Let GM go Bankrupt

The government already protects unfunded or bankrupt pension plans doesn't it?

Let the big 3 go through chapter 11 and restructure their union and parts suppliers contracts to get their costs down to something manageable (similar to Toyota's costs in their Tenn. plant).

To give them 25 Billion will not fix the underlying problems.

Yup. Let's face it there are a multitude of different things that could have been done to avoid this issue.

I for one have no idea why they put out so many different models of cars. Seems highly inefficient. Make 5 or 6 different kinds and that's it; streamline production and spare part production.

Cycloptichorn

It's more profitable though (or at least has been). Companies make more in replacement parts than they do in the sales of cars. The more different parts, the more expensive the parts are.

If they only had a few lines, more parts would be interchangable, more competition would grow in the aftermarket parts industry, and the car companies would make less money.

I mostly agree with this--let them go into receivership. But the glut and the waste are not at the level of the assembly line workers, they are at the top--When Lee Iacoca was making 11 million per annum, before bonuses and "expenses" and the assembly line workers were averaging $40,000 per annum, half of his salary would have paid for more than 1200 blue collar workers.

At heart, western capitalism is rotten, and the problems that arise from it and the old boy network never get solved.

By the way, i'm not denying it, but i know of no Federal program which assumes the costs of unfunded pension plans. That would still constitute a taxpayer bail-out, even if indirectly.

Depends on how much they would be saving on the back end. Less stock sitting around overall. Less duds that don't sell well. Less specialization in machinery to build all the different cars. But you're probably right. It would be more efficient but less profitable, which is odd.

You could always try the complete opposite route - every single car a BTO, like Dell computers.

Cycloptichorn

This is the one thing I'm stuck on... Let's say they go into Chapter 11. One estimate that I saw of the first year Chapter 11 cost to GM alone was over 1 billion dollars (not sure what goes into the costs of going through Chapter 11) and that GM would take upwards of 3 years to complete the restructuring process.

In the meantime, the assumption is that no one would buy a GM car because there is no faith in the availability of service or parts and car purchases are long-term "investments" that folks need faith in before they make the deal. So -- if they go into receivership and it costs them over 1 billion per year and no one is purchasing the products coming off the line how do they survive Chapter 11?

United Airlines went through Chapter 11 and restructured but folks continued to fly on UAL flights throughout the process. MA -- since you're one of the ones saying they won't fail -- are you planning on buying a car made by a car company going through Chapter 11?

Settin' Ah-aah wrote-



What a load of rubbish. Have you never tried Auntie Bessie's Steak and Kidney Pie at $1.99 (buy 0ne get one free)? Are you still getting up out of the chair to change the channel on TV. Do you still admire cheescake pics of Ava Gardner?

Yes--but after an airline flight you don't need any spare parts fitting. Or you're not supposed to at least. The garuantee of spares is an important factor with car sales and it isn't with an airline flight.

So the comparison is invalid JP. I like it though.

If you think they are going under you should buy all their spares you can at the auction, or quicker if you know the man, and store them. Then go on e-bay.

No Spendi. What I'm suggesting is that the current business model doesn't work and adding more government money and control is unlikely to improve it. I didn't suggest $10 an hour peeps would be better; I suggested that it's unfair to tax them to prop up jobs that pay more.

By and large; I don't have a problem with high salaries or Private Jets for people whose time is worth more than the added expense either… but that doesn't mean it isn't stupid to use them on your way to beg for financial help.

The difference between Auto worker compensation packages and typical packages for similar jobs is substantial enough that the companies wouldn't be in this shape without them. This distributes the guilt between the parties who demanded more than the company could pay; and the management who agreed to it. A contract that cannot be sustained on its own merit shouldn't be subsidized.

I too speculate that larger investment in R&D for more efficient and alternative fuel vehicles would have been a good idea. But this is speculation. (That Ford manufactures a CNG version of the "Ford Focus", but doesn't sell it in the United States I personally find obscene... but I can rationalize they probably thoroughly researched the decision.) The incredible burdens of bloated labor contracts, on the other hand, are a matter of fact.

