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Old 11-18-2008, 08:19 PM   #1
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I don't get it!

I am watching the news today and can't believe what I see. When a bunch of bankers and wall street execs. go the congress asking for money the politicians are tripping over each other to hand them a blank check, but when the auto industry which employs between 1 and 3 million (depends on who you believe) blue collar workers asks for help they get the cold shoulder.

I was just playing with some number if 1 million file unemployment benefits for 26 weeks at $2000 per month (just a guess at the level of benefits) that equals 15 Billion right there. Then add in lost tax revenue, I have heard estimates of as much as 200 Billion and the havoc it would play with our balance of trade. Imagine if we suddenly had to import all of the value of output of the US auto industry. We would also loose the value of our auto exports. Ouch! All of a sudden $25 billion doesn't sound so expensive.

Maybe Toyota and BMW just have better lobbyists than Ford and GM.

Looking on the bright side it may help the value of our Sportsmobiles because unless someone can figure out how to get 35 inch tires on a Sprinter there won't be anything like them again.

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Old 11-18-2008, 08:30 PM   #2
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But the auto industry can go through bankruptcy and restructure and come out smelling like a rose... well,.... like some kind of lesser flower maybe,.. and continue on with business.

Bankrputcy probably hurts car sales for a period of time, but they can keep doing business.

Can a bank go through bankruptcy?
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Old 11-19-2008, 11:10 AM   #3
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Bankruptcy? Don't get me started...

That concept is one of the most disgusting and destructive concepts that out country and government employ. Basically it means that anyone or any company can, through bad financial decisions or practices (or just being plain stupid), bring hard times upon themselves and then declare bankruptcy, essentially screwing all the vendors, suppliers, creditors, and employees out of the money owed them. And it is legal!

Imagine the plight of the thousands of other businesses that supply the automakers that will go out of business, or be hurt very badly by such action.

One of my customers declared 'bankruptcy' a few years ago, and I got screwed out of $40K. Then they sold the company to a competitor and kept the money! To all hard working Americans, it is one big F YOU. The execs still live in mansions.


Quote: "Maybe Toyota and BMW just have better lobbyists than Ford and GM".

NO, they simply have better products!
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Old 11-19-2008, 11:24 AM   #4
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Agreed. It is a nasty out.

Agreed, The US automakers have not been reading the writing on the walls about product offerings and quality.

...and the US automakers have made some terribly stupid business decisions....

but the orignal question wa about the bail-out I believe.

Whether we like it or not, businesses have the option of bankruptcy and thus I feel we should not be bailing them out.

Banks on the other hand, I am not sure if there is such a thing as bankruptcy for banks....
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Old 11-19-2008, 03:51 PM   #5
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I agree that the US auto makers made a lot of poor decisions about the type of cars they are building. However in their defense they have been building powerful gas hungry vehicles because that is what as Americans we like to drive. Just look at the Toyota Camry. It used to be a compact but now it is a full size car with 200+HP. Why, because that is what the American market place demands.

I don't think anyone at this time last year would have predicted that gas would have climbed to over 4 dollar a gallon by September. High gas prices killed sales of SUV's and full size trucks of which the Big 3 have the majority or the market. Now that fuel prices have dropped people are more worried about keeping their house and job than buying a new car. Even if someone wants to buy a car unless they have a 750+ credit score they can't get a loan and without financing there are no car sales.

I agree that our bankruptcy laws are way to lenient and in the event that any of these companies file bankruptcy there are a lot of small companies that will pay a very high price. Although, in the long run this may be the best option for the health of the Big 3.

When banks fail or become insolvent the process is very straight forward the Federal Reserve steps in and takes over operation of the bank. They dismiss the management as in the case of Washington Mutual and either restructure the bank or liquidate its assets.

My comment about the lobbyists of BMW and Toyota was just me being cynical. I was hinting that maybe the foreign automakers have lobbied congress to deny the bail out so that they can come in and buy up the assets of the Big 3 at pennies on the dollar after they declare bankruptcy. While this is not likely it certainly isn't beyond the realm of possibilities.

It just seems odd that the politicians that were stumbling over each other to rewarded the bad (greed motivated) decisions of the financial industry with a $700 Billion bail out are unwilling to help the auto industry that is failing in no small part from the fall out of the financial crisis.

John

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Old 11-20-2008, 06:54 AM   #6
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It just seems odd that the politicians that were stumbling over each other to rewarded the bad (greed motivated) decisions of the financial industry with a $700 Billion bail out are unwilling to help the auto industry that is failing in no small part from the fall out of the financial crisis.
There are a lot of assumptions here I don't agree with. The responsibility for 'bad financial decisions' does not exclusively belong to the financial industry. How about some accountability for 'greed motivated' (to use your term) households that lied on their mortgage applications and borrowed way beyond their means? Yes, financial firms did some very dumb things and you'll notice that many have been totally wiped out as a result. So, bad or dumb financial firms that make mistakes get taken out a shot as they should. The list of casualties in the financial sector is long and growing. Government support is designed to help the remaining viable firms survive, and it comes at great cost in terms of conditions and ownership dilution for shareholders. Key word here is 'viable'.

Now, the US auto companies are anything but 'viable' in my view. They have been struggling financially for years, not just recently. Giving them additional life support without also forcing them to change how they run the business is like burning money. In their current form, they can't earn a sustainable profit. Maybe with mergers and consolidation they can change, but any govt. support should come with very very significant plans for restructuring. That does not seem to be what the managements of the US auto industry want. So until they can show a credible path to become viable (that will require a lot of pain), let them disappear. In broad economic terms, they won't be missed.
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Old 11-20-2008, 06:08 PM   #7
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Old 11-20-2008, 11:13 PM   #8
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EMrider, looks like the Congressional majority agrees with you. At least the latest news indicates that the Big 3 were asked to come back with action plans that will show it's worth the risk to us taxpayers to kick in $25 billion (for starters, anyway). I hate it when even one person loses his or her job. That said, the automaker CEOs were bandying about a figure of 3 million jobs lost if "we" don't pay up. Even if that's true, it's less than one percent of the US population or somewhere around two percent of the civilian workforce. Plus, since Chapter Seven bankruptcy with restructuring is NOT like personal bankruptcy and does NOT entail loss of all employment in a given business, even bankruptcy of, say, GM would not toss all GM employees out on the street. When I was a kid, you could buy a good camera or TV, etc. etc., made in the USA. Then our lifestyle demands and expectations priced such US manufacturers out of our own market. For years now, US-made automobiles have been going the same way - too high a price and quality too low, in general. This terrible situation may have the silver lining of forcing all of us to work together to turn that trend around, before we become an industrial has-been like Great Britain but without the benefits of a revered culture.
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Old 11-21-2008, 07:11 AM   #9
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I was amazed that two of the three head-honchos were not willing to cut their own salary.
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Old 11-21-2008, 07:37 AM   #10
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The salaries are actually a small part of their total "package" too. Between stock options and bonuses, their total compensation is usually 10-20 times their salary.

Where do I apply? I coudn't do any worse.


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