Should we allow the U.S. automakers to go bankrupt?
I am disturbed by the bail out plan of the automobile industry under consideration. In the past, Washington had supported and granted billions of dollars to the auto industry. Today, there is little hope in the near future for the auto industry to recover. Car manufacturers from both China and India will only exacerbate the problem as those country ramps up their capabilities, making a crowded and competitive markets space worse. With all likelihood, the automakers will be back for another handout in a few years.
There is no seriousness or commitment by the automakers to change. They had approached Washington the first time without any real plan to turn things around. Obama had said he was disappointed at the automakers for approaching Washington without a turnaround plan. This is their second time back and now they come back with a cocktail napkin plan, but it is doubtful that any of the those plans will ever be put into action.
The automakers had many chances to improve and set a course for the future. Environmentalist in the United States had pushed for greener cars for years, but the auto industry had resisted and sabotaged their efforts. U.S. automakers problems are their own product. If U.S. automakers had accepted the environmentalist challenge and led the charge, the Japanese green autos would not the better selling green autos. They have no one to blame but themselves.
Some people argue that we are compelled to save the auto industry, regardless of how distasteful. If we don’t act to save the auto industry, massive layoffs will result and that will only worsen the unemployment and the economic recession. Some also argue that we’ve bailed out banks, why should’t automakers be bailed out as well. I believe the key difference is whether the automakers in their current form are sustainable. For bank bailout, we don’t expect the banks to come back year after year for more money. However, everyone believes that this will be likely case for the automakers. If the automakers are unsustainable then layoffs are inevitable and rise in unemployment are inevitable. We’re simply prolonging the agony.
For national security reasons, it is unwise to allow all of the automakers to go bankrupt. However, we should let the field shrink and support the strongest left standing. It should be noted that by allowing the antiquated automaker to pass; it is possible that a new, better suited companies may rise to take their place. For instance, Tesla motors (www.teslamotors.com) which makes green autos may have better opportunity to enter the market. In effect, we may be damaging the long-term health of the U.S. auto industry by further supporting the Big 3 automakers by preventing more innovative young upstart companies from taking their place.
Please join me by writing a paragraph to your congressman telling them that you do not support the auto bailout. Please click on the link below and choose your state to send an electronic message. It doesn’t matter if you old enough to vote or if you’re not an active voter. It is an IMPORTANT issue and you should let Washington know how you feel!! Thank you.
Click here:
http://www.senate.gov/general/contact_information/senators_cfm.cfm
Also, let me know if you agree or disagree with my remarks.
The major difference is that other countries close their markets to outside competition to save their own. Our country lets everybody in but we cant sell in their market.
Perhaps you missed all the plant closing, pay cuts, and layoffs as the Big 3 cut costs. They make reliable and fuel efficient cars and trucks already too.
Perhaps you don’t care that 3-4 million Americans will lose their jobs with no chance of finding a new one. Your tax money is going to be supporting them for a long time.
Perhaps you don’t care that this would be yet another product that we import. Do you complain at how large our trade deficit is too?
Maybe you want to pay more for your next car. Less competition means higher prices.
Do you even know the difference between a BAILOUT and a LOAN is? The Big 3 are asking for LOANS. They have to pay them back with interest which makes them profitable to the government. They made $330 million in profit on the Chrysler bailout in the late 70’s.
Of course if the banks weren’t broke they could have given the Big 3 loans and they wouldn’t need to ask the government. Good thing we gave the banks 10x as much money as a BAILOUT which they still wont loan out and used to have parties.
June 21st, 2010 at 11:48 pmThis is for questions. You need to go to the Yahoo discussion forums.
June 21st, 2010 at 11:49 pmAmerica get a good profit from the auto maker company even if they are not going bankrupt the company will still report bankrupt because the can save extra money on the side.
June 21st, 2010 at 11:49 pmIn addition to Miller’s above comments:
Who do you think makes our tanks and military vehicles? Hummer was originally made because our government went to General Motors with the blueprints to make it. The only reason this car is being sold on car lots now, is because they thought there may have been some selling potential among the civilian market – which, was true considering the types of vehicles we were purchasing a few years back.
Now, think… if the Big 3, including General Motors, were to go under – who would supply us with military vehicles. Do you think that there is any conflict of interest there? Considering the way we are viewed by the world now, there are too many risks to rely on foreign automobile makers to supply us.
Furthermore, to address this hubbbub about the governmental subsidies that car makers received in the spring. This "money" was received so our automakers could research alternative automobiles and gasoline efficieny. As GM placed this money into research for building the impressive Volt – the government now is saying that our automakers should have used THIS money to pay to get themselves out of a hole. Say one thing and do another?
Long story short – it is absolutely vital that these automakers are given a loan – yes, that is right, a loan – not money that is just given away to AIG with no regulations or expectations that is it paid back.
Remember, everything in our society is interwoven.
June 21st, 2010 at 11:49 pmIn my husband’s opinion, we should let Big Oil bail out the auto industry. After all, it’s from the low mileage vehicles that Big Oil has made billions in profits.
June 21st, 2010 at 11:49 pmYes.
June 21st, 2010 at 11:49 pmLet’s talk about pensions. $2000 of the price of an American car goes to pay retired worker pensions. Japanese automakers don’t have that problem, their government takes care of pensions and healthcare.
So. Plan A. Give up on the American auto industry and just buy all foreign goods. Um… with what money? How will we have any money if we don’t make anything? Wonder why the dollar is weak? Wonder why we’re having trouble recovering from this recession? Walk around Wal-Mart or Target and look at the "MADE IN _____" labels on all the boxes. There’s your answer!
Plan B. Junk GM, Ford, Chrysler and start new companies. One problem. Starting a new auto company is really, really hard. To replace our auto industry would take hundreds of Billions of dollars over a decade or more. That’s how Toyota and Hyundai came to exist – the governments subsidized them THAT MUCH!!!! Now they’re total cash cows, obviously. Welcome to modern international finance, you better get over your fear of subsidy.
Plan C. Give the automakers just enough support to stay alive. Form it as loans which must be paid back, so the industry will be EVEN MORE burdened later, and at even more of a disadvantage against foreign competitors. Upside: they’ll pay their own pensions.
Plan D. Lift the burden of pensions off the automakers and let them recover on their own. We can compete in the world market, but not dragging a ball and chain.
And before you blame the automakers for building SUVs, remember until gas went up, SUVs were the most profitable things the automakers were making, BECAUSE we Americans were buying them and paying top dollar. Don’t blame them for selling us what we wanted.
You can’t change production overnight. Automakers must decide what to build at least 3 years before it shows up in dealer showrooms. That’s the lead time. Fickle consumers are reacting to high gas prices, and so is the auto industry. But they have a 3 year lag. Will you buy an efficient American hybrid 2 years from now if gas stays low? *laugh* history says "no you won’t".
June 21st, 2010 at 11:49 pm