One More Reason We Shouldn't Bail Out Detroit

Yesterday, Ford (NYSE: F  ) did something bailed banks like Citigroup (NYSE: C  ) and Bank of America (NYSE: BAC  ) were never required to do: It submitted a turnaround plan to Congress to justify its proposed bailout. The plan shows that Ford could return to profitability by 2011. Woo-hoo! Success is right around the corner!

Not one to take a struggling company for its word, I pulled up Ford's 2005 annual report to see how accurate its three-year turnaround projections have been in the past. No surprises here: Scroll down only a handful of pages, and you'll come across this telling 3-year-old prediction:

"This [turnaround] plan will restore our North American automotive operations to profitability by 2008."

Ah! So close! Maybe change just ain't its thing.

The truth is that Ford, General Motors (NYSE: GM  ) and Chrysler are on their last breaths because their business models have been outmoded for years, not simply because the financial crisis kicked 'em while they were down. I've yet to hear a good explanation why Toyota (NYSE: TM  ) , Honda (NYSE: HMC  ) and Nissan (Nasdaq: NSANY  ) aren't on the brink of failure as well, if Detroit's problems are simply the result of a one-off economic storm.

But that isn't the half of what should concern you about providing the Feeble Three with the money they're requesting. Where they're proposing that money come from is even more worrisome.

$25 billion for me, none for you
Last year, Congress passed the Energy Independence and Security Act, which was primarily designed to raise fleetwide fuel-efficiency requirements. Tucked inside the bill was also the commitment to provide $25 billion for automakers and suppliers to produce "advanced technology vehicles or components."

Now that almost every corner of Washington has made it clear that the auto industry won't get their hands on one dime of the $700 billion in funds set aside to right the financial system, Detroit and Washington alike have put a bullseye on diverting money from that $25 billion development kitty, hoping to use it to get Detroit through its current survival scramble. The fear now is that the $25 billion appropriated to develop the next generation of cars could end up going to pay for Detroit's next generation of losses.  

On the other side of the country, Tesla Motors, an infant car company that designs and manufactures fully electric cars that can travel more than 200 miles on a single charge, has requested a chunk of the $25 billion fund. It wants to plow part of its request into a manufacturing plant in California that it'll use to build its next production model; a four-door, 100% gasoline-free sedan that serves as a beacon for our chance to wean ourselves from foreign oil dependence.

You want to talk about efficiency? Tesla designed and brought to production its first model -- a car that practically transformed the automobile as we know it -- for $140 million … start to finish. For comparison's sake, $140 million is exactly one-tenth of what Detroit collectively spends each year on its so-called "jobs bank," a program that literally pays idle employees to do absolutely nothing.

Seriously?
So in other words, the plan to get the automotive industry back on a sustainable track is to divert funds from innovative, efficient, and rapidly growing auto manufacturers. Instead, that money will pay for a Hail Mary chance that maybe, if we wish hard enough, Detroit will be able to pull off a turnaround it couldn’t accomplish when the economy was booming, much less in the midst of the worst recession in decades. You can't make this stuff up.

To put this all into context, imagine Ford and GM as they existed at the turn of the 20th century -- innovative and resourceful companies, poised to take the economy to new heights -- being stifled by a government hellbent on saving the horse-and-buggy industry.

There's a very real difference between bailing out something that has a sustainable and vital future, and bailing out something that's proven horribly inefficient. Now factor in bailing out something that's horribly inefficient at the direct cost of something that's innovative and spectacularly efficient, and we're venturing into a whole new realm of disaster.

Further functional Foolishness:

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Nissan is a Motley Fool Global Gains pick. Bank of America is a Motley Fool Income Investor recommendation. The Motley Fool is investors writing for investors.


Read/Post Comments (53) | Recommend This Article (110)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 03, 2008, at 4:07 PM, stcrusipher wrote:

    VinMan88,

    If you'd like to come up with a better name for a $25 billion capital injection from the Treasury, I'm all ears.

  • Report this Comment On December 03, 2008, at 4:09 PM, TMFHousel wrote:

    VinMan: Bank of America received $25 billion back in October.

  • Report this Comment On December 03, 2008, at 4:44 PM, JGBFool wrote:

    I would get a Tesla roadster, but there's nowhere to put the baby seat.

    Okay, that and the fact that I don't have $105G just sitting around. Pretty sweet looking car, though.

  • Report this Comment On December 03, 2008, at 4:46 PM, wesleyaring wrote:

    I can not tell you how much I believe that Morgan owns stock in toyota or nissan.

  • Report this Comment On December 03, 2008, at 5:03 PM, 7mark7 wrote:

    Hello! If we don’t bail them out, an additional 100 million people will be unemployed. That WILL throw us into a depression. PLUS 100 million unemployed households will cost us 40 billion a year in welfare & Medicare.

