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Does the U.S. Auto Industry Deserve a Bailout?

Posted November 29, 2008 8:51 AM

In comparison to Asian and European automobile manufacturers, Detroit's Big Three — GM, Ford, and Chrysler — have managed to get most things wrong. Out of touch with the market, they continue to design and build the wrong size cars, make the wrong size engines, and make unsustainable deals with assembly worker unions that price them out of the market. If the government bails them out, would this not be rewarding incompetent business practice?

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#1

Re: Does the U.S. Auto Industry Deserve a Bailout?

11/29/2008 12:49 PM

Yes,

But of course it's not as simple as that.

I do think that any bail-out should include some strict guidelines. If they are going to use taxpayer money they should spend it the way that benefits taxpayers most.

I'm thinking of the show "Blog Cabin" on the DIY Channel. Everything gets voted on online and the cabin gets built surprizingly well.

Top management for these companies should also come under citizen review.

If this works we can look at congress next.

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#2
In reply to #1

Re: Does the U.S. Auto Industry Deserve a Bailout?

11/29/2008 11:30 PM

The managers and the unions blindly exploited the barriers to entry to increase wages and pensions and fringe benefits to unsustainable levels.

These barriers were mainly the high cost of freight and the network of dealers in USA/Canada, different standards and rules also acted as barriers.

So management let wages go up to $72/hour with fringe benefits and pensions summed in(cash was about $35. On top of this was the overlay of management wages which added another $50 or so.

As time went by, the Japanese and Koreans solved the freight problems with special fast on/off ships and their own dedicated ports(to bypass the longshoremans unions) and they gradually built up a dealer and parts supply network and began to sell cars that were better assembled (with lower wages the workers could spend more time on each aspect of car assembly). So the foeign cars started selling and the % of he market grew every year.

Management and unions kept their heads deep in the sand and wages went up and management waste went up, and in time we arrived at our current state.

All we can do is retrench the wage, benefit, and pensions of both management and unions by about 50%.

Even with a 50% drop, both management and workers will be getting more than the average industrial wage (which shows you the degree of the imbalance).

That is about all that can be done. Giving them bailout money and letting the current state carry on will solve nothing and the whole thing will collapse a litle later.

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#3

Re: Does the U.S. Auto Industry Deserve a Bailout?

11/29/2008 11:40 PM

I think the only answer for our automotive industry is to put them through chapter 11 reorganization. The old management system needs a big time shake up and the fat unions need a reality check.

But we (the federal government) need to keep this from happening until we get our nation economically stabilized, get the new Administration and Congress firmly in place and determine where we are going with health care and energy policy, both of which will have a big effect on the industry's future.

So I think a short term bailout, like 6 months is a good idea. The government should take some kind of preferred equity position and also insure in some way that product warranties and parts availability will be maintained.

What I don't think we should do is dismantle our American auto manufacturing companies in favor of foreign companies. Chapter 7 is not a good option. The idea of punishing the auto companies should be cast aside.

Also I don't think the auto companies should be forced to get rid of their large autos, SUV's and sport trucks. Just limit their sales in the USA and maybe allow the SUV's and light trucks to be sold only as diesels. They are in fact profitable exports for the companies and help our trade position.

Ed Weldon

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#4

Re: Does the U.S. Auto Industry Deserve a Bailout?

11/29/2008 11:42 PM

Every once in a while I hear a phrase or statement of some kind that just fits the bill.

In the movie "Unforgiven", starring Clint Eastwood as "Bill Mundy" (sp?), the sheriff is lying there dying, and he's complaining that he doesn't deserve to die, he's building a house.

And Bill says to him: "Deservin's got nothin' to do with it".

This applies to the car makers, and the victims of genocide, and the....

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#5

Re: Does the U.S. Auto Industry Deserve a Bailout?

11/30/2008 7:32 AM

Chrysler and GM are the ones REALLY in deep trouble. Ford's woes are not quite as bad but could suffer seriously.

They have watched their market share erode steadily for over 30 years and done little or nothing as better handling, more reliable cars with vastly superior fuel mileage were imported in vast numbers.

While other American industries moved jobs and production off shore and to Latin America, Asian and European car makers were building plants here!

Toyota, Honda, BMW, Mercedes, et al, actually compete head to head with the Big Three, right in their own back yard, with the same American workers and kick their butts in every domain worthy of measurement: perceived quality, reliability, handling, price, frugality, etc.

The American Auto Industry has been synonymous with the American Way of life for close to a hundred years. It was what people pointed to as a indicator of American prosperity and the American Dream.

Ironically, that same automobile industry now betrays the embarrassing fact that we have failed to rein in our glutinous, recklessly wasteful habits as a nation.

From the world's largest creditor nation in 1950, we have slipped into the abyss of being the world's largest debtor nation, all as a consequence of reckless spending at all levels, both public and private. And our cars betray that predisposition.

What is wrong with Detroit is symptomatic of what has happened to America.

An infusion of money from the American Taxpayer won't compensate for the simple fact that the same taxpayers simply do not like their products. Until paying customers start populating their showrooms, anything the feds dole out will be little more than corporate welfare to an unrepentant industry that lacks vision and initiative.

Ironically, those same three automakers are selling cars in Asia and Europe that are the antithesis of what is gathering dust and mold here! Why?!

The doomsday hysteria and prophecies of economic Armageddon if they fail, are purposefully created fiction for the singular purpose of manipulating an already panicked American public and the Feds into a sweetheart deal.

We've lost airlines, auto companies, steel mills, the electronic industry, injection molding industry and railroads. Ship building has moved too as have aircraft manufacturers.

Notice: we've ". . . taken a lickin and we're still tickin' !"

If Detroit's CEO's really believed in those bleak, black futures they predict, they'd have sold off their Gulfstream's, Falcon 50's and Lear's and ridden commercially to D.C. to bang their tin cups on the table.

