GM and Chrysler ask for 21.6Billion More

[owequitit]

Exactly. We didn't bailout circuit city and we're not bailing out many of the other companies on the list that was posted on this forum, because there are other companies that can provide the same products and have the funding to support their business.

I do have sympathy for the people whom are being laid off in detroit, but it comes to a point where the government needs to cut there losses and let these companies die.

Why have 21.6 more billion dollars go to these companies that will most likely fail. *its as if we're taking a bet at a casino, we have the risk of losing, and we have the chance of winning. However, the gov't would be doing this with OUR money, are we willing to take that risk?

The only problem is that 1 in 10 jobs in the US are directly related to the auto industry. Most of them for suppliers. If someone like GM goes bankrupt, then the suppliers are going to start following suit one by one. Most of them will be insolvent, ESPECIALLY with the current credit crisis. That means that they will liquidate and those employees will lose their jobs too. Then, since all suppliers work with pretty much all manufacturers, companies like Honda and Toyota get the shaft. This causes supply problems for them, and thus financial problems and potentially layoffs. It creates a domino effect through the system.

That leaves us with exactly 2 choices. Spend 30 billion now to prevent spending 300 billion later, or don't. If we don't, the economy will eventually recover and bottom out, but there is no telling when, where, why, or how. There is also no telling how much it would cost to not let those people starve, and what burden that would place on everyone else that might be able to keep their jobs.

As shitty a proposition as it is to keep them afloat, it is far less shitty than the alternative. This is why you are seeing previously free market biased people doing what they are doing. George Bush and Alan Greenspan come to mind. Having said that, Greenspan isn't completely convinced that regulation will do anything anyway, and I agree. The free market right now is being far more conservative than any proposed, suggested or considered regulatory change, and quite frankly, many of the regulatory tools that were supposed to be in place to prevent this failed just as miserably. If 100 laws are implemented and failed, then it serves to reason that an additional 1,000 laws isn't going to protect us nearly as much we want to pretend it is. Not to say that some change isn't needed, but frankly, wide sweeping change will probably do more harm than good.

[owequitit]

I don't exactly like the idea of giving them more money either, but it may be a necessary evil. If these companies go out of business, that's $50 billion lost in trade revenue, and we already have one of the world's largest trade deficits. Plus you have all the lost jobs, pensions, benefits, etc. Many of the former employees are gonna need government assistance and benefits and that's just going to be a further drain on government funds.

None of these issues is a direct result of GM, Ford or Chrysler producing shitty product, other than the current financial situation. Management is a big part of the problem, but frankly, labor was equally responsible. It isn't going to kill them to lose something like everyone else has, because maybe then they will wake up and smell what they are really worth economically.

But you are correct. Bailing them out now is probably better than the alternative.

And just for the record for everyone in this thread, management hasn't been axed yet, because the current management has made huge strides in turning the companies around. Rick Wagoner has been CEO for 8 years, but with as messed up as GM was, they have made remarkable progress organizationally, and product wise. Ford and Chryslers management hasn't been on the job long enough to have turned everything around yet.

[williamsvt]

I understand the fact that if we do not help GM and Chrysler there will be a big back lash to the rest of the industry, employment, economy, etc. But when do we draw the line?

I understand that spending another 30 billion now will potentially save us from spending 100 billion later, but after this 30 billion are GM and Chrysler still going to be safe?

GM needs to restructure, which i know its doing right now, cut brands now (like saturn, saab) and try to rebuild what they have left.

I'm just worried as probbaly others are that all this billion dollar spending is going to create quite a tax problem in the future when we have to pay back all of this debt. Because suppose that these big companies receiving aid do fall?

[owequitit]

I understand the fact that if we do not help GM and Chrysler there will be a big back lash to the rest of the industry, employment, economy, etc. But when do we draw the line?

And therein lies the problem. The short answer is that nobody knows, especially not with everything inter-related to the degree it is.

I understand that spending another 30 billion now will potentially save us from spending 100 billion later, but after this 30 billion are GM and Chrysler still going to be safe?

There is no guarantee that any company is going to be safe. However, given the circumstances, if you buy them time to complete turning themselves into smaller, rightsized businesses with less debt and fewer problems the odds that they will be good for the long term go up exponentially. Part of the problem now is that it was a perfect storm on all fronts. The housing market crashed, locking the credit markets and destroying sales. So now, they can't sell cars, they can't borrow money, and they don't want to have to lay off workers which just aggravates the problem. Frankly, as much of this is their fault, they aren't the only ones on shaky ground. Toyota is reporting its first loss in 70 years. Nissan is losing a ton of money for the year and slashing 20,000+ jobs. Honda is laying off "temporary" workers. BMW has said that if this continues for another 2 years, they will be facing bankruptcy. It is affecting the perfectly healthy companies too.