    Give them the money & let them lose the money trying to stay open. It’s way cheaper then the losing those jobs.

    P.S. Look at the unemployment % from the great depression. We loose our US auto industry & related jobs, we’re there. Think you’ll be able to afford a cell phone if it happens again? You probably won’t be able to afford food.

  • Report this Comment On December 03, 2008, at 5:17 PM, damasterwc wrote:

    i agree with mark, you're foolishly insane to believe in market forces that force the loss of millions of jobs and think it is "efficiency"

  • Report this Comment On December 03, 2008, at 5:28 PM, ohiomom2 wrote:

    First, it is not a Detroit bailout, it is a loan. Second, the technology for the electric vehicle was developed in the early 80's. The problem is cost per vehicle. GM is working on the VOLT production car which will provide a reasonable price point. Electric cars have been around for years if you can afford the over $100,000 price tag. Telsa Motors is not doing anything the other auto manufactures have been working on for years.

    You should research the loss to the ecomony without U.S. manufacturing. Compare taxes paid by GM vs. any other auto manufacturer in 2007 and the answer to why a loan to Detroit is needed will be clear!

  • Report this Comment On December 03, 2008, at 5:29 PM, calicom wrote:

    In Silicon Valley we have seen more than our share of market downturns with the associated "downsizings". We could only wish for a "Jobs Bank" to while away the hours playing cribbage at the pittance of 95% of our full pay. Many of our CEOs' and peers have taken the $1 salary position not in request for bailout funds but to boost investor confidence. Free market, remember?

    A bailout, in my humble opinion, would only be a very temporary solution to these G-5 flying, cribbage playing, politically arm-twisting dinosaurs. Free your engineers and intellectual innovators to save your butts. My intel tells me you have been stifling them for too long.

    BTW, the oil companies might be a better direction to thrust your open palms towards. They are truly grateful for your Hummer-type thinking.

  • Report this Comment On December 03, 2008, at 5:32 PM, bluedog341 wrote:

    I agree with Mark, even tho I saw the GM COO on GMA this AM and he came across as a fool to me, and not the kind you guys mean. Their cars are inferior and more money will not fix that. The additional money will allow them to expose further their lack of understanding of what the driving public likes, wants and needs in this era

  • Report this Comment On December 03, 2008, at 5:35 PM, 7mark7 wrote:

    Sorry my decimal point was off in my calculations, THAT SHOULD BE $4 BILLION a year in welfare & Medicare. $40,000 per family – including Medicare, x 100,000,000 households.

    What are you talking about ? "Efficiency"? You want to replace $50 to $75 per hour jobs with welfare? Sure, maybe that will get some sort of revenge for your Chevy breakin’, but it’ll hurt you in return.

    Unemployment is already up, where are these people gonna work? Give them the $ and keep them open.

  • Report this Comment On December 03, 2008, at 5:40 PM, 7mark7 wrote:

    We need high paying jobs in the US, so people can spend the money needed to keep the economy alive.

  • Report this Comment On December 03, 2008, at 5:50 PM, rachelkonrad wrote:

    This article rocks. Morgan is one of the rare writers who understands the Advanced Technology Vehicle Manufacturing Program, which provides new and established automakers and suppliers with low-interest loans and other incentives so they may build fuel-efficient vehicles and get them to customers faster. It should NOT turn into a Hail Mary bailout in which the government gives funds to moribund automakers to fund ongoing operations.

    To add data points to this post: Tesla is applying for $400 million in federal loans. The funds would support two projects: The first would supply recyclable batteries and components for other automakers hoping to produce more fuel-efficient vehicles. The second would help finance a manufacturing facility to make a five-passenger family sedan – all-electric and zero-emission, freeing owners of petrostate dictators, OPEC-mandated price fluctuations and Big Oil oligopoly.

    As this blog notes well, Tesla directly addresses the crises of energy security and climate change. The all-electric, zero-emission Roadster delivers double the efficiency and generates one-third the carbon dioxide of popular hybrids. The 244-miles-per-charge car is the technical validation and precursor to a planned family sedan and subcompact in Tesla’s product pipeline -- evidence that EV technology is already viable. Say what you want about him, but even Bob Lutz, vice chairman of global product development for General Motors, has credited the Roadster for helping juice the Chevy Volt program. Companies like Tesla deserve to participate in the ATVM because, ultimately, its technology will benefit the broader auto industry and ultimately the environment.

    Rachel Konrad

    Senior Communications Manager

    Tesla Motors

  • Report this Comment On December 03, 2008, at 6:10 PM, 7mark7 wrote:

    Give them the money. Give it again, ten more times if they need it. The United States economy can not afford to loose those jobs.

  • Report this Comment On December 03, 2008, at 7:01 PM, FatAmericansUAW wrote:

    Unions used to be necessary. Now they shelter people with low-value skills.