I wish Lee Iaccoca would come out of retirement and speak to this issue. I wish Ross Perot would too. Neither one is afraid to speak his mind. It might not resolve the issue but it would be sure as Hell fun to watch both the politicians and the CEO's squirm in front of network TV.

L.J.

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#6

Re: Does the U.S. Auto Industry Deserve a Bailout?

11/30/2008 8:18 AM

The US government would be insane to give tax payers money to the car manufacturers without massive restructuring of management and work practices, also a complete rethinking of the type of sustainable transport needed in the futer.

Our government has just donated 3 billion dollars[ I have serious doubts about there sanity] to our car manufacturing industry with little or no thought to futer requirements. The companies in question did not need the money,they might be doing it tough but were not down and out.

If the car mnf Ind needs help they will have to prove they have something worth helping

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#7

Re: Does the U.S. Auto Industry Deserve a Bailout?

11/30/2008 9:31 AM

These are the companies that are run by people who took 3 SEPERATE private jets from Detroit to go to Washington & beg for more money.

It took 2 of them a week to figure out that they really should give them up. Of course, they won't take a big cut in salary like Lee did, but what do we expect.

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#8

Re: Does the U.S. Auto Industry Deserve a Bailout?

11/30/2008 9:33 AM

Bailout NO

FIRM restructure guidance YES

The party's over,now it's time to clean up the mess.

Like in nature, the market takes care of itself.

Only the strong and smart survive.

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#9

Re: Does the U.S. Auto Industry Deserve a Bailout?

11/30/2008 9:42 AM

No.

I am from the Pittsburgh, PA area, remember the Steel Mills and Steel Workers?

Noone bailed them out and the number of people who lost their jobs and the suppliers who went out of business and downsized forced Western PA to reinvent itself.

We as consumers spoke about the lack of new design, poor design, and providing of vehicles we didn't want.

Quality seems to have always taken a back seat in Detroit, but it never came to light until Deming showed the Japanese what it was all about.

Quality and cars people want, a selling point that has now been passed unto the Koreans, and I suspect very soon to the Indians and Chinese manufacturers.

They are striving hard in that direction right now.

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#10

Re: Does the U.S. Auto Industry Deserve a Bailout?

11/30/2008 10:52 AM

Hi,

thinking and speaking from Europe but with the intention to save the big 3:

Let them merge to a single company after going bankrupt to get rid of overwhelming burdens.

Let them offer their European designs (Opel and Ford have good and cheap small to medium size cars),

try the best to get a fundamental reorganisation

and hopefully this one will survive.

The crisis did reach all car manufacturers, their suppliers worldwide and their material suppliers: steel, copper, plastics - prices and deliveries are down.

Warnings of immediate severe problems are existing in any of the car-builders countries.

So we will see in 2 to 5 years what happened. Good luck - to be amplified by good management!

RHABE

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#11
In reply to #9

Re: Does the U.S. Auto Industry Deserve a Bailout?

11/30/2008 10:53 AM

". . . . . but it never came to light until Deming showed the Japanese. . . "

Wow! There's a famous name from the past!

Yup! The Asians learned how to best the Americans from an American!

L.J.

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#12
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Re: Does the U.S. Auto Industry Deserve a Bailout?

11/30/2008 11:33 AM

Quoting qaqcpipeman:

"We as consumers spoke about the lack of new design, poor design, and providing of vehicles we didn't want. ........ Quality and cars people want, a selling point........"

This line of thinking is only partially correct. Sure, everyone wants quality, especially the owner that just paid up in the 4 figures to repair a mechanical breakdown on a vehicle a few miles or months out of warranty. That's why we buy Toyotas in our family. Yes, people like us are a large factor in the Big 3's loss of market share. Yes, a lot of people want economical hybrids and electric vehicles now (there's a fad and "look at how green I am" factor acting out here).

But a big piece of the car buying market got exactly what they wanted in the SUV's and luxury pickup trucks. I know countless guys (and it's usually guys) who loved their big vehicles, Suburbans, F350 duallies, etc. for their recreational and ego boosting value up until the price of fuel became intolerable. Some of them still do nurture that love affair. They just don't drive as much.

The Big 3 had an edge of many years of experience selling trucks for use as family and personal vehicles rather than work vehicles. So they were well poised to serve a market that came into the showrooms with prosperity, easy credit and a "what the h....; lets go for it" attitude in their pockets. Note here that even the high quality foreign car makers in recent years have gotten into that game and are taking away SUV and light truck market share from the Big 3.

Everybody knew what was coming; but like addicts we refused to face it preferring to live in the present with no view to the future. So now they are in big trouble largely due to hubris, poor management at the top and a commitment to short term profits rather than producing good product and a sustainable business model.

We should temper the cries to throw the entire industry (the Big 3) into the landfill of history. The rot is not 100%. There is still a lot of good stuff in "Detroit" worth saving.

The United States needs to play the roll of a surgeon rather than undertaker. We need to carefully cut away the bad stuff so the organism can get better. Further the medical analogy, the patient really can't operate on himself except to remove the occasional splinter from his skin. A few pills may make him feel better for a while but won't produce a cure. The surgical procedure is called Chapter 11 bankruptcy.

Ed Weldon

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#13

Re: Does the U.S. Auto Industry Deserve a Bailout?

11/30/2008 2:13 PM

The mfgs gave the buying public what they wanted, luxury trucks and SUV's.

But we are our brothers keeper, like it or no. They should have been continuing to develop more and more efficient cars, and should have put up advertising that reminded us of the '73 oil embargo and the possibility/probability of global warming, to encourage us to buy them. Had this been done, we wouldn't be engaged in this conversation.

Ever since '73 I've driven fuel efficient cars. I didn't want to get caught with my pants down a second time.

I guess what I'm getting at is that those executives thought they were so smart they 'deserved' multi-million dollar compensation. It's obvious they weren't.

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#14

Re: Does the U.S. Auto Industry Deserve a Bailout?

