More Taxpayer Bailouts...

[GrayMatterWife]

Now we're apparently going to be paying for MORE incompetency by corporations.

Pelosi is in talks today to give to the auto industry another $25BB to prop them up. An industry that functions, pretty much, to pay for its pension plans. Now, those pensions plans will be paid with tax dollars. I am paying for someone else's retirement, while I am trying to save up for my own. It's corporate welfare. CORPORATE welfare? That's exactly what this is, under the guise of "saving jobs." "Saving" them for what? To buy enough time for the companies to turn themselves around? Please, who are we kidding here. Absolutely nothing about the internal economics of the American auto industry suggests that this is possible, given their debt obligations. This is so myopic that it's logic-blind.

This is silly and will solve absolutely nothing. Unless the American auto industry starts producing more competitve cars, we will be propping them up forever. (For example, Amtrak...) Why are we subsidizing an industry that cannot function in the black? And what's next...oh, wait, I know: the airline industry. It would be cheaper for the American public to allow these companies to go into bankruptcy (which is what happens when companies can't be profitable) and then let the pension obligations be paid for by the PBGC (also taxpayer funded, but at least it's not an additional, short-term-only solution, and the money would be much better monitored by the PBGC than by the people who are running the American auto industry into the ground).

Re: More Taxpayer Bailouts...

Absolutely nothing about the internal economics of the American auto industry suggests that this is possible, given their debt obligations.

ITA. Time for this gravy train to come to a screeching halt.

[SuzySunshine]

Re: More Taxpayer Bailouts...

I agree, free market competition is exactly that - if you can't compete get out of the way. I get that the government is trying to save these jobs but there has to be a better way.

[DCJenn]

Re: More Taxpayer Bailouts...

Actually, the automakers have had their hands out since about August, but it got lost in all of the OTHER bailouts we have to deal with. I have no problem with the free markets actually being allowed to work- I mean, really- if no one wants to buy your product, then move along and either make stuff people do want or make something all together different or stop making stuff all together.

What I didn't realize though is how entrenched the auto industry is in all kinds of ways in all kinds of places throughout the US. I don't know how I feel about the widget manufacturer in Ohio going out of business because Ford, GM and Chrysler are going out of business, too. Part of me thinks well, WIdget boss you whould have thought about that before you signed the contract with the Big Three. The other side of me says Podunk (OH, TN, SC, etc.) would be delighted to have ANY industry at all since things like the furniture manufacturing and nearly the entire apparel and linens industries have already gone overseas.

Which then leaves yet another small town with no jobs. or a lot fewer jobs anyway. and then those people need to go on unemployment, and some will need medicaid benefits and the stores and services jobs will also dry up because who needs a pizza or a dye job when you don't have money to pay for it.

We're screwed no matter which way it goes. Either we bail them out now, or we bail their employees out later. If we go with the latter, I hope that long-term re-training programs are a part of the package because if all you know how to do is make widgets that no one wants, you're screwed too.

Jenn

[GrayMatterWife]

Re: More Taxpayer Bailouts...

What I didn't realize though is how entrenched the auto industry is in all kinds of ways in all kinds of places throughout the US. I don't know how I feel about the widget manufacturer in Ohio going out of business because Ford, GM and Chrysler are going out of business, too.

Yep. In the bankruptcy world, these companies are called collateral bankruptcies (or, less respectfully, "collateral damage). It is a bankruptcy that happens to a smaller company that is significantly or completely dependent on one client, a mega-giant, that goes into bankruptcy then rejects (as is allowed through the chapter 11 process) its executory contract with the smaller entity. That executory contract rejection, complemented with often a pennies-on-the-dollar payout on prepetition debt to the smaller entity, results in the soon-to-follow bankruptcy of the smaller entity. It is a risk that companies take by being significantly (or completely) reliant on a contract (services or goods) relationship with a mega-giant...especially when the ordinary course terms of performance do not require a net-30 payment.

It is sad, but the collateral damage is not an economically viably reason to prop up a company with no legitimate prospects for rehabilitation or reorganization.

Re: More Taxpayer Bailouts...

