TARP, the Sequel: Auto Bailout

The Detroit auto bailout is beginning to drearily resemble the drama that surrounded the enactment of TARP. Only, like any bad sequel, you just want it to be over since you have already figured out the end.

Republicans are standing on free market principles -- for the time being. Democrats are doing their best to make sure that all the blame gets placed on the departing Congress, and the administration just wants to clean off their desks, kick back and enjoy the holidays and then get out of town and wish the new team good luck. By next week a poorly conceived, probably unworkable plan will be in place and we can plan on starting the whole thing over sometime around the end of March. Only then the taxpayer will be in for billions and all sorts of illogical arguments will be advanced for throwing good money after bad.

Just about everyone that I respect seems to think that a real Chapter 11 is the way to go. Two articles caught my eye which make some excellent points as to why we need to head down that road.

David Leonhardt in the New York Times does a good job of parsing and debunking a lot of the myths about the supposed burden that labor costs place on the Detroit auto makers. After working through the numbers he makes a convincing case that if you reduced the labor cost of the Big Three to $45 an hour, roughly the cost of the competition, it would reduce the cost of producing a car by about $800. Not exactly a huge number and of even less importance when you consider that they already price their product about $2500 below the competition.

Mr. Leonhardt contends that the problem isn’t going to be solved by reducing costs since the real problem is that no one wants to buy their product. If that’s the case, and I suspect it is, then no amount of government money is going to solve this problem.

My favorite pundit on this subject is Holman Jenkins and he delivers another missive in the Wall Street Journal. His contention is and has been that the essential problem is that Detroit is hamstrung by Washington rules catering to constituent groups. His contention is that Ford (F) and GM are very good at building trucks and SUVs that consumers love and do a very credible job of building small, energy efficient cars overseas. What they can’t do well is deliver small cars with comparable value to their rivals in the U.S., thanks to high wages and government mandates.

All this is dragged down by federal fuel-economy mandates that require them to lose tens of billions making small cars Americans don’t want in high-cost UAW factories. Understand something: Ford and GM in Europe successfully sell cars that are small but not cheap. Europeans are willing to pay top dollar for a refined small car that gets excellent mileage because they face gasoline prices as high as $9 a gallon. Americans are not Europeans. In the U.S., except during bouts of high gas prices or in the grip of a Prius fad, the small cars that American consumers buy aren’t bought for high mileage, but for low sticker prices. And the Big Three, with their high labor costs, cannot deliver as much value in a cheap car as the transplants can.

Under a law of politics, such truths were unmentionable in last week’s televised circus because legislators are unwilling to do anything about them. They won’t repeal CAFE because they fear the greens. They won’t repeal CAFE’s “two fleets” rule (which effectively requires the Big Three to make small cars in domestic factories) because they fear the UAW. They won’t hike gas prices because they fear voters.

In the end, these two views seem to come to somewhat the same conclusion. Detroit doesn’t produce cars that the government would like them to manufacture and will at the same time be purchased. So we proceed down the road of a bailout that probably only means we have to add more zeros down the line. Congress continues to pretend that up is down and that their actions don’t have real world consequences.

Enjoy the TARP sequel. Or take a nap because you already know the outcome.

Comments

[Thadeus Tho...:]

Yes, the thing is that the "Big 3" have gotten more productivity out of workers in the last 7 to 10 years than any time in history. At a typical plant the total "cost" including retirees benefits as stated in the article, represent from 4.3% to 5.6% of the average vehicle. To put that into perspective, when Henry Ford got his assembly line operating at full speed for the Model T, employees pay amounted to about 15% of the cost of the vehicle. And that didn't include the other benefits that Henry Ford originally provided, such as housing, doctors, even schools for his workers. 1920's auto workers had a tough life. Today's auto worker is has reached the same level of toughness due to productivity demands. Less workers, more work to do on each vehicle assembled.
In addition, those people that say today's auto workers sit around and loaf need to visit a modern plant. A worker has to be in constant motion on the line. He/she has a series of numerous tasks to complete in usually 40 to 60 seconds until the next vehicle comes along. There are ergonomic and repetitive injuries galore in an auto factory. Personal safety has gotten better in modern times, but sadly, damage is done to a workers body in assembling so many vehicles each day. This is true at Ford, GM, Toyota, Honda, and more. Sports players get premium income for the hazards and possibility of injury in their field. So do construction workers. Shouldn't anyone who risks injury sometimes of lifetime extent be compensated for wear and tear on their own bodies?
People should be outraged at the GROSSLY overpaid financial gurus with derivatives, credit default swaps, and all kinds of unscrupulous investment banking "products" that got us here. Where are the regulations to put a stop to that? This auto thing is just a smoke screen to distract attention away from congress and George W throwing HUNDREDS of Billions at there financial friends. Look who is running the Treasury and Federal Reserve!
The auto industry as well as other large industry needs a constant supply of credit to fund inventory at dealers, assembly plants, etc. Add to that dried up consumer loans and what do you think will happen? This is going to get worse if you start letting large industry like the auto makers fail. Bankruptcy is not the solution here after the financial sector effectively tied the industries hands.