11/30/2008 2:29 PM

The big three have shown enough poor judgment over the last few decades that it is easy and satisfying to just declare a pox on all their houses, watch them go down the drain, and buy Toyotas and Hondas.

· They have spent a fortune convincing our national government (executive and legislature) not to impose meaningful standards for mileage.

· They have fought to prevent the States from imposing their own standards for mileage or emissions.

· They have fought safety standards.

· They ignored Deming when he went to them with his plans to modernize the industry, plans that were then adopted by the Japanese and others to our great detriment.

· They killed the electric car.

My gut tells me that we need to round up the top management and their lobbyists, maybe the leadership of the UAW, and all of their cronies in government, chain them to their fleet of unsold gas guzzlers, and drop them into a deep but undisclosed part of Lake Michigan. But my head tells me that loosing one of the few segments of our economy that still actually makes anything is not at all wise. I don't think that sacrificing the entire industry on the altar of accountability is in our best interests.

I think we should make a choice. Clearly in the big three we have a lot of excess production capacity, and as a result all three face dismal futures fighting over the same piece of the pie. If we try to save all three we will still have more capacity than the market requires.

Most rational people have seen this economic downturn coming for at least a couple of years, and yet of the big three, only Ford's management seems to have planned for it. So to me the best approach is to find a way to 'reward' them for their competence (at least relative to the competition). We should find ways to provide Ford and their supply chain with enough cash and security to weather the current storm, and to get serious about producing cars and trucks we actually need. This could be done through government purchase of voting stock, through short term loans (maybe from the banks we have already bailed out), and through contracts to purchase more fuel efficient cars for federal, state, and local government fleets. It should include incentives and regulations to produce the kinds of transportation we need to start weaning ourselves from our economically and politically devastating appetite for imported oil.

If against the odds GM and Chrysler can survive then they will deserve to continue. If they end up in receivership then Ford can try to scarf up any profitable bits. One viable domestic auto producer is far better than three on permanent disability.

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#15
In reply to #14

Re: Does the U.S. Auto Industry Deserve a Bailout?

11/30/2008 3:49 PM

The big three have shown enough poor judgment over the last few decades that it is easy and satisfying to just declare a pox on all their houses, watch them go down the drain, and buy Toyota's and Honda's.

I'm all American... red white and blue.....apple pie and the 4th of July .....but.... I'm also a former machinist and current quality inspector with over 10 years in manufacturing so when it came to purchasing a vehicle it was only a question of Toyota or Honda. We got a Toyota Camry that was built in Kentucky. Awesome design, superb quality and a great price. I've never seen a comparable product from the big 3 even come close to this vehicle but I wish they could.

Buying a foreign car (even from built here) was like admitting defeat, but I had to.

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#16

Re: Does the U.S. Auto Industry Deserve a Bailout?

11/30/2008 5:29 PM

No.

Reality is a far bigger picture than many can conceive.

The U.S. Auto Industry and how is it actually contrived?

The question as I see is do the supporting industries deserve to be left in the cold because of poor parent industry management and CEO ineptitude? Can we as a nation allow a considerable segment of our manufacturing base to squandered due to casual manipulations of an irresponsible host?

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#17
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Re: Does the U.S. Auto Industry Deserve a Bailout?

11/30/2008 5:47 PM

The only rational way is for a bankruptcy court to break all contracts and impose a wage drop of 50%, and a similar cut to pensions and fringes as well as 50% less management salaries(some at the top should be cut 90% or more or fired) and all stock option plans, bonuses etc = toast.

The carmakers could then operate and go forward, shave output, shift out put etc.

They call this "grasp the nettle"....will they do it?

Not a chance, a gnashing and wailing will ensue from all the unions and right waing groups.

I for one like the idea of competing quotes.... for work forces.

We need 1000 machinists, which union will give us the best quite for 1000 jobs for 10 years? As it stand unions are protected from anti-competitive laws, they are indeed local monopolies and they have grossly abuse their powers. There is still all the union fat in state and federal govermnents, teachers unions etc to be cut away to get the USA/Canada into health.

Unions talk of zero wage increase if they get a COLA (Cost of living adjustment embedded in ALL union contracts). So for the past 30-30 years they have gotten 2 to 3% above the COLA cap. COLA is also 2-3%. so now you see why this devastating wage inflation has occurred. Private wage payers are dragged up by this.

It is politically incorrect to mention this or deal with it in any way = ultimate sacred cow.

Now the USA has a union loving administration, you think they will grasp this nettle? Not a hope. They will pay the 25 billion and when it fails to work, wring their hands to distance them selves from the inevitable bankrupcy proceedings

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#18

Re: Does the U.S. Auto Industry Deserve a Bailout?

11/30/2008 5:58 PM

In my opinion NO!

Having driven, worked on, and made my own from the "BIG 3" I find no redeeming value.

In 1980 my Dad and I made a 25 MPG diesel 3/4 ton Pickup from a Ford Chassy. 25 MPG was loaded and unloaded average and this was used to deliver lubrication (Oil drums) to customers. The last I heard the Pick Up had 500,000 miles on it. That was years ago.

If any of the US car manufactures wanted to they could have done this then, they have not even now.

The AAW and Big 3 stock holders have funneled value from the US car market for years. They have used the American pride of made in America to charge far more than the value given. Now it is time to even the free market system. Not pay them for their greed. If you bail them out they will need it again because they will have learned the wrong lesson.

Brad

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#19
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Re: Does the U.S. Auto Industry Deserve a Bailout?

11/30/2008 7:02 PM

Bailout .? Should we or shouldent we ? All replies to this are excellent but i agree with Ed Weldons comments here . I am Canadian but we here are as guilty as any . I look at the current state of affairs regarding the car companies and all the other crap that is coming to light as a " reflection " of what we have allowed to happen in our basic operating systems . Our capitalist system with its good points and bad are now so corrupt and flawed that we have no other choise , but to reap what we have sown.

