News Should the government bail out GM?

[turbo]

Rather than bail out US automakers directly, we should give them a favorable environment with respect to health-care costs, which are skyrocketing. Single-payer universal coverage for US citizens would take that big negative off their books. Of course, it would also help the foreign automakers who have plants here and offer health insurance to their employees. In the end the Big 3 would have to learn to take advantage of that huge gift (get health insurances off their backs) AND learn to compete against foreign-branded vehicles. They would jump at the former, but I don't hold out much hope of success in the latter case. At least we will have managed to provide health-care for all US citizens instead of bailing out mismanaged companies, and that kind of climate would attract more manufacturers, who would prefer to manufacture goods for the US market here, and defer shipping costs and reduce the time for which unsold inventories need to be held to accommodate delays due to shipping, distribution, etc.

 

[BWV]

It is worth considering what GM would be bailed out from. When a corporation cannot pay its debts, the lenders (i.e. the bondholders) take over control of the company. This means a wipeout of the equity value and some restructuring arrangement that maximizes the recovery of value for the bondholders. If the company is worth more alive than dead then the bonds are typically converted into equity of the reorganized company. Arguably GM is worth more as a going concern than its liquidation value. In which case it would be business as usual aside from the equity holders who would be (rightfully) wiped out.

It is important to note that it was not Bear Stearns who was "bailed out" it was JP Morgan who benefited from the government intervention. Bear's stock took a 90% haircut and JP Morgan got government financing and guarantees on the acquisition.

 

[huckmank]

Did I not just address this or did you skip over it? It's more practical because there aren't enough public systems in place. If there were more, more people would use it. It's not hard to understand, I don't see why I have to keep repeating myself.

Nonsense. It's more practical to drive in the US because our country is less than 300 years old and the cities built up over the course of one-hundred years - pretty much everything west of the Mississippi - are sprawling metropolises with suburbs ranging 30-50 miles from their respective centers of commerce. Comparing these cities to densely packed European cities that have existed for a millennium or more is ridiculous, and even more ridiculous is blaming GM for the disparity between American and European public transit.

On the subject of the bailout: no, GM should not be bailed out, but neither is it unconstitutional to do so.

 

[WarPhalange]

It would help if cities (or at least all suburbs) weren't designed with cars in mind. The closest store to me currently is about a 10 minute bike ride away. That's one hell of a journey if I just want a fresh loaf of bred for breakfast.

 

[huckmank]

It would help if cities (or at least all suburbs) weren't designed with cars in mind. The closest store to me currently is about a 10 minute bike ride away. That's one hell of a journey if I just want a fresh loaf of bred for breakfast.

Are you implying that suburban sprawl is all the fault of GM buying up a trolly car company in the late 30's?! Oh my dear lord.

edit: and you get no sympathy from me. My commute to school is 15 miles round-trip and I bike every damn day. Not GM's fault that home prices are cheaper the further you get from commercial centers.

 

[WarPhalange]

Are you implying that suburban sprawl is all the fault of GM buying up a trolly car company in the late 30's?! Oh my dear lord.

No, actually I'm not. I'm saying this "suburban sprawl" as you call it further contributes to a crappy public transit system.

edit: and you get no sympathy from me. My commute to school is 15 miles round-trip and I bike every damn day. Not GM's fault that home prices are cheaper the further you get from commercial centers.

You could have small shops all over the place if it wasn't for zoning rules. Look at Europe.

My commute to school is an hour long bus ride. I don't think I could bike that far.

 

[huckmank]

No, actually I'm not. I'm saying this "suburban sprawl" as you call it further contributes to a crappy public transit system.

You could have small shops all over the place if it wasn't for zoning rules. Look at Europe.

My commute to school is an hour long bus ride. I don't think I could bike that far.

And I'm saying that suburban sprawl stems from the fact that Americans have vast tracts of land available to them. Homeowners want to buy their houses far from the city because they can get more for their money when they purchase a house in the middle of nowhere. Retailers don't want to set up in sparsely populated areas because they won't have any customers.

You seem to want to blame someone for this, but there is no one to blame/we're all to blame. Parents want the best home they can get for their children and retailers want to succeed. Any part that zoning plays is minuscule compared to the driving force of these two needs.

Good news though. When gasoline hits $10 a gallon, homeowners may start to realize that the $150,000 mortgage they have turns into $300,000 when they factor in a 60 mile round-trip commute. They'll either need to move farther in, petition their local governments for better public transport or press their companies to allow them to telecommute. While all of this is happening, the stratospheric price of oil will make alternatively powered vehicles financially viable and American consumers will purchase electric cars, not because the government forces them to, but because it makes financial sense.

Good lord, I love capitalism.

 

[OrbitalPower]

How is it the unions' fault that American car companies are failing? Unions provide accountability and provide some standards. When Firestone tires fired all their union workers and went over to Mexico they had the disasterous rolling tire problem.

Saying its the unions' fault is like saying minimum wage laws wreck the economy, it's actually been shown they have a positive effect. And do they not have unions in Germany etc.?

The unions did not decide to produce mostly large cars that would not be applicable to the future, GM, Ford, etc. did, as they could make the most money off selling these vehicles, as they costed more than cars and people could get tax breaks back on SUVs.

It was simply poor vision by the car manufacturers.

 

[Greg Bernhardt]

Saying its the unions' fault is like saying minimum wage laws wreck the economy, it's actually been shown they have a positive effect. And do they not have unions in Germany etc.?

It was simply poor vision by the car manufacturers.

Unions and Insurance are two minor players. I don't think anyone will dispute poor vision isn't the main culprit.

btw, increased min wage = increased unemployment

 

[OrbitalPower]

Unions and Insurance are two minor players. I don't think anyone will dispute poor vision isn't the main culprit.

btw, increased min wage = increased unemployment

"In a comprehensive 2004 study, the nonpartisan Fiscal Policy Institute reported that since 1997, states that had boosted their minimum wage above the federal minimum actually created jobs faster than those that did not. In higher minimum wage states, employment grew by 50 percent more than it did in states still at the pathetic federal level. Even in tough economic times, the minimum wage doesn't hurt jobs: Princeton University economist David Card found that even the minimum wage increases during the 1990-91 recession 'were not associated with any measurable employment losses.' As Republican Sen. Arlen Specter (PA) once noted, "history clearly demonstrates that raising the minimum wage has no adverse impact on jobs."...In Oregon, for instance, the state raised its minimum wage in 1998, and the average earnings of newly-employed welfare recipients climbed by 9 percent, while the percentage of welfare recipients who found a job actually rose."

From the book "Hostile Takeover."

When the US didn't have the minimum wage, large classes of people were unable to buy things and factories shut down. It seems the empirical evidence shows that minimum wage laws do not lead to unemployment.