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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I don’t really agree with saving the companies. They couldn’t make money in the best of times so what’s propping them up going to do? But I feel we have to. Imagine the impact to the economy. Imagine another 2-3 million people with decent paying jobs being out of work… bad news, unemployment poverty of epic proportions, death of towns, separation of families… What does need to happen is that the sweeeet deals that these workers have been riding $70-100K per year to work on a factory line, mad benefits, pensions, overtime they gotta go simply. Auto workers union strong arm tactics gotta go. Simply doesn’t make sense anymore.

Posted by J Tirmandi | Report as abusive

The automakers knew they were in trouble long ago & yet,
while losing money, they kept on giving their ceo’s & top
executives millions & millions of dollars in bonuses, which is inexecusable. This is true of just about every enterprise that asked for bailout money. I know there will be a tremendous & awful ripple effect if the government does not step in. However, there must be a way to retrieve some of the bonus money that was given to these top executives.

Posted by R Citron | Report as abusive

I left GM almost 40 yrs ago because I could not stand to make poor quality products. They would ship a car to a dealer and leave him with the problem to fix. It has improved since then but they still have their mind set on large vehicles. Wtihout a quality small engine and an appropriate light weight body, the Big 3 will not be competitive. My son was an engineer for Cadillac Hamtramick. When we would talk about automotive he reminded me that…. “I should not be familiar with his present design, assembly, etc. problems. What he was saying is that the system has not changed in a generation. Detroit’s day has gone. Lope off their heads and get on with a new day and design!

Posted by boobyprize | Report as abusive

Bailouts

Bail out the Student Loan People.

If you bail out the Student Loan People and remove the disgusting debt, then they cn stary buying stuff again, including cars.

Yeah, Trilion dollars for the gambling bankers, and the opportunity for bankruptcy. But no money for the people that invested in education and only DEATH can get you out of it.

Cancel the STUDENT LOANS and free-up Amerian SPIRIT, millions of dollars, and happiness from suffocating debt.

A few points…

Many of you here like to bash American cars, saying they’re horrible because you owned a bad one 20 years ago. Obviously you haven’t read recent critics reviews (see Consumer Reports…Edmunds…anyone) that indicate that many of them run with the best.

And no fuel-efficient American cars? Hello…all make fuel-efficient small cars that meet or eclipse the fuel efficiency of the Civics, etc. that some of you seem to think are so unique.

Instead of bashing American cars, why don’t you educate yourselves instead of regurgitating what mommy said 15 years ago.

Also, those of you in pursuit of “fairness” should research how many jobs the industry provides, and then think for 2 seconds about the effect its collapse would have on your lifestyle.

Posted by Andy | Report as abusive

Give the auto workers union a federal loan to buy the automakers at distressed prices, the loan to be paid back by payroll witholding from the rank and file. Then they can negotiate with themselves! Also, try modest fiscal incentives for them to make competetive and responsible cars. Vehicles are a huge import item, and if we don’t slash imports it’s just possible that you’ll be blowing your nose on $20 bills because you don’t have enough $20 bills to buy a box of tissue!

Posted by Kurve Ball | Report as abusive

I think a mix of the two proposals should be considered. The US auto makers desparately need to reorganize, replace management and corporate boards. The required change in culture can only hapen from the very top! On the other hand, just allowing them to enter chapter 11 runs the grave risk of their markets disappearing altogether. After all, unlike the airline industries which are protected from foreign competition through ownership limitations, there is plenty of Asian and European companies to fill the remaining void. To prevent a total collapse and dump another 2 to 3 million people onto the unemployemnt role, the government should remain the lender of last resort in the case that the private sector will not step in with debtor in possession financing to assure thatn companies can continue to operate during the reorganization process.

BAIL THEM OUT! Wouldn’t it cost more in the long run through unemployment, food stamps, medicaid, not collecting income taxes, not collecting sales taxes, list goes on and on!

Posted by Lorenda | Report as abusive

I’m generally against the bailout. I don’t see why we should reward companies with bad business practices. The Big 3 for too long have been dinosaurs unable to keep with foreign competition. Let them go into bankruptcy and restructure. It worked with the airlines, why not the auto industry?

