To bailout, or not to bailout

[goku]

should gm or anyone be bailed out?

without any doubt, no

 

is someone going to bail me out? absolutely not

[Zythryn]

Depends on the form and effectiveness of the bailout.

In GM's case I would say no as the business is not viasble (IMO).

Perhaps a bailout in the form of providing money so they can restructure in chapter 11.

But I am afraid that any money given to them is just going to delay the inevitable and every month or so they will ask for more money.

[Buffy]

Actually as of today, if you have the right parameters, you'll get bailed out on your mortgage. As of Monday, there might be a bunch of new jobs in the near future that weren't going to happen, and fewer other people competing to get them.

 

Sounds like a bailout for you!

 

Most Republican Governors are dying to get that stimulus money, and some--like Charlie Crist and Ahnold--even lobbied for it....

 

GM is a classic example of "too big to fail"...but you know what made all these companies get to the size where they were too big to fail? A massive push by conservatives to quash all anti-monopoly action by the government.

 

That's right, if you really want a "Strong Free Market Economy" where its easy to let companies fail when they screw up then you can't let those markets dwindle to a handful of players, who the *country* can't afford to let fail.

 

Democracy is the theory that the common people know what they want and deserve to get it good and hard, ;)

Buffy

[CraigD]

I find myself sharing the opinion of a minority, the majority of whom I disagree with about most other issues.

 

I’m pretty close to a pure “tax the rich/feed the poor/’til there are no/rich no more” socialist. However, I’m opposed to the Congress and the President’s current resolve to keep as many companies solvent and as many people employed as possible by, essentially, borrowing on the credit of the United States. In this regard, I’m socially and economically laissez-faire.

 

I believe that the present US, and to a similar extent, other industrialized nations’ economic systems are the result of dramatic growth of mortgage banking that began around the year 1950, resulting in a dramatic reduction in average per-person savings and increase in debt. This, in turn, has had the effect of making the majority of people debtors, and a small minority, creditors. I believe this has had a broad and profound bad effect on the wellbeing of individual and society.

 

Therefore, I disagree with the position that preserve this economic state is a good idea, or that its collapse would be a humanitarian catastrophe. Its collapse would, I agree, be chaotic and uncertain, but I believe that it would be survivable, and ultimately beneficial to the majority of the world’s people.

[DougF]

I voted NO:

I think it should be broken up and sold off, too big to fail? it should be smaller shops owned by smaller companies then it would be just the fender man filling chapter 11.

 

Although building Roads and Bridges to put the working class back work is a good idea. IMHO

[Zythryn]

The questions of 'should GM be bailed out', 'should banks get a bail out' and 'should homeowners get bailouts' really are different questions.

 

In my opinion, you need to ask:

1. Will the bailout result in short term economic growth (job creation/preservation)

2. Will the bailout resul,t in long term economic growth

3. Will the bailout result in improved standard of living.

 

In GMs case the answer to number 1 MIGHT be yes. The other two most likely no.

Helping people stay in their homes doesn't grow the economy so much, but it does prevent a lot of further damage to it that results from forclosures.

Additional infrastructure can create a whole bunch of jobs and give us improvements to our infrastructure. Huge Win-Win if you ask me.

[Buffy]

While I certainly like the idea of failures failing and the uncertainty that Craig alludes to above making any decision one with no clear answer, I do come down on the side of being concerned that making the conscious decision to allow the failure of our auto industry could be a significantly detrimental strategic setback to the US's manufacturing as a whole.

 

In a new book "Why GM Matters: Inside the Race to Transform an American Icon" http://www.amazon.com/Why-GM-Matters-Transform-American/dp/0802717187/ by William J. Holstein makes several arguments about why GM's recent technology moves are actually fundamental to our leadership in the Green Economy. Here is one discussing the development of lithium ion battery technology:

Not enough Americans understand why General Motors’ effort to develop the Chevrolet Volt with a lithium ion battery is so important. Here’s why:

 

Alliance Bernstein estimates that lithium ion batteries could be a $150 billion a year industry by 2030. It is a new industry waiting to be born. It’s a perfect example of the so-called “green industries” that President Obama says he wants to see in America.

