U.S. Auto Industry bailout

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Originally Posted by Uncle

wow cool. i don't know if u guys are americans, but if u are- congrats :) good to see some straight thinking guys on the other side of the atlantic :)
i'm not completely sure how things are with the car industry here in europe, but from the looks of oil reserves and polution i'd guess u should take japan's or our way if u want to be world wide competative. actually i think that ford for example produce cars specialized for the european market, observing our regulations. i guess that's a step in the right direction
as for the bailout, these companies are not banks and governments shouldn't bail them. if they want to survive, they should addapt. snugle's idea is good though :) oil and car industries go hand in hand

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From what I understand, American cars in the European market have higher MPGs but they wouldn't pass American emmissions inspections. Retuning the engines so that they would meet American emmissions inspections is why we have lower MPGs. But American auto companies have always been about power and flash rather than economy and value. I'm pretty sure that they have the highest depreciation values of any automobile maker (not fact, not researched, going with observation). Couple that with the fact that there is a strong urge in some parts of the country to "buy American". While I have never subscribed to that philosophy, it is simply because I have always valued economy and value over flash and power. But if an American auto maker made a car that came close to what Japan or Europe can produce for MPG, life expectancy, etc. I would buy it in a heartbeat. The Big 3 deserve to go down if they can't meet the demands of their consumer.

Government regulations are important. Anyone who disagrees, look at what has happened to our "unregulated" market now. Minimum wage provides consumers with a minimum base income; why be upset about giving more money to the people who spend it (making the economy go round) when you should be upset about the people at the top who are hoarding it or blowing the money?

I am opposed to a government bailout for ANY industry.

Democracy without Capitalism is just mob rule. If 51% of a population democratically votes that your property is not yours but the communities or another persons.. well that's when you can have a democracy that is almost indistinguishable from socialism. Democracy tempered by capitalism and the free markets, well that was the American experiment.. and until people understand that government does not and can not create wealth, merely tax it or take it, there will ever be an endless succession of tech bubbles, housing bubbles etc. due to the governement misallocating resources and picking and choosing which businesses will survive via government subsidy.

The moral of the story is, if a company/business/product is not viable without government subsidy, it will never be viable with government subsidy. Look to Fanny Mae, Ethanol, and any number of government failures funded with your tax dollars.

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I am opposed to a government bailout for ANY industry.

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That much we can agree on at least.

Food's subsidized.

And many millions of people around the world began to starve, once the American government decided to subsidize corn based ethanol. Turing a very efficient food into an inefficient fuel, reducing supply while demand remained constant or growing, increasing corn/food prices across the board. For reference take a look at some interesting articles from the BBC and UK Telegraph.

Again, Government creates artificial demand, which brings about a malinvestment in the marketplace leading to unintended consequences down the road.

corn ethanol is stupid. But you seem against subsidies. I disagree. Food, Education, and health should be subsidized imo.

I am against subsidies because a politician is not a farmer, teacher or doctor and to pretend otherwise is just plain silly. Right now, Sen. Barney Frank is playing like he knows how to be the CEO of a automobile company.. and while it would be hard to screw things up worse than things already are, he's certainly trying.

Just a few months ago food prices were at all time highs yet farmers continued to get subsidies due to previous promises and legislation. Farmers profited on both ends, not to mention the lobbyists in Washington. Education is a mess, and throwing money at it isn't going to solve the problem. Take a look at LA, Detroit, and Washington DC. They all spend among the most in the US and yet have the worst results in regards to graduation rates from HS. There are a number of other issues that go along with education, but i'll leave it at that for now. Health care.. well that was a hot button issue during the election season, and will probably continue to be so in the future. Instead of taking more money from a tax payer to subsidize health care for everyone, they should allow inter-state insurance policies to go forward and allow insurance policies to be bare bones if the customer wants it that way. Competition always lowers costs, and taking out mandatory port wine stain removal from your health insurance might help in lowering costs a bit more too.

Ultimately it comes down to this, politicians invest other peoples money for future votes benefiting themselves; and private citizens invest their own money for future profits for their own benefit. If there is only one thing in this world that I don't doubt, it's how strong of an influence self interest is. Politicians, both Republican and Democrat don't deserve praise right now, they need to be reminded that the money that they spend so freely is not theirs by right, but by consent of the governed and political good will can be quite fickle..

Subsidizing something starts it on the path to eventual control. The current economic crisis speaks to the truth of those words.

I work in the auto industry.

1.Honda and Toyota have not offered better and longer warranties compared to american vehicles.

2.There is a lot of reasons why teh big 3 have folded. A big part is due to the union labor, where here a man hour is rougly $60 per hour( pension, insurance etc...) where it can be done for 1/10th the price in foreign countries. Quality and engineering the big 3 lack atm, as they have to compensate with competing with other makers that produce the same product for far less than they can with un-unionized workers.

3. If the big 3 fail, alot more fails. Suppliers like bearings ppl, scrap metal, shippers, assemblers etc the list goes on. Automakers supply 50 fold more jobs than they do on the assembly lines.

