Join Early Retirement Today
View Poll Results: Should the government bail out U.S. automakers?
Yes 18 10.00%
No 100 55.56%
Limited bailout 15 8.33%
Need to see the details before deciding 47 26.11%
Voters: 180. You may not vote on this poll

Reply
 
Thread Tools Search this Thread Display Modes
Bail out U.S. automakers?
Old 11-11-2008, 09:58 PM   #1
Recycles dryer sheets
 
Join Date: Jan 2007
Posts: 222
Bail out U.S. automakers?

Bloomberg.com: Worldwide

I really don't want this thread to get political; I'm just trying to look at this from an economics standpoint. On the one hand, if the government bails out GM, Ford, etc., it seems like it's just propping up a broken business model, and we're going to have no choice but to keep bailing them out. On the other hand, if you don't bail them out and they go belly-up, thousands (millions?) of people lose their jobs.

It's easy for me to sit here and say, "Let them fail! I don't want taxpayer money being used to bail them out!" But then I think about the fact that I'm still gainfully employed and able to provide for my wife and kid. However, lots of businesses go under all the time. The government can't bail them all out. My instinct tells me that if consequences are removed, then capitalism doesn't work.

What do y'all think?
__________________

__________________
CompoundInterestFan is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 11-11-2008, 10:03 PM   #2
Thinks s/he gets paid by the post
 
Join Date: Dec 2007
Posts: 4,764
Bail everything out. Pass it on to future generations.
__________________

__________________
Notmuchlonger is offline   Reply With Quote
Old 11-11-2008, 10:03 PM   #3
Thinks s/he gets paid by the post
 
Join Date: Jun 2006
Posts: 1,666
I think you are exactly right in that the government would just be propping up a broken business model.
The auto companies need to show the government a well laid out plan for how to fix things. And I think a necessary part of that plan is to restructure their pension, health care and UAW contracts.
Then they have to figure out a way to restructure the companies such that they can change direction more nimbly as changing market conditions require them to.
__________________
"We do not inherit the earth from our ancestors, we borrow it from our children.
(Ancient Indian Proverb)"
Zathras is offline   Reply With Quote
Old 11-11-2008, 10:12 PM   #4
Thinks s/he gets paid by the post
Bikerdude's Avatar
 
Join Date: Jul 2006
Posts: 1,901
I would like to see the terms before I say yes or no. However, I would be against a bailout unless the business model is changed to match their successful competitors. Limits on management compensation and union givebacks. We are on the hook for their pensions if they fail though.
__________________
“I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said” Alan Greenspan
Bikerdude is offline   Reply With Quote
Old 11-11-2008, 10:19 PM   #5
Recycles dryer sheets
Culture's Avatar
 
Join Date: Apr 2007
Posts: 491
There is no possible way that we can bail out all the companies that are in trouble. If we are going to spend money, it needs to be fundamental investments in the country, not companies. Infrastructure, education, technology (think solar and fusion energy), etc. Quit rewarding bad behavior.

So the answer is NO, no matter what the details.
__________________
Culture is offline   Reply With Quote
Old 11-12-2008, 12:54 AM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
kcowan's Avatar
 
Join Date: Jul 2006
Location: Pacific latitude 20/49
Posts: 5,693
Send a message via Skype™ to kcowan
I say yes. Keep the people working. If we can bail out banks without forcing them to change their reckless business practices, why would we treat automakers any differently?

Corporate socialism seems to have been embraced as a government policy. It is very difficult to pick and choose.
__________________
For the fun of it...Keith
kcowan is offline   Reply With Quote
Old 11-12-2008, 01:16 AM   #7
Thinks s/he gets paid by the post
kyounge1956's Avatar
 
Join Date: Sep 2008
Posts: 2,171
Quote:
Originally Posted by CompoundInterestFan View Post
Bloomberg.com: Worldwide

I really don't want this thread to get political; I'm just trying to look at this from an economics standpoint. On the one hand, if the government bails out GM, Ford, etc., it seems like it's just propping up a broken business model, and we're going to have no choice but to keep bailing them out. On the other hand, if you don't bail them out and they go belly-up, thousands (millions?) of people lose their jobs.

It's easy for me to sit here and say, "Let them fail! I don't want taxpayer money being used to bail them out!" But then I think about the fact that I'm still gainfully employed and able to provide for my wife and kid. However, lots of businesses go under all the time. The government can't bail them all out. My instinct tells me that if consequences are removed, then capitalism doesn't work.