2008 Dec 11 08:16 AM

[eddie6442:]

Your friendly Congressmen are once again ignoring [defying] citizens wishes, and voting for another bottemless pit BAILOUT! Autos won't exceed TARP, at least not in 2009/10. But eventually the Business Model WILL FAIL @ GM & Chrysler...... UAW 1, TAXPAYERS 0

Congressmen talk about the "taxpayers" as though we are something important, or relevant to them. Kinda like every Pro sports franchise tells us , "You're the greatest FANS in the world", as we PAY, PAY, PAY!!!!!!!

Government BY THE PEOPLE, OF THE PEOPLE AND FOR THE PEOPLE........ What country are they referring to???????????

2008 Dec 11 08:28 AM

[Thadeus Tho...:]

......" I Americans are not Europeans. In the U.S., except during bouts of high gas prices or in the grip of a Prius fad, the small cars that American consumers buy aren’t bought for high mileage, but for low sticker prices. And the Big Three, with their high labor costs, cannot deliver as much value in a cheap car as the transplants can."

I have to disagree. The ACTUAL cost to a buyer for a Ford Focus, Chevrolet Cobalt or Aveo, or Dodge Caliber is no more than a Honda Civic. And the mileage is comparable. There are cars the Big 3 make that are already economic to buy and own. The media, advertising, and snobbish automotive journalists touted foreign cars appealing to peoples egos as "must have" objects to be owned if you are anyone at all! The "big 3" discovered the SUV market appealed to Americans egos also. Honda, Toyota, Nissan, even Porsche joined in. And, yes, those factories making those products are idled or reduced in output. It has been a domino effect of fuel prices, financial misdealings, and not unfair market conditions in tariffs for domestic manufacturers.
The UAW constantly gets a bad rap. They have done nothing but cooperate with GM, Ford, and Chrysler especially in the last 10 - 15 years. The Big 3 were well on their way to internal restructuring including $14/hr wages with no defined pension plan and reduced medical. Ford already is benefiting from some of that. GM and Chrysler were simply caught short because of yes, rising fuel costs ( and who let that happen at this time? ) and mostly the lack of regulation in the financial sectors that precipitated the credit freeze up. That the author, and others like him, continue to beat on the real American auto industry, it's workers, and it's unions is very sad. With out the influence of unions, do you really think many businesses would provide fair wages and benefits? Human greed always takes over and the workers suffers. Yes, just like politics there has always been exaggeration on both the side of business and unions. That's how it works in any two sided situation. One other factor that has entered into this and has not been recently mentioned, is the influx of illegal aliens and how that has contributed to driving down a fair days pay with a decent standard of living. So then what? We should all jump in and join third world countries in that standard of living? How many journalists will have jobs in that economy and for what kind of pay?