Where GM, Ford and Chrysler are at fault is not having a viable LONG term business plan. For 30 years, all they were interested in was milking the most they could from that quarter, while the Japanese have 10-100 year strategic plans. This allows them to remain focused on the long term goal, which is something the domestics never did because there wasn't any money in it right now. It bit them in the ass hard. It has been coming for a long time, but they were too short sighted to see it. They didn't develop competitive small cars or fuel efficient engines because there wasn't as much money in it at the time. They didn't build 200K-300K mile cars because there wasn't as much money in it at the time.

However, current GM management can't be held solely responsible for it either. That would be like a black guy today telling a white guy that it is OK to blame him for slavery 200 years ago, even though that person had no control over it, and may not be pro slavery or have even had any history of it. It is placing blame and not the fixing the problem. The amount of good things I have seen GM do since Rick Wagoner got in there is pretty impressive. He seemed to start out slow, but then they really have done a lot to bring new technology, and ideas to the company as well as trying to leverage their worldwide talent and capabilities to try and maximize efficiencies while downsizing the company to a more realistic level. But, that all takes time and money. Time and money they probably would have had if the financial apocolypse hadn't occured.

Personally, I am less forgiving of Chrysler, as they are a privately held firm and have refused to share data on what the money is being used for. Let them drown if they don't want to be transparent. That is part of what got us all into this in the first place.

GM needs to restructure, which i know its doing right now, cut brands now (like saturn, saab) and try to rebuild what they have left.

They have to have time to do it.

I'm just worried as probbaly others are that all this billion dollar spending is going to create quite a tax problem in the future when we have to pay back all of this debt. Because suppose that these big companies receiving aid do fall?

I am too, but frankly, if we just expect them to swim on their own at this point in time, then we will most certainly have a tax problem, because their failure is going to inflate our unemployment numbers by close to 5%-10%. That will entail government benefits, for who knows how long or how much, which will certainly lead to a tax issue in the future. Government spending is so out of control it isn't funny anyway. Our government will go bankrupt before we ever get a chance to talk about paying it back anyway. One thing is for sure. You can't increase spending, and decrease revenue and expect to make money. You probably can't even increase spending and increase revenue, because there is such a shortfall, they would have to take so much out of the system, growth would disappear and you are left with less revenue on less growth, but that is another matter entirely.

[IAmTheNight]

I understand the fact that if we do not help GM and Chrysler there will be a big back lash to the rest of the industry, employment, economy, etc. But when do we draw the line?

I understand that spending another 30 billion now will potentially save us from spending 100 billion later, but after this 30 billion are GM and Chrysler still going to be safe?

GM needs to restructure, which i know its doing right now, cut brands now (like saturn, saab) and try to rebuild what they have left.

I'm just worried as probbaly others are that all this billion dollar spending is going to create quite a tax problem in the future when we have to pay back all of this debt. Because suppose that these big companies receiving aid do fall?

Taxes are going to have to increase at some point within the next 20-30 years. I don't care who's in charge. The national debt is just growing too quickly. The current tax rates are simply not going to be able to pay off future debts, such as the coming Social Security deficit (right now we have a surplus but that won't last). And this is all excluding the price of the stimulus bill.

Giving the car companies more money doesn't guarantee anything except that they will stay alive a little while longer. The government has decided to give the auto industry a bailout because they promised that they will make improvements. If they haven't shown any improvement, I doubt they will get more money. Maybe the government will start its own auto company.

I guess we draw the line at the porn industry. They asked for a bailout and didn't get it.

[owequitit]

So much for my raise.

You don't work for GM. You work for a GM dealer. There is a difference.

[williamsvt]

And therein lies the problem. The short answer is that nobody knows, especially not with everything inter-related to the degree it is.