What do y'all think?
I agree that a government bailout seems likely to be just the first of a series. I've got a third idea other than a bailout or letting the big car companies go down the tubes. How about if the UAW and/or the employees buy them out? Maybe this is totally crazy, but I can't think of anyone who would have a bigger incentive to make a going concern out of those companies than the people who will be out of work if they finally fail. Likewise, maybe the union is the only entity that can come to a balance between the current employees' needs and the promises made to retirees, which will be acceptable to both groups.
__________________
kyounge1956 is offline   Reply With Quote
Old 11-12-2008, 01:29 AM   #8
Moderator Emeritus
 
Join Date: May 2007
Posts: 11,031
After reading this:

Bloomberg.com: U.S.

something probably will have to de done or it will be a devastating blow to the economy, particularly in states that have been hit pretty hard already. Plus I have heard that there is so much GM debt floating around that a failure would have serious consequences on the whole financial system.

I hate the idea of a bailout, especially for companies as badly run, as heavily unionized and that make such bad products (just like the airlines and they'll probably be next). Maybe they'll save Ford and GM and let Chrysler go under (strike 2 against Bob Nardelli after he screwed up HD).
__________________
FIREd is online now   Reply With Quote
Old 11-12-2008, 03:55 AM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2007
Posts: 5,072
Ford and GM represent an entire domestic industry. They could go through bankruptcy and survive. They could be sold off unless the govt stepped in and said no to foreign buyers.

I think they should help GM Ford and Chrysler if they need it... but make them pay back the money lent. Those companies need to have a solid plan for the future that corrects their big problems. The solution is likely to be painful. Part of it is dealing with the unions and their pension and health care plans.

Although... I do not like it. Letting them fail right now would pose too much at risk to our overall economy.

The Domestic manufacturers need to restructure and develop a new strategy.
__________________
chinaco is offline   Reply With Quote
Old 11-12-2008, 07:45 AM   #10
Recycles dryer sheets
gandalf42's Avatar
 
Join Date: Mar 2007
Location: Fort Collins, CO
Posts: 138
These are companies that have been run into the ground by poor management and agressive, short-sighted unions. A bailout should require clear plans for the future and, I believe, de-unionization with big changes in wages and benefits, dropping them to more in line with the rest of the country and more competitive to the world.

I doubt that a Democratic congress will take on the unions though.
__________________
"Being rich is having money; being wealthy is having time."

"It is only possible to live happily ever after on a day-to-day basis” Margaret Bonnano
gandalf42 is offline   Reply With Quote
Old 11-12-2008, 08:02 AM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2007
Posts: 5,072
The auto unions may be soon faced with a choice.

No job or benefits

or

Job with self-funded insurance and retirement benefits (possibly some company match).
__________________
chinaco is offline   Reply With Quote
Old 11-12-2008, 08:42 AM   #12
Thinks s/he gets paid by the post
 
Join Date: Jul 2002
Posts: 1,037
kcowan wrote: Corporate socialism seems to have been embraced as a government policy. It is very difficult to pick and choose.

And done under a Republican President .

But do to the potential impact on the economy, I think some limited bailout should be done for the automakers with conditions that the taxpayers stand a good chance of getting their money back. What concerns me is how do we return to a free market economy after this crisis?

BTW, any options should be completely declared value-less and the same with stock. Government can sell their equity stake once company more stable.

RE2Boys
__________________
RE2Boys is offline   Reply With Quote
Old 11-12-2008, 09:04 AM   #13
Moderator Emeritus
laurence's Avatar
 
Join Date: Feb 2005
Location: San Diego
Posts: 5,234
Couldn't the govt. help guide GM and Ford through bankruptcy and make sure it's not a total meltdown? They re-org, get out of toxic financial arrangements with dealers and unions and get back on their feet. It seems some sort of backing/guarantee by the govt. while curing the bad behavior would work out best in the long run. I mean, if GM is burning through 2 billion a month, a $50 billion bailout just puts off the inevitable. How many Chevy Volts do they really think they are going to sell?
__________________
laurence is offline   Reply With Quote
Old 11-12-2008, 09:07 AM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
FinanceDude's Avatar
 
Join Date: Aug 2006
Posts: 12,484
Quote:
Originally Posted by laurence View Post
Couldn't the govt. help guide GM and Ford through bankruptcy and make sure it's not a total meltdown? They re-org, get out of toxic financial arrangements with dealers and unions and get back on their feet. It seems some sort of backing/guarantee by the govt. while curing the bad behavior would work out best in the long run. I mean, if GM is burning through 2 billion a month, a $50 billion bailout just puts off the inevitable. How many Chevy Volts do they really think they are going to sell?
I believe some of the $820 billion bailout bill was for the automakers, maybe $25 billion or so? However, they want ANOTHER $50 billion or so. Reminds me of the airlines after 9/11. The wanted $25 billion, and got $5 billion.

The US govt has set a dangerous precedent with bailing out EVERYONE. How can they tell the domestic automakers NO??
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)


This Thread is USELESS without pics.........:)
FinanceDude is offline   Reply With Quote
Old 11-12-2008, 09:49 AM   #15
Full time employment: Posting here.
cardude's Avatar
 
Join Date: Feb 2006
Posts: 599
I think some of the bailout money should go to the auto dealers as well........