    Americans who are motivated in school and after will be the best Americans. I'm not Asian, but I see it in today's Asian-Americans. I worked 70 hour weeks in college and now make 6 figures. I earned it, like successful immigrants that didn't folow Daddy to the Union gravy train.

  • Report this Comment On December 03, 2008, at 8:35 PM, redneckdemon wrote:

    Oh, sure. Give them that "loan". Watch them piss it away. Then give them another one to save those jobs. Watch that get pissed away, too. Watch their "profits" plummet, with layoff and cutbacks canning all those important jobs, followed by the companies going belly up, geting rid of all those jobs that might be left. Now, unemployment is up, and the taxpayer is still out all that money you gave them. Great plan, guys. Do you work with Ben or Paul, by any chance?

  • Report this Comment On December 03, 2008, at 8:46 PM, redneckdemon wrote:

    And, yes, the Volt. One car, cheaper than some other electrics. But guess what? After your charge runs out 40 miles later, your back to using gasoline. Don't get me wrong, I'd buy one. Even after it has to star burning fuel, it should still get over 600 miles per tank. Price is supposed to be between 32k and 40k. Not too bad. But it hasen't even been produced yet, the EPA isn't sure how to test it's emmisions, and ONE decent car ain't enough to prop up a whole company. Not these days. Don't save the danged comanies if they can't do it themselves. If the Volt is that great, they should need any handouts, right?

  • Report this Comment On December 03, 2008, at 9:25 PM, NightBengal wrote:

    A few comments...

    1. EVERY large government loan or guarantee is called a "bailout." The airlines' loans in 2001-02 were "bailouts." Money loaned to AIG was a "bailout." If you aren't happy with the terminology, tackle the mainstream news media.

    2. If a start-up company can develop a car that gets 200 miles per charge, why is GM intent on releasing one that only gets 40 miles per charge? Other articles aptly point out that this is less than most people's commute.

    3. This article's main issue is where the Big Three are trying to get the funds. They have no right to rob an R&D fund for daily expenses, any more than you or I could rob a college scholarship fund to buy a house.

    4. Does anyone here really think that Tesla's car will stay at $100K once it is mass-produced?

    5. I've said it before and I'll say it again: If one or more of the Big Tree go under, they are NOT going to fall into some black hole and cease to exist. Someone will buy the patents, research, factories, etc. Despite all of Wagoner's cursing at it, Chapter 11 bankruptcy CAN happen, as well -- if it's managed properly.

    Cheers,

    NightBengal

  • Report this Comment On December 03, 2008, at 11:15 PM, tomcmh wrote:

    Let's not give money to Detroit. Why not buy a few cars, instead? At $20k per car, $1B will buy 50,000 cars! So, let the US replace every federal auto over 3 years old (or >30000 miles). If that won't stimulate the economy enough, subsidize the replacement of other public vehicles. Oh yes, these MUST be fuel efficient and well built. The secondary mkt for used cars will also help the economy.

  • Report this Comment On December 03, 2008, at 11:16 PM, mhouse00 wrote:

    I don't think bankruptcy is a viable answer for these companies. A recent survey (~ July 08) by CNW research, basically states that 80% of car-buyers would abandon ship on a automaker in bankruptcy.

    This makes sense when you think about it. Buying a car is a major investment (ok, it won't make money, but it sure costs a lot). Most logical people want to be sure that their new $20K+ ride will have parts, service, and warranty support for at least 5 yrs, if not more. A company in bankruptcy, no matter what the restructuring plan, just doesn't inspire enough confidence to make a heavy investment.

  • Report this Comment On December 04, 2008, at 5:20 AM, bjmj wrote:

    Why not bailout the auto industry? After all it was an American dream a hundred years ago and then along came the unions and informed LABOR that if they gave them part of their paycheck that they could FORCE MANAGEMENT to do things there way. All you are doing is getting your fair share from those rich people. Those folks that worked and saved their money and invested their money in the auto industry to make a dollar, and they did make their dollar and than the union workers came along and made their inflated dollar. Well now it has come full circle, they screwed you in your mind and you (union workers) surley screwed the owners. Now it is time for you to go get a real job that does cause a little sweat to form on you brow. The auto industry will not go out of business. It will down size, allow them to get rid of organized thieves, and produce a product that the "American" public would be proud to own again. Oh yes Ms. Konrad, that was a nice article that you wrote but dont let your company be draun into the same crap that the other folks got in. You folks started on the dream using capitalism. Don't lower yourselves to the level of these giant cesspools of greed and coruption. Keep doing it the american way and if there is stock to be bought in your company I will own some of it today. The rest of you folks who want to bail out the auto industry, we know which way you voteed now. Mommie and Daddie are not here to bail you out so you are looking to a LIBERIAL government to bail out your lack of good judgement.

