Automaker Bailout Fails: This Is Not Good 33 comments
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The WSJ reports that talks to save the automakers have broken down in the Senate, and that there will be no bailout.
Once again, Congressional Republicans have killed an intiative backed by both the White House and the Democrats -- and I can't imagine that the stock market will take any more kindly to this news than it did to the news that the House Republicans had voted down the first attempt at TARP.
The problem here is that there really doesn't seem to be a Plan B: there isn't any indication that the government is even willing to provide debtor-in-possession financing within Chapter 11. And if such financing is not forthcoming, the worst-case scenario is looking increasingly probable: an outright Chapter 7 liquidation, which would cost millions of jobs and would probably have a devastating effect -- thanks to the inevitable supplier bankruptcies -- on the big Japanese automakers with plants in the South. In other words, everybody loses.
Can Congress really be so pig-headed as to let this happen? Evidently, yes. Expect serious excoriation from the media: I think that most journalists have a gut-level understanding that Detroit's massive adspend was one of the few things keeping them in a job these days. And maybe in coming days some kind of Chapter 11 solution might be cobbled together, or at least a package which helps out the suppliers and the remaining US carmakers (including Toyota, Honda, and other foreign firms with a US presence).
Up until recently, bankers have been Villain Number One in the story of this crisis. But given Washington's astonishing ability to screw up just about everything it's attempted to make things better, maybe politicians will find their way back to the top of the list. Certainly, this is not representative democracy's finest hour.
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This article has 33 comments:
If they had all taken pay cuts of say 30% (top to bottom except maybe the janitors and stuff) they'd probably have got that 35 billion they initially requested.
What the labor unions fail to realize is that they are going to get a hair cut one way or another. If they force their employers into chapter 7 bankrupcy then they have no jobs. No jobs then you house is worthless for the time being. How will you pay for that food?
If they take the paycut they have less income this is true. But at least they don't have to sell their house to find work in Arizona or something dreadful like that. Time will be tough but they can all slowly migrate away from that area of the country instead of all at once.
Besides $40 and hour in total compensation doesn't sound to bad to me. I think most people are against this bail out and we all sick and tired of watching those who squander the things they are given and then ask us to pay the price again and again an again and again and a.........
"The bill failed after talks broke down over the refusal of the United Auto Workers union to meet Republican demands for aggressive wage reductions."
After you do this, what other industries would you consider? They're all important. Tech? Aerospace? Hollywood? Would we want a czar for each of those industries, and the federal government to have a cut?
Is that really the kind of country we want? Sounds a lot like the USSR with its 5 year plans. They ended up with grey buildings, empty shelves, bad shoes, bad cars.
As painful as it is, competition is the system that got us where we are, and really doesn't it kind of emulate how nature works? Viewed that way, these efforts by congress and the unions actually go against nature. They are unnatural and artificial and thus cannot last.
So you're proposing that we spend money on companies that can't even sustain themselves for the next few months in order to preserve your "adspend". I presume you also support another "stimulus" where we print money and mail cash to folks in the hopes they spend it. Is that really the most we can aspire to from our economy and our citizens?
No! The answer is no. We as a nation have done better than that pathetic vision for most of our history and I think we have it within ourselves to excel again - but it is not helpful to have congress brainwash us into a self-pitying stupor.
What kind of lesson would a bailout like this send to our children, not to mention some of the measures being considered and taken regarding mortgages. What's the lesson: be a failing company, or don't pay your bills, or buy at a bad time and then want out - no problem, the government will print money or take other people's money to prop you up! If that's the case, why bother to strive at all?
After about 2 generations of training our children to think like that we really WOULD be in trouble.
I do not think that government is pig headed. I think they have a hard burden to carry, nobody wants them to intervene, but now everybody is blaming them for doing nothing, other are telling them to keep on doing nothing.
Fact is that the US has been screwing up many industries in the recent years, and (tries to) keep on forcing their system onto the rest of the world.
Surely the current situation id bad. In the forum I with my very socialist point of view am getting around 50% + votes, which is fine. This does not mean that all US are little capitalist that are screwing up the world with their system (democracy ?? haha )
As for many things in live (work, marriage, friends) one always needs a form of compromise to make things work - live and let live ( the US version is, lets live and screw everybody else).
I hope that due to the fact, that nobody trust anybody after many years of brutal capitalism, the people will get back down to solid ground.
Conclusion: Giving them money is probably not the best solution, not giving them is probably also not the best solution.
Jump over your shadow and find a median way - e.g. give them 15 bill to give the rest of the industry at least a few month to get things settled out before shutting them down.
I fully agree with you. I am from Austria/Vienna where we consider ourselfs to be very social.
But don't mistake us for being stupid. We also know about this problem, and the system has adapted to it in a good way. Read the article about compromises above.
e.g. We have lower social insurance paying from GDP than the states, even though everybody is insured !!!! with higher live expectancy !!!
