Democrats, White House clash on bailing out automakers
WASHINGTON —
Democrats in Congress Monday launched a new multi-billion dollar drive to save the US auto industry, but the White House warned against their plans to take funds from a huge finance industry bailout.
Less than two weeks after Barack Obama’s presidential election victory, Democrats and Republicans on Capitol Hill clashed in a new showdown over the reeling US economy, at the start of a “lame duck” session of Congress.
Democrats unveiled a $25 billion plan to shore up the reeling car industry using funds drawn from the finance bailout, in the final congressional session of President George W Bush’s turbulent presidency.
Senate Majority leader Harry Reid hit out at Treasury Secretary Henry Paulson for refusing to adapt the huge bailout to aid the auto industry, on which millions of jobs depend.
“All it would take is one stroke of a pen and that problem would be solved,” Reid said, as he opened the Senate lame duck session.
“We are seeing a potential meltdown in the auto industry, with consequences that could directly impact millions of American workers and cause further devastation to our economy.”
But the White House got in a preemptive strike before lawmakers reported for work saying the special rescue funds for banks were not the answer, calling on Congress to adapt an existing $25 billion auto industry loan program.
“The administration does not want US automakers to fail, and in fact we support assistance to automakers,” Bush’s press secretary Dana Perino said.
But “we believe this assistance should come from the program created by Congress that was specifically designed to assist the automakers—from the $25 billion Department of Energy loan program,” she added.
“This is the appropriate funding to use for automakers rather than seeking an additional $25 billion from the TARP program”—the Troubled Asset Relief Program, as the bailout is known.
“The TARP program was never intended by Congress to assist automakers or other sectors of the economy—it was solely intended to deal with what is an ongoing credit crisis in our financial sector.”
Despite the political posturing, it seemed unlikely the Democratic leadership would muster sufficient votes to press the bailout through the Senate.
Until Sunday, Democrats had a 51-49 vote majority in the chamber, but president-elect Obama resigned his seat on Sunday, further paring their numbers.
Democratic leaders would need at least 10 Republican votes to pass the bailout in the Senate and overcome the minority’s obstruction tactics with a 60-seat filibuster proof majority.
Perino pointed out that any attempt to reopen the TARP program would not make it through the Senate, and said the White House was working with Senate Republican minority leader Mitch McConnell on the issue.
But John Engler, CEO of the National Association of Manufacturers trade association backed plans to tap the finance industry bailout.
“The auto industry is in dire need of relief today, and such relief should be seen as a critical component in our overall effort to restore confidence to consumers and investors, and stabilize the economy,” he said.
In the new Senate, which takes office in January, Democrats will have at least 57 seats and their numbers could rise further with three races from this month’s congressional election still undecided.
Democrats also put a new economic stimulus plan on the table on Monday, which includes infrastructure spending, rises in unemployment insurance and food aid for the poor—but prospects for the bill are also considered slim.
The House of Representatives is set to return for its lame duck session on Wednesday and House speaker Nancy Pelosi was meeting Paulson and Federal Reserve chief Ben Bernanke on Monday.
The Senate Banking Committee meanwhile confirmed the chairmen and chief executives of the “Big Three” automakers, Ford, Chrysler and General Motors, would come cap-in-hand to Capitol Hill on Tuesday for a hearing.
The three top executives are due to address a House panel on Wednesday.
Many lawmakers have questioned whether bailing out the automaking sector would simply put off a day of reckoning for an industry which has failed to compete with foreign auto giants.
But others warn letting the industry fail could have a devastating impact on the already crisis-ridden U.S. economy, and cost tens of thousands of jobs.
Wire reports
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0
adaydream
We can bail out the Wall Street bandits, but we can't help the Big-3.
I'm not advocating that we just give them $25Billion with little to no guidelines and requirements, but we need to help them.
Require change in 75% of management.
Require that models be hybrid or electric, but the bottom line is they can't continue the way they been doling business.
These aren't the only requirements that need to be levied. But there are too many jobs and people effected. < :-)
0
skipthesong
Require that models be hybrid or electric, but the bottom line is they can't continue the way they been doling business." They have been slipping since the 80's. It took Ford years to comply with right hand driving, glass safety standards, and how many American cars are on Japanese roads?
A bailout is necessary, but its also a bad thing. The politics behind this too is awful. If it weren't for the amount of jobs lost, I wouldn't give these people a dime.
