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To bailout, or not to bailout, that is the question.
What about saving only two? I haven't heard that option discussed.
What about saving only two? I haven't heard that option discussed.
There are a lot of scenarios that have to be played out and evaluated. If Chevy drops a truck line where the trucks are assembled in Canada, the suspension and critical drive elements come from Germany, the engines are made in Mexico, and the wiring harnesses are made in Guatemala, there are going to be LOTS of repercussions. Nobody knows how all of that could settle. I still hesitate about throwing money at the big 3, because if they are "too big to fail", they are extortionists that are "too big to exist".Ivan Seeking said:Well, I find myself at odds with my own lifelong philosophies. What you say makes perfect sense to a free-market guy. But, beyond the issues of time and pain, and ignoring the catostrophic failures of free market principles [too big to fail], I do see another twist. This may be the last chance to save the US auto industry. Mark Shields made this point the other night on the News Hour. We as a nation cannot afford to be uncompetitive in the global auto industry. It could take decades to recover from a complete collapse.
nuby said:The 'real economy' wants these car companies gone.. They've failed produce electric vehicles, and anything that the public might be interested in. I say let them die off, and make room for the new innovative companies.
Don't GM own part of Subarau ? Pity they haven't learned anything from them.my wife's Subaru Legacy was manufactured in Indiana, and it is a VERY reliable vehicle, and handles a lot better than my Nissan 4WD pickup in sloppy conditions. It has also proven to be very reliable -
I'm not sure why that would be true. It isn't like they would just close their doors and cease to exist. Someone would buy them and restructure them. It'd be painful, sure, but eventually they'd all become divisions of Honda, Toyota, and Hyundai.Ivan Seeking said:The justification: It is argued that US industry generally would suffer a catostrophic collapse if the big three go under.
I'm not a big fan of that logic, but the difference between them and AIG (and some of the other banks) is that AIG is a facilitator for an enormous fraction the businesses and a failure of them would be catastrophic. I do think that the govt should have let some of the other large banks fail. Since most of the money in them is insured, I don't think it would have been as bad as people feared.But then my next thought was, why all three? It is discussed as if all three are one. But like AIG and everyone else, the argument is that unless we want another great depression, they are too big to fail.
Why does there have to be an American car manufacturing industry?CaptainQuasar said:So whether we preserve the old companies or federally subsidize and protect new ones, for there to be an American car manufacturing industry in the future it's not just going to happen as the result of a free market.
russ_watters said:Why does there have to be an American car manufacturing industry?
The global financial crisis is suffocating the Detroit automakers, but the problems at General Motors, Ford, and Chrysler have been festering for years—even when the mighty "Big Three" were earning billions. Aging factories, inflexible unions, arrogant executives and shoddy quality have all damaged Detroit. Now, with panicky consumers fleeing showrooms, catastrophe looms: Without a dubious federal bailout, all three automakers face the prospect of bankruptcy.
There will be plenty of business-school case studies analyzing all the automakers' wrong turns. But, as they say in the industry, it all comes down to product. So here are 10 cars that help explain the demise of Detroit:
Ford Pinto. This ill-fated subcompact came to epitomize the arrogance of Big Auto. Ford hurried the Pinto to market in the early 1970s to battle cheap imports like the Volkswagen Beetle that were selling for less than $2,000. Initial sales were strong, but quality problems emerged. Then came the infamous safety problems with exploding fuel tanks, which Ford refused to acknowledge. Message: The customer comes last. "The problems for the domestics really started in the '70s when they were offering cars like the Pinto up against higher-tech, better-built Toyota Corollas and Honda Civics," says Jack Nerad of Kelley Blue Book.
Chevrolet Cavalier. GM sold millions of Cavaliers in the 1980s—and decided the thrifty car was so successful the company didn't need to update it for more than a decade. To milk the model, GM even added some lipstick and high heels and tried to peddle the upgrade as the Cadillac Cimarron—a legendary flop. Honda and Toyota, meanwhile, were updating their competing models every four or five years, and grabbing market share with each quality improvement. . . . .
