GM facts and fiction

[toastie]

What’s Good for G.M. Is Good for the Army

More challenges lie ahead for our military, and to meet them we need a strong industrial base. For years the military has sought better sources of electric power in its vehicles — necessary to allow troops to monitor their radios with diesel engines off, to support increasingly high-powered communications technology, and eventually to support electric propulsion and innovative armaments like directed-energy weapons. In sum, this greater use of electricity will increase combat power while reducing our footprint. Much research and development spending has gone into these programs over the years, but nothing on the manufacturing scale we really need.
Now, though, as GM moves to plug-in hybrids and electric-drive technology, the scale problem can be remedied. Automakers are developing innovative electric motors, many with permanent magnet technology, that will have immediate military use. And only the auto industry, with its vast purchasing power, is able to establish a domestic advanced battery industry. Likewise, domestic fuel cell production — which will undoubtedly have many critical military applications — depends on a vibrant car industry.

Read more: http://www.nytimes.com/2008/11/16/opinion/16clark.html

[Silvertwinkie]

For all the naysayers about keeping the big 2.5 alive and US run, here is your big break, Gov owned and run China automakers are already drawing up plans to pick up the assets of the big 1.5 of the big 2.5, with Ford only slightly behind.

If we don't do it, the Chinese are more than willing to, so that every car who's profits and control were domestic could now be in foreign control.

Wal-Mart type followers rejoice!

Are Chinese Automakers Considering Buying GM and Chrysler? | GM-VOLT : Chevy Volt Electric Car Site

Anyone still think we shouldn't spend even 100 billion or more keeping Detroit in Detroit and forcing their hands via these loans had better think again......

[hampstead38]

I don't feel that I need to think again. I'm pretty happy with my thinking in the first place.

The arguments for bailing out American auto makers are emotional, not economic. Apparently, we "owe" GM something for building war supplies a half century ago. If we let the U.S. auto makers fail, the Chinese will sweep in. The loans are OK because we "all own" GM via our mutual funds so we're really just loaning money to ourselves. The sky is falling and we have to do something!

All of these emotional arguments do not sway me from the simple principle that in a capitalist economy, the government should not be loaning money to private firms. There are simply far too many historical examples where government intervention has done far more harm than good. I'm not afraid of a recession, or even a depression. I'm not worried about the Chinese. I'm worried about raw emotion, nostalgia and politics further compromising the free market system. In the long run, it is best to let GM rise or fall under its own weight without any intervention funded by the American taxpayer. Unless, of course, you think the government is smarter than the marketplace. In that case, I suggest you should cut out the middleman and simply advocate for the nationalization of the auto industry. And in that event, it makes to sense to talk with the Chinese. They have a fair amount of experience with state-run industry.

[wheel interested]

It may cost more to keep workers working but that is the right thing to do. Private corporation is not interested in that and that makes a HUGE mess in it's wake. It's more important for people to have gainful employment and occupation and a means to sustain themselves than to have corporation see profits. Now how that can be fixed is hopefully what is a priority. The value of an individual must outweigh the value of commerce in the kind of society of which I would like to live. Would it help to clarify if I mentioned that Steinbeck is my favorite author and the country has been through this question of balance before?

[Gene]

Hampstead, I know it's unlikely I'm going to change your mind about free markets. I do see that you aren't worried about a depression. The last one had 25% unemployment, assets wiped out, extreme poverty, well, you know the rest. I'm not willing to risk that. I know you may reply that govt intervention made the Great Depression worse and you know I'll reply that's only the belief of only a minority of economists and we can repeat ourselves again and again. But, I'm still not willing to take the chance.

On to safety. Mrmossy', I think all those statistics are interesting and I'm glad you didn't post more. We agree all things being equal, more mass means more destruction. But, I don't think all things are equal and hopefully there can be safe small vehicles designed. Some are pretty safe now. I guess we'll buy as much mass as we want to if we can afford the fuel. I suggest looking for my father's '56 Lincoln Premiere—it was massive and seemed to be able to go through brick walls, but it kept falling apart because it was built badly. He didn't learn and bought two Thunderbirds in the mid-'60's—they were pretty, but badly made too. Then he went back to GM. He had a Buick around '67 that had a suspension that rocked like a boat on a flat road and made me carsick to drive, something I tried to avoid. He seemed to think all those bad cars were normal. Meanwhile I was buying foreign and spending less on repairs and having more fun driving. Well, that '66 Triumph and the '68 or '69 MGB had little QC, but they were fun, but maybe they were my mistakes. Despite my past life with small cars, I remain uncrushed, though now that I've learned pickups are so unsafe, my time may be up soon.

Gene

[Air2Go]

Rick Wagoner saw his pay increase by 64% in 2007.

