Should the US bailout the big three automakers?

[Jamo]

In a word (or a few)...NFW!!!!!!!

They are threatening to go through BK, which means they will use it to get out of the union contracts...that's why the Democrats are pushing this (to protect the unions).

Let them go through BK and/or obtain investment from other mfgs. I was against the Chrysler loan a few decades ago, and I truly don't care if they paid it back...it opened the door to the failures of our corporate world to come begging ever since. Saving that POS made money for a fellow Armenian (Kirkorian), lowered the quality of Mercedes Benz and now rests in the hands of a private investment firm...who did we save it for? Where do we stop...airlines, utilities, big retail corporations, etc.? Isn't Macy's as much a fixture as GMC?

We're going to end up with a collection of British Leylands...bad products and private welfare for union retirees.

And BTW...1ntCobra, nothing personal...WTF with blaming the "fickle American consumer?" Toyota and Nissan came to the big pickup/SUV party late and are soaking up their losses, so why should we help the morons in Detroit for their bad choice of products? Sh!t happens.

OK...who's next, MS for bringing out Vista?

[Don]

Source: New York Times.com

November 18, 2008
A British Lesson on Auto Bailouts

By NELSON D. SCHWARTZ
PARIS — A faltering auto giant whose brands are synonymous with the open road. Hundreds of thousands of unionized workers with powerful political backers. An urgent plea for the government to write a virtual blank check.

This is not the story of Ford and General Motors, but British Leyland, a car company that went through £11 billion of inflation-adjusted British taxpayer money, or $16.5 billion, in the ’70s and ’80s before going out of business. All that is left of the company now are memories of cars like the Triumph, and a painful lesson in the limited effectiveness of bailouts.

“It’s all too evocative,” said Leon Brittan, a top official in the government of Margaret Thatcher, the free-market-minded prime minister who nevertheless backed the rescue. “I’m not telling the U.S. what to do, but the lessons of the British experience is don’t throw good money after bad. British Leyland carried on for a few more years, but they’re not there now, are they?”

Other experts are sounding the same alarm. “The British Leyland experience is a relevant and cautionary one,” said John Casesa, a principal in the automotive consulting firm Casesa Shapiro Group in New York. “The government got in the business of trying to make a winner out of a structurally flawed company. That’s the risk in the U.S. as well.”

Though Continental automakers have fared better than British ones, Mr. Casesa argues that the long history of government support in Europe made companies like Renault and Fiat strong players in their home markets, but not worldwide.

“With the exception of BMW and Mercedes, European automakers haven’t been globally successful,” he said. “Nor have they been hugely profitable.”

That comparative history is receiving new attention as Congress turns its attention this week to the fate of Detroit.

The British Leyland bailout remains the classic example of a futile government intervention. The tight cooperation between governments and automakers on the Continent has produced happier results.

For half a century after World War II, the French government was the majority stakeholder in Renault, and Paris still holds a 15 percent stake in the company. In the 1980s, the company received a bailout equal to nearly 4 billion euros, or $5.1 billion in today’s money. Now it is highly profitable — at least compared with its American counterparts.

Today, G.M.’s German subsidiary, Opel, is appealing to Berlin for help, seeking more than 1 billion euros in credit guarantees, according to Carl-Peter Forster, G.M.’s European chief.

Monday, Chancellor Angela Merkel of Germany said her government would make a decision before Christmas.

“It’s not decided yet whether these loan guarantees will become necessary,” Mrs. Merkel told reporters in Berlin after meeting with Mr. Forster and other management and labor officials.

“If these guarantees become necessary, those funds should remain within Opel” in Germany, she added, echoing a concern some Americans have expressed that any United States bailout money go only to American automakers.

So far, Asian companies have not complained that such a bailout would amount to an anticompetitive subsidy. But José Manuel Barroso, president of the European Commission, said last week that he thought an aid package for Detroit could be “illegal” under World Trade Organization rules.

That has not stopped European automakers from seeking 40 billion euros in loans from the European Investment Bank, ostensibly to help develop cleaner cars.

For Garel Rhys, head of the Center for Automotive Industry Research at Cardiff University in Wales, the trajectory of General Motors is reminiscent of British Leyland not only because of the former’s decision to seek aid to avert bankruptcy, but also for its slow, seemingly inexorable loss of market share. “Both had a history of being the biggest in their market but couldn’t adapt as they lost sales,” he said. “They couldn’t get customers back.”

Historically, British Leyland’s roots stretched back further than Henry Ford’s Model T. The company controlled 36 percent of the British market well into the 1970s, with mass-market brands like Austin and Morris and premium lines like MG and Jaguar. But rising competition from Japanese and German automakers, shoddy workmanship and a breakdown in labor relations brought the company to near bankruptcy by 1975, Mr. Rhys said.

Michael Edwardes, who took over as British Leyland’s chief executive in November 1977, recalled that when he joined, no one even knew whether individual brands were profitable. “It was a farce — no one knew what the costs were,” he said.

As it turned out, every MG the company sold in the United States resulted in a loss of $2,000 for British Leyland.

Wildcat strikes consumed more than 32 million worker-hours in 1977, and the company became a symbol of labor strife, with some employees walking out the door with spark plugs in their coat pockets and engines in the trunks of their cars, Mr. Edwardes said.

Mr. Edwardes immediately began reducing the company’s work force of roughly 200,000 — to 104,000 within five years — and closing 19 factories. He appealed to the Thatcher government for aid, arguing the money was needed if British Leyland was going to be able to afford to lay off workers while investing in new models.

Eventually, the government put up £3.6 billion, equal to £11 billion in today’s money. But the rescue did not do much to preserve British Leyland’s labor force or market share in the long term.

