Just a bunch of Wednesday night thoughts.
Perhaps it would be better to give tax credits to consumers who buy American-made vehicles.
I maybe way off because I haven't done enough research, but I've always thought that the unions have indirectly caused much of Detroit's woes by not adapting with the expanding global marketplace. The Asian companies make their cars faster and cheaper than the US–even in their US-based factories. To me, that's clearly an efficiency/productivity issue.
I read that in '06 GM lost $1,400 per vehicle and Ford lost $5,000 per vehicle. Also, benefits being paid to retired US auto workers add $1,500 to the cost of every vechicle. I'm all for retirement benefits, but c'mon ... these US companies are basically paying for the salaries of all their workers–plus the salaries of all their former workers.
When you're selling cars and your profit margin is -10%, a bailout is not the right fix, IMO.
Full disclosure: I drive a '97 Bronco :)
I know everyone loves Ron Paul on the Internets, but one cannot seriously argue in favor of market solutions to problems and somehow believe labor agreements reflected anything but a supply/demand equilibrium price between capital and labor when made. Collective bargaining secured lower labor costs up front in return for imposing obligations on companies to invest a certain amount of funds to cover worker benefits in the future.
And yes... many companies have gutted their pension funds, or entered bankruptcy to foist their obligations onto the government. And others have deliberately underfunded plans to increase short-term profits and management payouts..
The anti-union bias in these comments is a right-wing talking point, and not a very good one unless people really believe that debt obligations on capital are somehow more sancrosanct than similar obligations made to labor. And frankly, when the senior management at General Motors starts spouting right-wing talking points I consider that prima facie evidence that the company is managed by a bunch of idiots:
http://www.reuters.com/article/latestCrisis/idUSN22372976
There is a cost to having major sectors of your economy run by a bunch of idiots. This is it. If there's a lesson relevant to this forum, it's to ask for your cash up front, and start your own business so your pension isn't in the hand of someone with short-term managerial incentives and the ability to screw you.
Large corporations down to individuals file bankruptcy to shield themselves from debt obligations all the time ... so, if anything, labor is more sacrosanct.
There's a reason car companies who want to sell to the US put their plants in Canada, Mexico, and Alabama (in the case of Hyundai) ... and it's not the weather.
Again, I don't claim to be an expert on this, but you haven't done much to convince me that poor management is entirely to blame.
Millions of people out of work with no money becomes your problem, and mine. This is the only reason that the big three are getting any money at all.
It stinks, but it's certainly better than the chaos that would ensue if GM didn't exist tomorrow.
Which is probably about 80% of all investors in the market, btw.
It would also render insolvent all their existing pensioners retirement funds, as well as every loan that GMAC finances...
Not something anyone would be thrilled to deal with.
Look, if I take 10 dollars from you and give them to the shit sandwich maker, whose business is failing, that's 10 dollars you can't give to his competitor, a gourmet bread maker that could be thriving if only the government didn't redirect his potential income to his failed competitor. Moreover, this gourmet bread maker could actually be the same person as the shit sandwich maker, provided you stop supporting his failed business and force him to create something people really want.
If you want to have social policies, at least try to have sensible ones: protect individuals themselves (not their jobs).
First, you're assuming that the market for shit bread is the same as the market for gourmet bread. That's ludicrous. All you've done is drive up the price of bread for everyone.
The other issue is the fact that the gourmet bread maker may actually only be in existence because shit bread is the commodity. People who buy luxury brands do so specifically because they are not the most popular option.
So know you've popularized the luxury item, but it's even more expensive than the shit bread that it replaced.
As I said, the auto industry is certainly not the easiest to defend. To be honest, I think this is a perfect chance for the government to force them to think in ways that actually improve their business models. Of course, that's hard work and nobody wants to do that.
Allowing the invisible hand to sort things out has the slight problem of absolutely crushing economies in the bad times as much as it let's them thrive in the good times.
the mistake socialists make is to treat the world as a zero sum game like the mercantilists did. As if those people couldn't be doing something that people want. Until everyone has everything they want there shouldn't be anyone wasting time doing something that people don't want.
I'm sure there are tertiary jobs that would also be affected, but how many really? Auto parts and auto sales?
The world will go on after GM and Chrysler fold.