To bail or not to bail, THAT is the question.

We’ve been seeing gas prices rise steadily for a few decades now. We’ve seen fuel efficient cars come to be in high demand. We’ve come to see “reliable” and “economic” top the lists of attributes that the new car shopper looks for in a new car. What has the Detroit Three done to answer these wants? Not much. What have the foreign (the Japanese and Korean in particular) car manufacturers done to answer these wants? Just about everything they could. Now, we see what used to be “The Big Three” are in trouble. GM is crying that they won’t have any money left by years end and the other 2 aren’t far behind. How could they not see this coming? Many on this board saw it coming years ago. Now they want us to give them a few hundred BILLION dollars to rescue them? Why should we? They have shown that they are non-to-bright in reacting to anything other than perfect business conditions so how do we know they won’t blow this money and be in the same boat a year or two from now? My wife’s business is hurting because of tough economic times (not mis-management like them) so where’s her money? My question to you is this: Should we bail out the Detroit 3? If so, how and what conditions/stipulations should there be?

As for me, I’m not sure. My knee-jerk reaction is to let them drown in their own stupidity. Maybe after they fall apart they can form a decent car company out of the ashes. Designers from Chrysler. Powertrain engineers from GM, and I’m not sure what from Ford. Well call this Pheonix Motors or something like that. Now, on the other hand I don’t want to see that many people out of work but know that throwing money at the problem won’t make it go away for long. Maybe give them the cash but banish the unions forever? When you declare bankruptcy you are breaking contracts and agreements so why not break those? Then they won’t be saddled with that burden.

We should let them fail. It would be painful and cause a lot of havoc, but this whole idea of too big to fail is absurd.

When did we change into a country that rewards mediocrity and punishes excellence? What is the point in giving them billions so they can continue to build cars that people don't want to buy?

I am hoping too get a good deal on a Z06 when they start selling them without a warranty.

I know this is like being the first to notice the elephant in the closet but I feel we should let the BIG3 fail IF they can not figure out a way to make their products cheaper, better and less problematic than the competition.

I would not want to see afailure of any of those three companies though.

the ripples through the entire US economy will be huge. and beyond the economy into the infrastructures of cities and towns not getting the business taxes, property taxes, sales taxes. then you can expect gov't to push tariffs on imports to provide funding lost by collapse of domestics.

not saying it shouldn't happen, just saying don't be surprised when prices for your beloved imports and the parts to keep them on the road go way up as a result.

I am not so sure. My first thought is to let them fail, not my next thuoght was how meny people this will efect. The cars I could care less about. The people on the other hand, I feel sorry for. Finding good job is not the easyest thing to do.

There my two cents..

Here's the way I see it: if the Big 3 (or even any one of them) goes belly up there will be a huge hole in the domestic market that will need to be filled. Actually, it would be a small piece for, say, GM but huge for some of the smaller players in the market, in many cases they can double their sales by going after a piece of that.

There will also be a fire sale of assets which will be much devalued because the creditors will be clamoring for ANYTHING on the dollar ASAP so they can try to keep their doors open.

Into this hole will come the companies which have been waiting and watching. Some, like maybe BMW and other smaller percentage players, will see an opportunity to buy a complete plant with stamp machines, etc which require only retooling to begin to produce their products.

Then there's FIAT, they have been quiverin' and bristlin' to get back in the US market for a while. Given their lineup of small fuel efficient cars it wouldn't surprise me if they bought 3 plants (East Coast, Midwest and West Coast) to produce cars here to try to grab a toehold in the market.

The Pacific Rim countries, particularly China, will also see a chance to grab a piece of the action.

The thing I see in common with all of these: the UAW will need to make some big concessions to get people in these plants or face the very real possibility that they too will be out of business.

Lots of the mom and pop dealers in the smaller towns are going to go under, sadly. That means there will finally be a glut of technicians on the market looking for jobs. As hard as it is to find truly qualified techs right now that could be a good thing for the service/repair end of the industry; some of the borderline 'don't give a crap' guys will lose their jobs in favor of those who will care and try.

If we bail out the US automakers, we should stipulate that the boards of directors that have been signing off on the executive pay packages and the rest of the ineffectual leadership should have to step down.

This is going to step on some powerful toes. If memory serves me, the Ford family controls Ford and the Dupont Company owns a significant, if not controlling, interest in GM.

I forgot to add this in my post about the UAW making concessions: the disparity in income between the factory floor and the boardroom has always been a problem. It was bad enough when it was like 40x, now that it's more like 400x in some cases it leads to a LOT of resentment and that is a big chunk of the Big 3's problems right now.

