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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The majority of the opinions against the bailout of the Auto industry revolve around the fact that union employees cost more than non union employees of foreign companies located in mostly Southern states. This is where wages of any kind are welcomed because the alternative is minimum wage jobs at Wall Mart. Essentially the American worker is again being told that globalization is good for him and that in order to keep his “new living wage job” he should work for less and that he is lucky to have a job that pays like Mexican, Korean and Chinese workers and be happy! Of course no one remembers that the 8 hour work day, 40 hour work week, paid vacation, paid holidays, retirement pay, health insurance, work rules and many other progressive workplace benefits taken for granted, were not the result of corporate benevolence or globalization, but of hard won concessions fought for by unions. These benefits are one of the cornerstones of what has become the middle class and we are now asked to lower our living standards in order to survive. There is plenty of blame to go around and the government is one of the biggest culprits because for the last 40 plus years they have promoted the interests of the few at the expense and detriment to the many. Our trade policies are the laughing stock of countries like Japan, Germany, China, Korea and many others because we opened our markets to their products but they have not reciprocated. How many cars made by American union workers do we sell to any of these countries? Yes we sell Boeing airplanes and Caterpillar tractors and even some microprocessors to these countries but all these items have increasing local content as a condition for their purchases. And ultimately they will be made entirely of local content because their goal is to capture high valued items so that they can create high, by local standards, paying jobs for their immense population. This problem needs serious attention that has been lacking in the last 50 years, from all parties, labor, government and corporations. Here is a statistic that is worth pondering in 1953 75% of the cars made in the world were made in the USA, today it is likely the reverse of a much larger market. But no one in their right mind then would have believed that that situation would last forever. The trick obviously has always been how to get from there to the new reality without marginalizing a large segment of the population namely the middle class. If foreign workers are happy to work for serf wages that does not mean that American workers should compete with them on a race to the bottom.
No!! We cannot bail out every Tom, Dick and Harry who wants a handout. Let them file for Chapter 11, regroup and go forward in the 21st Century to compete with the world
Lee Iacocca went with no salary when he negotiated Chrysler bail out. These guys have been paid millions for their mismanagement and won’t give up anything???
Folks are being laid off in the thousands in the financial industry. Non big-three auto workers earn far less in pay and benefits. And these workers won’t give up anything???
If putting them out of business is undesireable, then at least make any aid contingent on serious concessions by both executives and employees. Anything else would be a complete sellout of the electorate by the government.
Absolutely not!!! let them use the courts, file for Chapter 11., get their act together so they can go ahead in the world for the 21st Century. We cant bail out every Tom, Dick and Harry that wants a handout.
Bailout will NOT save jobs. OK for only 1/2 year maybe. Is it worth it? NO, NO and NO: the amount of money available for investment is limited, throwing 25 bil down the crapper means 25 bil less for viable (profitable and growing) projects. The automakers in the US will not change because: talented and clever americans don’t go into cars. Only stupid and unambitious do (just look at those 3 faces at the hearing - imbeciles all)
US auto makers are Troglodytes. Out of date, out of touch. Destined to die. No amount of cash will save them. For the simple reason that smart, talented people do not go into cars any longer. Let Koreans and Chinese take over and give us cheap, reliable, cool-looking automobiles.
dump the union turn every thing over to the ceo’s at toyota and they will educate them .toyota can make any thing that the big three can make.
To get the scope of this solution, begin by looking at what GM and Ford are currently offering in Europe, look at the quality and mpg they offer:
http://www.vauxhall.co.uk and http://www.ford.co.uk
They both are manufacturing a wide range of cars and trucks that get 50+ and 60+ mpg.
These autos all meet the EU regulations on safety and emissions; these are fine autos. While I haven’t looked, I’m sure that other manufacturers are also making equally fine automobiles for both the asian and european markets. This is current engineering and tried and true manufacturing efficiencies. Why the difference from the US market? Lots of reasons… but we are looking for solutions to our current problem with GM and Ford so lets continue. However, remember these levels of efficiencies are what we are looking for in the far future. They are available now in a win-win solution!
But first:
GM, Ford, and Chrysler want the tax payer to bail them out of their problems. They indicate that the costs of loosing one or more of them is more than the bailout request of around 25 billion dollars, or more. GM at least is saying that bankruptcy is unacceptable to them, even though history and the very intent of the law says otherwise. I believe Chapter 11 is the only way they can shed their higher legacy costs, a step that is needed in today’s competition. I also believe that giving them money will not secure the employment of workers. We need to have sales to prop up production, that is the only way to ensure employment.
