Political Discussions
GM - Which one of these 4 options should the Gov't Take?
Posted by davidckaplan • 11/17/08 • Subscribe to this Discussion [RSS] • Report This Topic
Topics: gm bailout shelby obama lame-duck levin michigan gop
Option 1--If the lame duck session of Congress passes a bailout package, and GM Recovers, the Dems have an issue to beat the heck out of the GOP with. The Upper Mid-West is Blue for the next 3 elections, minimum (that includes Ohio, Indiana, Wisconsin, Michigan, Minnesota--68 Electoral Votes, last time I counted...)
Option 2--Congress bails out GM, the company does NOT recover, and the taxpayers revolt against a Congress that wastes our taxpayer money on lost causes such as GM. The upper mid-west craters, and probably turns Red.
Option 3--Congress does NOT bail out GM, and GM dies a painful death, and most of the upper mid-west blames congress, but probably disproportionately Republicans. President Obama spends most of the rest of his Presidency trying to figure out how to implore other Automotive companies to hire workers in the Upper Mid-west. A debacle.
Option 4--Congress does NOT bail out GM, the company dies, and Toyota, Honda, or others pick up most of the slack. Unemployment does tick up, but Conservative philosophy proves to be a winner, and the mid-west continues to be a force for automotive production. The Upper Mid-west goes whole-heartedly Red for a generation.
For more background into this see... www.pragmaticpundit.com/2008/11/gm-debate-could-decide-some-ideology.html
User Comments
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I do not think Congress needs to really do any of these. If the government really wanted to do something to help out the automakers they would break the stranglehold the unions have on GM and Ford. These companies are being forced to pay pensions they cannot afford because they were negotiated without a long term view in mind. The contracts were agreed upon while the car industry was doing well, selling mostly SUV's in the earlier part of the decade. Now that the industry is obviously not doing well, the companies cannot afford such high pensions and other labor costs. The government needs to force the unions to give into the fact that GM and Forc simply cannot afford everything right now. If the unions wanted too, they do not have to give in to anything, but then they won't have any jobs.
Unfortunatly, this will never happen because Pelosi is a partisan hack who is going to run Obama's presidency into the ground before it even gets started. Pelosi is going to want another "bail out" package with money the government does not have. So I am going to go with option 2. -
Who cares about the electoral politics of this? It's about the economy.
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I also think that there is a more likely option.
No bailout, company restructures and through the restructuring, can renegotiate their deals and thereby break the UAW chokehold on them.
Besides, if toyota, honda, Tata or any other company buys, there is no guarrantee that they will stick in an area that is so heavily unionized. In fact, i'm pretty sure that they wouldn't. Just bad business to pick an area where the workforce is geared against you to begin with. -
Management at GM is clueless, but do we let them go under at a time when the economy is hemorrhaging jobs? We should give it to them as a loan, with a stipulation they restructure to the company to one that's more competitive. While unions and pensions cost GM a lot of money, that doesn't explain why people aren't buying their cars. They're not buying because their cars are crap compared to Japanese cars.-
People buy crap cars all the time. But they have to be cheap.
GM through the unions are producing crap cars at premium prices.
Edited to add, There is a sign at the local repair shop that is great and sums it up perfectly.
"You can have any two, but never all three.
Fast - Cheap - Good" -
That's right. When I was shopping for a new car a few years ago, I test drove an Impala. While it looks like a modern car, it drove like something from the '70s. Plus it was only a few grand less than the Accord, which I ended up buying.
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would you have considered the impala at 30% off?
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I might have considered it more, but I probably still would have went with the Accord. You never have buyer's remorse with a Honda.
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We'll thats not true... YOU might never have it. I sure did when i got a Civic a long time ago.
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If you had a really old one, like from the late 70s or early 80s, they had problems with the oil seals. But I had an '86 Prelude and put 250k miles on it before it started to fall apart. I had another Accord before this one and got rear ended in a construction zone on the highway by a Chevy Suburban. The car was totaled, but we didn't get a scratch.
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What do you think about the issue raised that a Chapter 11 will cause a Chapter 7, because nobody will buy a car from a company in bankruptcy?
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I Think that it is normally true. But with the coverage that is given to this whole event, i'm pretty sure that enough people will understand that the company is not going away, but it truly in a restructuring process.
I'm also certain that there is enough hard core Ford/Chevy people out there that they won't be going anywhere.
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I'd hope they don't go bankrupt. However, I don't beleive GM is a particularly well run organization. For that matter, I would argue that it hasn't been a company of vision for some time.
Here's the real question... How badly would the bankruptcy of GM cripple America? would something rise out of its ashes? Would the pieces and labor be bought up?-
Well David, That natrually would all depend.
Lets break it down a little.
1. Would the pieces be bought up?
- Most likely, these are assets, assets have a value, when you can buy that asset for less than its worth, there will always be buyers.
However, if that asset isn't worth anything, chances are that it wont be bought.
2. Will the labor be "bought"?
The question is really will someone pick up production enough to hire the ones employed now.
And quite frankly, most likely not. As long as the UAW hold of the area is so strong, the cost outweighs the benefit. It is important to remember that a Detroit Autoworker carries a cost that is about 60% higher than a for instance Tennesee or Arkansas worker.
If the company and production is bought up, the new owners will probably see to it that they stay as far away as possible from UAW strongholds.
3. How hard will this hit the economy?
Not as hard as pouring money down a black hole will in the long run. And you are absolutely correct, not being a company of vision in a time like we have now, when vision is paramount to find the new markets and market preferences first. Something big3 have an trackrecord of almost never doing since the 60's.
It's big. No doubt. But in essence, they are behind the curve on innovation and quality. And still want top dollar for their products. What small business do you think could survive with that mindset. And why should we pay badly run businesses taxmoney instead of giving such breaks to companies that are at the front of the curve?
To give them this break, would be to give them an unfair advantage, not just against foreign automakers, but against small companies in this country that are trying to break into the market.
Why should we reward bad business, and at the same time, effectively penalize smaller - well run businesses?
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The unions have as of the last few years given concession after concession and restructured their labor contracts to reduce the impact of health and pension benefits. More could be done there, and will have to be but they won't go away. The GOP wet dream to destroy the labor unions.
The top management should be shown the door for sure, but to let them all fizzle is the wrong response and it would result in consequences the country can't live with.
I'm with these guys on this.
www.tnr.com/politics/story.html?id=a4893b49-36df-4784-9859-2dfa3a3211bf
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krugman.blogs.nytimes.com/2008/11/16/cars/
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There has to be a way to structure a bail-out that will direct the funds to innovation, and restructuring and fast tracking some green ideas without directing the money to pension funds and health care of employees - if they guy on the street has lost half his retirement fund and can't afford health insurance his tax money shouldn't be used to shore up the pension plan of someone else.
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