2008 Dec 11 08:39 AM

[Mike InMich:]

The following U.S. government policies, many of them having popular support, hurt the big three significantly relative to the foreign transplants:
1. Uneven union laws across states:
a. The 1935 U.S. government Wagner Act granted the right of workers in the private sector to organize labor unions and take place in strikes. What this effectively meant was the labor unions were allowed to seize the plant and prevent its use until they got what they wanted. This created the ridiculous result in the US that workers are paid in proportion to the pain they can inflict by shutting things down. Trains, docks, garbage collectors, police, … get high pay. People in low capital or less critical to safety related industries like restaurants and retail get paid low paid. The relationship of pay to skill, work ethic, hazards goes away. Soon after the Wagner act the UAW took over the auto industry; GM and Chrysler in 1937; Ford in 1941. With no foreign competition the UAW monopoly flourished for about 30 years.
b. The 1947 U.S. government Taft–Hartley Act tried to reign in the unions after a series of post-war strikes. While some provisions were national, the states were allowed to pass "right-to-work laws" that outlawed union shops. Such shops require workers to join the union and pay dues. Said state laws are serious impediments to union organization and viability because few people want to pay dues if not required.
c. The vast majority of foreign owned plants are in right-to-work states providing huge advantages in labor costs and productivity relative to the big three.
d. The big three would find it impossible to change the state laws where they are located due to union dominance of state governments. If they built in the South they have to accept the UAW because they would strike back in Michigan.
e. No other country has this crazy system to my knowledge.

2. Promoted defined benefit packages and kept them in the company name. Did you ever consider how totally stupid it is to pin an employee retirement package, meant to last about 50-60 years from first hire until death, to the viability of their company? The top 10 companies in 1950 were very different than in 2000, with the railroads taking a big dive since then. And in 2020 it will be totally different again. Defined benefit packages were a bad idea, promoted by the US government till this day, and the big three are paying the price. If a company is in decline, due to the other items mentioned here, their retiree pool grows relative to gross income and number of active workers. Costs rise and competitiveness goes down, sales decline in a vicious spiral. Note also that while someday the transplants will pay pensions here in the US, the bulk of their corporate salary people (engineers for instance) back home get pensions from the government. Again, a totally crazy concept promoted by the Feds with widespread public support. And again, affecting the big three orders of magnitude harder than the foreign auto companies.

In most western nations, if there is a defined benefit program, it is paid into a government fund and is divorced from the company. If the company fails, people don’t lose their pension. In the U.S., the Pension Benefit Guarantee Company, a quasi-government / private company (like Fanny-Mae) supposedly fills in when the company goes belly up. But it is really a welfare program, with maximum limits far lower than promised pensions for many salaried workers. The airline pilots at United Air Lines, the current poster child of how wonderful chapter 11 will be for the big three, got screwed out of a large percentage of their “guaranteed” pension. Apparently the courts have ruled bond holders have first dibs on people’s defined benefits supposedly “held in trust”. What a travesty; only in the worse run country in the western world. These plans were in lieu of 401k plans. They are not deferred compensation as some say. There is a pot of gold with the employees names on it.

See the PBS Frontline episode here for what happened at United.

www.pbs.org/wgbh/pages.../

All of you with defined benefit plans are in jeopardy. The Feds can fix these laws by simply making pension funding shortfalls first in line for bankruptcy allocations. Put the vulture chapter 11 lawyers and banks second in line after peoples pensions (which are essentially saving accounts).

3. No national healthcare. This is killing all US industry because we are competing with foreign companies with virtually no health care costs at home. Again, for transplants, the tens of thousands of such people at corporate headquarters are not in the U.S., but back home with free insurance. I’m basically a free market person but U.S. healthcare is so screwed up, and the employer based care creating such a competitive disadvantage, I give up – company paid healthcare must go and something needs to replace it. Watch for a future blog entry on that topic. Even though the transplants provide health care for their workers this is again an order of magnitude bigger problem for the big three because: 1) Corporate staff is back home with free health care, transplant workers are younger and therefore healthier, big three also pays health insurance for a million retirees.

