OMG!! Everybody wants to be bailed out!

[Halon451]

I think the business model they have been using is crap.

Or lack thereof... Greed is not a business model, but they sure seem to act as if it is.

 

[fredk]

Every business agreement I have ever negotiated had terms and conditions. I wonder, what sort of terms and conditions could one apply before agreeing to hand over wads of bailout cash.

Maybe something like: all senior executives give back the multi million$ bonuses they have paid themselves for making this mess. Oh, and how about handing over those stocks and options they have also accumulated?

Nah, we don't want to interfere with the 'free market' that would be socialist/comunist. What was that f word that was used a few pages back?

 

[Davemcc]

The more I think about GM's situation, the more I think they should be bailed out. Hear me out. The auto industry is one of the most heavily regulated industries in the nation. The gov't has mandated union legislation that allows the union take what it wants from the company without regard to the future, Some might call the process negotiation, but current law allows the union to hold tens of billions of dollars in GM assets as literal hostage during strikes to get what they want. GM has only been allowed to "negotiate" with a gun to it's head for every contract. Labor law almost totally favors the union side of negotiations and the result has cost GM billions in additional ongoing costs. It's these billions of dollars in legacy costs and retirement benefits that are killing GM and the process is legislatively against GM.

On the product side, GM is hugely succesful in the international market but the Japanese gov't has all but excluded foreign vehicles from entering Japan. Japanese automakers have been given a protected home market, preventing GM from making inroads into those automakers profits in their home markets. The US gov't has never taken the position that Japan should open their markets to our automakers while their automakers dominate our market. Not only that, but the advanced batteries in Japanese vehicles were heavily subsidized by the Japanese gov't, even as our gov't expects that our automakers will develop such technology on their own. This puts our automakers at a disadvantage of tens of billions of dollars.

Never mind the ridiculous demands of the gov't for ever higher fuel economy and safety equipment, much of it based on technology that doesn't currently exist, further draining the budgets of our companies to meet these demands.

I would venture to say that if the US automakers were allowed to run their business without such a massive intrusion of the gov't in their affairs, they would not need a buyout. But as things stand, the gov't itself plays a HUGE role in the state of the auto industry. To lose such an industry and simply hand it over to protected and subsidized foreign competitors is NOT a result of FREE MARKET competition, but an indication that our own governments have mismanaged it's own involvement in the industry.

Or to quote Clausewitz, economics is war by other means...and we are losing due to the shortsightedness of our gov't leadership. Ask yourself why GM and Ford are profitable sales leaders in every foreign market in every region and nearly every country except the United States.

 

[Alamar]

The more I think about GM's situation, the more I think they should be bailed out. Hear me out. <snip>

I see your logic but I doubt that a bailout without other corrective steps would help at all.

If you want to bailout the auto makers you likely have to let them go bankrupt then allow the auto makers to reorganize & renegotiate contracts in light of the current economic realities.

At this point, because of the credit crisis, then the government would step in and make sure that the auto industry gets the loans they need to continue. In terms of trade I believe in free trade but I'm spiteful enough that I could live with reciprocity [sp?].

If you want a bailout I don't see how it could work unless you do something like the above ...

 

[Davemcc]

I see your logic but I doubt that a bailout without other corrective steps would help at all.

If you want to bailout the auto makers you likely have to let them go bankrupt then allow the auto makers to reorganize & renegotiate contracts in light of the current economic realities.

At this point, because of the credit crisis, then the government would step in and make sure that the auto industry gets the loans they need to continue. In terms of trade I believe in free trade but I'm spiteful enough that I could live with reciprocity [sp?].

If you want a bailout I don't see how it could work unless you do something like the above ...

Here's the worst part, I consider myself a free market conservative. But the auto industry has not been operating in a free market and now is not the time to pretend that is has. The government has been so intrusive in the operations of these companies for so long, I'm at the point of saying that it's the government's mess, let them fix it.

Even at that, $25B isn't much when you consider the govt's take from these companies over the decades, considering income taxes from the employees, profit tax, property tax on plants and offices, sales taxes on retail transactions. When you consider all the sources of taxation on these companies for decades, the govt's skim has been astronomical compared to the buyout that's on the table now.

A better solution might be for GM to close all it's US plants and facilities and simply move to another location where it's profitable. GM is, in fact, profitable in virtually every market outside the US and it's the US that's draining the life out of the company. If they closed down all US sales and operations and moved to India or Rio de Janiero, for example, they would be a profitable market leader around the world.

 

[haraldo]

Here's the worst part, I consider myself a free market conservative. But the auto industry has not been operating in a free market and now is not the time to pretend that is has. The government has been so intrusive in the operations of these companies for so long, I'm at the point of saying that it's the government's mess, let them fix it.

Even at that, $25B isn't much when you consider the govt's take from these companies over the decades, considering income taxes from the employees, profit tax, property tax on plants and offices, sales taxes on retail transactions. When you consider all the sources of taxation on these companies for decades, the govt's skim has been astronomical compared to the buyout that's on the table now.

A better solution might be for GM to close all it's US plants and facilities and simply move to another location where it's profitable. GM is, in fact, profitable in virtually every market outside the US and it's the US that's draining the life out of the company. If they closed down all US sales and operations and moved to India or Rio de Janiero, for example, they would be a profitable market leader around the world.

Very true Dave, in reality some of this is quite simple, outsourcing of factories happen all the time and I can't even count the numbers of plants and factories that have moved from Europe to Asian low cost countries to cut cost and make them more profitable

It's quite easy sometimes to make a company profitable but then everybody will lose their jobs, and then.... who is going to buy the products, if they are without jobs....

This is very scary and dangerous things indeed......

An example, the tax on CO2 for factories in Europe makes some of them non competitive from a cost point of view.... what do they do, they relocate to countries without these taxes and the result is more CO2 spill to the atmosphere, and all people lose their jobs, I don't call that a win-win situation....