Comments on: Auto Bailout Plans

By: stuartzechman

stuartzechman — Wed, 03 Dec 2008 13:37:06 +0000

...but thanks for reporting on this, Jay Newton-Small.

The plans are actually important. Think of them as if they were the Iraq Coalition Provisional Authority plans that the Congress was considering funding.

By: holly201

holly201 — Wed, 03 Dec 2008 13:18:58 +0000

Petition Congress:

http://www.rallycongress.com/no-bailout-for-the-auto-industry/1409/

NO BAILOUT FOR THE AUTO INDUSTRY
Nancy Pelosi, with the help of Barney Frank, wants to bail out yet another failed sector of the economy. It is not government's role to reward incompetent, overpaid executives pursuing a failed and anachronistic business model. The American auto industry is in trouble because it produces a shoddy, polluting, gas guzzling product at noncompetitive prices driven by trade union benefit packages. It is a waste of taxpayer money to try to shore up an industry that needs to be radically restructured. The Big Three should be allowed to fail and file for reorganization under Chapter 11 of the Bankruptcy Code. They will not cease to exist, but will be restructured under the supervision of the bankruptcy courts. Congress cannot do a better job than the courts. The courts will supervise the reorganization of the industry without being tempted to reward lobbyists, campaign contributors and unions for their political and financial support.
Congress must allow the economy, existing laws and judicial bodies to resolve the Big Three's financial problems and not throw more taxpayer money away under a hasty and ill conceived bailout.

By: jayackroyd

jayackroyd — Wed, 03 Dec 2008 03:19:08 +0000

Yes, Bryan, I agree. Any money spent should go directly to workers directly affected by bankruptcy of the automakers.
.
The time for working this through was the last decade. The last decade is over. For me, the last straw is the dealer network.
.
And, as atrios keeps saying, any bailout is a violation of the WTO. Direct money paid to autoworkers, either into their pensions or retirement medical care, to the workers themselves, etc

By: bryanfromhouston

bryanfromhouston — Tue, 02 Dec 2008 23:11:52 +0000

This is all well and good, but Chris Isidore does (as usual) a great job in conveying the depth of the problem. The problem is the fact that we (just like housing) had an auto bubble. See here: http://money.cnn.com/2008/12/02/news/companies/automakers_plans/index.htm?postversion=2008120213
.
Unfortunately, no amount of CEOs taking road trips in their latest hybrids, opting for $1 yearly salaries or pontificating about future models and sales will change this very significant fact. The only way to get out of a bubble is to reduce capacity and wait for demand to overcome supply until they are back in equilibrium.
.
There is no bailout short of a handout that will keep people employed in Detroit. And any bailout making more cars only prolongs the scenario of bringing supply and demand back into balance. This is the paradox of the bailout...it is welfare where the poor worker never regains control of their wealth making ability.

By: bobcn1

bobcn1 — Tue, 02 Dec 2008 23:06:31 +0000

Recently we've heard a lot about how UAW workers in GM plants are making $73 per hour. Of course, we're beginning to learn that the figure is arrived at through the curious method of adding GM's 'legacy costs' (retiree health and pension obligations) to the actual hourly wage of an auto worker (about $28 per hour + $13 in health and pension benefits).
.
If it's reasonable to add the 'legacy' costs of retirees to the hourly wage of the guy who installed the dashboard in your Saturn, then isn't it just as reasonable to add those costs to the $1 per year that the GM CEO has agreed to? After all, the auto worker didn't hire and benefit from the labor of the retirees -- GM's management did. If it's reasonable to saddle the guy that painted the fenders on your Buick with the cost of retiree obligations, isn't it just as reasonable to apply those costs to the GM CEO?
.
By doing a little calculation we can discover the GM CEO's true pay (using a calculation that's just as intellectually honest as the $73 per hour number being thrown around).
.
We start by adding:
$1 per year + $60 billion (in GM retiree health benefits) + $87 billion (in GM pension obligations)
.
We then divide the result by 2080 hours (assuming the CEO works a full 40 hour week).
.
We have just discovered that the CEO of GM is actually offering to have his pay reduced to a mere $70.7 million dollars per hour.
.
Maybe we should cut his pay even more.

By: Jay Newton-Small

Jay Newton-Small — Tue, 02 Dec 2008 21:46:06 +0000

53_3: Because, yes, when I blog I'm always aiming for the 30,000 foot angle. It's a blog, 53_3, do you really expect the big picture??
JNS

By: nibblybits

nibblybits — Tue, 02 Dec 2008 19:05:35 +0000

Cliff and dunedweller: Only fear of failure will fix the problems of the auto industry. Make an example of the third and the other two will get the message.
.
Besides, the third will still have a shot to survive. Go into bankruptcy and let the system do its job. The Republicans are happy. The third company will lean down to its vital parts and hopefully, survive. If not, the best parts, the viable parts, will continue on when they are snapped up by the free market.
.
Plus, saving two companies instead of three is cheaper for taxpayers as well.

By: jarais

jarais — Tue, 02 Dec 2008 18:40:01 +0000

WTO - closed and secretive in decision making, constantly infringing upon the sovereignty of member states, interfering in issues beyond its mandate, and increasingly seen as illegitimate. Sound familiar?

By: dunedweller

dunedweller — Tue, 02 Dec 2008 18:14:00 +0000

nibblybits: You're onto something - why don't each of the 3 companies present competitive proposals and the best of the 3 gets the bailout? Even though the auto industry is far-reaching and deeply woven into our economic landscape, the product they are currently stocked with is on its way to extinction. It simply doesn't make sense to keep all 3 companies afloat without major rethinking. It's like giving the horse-and-buggy industry a bailout when autos were on the horizon.

By: nathan7777

nathan7777 — Tue, 02 Dec 2008 18:09:37 +0000

Ford tells Congress it likely wouldn't need to tap the $9 billion bridge loan it's asking be held in reserve through next year and expects to return to profitability by 2011... . Ford tells Congress they likely won't need the loan, which will make Congress feel better about giving it to them, and once Ford inevitably takes it, they'll point to that likely qualifier and claim they couldn't have known. This is what you call "priming the pump", also known as plausible deniability. Wall Street has been using this tactic to successfully siphon off now trillions from the Fed. . I wouldn't mind all this spending if there was some coherent plan behind it all, but I've seen nothing of the sort. Congress just seems to be throwing money at everything they see, hoping that eventually they'll hit something that works.