Should the US bailout the big three automakers?

[cobra bill]

Originally Posted by Jamo

Edited...presumably cobra bill has gotten the message.

Just getting back on Jamo, so come on show me the love!

[Jamo]

Originally Posted by cobra bill

Just getting back on Jamo, so come on show me the love!

Sure thing.

[Ron61]

Here is the latest report that was just posted this morning on what they are doing. It looks as if they may help them, but not to the extent that the auto makers want. And I do like the part about it being a loan and they have to pay it back. However I felt the same way about the bail out of Fanny Mae and the others.

http://www.reuters.com/article/busin...e=businessNews

Ron

[What'saCobra?]

Most everyone feels somewhat disturbed that workers negotiated in good faith for benefits and salaries that eventually turn out to be re-negotiated. But, such agreements might become ineffective due to various factors not truly within worker control. Military service, market forces, financial results, church service, health services, legal advice, consultant 'recommendations' and much more are, unfortunately, subject to error, revision and adjudication. Everything is subject to a lousy economy for whatever sequence of obvious or obscure events including war, pestilence and incompetency, just to pick a few.

For instance, in trying to correct the falsely high valuations of assets and shares held by Enron, which when discovered tipped the entire company upside-down into the proverbial toilet, the Accounting Standards Board and AICPA, after considerable hand-wringing and hearings at every level of society including Big Brother, public audits became subject to marking-down of over-valued assets to their current market values in order to issue a "clean opinion" with no scary qualifications. The quick phrase to describe this rule became "mark to market". It typically marked valuations down, not up.

The previous asset valuation method was at COST... how much did you pay? How long ago? Still performing? Not a bad old method for several hundred years or so, since the Italians (!) invented double-entry book-keeping to reduce theft and divide authorities/responsibilities. But, probably un-intended was this effect of this rule on banking audits, when lousy asset-based mortgage paper, still properly performing within normal payment policies, was required to be marked down with some sort of guess of the current market price. AND, if the market value continued to drop (have you looked at real estate prices lately?), the bank, mortgage bank or lending institution MUST continue to drop the book entry accordingly.

Overnight, bank balance sheets were bleeding in the streets with loans outstanding far in excess of their asset holdings valuations. This threatened not only the viability of the bank as a going concern and the legality of their State or Federal Charter, but made continued business as usual actually a federal offense that would nullify their FDIC insurance of depositors money. As certain elements of the "public" became aware of these ratios, they withdrew their moneys from the risky bank. The Fed Reserve watched these funds each night and stepped in as they chose to force various mergers, sales and closings.

Presuming banker honesty (ahem!), this was a huge restructuring of the entire banking profession, not according to well-defined and well-adjudicated agreements and laws. Everyone's career and retirement plans have been severely adjusted downwards, mostly. (Of course, dem party/family compliant FNMA and Freddy mac executives mostly have not been asked to return their bonuses based on fictitious profits (volume based sweet-heart deals).)

When certain un-American entities (Soros et al) decided to short-sell mortgage bankers big time, the cards fell on the floor, as planned.

Given all this and more, putting off the unfortunate isn't in most of our interests. Buying FORD shares may be a brilliant move. i hope anyone makes a bundle on it. But, i'm not personally that brave. i would rather bet on GM or maybe a newly merged FORD/Chrysler. But, i would even rather skip them all at the moment.

[Jamo]

Damn good explanation, Whatsa.

What cracks me up is how Soros finances the Democratic Party and then bails on America. May very well be the worst economic criminal of them all.

[Tom Kirkham]

If the Big 3 and the Financial Institutions are too big to let fail, then:
1. Why did the Government let them get so big?
2. If a company is "too big to fail," why aren't they being broken up?
3. Why is the Government letting them get bigger (Bank of America merging with Merrill Lynch, GM in merger talks with Chrysler)?
4. What other companies are "too big to fail" (probably Lockheed, and Boeing)?
5. Is "too big to fail" really "too big to save"?

[Bartruff1]

Originally Posted by Tom Kirkham

If the Big 3 and the Financial Institutions are too big to let fail, then:
1. Why did the Government let them get so big?
2. If a company is "too big to fail," why aren't they being broken up?
3. Why is the Government letting them get bigger (Bank of America merging with Merrill Lynch, GM in merger talks with Chrysler)?
4. What other companies are "too big to fail" (probably Lockheed, and Boeing)?
5. Is "too big to fail" really "too big to save"?

The financial inst got to big to fail because of a lack if regulation, your regional bank is not failing because they are for the most part regulated by the states. The investment banks were allowed to leverage at 40 or even at 100 to 1. The US has the 41st most stable banking system in the world, behind Namibia !! Canada, the most regulated, is the most stable. There are other reason's ...short selling, loss of the up tick rule, hedge funds, etc...but in the end, a lack of regulation. The Auto's got that big because of competition, at one time there were more than 100 automakers (just like snowmobile makers ect) and the weaker ones were allowed to fail. Yes, they have made mistakes, the same mistakes they were making when they were selling 17 million cars a year. Now because of the lack of credit and the previous high cost of gas they are in a bind and are selling 10 million. It would be foolish to let them fail, I just hope they give them a large enough loan so that the Gov of Mich. can get that fricken pimple or whatever it is off her cheek !!