Off the top of my head, and I'm not married to any of these thoughts, I'm thinking maybe it should go something like this:

Each company seeking help this substantial should be examined separately and placed into receivership. Next, it should be determined what percentage of obligations the company could pay if it were allowed to go under. Accordingly, shares in the company should be divided allowing the indebted to either continue to gamble on the company's success or cash out.

By now; there has to be some pretty accurate information on the costs of training employees for various positions. This cost should be converted to a reasonable premium or "X-Factor" to cover the extra value of current employees based on their company history, training and proven value. From there; most jobs should be bid down in a reverse auction, allowing all qualified potential employees to bid... but with a built in preference given to current employees via the X-factor (basically, deduct X-factor from their bids). The final 24 hours of bidding should be restricted to current employees only, which should, theoretically, allow most current employees to keep their jobs at something reasonably higher than the market value for same. Yes, this would probably still mean a substantial pay cut, but most should realize it's a better deal than they'd be likely to get on the free market if the company were allowed to go under. Let them make their own decisions.

All employees should be encouraged to disregard the Union in their bidding, for failure to do so would likely result in losing their jobs. Tough luck. A contract with a failed business has no value at all (beyond the aforementioned percentage share each would be entitled to according to what the company is actually worth and what it's current obligation to the employee is.)

The "Bailout" should be structured as an investment that is backed by an ownership percentage share of the company's newly minted stock. This would allow the United States to first provide the necessary cash to put this company in high gear, then to recoup it's investment by unloading the stock. This way we will, in effect, avoid nationalizing the auto industry, which would be the surest way, IMO, to insure that it would never become profitable again.

The receivership should seek a new acting CEO with an impeccable resume and a willingness to work for a percentage of profits. Every employee from top to bottom should receive a portion of their pay package as a share of profits. An escalating formula should be developed for those higher up that structures pay packages increasingly on performance... taking both performance comparisons to their peers and overall profits into account.

To the extent many Americans believe the auto-makers should be forced to work on more efficient and/or alternative vehicles, I agree... but NOT directly. I do not object to gas taxes or "gas guzzler taxes" or incentive programs via tax breaks (or even research grants) to bring about this behavior; but I object to direct intervention because I don't believe bureaucrats are qualified to run the industry.

But that is the point, spendi. Those who are saying that the big three can survive Chapter 11 are saying other companies such as UAL did so and can be used as a model. The model doesn't hold and I've yet to see a model that shows how an auto manufacturer can survive Chapter 11 when there is no faith in the survival of the company (I see but haven't read O'Bill's response below).

Well, we also don't know who would buy their stuff with a 25 billion bailout, either, do we? Now, if there were reason to believe the bailout would produce viable companies, the idea might have a little more support; simply prolonging the agony another six months or a year is not much of a selling point. The only way I can see it working is if we're due for a red hot economy, accompanied by low fuel costs six months from now. If we can count on that, government loans could probably be repaid, and Detroit could lumber through on a business as usual basis. I don't think we can count on anybody being bailed out by a strong economy in the near future.

On the one hand, they need the money for retooling and designing quality, fuel efficient cars. On the other hand, they want a relaxation of CAFE standards, because they can't make a profit on small, quality, fuel efficient cars. We're just not supposed to put the two ideas together, at once.

Now there is the Occom Bill I know and love.

Of course we can't.

The best we can strive for is a society where the winners have earned their laurels with integrity and through creativity, smarts, and old fashioned hard work.

Losing need not mean abject poverty or destruction, but there simply isn't an even imaginable system that will result in everyone winning; where winning actually means something.

We can come close to all losing together though, but history has shown us that even then there are winners: just not the industrious, but the powerful.

Zero-tolerance in any context is untenable and will always lead to irrational and/or harmful decisions and actions.

If no one can be left behind, we will not advance.

