Bailout/buyout/bankrupcy

[bluesguy]

Any thoughts on the recent bailout of the financial companies and the proposed bailout/loan
for the auto companies? Just curious since it affects all of us, especially tax wise.


bluesguy

[RP Racing]

My guess, we'll get slammed with taxes.

[ciddog91]

If the government doesn't bail out the auto industry, or at least help with some new legislation, the Detroit area will be DEVASTATED.... It is predicted that the Michigan unemployment rate will be well over 20% if the auto industry goes down in flames. The economy in Michigan will collapse. As a Detroit area resident, this is very concerning for me. But I am not sure I like the bail out plan. Where does it stop? what other businesses get bailed out?

I have several family members out of work already, and several more that will lose their jobs if the auto industry does not get help, but whatever does happen, our taxes (for those working) will go through the roof......

We could be looking at some serious trouble on the horizon....

Phil

[SmartWombat]

It's very hard.
Should businesses that fail be supported?
Do you want to bail out every business hit by the recession?
Do you include people who made stupid business decisions?
Do you only want to bail out large employers, let the little ones go?
Do you want to let the financial sector that created this derivative-driven mess fail?
At what point does the special-interest lobbying make the decision, rather than policy?
If whole industries fail, and they're concentrated geographically, what replaces them?
If our financial system is a house of cards, why support it and rebuild it?


I have no answers.
The talking heads on TV and the chattering classes have lots of opinions.
I have only a certainty that we'll all be paying for it, one way or another.

[Franglais]

Any thoughts on the recent bailout of the financial companies and the proposed bailout/loan
for the auto companies? Just curious since it affects all of us, especially tax wise.


bluesguy

The $700BN plan to get the finance industry working again and the problems in Detroit are two different subjects and should be treated as such.

In the case of the finance industry, people gradually went mad. People got so used to companies borrowing money and seeming to make big profits out of it that they lost all sense of caution. Lehman Brothers had 7 times more borowings than their turnover. Would you lend to someone who was so endebted? Of course not. But the banks did.

Then one day the bottom of the pile - the poor people who made loans to buy houses - couldn't repay and went bankrupt, causing the whole house of cards to collapse. And nobody would lend money to anyone in case they went bankrupt.

The Paulson plan is now to put money into the banks so that the other banks have confidence and start lending again. That way the system keeps running. And having lent the money to the banks the government has a say in what they do and hopefully stops them being so stupid in the future. I hate Golden Boys.

The American car industry problems look completely different. Wrong cars, wrong decisions, don't know how to change, long term decline. Giving the manufacturers extra money to keep on making the same mistakes is not a solution. In England Margaret Thatcher let the whole thing sink and foreign companies picked up the pieces. In France the government quietly stage-managed a long-term recovery and now the French companies are up with the best of them.

[bluesguy]

I am deeply conflicted on the auto bailout issue. While I think business should sink or swim on their merit, this is sort of a unique case. I have skin in the game as I retired from GM and draw a monthly pension from them. If the bailout does not occur and GM is forced to restructure in some way, what's going to happen to all the retiree's, both salary and hourly.
If GM is allowed to fail, the ripple effect will be far reaching into all aspects of American life as we know it. That giant sucking sound that you hear is the heart being pulled straight out of America. If all the top brass at GM is cut loose with no golden parachutes and is replaced by a Gov't appointed committee to run the company, perhaps that is the solution. Ot at least on a temporary basis. A good question to ask yourself or of others is after NAFTA was signed and cheap labor was found, why are autos, etc. manufactured in Mexico still have a high price tag and not reflective of the cheap labor. The answer to me at least was still the insane quest for more profits thus grealty benefiting upper management.
I am constantly amazed that if we(Americans) are so smart with the manufacturing processes, why are we constantly behind the curve? Is it possible and conceivable that we are not as good as we think we are, or is it something else. Foreign manufacturers have been eating our lunch since the 80's and we have done squat about it, except to cry about it and do nothing.



bluesguy

[Franglais]

I am deeply conflicted on the auto bailout issue. While I think business should sink or swim on their merit, this is sort of a unique case. I have skin in the game as I retired from GM and draw a monthly pension from them. If the bailout does not occur and GM is forced to restructure in some way, what's going to happen to all the retiree's, both salary and hourly.
If GM is allowed to fail, the ripple effect will be far reaching into all aspects of American life as we know it. That giant sucking sound that you hear is the heart being pulled straight out of America. If all the top brass at GM is cut loose with no golden parachutes and is replaced by a Gov't appointed committee to run the company, perhaps that is the solution. Ot at least on a temporary basis. A good question to ask yourself or of others is after NAFTA was signed and cheap labor was found, why are autos, etc. manufactured in Mexico still have a high price tag and not reflective of the cheap labor. The answer to me at least was still the insane quest for more profits thus grealty benefiting upper management.
I am constantly amazed that if we(Americans) are so smart with the manufacturing processes, why are we constantly behind the curve? Is it possible and conceivable that we are not as good as we think we are, or is it something else. Foreign manufacturers have been eating our lunch since the 80's and we have done squat about it, except to cry about it and do nothing.

bluesguy

The manufacturing process is just the start. Everyone has got good at that. To be successful in the motor industry you need:

- quality construction and feel. The car has to run with no defects for at least 4 years
- daring and style. Take Audi as an example (I would say Peugeot/Citroen but they aren't imported in the US)
- a bit of luck. Toyota's image has been improved a lot by the Prius hybrid

It's all about the product. You don't make a car that people want to buy if you're scared.

I think that the worst thing for GM would be for the US government to take control. They don't know anything about making cars. I think Nissan is a better example. They got bought by Renault who put in brilliant international management team. They revamped the whole product line, which the factories were delighted to make and it was all a success.