0
SezWho2
If we are going to give $25B to the auto industry, it really doesn't matter whether it comes from the TARP program or whether it comes from the existing Department of Energy program. However, it seems to me that the TARP program could provide the funds now whereas the Department of Energy program funds may already be largely committed. The major rap on the TARP program is that money distributed to financial industries is no--at least at this early date--finding its way back into the business community.
But why is $25B the right number for automakers? If we were bankers, we would like to see a business plan, to understand how the money is going to be used and to receive a convincing demonstration that these funds would be successful in turning the industry around. As far as we know, the $25B is just the first installment of an open-ended series of handouts. It's a little like when your teenage son tells you he needs $60 bucks to rent a tux for the prom and three days later he tells you he needs money for a corsage and for the after-prom breakfast.
Jobs are at stake, but the question is one of who we should help in the age-old struggle between labor and stockholders. Unless the automakers can come up with a convincing plan, I would rather see them fail and go into receivership. The money could be used for extended unemployment benefits and for educational assistance for workers who lose their jobs.
0
Nippon5
We shouldnt be bailing out any of them...
Since the 1970's car manufactures have used every excuse to not change the way of thinking they have. They had many chances to create a viable energy efficent vehicle and said no..
With that said I agree with the idea of a loan system in which the car companies have a set dead line to make changes to their platforms and to repay the loan, remove ceo bonuses until the loans are paid off and the company is in the green.. ETC ETC
0
VOR
The reason the big three are in so much trouble is because all they have managed to push off the assembly lines for the last 40 years are overpriced low quality products. Bailing them out now is not going to change the fact that American cars suck and only people who fall for that "made in America" crap will mindlessly throw their money away on inferior products. Its time for GM, Ford and Chrysler to restructure and they don't need taxpayer money to do it.
I for one will never buy an American car or truck again.
0
timorborder
Interesting arguments here. On one hand, there is the argument for letting these companies go the way of the dinosaurs. In the current world economy in which free markets have been held up as a paragon of virtue, for the US to turn around and bail out the auto makers would seem somewhat hypocritical.
On the other hand, what about the strategic implications of letting such companies go bust. Is it in the US's strategic interest to have a viable (if not strong) auto industry within its borders?
Irrespective of what ever argument you adhere to, however, there is one truth. That is that the auto makers have to change the way they do business if they are going to survive in either the short or long term.
0
Nippon5
To say the American cars are inferior to foriegn cars is a strange at best statement... Consider the Ford ranger and the Mazda b2500 truck are from the same place, the Caravan was a Mits engine and trans, the Small car line of GM is from GEO.. The cars are almost even in par.. Ive had allot of cars in my time, and Ive had bad Japanese cars, bad American cars, Bad German cars, and good cars of almost every brand.. An example.. My 2002 Dodge Dakota had over 300k with no major repairs, My 2001 Subaru legacy had the motor replaced at 89k, My wife's 2001 Ford explorer had no problems at 160k, My wife's 1995 Intrepid had problems with the trans at 40k, 70k.. My Supra 2000 had 190k when the engine started to burn more oil then gas.. and on and on,....
But what American car companies had not done was simple, they did not plan for the change in oil prices, consumer purchace trends, and other factors that have affected them... They have created their own issues and they seem to not want to change to the better. In contrast Japanese companies have led the way in ECO friendly vehicles and that has helped them out in the long run, but they too are in serious trouble...
0
SushiSake3
I was initially for supporting the Big 3, but have since changed my mind.
Bill Ford made a presentation way back in the early 90s advocating the need for Ford and the entire auto industry to re-tool and create greener, more fuel-efficient vehicles. He had a very bold vision to do so while at the same time, Ford was making millions selling large SUV/trucks.
That was more than a decade ago.
Sezwho hits the nail on the head when s/he says - "But why is $25B the right number for automakers? If we were bankers, we would like to see a business plan, to understand how the money is going to be used and to receive a convincing demonstration that these funds would be successful in turning the industry around. As far as we know, the $25B is just the first installment of an open-ended series of handouts."
Another question people need to be asking is why the sudden intense rush for bailout funding, especially when both Ford and GM have seen this problem coming for years?