I think for the Big 3 to be successful, they’ll need to stop letting the unions have so much power. Unskilled American workers demand high wages and cushy benefits just because they were born in the US. Foreign workers will do the same job for much less. However, the unions have been dragging down the Big 3 for too long. American workers to get the skills to compete in the global job market. The Big 3 shouldn’t pay a premium to Americans with a sense of entitlement.

Posted by CJ Burgbacher | Report as abusive

Sorry to say the American auto industry is is need of systemic overhaul, from their willingness to feed the public’s gross excesses in vehicle design to the corrupt and out of control union behaviors. Sending them bailout money will not force the changes needed.

Posted by Fred Wilson | Report as abusive

Let the Oil Companies bail-out the Big Three. That’s who the domestic car makers have been in bed with all these years. Building gas guzzlers that keep us addicted to the oil companies, instead of sensible alternative cars the public wants, like Prius.
Just look who GM sold the patent to it’s original electric-car battery…..Chevron, the OIL COMPANY. And that move deprived everyone of electric cars for the last decade. Use oil company profits to bail them out, not taxpayers money.
F#CK GM.

Posted by Greg | Report as abusive

To Andy

Concerning you comments Posted below…..
People bash domestic because the are mechanically, sylishly, ergonomically and technically inferior.
1) the “fuel efficient” Domestic cars are in-fact
RE-BADGED IMPORTS from asia and korea. Obviously you need to get your facts straight.
2) domestic car makers are selling inferior cars RIGHT NOW…and 20 years ago. How many Chrysler mini-vans need new transmissions in the first year?
3) Gm can’t even get it’s ridiculous MILD hybrids (what a joke) right, having recalled ALL the batteries in ALL OF THEM.

Posted by Greg | Report as abusive

Let start by balancing our nation’s checkbook ! We should immediately start cutting goverment jobs at the national,state and local levels 33%. The benefits, salaries and cola’s can not be sustained and should not be sustained at the expense on all of the rest of America’s employeed workers. Military spending must be cut dramatically 50%, and we need to close all foreign bases and bring home all military personal, if we have any hope of trying to balance our national debit load.

I feel the big three auto makers should be helped, but how much is the problem. They have set still for too many years on their research and develop on alternative fuels and other unconventional ways to power their vehicles. I know they will say their customers dictate what they build because of the market. But they have been so busy paying their executives and management for non-performance their R&D budgets have suffered.

Some proponents of the “bailout” has said to put restrictions on Executives pay require them to do more research. That was brought up years ago and they resisted because they could sell what they built. They have shown they only care about profit. When hearings are held they will say other wise, they will be lying.

When the Congress started bailing out the financal institutions they started something that will lead to a horrorable recession and possible a depression. The lending institutions have for years made it too easy for businesses and individuals to borrow money. When money is borrowed without proper collateral bad things happen. For many years banks have been lending too high a percentage of the amount needed to buy a home or product and the American cunsumer is spoiled.

A change is needed!!!!!!!!!!!!!!!!!!!!!1

Posted by Clay | Report as abusive

the companies should produce some prototypes of green technology and detail plan to get to the green technology before getting a single cent.

The taxpayer should be buying if any at all tangible goods and IP rather than giving away money base on faith that the companies will actually pursue and create green feasible technology. Remember this is not the first time these companies had asked for and received help.

Posted by Cassandra | Report as abusive

TO WHO IT MAY CONCERN, I AM A FORD RETIREE. ITS ALL THE UPPER MANAGEMENT FAULT. WHO IS THE UPPER MANAGEMENT? OF COURSE ITS FORDS CEOS,BUT WHO IS THEIR UPPER MANAGEMENT? THE US GOVERMENT IS THE UPPER MANAGEMENT. WHO IS THE US GOVERMENTS UPPER MANAGEMENT? WHO IS REALLY CALLING THE SHOTS RIGHT NOW. GUESS WHO. THE BUSH ADMINISTRATION. PLEASE DONT BLAME THE POOR FACTORY WORKERS AND THE UNION. YOU HAVE NO IDEA HOW HARD I HAVE WORKED ALL MY LIFE, AND ALL AUTO WORKERS. I HAVE A RIGHT MAKE A STATEMENT. I DONT KNOW WHAT MY LIFE WOULD HAVE BEEN LIKE WORKING AT THE FORD MO COM WITHOUT THE UAW. THEY PROTECTED MY RIGHTS AS A HUMAN BEING. BELIEVE YOU ME I EARNED EVERY PENNY I WORKED FOR. AN HONEST DAYS WORK FOR AN HONEST DAYS PAY. GO NO FARTHER. SINCERELY,LANA GODSEA