Chrysler is owned by Cerberus, a private investment firm; they also own half of GMAC. I see no reason to support a private group with tax payer money. Any production or labor lost with their collapse will either be taken up by the remaining firms or is a level of over capacity that will be lost anyway.
Here’s what we can do:
Production / Employment support:
-Allow them to go into a reorganization plan if that is the result of their missteps.
-Contract with them for production of those same cars that they currently make for the european market at say 50+ mpg for cars and 30+ mpg for trucks. Use that 25 billion to buy over a million autos… adding nearly 20% to their current production levels.
-Allow these “World Cars” to be made with their current engineering and manufacturing so that development costs will be nil to only slight costs. All the EU rules offer a safe and efficient, and low emission auto. We need to work to minimize costs of production everywhere, and this is a swell way to truly present a world car and truck.
Distribution:
-Re-sell these autos to retailers, financial markets, car rental, lease, and temporary alternate transportation firms such as “Zip Cars”. Offer them at discounts and on a consignment basis, thus negating flooring costs.
-Consumers will be able to least, rent, purchase them at discount, but only with a “disposal agreement” for recycle of an old auto that had less than say 25 mpg; trucks 15 mpg.
Result:
-Real stimulus by a large order to produce autos so that employment will be supported. Forecastable & controllable cost at a net amount, say 2 to 5 billion.
-GM and Ford will be able to obtain bridge loans or DIP loans to maintain them through re-organization and re-tooling. Likewise all their suppliers would have contracts in turn from GM and Ford to support any needed borrowing they might require.
-Public purchase of these discounted and efficient autos will occur, and we will want additional cars - once they have been produced and on the roads. The complaint from the auto makers that they were only fulfilling the market demand with large pick-ups and SUV’s is specious. The public demanded them because of advertising and marketing. Let them earn a living from economical cars as they do in Europe and you will see demand quickly shifting.
-These highly efficient autos happen to be diesel. This will give a kick start to bio-diesel and alternate fuel production, that will in turn give us additional support in the drive to cut petroleum. We’ll not only reduce consumption by increased mpg, but will further cut imported oil with alternate fuel. While we want to quickly go to electric power, this can be in that same path; and with a very efficient hybrid (diesel/battery), a system currently being beta tested in Europe by several manufacturers.
-Emissions will decrease; petroleum use will decrease; financial activity will increase.
-We will also demonstrate that we can work with foreign countries in obtaining economies by acting in concert with them in auto regulations. We can drive to Bretton Woods in our new World Car!
The Big 3 domestic automakers must be bailed out. First of all if the so-called taxpayers think they are footing the bill, it is not a bailout, it is a loan, to be repaid with interest. If the loan is not made it will force GM and Chrysler into almost immediate bankruptcy. Their bankruptcy will then force suppliers into dire straits and their collapse will bring down Ford as a result, as they will not be able to secure the parts needed to build their vehicles. Then also as a result, Honda, Toyota, Nissan etc risk collapse of their North American operations because they use a lot of the same suppliers as the Big 3 do. North American auto production will vitually cease for a year or better. The imports may rebound in time, but in the interim the demand will far exceed the supply of autos and the consumer will pay more for the product. Parts for all those who currently own a domestic will be sold at premiums as they would no longer be produced and you would have pandemonium. Secondly, you as a result will now have about 5.5 million people applying for unemployment benefits and another 2 million in addition applying for medical benefits. The State of Michigan would be in collapse and need Federal assistance because of the lack of property, sales and income tax that would no longer be collected by those individuals and corporations. In short the federal bailout of all these people and the State of Michigan would far exceed the 50 billion that they are asking for, so the taxpayer in essence would be in worse shape.
Also, we have spent the last year harping that we need to rid ourselves of our dependence on foreign oil, but it’s ok for us to be dependent on foreign cars? That doesn’t make sense. The Big 3 is our largest manufacturing base, we cannot continue to survive on credit default swaps to fund our economy. The collapse of this industry will certainly effect us all in a very negative way. Traditional economic ideologies do not apply in this situation, the consequences are too dire.-
A Japanese company ( Toyota ) and an American company (General Motors) decided to have a canoe race on the Missouri River Both teams practiced long and hard to reach their peak performance before
the race.