Stephen Feinberg, one of the most powerful — and secretive — financiers in the United States, hoped to make a fortune out of the detritus of the American auto industry. Instead, he seems to be losing one.
Feinberg's giant investment fund, Cerberus Capital Management, is racing to salvage multibillion-dollar investments in Chrysler, the smallest of the Detroit automakers, and GMAC, the financing arm of General Motors.
But for Cerberus, named after the mythological three-headed dog who guards the gates of hell, the news keeps getting worse.
On Wednesday, Chrysler, which owns the Jeep and Dodge brands, said its sales in the United States fell by a third in August — nearly twice the industry average — as the downturn in the auto business dragged on. Honda eclipsed Chrysler as the No. 4 seller of cars in the United States, and Nissan is closing in fast.
The same day, GMAC, in which Cerberus holds a 51 percent stake, said it was trying to stanch the bleeding from a business that was supposed to be immune to the ups and downs of the car industry: home mortgage lending. GMAC and its home loan unit, Residential Capital, announced that they would dismiss 5,000 employees, or 60 percent of the unit's staff, and close all 200 of its retail mortgage branches.
. . . .
Moonbear said:And, without the big-3 to compete with, companies like Toyota should be able to expand their production and sales to pick up the slack.
I don't think this is a concern that has any chance of being realized. Toyota, Honda, Nissan, etc built plants here in the US to take advantage of our workforce and markets, and reduce the costs associated with transporting materials and finished products. I don't care where the manufacturer is headquartered, as long as jobs are created here in the US, providing income for families and stimulating local economies.CaptainQuasar said:We already buy just about everything from China and it concerns me that we might end up buying all our cars from them too without any domestic manufacturers.⚛
turbo-1 said:I don't think this is a concern that has any chance of being realized. Toyota, Honda, Nissan, etc built plants here in the US to take advantage of our workforce and markets, and reduce the costs associated with transporting materials and finished products. I don't care where the manufacturer is headquartered, as long as jobs are created here in the US, providing income for families and stimulating local economies.
This isn't true.CaptainQuasar said:An automotive industry is not something that just springs up out of the free market -
Moonbear said:I have a hard time believing the big 3 would see the error of their ways if they were bailed out. I think they NEED to face reality here and be allowed to go under if they don't figure out how to fix their problems. This isn't a new problem, and it's not like they haven't had time to see the handwriting on the walls AND implement changes to correct them.
I AM concerned for their employees, but that's not enough of a reason to give the CORPORATIONS a handout. If the money is going to be spent, I'd rather see it go toward things to directly help the employees get back on their feet:...
CaptainQuasar said:Yeah, but will they do so in this country while the global recession is affecting Japan too?
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We already buy just about everything from China and it concerns me that we might end up buying all our cars from them too without any domestic manufacturers.⚛
turbo-1 said:I don't think this is a concern that has any chance of being realized. Toyota, Honda, Nissan, etc built plants here in the US to take advantage of our workforce and markets, and reduce the costs associated with transporting materials and finished products. I don't care where the manufacturer is headquartered, as long as jobs are created here in the US, providing income for families and stimulating local economies.
Again, we'll still have an auto industry, the headquarters just might be elsewhere. On the other hand, you never know. When companies that hold such a grip on the industry go out of business, it opens opportunities for new ones to fill that niche too. Maybe there's someone out there with good ideas who just knew they had no chance to break into the current market, but could finally get off the ground if they didn't have to compete with the Big 3, not just for sales, but for employees. Maintaining an auto industry for consumer vehicles isn't really such a big deal. Now, when we're talking manufacture of military vehicles, yes, we want to keep that in the US and run by US companies.CaptainQuasar said:I think all of your points about helping the employees are good. But I think we seriously need to think about what we would end up doing in the future anyways if we allowed these companies to collapse and decide later on "Whoops, we do want to have an automobile industry in the U.S."