4. Blunt instrument CAFÉ laws. The original purpose of CAFE was to reduce depletion of finite fossil fuel supplies and/or to reduce foreign imports. The Global Warming theory did not exist when CAFE was instituted but CAFÉ supports this as well. These same goals are achieved in almost all other Western counties via very high (on order of $3-$6 per gallon) federal gasoline taxes. That is the primary reason the cars are smaller in Europe and Japan. Our cowardly government did not want to be associated with taxes so instead wrote CAFE laws so the big three could do the taxing. I would argue that such laws fell, and continue to fall, disproportionately on the big three. The laws regulate an average fuel economy for a fleet produced by a given company. This forced the big three to abandon the cars they made money on, and build cars they don’t make money on, usually at a loss. The economics are simple: it takes as many overpaid UAW workers to put a door on a $14000 focus as a $30000 F150. So the bigger and more expensive the car the better the big three can compete. The above mentioned economic disadvantages of the big three are exaggerated on small, lower cost cars. And yes, people expect small cars to cost less. Screwed again by the feds! Ford, for instance, has trucks providing over 50% of sales. A rapidly increasing percentage of these trucks are used in the trades; try carrying a load of bricks or even a saddle in a Focus. Why does the Ford commercial truck have to go into a CAFÉ formula when a Mack Truck or Caterpillar dump truck does not? In the rest of the world, where gas taxes are used to reduce fossil fuel consumption, each company is allowed to compete in the part of the vehicle market where they do best. The customer takes the cost of gasoline with tax into consideration when he decides what size and features he needs, and then shops the brands that play in that market. With CAFÉ, the big three were forced at gunpoint to build and sell small cars at a loss just so they could meet the consumer demand for larger cars and trucks with their greater utility (carried more people for instance). The Japanese entered the market in the small car nitch where their low cost and experience from the sane countries with gas taxes gave them the greatest advantage. The Japanese became associated with small cars and better gas mileage, although for the same size car and performance there was no difference on average.
It it were one or two of these items the big three might have competed better, but between the four the cost disadvantage in thousands per car and the hill too hard to climb. People seem to think Americans are superman, blessed with privilege, and the big three should have been able to overcome these odds against our oriental upstarts. In my opinion the big three did an amazing job lasting this long, as they are only mere mortals; doing the best they can given the stacked deck against them.
In the end it is not the above items that are killing the big three right now. These items and the recent gas spike put the big three in a weak position, but they were recovering with the help of the UAW. Cars sell on credit, and there is no money available. Houses are also credit sensitive, but the housing industry doesn’t have the large capital equipment (factories, labs, buildings) and huge staffs (engineers…) to keep feeding when there is a drop in sales. And the housing industry is dominated by illegal alien workers which they just let go.
This credit crisis in not of the big three’s making by any stretch of the imagination. The most likely biggest wrongdoers in the congress and the federal bureaucracy, will keep their jobs and pensions. The second biggest wrongdoers in the financial sector, are getting a trillion or so dollars of bailouts.
The big three are asking for a 5% loan and all this hate comes out in the press and the web. The gap between perception and reality is staggering.

2008 Dec 11 09:06 AM

[sumosama:]

VERY well done!!!


On Dec 11 09:06 AM Mike_I_N_Mich wrote:

>
> The following U.S. government policies, many of them having popular
> support, hurt the big three significantly relative to the foreign
> transplants:
> 1. Uneven union laws across states:
> a. The 1935 U.S. government Wagner Act granted the right of workers
> in the private sector to organize labor unions and take place in
> strikes. What this effectively meant was the labor unions were allowed
> to seize the plant and prevent its use until they got what they wanted.
> This created the ridiculous result in the US that workers are paid
> in proportion to the pain they can inflict by shutting things down.
> Trains, docks, garbage collectors, police, … get high pay. People
> in low capital or less critical to safety related industries like
> restaurants and retail get paid low paid. The relationship of pay
> to skill, work ethic, hazards goes away. Soon after the Wagner act
> the UAW took over the auto industry; GM and Chrysler in 1937; Ford
> in 1941. With no foreign competition the UAW monopoly flourished
> for about 30 years.
> b. The 1947 U.S. government Taft–Hartley Act tried to reign in the
> unions after a series of post-war strikes. While some provisions
> were national, the states were allowed to pass "right-to-work laws"
> that outlawed union shops. Such shops require workers to join the
> union and pay dues. Said state laws are serious impediments to union
> organization and viability because few people want to pay dues if
> not required.
> c. The vast majority of foreign owned plants are in right-to-work
> states providing huge advantages in labor costs and productivity
> relative to the big three.
> d. The big three would find it impossible to change the state laws
> where they are located due to union dominance of state governments.
> If they built in the South they have to accept the UAW because they
> would strike back in Michigan.
> e. No other country has this crazy system to my knowledge.
>
> 2. Promoted defined benefit packages and kept them in the company
> name. Did you ever consider how totally stupid it is to pin an employee
> retirement package, meant to last about 50-60 years from first hire
> until death, to the viability of their company? The top 10 companies
> in 1950 were very different than in 2000, with the railroads taking
> a big dive since then. And in 2020 it will be totally different again.
> Defined benefit packages were a bad idea, promoted by the US government
> till this day, and the big three are paying the price. If a company
> is in decline, due to the other items mentioned here, their retiree
> pool grows relative to gross income and number of active workers.
> Costs rise and competitiveness goes down, sales decline in a vicious
> spiral. Note also that while someday the transplants will pay pensions
> here in the US, the bulk of their corporate salary people (engineers
> for instance) back home get pensions from the government. Again,
> a totally crazy concept promoted by the Feds with widespread public
> support. And again, affecting the big three orders of magnitude harder
> than the foreign auto companies.
>
> In most western nations, if there is a defined benefit program, it
> is paid into a government fund and is divorced from the company.
> If the company fails, people don’t lose their pension. In the U.S.,
> the Pension Benefit Guarantee Company, a quasi-government / private
> company (like Fanny-Mae) supposedly fills in when the company goes
> belly up. But it is really a welfare program, with maximum limits
> far lower than promised pensions for many salaried workers. The airline
> pilots at United Air Lines, the current poster child of how wonderful
> chapter 11 will be for the big three, got screwed out of a large
> percentage of their “guaranteed” pension. Apparently the courts have
> ruled bond holders have first dibs on people’s defined benefits supposedly
> “held in trust”. What a travesty; only in the worse run country in
> the western world. These plans were in lieu of 401k plans. They are
> not deferred compensation as some say. There is a pot of gold with
> the employees names on it.
>
> See the PBS Frontline episode here for what happened at United.
>
>
> www.pbs.org/wgbh/pages.../
>
> All of you with defined benefit plans are in jeopardy. The Feds can
> fix these laws by simply making pension funding shortfalls first
> in line for bankruptcy allocations. Put the vulture chapter 11 lawyers
> and banks second in line after peoples pensions (which are essentially
> saving accounts).
>
> 3. No national healthcare. This is killing all US industry because
> we are competing with foreign companies with virtually no health
> care costs at home. Again, for transplants, the tens of thousands
> of such people at corporate headquarters are not in the U.S., but
> back home with free insurance. I’m basically a free market person
> but U.S. healthcare is so screwed up, and the employer based care
> creating such a competitive disadvantage, I give up – company paid
> healthcare must go and something needs to replace it. Watch for a
> future blog entry on that topic. Even though the transplants provide
> health care for their workers this is again an order of magnitude
> bigger problem for the big three because: 1) Corporate staff is back
> home with free health care, transplant workers are younger and therefore
> healthier, big three also pays health insurance for a million retirees.
>
>
> 4. Blunt instrument CAFÉ laws. The original purpose of CAFE was to
> reduce depletion of finite fossil fuel supplies and/or to reduce
> foreign imports. The Global Warming theory did not exist when CAFE
> was instituted but CAFÉ supports this as well. These same goals are
> achieved in almost all other Western counties via very high (on order
> of $3-$6 per gallon) federal gasoline taxes. That is the primary
> reason the cars are smaller in Europe and Japan. Our cowardly government
> did not want to be associated with taxes so instead wrote CAFE laws
> so the big three could do the taxing. I would argue that such laws
> fell, and continue to fall, disproportionately on the big three.
> The laws regulate an average fuel economy for a fleet produced by
> a given company. This forced the big three to abandon the cars they
> made money on, and build cars they don’t make money on, usually at
> a loss. The economics are simple: it takes as many overpaid UAW workers
> to put a door on a $14000 focus as a $30000 F150. So the bigger and
> more expensive the car the better the big three can compete. The
> above mentioned economic disadvantages of the big three are exaggerated
> on small, lower cost cars. And yes, people expect small cars to cost
> less. Screwed again by the feds! Ford, for instance, has trucks providing
> over 50% of sales. A rapidly increasing percentage of these trucks
> are used in the trades; try carrying a load of bricks or even a saddle
> in a Focus. Why does the Ford commercial truck have to go into a
> CAFÉ formula when a Mack Truck or Caterpillar dump truck does not?
> In the rest of the world, where gas taxes are used to reduce fossil
> fuel consumption, each company is allowed to compete in the part
> of the vehicle market where they do best. The customer takes the
> cost of gasoline with tax into consideration when he decides what
> size and features he needs, and then shops the brands that play in
> that market. With CAFÉ, the big three were forced at gunpoint to
> build and sell small cars at a loss just so they could meet the consumer
> demand for larger cars and trucks with their greater utility (carried
> more people for instance). The Japanese entered the market in the
> small car nitch where their low cost and experience from the sane
> countries with gas taxes gave them the greatest advantage. The Japanese
> became associated with small cars and better gas mileage, although
> for the same size car and performance there was no difference on
> average.
> It it were one or two of these items the big three might have competed
> better, but between the four the cost disadvantage in thousands per
> car and the hill too hard to climb. People seem to think Americans
> are superman, blessed with privilege, and the big three should have
> been able to overcome these odds against our oriental upstarts. In
> my opinion the big three did an amazing job lasting this long, as
> they are only mere mortals; doing the best they can given the stacked
> deck against them.
> In the end it is not the above items that are killing the big three
> right now. These items and the recent gas spike put the big three
> in a weak position, but they were recovering with the help of the
> UAW. Cars sell on credit, and there is no money available. Houses
> are also credit sensitive, but the housing industry doesn’t have
> the large capital equipment (factories, labs, buildings) and huge
> staffs (engineers…) to keep feeding when there is a drop in sales.
> And the housing industry is dominated by illegal alien workers which
> they just let go.
> This credit crisis in not of the big three’s making by any stretch
> of the imagination. The most likely biggest wrongdoers in the congress
> and the federal bureaucracy, will keep their jobs and pensions. The
> second biggest wrongdoers in the financial sector, are getting a
> trillion or so dollars of bailouts.
> The big three are asking for a 5% loan and all this hate comes out
> in the press and the web. The gap between perception and reality
> is staggering.

