Automotive "Bailouts" vs. Subsidies

[BeanCounter]

Some off-topic discussion in another thread has led me to post this to see what comes of it...

This topic borders on the political edge, but I want to focus on the aspect of vehicle manufacturer sentiments and preference.

What do you feel about the two and are either "okay" with you?
Are you inclined to prefer one over the other?
Is there a reason that we cast down some firms for receiving bailouts and prefer to buy from the subsidized?

I have always been partial to GM, but I was not supportive of the CPP program that the federal government created for the automakers. This is NOT a "GM is awesome....I love them" thread whatsoever.
Although I think our unions are one of the main reasons we are going to continue to have a hard time fully competing with foreign companies, I still don't like the program, even if it is loan-based.

I will post up some quality info to put some of this in perspective, but I am curious to see the thoughts on some of these items.
Especially those who are extremely supportive buyers of Honda, Toyota, and other foreign/foreign-owned manufacturers.
This seems like a major argument that I have heard in the past 12-18 months against GM, Chrylser, etc. but I have yet to see the issue put into perspective with the reality of the other automakers' received benefits and the reality of the difference between the two.

Go.

 

[Steve S]

The management practices of the over compensated CEOs haven't helped.

 

[BeanCounter]

Originally Posted By: Steve S
The management practices of the over compensated CEOs haven't helped.


You're right. They should live by the sword and die by the sword, so to speak.

 

[pcfxer]

When I heard that my government was joining the bailout party my jaw dropped. Apparently Ontario owns over 12% of Chrysler...and I get treated like [censored] at the dealer still eh? Makes sense to me. I'm an owner and get treated like I'm trying to pull a quick one on THEM!

Venting aside, giving the reigns BACK to the people who didn't take control of a flaming plane is the single dumbest move any GOVERNMENT or BUSINESS PERSON can every make! It's like no one went to Business 101.

 

[tomcat27]

C-level execs overcompensated? I think so. In a recent story on Mr. Toyoda, he shared an open office with others, his salary was under 1 mil, and he would actually drive an avalon except the board wont let him for security reasons.

I would like to see the govt assist in starting (not running, but assisting ) R & D centers in a few industries (auto, health, food, electronics, energy, energy....) other countries do this. (remember, you heard it here first, so when I run for president.....)

Union wages and the "us vs. them" attitude (from both sides) sure doesn't help, but there is a reason that the prior GM CEO was asked to leave. lack of product development (in the proper areas) wasted money (at one point GM had over 47 different fuel pumps in use) etc.

Chrysler was injured by Daimler and anhilated by Cerebrus. no new products from the Cerebrus folks. not suprising, as they are a VC & a "fix n break/sell" group that expects a return WAY higher than you can get from an auto company.

as far as bailouts vs. subsidies..... I just silently shake my head.

I am very disappointed in the "Big 3" (I know, an old term) for their answer seems to be they can only afford to build cars outside the US. somehow all of the Japanese and Korean mfrs have plants here and turn out good products very profitably.

 

[bretfraz]

To me it has less to do with the individual companies and their employees, and much much more to do with the impact the failure of these companies would have on the overall US economy. In that respect I support the bailouts.

Whatever ends up being said in this topic, the bottom line is the US economy has contracted, and we may never see the US sales volume as we have before. I think 17 million new cars and trucks is 100% pipedream for the forseeable future.

All car companies will have to operate under much lower sales forecasts, and that affects their entire operations. If the bailouts help GM and Chrysler restructure so they can be more competitive in a shrinking market, ultimately the investment will be worth it. If its good money after bad, that will be disappointing, but our govt and our people are world class when it comes to wasting money on silly stuff, so no big deal in the long run.

 

[BeanCounter]

Originally Posted By: tomcat27

I am very disappointed in the "Big 3" (I know, an old term) for their answer seems to be they can only afford to build cars outside the US. somehow all of the Japanese and Korean mfrs have plants here and turn out good products very profitably.



I'm going to presume that you realize the differences in operating costs between the unionized domestic manufacturers and the highly subsidized foreign auto makers.

Do you really doubt why they say that can't efficiently compete when the status quo is what it is?

I am not integrating management decisions and such, at least not with much scrutiny, as that involves quite a bit of subjectivity.

 

[tomcat27]

Originally Posted By: BeanCounter
I'm going to presume that you realize the differences in operating costs between the unionized domestic manufacturers and the highly subsidized foreign auto makers.

Do you really doubt why they say that can't efficiently compete when the status quo is what it is?

I am not integrating management decisions and such, at least not with much scrutiny, as that involves quite a bit of subjectivity.

Oh, I know.... high-wage workers with great (expensive) benefits and great (expensive) pensions and health plans. Plants located in expensive high-tax urban areas. after years of de3clining sales its impossible to fund the pensions and the health benefits - as they were actually a Ponzi scheme instead of self-funded.

compared to: brand new subsidized plants in "no tax" zones with subsidized energy rates, all located in farm belts where young, healthy labor was available at a lower cost (with a great work ethic).

no, not fair. but then fix the problems, dont mask them. then why didn't Saturn work? they tried to follow the "new" model (ok, really only a little) decent cars - but they never imagined early on that anyone would want anything other than a small econo car. they actually believed that buyers (foreign car buyers) would try a saturn and then move "up" to a GM. they never turned a profit.

 

[BeanCounter]

Originally Posted By: tomcat27

no, not fair. but then fix the problems, dont mask them.


I agree.
Government is not present to conduct business. Especially when it involves money that is not theirs to begin with.