The cost of entry in the automobile market would be huge. Tooling and automated production lines do not come cheap. Plus to sell at an economical price you would need economies of scale which would only materialise over time as a new entrant built up market share during which time you would need huge injections of capital to keep you solvent.nuby said:This isn't true.
With enough innovation, a little government support, a lot of public support, (which there would be if Ford, GM, & Dodge were gone) a new auto company would rise out of a free market. When cars were first invented and manufactured in a economical way 100 years ago, that was a revolutionary product .. everyone had to have one. So, why is it not that simple in a real economy? Invent a revolutionary product, or feature, that everyone has to have, the product sells itself... Problem solved.
The bigger problem is resistance to innovation.
For (hypothetical) example,
If a car company invented a vehicle could drive itself with auto pilot (with GPS and AI).. Would that ever hit the market, even if it was proven 10x safer than a human driver, got rid of all traffic jams in metro areas, and saved 100k lives a year? Probably not. It would put 500k truckers out of work, and would cost other groups millions. This is the major flaw in our economic & political system, and most likely the root source of the "Financial Crisis" we're having today, imo.
Yep! Look at the logistics. Japan has manufacturing know-how, engineering, and a LONG view of business profitability. Why should they import all the raw materials needed to build cars, build them in Japan, and ship them to the US? It's far more efficient for them to build them here and sell them here. Remember that on-hand inventory is a drain on business, and when cars are being stockpiled at Japanese ports, loaded onto transport ships, taking a long, slow trip to the US, waiting for off-loading, and distribution... Well, you get the idea. Add in the lack of flexibility at the dealer level when the supply-chain is so long, and you'll see that the foreign car-makers would be anxious to site more manufacturing right here, as long as their output does not exceed demand. Siting plants here cuts an enormous amount of overhead compared to foreign production/stockpiling/shipping.Moonbear said:I think turbo's response on that is reasonable. It's also not worth the added cost of shipping the vehicles when they can be manufactured in the US. If anything, there's an incentive to do more manufacturing in the US if we have a lot of auto-workers unemployed so the Japanese companies can pick and choose the best employees...or the cheapest...whichever works for them.
I see that as the same, or similar, problem. I don't think bailing out the financial institutions was a good idea either. If anybody should be aware of the risks they were taking, it's financial institutions.edward said:I can certainly see your point of view, but I do have a problem with where we are going to spend the money.
Will the big financial institutions see the errors in their ways now that they will be receiving federal money. For the most part they can't even account for how or where they lost so much money.
And that's why I'd rather see the money go toward that. It'll be tough for them to do that on their own, so if you're going to give someone a leg-up, that seems like a place to do it. That pattern of factory closings is part of the problem, but rather than the companies recognizing it as a harbinger of failure, they just reshuffle workers around or layoff more employees without making any substantial changes.The cost and logistics of retraining and relocating that many people is overwhelming. Many people who work in the auto supply industry producing; seats, wheels, windows, door handles and tires, etc have already been through factory closings one or more times.
It ignored foreign competition beause who could take those silly little Japanese cars seriously.If you want a real world view of what happens when domestic auto industries go bust you need simply look at the UK, once the world's major car manufacturer and now nowhere.
russ_watters said:I do think that the govt should have let some of the other large banks fail. Since most of the money in them is insured, I don't think it would have been as bad as people feared.
If you insist on the car companies being US owned presumably they would be happy to only buy US steel and the steel companies would be happy to only use US mined ore and only use US built ships to carry it. Pretty soon you could have an economy that would be the envy of the soviet union.baywax said:America was built on the freedom that cars brought to its citizens.
GM and Ford that might not want to bring that up.look at the contribution they put into the 2nd ww. Letting these institutions fail would be like ignoring the needs and potentials of a veteran.