  • Report this Comment On December 04, 2008, at 9:52 AM, BlueLakeVentures wrote:

    This story is right on, those thoughts are echoed at http://bluelakeventures.blogspot.com/2008_11_01_archive.html

    Also check another site that offers interesting perspectives on energy facts: http://newgenerationgas.com

  • Report this Comment On December 04, 2008, at 10:13 AM, chali2na wrote:

    The point I'm wanting help with is, how is that 3 majorly huge companies are going bankrupt at the exact same time? Right at the time that there is gov't $$$ to be had? Seems weird to me that it wasn't until this $$$ was approved that these companies all of a sudden couldn't last until the end of the year without a chunk of it. I guess we shouldn't worry because come Jan 20th all of the countries problems will just suddenly disappear!

  • Report this Comment On December 04, 2008, at 1:10 PM, logic6l wrote:

    "I've yet to hear a good explanation why Toyota , Honda and Nissan aren't on the brink of failure as well, if Detroit's problems are simply the result of a one-off economic storm."

    How about - Toyota and the others don't have any retirees yet, and their workforce is relatively younger than the Detroit's 3?

    It is very unreasonable to compare the new startups with 100 year old companies just because they are both automotive related. It is like comparing Grapefruit with Grape.

  • Report this Comment On December 04, 2008, at 1:18 PM, trtwo wrote:

    To those who are making 9.00 an hour with no benefits, if you were in a union you would most likely make more and have benefits. The impact of job loss in that large an amount would effect more than just welfare. These employees buy the hamburgers you make or other product so your job would be at risk and the company you work for. They would lose their homes, cars, and no longer be a paying part of the economy. Think of where your money goes and then think of all the businesses that would suffer and in many cases cease to exist.The number of jobs lost by the auto industry without help could easily be 400 million with the loss of economically connected businesses.

    The model T, by Ford, did revolutionize the nation and the world. The basic mileage has not increased by any great gains since the gas crunch of the 70's and the auto industry is to blame and should be held accountable. We are partially to blame also because we buy the vehicles with bad gas mileage and seat heaters and auto opening doors. Instead of a reliable and fuel efficient car we get ones with lcd's and a table for meals.

    Anyone own a Daewoo, where is the parts base for that company. The ancillary industries for the car you drive will no longer carry the parts for your car if american made or even be in business. Toyota is now offering 0% interest loans they would love for the big 3 to crash and burn. They and their cohorts would corner the world auto market, but who would by their product.

    These companies can not be allowed to fail but their bailouts should have some teeth. Cost efficiency, fuel efficiency, reliability and product cost should be tied to any money they receive.

    We bailout banks that make nothing and only exist as a profit vehicle for the enrichment of a select crowd. We need companies that make a product to last or we will be a nation of consumers without any money.

  • Report this Comment On December 04, 2008, at 4:08 PM, nerd51 wrote:

    You might not believe it but the corporate titans of the big 3 automakers are big fans of Soviet style communism!

    During the cold war there were places in West Berlin where you could see over the wall into the decaying landscape of East Berlin. If you look at Detroit and the surrounding areas of Michigan today you can see the same kind of decrepit discouraging landscape. The big 3 automakers through their policies have destroyed the economies of Michigan, Indiana and parts of Ohio just as the Soviet Union’s policies destroyed the economies of the Soviet Satellite countries of Eastern Europe.

    Having plundered their communities, the automakers have now come to Washington for a big dose of Federal Government support. Never mind that we bailed out Chrysler once already. Forget that they have blackmailed local and state governments into giving them huge tax breaks and subsidies for decades. Now they are trying to blackmail the Federal Government. Now they want central government support to keep de-motivated workers employed in out-dated factories making mediocre products that no one wants to buy. This sounds just like the worst economic policies of the old Soviet Union that ultimately drove their economies to collapse.

    We have a capitalist free market economy, or so we claim. Let the automakers go through bankruptcy like any other business. Bankruptcy laws were put into place for exactly the kind of situations that these companies face. Say no to Soviet style economic policy.

  • Report this Comment On December 04, 2008, at 5:37 PM, mo55re3 wrote:

    Check out what Hawaii is doing about the oil addiction problem:

    http://www.nytimes.com/2008/12/03/technology/start-ups/03haw...

    Give Tesla the money to build an affordable electric car and put people to work building charging stations all over the country powered by solar panels and wind generators. And ,no the power companies running on coal charging the batteries DO NOT pollute as much as inefficient cars.

    An internal combustion engine is SUPER inefficient. Check out the TRANSPORTATION RESEARCH BOARD SPECIAL REPORT 286 , page 39. A maximum of only 15 percent of the total energy in fuel actually gets to the wheels to move a car. Hybrids like the Prius ( which gets 50 miles per gallon) are way more efficient because they have an electric motor helping. An electric car is WAY more efficient that a gas driven model. From :

    http://www.stanford.edu/group/greendorm/participate/cee124/T...