Sure, both have been making drastic cuts to both pay and benefits to workers in recent years (punches in the guts to loyal workers), but the fundamental direction of both companies is wrong - they need to be going green.
They are not.
Bailing both companies out is like feeding a dead horse.
GM was offered a hybrid tech tie-up deal by Toyota about 12 years ago. The deal was inked, yet GM effectively shelved it - selling too many SUVs and trucks.
One of the many problems here is that GM and Ford have known about this coming move to greater fuel efficientcy in cars for more a decade.
And they have only now started doing something about it.
This, to my mind, is a complete failure of management.
And now we have a scenario where US taxpayers are being asked to take on even more debt to bail out what is effectively very bad management that, collectively between GM and Ford, have made not only collossal errors of judgement, but they have also completely failed to act to take their companies in a new strategic direction that it is clear that - at least - Bill Ford knew all about more than a decade ago.
Another problem is that throwing $25 billion at these automakers isn't going to save them - it is only going to prolong their death dive by a small extent.
I say - no bail out - let them go bankrupt.
Enough of this rewarding bad management.
0
SuperLib
Strange that we'll throw $700 billion at Wall Street and financial wizards who created the problem to begin with and who will walk away with billions in their own pockets, but we're hesitant to give $25 billion to the auto industry that provides good paying manufacturing jobs.
I don't really blame current auto managers for the situation. They're saddled with so much legacy cost from past managers that their hands are tied every time they offer a new car to the market. They didn't create that situation... The government should just bite the bullet and cover the $90+ billion in underfunded pension and health care appropriations from the automakers. That's what's really killing them. Legacy costs add something like $2,000+ to the price of every new GM car. It's insane...
The quality of US cars has increased a lot since the 80s and they've narrowed the gap between foreign companies. In some surveys GM was ranked higher than Honda but still below Toyota (like everyone else). People buy as many GM cars as Toyotas, the difference being GM can't make any money selling them.
I also think it's a great idea to link the bailout to fuel efficient cars. That's a win-win situation.
0
gyouza
The $700billion for financial market bailout is to keep the markets fluid so that lending can still occur so that companies in trouble like GM can keep their suppliers happy and not have them ask for cash up front. The 700bio will affect just about everybody. I don;t like it, especially as I hear the boss at Merrill Lynch is still likely to pick up 200mio in a bonus next year, his number two to get 70 mio. Something aint right. But it is crazy to give 25bio to an auto industry that has refused to ignore progress, and has refused to react to oil crises, and does create substandard cars (notably Chrysler, the other two have European units that produce fine cars but it is a mystery why they don't make/sell them in the US as well).
Japanese manufacturers produce cars in the US. The hourly pay differential is 30 dollars an hour! The Japanese manufacturers are in the black, the US ones in the red. The bailout would only serve to maintain that differential, and another bailout would be needed in a few more years time, and effectively, the tax payer in the US would be subsidising the US auto industry.
Look at the UK. Everyone was up in arms when BL/Rover was collapsing, but now more cars are made in the UK at higher quality, with more exports.
The victims will be the unions in the US who's members are getting paid a salary that the company can't afford to maintain. No one wants to get paid less, so there is no obvious win for those people. If Detroit crashes, it could be a disaster. If people want to save their jobs, I think a lot of soul searching will need to happen.
0
SushiSake3
Superlib - "I also think it's a great idea to link the bailout to fuel efficient cars."
I think you are a little behind the play here - there has already been $25 billion approved by Congress to give to the Big 3 to help them re-tool their operations to make their vehicles more fuel efficient.
I think the problems is it hasn't been released yet.
SuperLib - "They're saddled with so much legacy cost from past managers that their hands are tied every time they offer a new car to the market. They didn't create that situation."
Neither did Carlos Ghosn or Watanabe at Toyota.
They worked around it, re-engineered their processes and started building fuel efficient cars that people actually want to buy.
Why couldn't Detroit do the same?
Linking the Big 3's inability to act to 'legacy' is a copout in my opinion.
Look at Nissan - in 1992, that company was on the brink of bankruptcy.
Look at them now - last time I heard they had the highest profit margin in the industry.
Again, why couldn't Detroit do the same?
0
SushiSake3
Superlib - sorry, I just re-read your post and saw you were talking about legacy costs, not 'legacy.' Sorry, you have a point, and a very good one, but that said, I stand by my previous point - the Big 3 have known about this coming move to greater fuel efficiency standards and greener autos, and yet have done next to nothing about it.