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>On the big day, the Japanese won by a mile.
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>The Americans, very discouraged and depressed, decided to investigate the reason for the crushing defeat. A management team made up of senior management was formed to investigate and recommend appropriate action.
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Their conclusion was the Japanese had 8 people rowing and 1 person steering, while the American team had 8 people steering and 1 person rowing.
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Feeling a deeper study was in order, American management hired a consulting company and paid them a large amount of money for a second opinion.
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They advised, of course, that too many people were steering the boat, while not enough people were rowing.
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Not sure of how to utilize that information, but wanting to prevent another loss to the Japanese, the rowing team’s management structure was totally reorganized to 4 steering supervisors, 3 area steering superintendents and 1 assistant superintendent steering manager.
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They also implemented a new performance system that would give the 1 person rowing the boat greater incentive to work harder. It was called the ‘Rowing Team Quality First Program,’ with meetings, dinners and free pens for the rower. There was discussion of
getting new paddles, canoes and other equipment, extra vacation days for practices and bonuses.
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The next year the Japanese won by two miles.
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Humiliated, the American management laid off the rower for poor performance, halted development of a new canoe, sold the paddles, and canceled all capital investments for new equipment. The money saved was distributed to the Senior Executives as bonuses and the
next year’s racing team was out-sourced to India .
>
Sadly, The End.
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Here’s something else to think about: Ford has spent the last thirty years moving all its factories out of the US , claiming they can’t make money paying American wages.
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TOYOTA has spent the last thirty years building more than a dozen plants inside the US. The last quarter’s results:
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TOYOTA makes 4 billion in profits while Ford racked up 9 billion in losses.
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Ford folks are still scratching their heads.
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IF THIS WEREN’T SO TRUE IT MIGHT BE FUNNY
NO BAILOUT (yet): Severe structural changes are required for long term success and they can be achieved in Chapter 11. Later, the government may have an important role to play in providing DIP financing to avoid Chapter 7.
It’s easy to say that “It’s management’s fault”, but that doesn’t make it untrue. And although manifest hypocrisy doesn’t prove anything, management did claim credit, in words and in sinfully large amounts of money, when things were going well.
Let ‘em go bankrupt… it’s the best thing for the companies, the country as a whole and for the workers, as long as it’s Chapter 11 and not Chapter 7.
No bailout, bankruptcy. Ralph Nader should then be appointed to the federal bench specifically to serve as the bankruptcy judge for the immanent reorganization of the auto industry. Who could be better than Ralph Nader to oversee the transformation of Ford, GM, and Chrysler from profit-hungry wasteful dinosaurs to lean and green transportation production outfits? Ralph is a lawyer (qualified to be a judge) and already knows all the ins and outs and legal snares that will have to be unravelled in the labyrinth of Detroit executive organization. The car company lawyers will have no chance of manipulating Ralph, nor can they intimidate him. Once Ralph is through with the big three, you won’t recognize them and they will be producing vehicles that are safe, practical, and efficient.
If the Obama government does not want to go through a bankruptcy with the automakers, then it can use Ralph in another way. Why not buy up all the auto stock and simply take over the companies and hire Ralph as CEO of GM? The price of all the outstanding shares is so low now that the cost of simply buying the companies outright would be far less than all the loans being considered now, Fire the current management and with Ralph as the new head of GM, he could lead the green revolution that the auto industry has so long avoided. One could not imagine that Ralph would keep on making gas-guzzling rollovers or that he would brutally screw all the pensioners and slice off workers’ health care. We know Ralph would not require excessive compensation; he could be a model for the next generation of corporate managers.
Barack Obama recently made a big show of pledging to work together with John McCain, Hillary Clinton and other political rivals for the common good of America. Old foes working together to forge a new and better future. What better opportunity to prove this position than by putting Ralph Nader and the auto industry together in a common cause. Detroit has been asking for this for over forty years. America is ready for it.
Complex issue with tremendous ramifications for sure, why is it “The Democrats” are finalizig a rescue plan? Where are the republicans?
Whatever is done or not done we will all live with what results and a bipartisan approach going in would at least promote a spirit of cooperation for the long struggle that lies ahead.
First to agree that seeing the big three go down the tubes. If that happens, who do we buy tanks from when we go to war?
