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Let them fail!

a_majoor

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We have all heard about the proposed plans to bail out the US "Big Three", but people still need transportation. Why not do the right thing and let the Big Three fail; here are 10 US automakers waiting in the in the wings with real products that people might really want (I'd take the Carbon Motors sedan without the police package myself). Saving the Big Three presupposes they are indispensable, this shows even domestically they are not (and you also have all the Japanese and European companies to choose from as well)

http://www.popularmechanics.com/automotive/new_cars/4291426.html

Top 10 New Eco and Exotic Car Companies

Can fresh startups weather today's economic perfect storm? The car industry is certainly in trouble, but these ambitious little companies intend to buck the trend. Some have arisen to take advantage of low labor costs in China or Eastern Europe. Some are determined to be the company that revolutionizes transportation by reinventing the automobile with some new technology or alternative fuel. History makes it plain that most of these companies are bound to fail without leaving behind much evidence that they ever existed—Bricklin and DeLorean come to mind. But radical change often comes from people who dream audaciously and act boldly. Here are ten new car companies that may (or may not) change the world.

By John Pearley Huffman
Published on: November 12, 2008

 
Colin P said:
But then who would pay the pension and health plans?

I think you forgot the [sarcasm][/sarcasm] headers  ;)

For those of you who think this is a serious question (and it actually is, in a way), you are responsible for making alternate arrangements. What would you do if your company failed? (There are plenty of RRSP and private insurance options out there).

Asking me to bail out GM through my tax dollars (or an inflation tax imposed by deficits) means I would have far less ability to go out and buy a car from any manufacturer, much less GM. Adding an additional tax burden or inflation burden for more bailouts in the future (since I can't buy a car) means I won't be buying new appliances, clothes, entertainment or even shoes and clothes. Think about that next time someone asks for a bailout.....
 
Let em go belly up.

Someone will buy out the assets for 10 cents on the dollar, turf the union, change the name and re-open a week later with people making a third of the wage

Life goes on.

 
Seems like a case of watching them fail now, or watching them fail later while they owe you oodles more money than before.  It's not like this hasn't been years in the making.  There's a time to cut your losses...
 
I'm most likely wrong, but I heard (and I must be wrong) that some average? pay for an employee at one of the big 3 is on the average $67 an hour?? This can't be true of course.
 
We have all heard about the proposed plans to bail out the US "Big Three", but people still need transportation. Why not do the right thing and let the Big Three fail; here are 10 US automakers waiting in the in the wings with real products that people might really want (I'd take the Carbon Motors sedan without the police package myself). Saving the Big Three presupposes they are indispensable, this shows even domestically they are not (and you also have all the Japanese and European companies to choose from as well)

Even though I agree with one side of your argument about alternatives, I don't see how advocating for the Japaneses auto makers is going to help us here in North America. People say they make a better product, but that is still a matter for debate. I owned Japanese and i say they have as many faults as American cars. Don't believe me, ask me to show you the cost of a new transmission in my Honda Odyssey sometime. Now getting to the other issue of bailouts, while you argue that it will leave you a bit poorer, well you have to look at the bigger picture, what if they are left to fail? overnight 500,000 jobs would dissapear, whole communities, towns and some cities would also go under. Then what happens to the economy? The massive amounts of money injected by these industries and there subsidiaries into the economies of both the US and Canada would no longer be there and it would affect everyone on a colossal scale and I think you would be much worse of in the end if they were left to fail than if we were to bail them out.

Just something to think about when you buy your next car and the price is jacked up by 30%, because its no longer a competitive market place because the Japanese have moved right in to fill the void.

Sorry but I already have enough products coming from these foreign markets without having to drive a Japanese car because theres' no longer any other alternative. Been there and done that and the old analogy, it always looks greener on the other side of the fence still holds true.

 
For those of you who think this is a serious question (and it actually is, in a way), you are responsible for making alternate arrangements. What would you do if your company failed? (There are plenty of RRSP and private insurance options out there).

Easy to say if it doesn't affect you.  RRSPs and private insurance cost money.  Now where would the older workers get those kinds of funds without a job?  Don't get me wrong.  I think they are paid way too much, and the CAW has become a self-serving corporation in it's own right, but the reality is that the economies of entire cities, and their inhabitants, would be devastated overnight.

