OT: Would the economy go bust if the Big 3 went under?

[Voyager]

Just curious what you think would happen to the U.S. economy if the Big 3 automakers (Ford, G.M., and Chrysler) were forced into bankruptcy?

[Enigma869]

Sticking with the question asked in the title, I would say that the U.S. economy has already gone under. I think the big 3 really need to get their heads out of their ass and work on re-structuring their companies. Until that happens, nothing will change.

[Don]

There will finally be people working at McDonald's who speak English.

[Enigma869]

Interesting Op-Ed piece from yesterday's NY Times. It's from Mitt Romney, the former Governor of MA and a Michigan native.

http://www.nytimes.com/2008/11/19/opini ... ey.html?hp



Let Detroit Go Bankrupt

By MITT ROMNEY
Published: November 18, 2008
Boston


If General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.

Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.

I love cars, American cars. I was born in Detroit, the son of an auto chief executive. In 1954, my dad, George Romney, was tapped to run American Motors when its president suddenly died. The company itself was on life support — banks were threatening to deal it a death blow. The stock collapsed. I watched Dad work to turn the company around — and years later at business school, they were still talking about it. From the lessons of that turnaround, and from my own experiences, I have several prescriptions for Detroit’s automakers.

First, their huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota. Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers.

That extra burden is estimated to be more than $2,000 per car. Think what that means: Ford, for example, needs to cut $2,000 worth of features and quality out of its Taurus to compete with Toyota’s Avalon. Of course the Avalon feels like a better product — it has $2,000 more put into it. Considering this disadvantage, Detroit has done a remarkable job of designing and engineering its cars. But if this cost penalty persists, any bailout will only delay the inevitable.

Second, management as is must go. New faces should be recruited from unrelated industries — from companies widely respected for excellence in marketing, innovation, creativity and labor relations.

The new management must work with labor leaders to see that the enmity between labor and management comes to an end. This division is a holdover from the early years of the last century, when unions brought workers job security and better wages and benefits. But as Walter Reuther, the former head of the United Automobile Workers, said to my father, “Getting more and more pay for less and less work is a dead-end street.”

You don’t have to look far for industries with unions that went down that road. Companies in the 21st century cannot perpetuate the destructive labor relations of the 20th. This will mean a new direction for the U.A.W., profit sharing or stock grants to all employees and a change in Big Three management culture.

The need for collaboration will mean accepting sanity in salaries and perks. At American Motors, my dad cut his pay and that of his executive team, he bought stock in the company, and he went out to factories to talk to workers directly. Get rid of the planes, the executive dining rooms — all the symbols that breed resentment among the hundreds of thousands who will also be sacrificing to keep the companies afloat.

Investments must be made for the future. No more focus on quarterly earnings or the kind of short-term stock appreciation that means quick riches for executives with options. Manage with an eye on cash flow, balance sheets and long-term appreciation. Invest in truly competitive products and innovative technologies — especially fuel-saving designs — that may not arrive for years. Starving research and development is like eating the seed corn.

Just as important to the future of American carmakers is the sales force. When sales are down, you don’t want to lose the only people who can get them to grow. So don’t fire the best dealers, and don’t crush them with new financial or performance demands they can’t meet.

It is not wrong to ask for government help, but the automakers should come up with a win-win proposition. I believe the federal government should invest substantially more in basic research — on new energy sources, fuel-economy technology, materials science and the like — that will ultimately benefit the automotive industry, along with many others. I believe Washington should raise energy research spending to $20 billion a year, from the $4 billion that is spent today. The research could be done at universities, at research labs and even through public-private collaboration. The federal government should also rectify the imbedded tax penalties that favor foreign carmakers.

But don’t ask Washington to give shareholders and bondholders a free pass — they bet on management and they lost.

The American auto industry is vital to our national interest as an employer and as a hub for manufacturing. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs. It would permit the companies to shed excess labor, pension and real estate costs. The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.

In a managed bankruptcy, the federal government would propel newly competitive and viable automakers, rather than seal their fate with a bailout check.

Mitt Romney, the former governor of Massachusetts, was a candidate for this year’s Republican presidential nomination.

