Fam62c

Do the Automakers Deserve a Bail Out?

[HOW CAN ANYONE GO TO THE VETERAN'S PARADE DRIVING A TOYOTA A HONDA A VW OR KIA?

SHAME ON YOU! ]

Turi;

My Dad is a WWII vet who fought the Japs in the Pacific. He drove American cars all his life and was loyal to Detroit. In his 80's, out of the blue he bought an American made Toyota Camry and he says it's the best car he's ever owned. He's had a lot of problems with American cars over the years. Some of the cars were good but some were just terrible. The last straw was a Chevy S-10 (a 2003 I believe) that had a defective transmission at less that 20,000 miles along with some other defects. I'm as American as the next guy but Detroit needs to work extra hard to get people to trust that their new cars are on par with some of the foreign makers. It's not the fault of consumers that Detroit made a lot of subpar vehicles over the years and drove their own customers away. I actually think that bankruptcy might be good for the Big-3 because maybe after they are reorganized people will believe that things are different and give them another chance.

Do the Automakers Deserve a Bail Out?

I don't want to see the US auto industry (all 3 of them anyway) gone because once it's gone it can never really come back; it's almost impossible to start up an auto company from scratch. I don't think a "bailout" or even a loan is the best way to go. If they can't make it, I think that they need to reorganize in Chapter 11 with some type of government backing for dip financing IF the creditors approve the reorganization plan. Detroit is like an alcoholic, it needs to reach rock bottom before it can start over. If we prop up any of these companies with government money outside of bankruptcy they will simply become dependent on support. Chapter 11 has a way of making everybody get serious because they realize that total failure is now possible. In chapter 11 even the sacred cows get slaughtered. If the taxpayers are going to get involved every stakeholder must give all they can possibly give and Chapter 11 is the only way I know of to make this happen. Plants must be closed, people must be laid off, models, brands and dealers must be dropped, assets must be sold off or collateralized, leases must be rejected or renegotiated, labor contracts must be made competitive in the current environment and liabilites must be shed; in short the companies must be totally re-designed. A government loan guarantee isn't going to make these things happen. Where's the sense of urgency? What is a company like GM doing right now on it's own? Is it stopping payment to creditors to conserve cash? Has it announced plans to shutter one or more of it's many divisions? Is it putting assets up for sale? Are they demanding concessions from their unions? Is the management team taking steep pay reductions to set an example? If they think they can just get a loan guarantee from the government they will drag their feet and not act as if their survival is at risk. I know they don't like to use the "B" word but when you are telling everybody that you might not have enough cash to see the new year it's really the same thing. It's time to start planning for a pre-packaged Chapter 11 filing. They will make it through bankruptcy just like the major airlines did because their creditors have too much at stake to let them fail. Remember the old saying; if you owe the bank a million dollars you have a problem, if you owe the bank billions of dollars the bank has a problem.

I'm worried about taxpayer money being used to pick winners and losers among private industry. How do we decide who to help and who not to help? Where was the bailout for, say, Circuit City? The banks were one thing because the government has authority in that area but where do we stop when we decide to help private industry? What if everybody comes forward with their hand out?

By the way, what about Chrysler? They are owned by a private equity company, why should the taxpayers loan them money. Shouldn't the private equity company raise money to help Chrysler since it's their investment? Isn't re-capitalization what they do? They just bought Chrysler I think that it's their problem. Chrysler certainly shouldn't get any government help until their parent company has given every last penny to the effort.

Demand More for Your Auto Bailout Dollar; Oil Patch Should Bounce Back Long Term

Here's my concern with natural gas: I have a gas furnace, stove, dryer and waterheater. If you listen to the media and Boone Pickens you would think that the USA is awash in natural gas, you would think that we have so much of it that we don't know what to do with it. If this is the case NG should be really cheap but my NG gas bill increases every year. They are banking on all this NG that they believe is in the ground and below the sea but nobody really knows for sure. I'm all for locating and recovering all the NG that we have, go ahead and "drill, drill, drill" but let's not kid ourselves and think that it's cheap. As we use more of it the price will skyrocket and the cost to recover these resources will be steep. Don't get me wrong though, I would rather pay more for US NG and oil than buy from the camel-sodomizers as long as we are also going all out with wind, solar, thermal, wave, cleaner coal, nuke and whatever else we can come up with that can be produced "in house" by the USA. Energy independence will mean higher energy prices for years with the promise of reasonably priced domestic enegy in the future; that's a short term sacrifice I'm willing to make.

My dream is seeing the mideast with a bunch of worthless oil that nobody wants because technology has made it obsolete. Without all that oil money the mideast is just a bunch of desert tribes on camels living in tents and killing each other. Without oil they have nothing; there is no Sadam Hussein, Osama-Bin-Laden, Azerminidjad (whatever) Saudi Royal Family, etc. American sons, daughters, mothers and fathers wouldn't have to be killed or horribly injured in wars over energy. If we don't do something I belive that sooner or later WWIII will be fought directly or indirectly over oil.

It's such a shame; with all that oil wealth in the mideast they could have built the best housing for their people, the best schools for their children and created vibrant, modern, sophisticated societies. If they had put the money to good use I wouldn't feel so bad about buying their oil but to see all that wealth and still all that suffering, poverty, violence, hatred, intolerance and misery makes me sick.

