To bailout, or not to bailout

[Buffy]

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...

Sigh.

 

This is the throw the baby out with the bathwater strategy: "Big companies! Evil! All their own fault Die! Die! Die!"

 

Over-simplistic solutions like this are exactly what the Republican's are famous for, which is why they are pushing against bailouts. They know they sell, its just that the reason they're pushing them now is that they want the economy to fail, so that they'll be able to win the next election cycle.

 

Realistic approaches to this problem recognize that letting GM "fail" causes a cascade effect that destroys not just one company, but an entire industry.

 

Arguing that GM should be "bailed out" absolutely does *not* mean "we forgive you, here's as much cash as you want so you can keep doing things the same way," it's putting them on notice that they're being given a chance to prove they can actually change. But most importantly, they get that chance only because having a Tesla start over from scratch to build the next GM is simply fantasy if you expect the US to have any part in the global auto manufacturing business in the next 20 years.

 

So....

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.

...if you think that this slump will last 20+ years, and there are no markets we can sell to other than the US, then sure, you're probably right.

 

You might want to ask yourself the question though, why countries like Japan, Germany, France, China and India are doing everything they can to support these "dinosaurs" at the moment. Are they fools?

 

Are we the smart ones because we let these gigantic investments undergo uncontrolled implosion rather than a more orderly sequence of bailout, nationalize, breakup, sell off assets if it comes to that, or perhaps a quick recovery if the stock holders get the chance to weed out the idiots at the top?

 

It's absolutely clear that the incompetence that's been shown is scary, but its a *symptom* of the inbred management that's been allowed to fester with the dramatically decreased amount of oversight--both internal and governmental--that we've seen over the last decade. It's something that we all can and should be indignant about. But saying that startups are somehow perfect and untainted and won't succumb to the same idiocy just isn't true: I've been there.

 

"Big companies" are not the problem. Lack of oversight, foolish investing and--as I've said before--elimination of competition by the virtual elimination of anti-trust and anti-competitive government oversight, are the real problems.

 

You could be right, but put yourself in Obama's shoes and try to forget for a moment your well-justified (if not, in my view, well-targeted) anger: Are you willing to bet that by letting GM, Chrysler and a good chunk of the parts industry have to shut down over night, and cascading into Ford, Toyota, Nissan, VW and countless other manufacturers shutting down because the same suppliers they share with GM and Chrysler simply can't supply them any more.

 

As Craig said earlier, you can make a bet that this won't happen, but it's a judgment call that should not be lightly tossed off as so many who pontificate on this debate seem to do.

 

Haste in every business brings failures, :lol:

Buffy

[Buffy]

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

Which is why, if pushed on my position, I advocate having the government take stock in order to force management changes and a stated strategy of breaking up the company into logical separate companies.

 

No, if you leave all the same idiots in place, nothing will happen. This is why the bank bailout was so boneheaded stupid. Likewise, I supported that even without the necessary qualifiers because the collapse of the financial markets--a real equivalent of 1929--really did almost happen.

 

Just because the last one wasn't done right doesn't mean "don't even try because they're all Bozo's and it'll never work."

 

Doing nothing is never a plan. Even if you're going to "do nothing" you should have a plan for what you do after that.

 

If you don't know where you are going, you will probably end up somewhere else, :lol:

Buffy

[C1ay]

When debt is the problem you cannot fix it by trying to borrow your way out of debt.

[Buffy]

It's also been scary but quite amusing to me that the folks on both the left and the right want GM to collapse "on principle," but the folks who are middle of the road want things to be done to limit the pain, no matter how ugly the result is from a theoretical viewpoint....

 

Oh, what a tangled web we weave when first we practice to believe, :lol:

Buffy

[CraigD]

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....

Indeed.

 

And while the Tesla remains a very cool and sexy sports car, it’s more of a packaging of decades old electric car technologies and a Lotus Elise chassis, and a good read of a niche market, than technological innovation. In all fairness, Tesla Motors doen’t even exemplify technical competence, having failed even to successfully deliver a working two speed transmission in the Roadster.

 

I can’t help but think that our culture has become infatuated with a superstitious belief that private industry under its own management and spurred by competition, can develop technology more effectively than well-directed agencies such as the 1960s NASA, wonder how well and quickly a Apollo project-like national program could develop plug in hybrid and pure electric vehicles to be manufactured by US factories, rather than the US government’s recent policy of unmanaged, effective no-strings-attached grant to industry to develop these technologies independently, wonder if such a program is planned, or if it is not, whether an policy blunder of unprecedented magnitude is being committed.

 

I also can’t help but be alarmed at the disagreement between this thread’s current poll result and US and to some extent world economic and technological policy.

[C1ay]

I can’t help but think that our culture has become infatuated with a superstitious belief that private industry under its own management and spurred by competition, can develop technology more effectively than well-directed agencies such as the 1960s NASA, wonder how well and quickly a Apollo project-like national program could develop plug in hybrid and pure electric vehicles to be manufactured by US factories, rather than the US government’s recent policy of unmanaged, effective no-strings-attached grant to industry to develop these technologies independently, wonder if such a program is planned, or if it is not, whether an policy blunder of unprecedented magnitude is being committed.

 

I think vehicle development, be it private or not, is a small part of the problem of accomplishing the dream of converting our transportation infrastructure to an electrical energy source. If one calculates the amount of chemical energy currently used across the nation from petroleum fuels to find the amount of electrical energy that would be required to replace it they will find our electrical generating capacity and the distribution capacity of the power grid is but a tiny fraction of what it would need to be. The average megamart fuel station today would need to be a mini-nuclear facility to charge the same numbers of cars they see today with an equivalent amount of energy as they currently get with a fillup of gasoline. FWIW, I see this infrastructure as less likely to develop in a reasonable period with private investment alone.

