Bailout for automakers?

November 17, 2008

automakers

As Congress debates legislation to help struggling automakers, many Americans say they are uneasy with the plan, arguing that while it may save jobs, it would reward companies for pursuing bad business practices. Some even question whether automakers will be viable, even with support.

“They need to restructure. If they get bailed out they are not going to do it,” said Eric Smith, a paint contractor interviewed in Chamblee, Georgia, on the outskirts of Atlanta.

U.S. automakers say federal aid is vital to their survival, and there could be devastating ramifications for the broader economy if the sector is not stabilized.

“This is an issue of the whole auto industry, if that becomes under severe pressure, the impact on the whole U.S. economy will be devastating,” GM Chief Executive Rick Wagoner said in an appearance on a NBC-affiliated television station in Detroit.

Retired Gen. Wesley Clark says that a rescue of U.S. automakers is important both economically and for national security. In a New York Times opinion piece, Clark wrote that the U.S. auto industry has played an important role in successive military campaigns, from World War II to today, and its ability to continue to develop new technologies is imperative for national security.

Some are calling for executive shake-ups if it would ensure congressional backing for a bailout. “If it was the difference between getting this kind of support or not, obviously the management should consider resigning,” Carl Levin, a staunch industry ally, said on NBC’s “Meet the Press.”

As Democrats finalize a rescue plan, the question remains: should U.S. automakers be bailed out?

(Pictured above: G. Richard Wagoner (R), chairman and CEO of General Motors, testifies next to Robert Nardelli (2nd R), chairman and CEO of Chrysler, Alan Mulally (2nd L), President and CEO of Ford Motor Company, and Ron Gettelfinger (L), President of the United Auto Workers union, before the Senate Banking, Housing and Urban Affairs in a hearing on “Examining the State of the Domestic Automobile Industry,” on Capitol Hill in Washington, November 18, 2008.  REUTERS/Molly Riley)

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184 comments

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Will $25B enough to let the Big Three survive and come back? Don’t fool ourselves. There have been no short-term and long-term plans workable for a long time. The only reason we are considering the rescue plan is that we can not afford letting them down. The point is that $25B will not turn things around. $25B will just let us wait for several months to hear another amount needed. Special case needs special means to handle. Unfortunately, the very critical and best solutions will normally be put aside for political and regional(or group)-interest reasons until we are forced to abide by a natural and worse selection. This world needs visionaries with lest self interests in the businesses.

Posted by Juns Fuller | Report as abusive

I’m a proud American. I’m not proud of how this country wants to have its cake and eat it too. In our capitalist society, not only in business but in our daily lives, where over 40 million of us cannot afford health insurance, we accept that the strongest will survive. Detroit has for years been behind the foreign competition in quality and management. It is the reason why millions of Americans drive foreign cars. It would be a crime to bail out the inept domestic auto industry while millions of people in this country are lacking the most basic human rights, such as health insurance and affordable education.

Posted by G | Report as abusive

Oh, by the way, once these Gas Guzzling Hogs are cleared from Inventory, It’s time to learn from Honda. I drive a 2003 Honda Civic LX (with a 5 speed) It averages 36 MPG. I used to drive nothing but American for almost 30 years, I am sticking to Honda. As far as the UAW, you guys live in an unrealistic world. You are way overpaid vs. the average Manufacturing Laborer (By at Least 100%). Deep inside, you know this. You push for higher “EVERYTHING” due to watching the OUTRAGEOUS Profits your employers make.The American consumer keeps getting into longer and longer LOAN TERMS (60 and 72 Months) to pay the (Higher and Higher Prices) for your overpriced junk.
Since Detroits Housing Market is in the The Toilet, what happened to all of your outrageous Paychecks???

Posted by Zeppelin | Report as abusive

Mark, should we also negotiate with terrorists? That is what you are insinuating here. Let’s bail everyone out because we have become this Reckless push everything to the Max country. Because we are American we are under the ILLUSION that it is our God Given Birth Right to have anything we want. We are through!!! We are going to suffer GREATLY for the next 10 years, to pay for the last 30+ years of Reckless Abandonment. We are heading for another Great Depression, whether you think so or not. The New “Debtor Nation” is now owned or will be owned by the Countries Corporate America Advanced. How Ironic that China sit on $2 trillion of what was our Wealth… We Globalized the World, at our expense…