The thing is, do we really want the government setting pay scales?

I do like the idea of letting them fail. The problem of course is that I think the figure is something like %35 of the US economy is related to the auto industry! Of course some of that is related to foreign companies so it is not quite as bad as it seems.

I was also thinking that we could bail out the companies and they could re-tool and focus on smaller more economical cars and pretty much eliminate the SUV's. Then have gas drop to $1.50 a gallon for some reason and have everyone out buying Titans and Armadas and such!

DrBoost wrote: As for me, I’m not sure. My knee-jerk reaction is to let them drown in their own stupidity. Maybe after they fall apart they can form a decent car company out of the ashes. Designers from Chrysler. Powertrain engineers from GM, and I’m not sure what from Ford. Well call this Pheonix Motors or something like that. Now, on the other hand I don’t want to see that many people out of work but know that throwing money at the problem won’t make it go away for long. Maybe give them the cash but banish the unions forever? When you declare bankruptcy you are breaking contracts and agreements so why not break those? Then they won’t be saddled with that burden.

So... the management screwed up, so you want to punish the workers?

I've got a great idea. You know what would really help businesses stay competitive? If we limit the power of their employees to assemble and speak freely.

I'm not sure if I think the big three should be allowed to fold. I don't think the government will let that happen. It would really destabilize our economy.

I think that, if they are unable to sustain themselves, I should not have to be called upon to keep them alive. If I think what they're doing is good, I'll buy one of their cars, or some of their stock.

However, our economy is rather shaky right now. If these companies are going to fail, now is a really bad time for them to do so. The ripple effect in the economy will be shake an already rocky boat more than I want right now.

As frightening as it may be, I suspect that an infusion of life-support now will save the economy more money in the long-run. Even if it only keeps them alive for another 2-5 years (I'm gonna say 3), the economy aught to be rebounding by that time, and better able to absorb the blow.

So, I don't think the Big 3 aren't too big to die. If they can't survive, they shouldn't. However, I think they are too big to let them collapse. Spending public money to stabilize their deconstruction would keep the overall national economy from becoming unnecessarily volatile and starting a chain reaction.

Spend a little money to save a lot. I'd rather have the government steal $100 from me, than have the market be unable to pay me $1000.

I don't think there will be a hole, supply wise. If one of them fail, supply will be closer in line with overall demand.

I'm suprised no one is talking about a foreign buyer for just a part of one of the big three.

Or it might be cool to see an independent Jeep.

Or a smaller Ford that builds trucks only??? (+the Mustang?)

Just a couple off the cuff ideas.

Of course there are many problems and ramifications either way (bailout or no).

The CEO pay doesn't bother me so much. 1.This is America. 2. Redistributing 99% of said pay to all the workers in a given company would be a pittance, I think.

It does LOOK bad, I'll admit.

Interesting times, no doubt.

Let them fail. The bank bailout was BS. Industrial bailout would be more BS.

Maybe I should be more clear about the exec pay packages. I am not advocating the government setting wage scales. Compensation programs are my bread and butter. My comment was directed to the fact that the heads are pulling down megabucks whether the company succeeds or fails miserably.

I'm torn on this.

I'd like to see the threat of failure force out the old company ideas and get them moving on new company ideas. By that I mean ditch the reliance on heavy, fuel inefficient cars/trucks and focus on what we want. More fuel efficient vehicles that are reliable and useful.

NPR was talking about this today. They mentioned that the foreign companies are not facing the crushing burden of health care and other retirement bene's for former workers. I see two industries crippled by this now. The airlines and automakers.

NPR also mentioned that the Auto guys aren't open to declaring bankruptcy for two reasons:

• perception that people won't buy cars from a company in bankruptcy
• the stock would tank and therefore cut into the head honcho's pay. (that is 400x the avg line workers salary. Good job corporate leaders.)

As to whether we should let them fail...I'm still undecided. On the one had that may, as mentioned by other posters, create a viable and healthier domestic auto industry unencumbered by mistakes of the past.

..but that would also impact so many other industries in the nation. We're talking steel, rubber, parts manufacturers, dealerships, etc. The reach would be great.

Let's not even talk about the emotional affect on the nation. Can you imagine the news stories about how we've lost a majority of our industrial production capacity? The waning of Factory America?

Xceler8x wrote: Let's not even talk about the emotional affect on the nation. Can you imagine the news stories about how we've lost a majority of our industrial production capacity? The waning of Factory America?

That horse left the barn 10-20 years ago.

CEO pay:

Approx. 1.5 MIllion Wal-Mart associates worldwide.

