Lawmakers deciding whether to lend money to U.S. automakers should consider how well bailouts have and haven’t worked overseas. British Leyland, the maker of such brands as Land-Rover and Jaguar, received $16.5 billion in inflation-adjusted taxpayer dollars in the 1970s and 1980s but still went out of business. “I’m not telling the U.S. what to do, but the lessons of the British experience is don’t throw good money after bad,” one former British government official told the New York Times. On the other hand, Renault received a bailout from the French government in the 1980s and is now highly profitable.
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47 Comments
I think they should let the automakers have the natural consequences of not adapting to the changing market. They refused to focus on manufacturing more fuel efficient and hybrid or electric cars, and now it’s bitting them in the butt. Whenever I drive past those huge lots full of big trucks that get about 10 miles to the gallon, I just shake my head. What were they thinking? We all knew this day would come when Americans could no longer afford to drive the big gas guzzlers.
Bail out Wall Street but not Detroit?
No.
Wall Street is more at fault for the ills of this nation AND Detroit. Our US automakers cannot be allowed to fail. But a Democratic government hand WOULD help them operate in better ways going forward.
I don’t know, sometimes the greatest vehicle for change is the pain that comes with not making the right choice to start with.
“…the greatest vehicle for change is the pain that comes with not making the right choice to start with.”
Well said.
The “pain” you speak of belongs to, and is largely earned by American consumers.
Regarding Detroit, maybe the bailout could be accomplished without cash- simply license the Big Three (only) to produce cars that use stealth technology. Who wouldn’t buy a radar-proof car?
I’m still waiting for that car that runs so efficiently on the fumes of other cars that I have to stop every 500mi. or so and empty the gas tank. Until then, my 10yr-old 4cyl pickup will have to do.
I have mixed feelings about this. Yes, I must agree that some of this has been brought on by Detroit with their lack of vision to dedicate themselves to high mileage, dependable cars like Japan has been making for decades.
Detroit is not responsible for the credit squeeze, but they are hurt by it. Makes me think of many years ago, Harley Davidson was retooling while Honda was ‘dumping’ motorcycles on the US market. Harley appealed to the Reagan administration for increased motorcycle tariffs for 5 years.
Harley petitioned the government to remove the tariffs early (after 3 years, IIRC), and now Harley dominates the heavyweight motorcycle market, going from less than 17% in the early 80’s to over 60% today.
The ‘big 3′ employ a huge number of people, and buy from thousands of suppliers. It appears that it would be devastating to our economy to let them go under.
The ‘big 3? employ a huge number of people, and buy from thousands of suppliers. It appears that it would be devastating to our economy to let them go under.
. . which is precisely why we need to keep that from happening.
But before one cent is paid, it’s mandatory that they have to jump through so many hoops it’ll look like a three-ring circus.
The American auto industry has been moribund for some time, due largely to the stubborn insistence of auto executives who, when it comes to their products, are still living in the 60s.
Some have pointed to the good wages that auto workers get, and I suppose, merely to survive, they will need to share the pain. But let’s also keep what’s left of those jobs here in the US, while we still can.
Let the car companies file for bankruptcy then they can reorganize, protect themselves from creditors and renegotiate all labor contracts. They have said that doing this would force buyers to go to foreign brands rather than buy from a company that has filed bankruptcy. Isn’t that what many Americans are and have done already because the so called big three don’t see beyond their own noses. What about new technology, gas efficiency, quality, competitive models, and looking farther down the road than they have ever before? Even if they did fail without a loan from Uncle Sam that would hurt the economy for some period of time but the void would be filled by other car manufacturers, that is what the free market system does. The US auto makers need to finally learn a lesson the hard way, change or perish. DON’T LEND THEM MONEY FROM THE 700 BILLION BAILOUT set up for the investment banking industry, that will just bring out more companies with their hands out. In this country we do not reward failure in business but we do reward success built on lean management, innovative ideas and progress. Hey Big Three build a better mouse trap and we will beat a path to your door, that’s how it suppose to work!!!!!
They have started innovating and would’ve been able to ride out the downturn with a lower cost structure going in effect in a couple of yrs, and new more efficient products coming out. Then they got caught by the bush perfect storm.
Even Toyota is supporting relief for the big three, because they know the cost from the surviving suppliers will increase the cost of their products.
The U.S. is in no position to turn over one of our few remaining production industries to Asia.
I’ve also read their quality is now equal to the imports.
Reorganization bankruptcy would lead to liquidation bankruptcy.
I’ve also seen the cost of not helping them with 50 bil. will cost the taxpayer 100 bil. over a couple of years.
Pay now, or pay later, and not have the industry.
We’ve tried going Global, Globalization is killing our country and workers.
Everyone’s a free marketer until it’s their company that’s getting padlocked.