 

But right now, the Americans are lagging behind Japan, China, South Korea and the French in developing these batteries that are considered more efficient and longer-lasting than previous generations of batteries, such as the nickel metal hydride battery that is in the Toyota Prius.

 

GM has invested $1 billion so far in this battery project and has tapped LG Chem, a unit of the LG group of South Korea, to develop a particular variety of the lithium ion batter. LG will make the battery cells in Korea and bring them to Michigan where they will be packagd into systems that can actually be built into the Volt.

 

It’s true that the Volt will be relatively expensive when it comes out by the end of 2010—somewhere in the $35,000 to $40,000 range. But what GM hopes to do is introduce the lithium ion battery into other models and into other geographic markets like China so that it can drive down the costs. It’s much like gearing up the semiconductor or flat panel display industries. Once you can achieve scale, you can drive costs way down.

 

If GM can get momentum with the lithium ion battery, it’s likely that more and more of the “value added” elements of making the batteries will end up on American soil. This is great from many different perspectives—it creates jobs, it eases our dependence on foreign energy sources and it will diminish emissions....

 

That’s different from the way the Prius works. It has a gasoline engine and a battery-powered engine. When you accelerate the vehicle, the gas engine is doing the work. But when you are idle, or when you are coasting or braking, the battery takes over. But it is not possible to operate the Prius in the battery-only mode for any extended period of time. This difference in how the Volt is equipped is another part of the breakthrough that GM is on the verge of achieving.

 

This is another element of why GM is important to America’s future. If the government forces GM into bankruptcy or other downward spirals, the Volt program almost certainly would be delayed—and with them, America’s hopes for being a player in the lithium ion future.

 

An interesting excerpt (from which the above was drawn) and discussion can be found from emptywheel at Firedoglake.

 

Many of the arguments against bailing out the auto industry--and indeed also against some of the Buy-American provisions of the recent stimulus bill--ignore the fact that other countries are very actively subsidizing their manufacturing industries. Japan--the only country that has really challenged the US in automobiles in spite of the US's supposed foolishness and weakness--heavily subsidizes all R&D expenditures by Toyota, Honda and Nissan. GM gets all it's R&D funds from those SUVs and Cadillacs.

 

While Richard Shelby (R-Alabama) has been somewhat disingenuously working against the GM-Chrysler-Ford bailout--his state has more factories from foreign than domestic car manufacturers--if GM brings down the auto parts industry with it--something that is highly likely due to the very tight supply-chain management that we stole from Japan--it won't affect Toyota or Nissan, which unfortunately it will.

 

As always, politics is really all about the law of unintended consequences.

 

Be careful what you wish for...

 

If these be motives weak, break off betimes, and every man hence to his idle bed; so let high-sighted tyranny range on, till each man drop by lottery,

Buffy

[Zythryn]

Oh no argument that the concept GM is working on bringing to market is a good leap in technology.

But as far as the US being a leader in this technology, well I think we would actually advance it more quickly giving more money to Tesla and Aptera.

Unfortunaately those companies can't produce in numbers like GM or Ford could (at least not for some years, if not decades).

If GM had held the lead in technology it had with the EV1 and built on that, I believe we would not be needing to contract with a South Korean company for the batteries, but would have that industry here in the US.

All that said though, GM's biggest issue in my eyes is that they can't make money on small vehicles because of their legacy and health care costs.

The only way I see for them to get out of that situation is chapter 11. Which the bailout simply delays, but I don't think it will prevent it.

[freeztar]

So, MI says were f***ed, and all of us bend over?

 

Ouch!

[CraigD]

So, MI says were f***ed, and all of us bend over?

Who or what's MI?

[freeztar]

Who or what's MI?

 

Sorry for the vague (and pointed) reference.

MI=Michigan

 

In hindsight, it's not an accurate statement as assembly and distribution does not equal total manufacturing. GM's parts come from all over the country.