That is bad management whichever way you look at it.
0
skipthesong
my business in certainly not in the billions of dollars but if I run into problems will the government, the one I pay taxes to help me? I doubt it. Sure, I get a few perks here and there many people wouldn't get but lately it really hasn't helped much. When I came to Japan with my wife, her father helped me setup this business here, but a big company to back me and actually I have been very fortunate with the Japanese government's help. I would like to see the US government help more people like me the same way the Japanese government is helping me.
0
bebert
No. You are quite wrong. U.S. automakers were very, very profitable during the 1990's. They were just very foolish with their money. Every M&A deal the Wall Street boys flashed before them, they bought. They could be on very sound footing, just like Toyota, except the Big 3 were run by a bunch of corrupt Freemasons who pissed everything away rather than investing in the long term health of the company.
0
adaydream
They have already said that the auto industry effects 2,000,000 jobs. I'm guessing that if they went belly-up, we'd lose about 500,000 jobs.
500,000 people on unemployment would cost us a mint in compensation, picking up the pension and health care for retired auto workers and then the taxes lost from all these people not working.
We can't not afford to bail out automakers. < :-)
0
skipthesong
No. You are quite wrong. U.S. automakers were very, very profitable during the 1990's. " Bebert: that's true and GM companies are still making a lot of profit. Its their factories that are not.
"run by freemason" what do you mean here?
0
smithinjapan
Let me just ask the companies this, plain and simple:
Would giving you the money you ask somehow get the public to buy more cars suddenly?
The answer is no, meaning that all their complaints that they are employing so many and what not would simply turn up as a problem again in a couple years, if not before. Sorry kids, but this would be trying putting a band-aid on open manhole spewing up crap.
The auto companies don't deserve it. Period. Their importance to the nation is simply symbolic, and since they have refused to change their ways in the last two decades when they have had all sorts of chances, why should they be paid to do so now? Cut all bonuses and salaries to CEOs and those others at the top, cut unnecessary spending besides, and move on to research into more practical products that don't guzzle gas.
0
VOR
anybody wanting to really understand Detroit's fall from grace 30 odd years ago should read Halberstam's "The Reckoning". The US auto industry has been in decline for almost four decades and the taxpayer should not be stuck with the bill.
GM, Ford and Chrysler should either consolidate into one large company and learn how to compete with the Japanese, Germans and Koreans with a few select high quality alternative fuel vehicles of just disappear.
0
skipthesong
GM, Ford and Chrysler should either consolidate into one large company and learn how to compete with the Japanese, Germans and Koreans"
Ah, but those companies are highly supported by their governments. As was once said the US auto makers aren't competing with other companies, they are competing against nations. Japanese and Korean government have put a lot of tax money into large companies. And, if you think numbers are big, you should see what is given to NTT
smitty: Would giving you the money you ask somehow get the public to buy more cars suddenly? " I hope someone in DC is reading this, that is such a simple yet not asked question and its the question that brings it all down to the bottom line.
Smitty is right to say they don't deserve it. These companies have overseas holdings that are incredible.
But, "Cut all bonuses and salaries to CEOs and those others at the top, cut unnecessary spending besides, and move on to research into more practical products that don't guzzle gas." Again, we are seeing cut the top cut the top, but has anyone seen the size of their workforce and what it gets?
0
Sarge
"Democratic leaders would need at least 10 Republican votes to pass the bailout in the Senate"
They'll probably get them, gosh darn it.
"save the US auto industry"
How about the U.S. auto industry making cars that Americans want to buy?
0
powderfinger
Detroit is a cautionary tale which reflects very badly on the Dems who have ruined that city and the state of Michigan. I predict that the Dem super majority will see to it that the Big 3 get what they want - so that the rest of the country doesn't get the picture.
Next up - massive bailouts for the late great state of California, where a liberal majority and Dem-controlled state legislature is also bankrupting that state.
0
frontandcentre
Let them die. They can't compete with superior non-American technology and only the fittest in the auto industry deserve to survive.
Bummer, isn't it, when free competition results in inefficient industries being killed off.
0
Madverts
"The quality of US cars has increased a lot since the 80s and they've narrowed the gap between foreign companies. In some surveys GM was ranked higher than Honda but still below Toyota (like everyone else)."
