Let GM go Bankrupt

@Cycloptichorn,

Cycloptichorn wrote:

Oh, you're against that? This practice - one of waiving taxes on companies that move there - is one of the PRIME reasons that businesses expand into 'red' states such as Texas and Oklahoma. Conservatives do what you are talking about with abandon.

Cycloptichorn

I think it is an important reason, but not the prime one. Manufacturers also consider local labor laws - right to work states have a big advantage here; access to needed transportation & markets; state employment & liability laws & tort history; taxes and several other factors. I will agree that such state pay-offs are a frequent tie-breaker between otherwise competitive states. In addition potential corporate investors try to get the best deal they can. However, that is a universal feature of economic transactions of every kind - including those done by both conservatives and liberals.

It is much more expensive year over year to operate a business in states like California, New York, Illinois, Michigan or Massachusetts. Since profits are a very small % of cost a (say) 3% increase in costs is a very large fraction of profits and a decisive factor in choosing a location. Even businesses located in these states for other compelling reasons, find ways of evading as many local costs as possible. What fraction of the computer code and chip design of the titans of the California IT industry is done by engineers and programmers in California? Very small - it is being outsourced to India and other areas. Bechtel, Parsons, and URS, all prominent, California based world wide engineering & construction firms now have only thin veneers of their corporate headquarters left in the state: the rest is distributed across the country - and mostly in the red states Cyclo so despises.

1 Reply

@georgeob1,

I'm fine with saying that it's A prime reason and not THE prime reason.

I don't despise Red states - I'm from one and care a lot about it - but I don't look to them as models for how business should be done. And the recent revelations regarding the disastrous budget situation in many of them gives the lie to the idea that they are any better ran than so-called Blue states.

Cycloptichorn

1 Reply

@H2O MAN,

H2O MAN wrote:

What do you know about motor vehicles?
What is your experience with building, driving, racing and modifying motor vehicles?

I do general maintenance and repair on motor vehicles.

I don’t build, race or modify motor vehicles.

I regularly drive motor vehicles.

1 Reply

@Cycloptichorn,

Cycloptichorn wrote:

I don't despise Red states - I'm from one and care a lot about it - but I don't look to them as models for how business should be done. And the recent revelations regarding the disastrous budget situation in many of them gives the lie to the idea that they are any better ran than so-called Blue states.

Cycloptichorn

While you may have some reservations about "how business is done" in the Red states, you should also be concerned about why so much less business is being done in California and why so much of it is moving to these states. The California "model" isn't attracting nearly as many players as it once did, and even companies with deep roots here are stealthily moving functions out of the state.

1 Reply

@georgeob1,

What's the implication of this, George? That CA simply will become a state where people don't wish to do business, and that it will destroy our state or something? I just don't find that to be credible.

The fact remains that CA is one of the most desirable locations to live in or travel to in the country. It's also chock-full of rich people; the median income is far higher here than in ANY so-called 'red' state. I don't see the state imploding due to a lack of business or business opportunity anytime soon.

Cycloptichorn

2 Replies

@InfraBlue,

InfraBlue wrote:

H2O MAN wrote:

What do you know about motor vehicles?
What is your experience with building, driving, racing and modifying motor vehicles?

I do general maintenance and repair on motor vehicles.

I don’t build, race or modify motor vehicles.

I regularly drive motor vehicles.

Even with your limited experience with motor vehicles you should be able to spot the flaws with the Volt

1 Reply

http://www.tundrasolutions.com/gallery/files/1/5/0/7/8/0/_778763.jpg

1 Reply

@H2O MAN,

H2O MAN wrote:

Even with your limited experience with motor vehicles you should be able to spot the flaws with the Volt

Which are what, exactly?

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@H2O MAN,

What I find interesting and amusing is that the attacks on Obama concerning the GM bail out is that the attackers need to overlook that the bail out was supported by both the Bush and Obama administrations.

Beside that the bail out not only save a large part of the heavy manufacturing capabilities of the US but is likely to earn a profit for the government and the taxpayers beside.

1 Reply

@BillRM,

Quote:

GM bail out is that the attackers need to overlook that the bail out was supported by both the Bush and Obama administrations.

There is a huge difference....Bush put an IV in the arm of GM, Obama allowed and paid for a rebirth.

1 Reply

@Cycloptichorn,

I think it means that the middle class in California will suffer declining economic opportunity. The business base in California increasingly consists of Corporate headquarters employing high paid executives and relatively low paid clerical staff, while the work by professionals is outsourced to other areas of the country. That is already a discernable trend in the Bay Area - Chevron moved its administrative staff out of SF a decade ago, leaving only a few executives. Bechtel did the same thing seven years ago, as did URS. In southern California Parsons, Jacobs Engineering, and Fluor, which once employed thousands there have exported large numbers of staff as well. I don't take any pleasure in noting this. It is simply an observable trend that is already having adverse effects on the state. Time to wake up and deal with the causes.

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@Cycloptichorn,

Quote:

It's also chock-full of rich people

But rich people are unstable in this regard. They have portable wealth. Just get them feeling insecure and they are soon off.

1 Reply

@spendius,

California can't pay its bills because they don't have the ability to raise taxes, and they can't fix this because the state is politically broken. Who the hell wants to invest in a broken state where the finances do not work? This state isone of the three most disfunctional out of fifity, which takes some doing.