Chrysler was given government loans in the past that saved them.  They managed to get their head back above water and paid it off.  A similar plan perhaps?  Any of our money that goes to these companies should come with conditions.  Conditions would have to be placed on the unions as well.  Alternate North American car companies were mentioned.  Maybe give them some assistance in becoming more well known and move to a position of legitimate competition to the Big 3.

I personally feel that our society and economy has become too dependant on the car.  This is a mistake that should be fixed or changed over a period of time, but that is a subject for a different thread.
 
For all the talk of bailouts and such, not once have you heard anything from CAW and the US wing about adjusting the wages downward to make any of the big 3 competive again....until that happens they should get $0.00.................
 
:rage:

Someone will buy out the assets for 10 cents on the dollar, turf the union, change the name and re-open a week later with people making a third of the wage.

And if the old employees don't like that, they can always become partners at Walmart and Home Depot.  :crybaby:

We, North American people, have lived on a FALSE economy long enough... The American Dream has just crashed, and Canada will go through the same pains if we don't smarten up soon !

Let's face it : only half of the population is actively working and too much of our pay goes back to the government to help support the other half that doesn't...

If someone you love came to you and said that they give 40% of their pay to a Cult Leader for eternal peace, you would have them committed ! Yet, we have been giving it to our government !  ::)

 
There are cars being built in Toronto right now that are FULLY electric, interestingly enough NOT for sale in Canada due to our idiot government and the big 3.

It's time to stop babying these companies and let them either stand up and walk on thier own, or fall over.

Cheers.
 
GAP said:
For all the talk of bailouts and such, not once have you heard anything from CAW and the US wing about adjusting the wages downward to make any of the big 3 competive again....until that happens they should get $0.00.................

I read a couple of days ago that the UAW has stated that they will not make any further concessions.  They feel that concessions made earlier have been enough.  A very stupid attitude to take.  I wish I remember which news source I got it from. 

 
Spanky said:
I read a couple of days ago that the UAW has stated that they will not make any further concessions.  They feel that concessions made earlier have been enough.  A very stupid attitude to take.  I wish I remember which news source I got it from. 

Blood sucking dinosaurs. They are headed for extinction. The hierarchy is starting to cement their positions and man the ramparts. They don't care about their members, so long as they have enough to maintain their office and position (and paycheck). The plight of the working man is no longer their concern, hence the anointment of the illiterate, desk thumping Ken Lewenza to the head position. As has been said, the CAW is no longer a union of like minded workers, intent on creating better and fair working conditions. It is now a socialist, self serving corporation, intent on driving political agenda in conjunction with the NDP. Case in point, Windsor. Where Ken Lewenza Jr (a puppet and mouthpiece for his National President father) was elected to city council by brainwashed unionists and works in conjunction with the Labour Council, run by Gary Parent, past president of the Chrysler union. This bunch has appeared before council demanding what the city should do with it's land, businesses and city agenda. They are nothing more than an extention of the NDP offices owned by Joe Comartin and Brian Masse. The only reason they have concern for the worker is because that is the source of their income.

The days of the CAW are quickly drawing to a close here. The dinosaurs will evolve into birds or go extinct to become the fossils for future generations of sociologists to pick at in history books.
 
We left Britain when I was a kid, largely because the trade unions had crippled the economy by pricing British labour out of the competitive market.  We moved to BC, and saw the forestry and paper unions do pretty much the same thing to BCs lumber industry in the 70s.  It was in fact a contributing factor in my career choice.  Now the auto workers are doing it to Ontario.  How does it go?  "Those who do not learn from history...something...something..."
 
A "buyout" would be much cheaper than a "bailout":

http://www.powerlineblog.com/archives/2008/11/022087.php

No UAW Bailout
Share Post  PrintNovember 17, 2008 Posted by John at 7:12 AM

Jim Manzi has done some of the best analysis of the proposed bailout of GM, Ford and Chrysler--or, one should more properly say, bailout of the United Auto Workers, otherwise slated for extinction. Here, he addresses the theory that the Big Three are in the midst of a turnaround, and if we only keep them afloat a while longer, they'll be profitable again.

This chart pretty much says it all: (see attached)



Bob Cunningham, meanwhile, does some basic arithmetic:

As of the close of business on Friday the market cap for General Motors was about $1.9 billion, Ford about 4.3 billion....Chrysler is privately held but it's a safe bet that their FMV is less than $2 billion...probably a LOT less....so for approximately a lousy $7 billion....a rounding error for the federal budget...the government could simply BUY the entire U.S. auto "industry" --- actually, of course, it's just the U.S. nameplate manufacturers, but that's another story --- for what amounts to a pittance.