Wal-mart CEO pay package: 23 Million/Year (Base 1.5 Million a year).

You can see that paying him less would do nothing for workers or economy. It would make some feel smug, apparently

We are running full steam down the wrong path.

Why are we offering relief instead of rewards?

These problems aren't new. These companies have been making questionable business decisions for 20+ years.

So we offer bailouts, and effectively encourage the bad behavior.

I would suggest we should be looking for people to reward for their good behavior.

It's kind of what the government started when they brokered the deal with JP Morgan and Bear Stearns. They saw Bear falling apart, and JP doing a good job, and they brokered the purchase. Since then, of course, all heck has broken loose.

So why not find a solid company with a good track record of success and fiscal management looking to grow and offer incentives to help the deal along- tax breaks, favorable lending, etc.

Same thing with home loans. Rather than bailing out people that made bad decisions (so they can make bad decisions again), why not broker deals where good property owners interested in increasing their holdings can become the owners of the bad owner's properties at deep discounts, low financing, etc. So if Mr. Smith down the road is defaulting on his sub-prime mortgage on his over-valued house, the bank takes a hit because they overvalued it in the first place, the government allows me to buy it at a deep discount (more accurately reflecting it's real value) and guarantees my loan, assuming I let Mr. Smith continue to live there on a lease/ option arrangement. If he works his way out of the jamb, I sell it to him, otherwise he remains a tenant. Bailing him out only punishes me for making good decisions in the first place, and positions him to repeat the mistakes.

One more note:

I don't care about CEO's pay. If the owner's (stockholders) aren't smart enough to realize how stupid this is, they deserve what they get.

Unless, of course, they get rewarded with a bailout.

We've been massively set up. What should be done or should have been done is now not the best way out. We need to find the least painful way out of the total trap Soros and the wealthy Democratics have sprung on us.

As most of you know, I'm no big GM fan. I have suggested a sign over every doorway at GM that says "Good Enough Isn't! Stop Making Crap!" The radio this morning said GM going down would kill 3 million jobs. That's a hit we can't afford to take right now. Now, add in Uncle O's obligations to the UAW, which he may or may not honor, but probably will, and you wind up with a GM bailout. Reagan bailed out Chrysler, after all, and they were making a lot crapier cars than GM is right now.

We don't have a free market economy. It has been captured by industry, which pass laws protecting themselves. That's just the way it is. Now, we can argue that it shouldn't be that way, which it shouldn't, but that's not going to change the way it is. So, how can we extricate ourselves from this mess? Well, that's not legal and Uncle O is going to ban those anyway after the next scheduled school masacre and already written bills and mass media tag lines, but besides that, as the feds take over the banking sector, they'll move into the manufacturing sector on our way to Marxism. So, yeah, the bailout of GM is on the way.

It's just like the healthcare industry: If there's nothing wrong, no one wants to change it. So, berkeley it up totally and the peons (you and me) will beg for whatever is shown to us as a way out.

Oh, so that Wally World CEO makes 23 mil/year for managing something like 8% of the US GNP. At least we can get Mobil 1 at a good price. Now, compare that to the QUARTER BILLION dollars the last head of Home Depot took TO QUIT after BERKELEYING up the company. There's a problem.

Salanis wrote: So... the management screwed up, so you want to punish the workers? I've got a great idea. You know what would really help businesses stay competitive? If we limit the power of their employees to assemble and speak freely.

Really, it's quite a stretch there to equate opposing the UAW's head-in-the-sand, blood-from-a-stone attitude with wanting to interfere with their right to free speech.

I think that's got very little to do with it. I think it has more to do with the fact that the average Chrysler line worker here in town makes more than I do, has better benefits and gets more vacation, and has a better retirement package - not to mention cradle-to-grave job security unless he shows up for work unconcious or deliberately kills someone on site. I'm starting to wonder what those 7 years of college really did for me. Except guess what? They've about bled that stone dry.

That's a much bigger issue than "limiting their power to speak freely".

On the subject of executive pay, frankly, it's a popular red herring that many many people have fallen for because it's aways easy to complain about the rich guy. But if the top executives make 400 times the lineworker's salary, why should I care? There are 40,000 times as many lineworkers as there are top executives.

If he's not doing his job properly, at any level of the company, he should get fired. But bitching about the salary structure is missing the point.

Agreed.

This is the ultimate conundrum in American Capitalism.

The capitalist view suggests that we let their choices dictate where they go. The big 3 have chosen to carelessly put all of their eggs in the SUV and Truck basket without making provisions for a fuel crisis. As per the construct of capitalism, they should go down in flames if the market selects them for destruction.