    (page 7 of 10) The Tesla roadster does 0 - 60 in 3.9 seconds, in contrast the the Porshe turbo does 0 - 60 in 4.2 seconds and is 5 - yes that is 5 times - LESS efficient than the Tesla. The corvette and the Ferrari 550 Maranello are way behind that.

    Bailing out the auto industry as it is will only make the problem much worse.

  • Report this Comment On December 04, 2008, at 11:29 PM, Ender1607 wrote:

    This all seems to be just so typical of the media today, no news is news unless it's negative. The term bailout screaming from the headlines is so misleading it's just sad. How are loans and guaranteed loans a "bailout"? The implied use of the word is that we the people are giving billions of dollars to these companies with no requirement of being paid back. Is that true? I keep reading that these companies are asking for loans, guaranteed by the government. Loans are given only with the expectation that they will be paid back, and Ford did not even ask for the loan, but only asked for a guarantee that if they needed the money, they could then come back and borrow it.

    Perhaps we should let the big 3 go bust, let them reorganize, as non union shops with thousands of folks out of a job, or perhaps we should just put up the white flag and let Honda and Toyota control our auto industry, which I am sure would be just fine with the government of Japan, not that they help their companies out at all. Then again, perhaps it's me, or were sales at Honda and Toyota off larger than Ford's were last month.

  • Report this Comment On December 04, 2008, at 11:40 PM, AMadeMan wrote:

    I think it is the implication, that like there is some blame somewhere to make on them.

    How bout like oops they messed up. We oughta forgive them, so we can keep America's economy employed.

    But even if we don't "give" it to them, perhaps we can do the preferred repayment plan deal? I don't know, seems like money is based on Faith anyways, same as people who have the faith in it too.

    Not that, I'm not jew. It's just slitting our own throats in the future today, to let these companies fail. Hell you could even run a NPV calculation on the gross effects to the economy.

    *shrugs*

  • Report this Comment On December 04, 2008, at 11:43 PM, AMadeMan wrote:

    When you finish running a NPV on the economy, take that same percentage and cut it out of all of your total wealth today.

    Because that is what will happen if these companies fail, every dollar you have invested in the stock market will decrease by whatever the % NPV decreases by in the economy.

    It's simple math. Maybe I missed a step, not to sound arrogant cause I read my text and it does sound arrogant. I just don't see why it wouldn't work like that.

  • Report this Comment On December 04, 2008, at 11:45 PM, AMadeMan wrote:

    Who are you talking to btw, truth?

    You say, "you". who are you talking to specifically would you please Identify your audience cause no offense I can't follow your writing.

  • Report this Comment On December 05, 2008, at 1:35 AM, needsadime wrote:

    c'mon friends.

    100 million jobs lost? 400 million? really? You do realize that there are less than 450 million people total in all of North America, right?

    Most sources I've read estimate 2-3 million *may* be lost. That's two orders of magnitude less than your claims (though admittedly still nothing to shrug off).

    And Toyota is a new startup? huh? Toyota was making cars in the 1930's. They don't have a lot of retirees? (Granted, I have no idea how they are pentioned...) Now, *Tesla* is a startup.

    And to throw my own hat into the ring, it seems to me that the cap. hill plan is a more like a bailout if the 3 can't pay it back (and I'm not yet sure that they can), and a loan if they do. So what you call it probably depends on how you forecast their fate.

    I'm on the fence with the bailout/loan/whatever-you-wanna-call-it, so I'm reading up on opinions where I can. But I have to say many of the larger points I read here do not come across as credible when the "facts" are so, um, not fact-based.

  • Report this Comment On December 05, 2008, at 10:31 AM, socialconscious wrote:

    IMHO there is no doubt the Auto 3 have been lagging in innovation, irresponsible and do not deserve a buy out, however neithier did the banks. It is IMHO elitist to not want to save 3 Million jobs because many of them do not require a college degree.Most of us need cars, mechanics and parts and the people providing these services paid their dues in long hours and trade school. It is disastrous to allow 3 million jobs to slip away. Add that to the present unemployment rate and it would be about 7.5 %. The jobles rate is about 4.7%. If this article was implemented Today's headline would have read Employers cut 3,553,000 not 533K jobs in Nov., most ever not in 34 years.

    Also bankruptcy is not an option. People will not buy autos from bankrupt companies. I have adressed this in my blog yesterday and check CNBC survey today.

    Also Nissan is in deep trouble from Reanault purchase bad choices and latest recall contrary to what this article suggests.

  • Report this Comment On December 05, 2008, at 1:01 PM, letmsink19988r wrote:

    .NO Green in Detroit........ To late.... Decade too late atleast.... Check the site no US car in the list....

    http://www.greenvehicleguide.gov.au/GVGPublicUI/QuickCompare...

    Job banks Getting paid by Ford or Gm or Chrysler just sign in sit around and or go work another job and get paid still from the Big 3 FYI brilliant plan there guys....... You wonder what went wrong....