[Voyager]

Interesting Op-Ed piece from yesterday's NY Times. It's from Mitt Romney, the former Governor of MA and a Michigan native.

http://www.nytimes.com/2008/11/19/opini ... ey.html?hp



Let Detroit Go Bankrupt

[b]By MITT ROMNEY
Published: November 18, 2008

Great article John. I have to agree with Romney. If they get bailed out, it will be like putting a band-aid on a broken leg.

[StoneCold]

Let'em go under. Free market rules, they didn't adapt to our energy needs, didn't plan for the future.

As for affecting the economy, being taxed to save them will affect us worse.

Note, the CEO's of the big 3 went to DC (asking for handouts) in private jets $20,000 versus $300 coach.

[Tito]

Let'em go under. Free market rules, they didn't adapt to our energy needs, didn't plan for the future.

As for affecting the economy, being taxed to save them will affect us worse.

Note, the CEO's of the big 3 went to DC (asking for handouts) in private jets $20,000 versus $300 coach.

Whatever free market there was, went out the window with the $700 billion bailout.

[stevew2]

Let'em go under. Free market rules, they didn't adapt to our energy needs, didn't plan for the future.

As for affecting the economy, being taxed to save them will affect us worse.

Note, the CEO's of the big 3 went to DC (asking for handouts) in private jets $20,000 versus $300 coach.

Whatever free market there was, went out the window with the $700 billion bailout.

No shit sherlock, what the fuck else could have been down dickweed?

[Tito]

Let'em go under. Free market rules, they didn't adapt to our energy needs, didn't plan for the future.

As for affecting the economy, being taxed to save them will affect us worse.

Note, the CEO's of the big 3 went to DC (asking for handouts) in private jets $20,000 versus $300 coach.

Whatever free market there was, went out the window with the $700 billion bailout.

No shit sherlock, what the fuck else could have been down dickweed?

Let the market decide.

[stevew2]

Let'em go under. Free market rules, they didn't adapt to our energy needs, didn't plan for the future.

As for affecting the economy, being taxed to save them will affect us worse.

Note, the CEO's of the big 3 went to DC (asking for handouts) in private jets $20,000 versus $300 coach.

Whatever free market there was, went out the window with the $700 billion bailout.

No shit sherlock, what the fuck else could have been down dickweed?

Let the market decide.

The market has been fucking us numbnuts

[Tito]

Let'em go under. Free market rules, they didn't adapt to our energy needs, didn't plan for the future.

As for affecting the economy, being taxed to save them will affect us worse.

Note, the CEO's of the big 3 went to DC (asking for handouts) in private jets $20,000 versus $300 coach.

Whatever free market there was, went out the window with the $700 billion bailout.

No shit sherlock, what the fuck else could have been down dickweed?

Let the market decide.

The market has been fucking us numbnuts

Now, the government and corporate whores are really fucking us.

[stevew2]

Let'em go under. Free market rules, they didn't adapt to our energy needs, didn't plan for the future.

As for affecting the economy, being taxed to save them will affect us worse.

Note, the CEO's of the big 3 went to DC (asking for handouts) in private jets $20,000 versus $300 coach.

Whatever free market there was, went out the window with the $700 billion bailout.

No shit sherlock, what the fuck else could have been down dickweed?

Let the market decide.

The market has been fucking us numbnuts

Now, the government and corporate whores are really fucking us.

Plus all them illegal fuckers comin over here

[Behshad]

People who say let them go bankrupt are the ones who need to get their heads out of their asses.
The auto industry is the backbone of this country's economy . You let that go under, we will have a more screwed up economy than we already do.

If the big 3 would go down, there is more than just the millions it will affect as far as jobs. We will become dependent on other countries when it comes to cars. Isnt it bad enough that we depend on them for oil!?
You think Honda, Toyota and any other manufacturer will keep their pricing "low" and/or competitive once the big 3 are gone? They will charge us what they want , cause they got what we need and we have to pay the price for it, simply because this country is way behind when it comes to public transportation.
Top that off with the Oil companies getting a big hit when no one buys or drives car as often as in the past and you have the recipe for a huge economic disaster.
The media is accusing the US auto makers for not making the vehicles that the consumer demand. Funny thing is that people DEMAND larger vehicle. They do want bigger vehicles so they can fit their kids & friends in it. They do want bigger vehicles so that can bring home their plasma TV from the store. Or pull their boat/camper. "the consumer" talks the talk when they want a midsize, fuel efficient vehicle, but once they see it, they walk towards the SUV/Truck line up because the fuel efficient car isnt big enough for them.