I haven't read articles on this closely...yet. I noticed that one talked about the major drop in demand for new cars being the problem. Really? I think that is just the nail in the coffin. I suppose an argument could be made for the drop in demand being due in part to credit availability but the core issue is how the businesses are run and the pension and retiree healthcare.

[ladymoreta]

Re: More Taxpayer Bailouts...

I was 100% against the financial sector bailout, but I like a good argument, so I'll play the devil's advocate say that I think this one is a little less ridiculous. Only a little...

I think that manufacturing jobs that provide good benefits are necessary to a healthy economy. Unfortunately, not everyone is capable/willing/interested in getting a college education, and we need better jobs for those people than the service industry has to offer. If more people had good blue collar jobs, we might not "need" the government to spend so much money supporting people.

The problem is, manufacturing companies in other countries don't provide the kind of benefits that the United States auto industry does. If the United States decides to help the auto industry, I would rather see it raise taxes/fees on importing vehicles from other countries, rather than just writing a blank check. Granted, that would raise prices for us, but it would provide good jobs with health care and retirement benefits to a huge number of citizens. If they did the same for other manufactured goods, we could see a dramatic reduction in the number of people who need government assistance, and our companies could have the money they need to get ahead instead of just trying to keep up.

Voila - ladymoreta's theory of Trickle Up®

[fluffhead]

Re: More Taxpayer Bailouts...

So today I heard about the craziest bailout yet on the news...
here in CT, you can "lock in" a heating oil price before the winter, if you anticipate higher prices. Well, with lower crude prices, those customers who "locked in" are going to be paying alot more for oil this winter (though you can escape the lock in by leaving your company for a small sum...but the story didn't mention this)
Anyway, the oil companies want federal loans to help them buy oil at cheaper rates from their suppliers, rather than the high prices at which they locked in, so they can let customers off the hook with the lock ins.

Note that the whole "locking in" thing is a gamble to begin with.

Say, I went to Vegas and lost $2500 on the craps tables. Do you think the federal govt can bail me out?

(no, I didn't really lose 2500 playing craps).

[PrincessFiona]

Re: More Taxpayer Bailouts...

I 'get' that there is collateral damage when industries like the automobile top 3 go down the tubes, but welcome to the free market that the republicans have screamed for for years. So the top 3 go bankrupt. This is America. What would stop someone from coming up with a few brand new companies and developing cars that people actually...WANT to drive? Maybe a company would come forth that would put a brand new face on US cars by creating vehicles that are quality construction, use less gas and are generally speaking BETTER cars that might even be successful exports.

As it is, why prop up these losing companies? We have a reputation around the world for creating low quality automobiles, so this is actually an opportunity: out with the old and in with the new. I'm sure the widget makers can team up with the new industry too.

[PrincessFiona]

Re: More Taxpayer Bailouts...

So today I heard about the craziest bailout yet on the news...
here in CT, you can "lock in" a heating oil price before the winter, if you anticipate higher prices. Well, with lower crude prices, those customers who "locked in" are going to be paying alot more for oil this winter (though you can escape the lock in by leaving your company for a small sum...but the story didn't mention this)
Anyway, the oil companies want federal loans to help them buy oil at cheaper rates from their suppliers, rather than the high prices at which they locked in, so they can let customers off the hook with the lock ins.

Note that the whole "locking in" thing is a gamble to begin with.

Say, I went to Vegas and lost $2500 on the craps tables. Do you think the federal govt can bail me out?

(no, I didn't really lose 2500 playing craps).

Seriously....unbelievable. I lost a lot of money in the stock market and on my house. I want a bail out too. Hey, I also thought my college degree would be a good investment and I'd be able to earn a lot more money...I want bailed out of that too. Ummm...my bottle of rum is a little low..do you think Uncle Sam could fix that too?

[DCJenn]

Re: More Taxpayer Bailouts...

My point thought is that the immediate result of the widget manufacturers going down with the Big Three is that it will pull us even deeper in the hole.

More foreclosures, more personal bankruptcies, more Welfare families, etc.