[vanoochka]

[khansmith]

A little off topic but.....What surprises me is that the government was so quick to give out $700B with a blank check and no accountability (heard on NPR last week that $350B has been spent but they don't know where) and now at least there is somewhat of a review of a plan. Don't get me wrong, I don't want to bail them out (loan maybe) but I am still fuming about the blank check that was written for the big ole bail out. Where was the plan from the lenders and how will it be reconciled?

[Bartruff1]

Originally Posted by khansmith

A little off topic but.....What surprises me is that the government was so quick to give out $700B with a blank check and no accountability (heard on NPR last week that $350B has been spent but they don't know where) and now at least there is somewhat of a review of a plan. Don't get me wrong, I don't want to bail them out (loan maybe) but I am still fuming about the blank check that was written for the big ole bail out. Where was the plan from the lenders and how will it be reconciled?

You are absolutely right...that's what friends are for...and in 6 weeks or so, there will be a new set of friends . The hypocracy is just amazing....

[Don]

Source: AutoWeek Dec 5th

" Taking a page out of the Obama playbook, Ford is appealing directly to the American public with a new Web site titled "The Ford Story"--complete with YouTube videos and details of its future plans--as it tries to build its case for part of $34 billion in federal loans.

With Congress appearing to possibly warm to the idea of giving loans to the Detroit 3, the new site tries to answer many questions Americans have about the state of the industry, how it got into its current predicament and how it is moving forward "

http://www.autoweek.com/article/20081205/FREE/812059984

Could not copy/paste and get the direct web link to work , but using The Ford Story as the search term will work

http://www.fordvehicles.com/thefordstory/?searchid=426441|28125566|205373347

[Tony Radford]

They know where the $350 Bln went. They're pumping it into the stock market during the last 10 minutes of trading on the days when the market is tanked. It's called the Plunge Protection Team. Google it. It really exists.

[Bartruff1]

Consider that there are BILLIONS of shares traded everyday by MILLIONS of individual traders worth TRILLIONS of dollars...each of those sales require cash or deposits up front....NO ONE can move the Market in any direction for even one day. Now, having said that, it is possible for Hedge Funds ...by ganging up on a individual stock can make that one stock move (usually down) by leveraging options on shares they don't actually own and this can effect a segment of the market for a short period of time. It is true that the market is full of sharks but no one group or government can move the entire market by buying or selling. The Fed can change rates and effect the market, but that is a different subject. Buy low sell high get rich buy Cobra's

[Sharroll Celby]

I wonder if this would work: ALL the car dealers have a "third-off" on MSRP sale on EVERY car on their lots/in their inventory. Two-thirds of the price is better than ZERO money on an unsold car!
This would do a few things: clear the (as of now) slow-moving inventory; give the auto manufacturers some cash to implement some changes that they so dearly need to make; it spreads some money around at the retail end, which pays for salespeople, mechanics, service writers (down the road); and MAYBE everyone in this "chain" can spend some money elsewhere, thus "helping out" many people in other industries.

[Bill Bess]

My two cents..let them fail!

Let the UAW's over priced workers get a job at Toyota or Honda for $15.00 per hour. Let the CEO's find other industriy to pillage, better yet put them in jail with OJ.
Don't worry the auto industry will get the money from you and me one way or another and they will never pay us back..the Dems. will make sure of that.

Bill

[Ron61]

Bill,

For the most part I agree with you. Overpaid, workers who don't care about the quality and CEOs whose only thought is how much they can pocket have been the big problem in my opinion. Instead of listening to the people and building quality cars that people want and can afford it has been more of a here is what we will build and you will buy it or not. And there aren't any more Lee Iacocca's ( Spelling ) to pull them out like he did Chrysler back when they borrowed money from the Govt. I think he paid it back in less time than they were allotted. But I do hate to see no more American made cars. Get rid of the overpaid people, build quality cars that people like and want, and price them reasonable and once the recession is past, I think they would be ok. I was just reading that Dodge is still going to build that Viper even though they are losing tons of money on it and they aren't selling hardly at all.

