Why don’t people understand this about the auto bailout?
If we DON’T bail them out, and instead let them go chapter 11….they will take the whole auto industry down with them.
GM has 54 manufacturing plants in North America, with 4,000 suppliers, including some small business suppliers. Then there are thousands more suppliers for the suppliers.
If 1 of the Big 3 files for chapter 11, all of those suppliers will go down, employee benefits will be cut (Starting with healthcare), and eventually 2.9 million people will lose their jobs.
That’s 1-2 million or so people trying to collect unemployment, being left without an insurance plan, and ending up on welfare. American unemployment would reach 10%.
So giving them money isn’t the question. Americans will be paying for their mistakes either way. The real question is…do we want to pay for their survival, or do we want to foot the bill for the funeral.
As for fuel efficiency….why haven’t the companies jumped on this sooner? Because Americans didn’t WANT fuel efficient cars. Americans wanted their SUV’s, and as long as there has been demand for gas-guzzlers there has been supply. It’s only been recently that people have been switching over to fuel-efficient cars…and that was only because of high gas prices
Stop buying foreign cars and start supporting the AMERICAN automobile industry.
Source: Time magazine
Joe…what kind of car do you drive? Is it a Toyota? Because MORE money is sent overseas by the FOREIGN car companies than with the AMERICAN car companies.
Do you people read the news?
The auto bailout plan was designed by congress to include a mandate that the companies being bailed out increase fuel efficiency 4% every year.
If you read the news today, you would notice that congress is waiting for the auto companies to agree with and add to the bailout stipulations.
It’s hardly just handing over a check.
I know that filing chapter 11 doesn’t mean the demise of a company. But if they do file for bankrupcy, assets would be liquidated, pensions would be void, and a lot of people would lose their retirement funds. They wouldn’t have enough money to begin competing again unless they took out huge loans…but banks aren’t giving out loans at the moment.
So eventually it really DOES mean the failure of the industry. Eespecially with our current economic situation.
They would not have the funds to start up again…and that means people unemployed, pensions and benefits down the drain…
And my number are, to the best of my knowledge, correct. There are people who are indirectly employed by GM, because they work for the suppliers, neighborhood sales companies…whole towns are dependent on the American automobile industry.
Remember the Rust Belt towns that went bankrupt when the auto industry left them?
This isn’t my opinion. This is the "opinion" of the economist who wrote the article in "TIME Magazine". And at this point, it’s the most credible thing I have read.
If anyone paid attention to where I listed my sources…I’m not pulling this out of my @ss. I actually DID research.
I would say that when an economist writes something about the economy and it’s industries, the credibility kinda outweighs you sitting at a computer typing a response.
Go Blue: America wasn’t "founded" on capitalism. We were originally isolationists, meaning we do everything ourselves.
Capitalism is also not a form of government. It’s a socio-economic system that didn’t really hit it big until the 1930’s.
General Motors employs 123,000 people, and losing those jobs would be bad enough. But GM’s demise could set off a chain reaction that might cost the country almost 3 million jobs…
GM regularly owes auto-part suppliers such as Delphi and American Axle & Manufacturing lots of money. If GM declares bankruptcy, a court could relieve GM of its obligation to pay off its debts to those suppliers, which could topple them.
That might disrupt production at Ford and Chrysler enough that those two car companies would fail as well…
In this disaster scenario, the upper Midwest could lose nearly "3 million jobs" (Center for Automotive Research). It estimates the Big Three automakers employ about 240,000 workers. The car business supports an additional 974,000 jobs among suppliers and related companies, and 1.7 million jobs are created by all the money all those people spend.
Sure, foreign automakers with U.S. factories, including Honda and Toyota, would pick up some of the slack. But many of the cars they sell here, such as the hybrid Prius, are made abroad. So these companies wouldn’t do enough hiring to offset all the job losses.
The loss of domestic auto companies would cut the number of producers, which means less competition. The remaining automakers would likely raise prices, at least in the short term, predicts David Thomas, a senior editor at Cars.com. "You would be paying a lot more for a Toyota Corolla than you ever thought you would be paying."
