In Defense of Detroit

It's interesting how often the subject of Health care comes up in a discussion of the Amercan cost of doing business. Seems to me if health care is fixed it would go a long way to making American companies competative.
It's notable in all the economic crisis not a single company in the health care field has a cash problem.
My wifes Doctor just bought one of the most beautiful Ferraris I have ever seen, I'm told it cost 1.2 million and I don't think he is much over 40. Yet we see people driven into bankrupcy because they got cancer or some other significant health problem. Something is very wrong with this picture.

The article said "Of course they're all correct. Allowing the listing Big Three to keel over would be a triumph of free markets."

I have to wonder just why America needs Globalization and what some call free markets? America opened trade with China and India but just what products do we buy that are unique to either country?
The answer is nothing, we now buy our own products now made in these countries. and one of the problems is they have turned our products into literal junk so we now buy three or four items in a given period of time, when only one purchase was the norm in the same period of time when that product was made in America.
I may be coming an isolationist, but it galls me that Bush would be so proud of raising the standard of living in China and India when the standard of living declined so noticeably in America.
But the question is just why do we need China and India at the expense of the American middle class?
I don't think it has anything to do with "free markets" it has more to do with pushing the American middle class to the same standards and life style as any of the third world countries. Certainly that is what is happening.

Help them to become normal!
There is nothing wrong with providing the giant automakers with some help. It would keep the spirit of the American industry alive, even though it is just the spirit.
However, since most of us have tightened our belts, and it is most of us that will take the risk on our absolute tax to come on top of our already heavy tax-burden, we need to make sure that the UAW and Management of the spoiled-child-attitude of the auto-industry will settle for their pay checks to be as the average pay of the American worker. Yes, it sounds tough, but either they come down to reality, or die on top of the cloud of gold, starving to death. No one should ever support anyone who keeps on living above those who support them.

The writer says: It's common, especially in the fever swamps of the right, to blame the UAW for the Big Three's high cost structure and legacy costs. (Never mind that management for generations willingly entered into the labor pacts,
The word "willingly" says it all. Management was and is carrying its share of fools. The UAW membership threatened strike after strike and they won, only to lose. Perhaps Newsweek's management and staff will kich in a few million to show their support.

Mr. Gross,

Your article provides important insight as to why it is imperative domestic automakers receive a government backed cash infusion similar to the package granted to our ailing financial sector. It can be a tricky matter understanding the complexities of the many interrelated issues impacting our economy, and the plight of car manufacturers happens to be one of them. You bring up an interesting point that filing for Chapter 11 bankruptcy is an expensive and extensively drawn out process for companies like GM, Ford, and Chrysler. In rationalizing this assertion, you write, "people would be reluctant to purchase expensive, long-lived assets from a bankrupt entity." Though the Big Three???s products appear to match these asset types, why do you hold this to be true? Is it because no matter what the market conditions, consumers demand a constant supply? It seems that in a significant downturn like the one we are facing, it would be a shrewd option to declare Chapter 11 and sell cars at a significantly discounted amount. Though consumers may be presently reticent to purchase large expenditures, if price tags were reduced to an incredibly attractive figure, vehicles could be sold at a high enough volume to possibly lift these manufacturers out of bankruptcy. Your discussion of the regional implications resulting from this sector???s potential collapse warrants reconsideration by those currently against the proposed bailout package. The forecasted figure of three million jobs lost nationwide is enormous, especially given the realities of the economic recession. It is significant that a large number of businesses in our country, large and small, have some affiliation with the U.S. automobile industry. According to a recently published article in the San Francisco Chronicle, Detroit lawmakers claim that one in ten jobs are tied to domestic vehicle manufacturing. Though these figures may be somewhat inflated, the inextricable nature of this sector with other currently fragile parts of the American economy grants legitimacy for a plan to keep it from failing. Though I agree with your arguments supporting the existence of U.S. carmakers, I worry that the proposed amount may be too little, too late. $25 billion may not be enough to save the sinking industry from its fate. Hopefully though, the amount will be enough to keep these corporations from bankruptcy, yet will be insufficient to keep them from operating in their current state. The Big Three need to downsize and streamline operations in order to realign with the marketplace and become attractive again to American consumers.

The writer brings up some good comments about Chapter 11 - although the airline industry was able to use the tool to restructure debt, they weren't capital intensive and there was excess, nonChapter 11 capacity out there. The comments posted so far hit at the 'nut' of this situation - the auto companies want a bailout, yet it'll be three to five years before they can bring competitive products to market in the categories where the most sales are - mid-size to compact cars. U.S. car makers have been ignoring that segment to their detriment for some time. There's no easy answer here - but if they get some kind of bailout, they should commit to some of the design requirements being talked about. I figure if Toyota, Honda and Mazda can build large mid-size cars getting 31 to 33 mpg, with nice features, plenty of comfort and reliability U.S. car markers can. The Malibu has proven that GM can do this, the Fusion is a shining example at Ford - Chryser (well, two out of three isn't bad). A balance between market forces and government support should be struck - it won't save all the jobs, but it could help. Oh, and cut those CEO bonuses that car companies are paying managers now - according to at least one autoblog I read.

Loan money to someone who has no proof of the ability to pay it back? Does this sound familiar? Let them die from their self-inflicted wounds. Maybe all three should go bankrupt, cancel out all current stock, get rid of the UAW and then all three merge into one company and actually build good cutting edge products with a 100,000 mile bumper to bumper warranty. Otherwise go away and never return as we are better off without your garbage vehicles...

It is probably too late for GM. GM's North American auto sales have come to a screeching halt in November thanks to their self-destructive, if unavoidable, announcement that the company is about to run out of money. Would you purchase a car from a company that might not be around to honor the warrantee or provide spare parts? Of course not.

BAILOUTS ARE COMPLEX BEASTS, but Try something outside the box like this to save the U.S. Auto Industry - - -

http://pacificgatepost.blogspot.com/2008/11/solution-for-detroit-gm-friends.html

Toyota and Honda also depend on the same suppliers who feed GM and FORD. No need to let ???Detroit??? disappear.

There is also much creative talent hidden inside the U.S. Big 3 that has been smothered by mismanagement and the UAW. ... and they actually "make" something, .... unlike Wall Street.

Its a loan. Its not free money. Its not a bailout. It will be paid back.
Richard Shelby supports Daimler with a plant in his state built with free Alabama taxpayer money. Yet he won't LOAN money to a company whose business has dropped off because of the consumer crisis brought on by mismanagement by the senate banking committe headed
by Sen. Richard Shelby. He's indictable.

The USA government is insolvent by any objective measure of financial fitness, it can't bail out any institution when it itself is sinking. Bailouts just create the temporary illusion of salvation, since the mountain of government debt will eventually collapse, with far worse real consequences than an auto industry collapse. Governments do not create wealth, they merely redistribute it (quite inefficiently it might be added), and right now the nation is broke.

Boilermaker, your recounting of something that happened thirty years ago seems a little tainted by your inability to get work at this plant you speak of. Many factory line workers are not enamored by their jobs. They are redundant and monotonous jobs, but they support families so that their children might go to college and become professionals. Surely immature workers, often young, think they can screw the system. And no doubt, the companies know this, but at least share the wealth with the employees by paying them above a living wage. Many other companies in this Country, including small businesses, pay their standard employee the minimum for their position, unless that employee has a job that they can and do excel at. It's hard to see a line employee excelling at his job. There just isn't room for advancement.

Anyway, you shouldn't let your negative feelings get in the way of reason and compassion.