    Janitor making 150,000 WTF is wrong here.

    Contractors being called in to do jobs that the Union guys should be doing.... But getting paid to stand around and watch.

    Hmmmm a million dollar project really takes 2 million cuz the lazy over paid workers dont wanna work and want Gym memberships and Golf course perks and Red wings tickets etc etc....... I know the people on the inside of all 3 and most are ashamed of this.... How about keeping our plants in the US ..... now there is a good idea.... Looks like the big 3 are in the business of creating jobs in other countries....

    MY bad just looking for the cheapest non skilled laborers...... Great idea....

    These idiots cant even get it right the first time when they have the opportunity to prove to congress and the world that they have the integrity and business savy to PROVE to the world they are SERIOUS in truly trimming the bloat and restructuring the internal of the business mobel...... JOKE at best...

    Sometimes it best that a fire burns down a forest in order to clear away the debris so a new generation of trees plants and wildlife can develop and nurture...

    I really do feel bad for some of the people for being leaches to the system and the fools that made these stupid decisions but they cant stay and repeat this disaster...

  • Report this Comment On December 05, 2008, at 5:12 PM, AriasPalm wrote:

    Yes, Hawaii will be the testing ground for the electric car and stations to recharge the batteries. Republican Governor Linda Lingle has made this possible along with many other innovations. Hawaii also has a huge budget surplus due to her conservative money management practices.

  • Report this Comment On December 05, 2008, at 5:34 PM, wimpy88 wrote:

    I run a small limo company. We use Lincoln Town Cars which average around 22-24 mpg at interstate speeds. We have 1 with 430K on the odometer, tranny was rebuilt last year, otherwise, we do normal maintenance, replace tires and brakes.

    Are we a luxury? If you put 8 people in our standard limousine for our average 100 mile round trip to go clubbing, fuel mileage/person is slightly worse than running 2 Prius sedans. With drunks driving the cars home, we win on safety.

    If I had an option, I'd like to see clean diesels in our fleet. Electrics don't have the long-term viability, costs are too high, and what the hell do you do with the old batteries?

    All three carmakers should be given the option of restructuring, prepackaged bankruptcy, govt guarantees existing warranties, eliminate some of the makes & models, adopt the same labor rules and practices BMW, MB, Nissan, and Toyota are using in the USA and allow them to restrict and eliminate dealerships.

    If you're looking for innovation, provide tax disincentives to consumers like Europe did after WWII. One result was the BMW 2002 developing better than 1 HP/Cubic Inch and delivering around 30 mpg @ 75 mph. Larger cars and/or engine size was subject to a higher tax..

  • Report this Comment On December 05, 2008, at 6:32 PM, Moveoverrover wrote:

    I have been bottom fishing in the market for a while. I was buying back in much too soon and can make no further purchases. Last one was yesterday.

    If I gazed into a crystal ball and saw that one of the big three was going to collapse (it is all or nothing - I would not buy a car from a company in chapter 11) then I would sell nearly every single USA stock that I own.

    Banking could easily have been outsourced. The Welfare on Wall street is already in the trillions. The $34 billion to the big three is peanuts compared to the bill that would be dumped on the doorstep of taxpayers if the big three collapse.

  • Report this Comment On December 05, 2008, at 6:47 PM, flyerd wrote:

    Someone who doesn't want to spend "a little" money on new brakes might decide against slamming on the brake pedal iot avoid hitting a100ft oak tree in front of them but would that be the right decision?

    The cost of the "brakes" is the equivalent of providing money to the auto makers and the oak tree is what's waiting if they let them go under (including the impact on jobs in the related industries like auto parts, steel, shipping, advertising, sports, media, etc. Don't forget the compounding effects of having to pay for all those unemployment checks and welfare costs either.

    Additionally, greater foreclosures would compound the impact on the financial co's by further lowering the value of the MBS's on their books and "by default" increasing their leverage ratio's which leads to a need for "MORE capital" iot "reduce" their leverage again.

    That, my friends, puts us right back to where we are now (only in a worse position and after a cumulative cost of about 10-20 times what the auto co's want...

    Spending a "relatively" small amount on the brakes is a much better option than hitting that tree and having to replace the whole car in addition to all the medical costs for the passengers inside)...

  • Report this Comment On December 05, 2008, at 8:10 PM, redkat103 wrote:

    Some people sound a little envy. We are GM workers.