The pragmatic view looks at the larger picture. The common line worker is not responsible for the company's poor management, so when the company goes belly-up, the common man shouldn't be punished for their incompetence.

The socialist view (I'm not saying that is a bad thing, just commenting) would say that the government can not only cover the common man on the assembly line, but it can cover the company itself.

Buyouts and billion-dollar help for companies like GM is like applauding a rich kid who's parents keep funding their escapades. They made a mistake. Capitalism would purport that they go down with the ship they set on fire.

I'm a big fan of the Capitalist view. These companies berkeleyed up, period. They deserve to die. Regardless of how the market affected their demise, it is the responsibility of the company to cover their butts. If you buy a house without doing the research, and your ARM ends up causing a foreclosure, then its your fault. It is not the government's responsibility to bail out uneducated capitalists who make dumb choices.

If the government funds mortgage companies, automakers, and other struggling companies, they also need to refund anyone who has bought something from an infomercial or a home shopping channel.

We are a society on the verge of libertarian greatness. This is evidenced by the struggle we currently have between capitalism and socialism. Once we realize (as a society) that Libertarianism is the culmination of those two philosophies combined, we won't need buyouts. Come to think of it... we won't need government either.

Ug, I find myself more or less in agreement with Jensenman and DrHess. I need a bath.

If any or all of the three US automakers were to fall, it wouldn't simply disapear. Equipment and facilities would likely be picked up by investors and entrepreneors wantint to make cars. Ford might die, but I'd bet a dozen replacements would spring up, making individual models of probably the same vehicles. The Mustang and the pickup truck for example, I bet would be continued by someone(s).

We actually saw something similar a few decades ago. Harley was the only US motorcycle maker. They levered themselves into a terrible position, and nearly died as a result of their own folly. People in the industry insisted that no one else could ever make motorcycles and be competitive in the US as startup costs and such were to high. Fast foward, and here we are with a number of US motorcycle makers, including Harley.

But, I think this all is moot, as our current government seems bent on maximizing inflation and indebtedness by printing money and throwing it at fools. After all, anyone who can run a bank into the ground deserves several hundred million more dollars. Same with airlines and cars. So I'm sure our government will continue to throw money at the problem, screwing it all up.

The only saving grace I can see with this bizzare government practice is that it seems globally, all the governments are doing it. So maybe it will all cancel out. Dunno. No ones ever seen an economic model like this before. Not on a global scale where there are no countering forces.

When we bailed out Chrysler part of the agreement included forcing them to get rid of the big bock and making them agree to make fuel efficient cars. That's why Dodge trucks were castrated in the 80's with only the poor old 360 (that got worse mileage than a 383 or 413) and why the first K-cars came with VW engines. I see no reason why stipulations like that can't be imposed this time around to force them to trash the mega SUV lines and beef up the compact car lines.

And remember Iacocca is now a multi millionaire from his decision to take a dollar a year.

If GM is going to succeed it will take EVERYONE making concessions. Make a graph of the 2007 salaries INCLUDING stock options. Find out what the average "real employee" earns as a base. (we will say $20.00/hr or $41,600/yr) PAY EVERYONE THAT AMOUNT IN THE COMPANY then sign contracts with every employee for stock for employees that make over that number up to and including the CEO. Reduce the million dollar a day ad budget. Reduce the NASCAR ad budget (Multiple millions per day from what I understand). Adjust the product ratio to include a whole lot of compact and subcompact cars and SUVs and reduce the big truck load and CONTINUE TO MAKE THEM BETTER AND CHEAPER. Let a product line run a little longer and don't worry about being the technical revolutionaries but rather build value into the cars.

Bankruptcy is this best thing that could happen for the automakers as on-going concerns. They could shed most of their dealer networks (most estimates show the domestics have at least twice as many dealers as they need) and GM in particular could get rid of non-relevant brands (GMC, Pontiac, Buick, Saab, Hummer) without having to buyout anyone. They could dump all their retiree obligations on the Feds (pensions and health care) and use the cash that had been allocated to those obligations to fund ongoing operations. They could renegotiate union contracts or just hire replacement non-union workers (MI should be particularly easy with over 8.5% unemployment) or move the plants to the south which are still non-union and get hundreds of millions in tax breaks to do so (Nissan got over $500 million in tax breaks to set up their latest plant in Tennessee). As an added bonus, the current board of directors and executives could be booted by the bankruptcy judge.

At this point, a bailout giving cash to the Detroit automakers helps out shareholders, executives, and the unions and hurts tax payers. Allowing the automakers to restructure through bankruptcy would result in companies in a far better position to compete and leave them ultimately as stronger companies.