If all 3 fail, then who pays out pensions and benefits(they dont go away)
the u.s. government has set up a program to cover the benefits. But in the even of a catastrophe of the automakers failing, they will have to pick up the bill from american tax payers. Keep in mind, if ppl are unemployed they cannot pay taxes.

Also if say they do fail and imports run the us for autos, all of the money is exported to their country, of course we pay taxes on the autos. But money that was american is now funding other countries which puts us further in debt. Also ppl think if they fail, theyll open up plants here, sure they willm but a majority will be overseas due to the cheap costs.

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Originally Posted by SnuggleySoft

Food's subsidized.

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Oy, that's a debate for another day :/

But on topic, the bailout makes me very angry. These recent business failures (not only auto but let's just say auto now) were obvious from far off, were they not? Well they were to me, and I'm not a master degree holding Wall Street punter whose life revolves around such things.

I don't see how it was the Union wages ruining things. I'd want to believe there is room for decently paying jobs in America. $60/hr = mildly upper middle class. These people aren't buying islands in Fiji when they retire. I reject making villians out of people on the low end of the financial spectrum because they have the audacity to ask for a modicum of dignity in their lifestyle. Cripes.

Besides, the cost of the cars wasn't the problem, they were making good profit margins with their giant gas chuggin trucks when fuel was cheaper. Then $4+/gallon fuel happened.

Yes, the government needs to regulate mpg, yes they need to tell the companies what to build and not allow the market to dictate. The market is a non-thinking non-entity whose only care in the entire universe if making a profit in the quarter. It has no foresight, no morals, no greater good than showing profit for 4 months of sales. Yes, that basic heedless greed needs to be tempered with human intelligence, and it wasn't. The outcome is laid bare for all to see.

/rant

I'm sorry Vespertine but you've got it a bit backwards there. People in a Locke-ian natural state don't come together to form a government so that the government can tell them how much to produce of a product and what standard to produce it to. The purpose of government is to protect freedom, both in a personal, bodily sense and in an economic sense. I think we've gotten so used to the government tending to our every need (welfare state) that we as a nation have forgotten what are and are not legitimate uses of government power and how it should relate to our lives.

If I choose not to buy a GMC because I don't like the mpg of their brands well then that is my right, just as it is GMC's right to either continue to make cars that they want to make or make cars that their customers want to buy. The problem came not because of a lack of government regulation, but because of increasing government regulation in the auto industry that domestic companies couldn't keep up with due to, among other things, inflexible union contracts, legacy health care/benefit costs and high gas/oil prices. Either way, if a business does not successfully cater to its consumer base, it will fail, that is what is happening now. Those same "giant gas chugging trucks" that are constantly hounded by the EPA and cafe standards here at home, are selling like hot cakes over seas where standards aren't nearly as over bearing.

As for the market, it actually does have foresight, (wall street operates on a futures basis of 6-9 months) has the morals of those engaged in the marketplace and I'm kind of wondering when the word "profits" became a dirty word? When a company makes a profit, it stays in business, rewards its share holders with dividends and keeps its workers employed, where along the line is that a bad thing? A company should make wages appropriate to the work and what will make the most profit for the company. If the work is low skill then there will be low pay, competition among producers bids the price of labor up to it's appropriate level. The entity that has no foresight, no morals, and knows no greater good than the next 2-4 year election cycle is the State or Federal Government.

Do I think the government is evil, no, though I'm sure that some might think so by reading my posts. My point is that the free markets are the answer to our current economic woes, not the source. The market demands transparency and accountability from both the producer and the consumer lest one be deprived of profit or product.. when you compare that to our current Congress, I'd take the free market any day of the week.

U.S. auto industry is yet another example of instutional thickness at its worst

government can prop up bad industries for only so long, but when cash is strapped and the economy hurts, then you can't maintain it.

This will mean massive lay-offs for the areas affected. Basically they'll go through yet another cycle of what has happened to steel, textile and coal in Belgium, France, Germany and England in the fifties. That will mean unemployment will go up by a lot and for a long time and it will take at length about a decade to recover.

Lets face it, you can't sell gasguzzlers, like you couldn't sell coal when you got oil and you can't sell steel when you got aluminium and plastics and you can't sell textile, because it is too expensive to be produced in your country because of high wages.

The failures of the US Auto indurtry is not just a failure of the management, though that did play a part, but also a falure of government, and the unions sacrificing their members future for short therm gains. While the marketplace would normally take care of the first problem, the other two are outside the normal market functioning

The government of the state of Michigan has done its best to tax all manufacturing out of existance. The rust belt became such thorugh overregulation and overtaxation, as well as unsustainable employee benefits and pay due to union coersion.

Michigan has the 6th highest state income tax, and 4th highest sales tax, and 17th highest property taxes, making it the 10th overall largest tax burden in the USA(www.taxfoundation.org) which I believe lead to that state being one of only 3 states with negative economic growth in 2006. Add to that a regulatory environment that ranks it third worst for business in the nation ahead of only California and New York (www.chiefexecutive.net) and it should amaze you that the big 3 have survived as long as they have in Michigan.