Dont get me wrong , im not a religious person but i cant think of a better way to describe how we have let simple GREED run our entire societies systems . Our Governments now are bought and sold to the highest corporate bidder , our Presidents and Prime Ministers are mearly talking heads who take there orders from the corporations who actually make things go one way or the other . I fear that we have made a very big mess of things and we will now have to pay the conciquences .

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#20
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Re: Does the U.S. Auto Industry Deserve a Bailout?

11/30/2008 7:27 PM

I for one like the idea of competing quotes.... for work forces.

I'm right with ya in this component... Some years ago I was asked to step into a plant manager position to refocus the mid managers and develop profit orientation; pat on head and kick butt

I took the shock treatment approach by having department heads sell their segments of a project to me and in due course I outsourced the majority of a project. Surprise surprise, no bonuses no raises and some shortened work weeks got the message across. I allowed that if in house departments couldn't compete with outside shops they may go by the way.

That plant is doing well today. With union contract this type motivation is a pipe dream

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#21

Re: Does the U.S. Auto Industry Deserve a Bailout?

11/30/2008 8:16 PM

What would happen to a "Big Three" CEO who decided to forsake government help and overhaul his company by lowering wages etc. Would his stockholders and board be pleased that he passed up that easy bailout money? I suspect that by the end of the next quarter he would be facing shareholder lawsuits. The government bail outs have been getting more frequent in recent years. Now they seem to be almost routine - an entitlement. This mentality will have to end sometime, maybe when the government can't raise any more money. That is when lots of money is going out and little is coming in.

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#22
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Re: Does the U.S. Auto Industry Deserve a Bailout?

11/30/2008 8:24 PM

The USA is learning from Europe, how to propr up huge inefficient organizations, hat in time collapse.

Better to collapse them now.

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#23
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Re: Does the U.S. Auto Industry Deserve a Bailout?

11/30/2008 9:04 PM

aurizon,

The motto would be along the lines of " take the easy short term way ", as opposed to your own motto.

LG_DAVE

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#24

Re: Does the U.S. Auto Industry Deserve a Bailout?

11/30/2008 9:05 PM

If you Google "Texaco, GM, and NiMh " you will get hits for the sale of the "magic" NiMh battery patent sale from GM to Texaco in the years 1998-2000. Texaco was later bought out by Chevron. You have to ask "Why would an Oil co want a battery patent?" They promptly raised the prices of the large format batteries to 20x higher (From ~ $50 to over $1000). Even to this day when a license is sold (as was recently) it stipulates " no large format batteries can be manufactured". Only a few co's are authorized the larger batteries, and most of those seem to go to the military. You have to realize that this time frame was also when GM chipped 1100 EV1 Electric cars to little pieces instead of selling what they insist was a bad design. In the past they always tried to sell bad designs anyway (ie edsel and even repainted Cars loaned to tv shows and sold them for profit). Why not the EV1 with its NiMh batteries?

They went on and on about how bad it was. They convinced Calif to drop the Zero Air Pollution requirements of 1% of all cars in Calif. They sold the NiMH battery patent to the Oil co's. That also was the same time that Oil Prices were being ramped up from 87cents to $1.49 (and much higher lately). Connect the dots!

DETROIT has worked against America at every turn because of Greed . They forsaked doing what was right for environment and society , to get massively insane profits from investments in oil. DO they deserve a good boy reward?

www.PeaceNikInternational.com has links to some of the sites that tell this story.

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#25
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Re: Does the U.S. Auto Industry Deserve a Bailout?

11/30/2008 10:07 PM

Thanks for bringing up the business about NiMh batteries. This kind of skullduggery is at the heart of everything that has gone wrong with our economy. Clearly the people responsible for these decisions do not deserve a bail out. But neither do the American people deserve to loose such a big part of our economic base. The factories are still standing, the technology and trained workers are still there. We need to get rid of the corrupt management without loosing too much of the infrastructure, both physical and human.

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#26
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Re: Does the U.S. Auto Industry Deserve a Bailout?

12/01/2008 8:51 AM

chapter 11 would bankrupt alot of the suppliers that supply the big three , as it did with alot of Tower automotive suppliers when they filed chapter 11 ,especially when the filer of chapter 11 can recall all payments made to these supplier for completed product of the previous 90 days piror to filing chapter 11, the answer is to let the big three file for bankruptcy and get rid of all the over paid lazy union workers that have run the three auto maker into ground. you dont see any Japanese auto makers having this problem!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

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#27

Re: Does the U.S. Auto Industry Deserve a Bailout?

12/01/2008 10:11 AM

I know that the auto industry seems to be the cornerstone of the economy. But even in that statement it is only a corner. I don't remember the figures, but only a fraction of the working population is employed by auto related companies. Sure the wages of auto employees support communities but there are other sectors to look at.

Putting all of your eggs in one basket (the basket being the auto sector) has never been good advice. I don't believe anyone with any sense is surprised at the current condition of the economy.

Support should be given to every manufacturing sector other than automotive. Those companies that support automotive could take advatage of incentives outside of auto to manufacture other products.

The big 3 should be left to work it out alone. Strip down and run like a buisiness rather than a country club.

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#28
In reply to #25

Re: Does the U.S. Auto Industry Deserve a Bailout?

12/01/2008 10:55 AM

johnfotl

"The factories are still standing, the technology and trained workers are still there. We need to get rid of the corrupt management without loosing too much of the infrastructure, both physical and human."

historically not a good reason for throwing good money after bad. when the US steel industry collapsed, they said the same thing about them. the US steel industry and the unions were not willing to change to a new business model, so they became almost extinct.

adage: automobiles evolve, they aren't engineered. meaning: what works one year is kept for the next year. what didn't work is dropped.

with automobile companies, it is the same way.

evolution vs de-evolution. in animals,species die-off occures because the species fed so well and grew to great proportions. then times changed and the species couldn't adapt fast enough, so they died out. other smaller species survived, expanded to fill the vacuume and grew in proportion to their food supply. then times changed and they died out. in nature, growing larger is easy, growing smaller is harder.

moral: trying to feed dinosaurs during a die-off doesn't work. they will eat everything and then still die.

i understand that this isn't quite the same as automobiles, but it sure sounds like it.

by the way, i have called detroit iron, detroit dinosaurs as common metaphors for at least 30 years

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#29
In reply to #25

Re: Does the U.S. Auto Industry Deserve a Bailout?