However - I think it might be more difficult with GM. I was born and brought up in the UK motor city (Birmingham). Nobody tried to turn around the Longbridge site. It got closed down.

[Canuck935]

The reason the US auto companies are in this mess is because of the auto workers union.

http://mjperry.blogspot.com/2007/07/...of-market.html

"Bottom Line: The average UAW worker with a high school degree earns 57.6% more compensation than the average university professor with a Ph.D. ... and 52.6% more than the average worker at Toyota, Honda or Nissan."

ABSURD!

[SmartWombat]

Bank bailout?
I recommend this: http://www.bbc.co.uk/blogs/thereport...k_bailout.html
And this: http://www.bbc.co.uk/blogs/thereport...300m_gift.html

As a guide to what's happening "over here" and what might happen where you are.


Cars? It's not just the US car industry (we don't have one of our own).
Honda in the UK has announced it's shutting down UK production at Swindon for two months next year to adjust to demand in UK, Europe, and Russia.

Joke from the radio recently...
Take the company Daimler-Chrysler.
How do the Americans pronounce it? "Chrysler"
How do the Germans pronounce it? "Daimler"

It was perhaps an unintended, but perceptive, comment on how countries view "their" industries in a time of globalisation.

Part of the problem is that large companies can not change direction rapidly.
You don't have to be good at manufacturing to be in the business, you also have to be good at design, meeting the customers' needs, anticipating future trends.
Unfortunately some companies can't manage any of those.

So despite employing thousands of people - is it right to prop up a fundamentally flawed company? Particularly in a market where international competitors have not just eaten your lunch, but your breakfast and dinner too?
In the UK the decision was, no.

Car manufacturing can be cheap. Look at the Tata Nano for 100,000 rupees ($2500). A 600cc engine in the boot, four doors, a lot of plastics. Comparable in societal impact to the wartime volkswagen perhaps? Of course it doesn't have to meet US emissions and crash safety standards - that's part of its low price.
http://news.bbc.co.uk/1/hi/business/7181432.stm

[Franglais]

I hesitate to post this as Americans are probably sick of hearing about GM and Chrysler. My favourite newspaper (Liberation) just published an analysis of the situation. I know from personal experience that they're pretty accurate:

Products: the big 3 have continued to make pick-ups and SUV's (which still represent 75% of the autos bought in the US) but with the gas price crisis, demand is switching over to smaller cars and hybrids

Retirement costs: An average big 3 worker costs $73 an hour, which is much more than an employee at Honda or Toyota in the south. However if you take just the salary this would be $40 which is the same as the Japanese. Add health insurance and the cost goes up to $55/hour ($45/hour Toyota/Honda). The killer is retirement costs which takes the whole thing up to $73/hour. There are 2.8 "inactives" (retired) for 1 "active" at GM

Competition from the Japanese: Better production methods, technology, quality image, new factories in the south with few unions.

Finance companies: 20% of the cars sold in the US are sold by leasing via credit companies belonging to the big 3. These credit companies should make a loss of $14bn in 2008. This system stopped working even before the bank crash, but in a certain sense it's linked to the $700bn plan.

[barb_48]

I think you're damned if you do and damned if you don't. If our governments on both sides of the border don't do something the wave of unemployment will be like a Tsunami. It will have such a trickle effect that I really don't think our gov.t's have the slightest idea of the damage that is about to happen.
The company I work for supply Chrysler and GM, we have had to permanetly layoff alot of people. Dec. 1, I got my notice of being temporaliy laid off, I fear that it will eventually become permanent. Like many others in the same boat around the world, what the heck are we going to do now?
Again I wonder when the price of fuel shot up like they did, why they didn't foresee the problems it was going to create.
I remember what our premier of Ontario said, "Get use to it" the price of gas is going up and there isn't anything we can do about it. Bull! (Never vote for anyone that looks like Norman Bates) LOL
Sorry had to vent
Thanks

[PRB]

And see, I would like a nice stimulus package to the tune of a billion bucks coming to my post office box, rather than the paltry $600 that didn't make it to my post office box, but rather, went straight to the IRS.

[JSPhoto]

They don't know anything about making cars.

Sure the US Govt. knows how to make cars:

1: they have been mass producng tanks, trucks, APC's, arplanes, helicopters and ships and so forth for decades.

2: mass production is a staple of the US Govt., (but so is massive waste)

3: who needs a $700 toilet seat for their car........ :idea:


JS

[JSPhoto]

Oh they know, and have for years. Pretty sad when someone with no ID can get loans to buy new cars and trucks, even handouts to buy a home yet those who are citizens are left out in the cold on the streets. Look at many abanndonded soldeirs coming back from overseas who are homeless, jobs given to "others" while they were serving their country
One small Indiana town grew by 57% the past 10 years, now the illegal Mexicans outnumber the US citizens! Now consider the illegals are still working, living in homes paid for by taxpayers, while the taxpayers are beng laid off and kicked to the streets. The illegals are NOT paying taxes, they are STILL getting food stamps, Still getting FREE medical services.

Something else to think about: Ever hear the present President speak Spanish? He actually sounds like he knows what he's saying, fluid, doesn't stop to think about the next word, then when he speaks English he is all tounge twisted and can't fnd words... who's really pullng ths puppets strngs?

JS

I think you're damned if you do and damned if you don't. If our governments on both sides of the border don't do something the wave of unemployment will be like a Tsunami. It will have such a trickle effect that I really don't think our gov.t's have the slightest idea of the damage that is about to happen.

[barb_48]

Makes alot of sense to me, with dwindling job prospects for us I wonder if they are still handing out Work Visas?