By the time it received its last government infusion of cash in 1988, Mr. Rhys said, British Leyland’s market share had slumped to 15 percent. British Leyland evolved into MG Rover, which was eventually acquired by BMW, then spun off, finally going bankrupt in 2005.

According to Mr. Rhys, just 22,000 workers remain at British Leyland’s successor companies, about 10 percent of its work force in the mid-1970s.

“It was a very poor return,” he said. “We felt collectively and nationally that we got our fingers burnt, and this was always used as a reason to avoid bailouts, both by Labor and Conservative governments in Britain.”

Mr. Edwardes still defends the government aid, arguing it preserved parts of the company that remain in business now — like Jaguar and Land Rover, which were bought by Ford.

Jaguar never made a profit for Ford, however, and was sold with Land Rover to Tata Motors of India earlier this year. Ford recouped only about half of what it paid to acquire the two brands, and is estimated to have poured $10 billion into Jaguar.

Despite the British experience, the case of Renault, which combined fresh money and new management in the 1980s, showed that government bailouts can be beneficial.

The French government help for Renault also came amid increasing losses for the company. But Mr. Rhys said that unlike British Leyland, Renault was able to use the financing to create new car models that were ultimately successful. That, along with tough cost-cutting by a newly installed chairman, cleared the road to profitability by the time the government began privatizing Renault in the 1990s.

If Washington does go ahead and help Detroit, Mr. Edwardes said, it is crucial that the government overhaul the management of the Big Three. “Throwing money at them isn’t enough,” he said. “They need money and they need new management. They need both, not one or the other.”

[G.R.]

NO WAY,NO HOW! Their damned CEO's and corporate robbers and the unions got them into this mess. Why should they expect the Gov't (the taxpayers)to fix their problems. If theyhave to go Chapter 11, then cancel the multi-million dollar bonuses to the top cadre and get rid of them replacing them with people that can get things accomplished, then ****can the unions, re-engineer their product offering, cut down on the waste...maybe then we'll see a resurgence of American industrial power.

Unions, IMO, have outlived their usefulness, at one time back in the '20's they helped the worker... today they are power hungry and a monolithic force in our political scene. The union bosses and in some cases stewards always get paid if they go on strike, not so the worker bees.

I've e-mailed our CO state legislators and governor on this issue as well as our senators and congress men and women....for all the good it'll do

[Ron AZ]

I have read all of these 'post' and find myself in agreement with almost everything that is posted. I have heard for years how the UAW contracts was 'killing' the automobile industry, I believe that time is upon us. 'The GOLDEN GOOSE IS ABOUT DEAD". The UAW needs to go.... along with all those large bonuses and costly retirements of top level executives.

I believe we need to help the auto industry and that will require a lot of CHANGES, which I also believe no one is willing to do, especially the UAW.

I enjoyed the video of the ford plant in Argentina, especially the last comment the commentator makes.

[jhv48]

The Democrats (that the vast majority of you all voted into power) will make sure that the Unions don't suffer, and that the big three get a much needed infusion of capital. Is McCain starting to look a little better to you yet?

Almost guaranteed to be a bailout of some sort or another.

It's British Leyland all over again. Those that don't learn by history are doomed to repeat it!

[mr bruce]

Yeah Let them F___in fail. That way. We can put 2- 3 million Americans out of work. Put them on unemployment insurance for a year. That should be cheaper for sure. Pay to retrain them. To do what I don't know. Maybe bartender school? There won't be much demand for high paying jobs when the economy is in shambles.

Take away those huge pension checks too. $1500 on average is way to much for Ma and PA. Let them crawl to the gov't and file for medicaid. That doesn't cost the taxpayer a dime right?

And All those stupid Americans that have succumbed to pre-existing medical conditions should be left cold. That way when/if they find new employment they can be denied medical because of that "pre-existing" condition. That is IF they find an employer that offers medical insurance.

Yeah those damned Americans don't deserve what they have. They're overpaid bums! They build crappy cars like the Ford Focus(37mpg) or the Chevy Malibu (33 mpg) or the Dodge Charger (27mpg) and the Corvette for that matter. What a gas hog. Each Corvette probably comes with it's own hole in the ozone layer.

Some of you just don't get it.

This can be fixed with proper oversite of the industry. They made Chrysler do it in 1979-1983. They can do it again.
I know everyone has BAIL- OUT Fatigue right now. And with good reason. But with the current financial crisis we're in we can't afford to make a mistake of this magnitude. It could trigger a catstrophe of epic proportions. Foreign governments are praying to God that we allow OUR manufactuing base to wither and die!

GO America!

[RodKnock]

Originally Posted by Jamo

In a word (or a few)...NFW!!!!!!!

Let them go through BK and/or obtain investment from other mfgs. I was against the Chrysler loan a few decades ago, and I truly don't care if they paid it back...it opened the door to the failures of our corporate world to come begging ever since. Saving that POS made money for a fellow Armenian (Kirkorian), lowered the quality of Mercedes Benz and now rests in the hands of a private investment firm...who did we save it for? Where do we stop...airlines, utilities, big retail corporations, etc.? Isn't Macy's as much a fixture as GMC?

And you can't compare Lee Iacocca to the current schmoe's that run GM and Ford. Chrysler actually paid the loan back plus interest and a small profit for the American taxpayer.

A guaranteed loan to GM and Ford? No way. I can guarantee you that Ford and GM will be back asking for more and they will never pay a dime back to the American taxpayer. Virtually, the entire product lines of both manufacturers have been bankrupt for decades. I've owed both and will avoid ever buying another again. Let them BK and reorganize.

Uh, except for the Ford GT or possibly a Corvette.