Bailout:

Do we let the Big Three fail?

Schadenfreude and faith in the market makes me want to see them fail- any company that is so incredibly ignorant of future market developments deserves to fail. That’s how the market works- if you suck, you don’t get to exist anymore. They sucked. They fought tooth and nail against fuel efficiency standards- investing millions of dollars in lobbying and litigation. Now their lineup of cars simply can’t compete with the foreign imports that have this uncanny ability to get 30mpg. The alternative is giving them another loan- but is there anything to suggest that this $30 billion (or whatever number) will somehow allow them to change their whole company’s focus from behemoths to fuel-sippers? I don’t think so- so let them file under Chapter 11.

Sorry. Was watching the NewsHour during dinner and got worked up. Any other opinions?

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10 responses to “Bailout:

  1. Isn’t is also more that the UAW just doesn’t allow them to compete with foreign automakers? I mean, technically Ford has released hybrid versions of its cars but they still aren’t doing well. It’s my understanding that these American automakers have been bleeding funds for years, even before the ecofriendly boom, and they are just now getting in way too deep. I certainly feel badly for all the people who will potentially lose their jobs (and for regular folk like myself who will nonetheless be affected), but at the same time, is it wise to dump more money into companies without having a new business plan to keep up with foreign companies who employ either workers in other countries or non-UAW employees in other parts of the US?

  2. polisciafterparty

    All the more reason for them to have adjusted. Yes, they are under entitlements from their contracts with the union- they have been for awhile. But instead of being forward thinking (like, did it ever occur to them that oil is a finite resource and that the U.S. didn’t have much of it?) and building high mpg cars, they sought to retrench themselves in the ways that burned them in the 1970’s- that is, bigass cars that aren’t even that attractive. Not only that, they fought every effort to regulate fuel efficiency tooth and nail. Pathetic. It’s really embarrassing. They were under resource constraints (union contract) and they fought innovation at every turn. Let’em fail.

    LE

  3. To be fair, GM created the first electric car over a decade ago. See: http://en.wikipedia.org/wiki/General_Motors_EV1 or the awesome documentary “Who Killed the ELectric Car”

    While they also killed the electric car, to their own demise, it isn’t fair to say they weren’t forward-thinking since clearly they were, at least from a technological standpoint.

    Nevertheless, I don’t think the argument for or against should be based on emotions. It should be based solely on the economic impact, and I don’t think either of us are well-versed enough to say for sure what that might be. =P

  4. polisciafterparty

    Emotion is what is driving the bailout talks. The coldly market-oriented approach would counsel chapter 11. It is the U.S.’s emotional attachment to its great, gleaming “auto industry” that forces the Congress to constantly feed the beasts. Also, it’s an emotional attachment to the workers in the Big Three. The best economic impact would come from the ability of the market to rid itself of rusted-out behemoths like the Big Three. It’s not a matter of emotion for me- it’s a matter of emotion for the government, unfortunately.

    And yeah. They killed the electric car- that makes it even more egregious. They were worse than not forward thinking- they found themselves with a forward thinking vehicle and decided to not even support the status quo (that is, build the damn car) but to fight back to the days when gas was fuel. The fact that they created and destroyed the only thing that they did right in the 1990’s/2000’s simply speaks to their own incompetence.

    LE

  5. Well, they did build the damn car. Lots of them actually. And people owned and loved them for much of the 1990s, until GM confiscated (literally) all of them and stuck them in a secret warehouse.

    It really is all kind of mind-boggling. I bet they are kicking themselves now anyway.

  6. polisciafterparty

    Yep. Let them kick themselves- or better yet, let the market do it for them.

    The government shouldn’t be in the business of market-butt-kicking protection.

    Except for AIG…..and every other major financial institution other than Lehman. Ha.

    But really. They shouldn’t.

    Edit: I just came across this on the Times Website:

    http://www.nytimes.com/2008/11/19/opinion/19romney.html

    It’s Mitt Romney- and I agree with him! What a world.

    LE

  7. Mitt Romney in a NY Times op ed yesterday said “Let Detroit Go Bankrupt”…

    http://www.nytimes.com/2008/11/19/opinion/19romney.html?hp

    Me? I say raise taxes on gasoline til people are forced to drive dinky little SmartCars. And tell Detroit we’ll give them some assistance only if they make those efficient little cars.

    If the demand is big enough, they won’t need much assistance. The market will put them back in the black. Call it trickle up economics.

  8. Didn’t see that Romney op ed had already been cited above. Whoopsy daisy.

  9. polisciafterparty

    As far as I can recall, back when we were in the … third or fourth grade (approximately the time Kate cites above), I had to do a relatively remarkable amount of research on GM’s innovative electric car. Part of the reason it failed was because of the technology involved — setting aside the sheer cost of repairing one of those things, they were unattractive to the American public at the time because the car’s battery needed to be recharged every 70 minutes. They needed several hours to recharge, and everyday establishments like gas stations were simply not equipped for that kind of product. Regardless of whether a push should have been made at the time to make electric cars more of a trend (as we all know that big money dictates what we think should be fashionable), they didn’t become hip.

    All in all, my sympathy for American towns such as Flint, MI compel me to align myself in this case in support of the bailout for the Big 3. My sympathy for fellow citizens losing everything overrides the schadenfreude i feel when I hear that car companies just didn’t plan their financial strategies correctly. If this issue, as well as every other one with which our country is plagued today, is to be solved for the benefit of the middle class, we cannot let these companies die. however, there should be serious regulations on them. that is all. 🙂

    amy

  10. polisciafterparty

    Those towns won’t lose everything. First of all, they’ve lost most of it already. But that’s not the reason. It’s probably better for the company/workers if the companies ARE allowed to fail since through reorganization under Chapter 11, they’ll finally be able to start doing things right. The bailout will only put-off the inevitable. Nothing about the companies now suggests that they’ll be able to improve with a bailout loan. If they don’t seriously restructure their company, the chapter 11 that inevitably will come will be far less favorable- they’ll have fewer assets to spin off and their entitlements will only be bigger. There won’t be a company to save under Chapter 11 if these behemoths continue to exist. Which means Flint, in all its glory, will only be worse off than if the companies were allowed to fail in the first place.

    LE

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