At the same time that I see a "BAIL OUT" as a form of rewarding failure, I also think that in this case, it is a more of a much needed LOAN compared to the AIG deal that was 4 times more than this and was a TRUE bail out.

[StevePerryHair]

So let me get this straight. Americans are all upset that so much industry is closing here, going over seas, and losing jobs here. And now you people are all for losing some of our biggest industry we have left? I hope these are jokes because it sounds scary to me.

[Tito]

Behshad, I agree with most of that.

[weatherman90]

Dow 6000 seems to be the consensus if this were to happen. Maybe lower....

[Behshad]

Behshad, I agree with most of that.

Thanks Tito,
That itself solves more than half of my personal problems

[conversationpc]

People who say let them go bankrupt are the ones who need to get their heads out of their asses.
The auto industry is the backbone of this country's economy . You let that go under, we will have a more screwed up economy than we already do.

Bailing them out only perpetuates the problem and will make the eventual crash worse than it would be otherwise, in my opinion. If they are allowed to go under and restructure under bankruptcy and actually FIX their problems rather than perpetuating them, the end result would be much better, in my opinion.

[StevePerryHair]

People who say let them go bankrupt are the ones who need to get their heads out of their asses.
The auto industry is the backbone of this country's economy . You let that go under, we will have a more screwed up economy than we already do.

Bailing them out only perpetuates the problem and will make the eventual crash worse than it would be otherwise, in my opinion. If they are allowed to go under and restructure under bankruptcy and actually FIX their problems rather than perpetuating them, the end result would be much better, in my opinion.

If they can fix them. What if they don't recover? Then what? What about all of the jobs lost in the meantime? From the factories themselves, trickling down to every dealership and those that would also lose jobs from them closing?

[conversationpc]

People who say let them go bankrupt are the ones who need to get their heads out of their asses.
The auto industry is the backbone of this country's economy . You let that go under, we will have a more screwed up economy than we already do.

Bailing them out only perpetuates the problem and will make the eventual crash worse than it would be otherwise, in my opinion. If they are allowed to go under and restructure under bankruptcy and actually FIX their problems rather than perpetuating them, the end result would be much better, in my opinion.

If they can fix them. What if they don't recover? Then what? What about all of the jobs lost in the meantime? From the factories themselves, trickling down to every dealership and those that would also lose jobs from them closing?

If they don't fix the problem, it's going to happen anyway. Did you read Romney's op-ed piece? That guy knows tons more about economics than anyone here does.

[Tito]

People who say let them go bankrupt are the ones who need to get their heads out of their asses.
The auto industry is the backbone of this country's economy . You let that go under, we will have a more screwed up economy than we already do.

Bailing them out only perpetuates the problem and will make the eventual crash worse than it would be otherwise, in my opinion. If they are allowed to go under and restructure under bankruptcy and actually FIX their problems rather than perpetuating them, the end result would be much better, in my opinion.

If they can fix them. What if they don't recover? Then what? What about all of the jobs lost in the meantime? From the factories themselves, trickling down to every dealership and those that would also lose jobs from them closing?

If they don't fix the problem, it's going to happen anyway. Did you read Romney's op-ed piece? That guy knows tons more about economics than anyone here does.

My problem with Romney's op-ed, it contradicts almost everything he said up in Michigan in January. He ripped (fuck) McCain when he said these jobs aren't coming back, etc. Grant it, they weren't necessarily talking about this situation but he thought the government could've step up. Just proves, all politicans are full of shit and will say anything to get elected.

[StoneCold]

If the American market is so afraid of foreign competition, they shouldn't have let the imports come in. Consumers are voting with dollars and the "Big3" are FAIL.

Boo hoo, let's ask the government to help us by using tax money from consumers who don't want our products in the first place so we can make more cars they don't want.

Yeah, that makes a lot of sense.

[Don]

If the American market is so afraid of foreign competition, they shouldn't have let the imports come in. Consumers are voting with dollars and the "Big3" are FAIL.