12/01/2008 11:02 AM

Hello johnfotl,

We need to get rid of the corrupt management without loosing too much of the infrastructure, both physical and human.

The problem is in all three aspects of the companies: Overpaid union labor; Controlling stock holders that skim the business; Over paid management who allow things to happen because they are paid to.

All will fight to keep their pockets stuffed. I'd even bet that the stockholders had something to do with GM selling Texaco it's patent on the NiMH batteries. If you leave any of the three you will just have a mess with that third taking advantage even more. The consumer will still lose. Like pigs at a trough.

Brad

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#30
In reply to #27

Re: Does the U.S. Auto Industry Deserve a Bailout?

12/01/2008 11:41 AM

Most of my former home was paid for with money earned in the car business. What says a lot is that in the 30 odd years I was in that industry, I never once worked for a domestic dealer or distributor.

The reason for that is simple: I've been heavily involved in engineering activities most all my life and frankly, never saw anything designed and built in Detroit (or York, Pennsylvania) that excited me technically or aesthetically.

Consistent with that position was that while I owned Porsche's, MB's, VW's, MG's and other cars of foreign origins, not once did I own an American made car.

What I find very novel is that Harley-Davidson has thrived beyond any one's wildest expectations, in spite a 50 year old design that has more cobwebs than an Indiana Jones cave.

Detroit's problems are not merely one of a lackluster image or old product designs. Harley too, damn went down the tubes when they were owned and mismanaged by AMF. It was new, sharp management that turned H-D around and some shrewed marketing that is the most innovative I've ever seen.

And, lest it be overlooked, please notice that they have more foreign born competition in the motorcycle industry than Detroit has from car makers anywhere.

Clearly it's inept management and while some might think that the current crises of confidence is the cause, it's not. Detroit has been slowly dieing for decades, simply because of their inability to compete.

Detroit is a family of chain smokers, who having discovered that they have a cancer, are pleading for salvation, while their fingers grope around in the dark, desperately looking in the ash tray for an old butt to light .

L. J.

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#31
In reply to #30

Re: Does the U.S. Auto Industry Deserve a Bailout?

12/01/2008 11:46 AM

Jeepers creepers that's quite the analogy. (the smoker part)

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#32
In reply to #17

Re: Does the U.S. Auto Industry Deserve a Bailout?

12/04/2008 10:41 AM

"a gnashing and wailing will ensue from all the unions and right waing groups."

I believe you mean left waing groups. They're in bed with the unions in this country.

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#33

Re: Does the U.S. Auto Industry Deserve a Bailout?

12/04/2008 12:28 PM

I worked at GM for twenty years and I can honestly say that this company is not deserving of a bailout. It is hide bound and so controlled by short term bean counter thinking that it can't get out of its own way. With out a significant change in management thinking it will continue to waste the resources of american manufacturing. That being said, I believe that they should receive the 18 billion so their default will not drag the economy over the edge. That amount should allow them to stagger in to bankruptcy in 2010.

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#34
In reply to #33

Re: Does the U.S. Auto Industry Deserve a Bailout?

12/04/2008 12:59 PM

Guest -- I agree with you (see my previous post here). "short term bean counter thinking" is a poison to those who must face competitors who have the strength to operate on the basis of long term strategy. It's not the only poison, of course, that our auto industry has been drinking. I can think of a few others such as subordinating technology and quality to name two.

But I'd like to dwell on the primacy of short term financial results here for a moment. I don't blame the big 3 auto companies for having to adopt that line of thinking. It has been forced on them, just like many other publicly owned businesses, by a legal and regulatory structure (e.g. the quarterly report syndrome) that for long has been assumed to be fundamental to America's economic success. In the face of current events that structure needs to be examined with some serious objectivity and measured against systems in place in the other major world economies.

We all have seen the success of Toyota and Honda. There is more to their story than Asian work ethic or outright bending of WTO rules and trade agreements.

What say you all? Where do we go once the dust settles from the current storm? What should our new President and his administration and Congress be doing besides throwing or not throwing money at the immediate problem at least with respect to the stuff the SEC administers ?

Ed Weldon

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#35
In reply to #32

Re: Does the U.S. Auto Industry Deserve a Bailout?

12/04/2008 1:15 PM

Age >10

i agree with a little but disagree with most. i agree that the primary sentence combines two elements that really don't belong mashed together. that is union and right wing groups.

but the wailing and gnashing from the left wing groups is not because they are in bed with unions. it is because corporations and government are all short sighted crooks and morons. that is how they feel, but out of politeness, they don't usually say it out loud, unless they are preaching to the choir.

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#36
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Re: Does the U.S. Auto Industry Deserve a Bailout?

12/04/2008 2:23 PM

It appears to me that the US is in a state where the large companies should be bailing out the government. Not the other way around.

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#37
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Re: Does the U.S. Auto Industry Deserve a Bailout?

12/04/2008 3:41 PM

Good idea - and it may be what actually is happening with the current "bail out"

Where is all this bail out money coming from?

Is there some huge pile of billions of dollars that the government had prudently set aside for just such an emergency?

Or, are they just printing up more as they need it?

In the "printing more" scenario, all the money becomes worth proportionately less, so all of us - widows, orphans, rich, poor, companies and unemployed are funding the bail out.

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#38
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Re: Does the U.S. Auto Industry Deserve a Bailout?

12/04/2008 3:55 PM

Hello LG Dave,

Or, are they just printing up more as they need it?

Yes with a twist, The Federal Reserve ( a private corporation ) let them print it for a fee. Nothing of value was brought forth, the dollar was just devalued by a large percentage. Sounds like it will be repeatedly devalued if the government and bankers have their way.