I do think some executive heads should roll. Starting with the idiot at GM.
But you can bet that if the economy wasn’t in the sewer, Americans would be buying the bigger vehicles even today. Since gas prices are declining.
Also, once the big 3 are eliminated, the price of imports will go up structually, and also because of the absence of competition.
Part of Obama’s vision is detroit will become a world leader by building more efficient cars. Bush vision is that Japan, Europe, and Korea will become the worlds economy engine.
If WE lend them a hand then offshore/foreign assemblers/suppliers of the Big Three should have their govenments put up some guarantees as well, or close down those assembly plants and bring the produciton home. Probably no problem with Canada, but Mexico may balk. Then we move on the envoirmental and wage parity stances promised in the deals set up for oversees production which was never complied with. I’ve been driving a Chev for 40 years, and can’t say any import haave ever enticed me to swithc, based on overall assessment and quality alone. JD Power claims 4 of the top 5 quality production plants in the world belogmn tothe Bg 3.
oops, that should be…”belong to the Big 3″
Phantom
Posted November 19, 2008 at 9:44 am | Permalink
Part of Obama’s vision is detroit will become a world leader by building more efficient cars. Bush vision is that Japan, Europe, and Korea will become the worlds economy engine.
_________________________________________________
lol @ thinking any government can force innovation.
Asia is the new locomotive on the economy train. America is now the caboose.
Only releasing individual creative energy and competition is going to get us out of this crisis.
Bailing out a failed business plan is a mistake. Ridiculous regulations and taxation need to be lifted on automobile manufacturers.
America is going to have to work very hard to get back to being a superpower. I hope that our new generation of workers is prepared to handle the workload.
The bailout money should go directly to us, the taxpayers. An estimate I’ve heard is $100K/person.
Now, THAT would stimulate the economy. Imagine how that money would flood the system with everyone benefiting. Huge amounts of products purchased, huge amounts of debt paid of, and huge amounts of tax revenue generated.
There is no downside to that approach.
If we hand them money, what will motivate them to change?
Let them file and re-org. Drop the union, then after they settle, bring the union back but keep all the damn fluff out of the contracts.
Flipping burgers at McDonald’s is far more difficult than putting on 6 bolts. The pay should be commensurate.
Drop every white collar employee that steered the company to this point. Restructure white collar pay with something manageable.
If they don’t feel a lot of pain, they will not change and they will either have their hands out next quarter or fail anyway.
We aren’t a socialist nation. Why are we acting like we are?
Obama and democrats have an obligation to the UAW and the big three automakers. The unions come first. Not the nation.
Doesn’t matter if the bailout is throwing good money after bad. It doesn’t matter that the union cannot compete internationally with the worlds workers.
What matters is perpetuating the party.
There is no downside to that approach.
Where would the money come from?
Obama and democrats have an obligation to the UAW
This isn’t true. The Neocons are worse that the Libs. The Neocons want new money. At least the Libs are trying to use some of the $700 billion blank check already out there.
There are no fiscal conservatives or free marketiers in DC.
“The Neocons want new money.”
This is going to happen, whether the government prints more new money, or you take it out of the 700 billion, which is NOT a final amount anyway.
You are correct. Republicans back the business. Democrats back the unions.
It’s a done deal. It doesn’t matter what the majority of Americans think
The money coming out of the 700 billion is a smoke screen.
Let’s not forget:
1. The big three lobby congress and presidents to not make tough EPA/CAFE standards.
2. The big three continue to make big gas guzzling cars, which also, according to consumer reports are not the worlds most efficient cars.
3. Congress and presidents have held off on “tough” EPA and CAFE standards – which in fact encouraged the big three to NOT build cars with higher MPG. Meanwhile automakers the world round are producing cars TODAY, with over 10 MPG higher than the year 2020 35 MPG fleet “average”.
In other words:
1. Take gun
2. Shoot self in foot
3. Take the gun again (bailout)
4. Shoot self in other foot
Then ask the American people to pay for your treatment and recovery.
And SCREW the other world automakers WHO ARE BUILDING CARS IN AMERICAN which compete with the big three.
Stupid is.
“SolDevVB
Posted November 19, 2008 at 10:52 am | Permalink
There is no downside to that approach.
Where would the money come from?”
Obviously, it comes from that 700 billion that Congress is ‘giving away’.
Give $100k to each of us instead.
Obviously, it comes from that 700 billion that Congress is ‘giving away’.
Give $100k to each of us instead.
Just an FYI, we don’t have that money. So to one up your scenario, let’s just not borrow it.
Well, Sol, it seems the money has been/is being borrowed to fund the $700 Billion, so why not “give it to us” rather than the changing targets of the Treasury Secretary. Talk about a “stimulus package”! :-)
I could think of better things to do with it. Is it, like, really dumb to pay off a loan with a loan?