Foreign automakers such as Honda, Toyota and Volkswagen spend far less on splashy newspaper ads than U.S. car companies do. So a GM failure would be another blow to an ailing industry already hit hard by subscription and revenue declines as readers and advertisers move to the Internet.
Lost jobs and lower wages means lost tax revenue. Federal, state and local governments would lose more than $156 billion in the three years after a failure of the Big Three in Detroit. That’s money that other taxpayers — or their children — would have to make up.
The demand for government services would likely rise as well, as many of the best-paid blue-collar workers in America started job hunting in a weak economy. Auto-sector pensions would have to be picked up by the government — a huge cost. And both autoworkers and the automakers’ retirees would likely need help with health care just as Obama and congressional Democrats were looking for ways to cover the uninsured.
If one or all of the Big Three auto companies failed in the first year of Obama’s presidency, it could leave voters disillusioned, wiping out much of the good will he has built up and making it harder for him to lead on other issues.
Losing millions of good jobs will make it the task of turning this economy around that much tougher. Letting GM die is not something any politician would want to answer for.
Don’t forget this would affect neighborhood dealers also.
Have a star!
that was well written and very informative.
Thanks for that.
A: I dont know. Because people arent that smart really.
people are easily swayed,and they are bitter at auto workers and execs. but they don’t realize the government will lose more in taxes ,and then have to pay more in unemployment if they go under. funny watching congress chastise the execs for poor judgment,have they ever looked in the mirror,only difference is auto companies can just raise taxes like congress
American cars are mostly crap, and your job count is the highest I’ve seen….and 2.9 million people will NOT lose their jobs if one goes down.
YOu act like a bankruptcy is going to completely shut down these companies…it won’t…do research on bankrupcty.
Toyota & HOnda will increase their market share, and they mftr a lot of the cars they sell here in the US now. The people who supply GM & Ford with parts might actually have to get off their butts & sell parts to Toyota and other manufacturers…it’s how business works. get over it.
No Laura they will not take the whole auto industry with them. What will happen is they will be forced into bankruptcy restructuring which would actually be a good thing . Because then the courts would force necessary cuts and union contracts would be re negotiated.
25 Billion would just put off the inevitable. So we might as get it over with.
if they are willing to bring back all the jobs they sent to other countries which took jobs away from Americans then I would be in favor of helping them……until then……no……let them file chapter 11 like any other company would have to do
Because there’s more to the story. Various companies have filed for bankruptcy and restructured and are still viable businesses.
People will still buy cars. If they don’t buy them from GM, they buy them from another company (which will need to add jobs due to increased production).
It will give new car companies a chance to start up who may be more efficient and produce a better quality product.
Who cares, years of Unions and payments to the DNC, well in the words of Obama’s spiritual adviser, "the chickens have come home to roost", let them go under. Only bankruptcy can save them. We must break the backs of the Socialists in our Governement and workforce. This is the power the people have left, before it too is gone.
I believe you have forgotten obama’s words to the masses. i will take from the rich and give to the poor. i will make everyone in america have health care. i will spend your money and not raise your taxes. so if i was you i wouldn’t worry about the small things like the auto industry. you should be worried that your nearest welfare office is not closed. then you would need that car to drive to then nearest office i wish you well my dear
I would support a bail-out if it included concessions, a definite pay back plan, and these "Big 3" being restructured for peak efficiency.
1. sell their fleet of corporate jets
2. federally mandated strangle hold on how much power the unions have over what is best for the survival of the corporation
3. reduce top level management at the same rate or ratio they reduce blue collar workforce
4. investing in alternative fuels, peak fuel efficiency
5. production equal to demand, instead of flooding the market with thousands of vehicles for which there are no customers
6. stop building factories overseas, financed by risky or unsecured loans, until the corporation is restructured and selling the products they have already produced
The moment the federal government puts its fingerprints on private sector, we no longer live in a capitalist society, we live with socialism and at that point government touches every single area of our lives. That is completely unconstitutional.
My TAXDOLLARS are not going to some big rich CEOS who produce poor quality cars at high prices. Tought sh*t let them sink and die they deserve it for their arrogance.
They need to grow up, It’s not the role of Government to bail out auto companies. Open up the constitution.
Your point is well made. If we get to chapter 11, those 4,000 suppliers don’t get paid. The bail out is a loan that they are expected to pay back. If we keep them going, it shouldn’t cost the government anything.