We heard, somebody once said to Schwarzennegger that he does not want to pay medical for some bum. Arnie said that the US constitution guarantees that everybody will receive medical treatment in the US.
We all work hard here, cause being social does not mean that somebody that is getting social wellfare lives good, it is the bottom baseline, nobody wants it. We also have 50% max Tax, so that the system stays in balance. I am sure that people that work hard don't want to pay tax, but I am also sure that normal people also have to work hard.
The problem with your system is, that at some people greed starts to grow over common knowledge.
Find a good way between both systems, it is the hard way, and not the way I encountered people in the US industry. US is NOT the high productive, high quality country you are always being told, which does not mean that it is bad.
GOOD JOB SENATE REPUBLICANS- you've called out the UAW clowns.
If the markets were intelligent, they would be rallying on the news.
The communist command economy.
I say good on the Republicans.
Is there any else who believes in a free market?
I do want the big three to stay in business, yes. However, if the UAW union demands that UAW workers maintain a far higher standard of living than other tax payers, tax payers who they want to bail them out, then shut the doors and close them down. Why should the poorer tax payers, which is the majority of tax payers doing equivalent work, pay for the wealthy, small minority of UAW tax payers, to insure that they have far more money, wealth and gravy benifits than the majority of tax payers, who they are asking to bail them out, have?
Thank you US Senate for putting the poorer than a UAW worker tax payer first. Good job Senate. If the UAW worker can maintain his higher than the rest of the US tax payer life style through capitalist free enterprise then great. The heck with the plan of using poorer than a UAW worker's American tax dollars to subsidise a UAW finacial life style that is far higher than the life style of the rest of the majority of US tax payers, those doing equvalent work, make.
Thanks!
Steve
Let me move to detroit,I will take a assembly job for 18 or 20 bucks a hour,And will gladly pay for my share of the benefits,
Absolutely right on. These 3 companies have had 30 years to get it right and can't seem to do it. as painful as it will be for the next few years, the bailout should not pass. Let the chips fall and perhaps Yankee ingenuity will create other niche markets from what rises from the ashes...
On Dec 12 04:03 AM dg314 wrote:
> I totally disagree. America is supposed to be about Yankee ingenuity,
> creativity, and hard work. It is not supposed to about taking charity,
> about propping up the poorest performing.
>
> After you do this, what other industries would you consider? They're
> all important. Tech? Aerospace? Hollywood? Would we want a czar
> for each of those industries, and the federal government to have
> a cut?
>
> Is that really the kind of country we want? Sounds a lot like the
> USSR with its 5 year plans. They ended up with grey buildings, empty
> shelves, bad shoes, bad cars.
>
> As painful as it is, competition is the system that got us where
> we are, and really doesn't it kind of emulate how nature works?
> Viewed that way, these efforts by congress and the unions actually
> go against nature. They are unnatural and artificial and thus cannot
> last.
>
> So you're proposing that we spend money on companies that can't even
> sustain themselves for the next few months in order to preserve your
> "adspend". I presume you also support another "stimulus" where we
> print money and mail cash to folks in the hopes they spend it. Is
> that really the most we can aspire to from our economy and our citizens?
>
>
> No! The answer is no. We as a nation have done better than that
> pathetic vision for most of our history and I think we have it within
> ourselves to excel again - but it is not helpful to have congress
> brainwash us into a self-pitying stupor.
>
> What kind of lesson would a bailout like this send to our children,
> not to mention some of the measures being considered and taken regarding
> mortgages. What's the lesson: be a failing company, or don't pay
> your bills, or buy at a bad time and then want out - no problem,
> the government will print money or take other people's money to prop
> you up! If that's the case, why bother to strive at all?
>
> After about 2 generations of training our children to think like
> that we really WOULD be in trouble.
It isn't the wages of the blue collar worker that is the root of this, and besides, if 3 million people loose their job, I doubt if your job will survive in the end, or at least at the wage you currently make... notice I didn't say "earn" The less people makle, the less taxes paid, the less you have in the form of "everything" Police, fire, roads, schools, etc. not to mention less money spent on non auto related products! The ENTIRE global economy will suffer!, wage cut or not!
And lets examine these Senators who are critizising the Auto industry..
Do they fly coach commercial planes? Do they get you (taxpayer) to approve their spending before they spend 100 million on, say war in Iraq? Do they ask you, the tax payer, to approve their budget BEFORE we give them the tax money to spend? Do they cut their wages to help the national deficit? Do they offer to work for this contry for $1.00 a year because they have allow us to be Trillions in debt, in Ressecion, to allow the loss of manufacturing jobs that is the heart of an industrialized country? This is like calling the kettle black.
