RSSDo not bail out the auto companies
Nov 12
Canada and the US are talking about bailing out the North American auto companies: PM hints at auto bailout
This strikes me as wrong for several reasons:
- Why should governments be bailing out companies that don’t have a sustainable business model? They’re losing money for many reasons including a cyclical market and bad decisions in the past.
- Propping up failing businesses is a drain on the economy and hurts productivity. Further, it’s a disincentive for innovation because every car sold from an artificially propped-up company is a car not built by a new and innovative competitor. (One example brought up on CBC: Canada has a very innovative car company called ZENN. Guess where the car can’t be sold due to government regulation? Canada)
- I think the American car companies have consciously fought innovation for the last few decades, which is why I’ve never bought any of their products. Now we’re proposing I pay them a few thousand dollars of my tax money as a reward?
- If people are set on handing out $4 billion, as proposed in Ontario, maybe a better idea is to let the companies fend for themselves and give a share of that money to anyone who loses their job in the mix, to help the transition to a new job. Let’s say 100,000 Ontarians lost their jobs, that would be $40,000 each, which would be a big help.
As much as I dislike the American car companies, the people that would really be hurt by their collapse would be the workers. While I think everyone may be better off in the end, it would be a difficult time. For this reason, the only kind of bailout I’d be willing to consider (like I had a say in the matter) would be to alleviate some of the car companies crippling pension liabilities, at least until the pension bubble bursts. If the companies collapse, the governments will step in to take some of the pensions anyways, so it’s inevitable. Further, the big 3 really are crippled compared to the competition due to the pensions because they suck up so much cash. While this is their own fault, it’s a small set of bad decisions that have shaped their entire future.
However, after any kind of help like that, the companies would have to left to fend for themselves. If they still failed there wouldn’t be any more excuses and they should be allowed to bankrupt.
Nov 17, 2008 @ 13:15:12
They’ve been threatening to close the GM plant in Oshawa for 30 years. But it’s been a cycle of layoffs and regrowth. Now everyone is finally taking the buyouts and leaving before the walls come crashing down.
A single car plant directly or indirectly provides employment for thousands, often the main employer in small towns which then live in fear of layoffs and plant closures. The fear is slightly overblown. Not all former automaker towns end up pits of unemployment and crime like Flint, Michigan. But noone wants to take that chance. And no politician wants it to happen under their watch. So people will do anything and everything to prevent it.
I agree that GM has been run by rabid monkeys in suits for years, and deserves to fall flat on its face, but the consequence to the workers and the economy will be much more severe than the billion dollar severance packages those monkeys will get when they leave!
And how long will this go on? Gas prices have dropped in half since GM declared that gas prices were killing their SUV market. Maybe once Bush is out of office gas prices will stabilize and SUVs will be cool again.
But the real problem is that SUVs are not environmentally friendly and basing your income on gas-guzzling technology is a recipe for disaster. In fact, continuing to sell products to a market that doesn’t want them and not building what that market does want, is a pretty sure recipe for failure no matter how big a bailout you get.
Nov 17, 2008 @ 13:41:22
When you said:
“… but the consequence to the workers and the economy will be much more severe than the billion dollar severance packages those monkeys will get when they leave!”
what are you saying is the alternative? Are you in favour of a bailout?
The more I think about this, the more it bothers me. I don’t buy the “consequence to the workers” argument. How large of a consequence is it to them to prop up an unsustainable and inefficient business? I think the most damage would be done to those workers who are past the age to be reasonably retrained or get a new job. Otherwise, it’s probably in everyone’s best interest to move on, tough as it may be in the short term. If we stop propping up bad businesses that are raising the barrier to entry for new competitors we’d see new interest and innovation in the sector and therefore new jobs.
Further, as liberal as I may be and as important as I think it is for there to be a social safety net, it is not the governments responsibility to provide jobs, which is what a bailout like this would effectively do. The governments responsibility, in my opinion, is to produce an environment where good jobs can be created.
Nov 18, 2008 @ 10:09:38
All the autoworkers I know brag about how much they get away with and how little work they do. People who work four hours and charge the company for twelve. These are unskilled people who never bothered going to college because they knew the plant would hire them. They’ve worked there for twenty or thirty years at the same station on the assembly line putting the same bolt in the same hole. They show up for work drunk and stoned and continue to drink and do drugs throughout the day just to get through the monotony of it.
