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Zenning up the bailout talk - blurbs [entries|archive|friends|userinfo]
Chicken Little

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Zenning up the bailout talk [Nov. 19th, 2008|08:06 pm]
Chicken Little
I've been reading up on the automakers-bailout-no-bailout fiasco, and have come to the conclusion that there's a lot of crap floating around in the toilet of the Internet. And that Obama will be fucked when he assumes office, assuming that the Big 3 are still around.

Some claim that 3 million jobs would be lost if the Big 3 went bust. Some say that there's no way that would happen--Toyota and other companies would build more plants. Some who are talking bailout want to get rid of the CEOs and strip the UAW of a LOT of their power--completely oblivious to the fact that many Congressmen got their jobs because of the UAW and the carmakers. Cronyism is not an excuse for going soft, but it's gotta feel awkward telling your bedfellow to get the hell out. Some are saying just let 'em fail. My favorite is the WSJ article that claims that the ultimate goal of the bailout is to make the automakers into another branch of the Sierra Club--the $25 billion that was already pre-approved (specifically for the purpose of retooling the factories to make greener cars) can't be used for bailing out the companies. What a moment for Congress to stick to its guns, no?

I am opposed to yet another bailout of yet another industry filled with morons for leaders, but I don't think I could be so hard-hearted as to suggest that 3 million people go jobless for the sake of my principles (I don't think that number is entirely correct--many industries will suffer, and a few companies will collapse, but I don't think it's 3 million). Nationalizing the car makers (Obama's plan) would probably be better than letting them fail, but only just.

I have to wonder why nobody's considering the third possible scenario: a buyout from Toyota, Honda, or Nissan (they're probably waiting in the wings for the price to fall). I'll grant you this is highly unlikely, because the only reason for their success is that, for the most part, none of the foreign companies do unions--well, okay, they also build rock-solid cars with good mileage, and don't fuck around too much with excess (and you can't call an Escalade anything but excessive). Furthermore they aren't that unsavvy not to realize that there's still a strong pro-American sentiment in the States (witness the kerfluffle over Anheuser Busch). But as long as we're considering scenarios, we may as well consider this one.

From: hobomagic
2008-11-20 02:42 am (UTC)
Allowing "foreign" companies to buy up General Motors in the midst of a financial crisis is a political nightmare. More importantly, if Toyota bought up GM they would still be required to abide by their UAW contracts. If the insisted on renegotiating the UAW would strike and American politicians would fall all over themselves to defend them. Even if they had assurances, the whole deal would costs billions and billions of dollars that Toyota doesn't have and headache that they don't need.

Nationalization would be a MASSIVE disaster. Can you conceivably imagine the government taking over a company then cutting pay and firing large numbers of people? Nationalization will reinforce every bad habit in Detroit. They will grow even more bloated, top heavy, and sclerotic. GM is already burning 2 billion dollars a month, think how much worse it will get if they get a check from Uncle Sam.

The big 3 need to declare bankruptcy, but that won't mean 3 million people out of a job. Remember all those airlines that were declaring bankruptcy a couple years ago? None of them had massive layoffs. Detroit will enter into bankruptcy protection and redo all their contracts, shed some employees, maybe eliminate some brands and dealerships. The truth is that the cars GM and Ford makes are just as good as the ones made by Honda. The difference is that GM loses money on every car it sells and Honda makes money.
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[User Picture]From: small_chicken
2008-11-20 09:43 am (UTC)
I don't think 3 million people will be out of a job, but I don't doubt that bankruptcy would screw over a LOT of people. Remember, it's not just the auto workers, it's the suppliers, from the people who refine the iron ore to those who machine the parts. The Big 3 consume a lot--if they go down a whole load of other industries are also going to be scaled back. I doubt the exact numbers of people that will lose their jobs is 3 million, but I don't doubt that it'll be huge.

Airlines, from what I understand, are different from autos, because airlines don't sell you seats for 10 years. I'm unsure about the sticking points of buying a car from a company in bankruptcy (that is, it doesn't make sense to me), but that seems to be the primary fear of letting Detroit declare bankruptcy--that nobody would buy, and if nobody buys, then there's still no money. And as for quality, well, perhaps that's true, but the perception that they're unreliable still persists, and that will mean a lot when people who don't have a lot of money contemplate buying a car. (My parents, FWIW, have been driving Fords for nigh on 30 years, and they've HATED every single one--you'd think they'd learn...)

I'm not thrilled about nationalization, either, but if Obama has his way then that's essentially where it's going--let's not kid ourselves about what he supports. He wants to bail out the automakers, but put a "government czar" in charge. Whether it succeeds or fails will depend entirely on who he puts in. Of course, the Big 3 could fail well before the guy assumes office, so this could all be moot.

I dunno about Toyota buying out GM...I tend to think that, if it comes down to losing the Big 3 for good, or having a decent job, the UAW would probably see reason. But maybe I'm giving them too much credit.
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