Q. Just how bad would GM have to be doing before Wagoner and others leading the company would experience a salary reduction/elimination of "bonuses?"

[Silvertwinkie]

Emotion is irrelevant and not playing into any of my thoughts on the matter.

Fact is that should any of the automakers go, or file, it's just a ticking time bomb. Again, you have two basic choices (non emotion based):

Pay now upward of 100 billion (with a B) or pay far more than that in lost taxes, unemployment, etc. Don't think so? Think again. We're not just talking the big 2.5. We're talkin' suppliers, we're talking more defaulting mortgages, we're talking ma and pa shops near the factories (in essence most of the towns around these plants) going under, adding insult to major injury.

Emotion? Not even close, it's simply fact. They sky might not fall, it actually will fall. Let the Chinese in? There is the most intelligent thing I think I've heard yet on this thread, and clearly signals to me troll like thinking trying to get a rise out of folks.

Oh and for the record, the GM CEO may have had a pay increase in 2007, but his compensation was halved FWIW.

Sure letting the big 2.5 file bankruptcy would be better cause they all could shed all the dead weight, union contracts that pay 1.5x what the non-union competition is paying....but in the long run, is that the best course of action?

Guess we'll all find out. Just glad no on here one this forum is in a position to make the final call (including myself).

PS- Buying a $75 to $500 plane ticket from a bankrupt airline is a heck of a lot different than buying a $12,000 to $60k car with a possibility there will be no parts or warranty for it.

[thatscool]

I have also been a meat cutter, and I am a good meat cutter. I am now a uaw jobsetter and also a good one. I flew on the corp. jet to get training on some machinery that was was built in Germany. I didnt see any hookers on the plane. If you think the work is done by zombies think again.
I have been on both sides of the fence here. I can understand the frustration people are feeling. My sentiments exactly, I am also a taxpayer! My reasons for supporting a loan isnt as selfish as you would like to believe. The people I work with give to the united way and other charities regularly. It comes right out of my check every week, I have gave thousands upon thousands to the united way over 16yrs. why? because it works for ALL of us. I also bought groceries for a man who had none today. what did you do to help anyone? if you have money in the bank, doesnt this make you selfish and greedy? so if I have to market my skills look out, I may just take YOUR job.

[thatscool]

I own a Ford, a Chevy, and a Dodge, I have owned japenese built vehicles in the past so I can join most any arguement. So lets not go there. Lets think what we can do to help our country as a whole at this time. I am certainly willing to take a cut in pay in order to pay back the government and taxpayers. Last time Chrysler was loaned money, the goverment make 300 million dollars on the deal.
Another 516 people from my town has no job effective tonight at midnight. they will no longer be supporting the charities as they were before.
It seems sometimes we are blasted with numbers like million and billion... and godzillion. We become deaf to huge numbers, try to count outloud to even a million. then realize these are real people who would be hitting the streets within weeks. Let the automakers fail if thats what the market dictates, but let it not happen overnight.

[jimmini]

Ganaraska in your posting 214 you said butcher WORKMEN.
In the USA we now say butcher WORKPERSON.
It is required to be politically correct.

[wahoonc]

My question is where does it stop? We can continue to bail out businesses, banks and what have you until we owe the entire world several times our GDP. Somewhere along the way changes will have to be made. Someone pointed out that the stimulus packages didn't do much...small wonder with the debt load most Americans are carrying. The $600 per person stimulus check doesn't cover a month's costs on operating a single car. The average American household has 1.9 cars and the average cost per month per car is $613...average credit card debt is $9200 per household and the average payment on that is over $300. Now how do you stimulate a debt ridden economy?

Does the auto industry need help? Probably, but they must stop doing business as usual. Shades of the old adage of putting all your eggs in one basket. Better to have several smaller industries rather than a few large ones. IMHO.

Aaron

[hampstead38]

Simply saying something is a "fact" does not make it so. "Ticking time bomb" is not a factual description, it is a subjective (and rather hyperbolic) characterization. I am sorry, ST, but you have offered absolutely no evidence that giving American auto makers loans, subsidies, etc. will change any of the underlying, economic problems these firms face.

The $25 billion "loaned" to car companies is not simply conjured from thin air. It is taxpayer money. The foundation of your argument is that the best and highest use of that $25 billion is to give it (or "loan" it) to U.S. auto makers. Why? Well, the automaker CEOs tell us so. So, we're simply to believe that out of the entire U.S. economy, the best investment for the taxpayers is propping up bloated U.S. car companies with loans, a tactic that will do nothing to reduce costs including UAW contracts or retiree benefits.

If you want to support GM, buy a GM car. Better yet, buy GM stock. I respect a man who will put his money where his mouth his... but you and Gene want to put my money where your mouth is.

If enough people really believed in GM, they would not need government loans. If GM receives the taxpayers money, it will be a triumph of politics over principle. It's really not that different than bailing out homeowners who made poor mortgage decisions. While we bought (and sold) near the top of the market, we made a conservative decision and one that has prevented us from having an upside down mortgage. Why should my tax dollars go to people who acted less prudently? There are thousands of well-managed companies that don't need government loans. Why reward the poorly-managed firms?

Loans, grants, subsidies... take away all the rhetoric and bombast about the world coming to end and what you have is three big companies looking for corporate welfare. I hope you read the brief article I linked. It does a better job than I can explaining why the bailout of the U.S. auto industry is a bad idea. And, yes, I agree that no one reading this thread will be making the final decision... but we'll all pay for the decision.

[wheel interested]

But you don't mind bailing out troubled Citicorp at 306 billion? Including taking a $20 billion stake in the firm as well as guaranteeing hundreds of billions of dollars in risky assets.

[hampstead38]

Actually, I am against the mortgage and financial sector bailout... but since the title of this thread is "GM Facts and Fiction," I thought I should focus my comments on the U.S. auto makers. After 17 pages, I don't recall anyone talking about "moral hazard." The government cannot simply jump into markets with its seven league boots, fix a problem and then have everything go back to "normal." Whether it is a car company or a homeowner, a government bailout today increases the risk of greater problems in the future. I'm sure someone on this forum is the beneficiary of government-subsidized flood insurance... and I'm sure they could give us an empassioned post as to why it's important for the U.S. taxpayer to defray the cost of them having a home in a flood plain.

The problem here is that a short-term fix results in greater long-term problems. When you save people or businesses from bearing the risks of decisions, particularly poor decisions, you reduce the incentive to make better decisions... which means these emergency "one time" bailouts will never end.

[85MH325]

Originally Posted by hampstead38

The problem here is that a short-term fix results in greater long-term problems. When you save people or businesses from bearing the risks of decisions, particularly poor decisions, you reduce the incentive to make better decisions... which means these emergency "one time" bailouts will never end.

You've hit the nail on the head exactly. We are now trying to repair the damage we've done with government intervention, regulation, and other gerrymandering with the economy since the last depression. The problem is that for the past seventy-five years, we've not actually had a free-market economy. So, what you're actually proposing, rather than free-market economic balance leveling itself out, is that the government should now abandon the previous seventy-five years of intervention that hasn't worked, and let all of the innocent victims fail along with the "usual suspects"?

I think that's what we're trying to avoid. Yes, there will be folks who benefit who shouldn't. But there will also be millions who benefit by keeping the meager holdings they have. Then, hopefully, someone will be able to figure out how to fix our auto industry to keep it solvent, and pay back the "loans".

The bottom line is that if they do nothing, we fail financially. If they do a "bailout", we might yet all fail, but there's some home that we can recover.

Roger

[Silvertwinkie]

Originally Posted by hampstead38

The problem here is that a short-term fix results in greater long-term problems. When you save people or businesses from bearing the risks of decisions, particularly poor decisions, you reduce the incentive to make better decisions... which means these emergency "one time" bailouts will never end.

All these are just all great arguments for why we shouldn't do this and why we shouldn't do that....and I am sure if you were running things we would have never gotten in this mess. However, the do nothing politicians we have continually voted back into office (all branches we can vote for) we have continually re-elected. These folks have blown trillions of dollars on pork belly spending, wars, discounts and tax breaks for the ones who lobby the hardest and subsidies for the the likes of the oil companies who might I add have been getting millions if not billions.....and you are here to tell me that even 100 billion to try to save the majority of the manufacturing sector is not reasonable? You say in one area you are staunchly against government assistance, then at the same time, you, I and the rest of us have let the politicians do exactly what it is we are complaining about here, now. I'm sorry, but it's that kind of thinking that has moved most of our jobs overseas. You stand as much of a chance of convincing me you are correct about as much as I stand a chance of convincing you that your outright wrong, so on that note, to each their own, I'm moving off this thread because it no longer serves any purpose to argue with folks who simply like to play the other side. The reality my friends we will know in a few months and at that time I may search out this thread to either be vindicated or take my lumps....either of which I am happy to do and again, my vote would be to give the big 2.5 up to 100 billion if they needed it, of course with strings and conditions attached. I feel a chance is better than a total meltdown, which I don't feel will happen if the politicians are smart about these *loans* (read not handouts or bailouts). There are no guarantees in life and the price of doing nothing could cost us more than if we tried something. Go tell you politicians to yank some pork barrel spending, pull the subsidies from big oil and the lobby groups who really don't need it and then I might be swayed that we should not give the representatives of the bulk of our manufacturing sector a loan,when these clowns (pork barrel spending, subsidies from big oil and the lobby groups) have been all handed free money (NOT LOANS). These funds would not cover all of it, but it's not chump change either.