Then we have the unions. I've worked in a couple of union shops, granted in Telecommuniations, not the Auto industry, but the same principals apply. Unions, rather than protecting job seurity, fare wages, and worker safty, have become a leach on industry and their members, leaching dues to push political agendas, protecting their own power,protecting incompitant workers when they should be fired for the safty and job security of those around them, and lining their own pockets. (Can you say Union Labor Life Insurance Corporation?)

The Union culture of entitlement has lead not only to the corruption that breads anti-union sentiments for many non unionized Americans, but also to unsustainable benefits packages that have directly lead to the problems faced by the big 3. Not only did they demand that maintainance, custodial and even lanscape workers be included and make union wages of $25 an hour or more plus benefits for jobs that would normally be filled by highschool students making $10 an hour, but they institued the jobs bank to pay 12,000 workers who no longer had line jobs most of the salaries they made on the line to sit on their @$$ and do crossword puzzles. Autoparts maker Delphi claimed that these union mandated idle labor costs may have cost them as much as $400 million in the second quarter of 2007 alone. The rediculous labor costs extend throughout the automaking and autoparts industry. While a forklift operator at an average corperation in the US made about $28,000 in 2005, one operator for Delphi that same year, interviewed by the Detroit News claimed his salarie was $103,000. Tell me, how the hell is that sustainable for ANY industry? No business in their right mind would agree to this insanity if it weren't for the coersion of unions and politicians.

While nobody will doubt that the culture of greed and corruption ran rampant in the management of the big 3 automakers, why do we continue to ignore the responsibility of government regulation, and union corruption, greed, and the culture of entitlement? What's good for the goose is good for the gander.

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Originally Posted by Takeshi 02

Democracy without Capitalism is just mob rule. If 51% of a population democratically votes that your property is not yours but the communities or another persons.. well that's when you can have a democracy that is almost indistinguishable from socialism. Democracy tempered by capitalism and the free markets, well that was the American experiment.. and until people understand that government does not and can not create wealth, merely tax it or take it, there will ever be an endless succession of tech bubbles, housing bubbles etc. due to the governement misallocating resources and picking and choosing which businesses will survive via government subsidy.

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Democracy is a form of government where authority is vested in its citizens. Socialism is an idea of how property and ownership is structured within a country. Democracy and socialism are two completely different ideas, so they can't be "indistinguishable from eachother." You can have a democratic socialist country, where the people would decide how to distribute the wealth. The American experiment had nothing to do with capitalism, it had to do with a representative democracy which hadn't been seen since the early Roman empire. Capitalism was alive and well in Europe when America was formed, and was merely adopted from there.

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Originally Posted by Takeshi 02

Ultimately it comes down to this, politicians invest other peoples money for future votes benefiting themselves; and private citizens invest their own money for future profits for their own benefit. If there is only one thing in this world that I don't doubt, it's how strong of an influence self interest is. Politicians, both Republican and Democrat don't deserve praise right now, they need to be reminded that the money that they spend so freely is not theirs by right, but by consent of the governed and political good will can be quite fickle..

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Politicians don't invest. Here's what actually happens. Millions of Americans go out and take their savings and invest it in companies. Some companies fail, which normally doesn't mean anything. However, this time some large companies failed. This, in turn, affected other companies, causing them to fail. Now you've got the beginnings of a crisis. I call it a crisis because all of those people at the beginning that invested their savings are now broke and harassing our politicians asking "Why weren't you watching out for MY money?" They are panicking, because they just made bad investments and lost their life savings. Now apply that to our current situation. You have the three largest auto makers in the US. IF they collapse, we lose not only them but a significant portion of our economy in the business they conducted (dealers, mechanics, parts, scrap metal, lights, tires, etc.). Would the gap get filled? Absolutely. But how long would it take to replace them? Not to mention all the people who are now broke and/or unemployed and pounding on the Senator's door angry or needy. Once again, crisis mode. So the politicians, in an effort to appease their constituents, are attempting to prevent that crisis. However only the lazy ones would be content with throwing money at them; the smarter politicians are trying to demand oversight and/or regulation.

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Originally Posted by Cultist of Personality

The government of the state of Michigan has done its best to tax all manufacturing out of existance. The rust belt became such thorugh overregulation and overtaxation, as well as unsustainable employee benefits and pay due to union coersion.
Michigan has the 6th highest state income tax, and 4th highest sales tax, and 17th highest property taxes, making it the 10th overall largest tax burden in the USA(www.taxfoundation.org) which I believe lead to that state being one of only 3 states with negative economic growth in 2006. Add to that a regulatory environment that ranks it third worst for business in the nation ahead of only California and New York (www.chiefexecutive.net) and it should amaze you that the big 3 have survived as long as they have in Michigan.

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The only tax you named that a BUSINESS would pay is the property tax. Maybe also the sales tax if and when the business makes a purchase. Income tax is paid by individuals, not businesses. The "unsustainable benefits and pay" you mentioned are not a result of the union, but of the 6 figure and up junior executives and the entire corporate branch. The companies need to be restructured. And I'm not going to start on unions, mostly because I'm out of time.