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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%
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Bail out U.S. automakers?
Old 11-11-2008, 08:58 PM   #1
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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?
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Old 11-11-2008, 09:03 PM   #2
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Bail everything out. Pass it on to future generations.
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Old 11-11-2008, 09:03 PM   #3
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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.
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Old 11-11-2008, 09:12 PM   #4
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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.
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Old 11-11-2008, 09:19 PM   #5
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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.
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Old 11-11-2008, 11:54 PM   #6
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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.
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Old 11-12-2008, 12:16 AM   #7
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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.
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Old 11-12-2008, 12:29 AM   #8
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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).
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Old 11-12-2008, 02:55 AM   #9
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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.
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Old 11-12-2008, 06:45 AM   #10
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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.
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Old 11-12-2008, 07:02 AM   #11
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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).
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Old 11-12-2008, 07:42 AM   #12
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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.

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Old 11-12-2008, 08:04 AM   #13
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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?
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Old 11-12-2008, 08:07 AM   #14
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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??
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Old 11-12-2008, 08:49 AM   #15
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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.
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Old 11-12-2008, 09:04 AM   #16
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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...
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Old 11-12-2008, 09:07 AM   #17
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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)...
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Old 11-12-2008, 11:11 AM   #18
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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
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Old 11-12-2008, 11:14 AM   #19
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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.
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Old 11-12-2008, 11:57 AM   #20
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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.

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United States public debt - Wikipedia, the free encyclopedia
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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]
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