The american auto industry is badly managed, it’s labor costs are too high, and it has more pensioners than workers. The whole thing is upside down, but we need to save it before we can fix it.
Actually what you’re saying is the misconception. Just because a company files chapter 11 bankruptcy doesn’t’ mean they can’t still operate. I think it’s what they need, and then that way they’ll restructure and hopefully become more viable businesses. A bailout would just delay their inevitable failure and waste a ton of taxpayer dollars. One congressmen put it best when he said "it would be like putting your last tourniquet on a dead guy." The bailout simply does not make sense at all. I’m an economist.
Because it is your opinion and not a fact. If the Big 3 go bankrupt, they can reorganize and get concessions from labor. When that happens, they have a chance of becoming profitable again, and I would approve of the govt lending them money. Airlines have gone bankrupt many times and come back in better shape to compete. Read about bankruptcy below.
Bailout with a price: Chapter 11 bankruptcy
By JIM KUHNHENN Associated Press November 20, 2008
http://www.gopusa.com/news/2008/november/1120_chapter_111.shtml
WASHINGTON (AP) — Mention a corporate bailout in the nation’s capital these days and chances are someone will offer a harsh condition to go along with it. Chapter 11 bankruptcy.
Lately, the term "prepackaged bankruptcy" has been gaining currency in the halls of Congress as lawmakers struggle with pleas for help from the auto industry.
Detroit Automakers a Relic of the Past by Michael Barone
http://www.creators.com/opinion/michael-barone.html
Congress will just add more pork to the barrel. America was founded upon principles that allowed people to fail or success. Right now the greedy union dogs are controlling the Big 3, and they need to go. I think if you let the Big 3 fail and get rid of the union dogs, the inovation of these 3 companies will come forth.
The bailout would just delay the inevitable.
anyone who is open minded (intelligent) enough to listen to Michael Moore should go to his website & you can see him on Larry King last night. His father worked for over 30 years for GM so he has done a lot of work about this subject. His comments were great so just check it out. I am sure you will agree with him. You have to watch it I can’t do it for you. If you judge him you are the reason why these greedy people get away with what they do. You put down the wrong people…I think the reason people don’t understand is they need it said to them which is what you did with the info. with your question & what they can see at michaelmoore.com
I can’t count how many levels you are wrong about.
The Big 3 have two huge problems:
First – Government involvement. Our government dictates the auto industry live up to standard that are not possible to obtain with their current technology and facilities.
Our government arbitrarily dictates that the auto industry has to make X amount of cars using this fuel or that by an arbitrary date. The Manufacturers in turn have to re-build or build plants and manufacturing facilities that can build those cars. This costs money.
Our Government cannot dictate to Japan or Germany how many cars they build have to be flew fuel/E85 or all electric or Hybrids.
Why does Japan build smaller more fuel-efficient cars? Because they are smaller people where their average man is the same size as our taller women. Their roads are smaller. They have to import almost all of their fuel sources, so fuel is super expensive. Not only that, but most people live in large cities near their place of work and do not even own cars. So even a small car is a luxury.
The US is the complete opposite. Until 2006, fuel has been extremely cheap. We are taller people. We are wider people. We have longer legs and broader shoulders. We like being able to take every kid on the soccer team to the ice cream parlor in one vehicle. WE LIKE BIGGER CARS…
BUT – Things changed overnight. We found out our government and environmental movement has screwed us for last 35 years. They haven’t allowed us to build new refineries to keep our gasoline cheap. They haven’t allowed us to drill for our own oil to keep our gasoline cheap. They have instead forced us to import 70% of it forcing our cost for fuel to go up. Forcing us into being like Japan – who HAS to import its oil.
So in the matter of two years an entire industry has been turn out on its head. Its now being forced to produce car with technology that is in its infant stage of development and develop other vehicle to demands where the technology doesn’t exist yet, while at the same time trying to build cars that get better gas mileage in manufacturing plants that were designed and built to manufacture SUV, Mini Vans and Trucks.
Second – Labor Unions are literally destroying the industry from the inside out. GM spend almost as much as it makes every year on benefits to people that no longer work for them.