So if these geniuses in the government, especially the best and the brightest coming in with The One, think they know better what to do...that they can defy the market's judgment....why don't they just cut to the chase and buy the companies, replace their boards and management and run the companies....can you imagine how disastrous that would be?....but that's in effect what they'll be doing...almost as much fun as Fannie and Freddie!

The numbers are literally absurd....Ford has $160 billion in debt!....with NEGATIVE book value of equity....GM has about $60 billion in debt...and a HUGE negative net worth on a book basis of $56 billion!....Essentially, the market is valuing the companies --- well above their (negative) book values --- but at what amounts to scrap value!...so $50 billion more from forced tax exactions should be thrown at them?....and that's NOT absurd?
 
More opinion:

http://volokh.com/archives/archive_2008_11_16-2008_11_22.shtml#1227141469

[Jim Lindgren, November 19, 2008 at 7:37pm] Trackbacks
A Simple Argument Against the Auto Bailout: A Bailout Would Destroy Jobs. I have hesitated writing about the GM bailout for two reasons. First, I like GM cars; I bought two of them in March, and every car I’ve ever bought was a GM car. Second, a professor with tenure should be somewhat circumspect in writing about the jobs of people who do not have the protections that we have.

But in watching CNBC debates on the Auto Bailout, I have been frustrated by the arguments of those who favor bailouts that government largesse will on balance lead to more employment, rather than less.

Those inclined against the bailout seem mostly to say, “When will the handouts end?”

Yet the best way to meet the “jobs argument” is with another jobs argument. Making bad, uneconomic investments in failing industries does not, on balance, preserve jobs; it tends to destroy more jobs – and more good jobs – than it saves.

If you give money to failing industries to save jobs, then you are probably taking even more jobs away from other industries who would hire or retain workers but for their higher expenses. In essence, throwing money down a hole may preserve jobs in the short term but should lose jobs in the medium and long term.

If you pay for an auto bailout with today’s tax money, then over the next couple years you are taking jobs away from lots of people currently working.

If, on the other hand, you pay for today’s auto bailout with an increased deficit, then lots of future workers will be unemployed or take worse jobs in order to pay for today’s auto workers. Again, you would be taking jobs away from lots of people (mostly in the future) to preserve the jobs of auto workers and their suppliers today.

Heavily unionized businesses usually have trouble competing with non-unionized businesses. Unions are successful in getting above-market wages and benefits, which makes it difficult for the businesses to compete. In the auto industry, there are many more dealerships than necessary. And, according to Larry Kudlow, the average compensation and benefit rate for auto workers in Detroit is $72 an hour, compared to $44 an hour for foreign car workers at US plants.

Even if two of the three Detroit automakers were to go out of business, most of their workers and the workers for their suppliers would be able to get some sort of job. That the jobs they would get would pay a lot less suggests just how much they are overpaid now. If General Motors has become a health and pension plan that makes cars on the side – in other words, unions pressured bad management to make promises they couldn’t keep – then inducing GM to go out of business should be on balance good for the economy. Any government bailout should go to the Federal Pension Benefit Guarantee Corporation, to provide money to cover partial pensions for the employees of companies in the bankruptcies certain to come.

As with so many problems, it is unlikely that GM would have made such foolish deals if the government had not forced it to bargain with striking workers, rather than simply replace them. As with mortgages in the banking industry, the federal government pressured businesses to make deals that were economically bad for the businesses involved.

If an industry is contracting and there is an oversupply of productive capacity, then the worst thing we could do is prop up that industry by taking jobs away from the healthier portions of the economy (including better run automakers). If government planners really were a lot smarter and better planners than business people (they aren’t), then the government’s strategy should be to try to drive bad businesses out of business quicker, not try to destroy the healthy companies by propping up the dying companies.

The argument that the auto unions and the auto executives have already made sufficient givebacks is not credible. And as the Congressmen pointed out, the Detroit executives could have flown to Washington on commercial flights (in first class), instead of in private planes. If a business is failing, union auto wages should be priced well BELOW what nonunion auto workers make, not well ABOVE what nonunion workers make. So until the unions have given back everything above the market value of their labor, they haven’t given back nearly enough. I don’t know enough about what goes into the $72 compensation rate, but perhaps the parties should consider having all current employees, both management and union workers, take a 50% pay cut.