Boo hoo, let's ask the government to help us by using tax money from consumers who don't want our products in the first place so we can make more cars they don't want.

Yeah, that makes a lot of sense.

They have tried that by raising the tariffs, the people have responded by spending the extra money to get the quality product over the substandard one regardless of country of origin.

[RossValoryRocks]

People who say let them go bankrupt are the ones who need to get their heads out of their asses.
The auto industry is the backbone of this country's economy . You let that go under, we will have a more screwed up economy than we already do.

If the big 3 would go down, there is more than just the millions it will affect as far as jobs. We will become dependent on other countries when it comes to cars. Isnt it bad enough that we depend on them for oil!?
You think Honda, Toyota and any other manufacturer will keep their pricing "low" and/or competitive once the big 3 are gone? They will charge us what they want , cause they got what we need and we have to pay the price for it, simply because this country is way behind when it comes to public transportation.
Top that off with the Oil companies getting a big hit when no one buys or drives car as often as in the past and you have the recipe for a huge economic disaster.
The media is accusing the US auto makers for not making the vehicles that the consumer demand. Funny thing is that people DEMAND larger vehicle. They do want bigger vehicles so they can fit their kids & friends in it. They do want bigger vehicles so that can bring home their plasma TV from the store. Or pull their boat/camper. "the consumer" talks the talk when they want a midsize, fuel efficient vehicle, but once they see it, they walk towards the SUV/Truck line up because the fuel efficient car isnt big enough for them.

At the same time that I see a "BAIL OUT" as a form of rewarding failure, I also think that in this case, it is a more of a much needed LOAN compared to the AIG deal that was 4 times more than this and was a TRUE bail out.

They LOSE $1000 in cash for every auto they sell...be realistic...it doesn't work...the only way they can get out of their UAW contracts is to use the Bankruptcy laws to restructure the union contracts to make themselves competitive with Toyota, Honda, etc that have VASTLY less expensive labor RIGHT HERE in the United States. (Tennesee Honda plant sot per employee $37/hr, Detroit Ford Plant cost per employee $78/hr)

The union is SCREWING the Big 3, and the union wants the bailout so they can suck that money out in the form of dues and retirement.

Until the UAW contract is null and void the Big 3 will NEVER be profitable.

Even the Democrats in Washington understand this.

[Tito]

Even the Democrats in Washington understand this.

Unfortunately, they also understand the union is a big backer for them as far as contributions, ground game, and obviously votes. For that alone will probably be the reason they will get the bailout.

[RossValoryRocks]

Even the Democrats in Washington understand this.

Unfortunately, they also understand the union is a big backer for them as far as contributions, ground game, and obviously votes. For that alone will probably be the reason they will get the bailout.

Too much in the public eye...the country is watching...and understand the issue, if the Democrats give them they bail out the general public will see it as a pay off of THEIR money to a union and 2 years from now the company STILL goes under.

The business model is broke, the execs and the union bosses are complicit in the fucked up way Detroit does business. Until it is fixed the Big 3 will NEVER return to profitibilty.

[Arkansas]

The Big 3 won't go under. They should be allowed to lapse into bankruptcy and restructure. Perpetuating the current crap business model is just plain wrong.

Honestly, I'm more concerned about the precendent. If the Fed allows this, then every other manufacturer in America will be in Washington begging for cash. This cannot happen. It needs to stop before going any further.


later~

[geforcefla]

Exactly right Rossvaloryrocks....the UAW contracts and Big 3 management for approving the contracts will and have killed the auto industry. Could it be anymore obvious why the imports build plants away from Detroit....In the same sense theres nothing good that will come from a failure of theses companies. People donot realize there will be immediate effects, at the local level across this country in every city. Its suprising there is not more said about the local and personal impact the failure of these companines will cause.

[Ehwmatt]

Let'em go under. Free market rules, they didn't adapt to our energy needs, didn't plan for the future.

As for affecting the economy, being taxed to save them will affect us worse.

Note, the CEO's of the big 3 went to DC (asking for handouts) in private jets $20,000 versus $300 coach.

Just proves what dickheads they are. The better move would have been to find the most fuel-efficient car they could and fuckin driven there. That woulda been a nice gesture.