These guys in the top slots in all most all industries being paid 15 million dollars per year? Insanity, stop bashing the unions, Regan broke the backs of the unions when he fired the air traffic controlers.
If you think its bad now, what do you think its going to be like, now that the great divider, G.W. Bush has turned the reins of the economy over to the E.U.? Which he has done, according to an articile by Dick Morris, who all so stated, with friends like G.W. Bush, who needs enemies?
The USA is going to be dam lucky to surive as a free nation, since China now owns more of our debt than Japan.
IF the big 3 is bailed out, it needs to be done with strict oversight, including how much the bigs shots get paid, as well as the guy screwing the bolts to hold on the fenders.
Let face it, now that all these wonderful free trade orgs. that have sucked the jobs out of the USA are in place, can we as a nation afford to see another 3 million jobs go down the sewer pipe?
If the bail out takes place, the forward thrust needs to be in cars that get 40 miles per gallon, no how many GPS toys can be installed, lets face it, do you really need a 10 disc, quad sound, a.m., f.m., GPS guide bemoth to drive to the train station to go to work? Or take the kids to the ball games? Or go to the super market to take home the food, grown in Mexico and Chile? Since we do dam near nothing except consume in the USA any more.
Hooters and Wal-Mart cannot support the USA own their own.
I am for a large bridge loan to the car companies. BUT with the exception of Nardelli, the other three came off as clowns. When asked if they would forego their salary until the businesses became profitable, Mullaly and Wagoner balked, but Nardelli said unequivocally “Yes”. They all refuse to admit their part in the failure that has occurred, and instead talk about which of their recent changes seem to be successful. The UAW has offered to give nothing, instead saying “we cut our retirement burden by 50% two years ago”, as if to say “we did our part, don’t look at us.” The Execs should forego salaries at least until 3rd quarter 2010, and the UAW should agree to a cut in all benefits by 10% during the same time, and Congress should change the quota system, which has up to now permitted the car companies to produce large gas guzzlers and small dumpy cars. And THEN, Congress should bail these guys out.
Roundup Logan has it right.
The key is the Unions. Hello anybody!
They must make concessions. They are the reason why the Big 3 cannot be competitive.
People forget that for the longest time there has been a fine line between turning a profit and losing money. Only by big volume were they able to survive.
If the UAW does not want to play ball, the Big 3 must play hard ball. Even at the point of filing for Chapter 11-Chapter 13.
Then somebody else like Tata Motors or VW will step in to pick up the pieces of these behemoths.
But it is not up to the tax payer to bail out, what was causes by uncompetitiveness and which can be resolved by normal market forces.
Let them go. And they will be resurrected into profitable mean, lean and competitive companies.
But Dems of course are in the pocket of the Unions so I am not holding my breath. And so we will see a bailout, and 3 months down the road again, 6 months later again and again and again.
I liked what Rep Sherman said as this tells me he is not one of the ones in his field that uses a helicopter to go to work himself. Yes help them but only if they are willing to kick in themselves. First drastically reduce the perks at the top and second you have to take down the workers pay as it is way over average. It’s sheer folly for the leaders of Ford and the UAW to beg to congress both totally unwilling to do a trick for food. If they won’t let them go. We’ll get over it.
GM has many assets it can sell to help obtain cash to help their situation. They must do what ever it takes that includes top brass removing the glass slipper.
Absolutely the US auto industry should be bailed, no question about it. The bottom line is what matters, millions of jobs lost, millions more families destroyed, an American icon our auto industry folds and the cost to the US economy ifs far greater than this bailout. The main thing to get this done correctly is to put alot of conditions on it and make sure none of these big execs get any of the money. This should be for the industry to survive and the auto workers that build the cars along with the thousands of suppliers that supply the industry that would also fail. This is not just some hand out for the CEOs of the industry, this is to prevent further unemployment and an American industry.
Hey - I haven’t seen one of the Big 3 send out a memo and ask for help and support from the employees, retirees, and the UAW. I haven’t seen the labor/management sit down at the table to see what the 2 can work out between themselves. If it’s such a good thing, then why aren’t they scrambling internally to make things work. They just want to keep the status quo and believe they all “deserve” what that is. High wages, protected jobs, luxury benefits, etc. etc. I think there’s other alternatives to this problem than just throwing my money at it for them to keep doing the same thing. I believe it was Einstein that said the definition of insanity was to keep doing the same thing and expect different results.