is supplanting the cumulative wisdom of the marketplace and substituting its own ideas about who should be winners and who should be losers. History has shown that governments do a very poor job of this as compared to market forces. The "we have to do something" argument presupposes that there's something better we can do than to let free markets work.
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Old 11-18-2008, 01:41 PM   #23
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Twinkie,

It's an interesting read (I was actually re-reading it on CNN as you were posting it). And there's no doubt the pain will be felt by (most) everyone. I just don't believe, in their current incarnation, that GM can survive in the long-term. I'd prefer to see them (with federal assistance, if necessary) embrace that change now rather than later.

The statistics are sobering, no doubt. But a bailout only forestalls the inevitable, at which point the statistics will likely not have changed.
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Old 11-18-2008, 01:42 PM   #24
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Quote:
Originally Posted by Stephen Mick View Post

I'm not against helping them, but if we're going to shovel money down a hole, let's pick the shallowest hole.
I've got no issue with that at all, but my take was that the consensus here was that it better to let them die than to get them loans. I think for once the politicians know that they can't just throw money at the problem and that real tangible changes and corporate culture shocks need to happen.

You're right on that the big 2.5 cannot continue business as usual. In GM's case, Oldsmobile should not have been the only one that was chopped about a decade ago. Most of the GM cars are simply the same cars and trucks, re-badged with minor trim modifications. Same goes for Ford/Lincoln and Mercury. If Toyota can do it with 3 brands and half the number of dealers, the big 2.5 should be able to as well. The main issue now with consolidation is that there is a bloated dealer network and cleaning that mess up is not going to be easy. It was hard when it was just Olds being the sacrificial lamb....now we're talking several brands.

About the only thing appealing for bankruptcy is that the big 2.5 could in a second walk from the UAW bad deals, but there is a darker side to a bankruptcy filing that really makes doing it a lose/lose, which is why I say if we can give it to AIG and they blow some of it on parties, etc, then I think the big 2.5 are equally fair game to help fund.
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Old 11-18-2008, 01:44 PM   #25
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C'mon, Hampstead! I like being narrow and having a singular vision.

(I owe you a beer for post #22, by the way. Perhaps one of the most level-headed, simple and insightful I've read or heard on this subject.)
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Old 11-18-2008, 01:48 PM   #26
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The way I see it is simply pay, and have a chance (knowing there is no way of knowing if it still won't die off) or, not doing it and it will die off for sure.

In my mind, we loose more in Iraq than we would helping the auto industry here and if there is even a bit of hope, then I say the money is worth the risk. I am sure 1.6 million folks would agree, but not to even try seems wrong to me in some way.

As for job created, sure, lots of Wal-Mart type jobs have been created.......they don't help or pay the bills. The jobs that matter are all going overseas....this is hardly a logical fallacy of a false dilemma, it's a reality that we are quickly becoming a service economy with the middle class disappearing. Losing the big 2.5 will only accelerate that evaporation which is why I feel trying is better than not.
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Old 11-18-2008, 01:49 PM   #27
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Old 11-18-2008, 01:53 PM   #28
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exec pay

Take a look at this website
Executive Compensation - CEO Salaries, Stock Options, Bonuses, Compensation for Executives
I might suggest that something major needs to happen when a company that lost $38B last year (GM) paid its top 5 execs , $38M or maybe worse Ford who lost $2B paid its top execs approx $50B. No matter what happens rank and file are likely to lose their jobs. But these guys, like the wall street chiefs pulling this sort of compensation , while destroying these instituions borders on criminal. I have little confidence a loan will change fundamentally the way Detroit behaves. Will they improve fuel efficiency to have more marketable cars, or lobby CAFE standards. Will they self impose executive pay? Can they move to an era of labor negotiations that is equivalent to Toyota and Honda and BMW in the USA, which by most folks standards is a pretty good working wage. It is sad we have come to this.
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