 

[tomcat27]

several years I used to have lunchtime conversations with a buddy about how to fix GM. first of all, I realize that maybe I am just an armchair quarterback - but I am also fairly intelligent and I am not blind to all of the competitive forces as some seem to be. that being said, I would gladly donate my time to GM, to help them work this out. I have no hidden agenda and other than a couple of new cars for my efforts, I would not want an outlandish salary. wanna join? even back then we predicted that GM should shutter Saturn and one other division. I'm also not convinced that they need both Buick and Cadillac. but hey, what do I know?
Wanna hear some of my thoughts on how to fix Chrysler? I want a Viper for these.... hint: start with quality and dont keep blaming suppliers for low quality scores. Toyota? has a few electrical & engine control ghosts. and poor initial handling of the sludge issue. Nissan? I have suggestions for them - sorry Carlos Ghosn - you've done very well, but there is still room for improvement. VW. yup. ideas there too. the only one I can't pick on is Honda.

 

[chet2]

i work at a supplier so i am glad GM and chrysler were helped by govt thru bankruptcy...i have paid my share of taxes to govt and so has GM and dodge...i wish more people would support american mfg and quit buying chinese goods when possible...i recently bought a woodstove mfg in virginia and 4 pairs of hi quality socks made in NC as well a pontiac g5 assembled in ohio with engine and trans also assembled in usa...the Big 3 makes good cars now and honestly i get sick of people saying they make [censored]...we need to get our trade deficit down, it is too big

 

[CivicFan]

I'm sure somewhere in my portfolio of mutual funds I own shares of Toyota, Honda or Ford so for me, making car purchase decisions based on who owns what is not an issue. On personal level, I am more interested on what value that car adds to my life - both as a means of transportation and a location where I spend significant amount of time.

As far as the bailouts go, I am not against them during critical times. GM supports a huge infrastructure in its value chain - from raw materials to the dealer so if there is a major shock to the system, you will have a domino effect. While I am not directly associated with GM, the organization I work for has a service point in a town where auto parts suppliers are a major employer. When these guys go down, we will feel it, too.

 

[eljefino]

I soften my rage with the notation that 5x, 10x, something like that of the car bailout money went to all the investment banks on wall street. All they do is push paper around.

Then I have to keep seperate 401ks, HSAs, child college accounts, all pretax income but each with their own fees... I hate having all these stupid accounts floating around out there.

Automakers actually make something useful, and while there are a lot of overpaid suits that need to go, like wall st, there are a few working Joes too.

 

[GROUCHO MARX]

The management looked out for the management, the unions looked out for the members and no one gave a hoot about the customers. If this doesn't change then the money is wasted.

I doubt there are many Americans who didn't mind the bailout however most felt it wouldn't solve the cultural issues at the automakers which are at the heart of their failures.

 

[PandaBear]

I have mixed opinion on the bailout.

Against it because it was not really fixing a lot of the short/mid term problems in the products mix, R&D, and efficiency area (too many SUV/big cars of lower quality, inadequate parts sharing, etc), and focus too much on the money side of the business (fix the accounting problems rather than the real business of building cars).

However, knowing from the semiconductor industry and how each nation use its own subsidizes to win businesses and drive healthy, efficient competitors out of business. I truly believe that it really is important that we "bail out" or "subsidize" the US based not so big 3 for the moment. These business can be fixed and having the old debt written off, and the union in a conflict of interest themselves (being both the owner and the employee) should be able to resolve some of the cost issue. The breathing room hopefully will be able to get some of the new product design finished to get them back on track. I'd be sad to see low quality Chinese designed cars made in US to replace the not so low quality American cars on the road.

Ideally good businesses will replace bad businesses and the more efficient ones win, but sometimes the bad businesses win because they have government backing (i.e. Japanese and Korean) to weather storms that small efficient ones couldn't.

 

[SteveSRT8]

Our Gov't. has no business bailing out anyone. They're broke, actually they're even worse (deficit). Printing more money is just plain dumb. Period.

If the big 3 had folded, there would have been mad innovation at the grass roots level. And there would still be new cars. It wouldn't have just blown away like dust in the wind. The market would have been very responsive to the needs of the consumers.

No offense to the union workers, but the unions corruption and insistence on unreasonable pay and bennies is more responsible for the situation than you may think. The unions have more pull with our current prez than any other special interest group, and it is drastically influencing the legislation being passed by Congress.

 

[CivicFan]

They are not printing but borrowing most of it. Ultimately, it has very little material negative impact as long as there are lenders to lend us and we remain the currency of choice in global trade.

 

[CivicFan]

BTW, the "printing money" part is a portion of the money supply growth that the federal bank prints and then lends to the government (treasury). There is an economic theory behind that.

 

[benjamming]

Bean,

I am inclined to prefer subsidies if forced to choose, which we are. A bailout means a business has failed. A subsidy doesn't necessarily mean that the business has failed or would fail w/o the subsidy. Neither are OK with me b/c as you said, government isn't present to conduct business.

 

[rshaw125]

Bailouts are always terrible. The Chrysler bailout in 1980 had awful unintended consequences. Such as the big 3 operating with the knowledge that if things are really bad they'll be bailed out by the tax payer. If Chrysler had not been bailed out GM and Ford may well have woken up and made the necessary changes years ago.GM should have been allowed to go through a proper bankruptcy.Riding itself of the contracts with the UAW and emerging as a new, lean debt free company. But instead we had the government interfering in areas they are not qualified to.