[hampstead38]

On your way out, ST, let me say that it is disappointing that you feel my defense of free markets is simply me playing the Devil's Advocate. I have a degree in economics. I've spent a fair amount of time, personally and professionally, thinking about issues like these. On this thread, I've tried to communicate my thoughts in a civil manner. Whether you are inclined to believe me or not, these are my honest opinions... and I'm hardly alone in them.

As for changing your mind, I really don't feel that is my responsibility. In logic, the burden of proof rests on the one making the assertion. You have asserted that we need to bailout (or loan) billions to the American automakers. You propose to do this with our tax dollars (yours and mine). You have not demonstrated that the loans are necessary... or even a good thing. As for vindication, the real damage to the economy done by the government bailout will take decades to assess... as any good economist will tell you. Look at how long it took us to understand the Great Depression.

My parting thought, ST, civil discourse means questioning ideas, not motives.

[purman]

I wonder how bad the companies really are???.

I started a thread about EA sports laying off 600 people... My brother who works there, had a meeting with the International CEO and others who said money was in the bank and the company was doing fine... Then people said this is not true EA has posted losses etc.

Well like GM and the others, who do we believe....

EA either lied to my Brother (why would they) or lied to the public...

I think maybe the big 3 are, lets say "are playing with the numbers a little"

Trying to use public opinion and scare tactics to get the money?
(DOOM DAYS IS COMING)

After reading a lot of this thread it seems to be working.

Personally I have never liked the Unions, I had a friend in one and it seemed a way to do less work and get paid without being fired!!!!!!!

Where do all those Unions dues go? Politicians!! Fat cats!!!

The Unions worked in the beginning and were great, but they are out dated..

Getting rid of them would be a start to saving the big 3..

[Silvertwinkie]

I had left this thread until I heard this news today:

Bush: U.S. will act to safeguard financial system - Nov. 24, 2008

Then please, enlighten my as to why this is ok and not giving the automakers money? Citibank was just given another 20 billion having already been given 25 billion a few weeks ago, and the government is guaranteeing 300 billion in losses.

So I know you are totally against these actions as well, but if we are already doing it, I can't see still how even $100 billion to the domestic automakers is any less important, degree in economics or not. We've already opened up the treasury for the banks, and I see the point of where do you stop, but my point is, you can't just stop with the banks. I mean really, 45 billion to Citibank in the last 4 weeks and zero to the big 2.5? Both institutions are important.

[mrmossyone]

Originally Posted by CrawfordGene

Hampstead, I know it's unlikely I'm going to change your mind about free markets. I do see that you aren't worried about a depression. The last one had 25% unemployment, assets wiped out, extreme poverty, well, you know the rest. I'm not willing to risk that. I know you may reply that govt intervention made the Great Depression worse and you know I'll reply that's only the belief of only a minority of economists and we can repeat ourselves again and again. But, I'm still not willing to take the chance.

On to safety. Mrmossy', I think all those statistics are interesting and I'm glad you didn't post more. We agree all things being equal, more mass means more destruction. But, I don't think all things are equal and hopefully there can be safe small vehicles designed. Some are pretty safe now. I guess we'll buy as much mass as we want to if we can afford the fuel. I suggest looking for my father's '56 Lincoln Premiere—it was massive and seemed to be able to go through brick walls, but it kept falling apart because it was built badly. He didn't learn and bought two Thunderbirds in the mid-'60's—they were pretty, but badly made too. Then he went back to GM. He had a Buick around '67 that had a suspension that rocked like a boat on a flat road and made me carsick to drive, something I tried to avoid. He seemed to think all those bad cars were normal. Meanwhile I was buying foreign and spending less on repairs and having more fun driving. Well, that '66 Triumph and the '68 or '69 MGB had little QC, but they were fun, but maybe they were my mistakes. Despite my past life with small cars, I remain uncrushed, though now that I've learned pickups are so unsafe, my time may be up soon.

Gene

One major reason cars with more mass are safer is that they generally have much larger crush zones to dissipate energy release. There is new technology coming on line to help increase the size of crush zones without increasing mass which would be safer in an accident with a car of same or less mass and even help in a wreck with a vehicle with more mass. There is no doubt that everyone would be safer if there were only small cars with very little litlle mass and large crush zones( which is not currently the case with small cars), but your playing with the big boys out there on the road and will continue to do so in the forseeable future. Small cars can be made to be much safer in auto accidents, the technology is there but be prepared to pay a whole lot more for the car.