On Dec 12 03:50 AM johngonole wrote:
> I for one am very glad that the 15 billion dollar plan failed. This
> was only enough cash to get them by for a few more months. The Unions
> are too blame thats all there is to it. Do they want their jobs or
> not? It going to be really hard to feel sorry for all those poor
> union workers who like a mindless mob can't see they are cutting
> off their noses in spite of their faces.
>
> If they had all taken pay cuts of say 30% (top to bottom except maybe
> the janitors and stuff) they'd probably have got that 35 billion
> they initially requested.
>
> What the labor unions fail to realize is that they are going to get
> a hair cut one way or another. If they force their employers into
> chapter 7 bankrupcy then they have no jobs. No jobs then you house
> is worthless for the time being. How will you pay for that food?
>
>
> If they take the paycut they have less income this is true. But at
> least they don't have to sell their house to find work in Arizona
> or something dreadful like that. Time will be tough but they can
> all slowly migrate away from that area of the country instead of
> all at once.
>
> Besides $40 and hour in total compensation doesn't sound to bad to
> me. I think most people are against this bail out and we all sick
> and tired of watching those who squander the things they are given
> and then ask us to pay the price again and again an again and again
> and a.........
Unfortunately, Bush will now by executive order give the auto makers money. Best case scenario was a bankruptcy before January 20, but I don't see that happening. It'll be business as usual, and the government will keep pissing away our tax money saving companies that can't survive on their own even under good economic circumstances. Soviet Republic of America here we come.
You don't get it do you?
It isn't the wages of the blue collar worker that is the root of this, and besides, if 3 million people loose their job, I doubt if your job will survive in the end, or at least at the wage you currently make... notice I didn't say "earn" The less people makle, the less taxes paid, the less you have in the form of "everything" Police, fire, roads, schools, etc. not to mention less money spent on non auto related products! The ENTIRE global economy will suffer!, wage cut or not!
I for one, as a GM retiree am greatly relieved that the bailout has failed. My pension will now be secured by the Pension Benefit Guarantee Corporation under ERSIA, which would NOT have been the case if the UAW had agreed to reduce my monthly benefit ($1,072) by the 50% asked for by Senate.
As for the 330,000 autoworkers displaced by the collapse, won't it be a great shock to the general public when they learn that close to 50% of them have college or Tech school degrees? LOL! I read so many comments where I find myself thinking... haven't these people read anything in the last 30 years except propaganda? The fallout will no doubt be devastating but most currently active autoworkers will come out ahead in the long run. No doubt the funds dumped into JPTA will first be made available to the largest number of workers directly displaced (autoworkers), then to those most indirectly effected (parts suppliers and sales). By the time any $8 hr Wal Mart employee applies for government funded training, the only jobs left will be at $6.50 hr in a newly structured American manufacturing industry.
We can only hope that all those auto workers and the workers of all the suppliers have been wise enough to have saved enough cash away to live and reinvent themselves better than they were before, and keep the economy humming along, or else taxpayers will be stuck with a far larger expense for unemployment costs, combined with lost tax revenue and a larger number of foreclosures due to mortgagees not being gainfully employed at all, as opposed to (perhaps) a smaller number of inevitable foreclosures of those that were living too close to the edge already. Oh, and let's not forget the retirees that may find no pension benefits that'll suddenly need to be covered by Medicaid, and all that does, too.
Please explain to me why this is a stupid idea!
Auto Workers Pension funds must have enough $$ to buy a significant portion, if not all, of the debt of F and GM at pennies on the dollar.
Covert those bonds into preferred shares, equity, what else (experts?) and relieve a good part of the financial pressure on these firms.
In short, surely the auto workers, with the value of their pension funds, must have enough equity to bailout their employers. Maybe they could own the companies!
All their eggs in one basket!? That's the life of a real entrepreneur.
Proof? Late last night the UAW kept swilling the Kool-Aid by saying they would not work for a penny less. Wow, what a surprise when the Senate vote failed.
GM needs Chapter 11 and I mean needs it badly. They need that dose of REALITY, something that bitch slaps them into the 2000's and out of the 60's and 70's. Union black mailing is sooo yesterday! They need this brush with death.
Hey johngognole, what's wrong with Arizona ('m from AZ)? I don't live there now but I'd much rather be there than in Detroit (ugh!). They should make MI a right-to-work state just like AZ. Why do you think many companies are relocating to the sun-belt away from the closed-shop rust belt?
Right on with your comments. It would of been sending good money after bad. And months later more good money after bad.
The UAW ought to be ashamed of themselves.
that the Unions will "consider" cuts at some later
date, but NOT now. This sort of "Union Think" is
exactly why these folks are in this situation and
why there may never be a solution to the Big 3's
predicament.
If they don't care about their jobs, why should we?
If we are all to pitch in - so should the unions.
No customers no business.........
The problem with American cars has a lot more to do with management than the workers who put them together.