Bailing out the Detroit automakers

[sandgk]

Originally Posted by Steve19

This argument is Economics 101. Cars or butter. I actually felt ill as I listened to the auto executives talking about their great managers and energy efficient cars.

Buy the companies (their value today is a fraction of the $34 Billion now requested).
Fire the managers (especially Nardelli - what the hell was that tool doing in charge of a major corporation in the first place?).
With the Government as temporary owner, go to the TARP and fund what they need to get and keep going. That might, in the short term, mean something that isn't a green eco-friendly PHEV or similar.
(The one part of the testimony on which the execs were right is that with current gas prices the siren song of fuel efficiency is less of a lure.)
Get the costs for the defined benefit programs under control.
Get the work rules (Who can work on what) onto a rational basis - be like Honda. Speaking of whom:

Quote:
Originally Posted by fourteenandoh
while honda spent 550mil for a brand new factory in Indiana

And received in excess of $140 Million in incentives from Indiana to underwrite a plant that would initially yield 2,000 jobs.

I would love to see a level playing field where the States don't fall over themselves to screw each other in the rear like this - let alone screw over the domestic manufacturing base. This is how you play Monopoly when you are losing.

Originally Posted by Steve19

The VW Beetle was getting 30 miles to the gallon in the 1960s. So, where is this energy efficiency?

Well, let's be honest here, there are plenty of small, relatively high mileage cars out there, Cobalt, Smart Car, etc. As for why there are not many more fuel efficient than their older fleet members - could have to do with the limits of the laws of Physics, combined with the desire of some to buy a "my dick is bigger than your dick" Hummer - or muscle-car, combined with the need for real hauling capacity for some, combined with the unattractive pricing for hybridized vehicles.

Originally Posted by Steve19

Why did they kill a very successful electric car program?

EV-1 or other? If EV-1 I think it's a myth to call that program a success - but it's failure was as much driven by the lack of government support as it was by managerial myopia. The primary technical cause for it's demise was the lack of truly PHEV capable battery technologies - it used NiMH which overheated, so they had to use some drivetrian derived power to air condition the damned batteries.
The primary commercial/regulatory causes of it's failure were, respectively low fuel prices and the roll-back of CARB. The former would be addressed through demand destruction (higher excise tax on gasoline), the latter by appropriate environmental legislation.
What I find much more depressing is that, despite all the wealth of data GM obtained via the EV-1 lease program, they still cannot bring a Chevy Volt to market under a cost to build of $40K.

Originally Posted by Steve19

Let us be very frank. This is a group of terrible executives who have avoided any of the social responsibilities they had -- all of which would have put them in an incredibly powerful competitive position today. It is an unsustainable industry that is paying for a generation of workers, now retired, who extracted expensive lifelong benefits that are not sustainable. Rather, provide a safety net for the workers and let them get out from under all this, even if it means Chapter 11 or whatever.

Agreed - though, with marginally different wording couldn't we say exactly the same thing about the Merchants of Debt who have siphoned off $350 Billion in the last couple of months?

Originally Posted by Steve19

Sell off the fancy corporate jets, the big buildings, the hunting clubs and fancy corporate club memberships, and get them back to innovative transportation.

Apply that also to AIG, Citigroup et al - and make them get back to lending.

[shetuck]

Originally Posted by sandgk

...Apply that also to AIG, Citigroup et al - and make them get back to lending.

Pfft... you act as if this whole mess started with negligent failure on the part of bankers in exercising prudent lending practices.

Oh... wait... nm... I thought a CDO was an innovative way of transport!



Back to trying to deciding whether to make a payment of my private Citibank student loan this month or my car loan payment to GM...

[MaxBuck]

Originally Posted by sandgk

... As for why there are not many more fuel efficient than their older fleet members - could have to do with ... the desire of some to buy a "my dick is bigger than your dick" Hummer ...

I'd be surprised if a single Hummer driver has a dick bigger than mine. And I'm hung like a chihuahua.

[sandgk]

CBS reports $15 Billion deal between White House and Congress fr automakers.

Money to come from the $25 Billion set-aside for energy efficient cars.

I suspect more help will be made available once Obama is in the White House.

Oh, for perspective - this is enough (I think) to buy all 3 2x over.

[Steve19]

Originally Posted by sandgk

Agreed - though, with marginally different wording couldn't we say exactly the same thing about the Merchants of Debt who have siphoned off $350 Billion in the last couple of months?


Apply that also to AIG, Citigroup et al - and make them get back to lending.

We are in complete agreement. We have a group of corporate clowns who have raped shareholders and customers for years. It's time for a clean up.

[fourteenandoh]

people are making this out to be blue collar vs white collar bailout type thing which i understand, but when it comes down to it thats not really the case. i think its more of a fact that modern finance is neccesary to modern life, and GM cars are not. also, add in the fact that its been proven that these banks can exist profitably on their own and GM has proven they can't. if you bail out the financial system you save modern society. if you bail out GM you give them 6 more months of employing americans before they are back asking for more.