Posted by Zeppelin | Report as abusive

you know I have to believe there are Smarter people out there writeing a lot of these POST’S….It truely amazes me at all the ignorance there is….why do you slam the little guy makeing *$25.00* which is afair day’s pay for afair days wage. my husband, father in law father ect. all worked probably just as, or more than likely harder than most of you. There’s alot of you that do not even come close to working as hard AS THE AUTOWORKER’S AND NONE OF YOU HAVE GOTTEN INJURED AS THEY HAVE AND ARE NOW!(THANK GOD YOU DONT HAVE TO)! ALOT OF YOU WOULD NOT LAST THE DAY!!!! UNTIL YOU KNOW PERSONLY THE PAIN & HARDSHIP’S THAT COME WITH THAT BIG $25.00 AN HOUR…. I WOULD KEEP MY MOUTH SHUT!

Posted by Joanne T. | Report as abusive

It would be criminal to give the automakers money and a free pass. There needs to be some very strict restrictions put on the money given to them.

Management needs to be changed. They should be required to submit their plan to Congress as to how they will change their business plan and the steps that they will undertake. There must be penalties for them if they do not abide by the plan.

Contracts need to be renegotiated and they must bring themselves into the 21st century and make automobiles that people would actually like to buy.

Cars need to be better designed and to be more fuel efficient. Further, GM has spent over $1billion to lobby Congress each year. Are they going to continue with this madness. Why are we rewarding them for wrecking the US auto industry?

Madness is doing the same thing over and over and expecting a different result. They have been running that company into the ground for the last twenty years with completely unsound policies and bureaucratic thinking. Why are they being rewarded for their atrocious management.

Throw them out , without any perks and golden parachutes.

So…why are we not hearing people screaming about the lack of financial assistance from the OIL industry to the AUTO industry?

I mean, after years of outrageous profits and without ever an offer to help even the poor pay for their ever increasing cost of oil & gas; isn’t now the time for big oil to come to the aid of one of it’s biggest users, i.e. the U.S. auto industry?

Or…does “big oil” not care if the auto industry fails?

Do we (you-me-Uncle Sam) once again have to step up to the plate to pay for the stupidity and excesses of executives who care only for themselves?

Ned H.
Chicago. IL

No, they shouldn’t be bailed out unless the goverment will bail me out.I have to pay my bills and so should they. I would consider a loan with stipulations as to where the parts are made and where the cars are assembled. This could be done in such a way to create jobs and stimulate more exporting rather than importing things from other countries that put Americans out of work. The negative start for America and jobs was when a past President pushed a NFTA law through.

Posted by Ron | Report as abusive

The United states automakers should be helped.

First of all, regarding SUV and gas guzzling cars versus small cars is based on supply and demand. Look at 10 years ago, if everyone was thinking conservation, it did not show! Consumers purchased SUV’s and trucks because that is what the demand was! No body wanted small cars and they did not sell as well or obtain a good profit. The profits from these sales of SUV and trucks translated in distributed profits to all including me as automotive engineer working for a suppler. I used this money to purchase a house, buy furniture and distribute the wealth onward. Second of all, trucks and SUV’s are not going away simply because there will still be a demand for them. Think about it, if you want to go on a trip with the family of 4 or 5 are you really going to cram everone into a pint size car? or better yet buy two of them to make sure everyone can go on the same ‘s trip? Waste of more gas, money and a bigger carbon footprint. Family’s will purchase a truck or a suv no matter what. Also, keep buying Honda’s and Toyota’s. They set up plants here and most of the money is sent back to Japan. How come the U.S. cannot set up shop in Japan to make Ford Fusions, Chevy Colbalts or Dodge Nitros? Japan does not want it and they shut down thier ports to U.S. exports. Also, U.S. carmakers design, manufacture and ship a product within the United States. What else is left in the United States to design and manufacturing? Not much as lot of imports come from China and so forth. Just think about it.

Posted by Jim | Report as abusive

I’m not for saving the automakers, although I have heard some arguments that are very valid such as Gen. Clark’s which is as much a scare tactic as anything else.
Unions are easy to attack which I’m all in for… but there is also a deeper more significant problem than just the unions and that is heathcare. As of 2004 $1500 of every car built, by GM specifically, went to pay for employee healthcare. Now are the autoworkers crazy for wanting heathcare? No, but framing this issue in a small perspective won’t help us any. This is a multi-facetted problem stemming from high oil prices to unions.