There is no guarantee that any company is going to be safe. However, given the circumstances, if you buy them time to complete turning themselves into smaller, rightsized businesses with less debt and fewer problems the odds that they will be good for the long term go up exponentially. Part of the problem now is that it was a perfect storm on all fronts. The housing market crashed, locking the credit markets and destroying sales. So now, they can't sell cars, they can't borrow money, and they don't want to have to lay off workers which just aggravates the problem. Frankly, as much of this is their fault, they aren't the only ones on shaky ground. Toyota is reporting its first loss in 70 years. Nissan is losing a ton of money for the year and slashing 20,000+ jobs. Honda is laying off "temporary" workers. BMW has said that if this continues for another 2 years, they will be facing bankruptcy. It is affecting the perfectly healthy companies too.

Where GM, Ford and Chrysler are at fault is not having a viable LONG term business plan. For 30 years, all they were interested in was milking the most they could from that quarter, while the Japanese have 10-100 year strategic plans. This allows them to remain focused on the long term goal, which is something the domestics never did because there wasn't any money in it right now. It bit them in the ass hard. It has been coming for a long time, but they were too short sighted to see it. They didn't develop competitive small cars or fuel efficient engines because there wasn't as much money in it at the time. They didn't build 200K-300K mile cars because there wasn't as much money in it at the time.

However, current GM management can't be held solely responsible for it either. That would be like a black guy today telling a white guy that it is OK to blame him for slavery 200 years ago, even though that person had no control over it, and may not be pro slavery or have even had any history of it. It is placing blame and not the fixing the problem. The amount of good things I have seen GM do since Rick Wagoner got in there is pretty impressive. He seemed to start out slow, but then they really have done a lot to bring new technology, and ideas to the company as well as trying to leverage their worldwide talent and capabilities to try and maximize efficiencies while downsizing the company to a more realistic level. But, that all takes time and money. Time and money they probably would have had if the financial apocolypse hadn't occured.

Personally, I am less forgiving of Chrysler, as they are a privately held firm and have refused to share data on what the money is being used for. Let them drown if they don't want to be transparent. That is part of what got us all into this in the first place.



They have to have time to do it.



I am too, but frankly, if we just expect them to swim on their own at this point in time, then we will most certainly have a tax problem, because there failure is going to inflate our unemployment numbers by close to 5%-10%. That will entail government benefits, for who knows how long or how much, which will certainly lead to a tax issue in the future. Government spending is so out of control it isn't funny anyway. Our government will go bankrupt before we ever get a chance to talk about paying it back anyway. One thing is for sure. You can't increase spending, and decrease revenue and expect to make money. You probably can't even increase spending and increase revenue, because there is such a shortfall, they would have to take so much out of the system, growth would disappear and you are left with less revenue on less growth, but that is another matter entirely.

by the looks of it you either take or teach economics maybe?

Good points.

[owequitit]

Taxes are going to have to increase at some point within the next 20-30 years. I don't care who's in charge. The national debt is just growing too quickly. The current tax rates are simply not going to be able to pay off future debts, such as the coming Social Security deficit (right now we have a surplus but that won't last). And this is all excluding the price of the stimulus bill.

Giving the car companies more money doesn't guarantee anything except that they will stay alive a little while longer. The government has decided to give the auto industry a bailout because they promised that they will make improvements. If they haven't shown any improvement, I doubt they will get more money. Maybe the government will start its own auto company.

I guess we draw the line at the porn industry. They asked for a bailout and didn't get it.

Or you could reduce expenditures... or even better, use a combination of the two, and then once the debt is down to a reasonable level or gone, lower the taxes again.

[owequitit]

by the looks of it you either take or teach economics maybe?

Good points.

It is something I dabble in...

[williamsvt]

It is something I dabble in...

I know this is a bit off-topic, but do the GMAC loans have to do with the downfall of usable money in the GM company. I know GMAC was creating cash flow for the company in the short term. However, now that we have the mortgage crisis upon us GMAC must be suffering on foreclosures.

and note the stockmarket today, 297points down, yikes.

[owequitit]

I know this is a bit off-topic, but do the GMAC loans have to do with the downfall of usable money in the GM company. I know GMAC was creating cash flow for the company in the short term. However, now that we have the mortgage crisis upon us GMAC must be suffering on foreclosures.

and note the stockmarket today, 297points down, yikes.

GM sold GMAC. I believe their last expenditure related to divestiture, or accounting was over the summer prior to the crisis. It most certainly would have had an effect. It could be that they retained a non-controlling stake in it, but it seems to me they divested it almost completely. I would have to go look, and I am not going to do that tonight!

[IAmTheNight]

Or you could reduce expenditures... or even better, use a combination of the two, and then once the debt is down to a reasonable level or gone, lower the taxes again.