The US assembly plants are just a small part of the Toyota Company and only a fair part of the cost of the cars sold in the US number one. Many years ago if memory serves me correctly I hear the figure 50 percent of the total cost of manufacturing cars for sale in the US is the US assemble plants.

Number two the health care cost in the US is smaller as their work force in the US is younger as their plants had not been around for generations and that mean lower cost in itself and the cost of retirees health care are not there compare to the big 3.

Let go on because of the tight relationship between the government of Japan and the businesses of Japan they do get other help that the big three do not enjoy.

The Japanese people have a very large saving rate and the interest rate on money that Toyota can access is a small fraction of what the big three need to pay.

And it go on and on.

However if the republicans get their wishes fulfill we will be buying all our cars form oversea shortly.

You know I have to laugh here we had firms that had been in business for a 100 years or so and all at once the experts on this thread are declaring them not viable!

The same experts love Toyota however the Japanese government would never allow Toyota to go under and would aid them at whatever cost.

Sure, I would. Even if the car company failed, someone would buy the rights to produce the replacement parts. Replacement parts would be available for years and years.

Yes, and we are not Japan.

It's all opinion but I think the argument that consumers will react drastically to Big 3 bankruptcy is self-serving and erroneous.

First - Americans are not buying Big 3 cars, and there is no reason at all (and certainly none provided by their CEOs) to believe that an infusion of $25B will change that trend.

Second - Americans understand that bankruptcy doesn't necessarily mean ultimate demise. They have already seen major companies resort to bankruptcy (Airlines) and come out the other side essentially viable. To the extent there is a stigma it can be overcome by financial assurances by the government that don't even approach a certain outlay of billions.

Third - If there is a product in America that is purchased through the gut and not the brain, it is the automobile. If the Big 3 start building cars Americans want, the longer term issues of service and parts will hardly come into play.

Fourth - The models that the Big 3 have been able to turn a profit on are trucks and SUVs. The Democratic plan for a bailout will never allow them to return to these profitable models despite the fact that current gas prices may suggest a renewed market

Fifth - Neither $25B nor $100 B of taxpayer dollars is going to deflect the Big 3 from the road to ruination upon which they have been traveling for over a decade. Witness the fact that their CEOs flew to DC on private jets without a shred of a plan for putting the money to good use.

Sixth - The Democratic bailout is a quid pro quo for Union support. While there may be provisions in a bailout plan to require some token shakeup at the management levels, there will be nothing designed to reign in the Unions.

Seventh - There is no way around losing billions. The economy is in a very bad state and we cannot possibly plug all the holes in the dikes. After the Big 3 get their bailout, who will be next? Do you think there will not be advocates of additional bailouts on MSNBC telling you why additional $50B outlays are absolutely necessary for:

The Steel Industry
Coal Mining
Insurance Companies (Don't let the AIG bailout fool you - The government is bailing out AIG financial services, not their insurance arms)
Farmers (Yet again)
Trucking
Newspapers
Municipalities

The list goes on and on.

A bailout of the financial system was intended as a cure for the economy's circulatory system. Lose blood flow and everything dies.

Manufacturing, and especially auto manufacturing, is not the life blood of the American economy.

In part you are correct, and perhaps their gravest mistake was to concede to ridiculous union demands when the most dire effects of doing so was decades in the future.

Now it is decades into the future and only an ideologue or an idiot refuses to acknowledge that past concessions to unions are a, if not the, critical cause of their current condition.

Unions will not be busted by concessions of their own.

If they refuse to make any concessions, there is no limit to the amount of taxpayer dollars that will be required to keep the Big 3 alive.

It is the very rare parasite that will kill its host and yet we have the example of the UAW.

You Lefties have either got to stop thinking of the world of commerce in centuries past or admit that your support for unions is mere political expediency.

Your romantic notions of unions as saviors of child laborers and coal miners enslaved by the Company Store is vacuous at best.

It is in keeping with your (very conservative!) tendency to view the world through a prisim of The Good Old Days.