Now you take that person’s job away. What is he going to do? What other jobs is he qualified for? Too old to go back to school and too lazy to pass if he did. A year ago I’d have said go back to school, learn some math and become a hedge fund manager or a real estate agent. But even they have fallen on hard times.
Yet the auto industry is leaving thousands of these people out in the cold. The car companies took people in, gave them a dead end job with the appearance of a career, gave them time to build a life and a family on the income from that monotonous, obsolete assembly line job, and then took it all away. Generations grew up in GM towns with no more ambition than to work at the plant.
But no, I don’t support a bailout. It wouldn’t keep the employees in their jobs anyway. GM will have to restructure. But it will and it will either survive or merge with another company. But look at it from their point of view: AIG got $80B. For ten percent of that you could prop up GM for another ten years. It’d still be doomed. But it would be someone elses problem.
Nov 18, 2008 @ 10:56:16
I watched part of a call-in show last night that discussed the auto bailout. A Detroit auto worker called in who was in favour of the bailout, and he said “We gave huge concessions at the last round of talks so we’ve done our part.”
This is the whole “Us vs. Them” attitude these too-powerful unions have built which is destroying those companies. The workers seem to think there are 2 separate entities, the company and the union, which each have their own rights. What some of these people don’t seem to understand is that if there’s no company there’s no union, so driving the company to bankruptcy means they lose their job.
Maybe the best thing to do is for the government to step in and help force the unions to accept larger concessions. Giving the companies money won’t solve anything.
Nov 19, 2008 @ 18:42:33
Neil, there already is a government mechanism available to GM (and other organizations) that will allow them to rewrite their union agreements and force them to concede more – Chapter 11. I don’t think a simple Chapter 11 would force the end of General Motors – Continental Airlines is the cream of the crop in the U.S. among major airlines today and they’ve been in Chapter 11 at least once.
As you know, I have a lot of friends on both the left and the right, and virtually no one that I’ve spoken to about this is in favour of bailing out the automotive companies. I wasn’t in favour of the financial bailouts, but if they were a a bad idea, then this is an even worse idea. Barack Obama, however, is in favour of the auto bailout. I’d be interested to hear how his supporters would defend his position on this issue.
Nov 19, 2008 @ 22:15:50
Steve, you’re right, Chapter 11 is probably the answer in this case.
I understand Obama’s position on wanting to bail out the auto companies. He is looking at the impact on potentially millions of workers, which is not something any government would ignore. However, in this case I think there’s a longer-term perspective that, while more painful in the short term, would be better overall.
And, at the same time, I don’t expect to agree with every position he takes. The thing that still feels good though, compared to the last 8 years, is that even when I don’t agree with something Obama is doing (or the “real” McCain, too) I still believe he’s doing it because he’s fully thought it through and honestly believes it’s the best thing to do. This is as opposed to almost every decision Bush made which were transparently political decisions.
That’s not to say politics don’t play a part in the decisions. For example, it would be very, very difficult for a Democrat president to let the UAW crumble. I just don’t believe that’s the overriding argument in this case.
Dec 09, 2008 @ 14:24:23
American auto industry say they are losing millions of dollars per day.. when it is that they aren’t robbing as much from the masses as they are accustomed to… American cars shouldn’t be 30-grand… they should be 2-grand… They last only five years before things start to fall apart and off them… They aren’t worth 2-grand… They are getting as much for a new car as houses sell for in small cities and large towns… They are part of what’s destroying the economy… All they care about is their god-damned private executive economy… Their pricing has made it so most people can’t afford a new car in their lifetimes… We get the garbage cars the lucky ones toss-out, after they’ve almost destroyed them… The price of new parts forces us to buy our parts from the car dumps… The car companies have treated us like shitt for decades.. Why the hell should the Public’s money be used to treat the car companies like royalty, when the car companies are nothing but shithead asshole money-sucking life-sucking blood-sucking cheapskate parasitic-bullies..?
Dec 21, 2008 @ 21:28:58
My take has been iterated by many others across the Internet, and that is: Why are we saving companies that won’t give us the products both our marketplace and environment need?
The US Automakers are building vehicles that are less-then energy efficient, and unfortunately I don’t see that changing in the near future. Perhaps this goes hand-in-hand with “Keeping Big-Oil” allive, too? Hybrid technology is something they should have been developing/adopting much earlier on. Instead, the US auto’s paved the way for the Imports to steal that thunder.