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Auto bailouts
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isobars



Joined: 12 Dec 1999
Posts: 14150

PostPosted: Mon Feb 27, 2012 9:37 am    Post subject: Reply with quote

From the WSJ at http://tinyurl.com/7zb6y6h .
Bailout Halftime: Taxpayers will be paying for the auto bailouts for decades to come.
Highlights:
GM and Chrysler shed billions of dollars of debt and labor obligations in their government-managed and -financed bankruptcies.

While GM, Chrysler and Ford may be out of financial danger, for now, their political liabilities continue to multiply. The Bush-Obama bailout isn't over because its terms increase the chances that one or more of the Big Three end up in trouble again

The government ... busy diverting cash flow into cars that Americans don't want to buy.

A formal bailout failed in the Senate, but the Bush Administration used the Troubled Asset Relief Program as a honey pot to tide over GM with a $19.4 billion bridge loan and Chrysler with $4 billion.

Ordinary bankruptcy would have been a trauma, no question. It would have meant pain for laid-off workers and exacerbated the recession, even if the auto makers posed no systemic risk. The taxpayer tab for guaranteed pensions would have been expensive BUT Chapter 11 would have provided an orderly workout, giving the auto makers the legal protection to clean up balance sheets, modify contracts and restructure under due process. The steel industry reorganized itself through bankruptcy a little over a decade ago, rationalizing its capacity and labor agreements. American Airlines is the latest legacy carrier to enter bankruptcy, and the planes are still in the air.

Detroit and the auto makers claim there was no liquidity (nobody was buying cars or lending) for normal bankruptcy to function. But lenders might have come forward if the government backstop wasn't crowding out private financing—or perhaps the industry would be more attractive to private capital if every business decision wasn't a political decision too.

That was the real issue for the White House because of its potential damage to union labor. ... Obama's force majeure subordinated bondholders’ rights to the UAW's. Even Steve Rattner, who led the auto task force, conceded that "We didn't ask any active worker to cut his or her pay, we didn't ask them to sacrifice any of their pension and we maybe could have asked them to do a little bit more."

Thus the bailout become a tool for less discipline, not more, when Chrysler entered bankruptcy with $8.1 billion in government financing and GM with $30.1 billion. The government became the majority shareholder in the latter and the UAW in the former. Taxpayers still own 26% of GM, and shares will need to rise to $53 from their current $26 to recoup the Bush-Obama investment.

However things shake out, it will be only a fraction of the true costs in precedent and politicized investment. The bailouts… undermined confidence in the rule of law. More troubling, the conversion of Detroit from an indirect to transparent Washington client continues to distort the auto market.

When Mr. Obama's enviroteers tightened fuel economy regulations … the auto makers agreed despite their misgivings because as wards of the state they had no political choice. So Chrysler, GM and Ford will still be forced to make cars that dealers struggle to sell profitably, only many more of them.

The new Obama budget includes a $10,000 tax credit for consumers to buy the green cars [i.e, Green votes] that they otherwise wouldn't. Will mandated purchases be next?

The point is that the auto bailout isn't an example of enlightened government revitalizing an industry after a market failure. It is a bailout in the wake of failed government policies and bad management that may keep going and going as Washington does whatever it takes to make sure Detroit keeps doing its political bidding.
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boggsman1



Joined: 24 Jun 2002
Posts: 3550
Location: at a computer

PostPosted: Mon Feb 27, 2012 10:00 am    Post subject: Reply with quote

Hey ISO , dont tell your bullshit Bernie Marcus story to the entrenpeneurs in Silicon Valley, a few of them might disgaree with him!
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boggsman1



Joined: 24 Jun 2002
Posts: 3550
Location: at a computer

PostPosted: Mon Feb 27, 2012 11:46 am    Post subject: Reply with quote

coboardhead wrote:
gt wrote

Quote:
There is a single category that, given at least adequate ranking in the others, transcends all in my mind. Quality of life!

Quality of life is subjective. Greeks, Romans, Stone Age Brits must have known so. In times of strife and emotional turmoil I didn't go to the doctors, I sat at the base of the main tower inside York Minster, back against a column just gazing up at the stained glass window and vaulted roof, absorbing the atmosphere and history of the place.

Once, I was lucky enough to be sitting there alone late on a Summers evening, with the sun streaming through the huge stained glass window, as the organist was playing a cantata. It was emotionally and spiritually overwhelming as the music reverborated through that magnificent structure, and it could have been two hundred years back in time. No medical treatment on earth could have been so healing. If I was terminally ill, that is the place to which I'd return.

Our experiences in life make us what we now are, and that is where we belong. Tabulating things means little to some of us.


Amen! I appreciate your posts the most, then Mac's, then Boggsman, then....

Let me second CB's praise. This was one of the best posts Ive ever read here in 10 years. It the magical moments in life that you remember all the way to the end, and that is what keeps your heart ticking...
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mac



Joined: 07 Mar 1999
Posts: 5202

PostPosted: Mon Feb 27, 2012 1:13 pm    Post subject: Reply with quote

And my sentiments as well. I just spent the weekend in Los Angeles at the LA County Art Museum, Sam Maloof's workshop/museum, the Norton Simon and the Huntington. The theme was the best of Sam Francis in the Los Angeles area--but so much more. Art lifts us.
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w8n4wind



Joined: 12 Nov 2008
Posts: 273
Location: canada

PostPosted: Mon Feb 27, 2012 1:49 pm    Post subject: Reply with quote

isobars wrote:
From the WSJ at http://tinyurl.com/7zb6y6h .
Bailout Halftime: Taxpayers will be paying for the auto bailouts for decades to come.
Highlights:
...............etc.....


http://www.benzinga.com/news/earnings/12/02/2375442/detroits-big-three-is-struggling-to-keep-up-with-sales
its not all bad news..
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GURGLETROUSERS



Joined: 30 Dec 2009
Posts: 1344

PostPosted: Mon Feb 27, 2012 1:53 pm    Post subject: Reply with quote

Thank you gentlemen. Some people claim that to be emotional is a curse, and most illogical. They're wrong!

Genius in music, literature, and art is worshipped the world over, and we ordinary folk can only listen, read, and look in wonder!

(Now if only learning how to spell hadn't been so flippin' difficult! Laughing )
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mac



Joined: 07 Mar 1999
Posts: 5202

PostPosted: Mon Feb 27, 2012 4:15 pm    Post subject: Reply with quote

In case you didn't read waiting for wind's post, here's the bottom line:

Quote:
More than 38,000 jobs were added by car and parts makers last year, and 13,000 more are expected this year.

Read more: http://www.benzinga.com/news/earnings/12/02/2375442/detroits-big-three-is-struggling-to-keep-up-with-sales#ixzz1ncRnt4s4

So tell us again how Obama doesn't create jobs?
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pueno



Joined: 03 Mar 2007
Posts: 2663

PostPosted: Tue Feb 28, 2012 5:56 am    Post subject: Reply with quote

mac wrote:

So tell us again how Obama doesn't create jobs?

If it didn't come from Faux or Limbaugh, then it's not real.
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