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Should the USA Auto Industry be bailout?

GamTrak asked 3 years ago
Here we go again! Should we bail out yet another company that was greedy and wanted to go with big oil and not think of other alternatives 10 years ago?

If the U.S. Big Three automakers want bailout help from the Federal government they should submit to at least an afternoon of new public hearings.

Automakers were heard from in September on the subject of attaching the $25 billion loan program to a continuing resolution for the Federal budget. That legislation, which passed, kicked off the process for such loans to move ahead—-loans that were part of last year’s energy legislation. The money is meant to go to help the companies re-tool factories and offset some research and development costs associated with more fuel efficient vehicles. The key is that all the loans must be attached to offset costs of vehicles that get 25% better fuel economy than the vehicle segment average. In other words, if Ford wants loan money to offset the costs of bringing its Fiesta to market, the car will have to exceed the average of the vehicles in the segment by 25% at the time the application is made.

Article

75 Answers
GamTrak answered 3 years ago
IMO This statement below sums it up best. It worked for the airlines so I say let them fail, reorganize, renegotiate and be done with it. There is no logical reason to save them because NO ONE wants or buys the cars anymore. Major car dealership are closing by the day and they should have seen this coming 20 years ago.

Several major U.S. airlines have operated under Chapter 11 bankruptcy provisions. United Airlines has been through it. US Airways and Continental Airlines filed twice. Both Delta Air Lines and Northwest Airlines, which are in the process of combining operations, emerged from bankruptcy court protection last year. Labor contracts were renegotiated, and everyone, from baggage handlers to pilots, took pay cuts. Yet through it all, travelers continued to book tickets to fly.

Goldfinger answered 3 years ago
Somehow I thought airlines received some direct or indirect assistance but can’t remember now :Cry:
One thing that’s for sure is that the steel industry received major protection shortly after 9/11 and for all I know they may still be in place. Without them they wouldn’t be able to compete against Indian, South Korean, Brasilian, and Australian steel mills. Technology is outdated and efficiency and output is low as well.

GamTrak answered 3 years ago
What bothers me most about this bailout deal is that the Federal Reserve is NOT disclosing who gets the money. Is Paulson picking and choosing his favorites to get money? What’s up with that and how did congress agree to no disclosure?

Treasury Secretary Henry Paulson is scheduled to give an update today on the $700 billion bailout program for the U.S. financial system.

Critics are complaining that the administration is not being tough enough on the banks who are receiving the assistance, that the original centerpiece of the program — government purchases of troubled assets — has been left to languish and that homeowners struggling with mortgage foreclosures are not getting the help they need to stay in their homes.

President-elect Obama, when he met with President Bush at the White House on Monday, urged Bush to support aid for struggling automakers and Democrats in Congress have begun drafting legislation that would give General Motors, Ford and Chrysler access to $25 billion of the rescue funds.

The Bush administration has already committed $250 billion of the money for the purchase of bank stock, giving financial institutions an infusion of cash that the government hopes they will use to resume more normal lending operations and address the most severe credit crisis in decades. On Monday, the administration announced that it was allocating another $40 billion as an investment in troubled insurance giant American International Group.

Those decisions leave only $60 billion left to allocate of the first $350 billion in funds approved by Congress and that is before any money has been spent to buy troubled assets, which originally had been the administration’s chief reason for requesting the bailout program, which Congress approved on Oct. 3.

The government on Tuesday sought to address another of the complaints of critics, that not enough is being done to help Americans deal with record levels of mortgage defaults.

source

Goldfinger answered 3 years ago
To put Paulson in charge of this has been a travesty. How can you expect an investment banker to sort out his buddies’ mess without running into conflicts of interest.

GamTrak answered 3 years ago

Refusal to back ‘dinosaur’ industry puts passage of proposal in doubt.

Hardline opponents of an auto industry bailout branded the industry a “dinosaur” whose “day of reckoning” is near, while Democrats pledged Sunday to do their best to get Detroit a slice of the $700 billion Wall Street rescue in this week’s lame-duck session of Congress.