Posted by LANA GODSEA | Report as abusive

Detroit makes junk cars that get poor milage and turn into a puddle of rust in a few years with prohibited repair costs. Hey Washington! Look at what people are saying in these commemtaries. You will not be re-elected if you don’t! John

Posted by John Dinneny | Report as abusive

GM pays their USA workers $73/hour, is not profitable and is asking for a bailout

Toyota pays their USA workers $42/hour, is profitable and is NOT asking for a bailout.

Just think about it …

Posted by California Kid | Report as abusive

The problem with auto makers can’t be fixed by $25B or any amount. Yet it’s as simple as 3 letters – UAW. Unfortunately America can have auto industry or UAW – but not both.
Just think: semi-skilled workers are paid college grad wages with executive level benefits and public sector-like pensions. It was hardly sustainable when the Big 3 had the US market almost exclusively for themselves, and a good chunk of it around the world. The money that could’ve been spent for R&D went to line the pockets of UAW bosses. Instead of hiring scientists, engineers, and designers, the auto makers had to keep on the payroll the workers of idled plants. The competitors meanwhile were not standing still, cutting in both perceptions of US-built cars as the best, and the market share.
It used to be that foreign car buyers were either too poor or too eccentric. “I can’t afford a Chevy” was stamped all over Toyota or VW Beetle – the original one. Caddy and Lincoln were the symbols of luxury and prestige. Mercedes? Only if you must have something no one else on the block does. These days? It’s Ford and Chevy screaming “I can’t afford a Toyota”. The new Beetle is luxury European import. It’s Caddy trying to compete against Europeans, and Lincoln largely relegated to limo service and rentals.
Now that the Big 3 are not so big, and their share shrunk, it’s not sustainable.
Just think: foreign auto makers are opening new plants, one after another after another, and make good business. What’s the difference between Alabama and Detroit? Just one – no unions down there, and the foreign auto makers want to keep it that way. One of the reasons for Daimler to part their ways with Chrysler was the UAW demand to open Mercedes plants to them.
The funniest thing is, one way or another, UAW will die anyway. If they bleed to death the Big 3, they will also go into oblivion because their remaining manufacturing base – Caterpillar and who else? – will be too small to sustain them the way they are. The bailout will just prolong the agony.
The Congress can help. Not by throwing good money after the bad, but by legislating dissolution of UAW. If it could be done to air traffic controllers, it can be done to any union. Yes, the membership will suffer. But if we let UAW to stay, the price will be to high for everyone, including UAW members. If we help the Big 3 to hire hourly workers directly, there will be jobs – not as lucrative, but still decent jobs. There will be benefits – yes, the workers will learn the meanings of HMO, copay, deductible, and coverage limits – just like most of us had to – but still better than no coverage at all. If most of us regular employees can survive with only 10 days of paid time off in a year, the auto workers also will. And the retirees… I feel for them, but they’ll have to make do with Social Security and Medicare, just as all non-union retirees do. Anyway it’ll happen to them if the industry goes under.
Too bad unions, and especially UAW, are the sacred cow for the Democrats, and Republicans will be in minority for the nearest foreseeable future. But even the Dems will eventually have to decide, if they want to have UAW or the industry. There seems no way to keep both. Just as there’s no way to have the cake, and to eat it too.

Posted by Anonymous | Report as abusive

Speaking of bailouts…how much is iraq costing us? Pocket I mean chump change. Bail out the automakers.

Posted by jim | Report as abusive