2008 Dec 11 11:07 AM

[dw57:]

not sure why there are claims that its the domestics are trying to sell cars nobody wants to buy when in the top 20 vehicles in sales, the top 2 are domestics. and they aren't the only ones in that list. the other is that only the domestics are having sales problems. nope, they all are as shown by the pictures of miles of parked vehicles at the ports, and more are still coming needing more places to be parked

2008 Dec 11 11:09 AM

[Jason Rines...:]

You could make the same "danger" argument about trash collectors. Truth is, trash collecting is a profitable business which the market sets the price of labor for and the government has little intervention into this business, unlike the automotive market which has much more intervention. Government meddling is much of the problem as the article states. Government should act to what it's true role should always be: A security guard against foreign and domestic enemies of the public, PERIOD. What we have now in America is a Plutocracy controlled by Central Banking and corrupt politicians directing profiting by there market meddling.


On Dec 11 08:16 AM Thadeus Thornton III wrote:

> Yes, the thing is that the "Big 3" have gotten more productivity
> out of workers in the last 7 to 10 years than any time in history.
> At a typical plant the total "cost" including retirees benefits as
> stated in the article, represent from 4.3% to 5.6% of the average
> vehicle. To put that into perspective, when Henry Ford got his assembly
> line operating at full speed for the Model T, employees pay amounted
> to about 15% of the cost of the vehicle. And that didn't include
> the other benefits that Henry Ford originally provided, such as housing,
> doctors, even schools for his workers. 1920's auto workers had a
> tough life. Today's auto worker is has reached the same level of
> toughness due to productivity demands. Less workers, more work to
> do on each vehicle assembled.
> In addition, those people that say today's auto workers sit around
> and loaf need to visit a modern plant. A worker has to be in constant
> motion on the line. He/she has a series of numerous tasks to complete
> in usually 40 to 60 seconds until the next vehicle comes along. There
> are ergonomic and repetitive injuries galore in an auto factory.
> Personal safety has gotten better in modern times, but sadly, damage
> is done to a workers body in assembling so many vehicles each day.
> This is true at Ford, GM, Toyota, Honda, and more. Sports players
> get premium income for the hazards and possibility of injury in their
> field. So do construction workers. Shouldn't anyone who risks injury
> sometimes of lifetime extent be compensated for wear and tear on
> their own bodies?
> People should be outraged at the GROSSLY overpaid financial gurus
> with derivatives, credit default swaps, and all kinds of unscrupulous
> investment banking "products" that got us here. Where are the regulations
> to put a stop to that? This auto thing is just a smoke screen to
> distract attention away from congress and George W throwing HUNDREDS
> of Billions at there financial friends. Look who is running the Treasury
> and Federal Reserve!
> The auto industry as well as other large industry needs a constant
> supply of credit to fund inventory at dealers, assembly plants, etc.
> Add to that dried up consumer loans and what do you think will happen?
> This is going to get worse if you start letting large industry like
> the auto makers fail. Bankruptcy is not the solution here after the
> financial sector effectively tied the industries hands.