Hah! My economics teacher has said the same thing.

But I have no idea where the government could reduce spending to make up for future debts. Have you seen the projections for Social Security costs in 10 years? Scary stuff.

[wed3k]

stop feeding the crack addicts more crack!

[owequitit]

Hah! My economics teacher has said the same thing.

But I have no idea where the government could reduce spending to make up for future debts. Have you seen the projections for Social Security costs in 10 years? Scary stuff.

Here are 3 things that would get us moving in the right direction.

1) Remove the lowest bidder strategy. Having worked with government, it is quite frankly the GM method of running a business. It saves money up front. It ends up costing more in the long run in one of two ways.

A) The lowest bidding company either underbid it to get the contract, in which case they have to keep crawling back for more money, which ends up costing more than the 2nd or 3rd lowest bid.

B) They do a shitty job, and or everything is the bare minimum which means we are left doing it over in a short amount of time which costs less on the front end but far more on the back end. Case in point. Road construction. Some of the roads that were paved when I was 5 are still working with their original surfacing. However, some roads that were repaved using the lowest bidder strategy when I was 20 are in WORSE shape than the ones made when I was 5. And the workmanship is subpar. Things such as seams in the roads, uneven shoulders, poor dirtwork etc. The solution? Let's pay more money to put "chipsealing" down on the road, which doesn't really do anything except tear shit up more than it already was. Then, because all the roads need repaved every 5 years, and we can't afford that, we patch them. And then we patch the patches. And then when that doesn't work to our constituents satisfaction, we blame George Bush.

If the government stopped paying for the lowest common denominator shit as s work, the dollars would actually go further, allowing us to accomplish more work for less money IN THE LONG TERM. The problem is that politicians are self serving greedy bastards that work in the short term because all that matters is what looks good on paper, not what actually matters. Then they either leave office during a re-election or leave it as a mess for their predecessors, who find yet another way to polish a turd and pass it on. By the time you are done and it can't be hidden anymore, the taxpayers have already spent 3x what it would have cost to just fix the damn thing in the first place. And it still isn't fixed, so now it has to be fixed. They can't crap money either, so they borrow it. More debt. It functions on all levels of government.

2) Make it illegal for the Treasury to cook the books, just like they have done for private business. That "surplus" when Clinton left office? Yup. Cooked books. The Social Security "surplus?" Cooked books. The fact is that we can't look objectively at what we need to spend or what we are actually spending if the numbers are dishonest. It is basically them saying, "give me all your money, you can trust me." If some dude came up to you in a subway and said that, you would tell him to go to hell. And yet, we perpetually allow our "leaders" to get away with it. It should be punishable by incarceration or death (since they are the ones that bust everyone else's chops and then don't follow their own rules). Sort of like how the head of the Treasury Department is apparently exempt from paying taxes until he wants to run the treasury. That is bullshit, through and through. If we start holding our elected officials accountable for either their success or their stupidity, then I bet you would see a drastic shift in government efficiency. The politicians like to tell everyone how they should be responsible for themselves. They return the favor by not being accountable for anything themselves. If they can talk the talk, they can walk the walk.

3) Programs need to be streamlined to make sense. Social Security, Medicare, and many other "social" programs no longer make sense in the way they did when they were created. The revenue realities, the social realities and economics have all changed. But, it is a centerpoint of the "democratic" agenda, and they won't even talk about changing it because that is sacriledge. It would be like hardline right wing Republicans accepting abortion. The fact is that there are too many people drawing and too few people paying in. It either has to get more efficient, or smaller. There is no other way. The only third option is financial ruin. ESPECIALLY as the number of people paying in continues to decrease and the people drawing out increases. I don't know about you, but I WILL NOT pay 50-60% of my gross income to Social Security and taxes. At that point, I am no longer working to further myself. I will quit and collect my check from the government, and everyone can kiss my ass. The end result of that is financial ruin, government collapse, and who knows what else.

Of course there are more, but those are a good 3 to start with.

[bcjammerx]

I don't think a merger would help, I think the opposite is what is needed. That way, if one company goes under...we don't loose millions upon millions of job...we only lose some thousands.

THAT is the reason why gm is being bailed...not just the workers...but the steel the company uses etc etc...all those companies built themselves on gm's back really...and if their biggest customer (gm) goes bye bye, they do to...cascade

What would also help? Firing the current exec's and banning them from management ever again.