The companies are seeking $25 billion from the financial industry bailout for emergency loans, though supporters of the aid for General Motors Corp., Ford Motor Co. and Chrysler LLC have offered to reduce the size of the rescue to win backing in Congress.

Senate Democrats intended to introduce legislation Monday attaching an auto bailout to a House-passed bill extending unemployment benefits; a vote was expected as early as Wednesday.

source

HERE IS ANOTHER RELATED ARTICLE. (It’s from 2005).

Professor answered 3 years ago
The US automakers and the hundreds of thousands of jobs they power are crucial to America. Lets hope this doesnt get politicized as these jobs are far more important to US consumers then the damned financial idiots we happily forked our money over too.

GamTrak answered 3 years ago
I doubt that the current administration will bail them out. Obama will have to do it when he gets office, IF they can make it that long.

I hate bailouts, but looks like we are once again FORCED to do yet another one in order to save an American Icon and jobs I guess. I’m wondering what criteria we are going to use to decide which of the other companies and major US cities that are lining up asking for a bailout.

I heard that this crisis is going to turn into a very bad depression so I say if it’s going to happen then we may as well get started now so that we can recover sooner. We still don’t know which companies are next to fail and how many are strong enough to survive in a free market. :Cry:

slotplayer answered 3 years ago
They should have bailed out the mortgage forclosures and kept those payments flowing, that would have added stability and confidence in the market.

GamTrak answered 3 years ago
@AmCan 186080 wrote:

AIG – the part of AIG that was bailed out was the CDS business, not their property and casualty insurance, those companies are not in trouble and are profitable. If you start dropping events to support your sales affilaites then that business will be the next to fail, as the best employees leave for better deals.

Which companies out there are currently hiring and is not worried about thier economic future? Just wondering who they are since it seems that this crisis is affecting everyone dispite the fact that the public may not know it YET.

AmCan answered 3 years ago
i’ve owned a subaru, a honda and a gm/toyota prism. I now own my 2nd Ford Taurus, it’s as good or better than the previous cars i’ve owned.

Buddy – The big change in demand from SUVs to small cars occurred 6 months ago, which is too fast to launch new models or retool truck plants to make cars. The japanese have been better at building more flexible plants, but most of them work on a single platform for their cars, US auto makers tend to have 3 car (small, med, large) and 3 truck platforms, it’s tough to build multi platform.

Also the latest GM SUV’s have been hybrids. The Escalade has a mileage est of 22 mph, in city, 21 on highway compared to 14/16 for non-hybrid. Since these were their most profitable vehicles for the last 10 years and it takes 36 to 48 months to launch a new model it certainly was a good business decision when it was made.

Gooner: the GM and Ford are actually burning about $2.5 to $3 billion in the 3rd quarter, so it’s even worse.

This crap about the unions is BS,
1. the % of union jobs in the US is at it’s lowest level since world war II, so their influence.
2. GM will have lower labor costs in the next few years which will reduce Toyota’s advantage at US plants by 80%, because all the older, more expensive union workers have/are retiring, new workers come in at a lower pay rate. Toyota, which started building US plants less than 20 years ago are now facing an older, more expensive work force, with higher medical costs, despite the fact that they are non-union.

People would probably be happy to work for half of what Toyota pays, so what? There is always someone with a crappy job or no job is always willing to undercut other people.

Finally the germans were doing fine selling cars, despite the fact that their cost are even higher than US UAW workers.

When i worked at Ford (as contract programmer) they lost over $1000 for each Each one sold. They needed to sell at a loss, to meet US mileage standards and avoid fines. So the detroit automakers never could sell small cars profitably, but continued to make and push them to help offset all the SUVs. Had government standards that not been an issue, there would be no ford focus today, which is the only thing really selling well now.

AIG – the part of AIG that was bailed out was the CDS business, not their property and casualty insurance, those companies are not in trouble and are profitable. If you start dropping events to support your sales affilaites then that business will be the next to fail, as the best employees leave for better deals.