My question is if the banks caused this by securitizing mortgages, which is illegal, why is no one going to prison? Even indited?

Brad

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#39
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Re: Does the U.S. Auto Industry Deserve a Bailout?

12/04/2008 4:05 PM

There doesn't seem to be much information on how we are going to get out of this mess by doing exactly what we have been doing.

We borrowed and printed money until we were clear down the crapper - so now we are going to borrow and print money on a much larger scale until .......

I too thought that lending money without proper security was supposed to be illegal. I am unsure where and when that became "complicated"

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#40
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Re: Does the U.S. Auto Industry Deserve a Bailout?

12/04/2008 5:36 PM

They are as you say just 'printing more money', and it is understood that this will de-value the dollar. But -

  1. If they don't do this our real economy will be in the crapper, and the dollar will be the same value as toilet paper. If on the other hand they increase the money supply by say 10%, the dollar will be devalued by a simalar amount which is a problem, but not as big a problem as the TP scenario.
  2. Since we are a debtor nation, a devaluation of the dollar will be a bonus, since we will be paying off the debt in devalued dollars.
  3. If our money is worth less we will export more and import less.
  4. In spite of all our economic problems, the rest of the world seems to think we're doing something right, and our dollar is actually getting stronger.

So yes the fed will cause inflation by printing more money, but right now inflation is probably our least bad choice.

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#41
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Re: Does the U.S. Auto Industry Deserve a Bailout?

12/04/2008 5:57 PM

I don't accept the notion of us being a "debtor nation" easily. With our resources - natural, infrastructure, intellectual and political stability - why do we have to operate in debt?

I can see how we got here, and could stay here, by operating with strictly short term goals. I don't see anything in this latest round of bailouts that will improve anything. Where is the mechanism that will let us plan a year or 10 years ahead?

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#42

Re: Does the U.S. Auto Industry Deserve a Bailout?

12/04/2008 6:05 PM

This is from Dan Digman in Momentum, the magazine of the National MS Society.

A woman at a campground walked by an outhouse with it's door flung open. She looked in and saw a man standing inside throwing $10 and $20 dollar bills down the hole.

She stopped and asked the man, "Why are you throwing $10 and $20 bills down the hole of the outhouse?"

The man looked up and told her, "I accidentally dropped a quarter down there, and I just wanted to make it worth my effort to climb down and get it."

I guess this makes about as much sense as bailing out the big 3.

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#43
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Re: Does the U.S. Auto Industry Deserve a Bailout?

12/04/2008 7:40 PM

I too thought that lending money without proper security was supposed to be illegal. I am unsure where and when that became "complicated"

The bundled securities is where the banks illegally took mortgages and converted them into securities selling them on the stock exchange. They no longer own the house just the debt. The Law states you must have the wet/ original signatured contract too foreclose and repossess the real property. Some of the banks have been doing bundled securities for over 15 years.

Many of the houses already foreclosed were done without the original note. This is the difference of the Holder in Fact and the Holder for Value. A Holder for Value can put a lien on the house for non payment but legally not much more. The court and the bank will bluff but if they do more when you protest they lose their immunity from recourse.

So many houses are now under the Holder for Value category a full scale foreclosure would fail as soon as the word got out on how to beat it in court.

Several times I've seen press releases by the government that state the bundled securities is the straw that started this mess we find our selves in. ( A straw is devastating to a house of cards)

We need to put some teeth into the corporate backsides of these criminals. They would convict us for doing the same. And the profits from these securities should be put back out of circulation lowering the National debt.

Brad

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#44
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Re: Does the U.S. Auto Industry Deserve a Bailout?

12/04/2008 7:58 PM

We don't have to 'operate in debt', but that is just what we have done. I think the current numbers are ~600 BILLION per year to the Saudis, Venezuela, Canada, and Mexico for petroleum, ~ 300 BILLION per year to Wal Mart, Costco, Home Depot etc so they can stock their shelves with stuff from China, and so on. At the current rate they will also own our houses and then rent them back to us. We can debate the blame and the details of the particular tawdry mess we have worked ourselves into, and no doubt that would be fun (at least for the political junkies among us) but there are at this point no good choices, only bad choices, worse choices, awful choices, or reliving the iron age.

The only things any of us can do at this point is design and make really good stuff (including cars) that people all over the world want to buy. We can choose our indulgences wisely so that we consume less, and we can learn to buy more stuff from our neighbors, even if it costs a little more and isn't quite what we want.

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#45
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Re: Does the U.S. Auto Industry Deserve a Bailout?

12/04/2008 8:50 PM

I didn't know all of that UV, GA

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#46
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Re: Does the U.S. Auto Industry Deserve a Bailout?

12/04/2008 9:25 PM

Shadetree -- I don't exactly agree with the applicability of the Dan Digman analogy; but it is a good one. A lot of us think we're looking at throwing good money after bad.

I view it a little differently. Our economists really don't know what to do. So we've got another high priced economic experiment to decide on. GM is the proverbial canary in the coal mine. Most of us view injecting money into them as just an attempt to save the canary's life. It's more than that. We are in uncharted waters of the world of economics and we still don't know what course to set to get us through. The difference now is we are asking the Congress to put on an economist's hat and do the right thing. They might as well experiment on GM and learn what will work the next time one of our major industries is about to tank.

The debate now is about what will happen to our country if GM goes into chapter 11 or even chapter 7. Henry Paulson and his crew are sideline sitters there. They had a pretty good idea what to do when the banks got into trouble because they all worked and earned their stripes in that world. But manufacturing is not their game. And neither is it the game of the Congress. Matter of fact our whole nation has been chewing for quite a few years on the idea that a "post industrial" society is a great idea. I don't think so; but that's just me. .....well, so much for our collective wisdom on the subject.

So back to the initial question: Does the automotive industry deserve a bailout? I guess that depends on whose ox needs to be gored and why. And what positives we would like to end up with and what negatives we think we can handle.