    We earned our pay.What got us here this day is cars not made here. What about all these little company's

    that are selling MADE IN CHINA, KOREA, AND SO FORTH. I'm am so mad at you so called Americans for Americans. Who do you think is screaming the loudest about jobs going to Mexico China? We have been warning our families friends and strangers for years BUY AMERICAN.Next you will be buying your cars at Wall Mart.So just keeping talking about what you know because that's what in the know people do (Blow Air)

  • Report this Comment On December 05, 2008, at 8:13 PM, redkat103 wrote:

    BTW wimpy88 you are just repeating a Senator on today's hearing

  • Report this Comment On December 05, 2008, at 8:50 PM, nerd1951 wrote:

    For those who blame the auto workers and the unions, check this out from the WSJ:

    "The union's relationship with the auto makers has changed significantly during the past few years. The Big Three combined have closed dozens of plants and slashed their payrolls. GM now employs 93,000 salaried and hourly workers in the U.S., roughly half as many as in 2002. Under the labor contract signed in 2007, the auto makers can pay new hires $14 an hour instead of the $26 that current workers get. New workers also get 401(k) retirement accounts instead of life-long pensions. Some union work, such as janitorial and parts-delivery work, can be outsourced to service companies paying lower wages. Analysts believe the changes will bring the average cost of union labor to less than $50 an hour by 2010 or 2011, in line with Toyota Motor Corp.'s labor costs. The Harbour Report, a closely watched scorecard of auto-plant productivity, earlier this year found that in 2007 the average per-vehicle labor costs for the Big Three in 2007 was no more than $260 above Toyota's."

    Thats at:

    http://online.wsj.com/article/SB122723654355647077.html?mod=...

  • Report this Comment On December 05, 2008, at 8:54 PM, nerd1951 wrote:

    As a follow up that labor cost of $50/hr. includes paying the pensions of retired auto workers who outnumber the working auto workers.

  • Report this Comment On December 05, 2008, at 9:38 PM, redkat103 wrote:

    BTW wimpy88 you are just repeating a Senator on today's hearing

  • Report this Comment On December 05, 2008, at 9:40 PM, redkat103 wrote:

    why was my post removed

    ????

  • Report this Comment On December 06, 2008, at 8:59 AM, MURRAYSC wrote:

    I believe that anyone who honestly studies the histories of previous financial crisis will conclude that full employment oportunities have rescued our country countless times. The civilian jobs created by FDR (such as the WPA) in the early 30's started the recovery from the Great Depression and the armament jobs of WWII was the key to ending it completely. There was no large giveaway of funds to banks or investment companies. It was Jobs,Jobs, and Jobs that did it. Once there are sufficient, well paying jobs, people will buy homes, purchase cars, send their kids to college, and get industry growing again.

    So, if money is needed to end the current crisis, It must be applied to both creating and saving jobs.

    It is almost humorous to see our congess, which is the most corrupt and innefficient group of people ever assembled in a single location, dictate fiscal responsibility to american industry.

  • Report this Comment On December 06, 2008, at 3:36 PM, kazwins wrote:

    nerd51 "If you look at Detroit and the surrounding areas of Michigan today you can see the same kind of decrepit discouraging landscape." I don't think your statement is fair nor correct. The auto business had nothing to do with the landscape of the city of Detroit (read up on Mayor Coleman Young someday if you want to learn about Detroit). Unless you've lived here you wouldn't know so don't make general statements like that. I've lived here my whole life (50+ years) and take exception to your statement. Michigan is a beautiful state!! At least it is for now. If the auto industry closes shop here it'll take years to knockdown the remains of a ghost town.

    p.s. when's the last time you've been inside of one of the plants of the Big 3 - or Toyota's for that matter? If someone blinded you till you got inside, you wouldn't know which one you were in save for the vehicles going down the line.

  • Report this Comment On December 06, 2008, at 6:55 PM, mike0804 wrote:

    It's sad. I've been watching Detroit, as we all have, getting its lunch eaten by Japan and Germany for years. Unions blame Management, Management blames Unions. There's probably plenty of responsibility on both sides.

    Meanwhile, cool companies like Tesla quietly do their thing. Recent history has taught us (well, most of us) that innovation and creativity are what is required to survive in the 21st centry. Detroit doesn't seem to get it. For example, Ford recently released the Flex. They actually spent R&D funds on this thing. It gets 17mpg. Meanwhile, Toyota is working on the 2nd gen Prius and Honda is about to release the new Insight.

    So what's the argument for bailing them out? And if we do, doesn't it look like they will go under anyway 6 months or a year from now? Billions have been lost already. Why throw good money after bad?

  • Report this Comment On December 06, 2008, at 11:26 PM, Clint35 wrote:

    I think a lot of people are missing the point when it comes to this issue. The question shouldn't be whether or not the big three can or can't survive without a bailout. The question shouldn't be how many jobs will be lost if they go under. The question is; when did uncle Sam become a bank? Why has uncle Sam become a bank? Why have American businesses stopped operating under truly competitive capitalistic ideas. Ideas like, the best product wins. The best companies that make the best products win. The companies that make the best products and make the most profits while doing so, win. We as taxpayers should not have to bail any company out. No matter how cruel it may seem. No matter what the effects on the economy might be or how many people might lose their jobs. If the big three or any other company can't make it on their own they should be allowed to fail. That's what capitalism is about. A lot of small business owners who go it on their own don't make it. They end up going out of business in a year or less, during bad economies or good. None of them ever get a bailout and none of them should. The few that do make it get bigger and stronger and some turn in to huge profitable, admirable, companies. All of the big profitable companies of today that we admire and invest in were once small businesses which never needed a bailout/handout. Bailing out the big three is not capitalism, it's protectionism. Let them fail!!!

