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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Today, these 3 auto giants are before the committee and tomorrow, there will be a thousand more Companies big and small who will line up for bail-out. And what about those individuals who lose their jobs? Who is going to provide the bail-out?
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“All three CEOs - Rick Wagoner of GM, Alan Mulally of Ford, and Robert Nardelli of Chrysler - exercised their perks Tuesday by flying in corporate jets to DC. Wagoner flew in GM’s $36 million luxury aircraft to tell members of Congress that the company is burning through cash, asking for $10-12 billion for GM alone.
It is one of eight luxury jets in the GM fleet that continues to ferry executives around the world despite the company’s dire financial straits.
Wagoner’s private jet trip to Washington cost his ailing company an estimated $20,000 roundtrip. In comparison, seats on Northwest Airlines flight 2364 from Detroit to Washington were going online for $288 coach and $837 first class.”
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.
Listening to all this, I (your basic professional woman who owns cars made by Honda and Acura) think no amount of money can save these companies while they are obligated to pay the pension and health benefit obligations on their books. If I were running one of these companies, I would dash as fast as possible to file for Chap 11 relief in order to get out of or reduce these obligations, and go on with life. Frankly, I would be much more inclined to buy that corp’s stock (as opposed to the non-filing companies) since I don’t believe that any amount of retooling will make them stable if they don’t reduce those obligations. Contrary to the nonsense I have heard about consumer reaction to a Chap 11 filing, I would buy a car from that company if I otherwise thought the car was a good car. And since the oil companies depend on these guys making it, if my Chap 11 company throws in 6 month’s worth of gas (gratefully provided by an oil company of the consumer’s choice), I will probably be less fussy about the car.
Would you pour water into a glass cup that had a crack on the bottom of it? Will pouring more water into it solve the problem??? That is essentially what you are doing if they decide to give money to the big 3.
We should not reward bad decisions and greed.
If you sell Doughnuts but no one wants to eat them because they found other shops that sell doughnuts that taste better than your…then you either sit there and hope…until you go out of business or QUICKLY find a way to make your doughnuts taste better than the competition. This is the way things work. Unfortunately, the big3 did not choose the latter.
I am a GM retiree and I would like the Government to bail out GM and Ford’s. Chrysler borrowed and paid back the government once before. I depend on my Pension check.
Our people of USA should be buying ‘Made in USA’ products, but everywhere you look products say ‘Made in China’. If the government bails out GM and Ford then a credit could also be given to the American people to ‘ONLY BUY’ the ‘GM, FORD, CHRYSLER CARS’.
I worked for GM 35 years and I need my pension check - I deserve it!
Granted the auto companies listened to some bad advice along the way - just like our government - EVERYONE makes mistakes.
Why not everybody go bankrupt?
Erase all jobs. Then what?
No bailout under any circumstances. The mess they are in is entirely their own doing. Unions are not at fault. The lack of health care reform is not at fault. The companies themselves are at fault. They talk like capitalist, until the butcher’s bill arrives. The companies elected to make the same ol’ product because they thought they could get away with it. Clearly, their model does not pass the sniff test in the market place of ideas. As Roy Batty said, “Time to die.”
Reduce hourly wage and benefits to level of competitors. Reduce the ratio of executive compensation to hourly compensation to the historical low.
The most important thing is to make sure workers are compensated at the same level as the competitors — Toyota, Honda, Volkswagon, etc. Executive compensation should also be in line with that of those companies. The companies do appear to be concentrating on green vehicles. That also must be a part of their business plan. If bankruptcy is needed to achieve these objectives, so be it but how will bankruptcy affect the no. of jobs and the saleability of the autos. With the right kind of advertising they may be able to convince the public that all the cuts in salaries and wages will mean bargain autos. They may also need a written guarantee from the government that spare parts and service will continue to be available.
No, they should not be bailed out, they should be jailed for ripping off the american people and made to sell everything they have and then get a 8:00 to 5:00 job and live off less than 400.00 a week like a lot of us. that bail out money should go to help people losing their homes and paying their bills.
I think that GM, Ford & Chrysler should go to Toyota & Honda & ask for 25 billion & see how much help they get.