The only job-saving justification I can think of for a Detroit bailout is if the problem were only temporary; then destroying jobs might be imprudent. If Detroit’s business model were strong, if there were little or no overcapacity, and if Detroit’s problems were only temporary, then one could reasonably think that a bailout might be efficient. But there is no temporary market failure here to redress. Detroit’s problems have been here since the late 1970s.

Anyone who thinks that giving money to a company losing 2-3 billion dollars a month — with overpaid workers and overpaid executives – would usually save jobs in the long run, rather than lose them, doesn’t understand economics.

UPDATE: I see that David Yermack said it better.

In 1993, the legendary economist Michael Jensen gave his presidential address to the American Finance Association. Mr. Jensen's presentation included a ranking of which U.S. companies had made the most money-losing investments during the decade of the 1980s. The top two companies on his list were General Motors and Ford, which between them had destroyed $110 billion in capital between 1980 and 1990, according to Mr. Jensen's calculations.

I was a student in Mr. Jensen's business-school class around that time, and one day he put those rankings on the board and shouted "J'accuse!" He wanted his students to understand that when a company makes money-losing investments, the cost falls upon all of society. Investment capital represents our limited stock of national savings, and when companies spend it badly, our future well-being is compromised. Mr. Jensen made his presentation more than 15 years ago, and even then it seemed obvious that the right strategy for GM would be to exit the car business, because many other companies made better vehicles at lower cost. . . .

Over the past decade, the capital destruction by GM has been breathtaking, on a greater scale than documented by Mr. Jensen for the 1980s. GM has invested $310 billion in its business between 1998 and 2007. The total depreciation of GM's physical plant during this period was $128 billion, meaning that a net $182 billion of society's capital has been pumped into GM over the past decade -- a waste of about $1.5 billion per month of national savings. The story at Ford has not been as adverse but is still disheartening, as Ford has invested $155 billion and consumed $8 billion net of depreciation since 1998.

As a society, we have very little to show for this $465 billion. . . . Yet one can only imagine how the $465 billion could have been used better -- for instance, GM and Ford could have closed their own facilities and acquired all of the shares of Honda, Toyota, Nissan and Volkswagen.

The implications of this story for Washington policy makers are obvious. Investing in the major auto companies today would be throwing good money after bad. Many are suggesting that $25 billion of public money be immediately injected into the auto business in order to buy time for an even larger bailout to be organized. We would do better to set this money on fire rather than using it to keep these dying firms on life support, setting them up for even more money-losing investments in the future.
 
Anyne remember DEVCO?

Ottawa, Monday, May 6, 1996

During the course of the period since 1968, while each next year would be a "better year," I calculate that since 1968 the taxpayers of Canada have paid approximately $1.5 billion in order to look forward to that next better year. I then look at your numbers tonight. I appreciate how candid you have been with us and the difficulties that you have had as you have come into this scenario for the second time. However, in trying to understand your numbers, I think there are assumptions in your numbers that are not supported, just as there were many assumptions in the numbers before that were never supported.

Bailouts don't make companies create functional business models or profitable and sustainable practices.  Companies that get bailouts accept them as an opportunity to repeat the same bad practices year after year
 
The greed and ineptitude at the top of this food chain deserves to go belly up and lose thier golden rainbows along with it. Chapter 11, no bailout, no handouts and no saviours. Chain the doors closed, wait for the auctions to end and then restart the industry with all new ownership and new personel. Put in legislation to block ANY and ALL unionized practices within the industry and start making vehicles for tommorow, not 100 years ago.

Cheers
 
Michael O`Leary said:
Anyne remember DEVCO?

Ottawa, Monday, May 6, 1996

Bailouts don't make companies create functional business models or profitable and sustainable practices.  Companies that get bailouts accept them as an opportunity to repeat the same bad practices year after year


Absolutely and so True.

Yes and we mustn't forget, CEO's at 9 Milion a year Salaries and  Factory Floor Sweepers at $71.00 a hour and lets not forget the Corporate Jets and Perks.

No wonder nobody wants to be a Doctor or Nurse anymore when you can work for the Big Three.

Cheers.
 
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