Ed Weldon

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#47
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Re: Does the U.S. Auto Industry Deserve a Bailout?

12/05/2008 9:56 AM

Should the automakers receive help?

The textile industry did not receive much help if any. Consequently all those people who lost their jobs are either not working, or are earning less.
The tire industry did not receive much help if any. Consequently all those people who lost their jobs are either not working, or are earning less.
The steel industry did not receive much help if any. Consequently all those people who lost their jobs are either not working, or are earning less.
They adapted to earning less. Also consequently they are all paying less income tax, or maybe even receiving money from the government, instead of paying taxes to the government. So our government needs to tighten its belt. We won't be able to afford the highest technology in military planes, weapons and wars to promote our way of thinking.

China will, India will.

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#48
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Re: Does the U.S. Auto Industry Deserve a Bailout?

12/05/2008 12:26 PM

I recall a short time ago trying to untangle my garden hose. It was very difficult because the thing was just a little too stiff to untangle properly. This was not the cheapest hose I could find - it was mid-priced.

We have let our standards slip a lot in this age of "low prices".

What about value?

Are these goods that sell for such "low prices" produced under conditions that we would allow here? If wage levels, environmental protection practices and toxic material levels are out of line with our own standards we need to impose protective tariffs to penalize these producers. Tariffs will raise prices and maybe make it more difficult to sell us lead painted toys, pirated CD's and melamine pet food. But they will also let us focus more on value rather than just "low prices".

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#49
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Re: Does the U.S. Auto Industry Deserve a Bailout?

12/05/2008 12:42 PM

Guest -- Your examples of the tire, textile and steel industries gives me pause to thought. How is the auto industry different? What is there that causes us to treat them differently than we treated the other three?

I submit that it is the financial power and the resultant political power of the UAW derived from their skillfully achieved wins in collective bargaining. This is a case of the symbiotic parasite outgrowing the host and now using its political power to feed its continuing appetite.

I've always had a side of me that was sympathetic toward unions in spite of my feelings about the damn work rules that so often slowed my efforts as a young working engineer in industry. But my recent observations of public employee union power grabs in California have taught me that unions can have a dangerous side.

The UAW needs to be given a big time haircut. I think they have too much political power for the Congress to do the job other than letting the courts have at it. The auto companies and their stockholders are little more than their chattels at this point. Congress needs to straighten out the economy, but that's all.
The last thing we need is for there to be any government ownership of auto companies. This allows the union to go directly to the "board of directors", i.e. the elected legislature, and completely bypass the "management".

If one or more of the automakers die as collateral damage to the "haircut" so be it. I feel certain our nation will survive and a new and much more vital auto industry alignment will rise out of the ashes. And in the long run the greater auto industry consisting of parts makers, dealers, aftermarket, etc. will arise strong because the US market for automotive transportation will be with us for many decades it will take to create a large public transportation infrastructure.

Ed Weldon

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#50
In reply to #49

Re: Does the U.S. Auto Industry Deserve a Bailout?

12/05/2008 3:30 PM

Yes Ed,

Unions have had a stranglehold on this country about as long as the banking boys. Just two different sides of a bad penny.

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#51
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Re: Does the U.S. Auto Industry Deserve a Bailout?

12/07/2008 11:15 PM

I don't disagree with your general line of thinking. The UAW and The big Three all need a haircut. My reference to the past industries being hung out to dry was to point out that they should not have been ignored either. I don't believe in our "open market" being as open as it is or in NAFTA.

The unions became strong due to the "protection racket" methods they exercised when the money was coming into Detroit in buckets. I also witnessed, from an engineers point of view, the rules that were put into place by the unions.

But it's all about greed. The unions were necessary to protect the workers from the greed of the management. They found what power they had, and became greedy themselves.

It's also about basic economics. Before the competition of imports Detroit concentrated on FLASH!!! Bigger. longer, lower, wider, CHROME!
They built what customers wanted, (with marketing people telling us what we wanted). Without competition they hyped what was easy to build, they had "planned obsolescence" style-wise and designed-in an abbreviated lifespan mechanically.

Next there is basic bargan hunting. You and I: Ten-dollar shirt from Taiwan, or thiry dollar shirt with "the union label"? The Big Three: they cried "Buy American" then took your american dollars and bought Japanese machine tools. Why? They were cheaper.

With competition American cars got better. Not soon enough, but better. They will get better if they are alive to compete. Of course I don't view the industry as a being that may live or die. It is a large number of individuals. Your next door neighbors and mine. It's totally unrealistic to envision all these millions of individuals going off into the sunset and millions of unexperienced replacements being able to reverse the momentum of some Americans buying foreign cars.

We can't extract revenge against the management or the union people who contributed most to the problem. They mostly are retired, or took buy-outs. To "let the industry die" would be trying to spite the replacements, who are now working for half the wages of their predecessors. Ideally a government intercession would weed out the last of the old-line union thinking, and old-line marketing and management (your Haircut). Maybe the question is "would the American public be more apt to buy American cars if we changed the name on the buildings from Ford, G.M. and Chrysler to Fred's, Joe's and Becky's"?

But who would be inside the buildings? The people with experience who are willing to change.

Let the courts have at it? Are you kidding? Do you want to go to court for ANY reason? (Think trying to run a cross-country foot race in the Okefinokee)

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#52
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Re: Does the U.S. Auto Industry Deserve a Bailout?

12/08/2008 1:34 AM

Guest --

I know where you are coming from; but I'm afraid I'm a bit more of a cynic than yourself. I'd say the UAW believes they are in a pretty good negotiating position figuring they delivered the state of Michigan to the Democrats. As long as this is the month when jumbo transfer of debt to the government is all the rage among economists they figure they will do just fine. The only thing sure about next month is that the UAW will do everything to insure that their members are not hurt in the coming depression and the rest of the nation be forgotten.