Get rid of the Unions & maybe the US Govt. will loan the money. Congress should look at the Auto Industry hard before they shell out that much money or read what the public has to say. Read what the public has to say is not in their(congress)vocabulary.
Sometimes an alternative, while not a good thing, is the best of two evils.
The late Maurice Chevalier once said;
” While growing old is sometimes depressing, the alternative is much worse “.
” While aid to the Big 3 auto companies may not be too popular, the alternative is much worse “.
Some, many, have predicted that if the big three were to collapse, five million direct and at least another ten million supplier jobs, in the US and Canada, would disappear overnight. As well another million and a half retirees would suddenly be left with no pension income and no health plans.
22 % of the total North American GNP would be instantly gone!
We could then be very close to an out and out depression!
I respectfully suggest there is a way to help these companies to immediately sell hundreds of thousands more new and used vehicles, AND NOT ONE PENNY OF OUR public monies would be injected directly into GM, Ford & Chrysler to pay pensions and health plans for retirees and multi million dollar severance packages for executives.
This is how I would suggest this be accomplished;
The US and Canadian governments grant anyone – individuals and company fleet vehicles alike – a $5,000 tax credit for each new and up to 3 year old used vehicle that they purchase.
This tax credit would be a direct deal between the governments and the buyers and the buyers could still cut other deals with the auto dealers like “ thousands off “ and “zero percentage financing”.
NO PUBLIC MONEY GOES DIRECTLY TO THE AUTO COMPANIES!
This initiative would result in the immediate sale of hundreds of thousands of vehicles – which, after all, is the main objective.
AND other positive spin-offs – hundreds of thousands of less “green” and some unsafe vehicles would be taken off the roads immediately thus adding to a cleaner environment and a little less dependency on foreign oil.
To those in the auto industry who may complain of Government subsidies and protectionism – while you have a point, drastic times call foe drastic action.
Respectfully submitted.
Although taxpayers helping private business is unpallatable to any American, we have to realize that we are in danger of loosing the largest domestic manufacturing base we have. Further, the human, social, and real dollar cost to every one of us of failed domesitc auto companies will absolutely be catastrophic. This will damage evereyone in America, not only those who are employed by the industry.
We must prevent the unorganized an uncontrollable failure of this industry in America and we must act immediately. Any plan must have an exit strategy for the taxpayers, and the taxpayers must earn a return, but this is only possible if we have a domestic auto industry. Failure to do this will leave us all picking up the pieces of 2 million plus lost jobs and the attendant catastrophe in all corners of our economy.
The U.S. auto industry has for a long time needed an overhaul. Yes, the economic situation has caused a great deal of losses, but that is not the core problem. The auto industry has not changed its basic business core, even as other major sectors have, realizing that they needed to in order to compete with the global market place. Unfortunately one of the main problems has to do with there workforce. Pay and benefits are still based on times in our past that only 1 person worked in a family and 1 stayed home to raise the kids. A time when the American Dream was running full steam. This is no longer the case and has not been for many decades. The unions have served their purpose to get the workers the best possible, but reality is that this level of pay and benefits are not sustainable. Not in this economy, not even before this collapse. The auto industry has to look long and hard on how to make these companies into something they have not been in a long time, strong, lean, a focus on quality, service,and a very close watch on the current consumer needs and wants, and based in reality.
Unfortunately the only way to make the changes needed in current law and contracts is to file for bankruptcy. With bankruptcy they can do the reorganizing that is greatly needed to transform these companies into the icons they truly are. If the government is to give the auto industry or any industry or company any financial help, they owe it to all tax payers to expect, NO demand the changes needed in order to help them survive now and to prepare them to be able to build their futures and ours, not on sand but on solid ground from the bottom up.
I can’t imagine giving a bailout to the automakers after they had produced a viable electric car in 1996, the EV-1, and then proceeded to recall and destroy them all in 2003 due to the extremely short-sighted policy of selling more profitable gas-guzzling Sport Utility Vehicles. Imagine how well those electric cars would have weathered high gas prices, or how the technology might have progressed had the program continued.
Although I don’t relish the thought of so many workers in the auto industry and related industries losing their jobs, the Automakers most certainly DO NOT deserve a bailout.
