The big three

cincybearcat

Where was the government bailout of the steel industry?

That certainly destroyed towns, etc as well.

Bailouts only push back the inevitiable, unless the business changes entirely.

chromiam

saveuplife wrote:

Second, if it was immediate (which it wouldn't be), the int'l firms wouldn't ramp up production to meet demand because demand fell off a cliff, so it's very very very low right now. There's too much supply right now.

There's the key point.. demand is horribly low right now.. especially in the group which US automakers threw all their egg (SUVs).. That's most of the problem there, they lived the life of kings selling SUVs to any and everyone never expecting demand to drop. But once gas prices skyrocketed and as a result SUV sales plummeted, auto industry had no backup plan.. hell they didn't even have a thought. And even with gas prices more manageable right now, consumers (as least the ones with half a brain) are going to stay away from the gas guzzling SUVs.

Kel Varnsen

saveuplife wrote:

The U.S. auto business is not housing-related. They are simply a poor industry. This was bound to happen once demand retrenched. During recessions, demand retrenches. During the next one, it will again, and the industry will be back. The U.S. auto industry is simply put... inefficient. They shouldgo bankrupt and actual alter their cost structures. Yes, it will hurt, but it's better than throwing money at someone begging for change and hoping that they won't come back.... they will come back. They've done this before and will do it again... basically, they are asking for a green light from the gov't.... and since, Dems won and are tied to Unions... they will most likely get it.

The auto industry is sort of housing related. With housing taking a hit people aren't buying and building new houses like they would during a housing boom. Less houses being built means less money for contractors. And these are the guys who buy new trucks every few years (since they can write them off as business expenses). So since the US automakers have all their money behind trucks, when trucks take a hit so does their whole company.

out of my head

As always, the most obvious solution is being ignored by Washington. I don't have the total numbers, but let's take GM for example: they want $18 billion, yet the total value of all their common stock is only $3 billion. We could buy a 100% interest for $3 billion. And, all we really need is a 51% controlling interest, for $1.5 billion. A savings of $16.5 Billion and OWN the company and call the shots. Then we fire top managment, hire some new blood, and do what they have failed to do: re-tool the industry for the 21st century. I mean, if we are going to give them more than what the company is worth, doesn't it make sense that we flat out own them?

Kel Varnsen

saveuplife wrote:

First, this process (big three failing) would take a lot longer than people make it out to.

Second, if it was immediate (which it wouldn't be), the int'l firms wouldn't ramp up production to meet demand because demand fell off a cliff, so it's very very very low right now. There's too much supply right now.

Third, since the process is not immediate, one of the big three would go, then the other, I bet atleast one would survive. You're right, the international auto co.s would come in and grab some of the share of the big three that went down. But, this would take a years.

The key is timing. If the gov't does nothing, they may sink, but it won't be quick. By the time the first goes under, I bet we'd be heading out of the recession. Which means, demand increases, perhaps saving the other two, they could then buy out some of the failed firm.

It is true this kind of thing would happen over a pretty long period of time. But why not spend some of that 25 billion to attract other auto companies to move more and more of their operations to the US. It would seem like a safer bet, and a smarter idea in the long run, then spending it on a company that may go under even if you give them that money.

saveuplife

Kel Varnsen wrote:

The auto industry is sort of housing related. With housing taking a hit people aren't buying and building new houses like they would during a housing boom. Less houses being built means less money for contractors. And these are the guys who buy new trucks every few years (since they can write them off as business expenses). So since the US automakers have all their money behind trucks, when trucks take a hit so does their whole company.

I don't know about that tie. But, you can create good arguments for how autos are tied to housing....


...Hence, the problem. You can make a pretty good argument for every single industry being tied to housing. Should we bail out Circuit City? Starbucks? How about grocery stores? How about cities like Philly? ect.

That's why we shouldn't bail out anyone anymore. Moral Hazard is the key issue now.

Recessions cause pain. The quicker you deal with it, the quicker it's over. Consumer confidence is the problem right now. The government should be focusing on what got us into this problem: Housing. Not anything else.

To use an analogy I've used many times... it's like being in a sinking ship (failing economy) and bailing out the water (downturn) that's flowing into different parts of the boat (different industries). Rather than plugging the hole (housing). We need house prices to bottom, and things will return to normalcy.

saveuplife

chromiam wrote:

There's the key point.. demand is horribly low right now.. especially in the group which US automakers threw all their egg (SUVs).. That's most of the problem there, they lived the life of kings selling SUVs to any and everyone never expecting demand to drop. But once gas prices skyrocketed and as a result SUV sales plummeted, auto industry had no backup plan.. hell they didn't even have a thought. And even with gas prices more manageable right now, consumers (as least the ones with half a brain) are going to stay away from the gas guzzling SUVs.