While I could put 100k to good use, I don’t want my grandchildren to be paying the interest.
Understand your point, Sol; using additional debt to pay off debt isn’t the best thing to do. I, too, don’t want my grandchildren, if any, to be paying the interest (nor, I hasten to add, anyone else’s grandchildren to be paying the same), it appears to me that this is moot at this point. Thus, my light-hearted agreement to give us $100K each to go forward and help the economy out (ripple effect and all that).
Where’s my check?
Where’s my check?
——————-
ATTN: Government
This time just send me the dang check. DO NOT waste paper and postage by sending me a letter telling me when to expect my check!
Thank You,
Common Sense
American Way, your 11:05 is spot on. I rarely agree with your politics, but this posting shows that rarest of attributes in human beings, common sense. Ain’t nearly enough of that going around.
Dennis
Hmm; the Chinese have other ideas for applying the surplus of dollars held other than buying U.S. government debt:
http://emptywheel.firedoglake.com/2008/11/16/we-are-all-flint-mi-now/
Wonder what a Buick Owner’s Manual translated from Chinese would read like?
The Economist has a special section this week on the world-wide automobile industry. One of the little facts is that GM sells more Buicks in China than it does in the U.S.
Dennis
I see the dumb ideological rhetoric is right on schedule.
I’d rather not engage in any kind of bailout myself, and I’d like to be convinced that letting them go bankrupt is an intelligent option. But as long I’m seeing the same kind I-heard-something-from-some-guy reasoning that gives us creationism, global-warming pseudoscience, and Holocaust denial, I will remain undecided.
Try harder, folks. But yet, try at all.
P.S. I agree with Dennis on AW’s one post.
VT,
I hated the GM bailout from the moment I heard about it. That link kinda makes me think though…
Thanks for posting it.
P.S. There are other good posts, too.
You know who you are.
P.P.S. I suppose I’m in a foul mood. Frig and phone went out at the same time.
Rage
Posted November 19, 2008 at 3:49 pm | Permalink
P.P.S. I suppose I’m in a foul mood. Frig and phone went out at the same time.
================
Sorry to hear that. I just gave away a rather new frig, I would have gladly offered it to you had I known.
I’ve had to live out of coolers for a few days myself. I feel your pain Rage!
Rage,
Like ANTI, I feel your pain; “been there, done that” as the saying goes.
Sol,
The natural result of GM, e.g., going down (through Chapter 7 IMHO) is that there will be liquidation of the assets. If one believes in a “free market”, there would be no reason to object to the Chinese buying said assets, if the offering price is highest. Then, of course, the production would be moved to a lower cost environment, with the consequences set forth in the linked piece.
Perhaps a “bailout” could be done with GM, e.g., filing for Chapter 11 protection, with the government doing the DIP financing. I don’t know how familiar you might be with the terms and conditions normally found associated with such financing, but the same are as lender friendly as can get the needed Bankruptcy Court approval. Should this scenario prove viable, the government should be as aggressive in doing the DIP financing as private lenders.
Since you are in MI, I’d like to hear your opinion on how GM, et al, going down in a Chapter 7 would affect the overall conditions in your state. I will give you mine: it would be a not to good a place to be living.
Yep, 100k for me and I buy a foreign auto, a foreign fridge, a foreign plasma tv, a foreign computer, foreign furniture and hire an illegal. Lot of good that 100k is going to do for the good ole USA.
Hell, maybe I take the 100k, move to Baja and retire.
Like ANTI, I feel your pain; “been there, done that” as the saying goes.
Indeed, I understand that fully, Vaughn.
And my small complaint is just a small gripe about usual day-to-day stuff. No big deal.
If American Taxpayers wanted to keep the The Big 3 in business and employed in Michigan, they would have bought more of their cars for the past 20 years.
Bailing out the Big 3 will only buy time for them to fail sometime in the near future. They have been losing market share for decades without the credit crisis or energy crisis even on the horizon.
Because there is little, if any, profit margin in small cars, Detroit has been building generic POS for decades. Any foreign auto company builds better small cars than the big three. Had they not given over the small car market to foreign companies, they wouldn’t be in this position.
These idiots have lived high on the hog for decades. There was always another hog to dine on . . . until now. The hogs ain’t no more and the big three are still wanting to butcher a porker. Nice touch, though, flying the corporate jet to Washington with their hands out. Makes me want to join in the debauchery . . . not. Dump the big three executives, hire, say, Japanese CEO’s and watch the fun. I’d pay fer that one.
Even if the Senate can’t get the needed votes, they should have a vote on it, let the obstructionist and bush live with the outcome.
At least they can say, “We tried”.
See Boeing Wichita is laying off 800 1/3 of their workforce because the tanker deal didn’t get done (Thanks Todd, Roberts, Brownback, we love ya!)