Heh, I still 'aint seen a sole GM in the dark continent where the old enemy to the American auto industry, reliability, is the only thing that matters in an automobile.
0
powderfinger
Maybe India's Tata Motors should step in and buy them up, like they did Birtish carmakers Jaguar and Land Rover
0
presto345
If the government is going to release any money, never mind from which program, it should not, never, be pumped into the auto industry. This industry, as it exists, is as good as dead. They have had decades to adapt and catch up with the Japanese and European industry, but failed miserably, forever stuck in the belief that cars should have rear wheel drive, bigger is better and energy would always be cheap. Any aid forthcoming should go directly to those who lose their jobs due to the demise of the auto industry.
0
presto345
It was said. Who did and what evidence? They, the US auto fakers, aren't competing against nations, they are competing against dedication and motivation.
0
SuperLib
Sure, if you ignore the fact that Japan's auto industry wouldn't even exist if it weren't for government intervention. Ford used to the be #1 company in Japan, and I can promise you free market competition had absolutely nothing to do with their decline. The next thing you know you'll be telling us that if Boeing can't compete with Airbus in a "free market" then they should go under, too.
I don't think anyone is proposing a blank check so the auto industry can go about business as usual, except those who don't support the bailout trying to convince others that this would be the case.
Can you show me your evidence supporting this? I'd need a comparison of passenger cars amongst all companies. I think you're confusing the concept of ignoring fuel efficiency with selling trucks. Trucks were very, very, profitable for the US automakers and they dominated the industry and it's no surprise that that's where they'd focus. Even the Japanese companies haven't been able to make any headway in this area despite billions in investment and advertising. A company can improve fuel efficiency while also selling trucks. They're not mutually exclusive concepts.
Ah, the big, bad automakers. Let 'em go out of business. They'll show 'em. This knee-jerk reaction is a purely emotional response and quite frankly, a dangerous one. The managers at the top aren't going to go bankrupt. They have their millions already. It's the people on the assembly lines, the salesmen on the floors, the owners of supply companies, etc. They are the ones who are going to face the dire consequences of your cavalier position.
Oh, let's not forget about you and me. About 40% of my customers are in the US. Sorry, but I don't think I'm quite ready to put my own customers out of work so I can "teach Detroit a lesson." How much are you willing to personally lose? How many Canadians are you willing to put out of a job while you tell everyone the loss is merely symbolic?
Last I checked the Big 3 still sell more than anyone else. I hear your statement a lot and it sounds like people believe the US is a distant 10th position on the sales list. They sell a lot of cars and trucks, they just aren't making money doing it, and the biggest reason is legacy costs, not quality, fuel efficiency, or product selection. One can point to the erosion of market share, but saying that they can sell their way through this problem isn't accurate. Toyota made $20 billion in profits a few years ago, the largest ever by a Japanese company. Compare that with GM's $90 billion in underfunded pension and health care costs from absurd contracts signed with labor unions decades ago.
Toyota pays for the health care of their workers from 20 years ago? And the European companies do, too? My guess is that people actually applaud the US companies for stepping up to the plate and paying for these costs as a benefit to their workers. But when these costs threaten to put them out of business then suddenly it's not mentioned at all.
Because auto sales suddenly plummeted due to the financial crisis. Had there been no financial crisis we wouldn't be talking about a bailout with any sense of urgency. Toyota is reporting profits that are less than 25% of what they forecast. I guess their management should be fired, too? Or maybe they just need to produce some fuel efficient cars for a change? Or perhaps they should start building cars people want to buy. Maybe if they did that they wouldn't have lost 75% of their profits, right? They saw it coming for decades....
BMW is currently talking to the German government about loan guarantees. They must be a bad company as well. The only difference is that the German government is bending over backwards to support them. Oh, and people aren't writing articles saying how poorly the companies are run since they need the assistance.
I might not be able to defend the US auto industry for everything they've done, but I can defend it against misrepresentations and emotional responses. Like I said no one is proposing a blank check. And it's silly to think you should put Joe Sixpack out of work to teach some million dollar manager a lesson. The bailout of the auto industry isn't an option, period. People might not like it but the other choice would be a complete catastrophe. So when your choice is a bailout or a catastrophe, make sure you tell everyone that you're supporting the catastrophe and not the bailout. You'll be more honest that way.