Well, it shows something doesn't it? The eastern asian based auto makers are quicker to adapt and more dynamic. They adapt to demand. U.S. auto makers are just not up to speed. They basically saying take this product.... rather than really thinking about what people want. Moreover, once they start on one product, they can't call it off easily if demand changes. They are simply just bad at what they do.

Regardless, demand is only low for autos because we are in a recession. Demand is low for every single industry. Consumers have lost confidence. People are scared to buy things right now because they fear losing their jobs. Big ticket items (like cars) are the scariest.

Pacomc79

The misconception is that all of a sudden they'll be out of business if they go bankrupt. That's not necessarily true. Those jobs don't just evaporate or suddenly go away.

Thier #1 issue is that they can't just retool and change thier operations because of thier union contracts and the way things are done. They make plenty of money in other areas of the world that they can't in the US. They like Delta etc have bought all these unsellable makes like Buick... Oldsmobile etc. They definately need to re tool I just don't think the US government should be in the business of lending them capitol to do so considering our own titanic amount of debt.

Thier failing will only do them and us good in the long run because it will force change. In my own opinion anyway.

DriftingByTheStorm

Pacomc79 wrote:

The misconception is that all of a sudden they'll be out of business if they go bankrupt. That's not necessarily true.

What do you think would happen to their cost of credit in bankruptcy?

Who is going to lend to them THEN?

On principle i am against ANY bailout,
but i have got to agree 100% with Alex Jones on this one.

We have given the banks EVERYTHING ... TRILLIONS of dollars.
And what are they doing with it?
SITTING ON IT in many cases, and at worst, INVESTING DIRECTLY IN CHINA [Bank of America doubles down on Chinese Construction Bank with $7 BILLION].

So,
We Give To The Banks, The Banks Give To China, and
China Wants To Buy The Big 3 !?!?!

Shit, why don't we just GIVE the US Auto industry to China then?
And THAT is why i am with Alex on this one.
If we are going to give TRILLIONS to the banks to invest in foreign countries, allowing them to directly compete with the REAL US Economy, FOR NATIONAL SECURITY PURPOSES, WE SHOULD BAIL OUT THE BIG 3.

I HATE TO SAY THAT.
But it is ridiculous.
Manufacturing, the REAL economy, is the ONLY thing that will SAVE America from utter destruction. Why would we give TRILLIONS to the banks that CAUSED this mess, and NOTHING to the industries that stand to be a last line of defense against a depression and all out catastrophe.

30 Billion dollars i the equivalent of an Air Craft Carrier or two ...
I THINK WE CAN HANDLE IT.

Giving trillions to banks, JUST AS BAD OFF AS THE AUTOMAKERS, and offering no real PRODUCT, and not giving a PITTANCE in comparison to the Auto Makers is an out right crime.

Seriously.
It border on treason, the "logic" used by our government.
:rolleyes:

Lesbelges

Kel Varnsen wrote:

I looked it up and the Big Three have about half of the entire market share for north american automobiles. Do you think if all three of them went out of business that the asian and european companies wouldn't ramp up their production like crazy to meet the demand, or would they just let their be a shortage of cars. I think they would ramp up their production, so why not make sure that when they do increase their production it is done in North American plants (to grab that other 50%)?

Exactly! All the foreign automakers have to do is turn the notch on their production lines to 11 to meet the drop in production of the Big 3. It's as simple as that!

Vedder316

cincybearcat wrote:

Where was the government bailout of the steel industry?

That certainly destroyed towns, etc as well.

Bailouts only push back the inevitiable, unless the business changes entirely.

Well said!

Commy

Kel Varnsen wrote:

Personally I don't really care about the autoworkers union. A few weeks ago in Canada, a tv call in show had a president of one of the Canadian CAW locals on, since Canada is considering possibly giving a bunch of money to the auto industry. It was insane how entitiled this guy was. Someone actually phoned in and asked how he can justify the insane amount of benefits that members get when the company is failing (the example used was free legal services for retired members who want to write a will). And the CAW guys reply was basically that non-union people are just jealous and wish they could get the same benefits. If those guys lost their jobs I would have not a lot of sympathy, because I think for the level of skill they have they have had it way too good for way too long.

Personally I think instead of giving money to failing companies, give the same amount of money to successful companies, to expand their operations. If you need to keep it in the auto industry give money to Honda or something and tell them to expand their Canadian operations. When GM goes under give them the option to buy up their facilities. Or just pick any successful industry and give them money (hell give the movie industry more money to produce more movies).

So instead of giving benefits to the wokers that actually run the company what should they do? give the benefits and the money saved to the fuckers that own the company?

pateljam

Wondering.... since Chrysler is privately owned should that company be treated differently than the other two... I am not sure...