Lining Up on Both Sides of Auto Bailout

People are neatly lining up on either side of this auto industry bailout subject, but most of them are ducking the core issues. If you’re pro or you’re con, here are some of the questions you have to answer to be credible.

• Pro. If you’re in favor of a bailout, you need to explain how the buck – literally – stops here. Why will capping salaries, for example, change diddly with respect to the U.S. auto companies’ competitiveness? Or are you merely arguing that this was a perfect storm – economic downturn, super-spike in oil, etc. – and so we should bail the auto companies out? (In which case, what about the airlines? Oh wait, they haven’t all failed yet – so much for that argument.)
• Con. If you’re in favor of letting the auto companies go bankrupt, you need to explain why we’ll be right this time about the systemic consequences when we have been wrong most of the way to this point about every other company, especially Lehman. There is no doubt that the auto companies need to be restructured, consolidated, and generally folded, spindled, and mutilated, but do we know enough about the implications to let it happen during the worst downturn since the Depression?

GM, for its part, isn’t taking this lying down. It has posted a video on YouTube explaining – okay, propagandizing – the implications of letting it die. Watch it to see how the straight-to-consumer “Save us!” game is played.

Comments

[Mister Jimmy:]

GM sells 6 of the top 20 selling vehicles in the U.S. Most are gas-guzzling trucks you say? Well, aside from delivering pizzas, most ranchers, tradesman, farmers, and contractors need a truck to earn a living, and GM (and Ford) trucks are the industry leaders.

In terms of alternative propulsion systems, GM has a fleet of hydrogen fuel cell cars running nationwide in its Project Driveway, has compressed natural gas fleet vehicles on the road, has invested in bio-fuel development, and will have an electric car ready for the public in less than two years.

Independent quality ratings are up across the board for GM and, in particular, the new Chevy Malibu beats Camry and Accord, according to J.D. Powers and many others. A Honda Ridgeline pick-up versus the Chevy Sliverado? Oh, please. Do some homework.

GM and the UAW have agreed to a second wage tier and reduction in company health care obligations that will save GM billions by 2010 so, yes, the Wall Street engineered credit crunch is what has de-railed things for Detroit.

2008 Nov 17 11:36 AM

[NightBengal:]

... so what is YOUR opinion, Paul? Would you spend even more billions we don't have to bail these companies out? Or would you let them falter during the worst economic downturn since the depression, as most folks are calling it?

This all despite the fact that nobody seems to want to admit the following: If GM really does falter, they are not going to just fall into a black hole and vanish. SOMEONE will come along and buy factories, patents, concepts, etc. If they go into Chapter 11 instead of Chapter 7, then it will result in a lot less loss than everyone is predicting, which is almost always absolute-worst-case roll-over-and-die(-lik... scenario.

Honestly, this situation is not black and white, no matter how you look at it.

2008 Nov 17 11:37 AM

[NightBengal:]

... not sure what happened to that comment, but minus the hyphens (which apparently confused the posting system), it was meant to say, "absolute worst case roll over and die (like an SUV) scenario."

Will it be painful? Yes, certainly. I sincerely doubt it will toss 100% of everyone onto the street with nothing, though.

2008 Nov 17 11:40 AM

[AmericanVOR:]

You call the video a "game". What you don't do is dispute what it is saying. This is far bigger than many give it credit for.

2008 Nov 17 11:42 AM

[Smarty_Pants:]

"SOMEONE will come along and buy factories, patents, concepts, etc." - NightBengal

I agree with this 100%. Let Toyota or Honda buy them at firesale prices and start producing with management and cost structures that are profitable. It's apparent that the management of the Big 3 over the last 20 years has not done much in the way of 'value adding'.

2008 Nov 17 11:53 AM

[10Q Detective:]

If Ford runs out of cash, who will foot the bill for billions owed to the new retiree health trust, including $6 billion in principal amounts of convertible notes? – American taxpayers!!!!!!!!!!

blogs.bnet.com/secdocu...

2008 Nov 17 12:26 PM

[Outside Obs...:]

Is this a ransom note or a management apology in waiting...?

2008 Nov 17 01:52 PM

[MonkDonk:]

I was in South Beach last weekend and there was a Ford Auto Parts convention or meeting going on there. This was at a Loew's hotel which is considered a resort hotel, where the average price per night is around $300. Now who wants to explain to me why we shouldn't make the big wigs in these companies pare down and have their damn conventions at the Holiday Inn? Why should we bail out the executives? I feel bad for all the assembly line guys but I'm not happy about your bosses sipping Mojitos and getting massages and pedicures in the Miami sunshine while their employees are chewing their nails over potential pink slips. BS. BS.

2008 Nov 17 04:04 PM