0
Betzee
Superlib you have an impressive degree of knowledge about the global auto industry. Industry-government partnerships are anathema to free marketeers but exist in almost every country. A capital-intensive industry cannot quickly respond to market signals, something Milton Friedman's model does not take into account.
When the gas crisis hit earlier this year, some blamed Democrats for blocking off-shore drilling. Had they not obstructed more drilling, presumably Detroit could find buyers for its S.U.V.’s, trucks and larger trucks now collecting dust at the auto malls while Toyota Prius buyers have to take a number.
An energy policy other than "drill, baby, drill" should dictate the terms for this bail-out. Otherwise we will revisit this place again.
0
SuperLib
You can check fuel efficiency ratings for 2009 here:
http://www.fueleconomy.gov/feg/byclass.htm
I don't think you'll find any evidence supporting the theory that the US automakers are going out of business because other companies are making cars that are more fuel efficient. All companies seem to be mixed on the list.
Here's a link to JD Power & Associates Initial Quality Study for 2008:
http://www.jdpower.com/corporate/news/releases/pressrelease.aspx?id=2008063
The rankings:
Porsche Infinity Lexus Mercedes Toyota Mercury Honda Ford Jaguar Audi Cadillac Chevy Hyundai Pontiac Lincoln Buick
(Industry Average Mark)
Acura Kia Nissan Volvo BMW GMC Mazda Volkswagon Hummer Subaru Scion Dodge Chrysler Mitsubishi Saab Suzuki Saturn Land Rover Mini Jeep
0
Betzee
Our cash-and-carry Congress is not well suited to looking at the long-term which energy policy demands:
When I was at the Department of Energy in the 1990s, we partnered with G.M., Ford and Chrysler to speed the technological development of hybrid gasoline-electric cars, given that increased fuel efficiency and advanced hybrids vehicles were (and remain) clearly the best hope for cutting vehicle greenhouse gas emissions and ending our oil addiction. This partnership was an informal deal between the Clinton administration and the car companies. We did not pursue fuel economy standards and the car companies promised to develop a triple-efficiency car (80 miles per gallon) by 2004.
In one of the major blunders in automotive history, G.M. and Ford and Chyrsler walked away from hybrids as soon as they could when the Bush administration came in -- and after taxpayers had spent over $1 billion on the program. Ironically, the main result of our government-industry partnership (which had excluded foreign automakers) was to motivate the Japanese car companies to develop and introduce their own hybrids. G.M., in particular, which had had a technological lead in electric drive trains, allowed its No. 1 competitor, Toyota, to achieve a stunning seven-year head start in what is certain to be this century's primary drive train, that of the hybrid gas-electric Prius.
G.M. was publicly criticizing the future of hybrid technology as late as January 2004, and announced later in that year a halfhearted effort to catch up to Toyota.
Worse, in the past quarter-century, G.M. has spent millions of dollars lobbying to stop Congress from increasing fuel economy standards -- standards that might have forced them to build the kind of cars people actually want when oil prices are high. And despite the recent temporary drop in oil prices, there's little doubt we will be above $4 gasoline in a few years, headed for $6 and higher within the decade.
http://www.salon.com/env/feature/2008/11/12/barackobamadetroit/index.html
0
SuperLib
It looks like I overstated the impact of bankruptcy. You can read more about it here:
http://money.cnn.com/2008/11/18/news/companies/detroit_faq/index.htm
It's not guaranteed that they'd go under but it's more than likely especially since they wouldn't be able to get new funding with the credit crunch.
This article talks about legacy costs:
http://money.cnn.com/2008/11/17/news/companies/gm_fixes/index.htm/
"But the biggest difference is the hundreds of thousands of retirees at GM, Ford and Chrysler - along with their surviving spouses and other dependents - who had been promised health care coverage. That coverage cost GM $3.3 billion in 2007 alone."
That's $3.3 billion for people who don't even work for the company anymore, including their wives and children. Amazing. Toyota's total profit for fiscal year ending 2009 will be $6.1 billion. If they had the same costs their profit would be cut by more than half. Multiply that over 10 years and you can see how that impacts a company's ability to invest in new technology, machinery, etc. And that doesn't include the health care costs for people currently working for the company.