[shetuck]

Originally Posted by fourteenandoh

...i think its more of a fact that modern finance is neccesary to modern life, and GM cars are not...

Nice try. No go... your [censored] stinks as much as everybody else's!

You need to choose either one of the two below:

a). Loans from Lehman Bros are no more necessary to modern life than cars from GM.

b). Financial services are as necessary to modern life as cars.

[fourteenandoh]

Originally Posted by shetuck

Nice try. No go... your [censored] stinks as much as everybody else's!

You need to choose either one of the two below:

a). Loans from Lehman Bros are no more necessary to modern life than cars from GM.

b). Financial services are as necessary to modern life as cars.

A) Lehman is gone
B) without the finance bailout, ALL of finance would be gone. without the big 3 bailout, there will still be plenty of other people to buy cars from

[shetuck]

Originally Posted by fourteenandoh

A) Lehman is gone

Smart guy... So is American Motors. You know the point I was making.

Originally Posted by fourteenandoh

B) without the finance bailout, ALL of finance would be gone. without the big 3 bailout, there will still be plenty of other people to buy cars from

That's a cute and convenient notion. Clearly you have NO idea to what extent ALL automotive suppliers share suppliers and parts. If you did, you wouldn't make such an absurd statement.

The automotive industry in North America is not indivisible... i.e. you can't pick and choose which parts you're ready to let go. Everybody is tied together at the hip (to some significant extent).

The arguments for the financial bailout and how the whole financial system is tied together applies here too, to a large extent.

[shetuck]

Look... let me be clear. I'm not stumping for the bailout of the big three.

I just think it's typical of our society... a sign of the times, if you will, that we're putting this level of scrutiny on the big three for the relatively minuscule amount of money we're hanging out there.

Like I said, we need to understand that one sort of economic activity does not necessarily act as a bigger driver for the nation than another - i.e. there isn't one sector of the GDP that is more *valuable* than another. Everything plays a role.

[fourteenandoh]

Originally Posted by shetuck

Smart guy... So is American Motors. You know the point I was making.



That's a cute and convenient notion. Clearly you have NO idea to what extent ALL automotive suppliers share suppliers and parts. If you did, you wouldn't make such an absurd statement.

The automotive industry in North America is not indivisible... i.e. you can't pick and choose which parts you're ready to let go. Everybody is tied together at the hip (to some significant extent).

The arguments for the financial bailout and how the whole financial system is tied together applies here too, to a large extent.

don't know why you are getting personal, that's not needed.

i'm not a supporter of "letting them fry", BTW. i think there has to be some sort of prepackaged bankruptcy put into place, then give them the bridge loan.

[fourteenandoh]

Originally Posted by shetuck

Like I said, we need to understand that one sort of economic activity does not necessarily act as a bigger driver for the nation than another - i.e. there isn't one sector of the GDP that is more *valuable* than another. Everything plays a role.

i'm not so sure there would be ANY GDP if the banking system failed. everyone would lose everything and we'd have to start over.

[shetuck]

Originally Posted by fourteenandoh

i'm not so sure there would be ANY GDP if the banking system failed. everyone would lose everything and we'd have to start over.

This is becoming a chicken/egg argument.

How was AIG crucial to the national economy?

[shetuck]

Originally Posted by fourteenandoh

don't know why you are getting personal, that's not needed.

You're right. I apologize. There are, nonetheless, big misconceptions about how the modern auto industry works (for lack of a better term).

Originally Posted by fourteenandoh

i'm not a supporter of "letting them fry", BTW. i think there has to be some sort of prepackaged bankruptcy put into place, then give them the bridge loan.

I AM a supporter of letting them fry because I think it'll be better for us in the long-run. But I don't think we should apply different standards to different industries that are both very important to our economy.

[Tresselbeliever]

The general reason for bailing out financial institutions has to do with the monetary structure of this country and market psychology. For every dollar sitting in the reserves of banks, several dollars are used to back industries. For this reason, and for the reason that one bank failure generally leads to multiple bank runs and ensuing failures without the backing of the Federal Reserve, monetary authorities try to restore confidence by providing enough liquidity to banks so that they can A. survive, B. supply enough money to the system. The great depression saw a third of the banks fail, a third of the money supply wiped out, and the ensuing deflation is without a doubt, one of the most painful memories for the nation. To this end, I agree with 14 that the monetary structure ought to be supported to a degree.

Now, it is somehow different to bailout the depository institution as opposed to a deal-broker institution. But the fundamental issue is the same: an economy that lives by leverage also dies by leverage. The bailout of the financial industry has to do with the elimination of this systemic risk on the wider economy, while the bailout of the automakers has to do with just one industry.