US auto industry is in real trouble
Bailout the Automobile Industry ?
- Thread starter TheMasterOfOrion
- Start date
Realistically the politicians can't let the US auto industry go down, too many people's jobs and votes are connected to that.
X2. We're teetering too close to nationalism. Look at how well that worked out for the old Soviet Union and former Eastern Bloc countries. Do we need Madame Dingbat and that idiot Harry Reid dictating how cars should be built?
The market does work, the problem is that the government has had its sticky fingers all over it these past 15 years and now the price is being paid.
Realistically the blackhole sinking the companies are the retirement benefits being paid out. Any measure besides the government deciding to take over payments to retires UAW members will fail. But then everyone else in the country sticks their handout saying I deserve the handout to because of my years at Wal*Mart. Many other industries have gone down. We will adjust to buying cars made in China like we adjusted to buying everything else from there.
They need to go into Chapter 11 and restructure. The government's role should be to lay on pressure to get them to actually make cars Americans want (i.e. GREEN/FUEL EFFICIENT). Chapter 11 also has the fortunate effect of breaking the union contracts. Car makers should even be free to relocate into the Southeast if that's what it takes to have them rebuild stronger...that's what all the foreign automakers are doing with THEIR US-based plants. States like Alabama and Mississippi are getting all the jobs, and why? Because they're non-union.
E
Elmo Dukat
Guest
From a purely microeconomic perspective, the reason the Big 3 (specifically GM) can't compete with the foreign car plants in the US is the cost of their labor, which is about two times the cost of labor at the foreign car plants. All the other costs are comparable. Spin that however way you want, but you can't force a product which is losing money to make money. The taxpayers can pour money into the Big 3, but with a fundmentally uncompetitive business model they will eventually fail.
If the Big 3 are allowed to file Chapter 11, then they will have the power to restructure the business in a drastic way, and will gain the potential to make their model more competitive. Some people will be laid off at first, but if the business model proves competitive and stable, they'll be eventually hired back. Or they can work in more competitive firms (like the foreign auto plants).
Truly, it is much more worthwhile for taxpayers to pay unemployment to individuals who lose their jobs due to auto restructuring than it is to keep dumping money into a failing business model.
If the Big 3 are allowed to file Chapter 11, then they will have the power to restructure the business in a drastic way, and will gain the potential to make their model more competitive. Some people will be laid off at first, but if the business model proves competitive and stable, they'll be eventually hired back. Or they can work in more competitive firms (like the foreign auto plants).
Truly, it is much more worthwhile for taxpayers to pay unemployment to individuals who lose their jobs due to auto restructuring than it is to keep dumping money into a failing business model.
The Government doesn't know what people want, that's called market forces.
I'm tired of people bitching that the American companies "forced us to buy gas guzzlers". The GM plant in OKC converted to SUVs when gas was $1.10/gal and had trouble keeping up with demand when gas was at $1.90/gal. It wasn't until gas hit $2.50 that people were becoming "uncomfortable" with gas prices.
In case you haven't noticed, truck and SUV sales are "sluggish", because people have figured out it's OK to drive something economical. I've driven economical cars for years while watching people talk about their 160hp 6-cylinder blah blah blah. Why do people need all of that power?
The Big 3 has noticed the shift to more economical cars. The problem is the COST of converting factories. Europe has some fantastic vehicles, but the problem is their safety standards are different from those in the US, so Ford and GM can't bring those neat toys they sell in Europe over here.
That's not that much power. Also, not everyone lives in FLAT Oklahoma like you.
Shows what you know, considering I lived in Washington State at the time
Yep, 40hp of raw fury in a 1964 VW from Bremerton to Seattle.I know someone in Idaho with a 90hp Taurus Sedan. Again, shows what you DON'T know. 160hp is quite a bit for just a daily driver.
Also, Oklahoma becomes more hilly east of I-35, like where I live. Do you even know where Oklahoma is? I doubt it.
Shows what you know, considering I lived in Washington State at the time
I know someone in Idaho with a 90hp Taurus Sedan. Again, shows what you DON'T know. 160hp is quite a bit for just a daily driver.
Also, Oklahoma becomes more hilly east of I-35, like where I live. Do you even know where Oklahoma is? I doubt it.
Sure I do, it's one of those fly-over states.
Let them enter bankruptcy proceedings, wipe out (the puny rest of) equity and convert some of the debt to equity. Basically, I'm with Bill Ackman on this one.
Use other policy tools to encourage all car companies to produce more efficient cars (AND actually sell them in the USA) if that is the sort of thing you like to see the government being involved in. Otherwise a capital infusion by the US government will just be followed by European, Japanese, etc. governments to level the playing field in that regard again.
Use other policy tools to encourage all car companies to produce more efficient cars (AND actually sell them in the USA) if that is the sort of thing you like to see the government being involved in. Otherwise a capital infusion by the US government will just be followed by European, Japanese, etc. governments to level the playing field in that regard again.
The Big 3 are in this situation because of the deals they have with the unions, specifically the UAW. I say the government should force all three into Chapter 11 and then help them develop greener vehicles. The only solution to the financial problem faced by the companies is to force the unions to accept restructured, competitive deals or dissolve the unions entirely.
The market will decide on greener vehicles. Heck, this past election there were many "Green" options on the ballot, in different states, that were voted down. Why? Cost.
Here's something I posted in the GM going under thread.
And if GM didn't have a deal with the UAW, he wouldn't have had a job. Thank you for proving my point.
GM and Ford are both oversized, bloated comapnies that need to be slimmed down. Thing is that the UAW will never stand for this unless it is mandated by the government.
Not sure about the current Chrysler. However, when Chrysler went down this road in 1979, they used the government to gaurrantee bank lonas so they could develop more competitive products while at the same time threatening the unions with bankrupcy proceedings in order to be able to slim down the workforce.
Where is Lee Iacocca when you need him?
What was your point?