"Another huge cost was health care, for which the Big Three paid billions more than their overseas rivals. Japanese automakers are helped by the fact that their workers back home are covered by a government-paid health care system. What's more, their U.S. employees are generally much younger than their UAW counterparts at the Big Three's plants, and thus have lower health care costs."
People are saying the Big 3 need the bailout to reach 2010 which is when health care costs will be shifted to union investment funds.
0
SuperLib
Betzee your article is mostly accurate, but it's doesn't give the entire picture. The US auto industry is behind the Japanese in terms of green cars, but so is everyone else. Japan might be #1 but the US is #2 with everyone else far behind. If you wanted to buy a hybrid in 2007 your only options were Japanese and US automakers. In the next few years the Europeans and Koreans will start to offer hybrids but only in a handful of models while the US and Japan will expand even more.
As far as lobbying to reduce restrictions on fuel standards, every auto company does that.
So like I said the article is accurate but it tends to restrict the focus. A better analysis would be to compare the US to the global auto industry as a whole. The article basically talks about Japan and the US only in which case the US is "last" by virtue of the fact that Japan is "first." Some people are claiming that the US can't compete in this area but when they do they're talking about the global industry as a whole and that's where the Salon argument falls apart.
0
Good_Jorb
When Joe Sixpack works for big 3, he joins UAW, UAW negotiated unstainable contracts on behalf of Joe Sixpack. Joe Sixpack has no problem taking the money and benefits when times are good but what concession has UAW said they would be willing take in order to keep the Big 3 viable? If the marketplace is unable to maintain the "legacy costs" but those receiving the "legacy benefits" are unwilling to take a little less for the betterment of the company, why should Joe taxpayers being willing to take a little less(more taxes to pay for the bailout)?
"Legacy costs" is only a part of the problem especially for GM. Another huge problem which parallels the sub-prime crisis is fuel inefficent vechiles and their resale values. GMAC, the credit arm of GM is facing huge losses because the resale value of the vehicles that GMAC finances are significant less than the buyout cost, so people are not paying the buyouts and instead just walking away. You can be blame this on idiot yuppies for thier bigger is better policy for SUV's, as well the car companies for inflating the residual value of the SUV's.
There is a difference between slow sales and bankruptcy. If Big 3 were small, or even medium businesses, their managers would be out of a job because there is no way the Government would ever bail them out.
A bailout that is just keeping a house of card from falling down. The big 3 clearly have failed business strategies, perhaps the need to fail so that new companies without legacy costs can be created or what have. The idea that new Americans companies wouldn't step up to the plate is crazy.
I think the Government would do better send the money that would use on bailing out the Big 3 and instead buy the assets of the big 3 and subsidies new companies with better business plans and not so many fleas.
0
adaydream
Okay, let them fail.
You ready to pay unemployment?
Ready to pay retirees pensions?
Ready to pay health care for all these retirees?
They only want $25Billion, huh?
At least with bailing out the Big 3, through requirements that can be mandated, we at least can get some cars that are more advanced then the crap they are putting out right now. By bailing out Wall Street, they get our money and still get big parachutes and junkets and we get no guarentees we'll ever see anything tangible.
Yep...yep... I'm convinved we need to allow the Big 3 to fail.
Pssssst, that's just sarcasm. < :-)
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Good_Jorb
Banks received 700billion and still citigroup fired 62,000 since the bailout.
What about all the retirees who lost their retirement fund wealth because mis-managed companies like banks and the big three, share values have nose dived. What makes retired autoworkers any more special than other retirees? How about the thousands of employees lost their pension when Enron sank?
Nationalize healthcare and it wouldn't be a problem.
Why not buy the Big 3 then?
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Betzee
I have no technical knowledge of automobile manufacturing, which many people posting comments on today's salon.com "How the World Works" site do. Some argue that GM is close to manufacturing a hybrid vehicle and we'd be nuts to let it go under. Since those with expertise are unable to agree, I will concur with Andrew Leonard, who writes the column and concludes by stating "I am one who has long believed that U.S. automakers deserved their comeuppance. But now is not the time to extract a Ford Expedition or Chevy Tahoe-size pound of flesh."
My background is more in industrial policy. The argument against it is that governments inevitably end up sheltering uncompetitive industries from market competition and therefore it's a bad idea. There's certainly lots of evidence for this. But there have also been cases where it has worked. South Korea is an example. Many laughed when Seoul embarked on auto manufacturing in the 1970s because, as a developing country, it was supposed to be out of their reach. The government made cheap credit available but required Hyundai to export.