UAW has agreement with GM to hold laid off employees in a "Job Bank" where the union auto worker can essentially collect a portion of his salary for not working. Retirees are guaranteed 95% of their salary when they retire. According to the UAW in 2006 the average 2nd year line worker (two years experience) makes $26/hour. That’s $54,000 per year after two years of experience no including benfits and pension.
GM as of 2007 had 74,000 UAW auto workers both active and retired. Do the freaking math.
I don’t care if you pay a CEO $35,000,000/year. 74,000 employees collecting $54,000+benefits for life…. Is absolutely unsustainable. Unsustainable. It’s almost 4 trillion dollars… It’s a time bomb waiting to explode and we are watching it happen on our news network of choice. This is JUST GM. Not Ford and Chrysler.
And the UAW got these promises from GM by extortion and threatening to stop making their cars. Crushing GM into submission.
GM has been spending their money just to keep up with payroll and benefits on UAW workers.
Mean while – Toyota, Honda, Suzuki, Nissan and the other Japanese manufacturers have been reeling in the benefits of already having smaller cars and better gas mileage. Not because they were geniuses and saw this coming, but because they had to have them for their home market out of necessity.
Bankruptcy – Is the solution. GM, Ford and Chrysler have made mistakes. They have been living high on the hog and have cow towed into Communistic Unions for too long. Time to pay the piper. By declaring bankruptcy, they will be forced to renegotiate contracts, debt, etc… People will lose their jobs. People will take pay cuts. But, the entire industry will no collapse because of it.
On the other hand, democrats want to throw at least 25 billion dollars of our money to these people for the sole reason of propping up the UAW union members. Not to help GM, Ford and Chrysler as providers of jobs. But, so GM, Ford and Chrysler can continue to prop up what is killing them for a few months or years longer.
Democrats in congress know this is the death nail in Unions in this country if the Big 3 fail. They’ll throw however much money they need to so that it does not happen.
If
is the wrong question.
People primarily focused on "if" are the people who insist on thinking of economy as an all-Reagan or all U.S.S.R./China kind of thing.
Economy was once based on nobles and serfs who tilled the nobles land.
People are still trying to think of economy in terms of government versus the market.
It’s like asking people… … … it’s like people arguing whether we should die in a drought or whether we should die in a flood.
Hello.
Excuse me, I would like to interupt just breifly and suggest we spend just 30 seconds longer contemplating maybe? Not Dying?
everyone knows we should bail out Detroit, but no one believes that 6 months down the road they wont come back for more money, then more…they arent addressing the reason why they are bankrupt..
We already saw the Bailout misused by AIG.
Well written question Laura, but I disagree with your premises in the long run.
There will always be a need for cars in the foreseeable future. If one company goes bankrupt, another company will come in and take up the slack. Sort of like what happens in the restaurant business.
GM in particular has believed for the longest time now, that they have a right to print money so to speak. They have produced vehicles that are not as fuel efficient as the foreign market ones are, nor are they the quality of the foreign competition.
The US of A is based on the premise of survival of the strongest. Meaning if you can’t compete in the market place, you should not be in it.
GM has made vehicles where the engine needs to be lifted by a few inches do to basic maintenance such as changing spark plugs. GM has charge me an other that needed O rings $40 for 8 rubber rings that would not fit around my thumb. That is more than gouging, I would compare it to what the underworld does with interest rates.
GM has produced crap when they built the small vehicles. The Cavalier/Sunfire was slightly better than a Lada. Although they were not selling for the [price of a Honda Civic, they were still super poor value.
GM and the other two have put themselves in this mess. Their executives are being paid money that no executive of Honda would dare to demand. They are spending money like it was pouring out of their faucets.
Lee Iacocca sent a message to the stock holders and management when he came in to revive Chrysler in the early 80s. He had the financial reports printed on low quality paper to bring home the point that they need to find cost cutting measures. What do the executives do that fly into DC asking for a spare $26B? They travel in a very expensive way.
If they can’t run their business then they should not be in it. And if their companies can not come up with a vehicle that the population will purchase, then they should go bankrupt.
Honda or Toyota or other foreign car companies will come in and start producing cars; they will have dealerships and any other infrastructure that will employ the American worker.