America is going through a rough patch but I believe that when we are focused as a nation and have the will to do something we are unstoppable; energy independence is possible if we want it bad enough. We should be the ones to take the lead and show the rest of the world how it's done. Imagine the benefit to our economy if we could be energy independent and have stable energy prices over the long term; we would have an advantage that nobody else in the world has. We are one of the few nations with the available resources, technology, industrial capacity and real estate to pull it off and we are stupid if we don't. If we had started a massive push to do this after the 1970's energy shocks we would already be mostly there today.

In the long run I think that cheap oil has hurt us more than it has helped us. If oil had stayed (or had been taxed) at high levels after the '70's the market would have forced the Big-3 to adapt and they could have done it before the Japs had a chance to get a massive head start........we would still be the world's dominant auto maker; our society as a whole and our competitive position in the world would be much stronger. The future can be very bright indeed for the USA if we get up off our a$$es and make the committment to truly be free from wild energy price swings. It won't be easy and it won't happen overnight but we can do it.

Should We Really Bail Out the Big Three Automakers with $73.20 Per Hour Labor?

This is the same problem the major airlines have and, frankly, at this point it doesn't matter how the BIg-3 got where they are or who's fault it is; all that matters now is what to do going forward. I think they (GM at least) aren't going to make it with a temporary loan; they need to do a total restructuring quickly that allows them to modify leases, agreements and contracts and transfer their pension obligations to the PBGC like the major airlines did. A pre-planned bankruptcy filing is probably the only way for GM to quickly do what needs to be done. At the rate GM burns through cash they will just burn through any financing that the government provides. Chapter 11 is the only way to stop the bleeding and make fast, permanent structural changes to GM. A band-aid isn't going to help here, GM needs major surgery or the patient will either die or live on in a vegatative state made possible by tax payer provided life support.

Demand More for Your Auto Bailout Dollar; Oil Patch Should Bounce Back Long Term

I think he's on the right track but is reaching beyond what is economically possible at this time. If we invest in the Big-3 we have to insure that they change their ways to provide some positive benefit to the US in the form of reduced use of foreign energy. At the same time you can't force a company to build vehicles that there is little or no demand for, the company will go broke. We have to find a way to make people want alternative energy vehicles and be willing to pay enough for them that they can be built by US companies at a profit. If we don't do this why would anyone build them? A previous poster was exactly correct in pointing out that the giant trucks, SUV's and V8's were something that the public wanted when gas was cheap. The fact is that no auto company can make a profit selling vehicles that ALL get 40+ mpg. Affordable technology does not exist yet to make practical vehicles for all uses that get this mileage. Not every can drive a Prius, some people actually need larger vehicles. I'm all for NG, and Hybrids and I think that the plug-in hybrid concept has a lot of merit and will eventually be a game changer. All electric is tougher because of the limited range, size and performance for these vehicles with existing technology but they may have their place as "city cars" that will work well as a second car for certain people.

As much as I hate to say it I think that we went wrong as a society by not taxing gasoline more heavily after the 1970's energy crisis to encourage conservation and fuel efficient designs with new technology. The fact is that when gas is cheap people will waste it and alternative power sources will never take hold. We have allowed our economy to have massive exposure to oil price spikes and have given OPEC a lot of power over us. As painful as it would be over the short term I would suport a gas tax program to keep gas above say $3.50/gallon combined with a massive, government backed effort (partially funded by the gas tax) to promote alternative energy sources. If we let gas prices fall again we will go back to our wasteful ways and alternative energy development will stall out for lack of investment. The result will be a future fuel price spike that we will be unprepared for and maybe next time oil goes to $250/bbl and creates the next great depression. It sounds counterintuitive but cheap gas is bad for the US economy in the long run because we can't insure that it will remain cheap, in fact, we know that it won't. If we could take a highly variable cost and make it more of a fixed and known cost it would smooth out our economy. We didn't learn anything from the 1970's so I hope we learn this time, history will repeat itself. We have seen the tremors, if we don't prepare for the inevitable earthquake we deserve what we get when it happens.

The US Auto Crisis

The US auto industry has never really been interested in small cars because they tend to be low profit margin vehicles for them. When fuel prices go up they make a half-hearted attempt to develop decent small cars but they are spring-loaded to return to big vehicles as soon as fuel comes down. I also don't believe that they are committed to future alternative technologies. They may talk about it and make a couple concept cars like the Volt (which I bet will never go into production) but they aren't real believers. To my knowledge even their hybrid drive systems were developed by others and are used under license. They realize that their cost structures will never allow them to be profitable unless they are selling a high percentage of high margin large trucks and cars. The US industry has been lucky that gas has been as amazingly cheap as it has been for as long as it has.

The Japs have, for the most part, stuck with what they are good at and sold large volumes of high quality small cars and trucks. They know that's what the rest of the world buys and they know that there is a large segment of the US market that buys these cars as well. They also know that fuel prices will always go up again eventually. I think that Toyota has learned a valuable lesson here by starting to get into the large pickup truck market that they had avoided in the past. They strayed from what had worked in the past and they got burned as gas prices went up. They are now converting a lot of the truck production capacity back to cars.

If you want to read a great book that talks about how things got this way read "The Reckoning" by David Halberstam. It was written in 1986 but it traces the roots of US and Japanese auto industries and compares the two. It's just as valid a book today as it was in 1986 and it's truly a great story filled with interesting characters. It essentially points out a fundamental difference in that the US auto industry got taken over by finance and accounting people after WW II (the Whiz Kids) while the Japanese auto industry management was more attuned to design, engineering, production and customer service interests.