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Auto bailouts
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mac



Joined: 07 Mar 1999
Posts: 5080

PostPosted: Fri Feb 17, 2012 2:11 pm    Post subject: Auto bailouts Reply with quote

This is one of the arenas where I think Republicans have made good arguments. I must admit that I was against the first bailout--to Iacoco, and kind of for the second one. The reasons match my politics, but also reflect the times. In the first case the remainder of the auto industry was strong, and Chrysler had been mis-managed into dire straits. A fat cat was at the wheel. The House endorsed the bail-out (HR 5860) by a 271-136 vote, so it had to be bi-partisan. I'm generally supportive of the recent bail-out because the auto industry is an iconic industry, and as it took Nixon to go to China, it took a Democratic president to get the unions to take their medicine. In the former case, the Treasury got the money back with interest. In the latter case I think the jury is still out, with both sides spinning payback vs. big loss. But the auto industry is not dead in America.

With that said, the conservative objection is pretty solid. While the market needs to be regulated, it does a better job of deciding what should be invested in than Congress or the White House. Picking and choosing winners and losers based on political power is a very dangerous thing for the economy. But we've been doing it for a long time. What do you all think?
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DanWeiss



Joined: 24 Jun 2008
Posts: 1930
Location: Connecticut, USA

PostPosted: Fri Feb 17, 2012 2:35 pm    Post subject: Reply with quote

I tend to think that, in this latest case, the proof is in the pudding. GM is back as the largest manufacturer in the world, in no small thanks to the disasters in Japan. Can you imagine the economic and personal impact if GM had failed entirely? Hundreds of thousands of direct employees now unemployed, but also probably a million others like parts suppliers, internal product suppliers (paper, carpet, light bulbs and computers, etc.) and all people associated with those contracts, plus the dealer network. Easily over one million people out of work.

Chrysler is building really good cars nearly at all levels for the first time since before I was born. FIAT's involvement came as a direct result of the bailout and has proven a boon for Chrysler by technology and platform sharing. Dodge and Chrysler now get the benefit of some of the very best engines currently available -specifically the Alfa's Multi-Air. FIAT will also begin manufacturing Alfa's in the USA for export!

All the money has been paid back, with interest. The risk is over, the bailout plan worked.

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boggsman1



Joined: 24 Jun 2002
Posts: 3500
Location: at a computer

PostPosted: Fri Feb 17, 2012 3:09 pm    Post subject: Reply with quote

Dan, not in the case of GM, which was substantially larger than Chrysler. The majority of GM's bailout money now sits in the common stock with a $50+ cost basis(27.40 today).
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pueno



Joined: 03 Mar 2007
Posts: 2616

PostPosted: Fri Feb 17, 2012 5:41 pm    Post subject: Re: Auto bailouts Reply with quote

mac wrote:

With that said, the conservative objection is pretty solid. While the market needs to be regulated, it does a better job of deciding what should be invested in than Congress or the White House. Picking and choosing winners and losers based on political power is a very dangerous thing for the economy. But we've been doing it for a long time. What do you all think?

I think we need to grapple with the philosophical concept of "too big to fail," which was the underlying reason we bailed out those industries and the financial institutions.

Limiting the size of any organization or agency might be in the better interests of society in general, so that one organization's failure doesn't threaten the stability of the entire economic system. In that case, the theoretical concept of a self-regulating market makes complete sense.


mac wrote:

FIAT's involvement came as a direct result of the bailout and has proven a boon for Chrysler by technology and platform sharing.

To think of Fiat and quality cars together is cognitive dissonance.

But if it's working, then more power to 'em.
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mat-ty



Joined: 07 Jul 2007
Posts: 1062

PostPosted: Fri Feb 17, 2012 5:54 pm    Post subject: Reply with quote

GM was failing because their cars sucked, the bailout was for the unions, everyone else got screwed. 2800 dealerships closed, tens of thousands of jobs lost. But I guess the DB liberal media does not mention that to often because the dealers where those evil rich people. Last time I checked Ford took nothing, and has done very well without any goverment handouts. That Volts awesome , 25 miles per charge, what a f%%king joke.
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swchandler



Joined: 08 Nov 1993
Posts: 5745

PostPosted: Fri Feb 17, 2012 6:13 pm    Post subject: Reply with quote

I'm with Dan on this. In my view, bailing out the American auto industry was an extremely important move, and I would praise the Obama Administration for taking the risks to help preserve crucial manufacturing capabilities in America. I think many fail to see how critical GM and Chrysler are when it comes down to the broad base of suppliers and subcontractors that directly benefit overall. The total number of jobs saved through the bailout have been huge.

Frankly, I think that the Republican right has been making too much noise about the whole UAW scene. At the heart of it, it is the hate of unions that drives their negativity. From what I understand, UAW members did take some hard hits as part of the agreements reached in the bailout. Also, I find it of note that auto workers are now stakeholders in the business. Often these days, I think that workers don't get a fair shake went industry executives keep taking enormous salaries and compensation, even when the business picture and numbers tank. A company is only as good as it's workers.

However, not to get the wrong idea of my opinion in this, I'm usually not a normal supporter of unions, particularly in closed shop scenarios. As I've stated in the past, I would never have joined a union myself. Nevertheless, I still recognize the value that unions have played to help build a sound middle class. One can readily point to how unions have played an integral part in the success of German industry and in their economy as a whole. Unions don't have to be considered a dead weight to industry and growth.
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coboardhead



Joined: 26 Oct 2009
Posts: 1922

PostPosted: Fri Feb 17, 2012 6:32 pm    Post subject: Reply with quote

dan wrote

Quote:
All the money has been paid back, with interest. The risk is over, the bailout plan worked.


I will have to check my retirement plan. But, last time I looked I had a big blank where my GM bonds used to sit.

I agree with Matty. Before we pop the champagne, I think it would be appropriate to consider the investors who have been, largely, left out to dry on this success story. These investors include public and private pension plans. The public plans will continue to pay benefits anyway, with taxpayers responsible for short falls. True success would be for GM to start repay those creditors.

Now, I get how crucial it was for these companies to stay afloat. But, the costs go deeper than the government loans. Let's be honest about the true costs.
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stevenbard



Joined: 11 Nov 1993
Posts: 4012

PostPosted: Fri Feb 17, 2012 8:07 pm    Post subject: Reply with quote

While they were bailing out the unions, they forgot about the pensioners, little old ladies and apparently windsurfers who owned their bonds. I am very glad that the bailouts saved the U.S. auto industry, however there should have been a shared loss between the bond holders and the unions until we got whole.

Boggs and I differ on the banker bailouts. I think they should have let those Goldman Sachs guys shine shoes for their bond holders. Nothing would have made me happier than to reward the savers and frugal bankers who could have bought those assets for 20 cents on the dollar, and truely re-vitalized this nation.
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mac



Joined: 07 Mar 1999
Posts: 5080

PostPosted: Fri Feb 17, 2012 9:07 pm    Post subject: Reply with quote

OMG I agree with Bard.
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DanWeiss



Joined: 24 Jun 2008
Posts: 1930
Location: Connecticut, USA

PostPosted: Fri Feb 17, 2012 10:15 pm    Post subject: Reply with quote

The question isn't whether the auto bailouts were good only within a vacuum, as appears to be premised by some here, but whether the bailouts were better than the alternative. Surely the damage would have been far more vicious and widespread had the federal money not come along as it did?
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