Most Agree that the Big 3 Should Go Bankrupt
The Administration and many Democrats are willing to redirect a $25 billion loan program, approved by Congress in September. These funds would be tied to development of energy efficient vehicles, which is also something proposed in President-elect Barack Obama's stimulus package. However, the automakers are supported by House Speaker Nancy Pelosi, other Democrats, and the auto unions in wanting twice that amount.
Those who oppose using the EESA funds state that U.S. automakers have brought their near-bankruptcy on themselves by not retooling for an energy efficient era, reducing their own competitiveness. The opposition's position is well-stated by David Brooks, who says "...if these companies are not allowed to go bankrupt now, they never will be."
Congress must decide on the auto bailout, and an extension of unemployment insurance, before they adjourn on Friday. Otherwise, they will need to reconvene for a special session in December. (Source: AP, Big 3 carmakers beg for $25B, warn of catastrophe, November 17, 2008)
Comments
I agree with the “let them go bankrupt”(Chapter 11) solution. The government has helped far too many institutions that did not try to help themselves first. I think the government(AKA the taxpayer) has done plenty for these companies. The unions are making them go broke and they simply don’t care.
Allowing them to reorganize will force them to get rid of contracts they can’t afford and make them start doing efficient business. The economy has changed and it going to continue to change. These American businesses are two steps behind and they need a swat on their behind rather than a piece of candy.
Get rid of the over paid CEOs and their company’s private jets. You help these moochers once, they’ll expect it everytime!!!Let’s get back to the basics and earn a decent wage of $40-50,000 per year.
Hi Rudy,
I think you will find that is exactly what is going to happen.
Kimberly
For many years, the big 3 automakers along with unions authorized hourly wages far excessive as compared to other corporations. Seventy eight dollars an hour for automaker employees on the production floor along with other benefits, lavish offices, company jets and many other unnecessities, triggered high costs of new vehicle prices on dealer sales lots.
Now, we see the result of that. They’re going broke. Big three ceo’s along with other upper management people, employee unions, and money hungry hourly employees as put the companies virtually on the rocks. Washington does not want to be the bailout capital of the U.S., and certainly the consensus of the American people do not want that to occur, thus, NO Bailouts from the Feds to compensate for low earnings of any U.S. companies. That’s the bottom line. The alternative at this point in our economy, file chapter 11 and start getting your act together.
CEO’s of the big three auto makers, who arrived in Washington in their private jets without a plan to substantiale their pleas for public money,leave the impression that they do not know how to make autos which sell, and have retrenched their public relations team.
The government might do better to bailout the auto workers until the auto industry gets back in the real world and works out how to make autos that sell on their own merits.
Those CEO’s seem to be making a threat rather than begging for help. Before any public money goes to them they should explain how much they (and their companies)are going to contribute and how. e.g. by selling their jets and taking a pay cut!
The capitalist system depends for its survival on risk takers receiving the profits and losses they make. If there are no losses there are no risks, so the system fails. Let the big three fail instead.
I can’t afford a GM or Ford and don’t want the hassel of repairing a Chrysler! Let the auto workers find a job with the other auto manufactures who will take up the deman for quality good cars. We a have needed to change jobs. Why is it that the UAW feels they have entitlement to lifetime job security.
Some of the comments are shortsighted bordering on intense dislike for people – that is an emotional outburst not an analysis of the situation.
These CEO’s inherited a quagmire that was created many decades ago. They have negotiated a deal with the Union’s to get the medical and pension liabilities minimized and it has taken between $2-7 billion per year to create a fund that reduces the liability. They need to do this till December 31st 2009.
The problems with the Union’s is not just excessive salaries and benefits, but a huge disparity in productivity compared to Asian manufacturers. If you work with these Union workers you find out that the Union member whose only job in life is to change light bulbs in plants will not replace a fuse even they can since it is “not in my job description”.
Wagner or Mullaly did not create the Unions. It is the nature of the beast. While bankruptcy looks like a option, it probably was a good option many years ago not at this point in time when the aggregate market shrunk by 28%.
If I were one of these companies, I would create a holding company and take a holding in the profitable and potentially profitable brands. Then spin off the rest of the assets with the largest open liabilities (largest Union, pension and medical)into separate companies and take them to bankruptcy for closure.
Also, another mis-understanding is that Quality is a problem. Quality of the US cars is on par or better than Asian manufacturers. For example, if Toyota had reported a recall in December 2007 when they identified it instead of the first week of January, they would have had their largest recall in history in 2007.
I would give them a chance, it is not the best timing for bankruptcy.
Hi Madwesh,
As always, your comments are very thoughtful and insightful. Your idea about what the auto companies should do is right on target. Of course, it would leave the auto-workers in pretty dire straits. My politically unpopular question is…why should they be protected when waitresses, store clerks and economists are not?
Kimberly