Posted by Nathan Rockman | Report as abusive

No, they\’re dinosaurs and subject to extinction. I grew up in mid-Michigan, the heart of US automotive country, and witnessed these titans of arrogance first-hand my entire life. While the boomers and earlier generations collected fat wages and benefits even while not working (pension? what\’s a pension?) – their gen x/y children were left out in the cold. Our ideas, innovations and educations went to waste and were squashed by the greed and corruption of our elders. The jobs and ways of life these industries promised to us growing up never materialized, and for 30+ years these companies (as well as so many others) blatantly refused to acknowledge consumer needs and the technologies needed to strive forward into the future – while every single social and economic warning siren blaired shrilly in their smug faces.

Do they have a super-secret-awesome car hidden away that they\’re going to sell to us if we bail them out? No. They purposely and with malice squelched every idea offered by their peers, science and even their own internal units dedicated to research on the subject over the past 30 years. They spent billions suppressing new fuel efficiency legislation and with their ever-willing buddies in the UAW created a mess of their own industry. Let\’s ask them all: what happened to the steam-powered car? Yeah, I thought so.

When I graduated college I was forced to move out of Michigan to the American Southwest in search of work and a chance at a career – as the Big 3 offered nothing but grey skies and a bleak future to the generations now eating at the barren table they themselves set for us.

Bail out the Big 3? Why? Why not bail out the Vegas Casinos while we\’re at it? They also, without question, support millions of jobs in the economy at large and have taken a massive hit. The Nevada unemployment rate now matches Michigan\’s. No casino bailout? Then screw Detroit, too. Welcome to Free Market 101. Welcome, Boomers, to the sinking ship you were warned about for the last generation (or more). You made your bed – time to lay in it. Go ahead, gnash your teeth – goodness knows your children are. We can even all do it together – since we\’re moving back in with ya soon – ya know, since our houses have been repossessed and our educations were (apparently) for nothing. All thanks to this impressive economy ya\’ll layed out for us. Good job! Well done!

BTW: I am also a lifelong auto enthusiast. I have owned, restored, raced and enjoyed more grand-daddy (US) autos in my 31 years than most 50+ year old UAW members can boast. I have enjoyed this hobby my entire life. But I will also be the first to admit the technology \”stinks\” (at best) – and there\’s only one car I\’m \”happy\” to have in my driveway: my trusty Honda Civic. The rest are now, for all intents and purposes, several tons of scrap. Hey GM/Ford! I got some cars you can buy back from me for pennies on the dollar! Heck, I might even PAY you to get \’em outta my driveway.

No, no bail out. No way. Bad for the US, bad for the free market, bad for the generations who will be left holding the massive bill when the inevitable tumble happens despite any potential bailout money. Welcome to you New World Order. Oh? This isn\’t what you had in mind? Oh well. Suck it up and move on like the rest of us have had to. Let the Big 3 fall, their day of reckoning has come.

Posted by Joel | Report as abusive

$38,954,972

GM CEO’s compensation jumps 64 percent in 2007

http://www.companypay.com/executive/comp ensation/general-motors-corp.asp?yr=2008

Sure! Let’s bail them out.

Posted by Will | Report as abusive

What happened to the entrepreneurial spirit and the opportunity to build a business in America? Remember when businesses could rise or fall on their own merits? Even today, over 75% of new businesses fail within the first two years of their start-up date. Was the Federal Government there to bail out a bad idea? No. There is no question that men and women who have an “idea” or a “vision” and have invested, barrowed, and devoted a lifetime of sweat equity to make their dream a reality were aware of the risks and the rewards of their venture. The risks can be disasterous but the rewards can be great. At one time, the rewards didn’t include a “bailout” by the Federal Government to further failing businesses. If companines got big enough they could go public or issue bonds to entice investors. If companines were to survive they had to offer a marketable product to deminish the risk faced by the investor. The question to be asked is: shouldn’t it be the same for the auto industry? Currently, the leadership of the auto industry hasn’t provided a product that entices the American investor. Why would the Federal Government step in to prolong the inevidable and disrupt a system that has been in effect for over 150 years?

