Big Three Bailout?

[skeptic]

Wonder what the feelings are about this one. While I tend to think the companies reap what they sow, it is a bit scary to think what will happen if they do go under. There is some rational for bailing them out, in my mind, probably at least as much as the banks, and very likely more, as they are more related to the real people who labor in the middle class trenches.

 

What say you all? Please try to not go off on tangents of vitriol and non-scout comments.

[OldGreyEagle]

No, we should not bail out the Auto makers, in the lexicon of our program, there has to be consequence for your actions. Too many years of poor decisions, producung a poor product has taken its toll. And now we have to prop them up? That is crazy, it is nuts, we talked a lot about what a Socialist Obama is, and now, even before he takes office, we are doing this? It does not make sense.

 

I realize the UAW is also campaigning for this. The UAW, the very model of the cartoonish union worker who produces a shoddy product while demandning ever increasing wages and benefits, needs to re-evaluate its processes and membership.

 

No, No, No

[Beavah]

Yah, capitalism is based on a notion that young, hungry, innovative businesses will continuously replace old, complacent, decaying businesses, eh? It's that notion that has brought us prosperity and economic strength.

 

The Detroit automakers are da picture postcard of old, complacent, decaying businesses, eh? Apple, when it's doin' well, is innovating so they're ready for the down cycle. Ford when it was doing well was slashing its engineering and design staff for lavish union contracts, exec bonuses, and quarterly earnings jiggering. Now they're hittin' the down cycle and they're shocked.

 

It's positively scary how many scuzzballs are linin' up at the public bailout trough. There's finance companies deliberately restructuring as banks in record time just to snarf up tax collars. When we do this nonsense, we just guarantee worse behavior and more long-term pain. If we'd let Chrysler fail way back when, we've had two stronger, more responsible American manufacturers and a more thoughtful UAW. That old bailout led us to this one, eh? Now we'll lose at least two of the three.

 

I'm with OGE. No, no, no, no, no!

 

B

 

[scoutldr]

I heard the other day that the average UAW worker salary is $74 an hour. The average Toyota/Honda non-union salary is $47 an hour. 'Nuff said. Our local Ford plant closed here last year...there was much gnashing and wailing over the loss of the $100K assembly line jobs...people had to actually SELL their vacation homes at the beach to make ends meet.

[OldGreyEagle]

well, you know, I wouldnt begrudge anyone a vacation beach house that they had bought because they were making 74 dollars an hour, if the product/work they turned out was worth 74 dollars an hour, and there is the rub.

 

 

[scoutingagain]

The $74/hr figure is the total labor cost, including wages, benefits, pension contributions etc. It also includes overtime pay. According to the UAW website, average straight time wages are around $28 - $32/hr. However, add in nearly fully paid health care, vacations, pension benefits, overtime etc. and the $74/hr figure is very believeable, if not low. It's more than the fully loaded labor rate for most of our engineers and scientists. Given a little overtime here and there and it's very believable a UAW couple could be bringing in a combined income of $100 - $120k/yr or more plus benefits available to no one else. Not a bad deal for someone with a High School education.

 

If there is going to be a US Auto industry in the future several things will need to happen.

 

1. Labor costs will need to come down. Period.

 

2. Non-profitable plants, models, brands, will need to close. There will be many, many jobs lost. GM has how many brand names it's trying to support in a shrinking market?

 

3. Consumers will end up paying more $$ for cars. This is the flip side. When the Big three restructure or fold, you can be sure prices for cars from the surviving companies both foriegn and domestic will go up.

 

These three things will happen sooner or later, regardless of a bailout. Without a bailout they will happen sooner and the industry can begin to move on.

 

So my vote is a qualified no.

 

SA

 

 

[Nike]

If the Big 3 were really interested in becoming 21st century industrial powerhouses, they would be in bankruptcy court where they can completely scrap the old union contracts and renegotiate everything.

 

I am not interested in paying for anyone else's willful ignorance and incompetence. If we bail out these bozos this time, they will just come back looking for more in ten years, like a junkie relative or friend. It is time to...

 

JUST SAY NO.