Ironically, it's not industrial policy which is the problem in the US but cash-and-carry government. Lobbyists ply members of Congress with donations in exchange for voting a certain way on legislation of interest to the party writing the check. Detroit and the oil industry, among others, are both guilty. But we also lacked an administration with an energy policy. I remember Dick Cheney saying in 2001, "Conservation may be a personal virtue, but it is not the basis for a national policy." Yet they never promoted a national energy policy, just left everything to the market. So I was heartened to read the following in the "The Perils of Cheap Oil:"
On Sunday, "60 Minutes'" Steve Kroft asked President-elect Barack Obama if the astonishing drop in gas and oil prices made dealing with energy issues "less important." Obama responded forcefully: "It makes it more important." He observed that there is a cycle of "shock and trance" in American attitudes toward energy. When gas prices go up, there's a "flurry" of activity, but when they go back down, well, never mind.
That's exactly what I want to hear from my president, because the truth is that the current low gas and oil prices are engendering a false sense of security. We are being set up for an even more painful energy crisis in the very near future.
http://www.salon.com/tech/htww/?laststory=/tech/htww/2008/11/18/perilofcheapoil/
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SuperLib
They've agreed to let their health care costs be funded through union trust funds. And they've agreed to new (lower) salary structures for new employees. If the Big 3 can make it to 2010 then they'll be able to be a lot more competitive with foreign rivals since the playing field will be a lot more level.
And there's a difference between losing tens of billions because of poor management and losing tens of billions because of health care costs that your rivals don't pay.
Most people agree that the cost of bailing them out would be more expensive than the cost of not bailing them out. If you're worried about dollars then bailing them out should be your choice as well.
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Good_Jorb
All employees should be taken wage cuts from the executives down to the janitors.
Most people agree that the cost of bailing them out would be more expensive than the cost of not bailing them out. If you're worried about dollars then bailing them out should be your choice as well.
They should be let go until they file Chapter 11, the government can use the $25b to insure the employees are not laid off, purge the management and unions, eliminate the unnecessary product lines, create sustianable contracts for employees(executive and factory) and impose mandates on the types of vehicles they should be producing and researching.
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presto345
It is way too late to start purging management and unions. The practices are too deeply ingrained. And America is not a dictatorial communist state where you can dictate what a company can develop or do research for. It is time for market forces to dictate the outcome. The west has laughed a lot when Japan started to develop industries that were generally led by western nations. Remember the automobile industry, shipbuilding, cameras, AV equipment, home appliances, the list is endless. The west laughed, and laughed, at its own stupidity. Japan surpassed in almost every field. Korea is next. Why is this? These Asians love to work and accomplish. They strive, persevere, sweat, are motivated and are proud of what they do. They see things beyond the Monday to Friday 9-5. Values virtually unknown in North America. Japan #1, US #2? Yeah, but the gap in between is huge, so the point is meaningless. You don't change values by pumping in astronomical amounts of tax payers' money, knowing that it is only a stop gap measure and a stay of execution.
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SuperLib
ok presto, thanks.
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Good_Jorb
Give them two options; adjust or no job, I am sure they will eventually come around.
That is exactly what creditor protection proceeding do, they decide how, who and what the company can spend its money on. They happen all the in the US, just read the notes to shareholders and the management reports in the annual reports of companies that are/were recently in creditor proceeding proceedings and you’ll find out just how restrictive and controlling they can be.
America is not a dictatorial communist state but it certainly is no longer a capitalist free-market system eihter(there has never been a truly free-market system – see tariffs).
Personally I don’t disagree with that but it would be shame to see the infrastructure and assets owned by the Big 3 go to waste.
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Sarge
I have a question. If Americans aren't buying American car makers' cars, why should the government use their taxes to help the American car makers continue to make cars Americans don't want?
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cysciborg
why bail them out ? in 1982 I owned a Toyota that got in the 40 MPG range, and in the 2000s' not one american car manufacturer even gets near thirty miles per gallon. and the styles suck. they have for years hoisted garbage for style on the U.S. and did not care what we wanted. they did not ever deal with the corruption in the union leadership, but, the union didnt either. so, now why bail out the cry babies ? I wouldn't !
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