 

Moderation note: 12 posts beginning with a reply to this post were moved to the Engineering and Applied Science thread 18651, because they are a discussion of electric car and electric power engineering, not a discussion of the pros and cons on government bailouts of businesses.

[Michaelangelica]

I voted "no" because I am angry that so many crooks, bad (managership) and extravagant CEOs, people with extravagant salaries, bonuses and parachutes, are being a get-out-of jail free card; when they have ruined so many lives and so many futures. They are parasites.

 

Many people reaching retirement age in Oz find they either have no superannuation or it has been cut by 50% or more. After putting aside 10% of their salary in Super Funds all their lives. Young people look at this and think- why bother with superannuation? (compulsory in 90% of jobs).

 

If a company gets bailed out, I would like every citizen to receive some (equal number of) shares in the company.

Otherwise the government should buy control of these mavericks.

 

BUT anger does not solve an economic meltdown of this magnitude;

pragmatism, and the 'ends justifying the means' will, no doubt, win out.

I do doubt, in fact, that anyone, government included, has the money to bail out all the rickety corporations.

Here, the problem is even good companies with fantastic assets, and future sales contracts cannot re-finance their operations. The banks just aren't lending. This in itself will cause a crash.

 

Meanwhile banks like Westpac bask in the praise of the "safest bank around."

The Federal Reserve Bank has cut interest rates drastically but the banks refuse to pass all of it on. They say they have to make provision for "bad debts" and can't afford to cut interest rates. Bad debts they might be creating with their refusal to lend and reduce interest rates for" home-owners" and consumer finance.

 

Meanwhile, also, PM Rudd has gone out on a limb to government guarantee ALL Bank and Credit Union deposits.

This has had good and bad repercussions. Mutual funds (usually involved in construction, 'making things' generally & mostly the only source of anything vaguely like Venture Capital here) are collapsing, as money is withdrawn from them and dumped into bank accounts earning 3% interest. (While the banks charge 11-19%)

 

The only place resource companies can get finance is from China and the Chinese, being sane capitalists, want to own assets (see Australia thread), not just bankroll them.

Rudd has just bailed out GM Australia;

still they are laying people off.

Many smaller companies, who make parts for them, are going to the wall.

Will the USA see the same after govenment bailout of GM et al?

There is not a lot of point making cars if people won't buy, or can't get the finance to buy them.

 

BTW 1

What happened to the stock exchange guy who made off with 50 BILLION (4% of Australia's GDP in a good year!!). I believe he has disappeared?

 

PS- a random particle of thought.

I sometimes wonder if the crack down on the many trillions in secret off shore accounts(recently by Brits. and USA) has not led to the weakening of some currencies like the pound. One trillion ($s ?, pounds?) used to be kept in British pounds.

I believe Monaco is the latest to set up "banking services" for the super-rich.

[Buffy]

As for our auto industry, everyone recognizes that years of bad decision-making and a global recession have pushed our automakers to the brink. We should not, and will not, protect them from their own bad practices. But we are committed to the goal of a re-tooled, re-imagined auto industry that can compete and win. Millions of jobs depend on it. Scores of communities depend on it. And I believe the nation that invented the automobile cannot walk away from it.

 

Capice?

 

The market can stay irrational longer than you can stay solvent, :)

Buffy

[C1ay]

I'm still of the opinion that the automakers situation is exactly the kind of situation our bankruptcy laws were designed for. Why circumvent them?

[Buffy]

I'm still of the opinion that the automakers situation is exactly the kind of situation our bankruptcy laws were designed for. Why circumvent them?

 

The primary difference in my mind is that going straight to Step 2: Bankruptcy is controlled exclusively by the company to the benefit of their shareholders. We're in a situation where the benefit that we're all concerned about is that of the industry specifically and the economy as a whole.

 

The nice thing about the Step 1: Bailout is the transfer of ownership (partial) and control of board seats to the people who care about these larger issues.

 

Note that GM still has the right to skip this Step 1: It's still a free country and an open market. Government is not *forcibly* nationalizing these key corporate players, but doing so at their behest.

 

While there's quite possibly some unrealistic idea on the part of GM's management that they'll all get off scot-free, I'll give them the benefit of the doubt and give them some credit for doing the right thing and making it possible for GM to get restructured under something considerably less than "fire sale reorganization" which is what bankruptcy is so often about.

 

If you want to see what I mean, look at United Airlines: they used bankruptcy to break their union contracts, but they didn't really *restructure* because the same board didn't want to rock the boat. With the US owning 60% or 80% of GM or AIG, it's doubtful that the outside folks that will be brought in will allow such "change-with-no-change"...

 

If we don't change direction soon, we'll end up where we're going, :)

Buffy

[goku]

i wonder what our fore-fathers would do?

i think lincoln, washington, etc. would have discharged a lead ball into the heads of the bankers and auto makers the same instant they asked for government help.

 

if the Lord waits long enough, if i live long enough, i'll tell my grandchildren what it was like to live in america.

 

none of us can begin to fathum the distruction the government is sowing. bailout?????

i heard some idiot on the news the other day say that the people have lost faith in free market.

 

does anyone really accually ohnestly think that senators, congressman, representatives, democrats, republicans really accually ohnestly care about anything other than getting re-elected? making more money? i don't.

 

america is dead. it's gone, that's it. soon we'll be a dictatorship, or worse. it will happen the same way the bailouts are happening, "the govt. must act to save the economy", "we must have a dictator to save the economy" or to "save the planet"

 

those are my thoughts, and i've never seen a time when i've wanted to be wrong, greater than i do now.