[scoutldr]

I am a govt middle manager (one of the ones Obama wants to get rid of) with a good salary. But out of that salary, I have to pay almost $400 a month for health insurance, $200 a month for life insurance, and over $1600 a month into my 401(k) which is the bulk of my retirement fund (no more cushy govt defined pensions!). Not to mention taxes. My true disposable income is less than 40% of my gross. Needless to say, I haven't bought a "new" car in over 30 years, and don't have a boat OR a vacation home. Can't afford a $500 car payment, especially now that over half of my retirement savings has evaporated. I feel for the auto workers. Maybe we should just look at it as "pain redistribution".

[anarchist]

Gosh we are willing to have a major negative impact on ten percent of the american work force over a little 25 billion but we give AIG 150 billion and watch as they give their excecs two large parties and $503,000,000 in deferred income.

 

lets say if GM goes chapter 11...how many cars buyers are willing to look at a car made by a company that might not be here next year...already poor sales results will flat line sales...

 

at least car makers produce something...what does AIG produce...paper? We are sitting back letting Paulson hand out 700 billion to his chronie banking friends with no real oversite or transparency but are willing to hurt millions of americans 'cause THAT's socialism...give me a break...please.

 

If we bail out banks and insurance bandits we should at least help the workers of the car plants...It could be the sea change this country needs, if viewed as an opportunity.

 

'course even that would need to be structured and have strings galore attached.

For example...start with bankruptcy where the U.S. government through an agency like the resolution trust (remember the last time we pulled the finacial boys chestnuts from the ol' fire?) Under bankruptcy protection we begin with a 50% lay off of corporate execs...GM does not need 50 + big wheels. Then set corporate pay for the big wheels at five or seven times the base hourly rate of the lowest paid full time line employee-not a penny more.

 

No bonuses or extras of any kind until U.S. government is paid in full. Banks lending to big three take an immediate 15% hit on outstanding loans and time terms are extended. Labor takes the same 15% hit and get revised contracts, health and retirement benefits. Parts suppliers take a minumum 10% hit on cost of parts and increases are caped at inflation rate or cpi...take your pick. Retired workers take an immediate 10% benefits hit and increases are flat for three years and will increase afterwards only with profitability.

auto lines (read hummer, pontiac, buick, dodge, etc) that are in the red after 12 months are dropped immediately. Government has majority of voting stock and veto seats on the board until profits and buy-out occurs.

 

head of design for new car/truck units are picked from brightest engineers availble...they can design anything they like so long as it has a bumper to bumper 100,000 mile trouble free life and gets 35-60 mpg...even large pick-ups... vehicle having lower milage rate are taxed at sale 50%. Results- many fewer land boats or more efficent "boats"

 

just some cardiac drug induced ramblin' thoughts.(This message has been edited by anarchist)

[OldGreyEagle]

perhaps todays views are the result of the bail out, when it first appeared, it had to be done, and done this week. There was a huge push to get it done before the week end and when it wasnt done, there was much consternation.

 

Now, the thought is, well maybe we were hasty up front. Well, let it all be sorted out without government help

 

I have commented before, I live in Bethlehem. Anybody remember Bethlehem Steel? Anybody remember US Steel besides like Eamonn and Ed? I dont remember many crying when they went belly up, they were victims of their own excesses, well, Bethlehem Steel was for sure I am not certain of US Steel. Who gets to decide which industry gets to be proped up? It wasnt that long ago bankruptcy laws were changed to make it harder to file, because it was felt to many people were taking the easy way out and now we say people, you go suck eggs and live with your debt, but you companies, no, we need you

[scoutldr]

My grandfather retired from "the Steel" as a blue-collar steel worker. Back in the hey-day of the 60's.

[scoutingagain]

I hear yah Anarchist. That's why I'm a qualified no. As an investor I might consider putting $$ into the auto industry if they showed they were really ready to make substantive changes. But I don't see any of what you're proposing coming from the industry or UAW. They don't seem to get it. As far as Chapt. 11 goes, who's ready to go out and buy a big three vehicle now? At least in Chapt. 11 they could effectively renogiate with labor and get their cost structure down and maybe be able to make a profit on a $15,000-$20,000 vehicle, that would sell. They have some models that are as good as the imports in milage, quality and performance. They just can't make money on them given their current labor costs. Either way, tens of thousands of jobs are going to go away in the industry.