That outfit will begin to get some credibility from me when an assembly line worker's pay drops below that of my engineer son (MSME, 12 years design experience, 70 hour workweeks in a CA company).

And the government telling the automakers how to run their companies? That's the biggest joke yet.

This country is looking at a double digit drop in GNP. The world economy is falling apart. Most of us are sitting here blindly expecting the automobile companies to lay off a few workers, hire some new execs and return to profitability by selling millions of high mileage new technology vehicles in a year or two. Just exactly who are we expecting to buy these vehicles and what are they going to use to pay for them with the 21st century version of war bonds sucking up discretionary income so our nation can pay off the maturing treasury notes now held by the Chinese and middle eastern investors?

Two of these auto companies are headed for bankruptcy. Chrysler will come first and then GM. Hopefully the industrial and commercial vehicle side of GM will survive intact. Ford may or may not survive depending on whether we can get enough people back to work to buy their cars.

Sure, bail them out so they have time to reorganize. I think we (the USA) still has a enough of a credit line to keep the billions flowing for another 3 or 4 months. But then what? Saudi Arabia says that they are rolling red ink for their nation at anything below $75/barrel oil price. (today it was something like $43) China's export business is not collecting the dollars that they pumped into treasuries in the past few years. The EU and the Soviets are in worse trouble than we are.

In a very few months the plight of the automakers will seem like small potatoes unless somewhere in the world of economics they come up with some better answers.

Ed Weldon

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#53

Re: Does the U.S. Auto Industry Deserve a Bailout?

12/17/2008 4:21 PM

Its obvious by the comments that the US car industry have made a rod for their own back. We don't know the fine print of any loan, but there will be stipulations. But if the companies are managed to continue with their loss making management and decisions, it will just prolong the inevitable.

You can only live on credit so long.

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#54

Re: Does the U.S. Auto Industry Deserve a Bailout?

12/22/2008 8:14 PM

The auto industry does deserve a bailout but the management deserves the boot

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#55

Re: Does the U.S. Auto Industry Deserve a Bailout?

01/02/2009 9:36 PM

There's something too many people on this forum have missed: the bailout is illegal. NOBODY deserves a federal government bailout. Or as James Madison put it, "I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on the objects of benevolence, the money of their constituents."

We have a right to a limited Federal government, one that does not take our money and hand it out to every pig snorting at the trough. See the Tenth Amendment and Article II, Section 8. Pay very close attention to the wording of the "general welfare" clause in II,§8. It actually says Congress has authority to levy taxes for the general welfare of the United States [government], meaning specifically and only that the tax collected for this purpose was to fund the Federal bureaucracy, not handouts to non-government entities. (This was written in the context of the problems with the Articles of Confederation, which had no provision for raising revenue for the central government other than begging from the states.) Madison warned that interpreting this clause otherwise, as it is so often misconstrued today, would make the Constitutional limits on government meaningless. If we insisted that Congress obeyed the law in this regard, we would eliminate 80% of the federal spending not associated with debt service and the economy would be far more stable.

Granted, few of those at this forum are lawyers (I am not), but this is basic Constitutional law that everybody was supposed to learn in high school civics class. The proper move is for the auto makers to seek debtor protection, then make their case to investors that they have a decent business plan worth capitalizing. If present bankruptcy laws make it too difficult to reorganize, then Congress should look into that. Congress could even provide a capital gains tax break to ease financing. But no more of this business of diluting or confiscating the honest worker's money to save the jobs of the inefficient, ineffective, incompetent, short-sighted, excessively greedy, or crooked, no matter what the business.

What is really troublesome, aside from the violation of the constitution, is that anyone takes seriously the claim that such and such a business is "too big to fail" or that the national economy will be wiped out if a bank or manufacturer disappears. It is particularly aggravating when the institution is a creation of Congress, such as FNMA. There is no excuse for that in the United States, one of the most economically powerful and diverse nations in the world. This is one of the reasons we have anti-trust laws - to prevent a business from holding the nation's economy hostage. The first time anybody came to Washington with this claim, Congress should have said, "Alright, then you had better break out your profitable business units and dump the rest; otherwise we'll investigate whether you are violating anti-trust laws." That would have put a stop to the problem before it started.

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#56
In reply to #55

Re: Does the U.S. Auto Industry Deserve a Bailout?

01/02/2009 11:20 PM

Mnice -- You sound like another well fed (and likely well armed) Libertarian trying to sell your ideas to the majority of us. Your sales pitch may not play to well this year with too many Americans feeling pretty vulnerable. But next year? Who knows?

Getting to the heart of the question I myself care little whether the US Auto Industry deserves a bailout or not. But I'm pretty sure the nation as a whole deserves to have the Auto Industry get a bailout. We can argue about the economic efficacy of bailing them out, and well we should. I, for one, support the current thinking that such action is necessary. Throwing up a flak screen of constitutional law arguments or other blocking tactics does not help anything IMHO.

Ed Weldon

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#57
In reply to #55

Re: Does the U.S. Auto Industry Deserve a Bailout?

01/04/2009 7:37 PM

Hello MNice,

...basic Constitutional law that everybody was supposed to learn in high school civics class.

After reading the 1917 common law legal books to pass the BAR, My civics class in high school was full of BS. Congress has replaced rights with privileges and laws with statutes. The Uniform Commercial codes are never mentioned.

Or that Judges by the Constitution (both State and Federal) are required to take an Oath of allegiance to the Constitution but most do not. Why? because you are not a party to the Constitution, They are required to uphold the Constitution or be guilty of Treason.

Lawyers of the BAR are agents of the court and most will not pee in their pool of construed laws.

Brad

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#58
In reply to #57

Re: Does the U.S. Auto Industry Deserve a Bailout?

01/07/2009 3:01 PM

History is an elective in many educational platforms today

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#59
In reply to #58

Re: Does the U.S. Auto Industry Deserve a Bailout?

01/07/2009 3:35 PM

And they only teach names and dates in most of the rest. Very rare to find a history course that focuses on what we learn from history.

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