Let’s look a the poor union workers. If it were not for the captains of industry willing to face the risks of surviving a grulling education, building businesses and creating opportunities; union workers, especially those feeling so lowly employed and being abused for profit, would have never had the opportunity to work in the first place. Unfortunately, union members have relied on poor leadership that serves their own self interest to the point of “hell with the company” let them fail we deserve more. All at the memebers’ expense. Read Obama’s Audacity of Hope. Go to school. Get an education. Get a good paying job. Create a skill set that isn’t dependant upon a shop steward’s whims for employment and promotion. In many areas of the United States today, Chinese, Indians, Latinos, Japanese and just about every other ethnic group in America are here working hard for their chance to get family members educated and schooled in hopes of realizing the American dream. Families work hard late hours in 7/11′s, local laundries, landscaping, resturants and any number of menial jobs to support the education efforts of family members. Unfortuantely, the union mentality of our workforce starts with those first jobs; we have American born kids who wouldn’t think of taking a job at McDonal’s for $10.00 an hour because it is beneanth them. Nor will they spend the time to seriously apply themselves school or after graduation to obtain a better paying job. Prime fodder for the labor unions. The tenured union elite will be spend efforts unionizing these young people, preying upon them and guaranteeing them jobs from cradle to grave. All at the expense of some poor bastard who believed in the American Way of life, built a business and risked everything she had to reach her goals. Does she deserve to be bailed out? No; and most of her peers don’t expect to be bailed out either. But she should have the right to seek the best way she can to build her “widgit” with limited government interference and taxation without some self serving union boss closing her plant down all in the name union benefits.

Those on both sides of this issue need to open their eyes and walk in one anothers shoes. It is going to be painful. Pray to God our new president can provide the leadership we have been lacking. it is not red, it is not blue; it is an American problem. We need to come together to solve this huge delima.

Posted by Steve Smith | Report as abusive

I have a Maquilia foundry in Mexico a few weeks ago we were asked if we would do work for a newly planned Chrysler plant that will be built in central Mexico at a cost of 1.9 billion dollars. Why waste our tax money on companies like this that push work out of the US? GM built 3 times the capacity it needed in China, if they survive they will bring cars to the US eventually, made in China! The car companies treat there vendors horribly, predatory pricing policies that drive many out of business. Those that live by the sword should die by the sword..its there turn..dont help them until they are in bankruptcy then the government can back the warrantee’s and help the leaner company they must become.
Thanks,
Dean

Posted by Dean | Report as abusive

Absolutely not. They need to restructure, and will not do it unless required. The business, and the economy, will be healthier in the long run. A bailout will only preserve a decayed system.

Posted by Sue Young | Report as abusive

The ignorance I see in some of these posts is amazing. You call for the collapse of the big 3. If that happens just wait and see how much worse we will be. I’m for a bailout of the big 3 but with conditions. I feel management needs to be replaced with fresh individuals with fresh ideas. I’ve always driven a GM car and I’m proud to say that I buy american. The ripple effect of a big 3 collapse will be far reaching and for the ignorant ones that say collapse just wait until the ripple gets to you.

Bail out the auto companies? Absolutely not! Shouldn’t be bailing out any company, including the banks.

Posted by Hugh | Report as abusive

No Bail Out – No Way!

Bottom line: GM, Ford and Chrysler make horrible cars.

I switched to Toyota after 20 years of trying out Chevys, Chryslers, etc. AND spending many hours in and out of dealerships for repairs.

The quality of the Toyota and Honda cars put our American autos to shame!

Build a crummy product – no customers! No Bail Out!!

Posted by Cat Smith | Report as abusive

Shame on all of you naysayers who pay lip service to refusing help for GM. It was the greed of some of the real estate and financial community that has brought us to this extreme difficulty in money flow. We gave the financial industry money and they have parties, vacations and increased dividends with our money! Have most of you forgotten that it was the auto industry that gave up some or their profits to the banks after 911, by introducing 0% financing to jump start the economy after the Twin Towers fell? The real estate and financial monoliths did not do their share to ease that burden and yet we bailed them out, courtesy of two of their own: Paulson and Kashkari. That is like asking looters to watch your property during a natural disaster. If GM is allowed to fail, then all of the millions of people who supply GM and their billions of people who supply them will also fail. This is the core of our economy whether you like it or not. Letting GM down will be worse than any natural disaster or terrorist act, and helping GM survive deserves to be considered a national state of emergency.

Yes, sell ‘em.. to the Saudi’s.
UK just sold a big chunk of one of the biggest banks to the oil rich.

Posted by Sueco, London | Report as abusive