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Old 11-19-2008, 10:49 AM
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Default Bail Out Auto Companies

The CEOs of the major auto makers went before congress the other day and pleaded for $25 billion to help them. Some members of congress said the auto makers made their own mess and that they should suffer the consequences. But one CEO said if they fall, the ripple effect would be felt throughout the country and could even affect national security. I'm really torn on this one as to whether or not I want to support such a request.
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Old 11-19-2008, 03:24 PM
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The automakers DID make this mess, I'm sorry to say. First they deliberately set out to buy the street car lines and other efficient public transportation modes during the 1940s to make us car-dependent - that part of Who Framed Roger Rabbit was not a made up story, just like the water rights issue in Chinatown was not fiction. Then they dragged their heels on making fuel efficient cars. Then they decided to push pickup trucks and SUVs like they were meant for cities and they're obviously not...instead of investing in hybrids and other more fuel-efficient models. In essence, they created a car-dependent society...so, in my view, they don't deserve to be bailed out.
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Old 11-19-2008, 06:00 PM
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So many people see doom and gloom in every situation. If the automakers were to all completely collapse at the same time, the people in the United States would buy cars from foreign automakers until a new automaker started up (probably led by the same management as the existing ones), but with new union contracts (or perhaps *gasp* no union contracts) that would allow them to compete. In the meanwhile, all of the people who had pensions from those automakers would end up with greatly reduced pensions or might lose them altogether (same with health care and other benefits). The end result would be more stable automakers and some people with reduced or lost benefits.

If the automakers are allowed to go bankrupt (a much more likely scenario), they'll file for bankruptcy protection and reorganize. During this time, they'll go through a process of restructuring their operations including renegotiating all of the contracts that have gotten them into this mess. Some people may have benefits or pensions reduced (which is better than losing them altogether), because the companies cannot survive under the burden of the existing union agreements (they should never have entered into them in the first place, but the unions were too powerful and the automakers assumed continued growth in the industry). In any case, all that would happen is that after renegotiating contracts and restructuring, they would be back in business making cars. The end result would be more stable automakers with fewer people having reduced or lost benefits.

If the government bails out the automakers, then the union benefits will last another year or two until either things get worse for the automakers and they ask for more money, or until things get better and they can continue along. In the meanwhile, the basic instability will remain where the contracts impose an untenable burden on the automakers so that another economic downturn will send the automakers back to the government for more money. The end result would be no change to the current situation and a scenario that would likely result in the same request being made a few years from now.

It is no surprise that US Automakers cannot thrive with the benefits, wages and pensions of the existing union contracts when US customers are not purchasing cars as much as they used to. The contracts assumed that times would always be good (same assumptions as subprime mortgages). Once the economy goes down for a few months, they are no longer sustainable.

The real question here, is whether it is government's role to bail out private companies (yes, they are publicly traded, but they are still "private" from the standpoint that they are not governmental companies). If so, then equal protection requires that the government bail out any company when it hits hard times. This isn't even remotely possible unless the government took over the companies and this is the path to socialism. If the government doesn't have this responsibility then it should not give the automakers anything. It may decide that a loan would be a good idea, but a grant is totally out of the question.

-- Jeff
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Old 11-19-2008, 06:50 PM
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They flew a private jet to Washington to ask for our tax dollars. That's what gets me annoyed, private jets cost a kings ransom.

Now, since gas has gone down, they should just suck it up and wait for business to pick up again. Tons of people have cars, of course you're going to run out of business eventually.
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Old 11-21-2008, 01:57 PM
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Quote:
Originally Posted by Dartz View Post
They flew a private jet to Washington to ask for our tax dollars. That's what gets me annoyed, private jets cost a kings ransom.

Now, since gas has gone down, they should just suck it up and wait for business to pick up again. Tons of people have cars, of course you're going to run out of business eventually.
Loved the fact that members on the congressional committee grilled the CEOs about flying on their private jets and asked, for the record, if they would fly back on a commercial airliner and if they planned to get rid of their fleet.
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Old 11-24-2008, 06:27 AM
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I am totally against the bail out package if it is going to be offered at free of cost. On concerning the employees status, the government must accept the bail out and give them enough time to pay back the loan. Because public money should not be wasted like this.
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