I read one report that 3 million jobs (adding suppliers, auto dealers, related industries) could be at risk if the domestic auto manufacturers fail, so obviously that can't happen. Plus, who would build all the tanks and aircraft if there is another World War?

I agree that propping up all three manufacturers and keeping the current business model doesn't make much sense. The industry has way too much capacity right now, so maybe the gummit could force the once big 3 to merge into one super (or at least semi) efficient government sponsored company that could start phasing out current technology and start to focus on alternative energy vehicles? I'm pretty sure Japan subsidizes their heavy manufacturers in some way.
__________________
cardude is offline   Reply With Quote
Old 11-12-2008, 10:04 AM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,250
I am against a bailout (but also was against one for the banks and AIG etc. etc.)....

We have a system in place to handle a company that is mismanaged and is 'burning' through cash at $3 to $10 billion a quarter... it is called

BANKRUPTCY....

It would be good for the industry to go through this system... and to show people that there IS risk in investing... and allowing companies to mortgage the future for their next quarter's profit...
__________________
Texas Proud is online now   Reply With Quote
Old 11-12-2008, 10:07 AM   #17
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,250
Quote:
Originally Posted by cardude View Post
I think some of the bailout money should go to the auto dealers as well........

I read one report that 3 million jobs (adding suppliers, auto dealers, related industries) could be at risk if the domestic auto manufacturers fail, so obviously that can't happen. Plus, who would build all the tanks and aircraft if there is another World War?

I agree that propping up all three manufacturers and keeping the current business model doesn't make much sense. The industry has way too much capacity right now, so maybe the gummit could force the once big 3 to merge into one super (or at least semi) efficient government sponsored company that could start phasing out current technology and start to focus on alternative energy vehicles? I'm pretty sure Japan subsidizes their heavy manufacturers in some way.
Again... a false description of what will happen... the companies will continue to exist... but with new owners... yes, there will be a number of people who lose their jobs, but the 'industry' will not go away... it will be much smaller, which it should be since they do not sell that many cars..

Remember... these companies were doing GREAT a few years back... (well, not Ford IIRC)...
__________________
Texas Proud is online now   Reply With Quote
Old 11-12-2008, 12:11 PM   #18
Thinks s/he gets paid by the post
 
Join Date: Jun 2005
Posts: 1,543
Quote:
Originally Posted by kcowan View Post
I say yes. Keep the people working. If we can bail out banks without forcing them to change their reckless business practices, why would we treat automakers any differently?

Corporate socialism seems to have been embraced as a government policy. It is very difficult to pick and choose.
at least the banks are changing business models and lending standards. Can't speak for GM management, but the UAW has always refused to give in to help save their employers
__________________
al_bundy is offline   Reply With Quote
Old 11-12-2008, 12:14 PM   #19
Thinks s/he gets paid by the post
OAG's Avatar
 
Join Date: Jun 2006
Location: Central, Ohio, USA
Posts: 2,598
Quote:
Originally Posted by gandalf42 View Post
These are companies that have been run into the ground by poor management and agressive, short-sighted unions. A bailout should require clear plans for the future and, I believe, de-unionization with big changes in wages and benefits, dropping them to more in line with the rest of the country and more competitive to the world.

I doubt that a Democratic congress will take on the unions though.
Not sure but I think Bankruptcy (chapter 11) is about the only way to shed the Union. But they are a great source of campaign funds for some politicians so we have to support the UNION.
__________________
Vietnam Veteran, CW4 USA, Retired 1979
OAG is offline   Reply With Quote
Old 11-12-2008, 12:57 PM   #20
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,255
I don't know what to think. I just can't get my head around the idea that one entity with $10 Trillion in debt is going to "bail out" another entity.

-ERD50

United States public debt - Wikipedia, the free encyclopedia
Quote:
On 30 September 2008, the total U.S. federal debt passed the $10 trillion mark for the first time[2], with about $32,895 per capita (that is, per U.S. resident). Of this amount, debt held by the public was roughly $5.3 trillion.[3] Adding unfunded Medicaid, Social Security, Medicare, veterans' pensions, and similar obligations, this figure rises to a total of $59.1 trillion, or $516,348 per household.[4]
__________________

__________________
ERD50 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
How to Bail Out Main Street.... audreyh1 FIRE and Money 75 10-16-2008 09:45 AM
New Bail out Poll :) chinaco FIRE and Money 2 10-01-2008 05:54 AM
Do you support the Paulson bail out? Canadian Grunt FIRE and Money 92 09-29-2008 04:40 PM
So Will the Gov't Bail ME Out... tgotch Other topics 2 05-22-2008 09:05 PM
Can I bail in July???? Cattusbabe Hi, I am... 21 04-28-2006 03:03 PM

 

 
All times are GMT -6. The time now is 08:44 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.