 

I suppose my comment came more from immediate frustration rather than deliberate consideration. As Buffy pointed out, it's easy for special interests to lobby for the caboose and engine while ignoring the rest of the train.

[DFINITLYDISTRUBD]

Depends on the form and effectiveness of the bailout.

In GM's case I would say no as the business is not viasble (IMO).

Perhaps a bailout in the form of providing money so they can restructure in chapter 11.

But I am afraid that any money given to them is just going to delay the inevitable and every month or so they will ask for more money.

So basically what's already been going on with GM and Unca Sam for years now...Throwing good money after bad is bad enough....throwin borrowed money which will be taken out of my pocket at gun point for the rest of my natural life is much much more despicable....and no I don't feel any sympathy for the workers and execs that have strangled nearly every bit of life out of their companies...."I'd rather work than join a union"-D.d-

 

 

:phones:and ya can't get blood from a stone:phones:

[Buffy]

The only way I see for them to get out of that situation is chapter 11. Which the bailout simply delays, but I don't think it will prevent it.

Well, that would solve GM's problem, but we'd then have all those retirees on welfare and with no insurance, and that comes straight out of the taxpayer's pockets.

 

These pension plans are funded though, and I think that the direct cost to GM's operations is just another wingnut talking point. The consessions the unions have made (including those in the latest plan GM submitted to the government) make them just about in parity with what Toyota and Nissan pay their US factory workers.

 

No question investments in Tesla would be a good idea, but that's coming from the alternative energy initiatives, and more importantly, if they go anywhere, it's going to take implementation by a big player like the Big 3 in order to result in world market leadership.

 

My overarching point though is that the US is going to be a dying economy if it lets its manufacturing leadership completely dissipate. We can't survive as "the place where the senior management outsources everything to other countries, and the locals all work at McDonald's and do repairs the Mercedes dealership."

 

So much of what we call management consists in making it difficult for people to work, :lol:

Buffy

[DFINITLYDISTRUBD]

We can't survive as "the place where the senior management outsources everything to other countries, and the locals all work at McDonald's and do repairs the Mercedes dealership."

 

All the more reason to look to startup companies instead of large corperations.

[Buffy]

All the more reason to look to startup companies instead of large corperations.

Having spent most of my career in startups, but also with a few big companies, I can tell you that the management that the VCs bring in can be just as brilliant or just as idiotic as the folks running the big companies.

 

What makes a difference is that one does not build the infrastructure to support a billion-dollar manufacturing line overnight: the only way to do it is to bring in the big boys when you need them.

 

Don't kid yourself into thinking that if we just gave Tesla enough money they could beat Toyota to market...its a nice fantasy when the little guys come in and win with nothing more than gumption, but unfortunately it happens rarely outside of Hollywood....

 

Instead of thinking about where you are, think about where you want to be. It takes twenty years of hard work to become an overnight success, :lol:

Buffy

[DFINITLYDISTRUBD]

What makes a difference is that one does not build the infrastructure to support a billion-dollar manufacturing line overnight: the only way to do it is to bring in the big boys when you need them.

It's the big boys that are a huge part of why we're in this mess...and I still believe its time to invest in small business and let big business either sink or swim on its own merits...as a nation we don't need billion-dollar manufacturing overnite...that would only create yet another floundering company struggling to survive because it's intended market aint got the money to purchase it's products in enough volume to sustain it.

[Zythryn]

I don't disagree with your point that we will be in a world of hurt if our auto industry goes under.

Where I differ, is that GM, IMO, will go bankrupt anyways.

The differences will be that if we keep shoveling money at them...

A. They won't learn a thing

B. Our representatives won't be able to muster the political strength to provide yet MORE money to finance chapter 11 restructuring forcing GM into chapter 7 illiquidation (which will hurt far more than chapter 11).

C. We will be much more in dept and have much more debt of GM's to pick up.

 

Right now, I believe the politicians could put together a bail-out fund to finance GM restructuring. It would still hurt, but not nearly as much.