Should Gov bailout automakers too?

[Pat Coyle]

So how's the bailout going so far? And what do you think about the Big 3 Automakers plea for Federal loans?
Hear's what one maverick says...
From Mark Cuban's Blog: You all do realize that anyone who buys a new car is UNDERWATER the minute you sign the papers and drive off the lot ? That you get further and further underwater every single day ? Maybe thats why so few are buying new cars ? We havent instituted a bailout for their underwater car loans.

Is this history repeating?. Read this story from NY Times

Share your thoughts here

[Gus Pearcy]

I think this is a pretty complex subject. I lean towards letting GM file bankruptcy, but I think it only deepen the recession and possibly tailspin us into a depression with the job losses.

In order for me to jump on board with a bailout, I would need to know how the money can keep them afloat. Once the government gets in, they don't have much of choice but to keep feeding the meter to stave off any tax dollar loss.

Another thing that keeps itching me is it's pretty apparent that no matter what happens, it's likely that layoffs will be looming. If I put my tax dollars into to save GM, shouldn't I reasonably expect that my job would be secure? I mean how do you justify that?

To state for the record, I don't think this country can go without a major auto manufacturer. We need that manufacturing base to jump start our green economy.

I don't work for GM but I am very interested in what will happen.

[Steve Stuck]

These loans are backed with paper money with nothing backing them. Our monetary policy will be a disaster by this time next year. That is the thing most Americans don't realize and most tv/radio pundits. You can loan these companies all you want, but people still won't be buying these cars two years from now. I also heard some people saying that they need to make more energy efficient cars with these loans. Who will buy them? Do you want people to go into massive debt just to buy a car that is "eco" friendly? Used auto lots will be very busy the next couple of years.

[Stephen James]

I've always thought that it was odd that people bought new cars in the first place.

(Yes, I realize that someone has to.)

[Matt Zentz]

Stephen, see my comments below. People don't "have" to buy cars.

[John R.(Dick) Troll]

Here are some reasons why we should help the Big 3

1. With the existing safety nets we will pay anyway. Laid off workers will seek unemployment and health benefits from beleagured state and local governments. When these units of gov. get too stressed they will seek financial help from the feds.

2. If thousands are thrown out ot work they will be unable to pay their mortgages. This will add fuel to the mortgage mess and harm folks who have never missed a mortgage payment as values in their neighborhood decline.

3. All of the US manufacturers use the same parts suppliers. Without all the players the parts suppliers cannot survive. Honda and Toyota don't want the Big 3 to fail.

4. Bankruptcy will not likely mean that they can emerge lean and mean. Instead, they are more iikely to be broken up for their asset value. And sold to ?? With a loan from??

5. Our economy is so fragile right now that the risk is not worth taking. With 4% unemployment and even a moderately hopeful outlook, maybe. But not now. Economists from across the political spectrum tend to agree on this point.

Ironically, if we as a culture had not been so anxious to live the easier softer way the Big 3 would be in better shape. We have had ridiculously low gasoline prices for many years. If we had been williing to pay the same rates as the rest of the world, it would have promped much more interest in fuel efficient cars. Other countries also tax engines based on size which also stimulates the auto companies to produce more efficient cars.

The great mistake the Big 3 made was to abandon the car for trucks and SUV's. Up through the mid 90's the Ford Taurus was often the largest selling car in the US. But the profits from bigger vehicles seduced them into believing that Americans would always want bigger vehicles. And the Big 3 failed to invest those profits for the long term. Instead they migrated to financial services and hoarded cash, to prop up their stock price.

[Gus Pearcy]

I love when the consumer gets blamed for the failure of an industry. I cry BULL! GM and Chrysler have no one to blame but themselves. This is about taking care of business and doing what's right. They didn't and now they are unable to weather a downturn in the economy.

I heard snippet of Barney Frank from an NPR interview that must have been recorded a few weeks ago, but he said the $25Billion is not enough. The automakers will have to report back to the government on March 31 with a plan to turnaround the business and apply for more money.

There's no guarantee that this will work and we can ill afford to throw away any money.

This is almost unbearable.

[Scott Emmett]

Well, I have been in the car business 12+ years and I don't have a clue. GM, Ford, and Chrysler all have tremendous costs that the imports do not have. Mitt Romney's editorial today spells out those costs that make them non-competitive. I will fall on my sword to defend the quality and durability of GM products versus the rest of the world. Their allied costs have rendered them non-competitive. That, plus senior leadership's inability to read the market and stick with big SUV's at the exclusion of smaller, more fuel efficient cars.

Have said that, I did not think the big financials deserved a bail out and don't think the car companies do either. The Congress has let the cat out of the bag with the financial bailout and now I think they will just about have to do something. If Obama is the socialist I think he is, he will probably move to nationalize the car business. That will be the end of the free market. But that's for another day....

[Trevor Bradburn]

The government should be more motivated to helping the automotive industry than the finance sector of Wall Street. I know that there would be at the very least 3 million Americans out of work. You think the economy is bad now, wait and see what happens when 3 million people file for unemployment.

[Gus Pearcy]

First off, there will be some level of layoffs no matter what happens. It's obvious that the giants have become too cumbersome to react to market cues.

Second, the reality of first point means that government intervention will be tricky at best. Perhaps, bankruptcy is the only viable alternative. I do think Chrysler will be forced to merge with GM if any government money is forthcoming.

[Scott Emmett]

Well, I hope not! I would not want to see Chrysler merge with GM largely because I don't want to get stuck selling them!

[Steve Stuck]

Much agreed on the 3 million number being inflated. Chapter 11 would effectively allow them to restructure and strip them down to their assets. Serious investors would then actually invest in the company. The last five years, I talk with investors and they won't even touch GM/Ford because of their business practices. Toyota and Honda are a better bet for them. Here are some other facts on these plants that many do not like to talk about:

-October 2007, GM transferred the health account for workers to the UAW. This was around $30 Billion dollars. The UAW will want universal healthcare so this money can be spent somewhere else. Fraud will tear up this fund. Read the article here.

-In some plants for GM, for every 5 employees, there is a union rep employee that walks around with a clipboard. The sole purpose of this employee is too make sure union rules are being followed. They make $10 more an hour than other employees. Waste of money.

-The dumb management of GM and Ford agreed to work centers for laid off workers. They get around $31 an hour to sit around and wait to get called back.

-Toyota and Honda tell their employees that they will effectively shutdown the plants if they unionize. What they do is compensate them with generous health benefits. Other things they do is provide childcare and gyms in their plants. They also share profits with their employees and drive them to be more productive with a "team mentality."

[John R.(Dick) Troll]

The Center for Automotive Research, which has conducted most of the national economic studies involving the autmotive industry since 1992, issed a report on November 4, 2008. A 50% reduction in the output of US auto manufacturers would have the following impact:

A loss of 275 billion over a 3 year period. This loss would be passed on to governments at all levels in the form of transfer payments, unemployment insurance, loss of income tax revenue, resulting in a net loss of 108 billion dollars to all of us over 3 years.

One of the most powerful aspects of social networking sites is that they allow a me to become a part of an us while still being a me. But I am constantly amazed to discover that many folks who love social networking have not considered that that in so manys we are already linked together.
It may feel good to shout WE should let THEM fail. But, as we are all learning, we are them. If they fail we pay for that failure.