Should we bailout the automakers?
If so, what conditions should we put in place?
Answers
117 points
sgodby answered one year ago …
In a word, NO! Even with the additional financing, American car companies are doomed to fail. The auto unions have created a situation where the car companies can no longer afford to continue to pay for the wages and benefits they ask for, and the retirees have placed a burden on these companies in a time where fewer people are buying cars and the competition is stiff. So despite whatever amount of money the government could provide, over the longer term, the big three American car companys will continue to loose money against their leaner and more efficient competitors.
Many will argue that the economy cannot afford to have these companys fail. But that is just plain wrong. First they will go into bankruptsy and renegotiate many of their debts. And then they will layoff more employees and union members, continually cutting costs while they continue to operate. If they should manage to be successful enough to emerge from bankruptsy, they will be better off for it with lowered debt, lowered costs, and by that time hopefully, an improved economy. And if they don't make it, then that will only improve the chances for other car companys that have more successful products.
2222 points
readytoretire answered one year ago …
If it was just the automakers, the answer would be easier. But as soon as you do it for them, everyone else will be lining up at the cash window. Still, the effect of GM or Ford or Chrylser going under would ripple through the economy. As the other people have stated, these companies were struggling before, so they will emerge smaller after this. The thought of them filing bankruptcy and trying to sell a car with a 5 year waranty doesn't sound like a receipe for success. The government has already passed 25B for them to retool for cleaner cars.
Years of giving away the bank on retirement benefits (including medical) is coming home to roost as the number of workers is much smaller now than before. Sort of like social security.
Still, I think we should see if we can do something to prop them up. The amount ? The terms ?
457 points
SallyG answered one year ago …
to the extent that their problems are the result of bad business decisions, no. to the extent that they are attributable to the privitization of health and retirement benefits that, IMHO, are the proper resonsibility of individuals and society as a whole (read government), yes. The country should have a domestic auto industry, it should be able to compete on equal terms with auto companies from other nations, but they should be responsible for misreading the future as any businessperson would be. (Watch "Who Killed the Electric Car?" [yes, it takes sides, but shares the blame]: it wasn't GM alone, although they abandoned and destroyed their inventory of the EV1 in the mid-90s, it was consumers and the government, too. However, with 20/20 hindsight they squandered a real opportunity to leap into the future.)
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4085 points
EthanR answered one year ago …
How about a bailout for the automakers, but in return the unions have to go! Probably not possible, and definitely not something a Democratic congress would ever do, but makes for a nice fantasy. I heard someone suggest that the three companies should be combined into one, but that would make prices go up for consumers. Listening to the congress chastising the CEO's of the big three for coming to Washington on private jets was embarrassing. I guess they would like to see the CEO's of the largest companies in America travel by Greyhound bus, as if that would keep the big three from going under.
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104 points
InvestorsDailyEdge answered one year ago …
Agreed.
The UAW holds the key to the success of the U.S. auto industry.
The recent Senate hearing with the CEOs of the big three car manufacturers was better than most sitcoms. The CEOs were unable to answer questions about how they plan to pay back the loans, or just avoided the question, or how long the loans would keep them afloat, or how they would change their business models to avoid asking the taxpayers to bail them out again. It went on and on....
http://www.investorsdailyedge.com/article.aspx?id=1651