These automakers (and also the banks) are businesses, not charities. Why would they need to survive on taxpayer’s money when they can’t run their businesses efficiently? Lets not forget huge pay packet for some of their Chief Executives who are proven to be very good at extracting huge pay packet for themselves, but not good at all in running businesses. And now, they one bailout from taxpayers’ money! What a fuss!!!
I do NOT favor a taxpayer bailout for the automobile industry. GM and Ford have heard the ‘wolf’ scratching at the door for years and have done nothing of significance in response. Chrysler simply does not have a place in the automotive future. Technology and design have moved on and GM and Ford are stuck in the mud. The US auto industry failed way back when the future was obvious. The taxpayers of America should NOT be called on to reward ineptitude. Again I do NOT favor a taxpayer bailout of the automobile industry, and particularly the UAW.
Since it is not enough to solve the problem and can’t effect the eventual demise…I say NO now and save that 25 billion. Each and every Americans portion of our debt is about $175,000 already and its not looking good down the line…use that money to retrain the workers or prolong unemployment benefits or some program to the benefit of the worker only(they were offered $186,000 each for early retirement a few years back weren’t they?) Now is the time to be solution oriented and not prolong this to the benefit of who? There are still millions of autos that will need parts and servicing down the line, so many of the suppliers will still be able to continue. Its similar to the housing crisis…the builders want concessions…well why not rehab all that existing inventory instead of building new? Isn’t is a supply and demand thing? If they build more now won’t that inventory just compete with the existing supply? Decrease the existing supply and the demand will follow. I am puzzled though about how oil got to $140 a couple of months ago and is now $56….did someone locate some lost oil? Finally, I heard Paulson state that the money wasn’t needed where they originally intended to put it but I also remember he said the financial system would shut down if it wasn’t done that way….well it wasn’t done that way and it didn’t shut down…maybe we should see what the auto industry bosses can do, those guys are supposed to be the best in the business(being paid as they are)and I think they should be reminded that its their job to locate those billions.
I like drfixu’s comment earlier today. I understand that the Federal Government employs 1.2+million people. Surely we can cut that by 33% and not miss a lick. Like drfixu, I think we should close ALL military bases outside the US, bring ALL our troops home and let western Europe, maybe France for example, police the world for a change, and thereby cut our military budget by at least 50%. I’m tired of the job, for as the old saying goes, ‘no good deed goes unpunished.’ Let Sarkosky get the chaos under control and we’ll just kick back and criticize for a change.
The US automakers should know how to make a better car but no they just keep on building junk! Hondas’ and Toyotas’ they are not! Honda is the company that has the highest rate of happy customers in other words they buy Accords over and over again. Even in Arkansas there are many a family reunions where the Accords cover the lawn! Just ask a person who drives a Toyota/Honda and they will tell you that they will buy another one over and over! They offer the highest resale too!
HUM WHY do thousands of Chevy, Ford, and Chrysler dealers go to auctions praying for the chance to buy a used Honda, or Toyota does this tell you something about H& Ts? They last forever with very very little maintenance other than oil changes ect. The US auto makers should go bankrupt instead of asking for bailout money for their poor products and miss management! Ford dealers could not survive without all the shop fees the Fords bring in $$$$s! Ask a Ford man if he has ever had an modular go out- and how many times he has had his car in the shop. I bought a new Corvette once and the rear end went completely out on it on the way to be serviced and with less than 100 miles on the unit! My brother in law bought a New Corvette and believe it or not the door come unhinged and fell off!!!!! A friend of mine has a 70,000 mile Chevrolet SUV with the transmission out on it, he will not buy a GM product again! For pure satisfaction and resale put your money in a H or T and have some fun for a while!!!
These companies wd be solvent if America had a Federally sponsored, single-payer health insurance system, and a similar basic pension scheme. Although they’re behind on developing fuel-efficient vehicles, they’re catching up, and they’ve already improved quality to the point even I’d consider buying. What’s killing them is egregious pension and health benefits, the costs of which wd be much lower if the U.S. cd ever drop the albatross of ideological opposition to this so-called ’socialism’. Every other developed country dealt with this sixty years ago. It’s bizarre that America ranks 28th in life expectancy in the world, and yet has the highest health care costs per person on the planet.