Do I WANT to prop up the Big Three? NO. I think the UAW and the Big Three honchos all should be made to flip burgers in the company cafeterias to ensure that every single person that they have collectively put out of work has a hot meal once a day. and they can keep exactly what the lowest paid union scale worker makes. and they have to take the rest of their paychecks and putit toward their employees. (although I think the Ford guy only takes a dollar a year in salary)

The writing has been on the wall that American car manufacturers have totally lost their competitive edge and partially because they're devoting bajillions to their retirees. But then again, those employees held up their end of the bargain- they worked for 30 years or whatever w/ the understanding that when they retired, they'd have a pension and healthcare benefits.

I don't see any good way out of any of this mess.

Jenn

[PrincessFiona]

Re: More Taxpayer Bailouts...

I agree partially with you Jenn...particularly that there is no good way out...but I think propping them out just delays the inevitable and costs us money at the same time. If we are going to prop them up, then we should be able to demand that they improve the quality and efficiency of their cars drastically. Why pay to invest in poor quality crap?

Maybe the govt. should just prop up the widget manufacturers instead. :huh:

[GrayMatterWife]

Re: More Taxpayer Bailouts...

My point thought is that the immediate result of the widget manufacturers going down with the Big Three is that it will pull us even deeper in the hole.

More foreclosures, more personal bankruptcies, more Welfare families, etc.

Do I WANT to prop up the Big Three? NO. I think the UAW and the Big Three honchos all should be made to flip burgers in the company cafeterias to ensure that every single person that they have collectively put out of work has a hot meal once a day. and they can keep exactly what the lowest paid union scale worker makes. and they have to take the rest of their paychecks and putit toward their employees. (although I think the Ford guy only takes a dollar a year in salary)

The writing has been on the wall that American car manufacturers have totally lost their competitive edge and partially because they're devoting bajillions to their retirees. But then again, those employees held up their end of the bargain- they worked for 30 years or whatever w/ the understanding that when they retired, they'd have a pension and healthcare benefits.

I don't see any good way out of any of this mess.

Jenn

I agree with you 100%. It is going to be devastating for the auto industry, the American taxpayers, the State of Michigan, and all the smaller companies and their employees (everything from goods & service providers to the waitress at the diner across the street from the factory). And it is the people who worked a 10-hour shift six days a week for thirty years that will feel the brunt. Their children will not be able to work for the same decent wage in the same factory they did. Their houses will be worth less as their communities decline.

The ripples will reach far and wide.

It is a reality that no Presidential candidate was willing to say or 'fess up to--because it is a hard truth that no one wants to hear. It makes you look unsympathetic and not "one of the common people" to admit that people are going to lose their jobs and things are going to get worse before they get better.

[DCJenn]

Re: More Taxpayer Bailouts...

Let's just say that there are compelling reasons why the cars in MY family are or have been:

2007 Toyota Yaris
2006 Audi A3
2003 MINI CooperS
2003 BMW M3
1999 Honda Accord

I had a 1997 Saturn that I did really like until the electrical stuff died- and I replaced it w/ a newer Saturn which was almost immediately replaced by the MINI.

I won't even consider an American car, and the companies that have been purchased by American car companies have gone to crap, too- i.e. Saab, Jaguar, etc.

I have NO problem letting the Big Three go under as long as EVERYONE who advocates letting the market do it's thing remembers that the ripple effect is going to be huge, and long-lasting and VERY expensive.

Jenn

[PrincessFiona]

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I just wonder if we could try and consider what the ripple effect would be and then invest money and resources there instead. If we have to pony up the 250Billion, I'd much rather see it go for job retraining and unemployment etc for those affected than to prop up a failing industry. :huh:

But regardless of what we do, the ripple will be huge. I think we're just kidding ourselves if we believe that we can keep throwing bad money after good at these problems and improve things. How would the money benefit the car industry? The quality of automobiles they produce is bad. People don't have the money to buy cars. What's next? Will we start sending checks to people so that they can buy the cars? :huh:

We were driving through town this weekend and noticed how many car dealerships we have here. It seems impossible for the economy here to even be able to support this many dealerships. There will be ripples. There are ripples. Just like in real estate, businesses will go under and communities will be reshaped.

What did Obama say?

That's the true genius of America: that America can change. Our union can be perfected. What we've already achieved gives us hope for what we can and must achieve tomorrow.

We can build a new and better automobile industry. Change can be painful....but ultimately, it is time for the car industry to change the way it does business and become competitive in the world again. Out with the old...in with the new.