2008 Dec 11 11:29 AM

[WhynoT:]

If I can summarize the comments on this board.

It's the governments fault the big 3 are failing.

Let's see if we can form a trade off of probable outcomes:
1. Government loans/bailsout/etc the big 3 gaining even more control and therefore worsening the outlook for all.

2. Government does not loan/bailout/etc the big 3 letting them fall into BK.

Conclusion: Short the big 3.

2008 Dec 11 11:51 AM

[WhynoT:]

The socialist esque please for the UAW workers "conditions" is quite laughable...

Is a line factory worker really comparable to a "financial guru" to use previous posters words?

You can pile on all of the hate for the over-leveraged mess most banks have gotten themselves into but the comparison between someone who probably at a minimum has some form of graduate degree to a high school dropout factory worker is hilarious. Oh and the sports comparison is equally hilarious, the sports player has.... TALENT whereas a factory worker is simply waiting to be replaced by a robotic arm.

2008 Dec 11 11:57 AM

[guiron:]

"Is a line factory worker really comparable to a "financial guru" to use previous posters words?"

At least a factory worker does an honest day's work.

But neither are disposable to the economy as a whole. We could have let the banks fail. There are a lot of "financial gurus" who'd be put out of work, and I hear a lot of them are looking for other careers today, but it's the free market, eh?

2008 Dec 11 01:13 PM

[Socialism c...:]

"Republicans are standing on free market principles -- for the time being."

Try, "freedom principles"...but sadly, they are actually not making a real stand, or we wouldn't have had TARP, much less this auto bailout coming soon.

"Democrats are doing their best to make sure that all the blame gets placed on the departing Congress"

Oh really? The "departing Congress" is already controlled by Democrats. Both houses. Care to explain how the blame will be any different?

"...and the administration just wants to clean off their desks, kick back and enjoy the holidays and then get out of town and wish the new team good luck."

I certainly don't agree with WHAT the executive branch is doing...but to say they're just sitting back is a LIE...they are being very active on this...they're just sadly making the WRONG MOVES!!!

2008 Dec 11 01:24 PM

[Thadeus Tho...:]

"Whynot"
What? I never compared an auto worker ( many who DO have BAs, some Masters, and other college education) to an arrogant, unscrupulous, pompous financial type. As for talent, many have other talents, but choose to work as an auto worker because of family situations and the pay/benefits used to be good. You confuse choice of employment with real human values and accomplishment. Your kind of hate and jealousy is evident. You lack of truth and understanding is also. Also, they perhaps wished to stay in a home town rather than be among the sleazy, money mongers in the elite North East or worse.

" You can pile on all of the hate for the over-leveraged mess most banks have gotten themselves into but the comparison between someone who probably at a minimum has some form of graduate degree to a high school dropout factory worker is hilarious. Oh and the sports comparison is equally hilarious, the sports player has.... TALENT whereas a factory worker is simply waiting to be replaced by a robotic arm."

2008 Dec 11 03:06 PM

[Thadeus Tho...:]

Oh, and by the way. Be careful of the comments you make about the credentials and the authority of "Alpha" journalists. I believe I am not being "stalked" and receiving "pot shots" from "Alpha " ringers because I happened to notice "Alpha" flooding Yahoo Finance with a lot of drivel about the LOAN the Big 3 are requesting.

2008 Dec 11 03:16 PM

[sumosama:]

so I am confused...

"thanks to high wages " ...so are they too high or not?

I do not believe that there is a $2500 difference in comparable smaller autos. Besides, if there was, let's chop that last "$800" and see what happens.

2008 Dec 12 04:20 PM