  • Report this Comment On December 07, 2008, at 7:06 PM, redneckdemon wrote:

    If you want people to buy american, you have to produce a quality product at a competitive price. If two cars cost the same, and one of them get 10 or more MPG better than the other, guess which one I'm going to buy? It dosen't freaking matter where it was built. That whole "Buy American or you are a Stinking Commie!!" tripe is not surpirsing coming from an employee of such a company.

    And the bail out might be a loan, but if they decide not to pay it back, what are you gonna do, fine em?

    And why do people think these guys are going to go straight to the slums if they lose their jobs? They had to learn a skill to get that job, and I highly doubt it is a skill ONLY relevent at the big 3. It ain't that freaking hard to learn a new one, either.

  • Report this Comment On December 08, 2008, at 5:07 PM, jzeffer wrote:

    As long as we are in a restructuring atmosphere with the economy finding it’s true values, I say: Do not bail out the Auto Industry. The quagmire is clearly reflected in the overpaid union workers all the way up to the big shots who are giving a stupid pretence of taking $1 a year salary. All they want to preserve is their big stock benefits that I am quite sure will be cashed out as soon as the bailout funds are received. Or as soon as it is politically correct to take their millions (Billions?) of dollars out of their companies leaving the government and taxpayers holding the proverbial bag.

    Yes, let it fail and let it happen now while we are still in the economic doldrums. Necessity is the mother of invention and I feel that the American economy will rebound with newer developments that are Greener and more conducive to the changing world that the Auto Industry has ignored over the past 20 to 30 years.

    I am sick and tired of OPEC determining what we should pay to support their lifestyles, and I am sick and tired of new ideas of technological benefit to the world being stuffed into a sack in order to maintain the status quo and political pork barrel promises made to elected officials. This is something I desperately hope the new administration will continue to deliver and maintain for at least the next four years.

  • Report this Comment On December 09, 2008, at 11:01 AM, 4for1 wrote:

    The Big 3 need to do what they must to get out from under the strangle hold the unions have on them. The benefits the members recieve are not on par with the education level and skill set required to recieve such benefits in corperate USA today. I worked a union job while in college and I can say from experience that the mind set is one of "entitlement" from the hierarchy of the particular union I was in, this needs to change, but now we enter a whole different realm.

  • Report this Comment On December 09, 2008, at 3:52 PM, kyddfool wrote:

    None of you (young fools) seem to get it. Our country is not responsible for companies that fail. Do you think for one minute if you had a business and it failed, anybody would come to your rescue? Don't throw good money after bad. Would YOU INVEST in any 3 of these car makers?

    Let the people who work for those companies sacrifice to save them; cut their salaries, invest their time, sacrifice, and read the book on how United Airlines and others who did just this - saved their jobs and companies!

  • Report this Comment On December 09, 2008, at 5:28 PM, hookman02 wrote:

    Lets call it a bailout and then once the money is repaid with intrest, then we can reclassify it as a loan.

  • Report this Comment On December 10, 2008, at 4:48 PM, kamuirei wrote:

    kyddfool - I think you've got it backwards... most of us whippersnappers have no problem with seeing the big 3 die. We have the least to lose. In our lifetimes entire new industries have risen up from the garages of college drop outs. Our experience is that innovation and creativity are what lead a company to be successful.

    This nation is one of the most diverse, creative and innovative in the world. America will not become some third world country, we will however have to accept the burden left to us by the previous generation.

    To the "buy American" crowd: America was not built on protectionism. It was built on hard work, determination, ingenuity, sacrifice... competition is essential to the free market. You argue for American products at the expense of American ideals.

    Who is more American then, someone born here; or someone that left their home, moved here in search of the American dream, and works 3 jobs to support his children's education? You complain about them not being able to speak our language! That's because they work from day till night! Their children will be the leaders of the next generation. I am a teacher, trust me when I say that immigrants and their children embody the American spirit. And their parents... are the most thankful for the opportunity and American education gives their children.

    It is not Walmart, not Toyota, not China that threatens our standard of living, but our sense of entitlement. If this does not change, the big 3 will fail, no matter how much money the government throws at them.

    Borrowing someone else's metaphor: once the forest has been cleared, then we'll see new growth.

Add your comment.

DocumentId: 787204, ~/Articles/ArticleHandler.aspx, 4/20/2014 5:30:19 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement