[vc318]

I know we have so many questions in regards to things that are happening with the economy and so forth, so I thought starting a thread where we can discuss this matter may be a great help. And as a moderator, I don't presume to know everything when it comes to politics, so if you can help out, please answer away. Thanks!

Here's one debate that's been going on:

Senator rips auto industry at bailout hearing - Nov. 18, 2008

Heated debate over auto bailout
By Steve Hargreaves, CNNMoney.com staff writer
Last Updated: November 18, 2008: 7:02 PM ET

NEW YORK (CNNMoney.com) -- The case for a bailout of U.S. automakers came under sharp scrutiny on Tuesday at a congressional hearing that portrayed the Big Three as both short-sighted in their business strategies and central to the economy.

"Their board rooms in my view have been devoid of vision," said Sen. Christopher Dodd, D-Conn. "They have promoted and often driven the demand of inefficient, gas guzzling vehicles, and dismissed the threat of global warming."

Dodd, chairman of the Senate Banking Committee, spoke as Congress kicked off the first of two days of hearings over whether the government should extend a lifeline to the nation's troubled automakers.

The head of the powerful United Auto Workers union, testifying side by side with the industry's top CEOs, said the failure of one automaker would shatter consumer confidence in the other two.

"If one of these companies goes into bankruptcy, I'd be willing to bet it takes two, or possibly all three, with them," said Ron Gettelfinger , president of the autoworkers' union, said during questioning.

The industry, already struggling because of high labor costs and weak sales, is being stung as car buying grinds to a halt amid credit difficulties, job losses and fears of a recession. The industry has been lobbying hard for a $25 billion loan from the $700 billion bailout slated for the finance sector.

One Republican lawmaker, Sen. Michael Enzi of Wyoming, said he was uncertain a bailout would work.

"We have little evidence this $25 billion will do anything to promote long-term success," Enzi said.

But the industry and its advocates, as well as many experts, say that without federal help, General Motors (GM, Fortune 500) will likely go bankrupt within months, and that Ford (F, Fortune 500) and Chrysler LLC could soon follow.

General Motors boss Rick Wagoner said his company was attempting to transform itself. He ticked off a long list of innovations - from developing nine hybrid models for next year to rapid development of the Chevy Volt, a car that runs on just electricity.

"We felt we were well on the road to turning around the North American business," said Wagoner. "Since then, the industry and the economy has been hit hard by the global financial crisis. It threatens the turnaround and GM's financial survival."

Chrysler Chief Executive Robert Nardelli, echoing Wagoner's remarks, said the industry is suffering a "critical lack of liquidity" because of nation's financial meltdown.

Nardelli said that closely-held Chrysler was burning through $1 billion a month in capital.

Ford's chief executive, Alan Mulally, said he understands the need for the industry to reorganize and that Ford has been doing just that.

"Few companies have restructured more aggressively," he said, adding that Ford has closed 17 plants and reduced its workforce by 51,000 workers.

"As a result of all of our actions, we were profitable in the first quarter of this year and well on our way to sustainable profitability before the economic and credit crisis hit," said Mulally.


I say let the Big 3 collapse. We've been bailing out too many companies lately. Every time we lend money out, it's abused. If there were certain guidelines in place as to how the money would be spent, then I could see this being a good thing.

[vc318]

I'm so glad that the Senate refused to bailout the automakers. I mean, they come strolling in on their chartered jets and then ask for a loan. Plus, they weren't even willing to give up the planes to help save their company. Anyone else feel like the U.S. is some ATM machine lately?

[UnsilentMajorty]

Morally we should not bail them out because they have refused to adjust their products to the markets demand for Green cars. They lobbied on behalf of the oil companies for almost 50 years and have refused to change their ways even in the face of being outsold by Japanese and German automakers who are making Green vehicles.

However, economically we have to bail them out because 5,000,000 jobs will be lost if we don't. That's not 5,000, or 500,000 jobs. Five million. In addition, we could not be a world power without a manufacturing base and automaking is one of the last few manufacturing industries left in the U.S.

I also agree there should be strict guidelines if we bail them out and that we should start by firing all the current CEOs, put a salary cap on incoming CEOs and they must produce results within a certain amount of time (say five to six years because that is how long it takes to retool assembly lines to produce viable cars beyond prototypes).

[vc318]

However, economically we have to bail them out because 5,000,000 jobs will be lost if we don't.

But even when those workers lose their jobs, won't they still get 95 percent of their pay for like a year or something or does this apply to the execs?

[UnsilentMajorty]

Originally Posted by vc318 (View Post) But even when those workers lose their jobs, won't they still get 95 percent of their pay for like a year or something or does this apply to the execs?

The execs have "golden parachutes", so they will be fine no matter what. This is what angers people the most (and rightfully so). The execs will come out smelling like a rose, and most likely setup for the rest of their lives while the companies they were responsible for... Including those five million directly and indirectly linked jobs... Fail (Chapter 11). This is what amounts to moral bankruptcy (rewarding greed) and why so many people are against the bailout just like with AIG, and Freddie and Fannie May.

However, on the other side of this is the men and women who actually work on the assembly lines and in the supply companies that will be affected the most. The question of how much they will be effected if the Big Three are allowed to fail is currently being debated. Republicans (and even some Conservative Democrats) argue one reason the Big Three aren't competitive is because of high Union salaries. Whether this is true or not, I have no idea as I do not have that data, nor have I spoken to anybody in this industry. Yet a third factor in all of this is foreign automakers (Japanese and German) who have factories in the U.S. (Honda; Volks Wagon) and are doing very well by producing Green, fuel efficient cars... But at the same time, they have no unions, either. This means the workers have to provide their own health care and other insurance, and this of course, makes them more vulnerable when it comes to collective bargaining and basic worker rights with regard to long-time employment and salary advancement.

I suppose you can say the workers are being "exploited", but one figure I saw said the workers at a Japanese plant in Virgina, make $44 an hour... Compared to $77 an hour at a the Ford plant in Detroit. So, there may be some credence to the fact the Unions are partly to blame. However, I still feel Unions are important in this country because they protect workers (as a group) and Republican after Republican administration have tried to destroy unions, so the CEOs could exploit workers even more than they already do.

It is a tricky situation because unlike Wall Street, a lot more "regular" people are going to suffer if the Big Three fold... But like we are discussing, to what degree is up for debate depending on what conditions exist as far as Union provisions for job loss and other factors are concerned.

[ceilirose]

Doesn't the $77 per hour include all the benefits though? If we had universal health care would it be that high?

I have mixed feelings. No one is going to bail me out of my debt. What I don't want to see is the workers get screwed because they did what management told them to do. It's a no win situation.

Also I saw Senator Shelby of Alabama moaning and groaning about bailing the Big Three out but I also read that Alabama has factories from foreign auto makers in his state so if the Big Three went under it could be beneficial for that state.

But I do find it interesting that there is much more resistance to bailing the Big Three out vs. bailing out Wall Street.

[vc318]

I have mixed feelings. No one is going to bail me out of my debt. What I don't want to see is the workers get screwed because they did what management told them to do. It's a no win situation.

Exactly. I don't even make as much as those automakers and I have both a bachelor's and master's degree. I'm not wishing for anyone to lose their job but nobody made any considerations for the now 1 million people who were let go. And it is not easy to get unemployment benefit these days. The people would rather shoot you in the leg then hand over any money that you are entitled too.

[Pacey'sgirl]

My issue is they are bailing out banks and insurance companies connected banks......And the places they bailed out already are spending just as the auto companies are....they are going to high priced spas for lunches and getting thousands of dollars in bonuses. So why are we bailing out the banks and not the auto companies? This is my issue.

[Uh Blah]

I stand by my view that the problem stems from lending $ from foreign countries especially China.

[UnsilentMajorty]

The thing that makes this economic crisis so bad is it hit all at once and all over the globe at the same time. It is world wide and only getting worse, unfortunately.

The news likes to use the "perfect storm" analogy and I agree with it because having worked in finance... It wasn't just one single thing that caused this to happen. It was a bunch of factors -- the biggest one for the U.S. being the subprime mortgage bundles -- That collided at the "right" time to bring the economy to a screeching halt here in the U.S. first... And because the U.S. is one of the leaders of the global economy it just spread to countries like Canada, the UK, etc. who followed suit in both the effects AND the same fiscal policies we had been pursuing up until this point. It's funny because politics, religion and economics are almost like high school politics where if "everybody is doing it", you don't want to be left out in the cold. Other countries saw how well the U.S. was doing and wanted the same success and as a consequence, were exposed to our "methods" (some illegal) and this is one reason why they are in the same predicament we are in, now. As the corny High School Musical song goes, "We're All in This Together" because everybody got greedy together

The good news is Obama is moving as fast as he can to not only get his Economic team in place, but already planning out policy he, the House and Senate can hopefully enact soon after January 20th. I know people pit their hopes for economic recovery on Barack, but I think he is genuinely doing the best he can given the fact he is not the President yet and has no executive power to pass some of the rescue packages and stimulus packages he wants. The big wild card is Bush. Will he (or not) help Congress and the House pass some of these stimulus packages before his term is up? Or will he just do what he has been doing for the last eight years and that is nothing, more or less?

In my opinion, I don't think Bush will block (veto) any packages, but he also doesn't have to sign them either. Doing nothing is the worst form of passive aggressive there is and in this economy that is dangerous and paramount to just hoping the problem will go away if you ignore it.

[*Ledi*]

oops.

[*Ledi*]

Originally Posted by UnsilentMajorty (View Post) And because the U.S. is one of the leaders of the global economy it just spread to countries like Canada, the UK, etc. who followed suit in both the effects AND the same fiscal policies we had been pursuing up until this point.

Canada has definitely been affected by the US economy, but not to the extent that we thought. We're actually doing a lot better than all other Western countries right now. A while ago I actually heard that Canada is the only country in the G8 that escaped a recession. Although, they were talking about a recession happening next year on the news earlier today. Anyway, we're better off than a lot of countries, which makes me feel good and bad at the same time.

So yeah, I don't know about the UK, but Canada isn't suffering as much as the US and other countries are. We also don't have any housing/mortgage crises as far as I know - thank god.

[cookiely]

Originally Posted by UnsilentMajorty (View Post) Morally we should not bail them out because they have refused to adjust their products to the markets demand for Green cars. They lobbied on behalf of the oil companies for almost 50 years and have refused to change their ways even in the face of being outsold by Japanese and German automakers who are making Green vehicles. .

the funny thing is that GM and Ford have been making "green cars" for the european market for yearS

Those buisnesses also happen to be stable.

In Germany a bailout for Opel ( belongs to GM) is discussed right now.
Opel is doing ok right now, but are getting sucked down by GM.

I know absolutely nothing about american worker unions, but I do know that
german carmakers also have strong unions here in Germany. VW even got its own law that gives a veto right to the State for importsant all decisions.

And from what I remember about the japanese retirement fonds system, I am pretty sure that Toyota also has a lot of financial burden to carry.


So I think the union thing is a rather lame excuse.

the reason japanese companies have been doing so well in the last years, is becuase they were the first
to develope and implement the just in times production of cars.
They have also been the firsts to optimize their supply chain and their production process with modern means and therefore
managed to build high quality for low prices

A lot of what is being taught in buisness schools right now have been developed by Toyota and while
other companies have started to copy their methods, Toyota has a first mover advantage that still pays of.


German carmakes like BMW and Daimler have the prestige bonus.
People expect their cars to be more expensive, therefore they don`t suffer the same (cost) pressure as middleclass
carmakers do.

VW the german middleclass carmaker is not doing so well either, and has just been overtaken by Porsche.

[vc318]

Originally Posted by UnsilentMajorty (View Post) The news likes to use the "perfect storm" analogy and I agree with it because having worked in finance... It wasn't just one single thing that caused this to happen. It was a bunch of factors -- the biggest one for the U.S. being the subprime mortgage bundles

And many people scored big time on them unfortunately. I say they reverse the rates back on the original loans and I'm sure they'll find plenty of people who will be able to pay their mortgage. And I don't care what they say - the banks should have opened their mouths to all those people who got into these types of loans and denied them from the start. I guess the banks just knew the would get bailed out sometime down the road and they were surely right. The worst criminals are really protecting these companies and Bush is holding the reigns. Since it's the end for him, why would he make an effort to help people with a stimulus package of any kind?

[vc318]

Deadlock over Detroit bailout may soon end - CNN.com

I can't understand why Pelosi and other Democrats are supporting this bailout while there are nearly 2 million people out of work right now. Was there any help given to those individuals? No, not at all.

The best part of the article was this:

Despite the apparent breakthrough, several House Republicans said they remained reluctant to sign on to any bailout. Some suggested that a bankruptcy filing would be a better way for the companies to become competitive, and others said they were concerned about other industries and businesses that might seek help if the automakers get aid.

I surprisingly agree with them for once.