Ron

[puppster]

Just a thought about all of the people working directly for the auto industry (me included). I can only imagine what this country would be like when industries like the automotive aftermarket, and the replica industry are reduced to just a handful of offerings, when you can no longer buy a brand new 427 SO for your Superformance, or Roush no longer builds crate motors for the public (if anything at all), and the cheaper high volume kit manufacturers who prop up the whole industry, are gone. What will it be like? Because the truth is that if the US auto industry goes down, the business of aftermarket toys will take a huge hit with disposable income across the country severely reduced.
I ponder questions like this, because I have always been a true "car guy". I went to college to become a car designer, and have worked for 15 years in the auto industry because of my love of cars. I have made the Motor City my home, and have started a family here. Automobiles have been and always will be a major part of our lifestyle. Today I consider leaving the industry that I always thought I would be a part of. I wonder what the future holds for my family, as I realize I may never afford owning another muscle car, fulfill my dream of building a replica with them.
I know that the things happening today in this country will affect me while I work for the Big 3, but I also know that I will feel the affects just as much if I leave the Motor city to pursue some other career. Have those of you who say you want to see the industry go down, considered how it will affect your lives? Because I too am opposed to my tax money going fix problems created by greed, but I still wonder if we will like the alternative.

[Dan40]

puppster,



I agree with what you are saying, IF, the auto mfgs. were to disappear. It COULD be a calamity. And for every facet of our economy, not just auto related. But that is the "SCARE TACTIC," that Detroit is trying to use. They actually said that if the bailout money is not paid, GM would be gone by January 1. THREE WEEKS? If I were a congressman I would have adjourned the meeting at that point, Telling them to get out and stay out since we do not negotiate with terrorists.
Bankruptcy laws contain many levels of protection for companies. What bankruptcy laws do not contain is registered voters that are UAW members.
That is the only thing our politicians are considering.
If bankruptcy protections did not work, THEN would be the time to consider bailouts. The big 3 are trying to hitch onto the credit crunch as the root of their problems. That is a lie, the credit crunch is simply the final exposure of their decades long mismanagement. They have been operating on the business model, "We lose money on every sale but the volume makes up for it!" for 20 or 30 or more years. Now they get exposed by the lack of volumne. The big 3 are not good investment risks, They are not good credit risks. They HAVE already been rejected by the people that are in the loan business. Congress knows nothing about the loan business [or any other], they are the last to approve a loan to anyone.
Imagine someone you barely know comes to you for a loan. A HUGE loan, more than you have!
They tell you that they are broke.
They tell you they owe billions to others in front of you.
They tell you they have no idea how they will pay you back or even IF they will pay you back.
They tell you their credit rating is at 0.
AND, THEY TELL YOU, YOU WILL SUFFER IF YOU DON'T GIVE THEM THE MONEY.

Who wouldn't jump on that deal?

Does anybody have any experience loaning money to someone with bad credit, huge debt, no income, no plan, and a horrible history?
How did it work out?

Bankruptcy, with a complete overhaul of ALL their business plans AND a complete change of management might be the best [and maybe only] thing to save the US auto industry.
We have decades of experience of knowing that giving people and institutions money they don't deserve and haven't earned, doesn't work!

Dan

[Keithc8]

You are exactly right about the Democrat congressman and the money they receive from the UAW. All of these people need to learn how to work and make the same money as other peolpe in other industries.
I know for a fact that they could fill those jobs in one week at 15.00 to 20.00 and hour. They have all made to much money and agreed to way to much compensation for way to long. File bankruptcy and then reorganize like many other companies have. They say this is not a option but I do not know why.
The unions have way out lasted their need to exist. They are not needed anymore. Most of the people that work at these plants work a lot slower than the avarage American worker for a lot more money. It takes way to many of them do the jobs that are required but that is the union way. You better not work very hard and make the rest of us look bad. The job banks and other stupid stuff they have to pay for is crazy. No one could stay in business with the pay scale and benefits that these guys have.
America better wake up and get of its ass and go to work because we are getting pretty lazy as a whole. I was taught that if you wanted something you worked harder and smarter than the other guy and you would be succesful.
If there is a demand for more cars someone will come along and do it better. They will buy the plants and get new workers and get the job done if there is money to be made. Last time I checked this was a capilist country and the Big Three have had their heads up their asses for 20 years and gotten raped by the UAW. Now they want us to pay for all of the mistakes and keep paying all of them these over priced wages. They need more like 150 billion to come out of this deal and we are just wasting tax payers money with bull **** loan that will never be repaid because they will go out of business anyway.
Someone is going to have to go in and tell the Big Three and UAW that this is the way it is if you want any money. You will structure yourself after other modern successful companies with similiar pay scales. Move them all to other states with no unions and they will maybe make it. I want them to succeed but in the right way. I have never purchased a foriegn car and came close this last time but I am a die hard American and try to buy American. The American car companies can not compete against the foriegn car companies the way they are now that is for sure. You would have thought these idiots would have seen this coming.

[sparks]

That makes sence, pay the workers $15 hr move to the south and live in a real nice trailer! Then let the execs build there 10mil. $ homes....Great idea! Its the engineers and execs who decide what equipt. the plant uses, and will determine the quality of the product. I do agree that the UAW contracts def. need some revamping. Its always the dems fault, GW did such a great job(not). Yes the uaw could work alittle harder and produce more cars a day but what good would that do if there not selling. Maybe if GW didnt f**k things up so bad we wouldnt be in the situation were in.