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@hawkeye10,

Quote:

There is a huge difference....Bush put an IV in the arm of GM, Obama allowed and paid for a rebirth.

No sane government Hawkeye of either party would had allowed such a large part of the manufacturing muscles of this country to go down the drain.

If Obama would not had won then President McCain would had been the one to prevent not only GM but the other two cars manufacturers from being destroy.

1 Reply

@BillRM,

BillRM wrote:

If Obama would not had won then President McCain would had been the one to prevent not only GM but the other two cars manufacturers from being destroy.

I don't think that "being destroy(ed)" is an accurate term. GM and Chrysler were facing bankrupcy, a process that involves some fairly quick triage among the holders of debt with a fairly clearly established hierarchy among them. It also allows the company to renegotiate the collective bargaining agreements with the UAW which were a principal cause of their demise. They would likely have emerged from this proceeding intact in about the same time as with the government managed bailout. A difference is that the bondholders of GM debt would not have been screwed as badly as they were by the administration in favor of their paying supporters in the UAW - in defiance of normal legal process.

The companies were nearly destroyed by the UAW and their flabby negotiations with them during the past two decades. Tha last strike by the UAW against GM was about five years ago and done to prevent the modernization and automation of two assembly plants in Flint MI so they could compete in productivity with modern Toyota plants in Kentucky. The union prevailed; the modernization was halted, and the plants were closed forever three years later.

1 Reply

@Cycloptichorn,

Cycloptichorn wrote:

okie wrote:
Actually, this subject has long been a pet peeve of mine, because I have observed local governments giving tax breaks to big companies to coax them into moving to their town. Examples would be giving a company a pass for a number of years on state or local taxes, or waiving property and / or sales taxes for a company when they agree to move into a town. One specific example was waiving property taxes for a Home Depot, meanwhile a privately owned hardware store had been there for 20 years quietly and obediently paying all of their taxes. Those kinds of practices strike me as "should be or might be unconstitutional." It is certainly unethical at least, in my opinion.
Oh, you're against that? This practice - one of waiving taxes on companies that move there - is one of the PRIME reasons that businesses expand into 'red' states such as Texas and Oklahoma. Conservatives do what you are talking about with abandon.
Cycloptichorn

I would like to clarify one obvious distinction about what I said, cyclops. I am not against more favorable tax and business climates in different states, as long as they are universally applied to everyone in those states. Perhaps you misunderstand the point I made? What I object to is granting favors or exempting taxes for particular companies in the interest of attracting them there, while they do not apply it to existing companies that have been there a very long time. To summarize, I believe tax policy and business regulations should apply to all businesses in a government jurisdiction.

For example, I have no objection at all if certain states do not have income tax, because it applies to everybody that lives in those states. Nor am I against local governments waiving property taxes, but it should not be given to a Home Depot for one year or 2 or 3 years for example, just to attract them into town. If done, property taxes should be waived for all businesses permanently by the town. Obviously, if a town wants to attract business to their town, the ethical and best policy would be to try to make tax policy less burdensome on everyone in that town jurisdiction.

Also, George has rightly pointed out that more favorable business climates in some areas are a totally different issue than what I was referring to. I am surprised you did not understand that? I said plainly what I was talking about.

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@georgeob1,

Sorry I think destroy is the right word as without the government I do not think that given the stresses on the banks and the whole worldwide finance market at the time that a chapter 11 bankruptcy would not had work out and in the end we would had been looking at a chapter 7 bankruptcy for both companies with almost no question about Chrysler.

If both of them had gone down the the supply chain of companies that Ford also needed to survive would had been down the drain also.

1 Reply

@BillRM,

I think we've bought into the idea that "too big to fail" is a sound principle, but count me as one not sold on that principle. In the economics books I've read, it is "demand," not "supply," that drives the economy. Perhaps the question is what would have happened to GM or Chrysler if they had gone bankrupt? In other industries I've had the pleasure of observing more first hand, often the bankrupt companies are sold to another company, or the company re-emerges with new investors, as allowed and supervised by a bankruptcy court. The new company or different company ends up doing pretty much the same thing and producing the same products as they did before filing bankruptcy. Often, the new company ends up healtier and managed better than if the old company had been artificially propped up. Eventually at least, that will be the end result because consumers will demand quality at a competitive price.

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@okie,

Quote:

often the bankrupt companies are sold to another company, or the company re-emerges with new investors, as allowed and supervised by a bankruptcy court. T

All true however as I said this is a special case number one the whole finance system was in great tumult and the available funds in the economic to float large deals was at an all time low. Hell, the funds from banks to consumers for retail cars loans were very weak at the time. GM if I am not in error needed to do a large percent of the loans financing for their customers as bank loans had dried up. Footnote the Federal government pump billions into GM for that very purpose once more if I remember correctly.

The whole supply chain of thousands of companies were hanging on by a thread and anything that would interrupt the already very weak flow of cash to them even for a short time period could had cause a complete collapse of the whole chain.

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@okie,

Quote:

In the economics books I've read, it is "demand," not "supply," that drives the economy.

Not many ladies would accept such a proposition okie. Prostitutes would.

And if your books didn't discuss the male/female relationship as the driver of the economy it can only be because they don't have the nerve.

0 Replies

Let GM go Bankrupt

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