 

The only way I see them making the needed changes is Chapt. 11. Then, I might be willing to have the govt. lend the new companies some dough to restart the US auto industry, with conditions.

 

I might add I would have made the same condition to the Banks. No govt. money until all stockholder money is used first. Then recaptalize the reorganized banks, with conditions on compensation, lending etc. Right now there is no stigma or down side for a bank to take govt. money. At least not enough to dissuade otherwise healthy banks from lining up.

 

As Beavah noted, the financial industry bailout is becoming somewhat of a joke. Everyone is trying to figure out how to game the system and get their share. Make me a bank so I can qualifiy. Maybe the big three should reclassify themselves as banks so they can get the financial industry $$$. Makes as much sense as those currently lining up at that trough. The way the current bailout is playing out, I have no desire to repeat that fiasco in autos.

 

And there is a big downside. Hold onto your hats when GM does go Chapt. 11. The initial economic black hole that will create will be felt by everyone.

 

SA

[vol_scouter]

In general, I oppose a bailout as well. We should have listened to the House Republicans on the bank bailout - return to the prior accounting laws and let the market adjust itself (which seems to be happening anyway).

 

That said, I am very concerned about the loss of heavy industry. We are able to make less and less. The US cannot manufacture a large nuclear power plant - we do not have the industrial capability! Our competitors such as China and Japan can. China is planning on building 45 nuclear plants in the few years. With the democrats and Obama opposing nuclear power, we are not likely to build any plants in the near future. We will never become energy independent until we embrace nuclear power.

 

Can we have a successful economy in the long run if we have no heavy industrial capacity? I think not. We should not have allowed Japan to unfairly undercut our steel industry. We are doing the same with autos. I see nothing but decline for our country.

[BrentAllen]

No way on the auto bailout. I said no on the AIG bailout as well.

 

If the big 3 go bankrupt, they aren't going to disappear. There will still be demand for US-built autos, so they will figure out a way to create a going concern. There will still be a demand for parts, etc., but just at a different level of demand. I think we call this a "correction" or an adjustment. Both executive pay and labor contracts need to see a "correction" as well.

 

My guess is congress doesn't have the votes to pass a bailout now, but Obama will push for one as soon as he gets into office. Then it will get interesting.

 

In the meantime, investors are fleeing the market like rats from a sinking ship. I don't think Wall Street is as enamored with Obama as is the media.

[Lisabob]

OK folks here's the deal. If the big 3 go bankrupt, all of you who live in OH WI and IL can start clearing out the extra bedroom because all of us in MI will be looking for a new place to stay while we sort out our remaining (and rather glum) options. Well actually wait a minute, there's a lot of auto industries in those states too...maybe we'll spread further afield.

 

On a more serious note, this issue got full-day media blitz today in MI on public radio. It is on the front page of all the newspapers and everyone is talking about it. Our governor cut short a business promotion trip to go to Washington to lobby for this bailout.

 

I don't work in the auto industry and none of my family does either, thank goodness. But the impact of a collapse in that industry will be felt on a huge number of other sectors of the economy. MI's economy has been in a shambles for some time as a result of declines in this industry and this will just about finish off hope of improvement. It is certainly true that the big 3 (and MI, and the country, and for that matter people working in that industry) should have been more pro-active and seen things coming a long time ago. So I hardly want to give anybody a free pass. But we're talking about an awful lot of jobs here. Conservative (non Auto industry) estimates are that something like 3 million jobs could be lost if the big 3 go under. Those are not all directly for Ford/GM/Chrysler, but also all of their suppliers. It does NOT take into account the ripple effect on the rest of the (non-auto) economy though, so other estimates go much higher, up to 13 million in some reports.

 

In a state where unemployment is already the highest in the nation, that's just downright scary. And if Congress is willing to throw billions at big bankers, I darn well do expect that they can spare some chump change to keep literally millions of people employed. You all may not live in MI but don't throw us under the bus.