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Bail faster Mr. Christian!

Troy Keith, The Armchair ConservativeA comparison between Treasury Secretary Henry Paulson and Captain Bligh may be a bit of a stretch (Ahab is probably a more fitting analogy), but this bail out voyage is bound to be a similar journey of chaos and confusion. The time for mutiny may well be at hand.

Given Washington's penchant for corruption, particularly with the plentiful bounty offered from the increasingly shallow pockets of the American taxpayer, the misguided leadership of the current administration is plotting a course that will most likely steer the concept of unfettered capitalism directly onto the twin reefs of bankruptcy and oversight.

I can offer no excuses for the Bush White House, and Obama's administration seems to be stepping in line for more of the same — with extra helpings for the holiday season. In the face of overwhelming evidence showing the deep corruption and botched management behind the financial crisis, we decide to pile on even more.

Years of runaway deficit spending and an inability to lead decisively on any issue besides the war on terror have brought us to the brink — the proverbial edge of the map where the ocean ends and the unknown awaits those foolish enough to keep sailing into the void. A new world may indeed be on the horizon, but rather than a land of milk and honey, it will most likely be a land of bread and cheese lines.

People went to prison over the Enron debacle, but Democrats skated through Fannie and Freddie's demise unscathed. Pockets are lined, perks are granted and governmental power is grabbed hand over fist.

House Republicans initially fought against the $700 billion bailout, only to be panicked into compliance (or is that assimilation?) after another dip in the market and the media's veiled threat to place all of the blame for any future financial turbulence squarely upon their heads.

Many claim that the government has forced the banking industry to get on board with a program that most financial leaders consider unnecessary and somewhat dubious in regards to its unspecified goals.

American Bankers Association president Edward Yingling wrote a forceful letter to Secretary Paulson stating:

[Many] banks run the risk of being subjected to additional unknown government requirements or restrictions in the future — restrictions that could have the perverse effect of discouraging private investment in banks.

Almost 95% of banks in this country remain well-capitalized. Since that time, many banks have been contacted by regulators, and urged, sometimes forcefully, to participate in the Capital Purchase Program.

Secretary Paulson recently informed us that the bailout money will not be used to purchase bad debt as initially intended.

Expressing their concern in a joint letter to Mr. Paulson, U.S. Senators Tom Coburn, Richard Burr and David Vitter stated:

We are concerned that the program has been fundamentally changed from its original intent and worry that continued changes may erode the structures of accountability put in to protect taxpayers.

Congress never intended for the TARP (troubled asset relief program) to be a blank check that could be spent with unlimited discretion. To ensure proper boundaries are in place to protect the taxpayer, we hope and expect that congressional approval will be sought by the administration before further changes are made.

The corruption deepens as, according to a recent NY Times article, "Lobbyists Swarm the Treasury for Piece of Bailout Pie."

With no definitive plan or demonstrable success shown for the first bailout, the big three auto makers are next in line with their hands extended. Execs from each company arrived at the nation's capital via private jets (approximately $10,000 per trip) to beg with silver cups in hand for government band aids to place upon their collective cancer.

Rep. Gary L. Ackerman of New York said:

It’s almost like seeing a guy show up at the soup kitchen in high-hat and tuxedo. . . . I mean, couldn’t you all have downgraded to first class or jet-pooled or something to get here?

Michael Capuano of Massachusetts added:

My fear is that you’re going to take this money and continue the same stupid decisions you’ve made for 25 years.

To his credit, Chrysler Chairman Robert Nardelli has offered to accept a $1 annual salary if it would help his company secure their portion of the proposed $25 billion bail out for the auto industry.

Late in the hearing, Rep. Peter Roskam of Illinois asked if the other executives would be willing to work for $1 per year as a symbolic gesture which prompted the following replies:

Richard Wagoner of General Motors ($15.7 million in 2007):
“I don’t have a position on that today.”

Alan Mulally of Ford ($21.7 million in 2007):
“I understand the intent, but I think where we are is okay.”

I sympathize with the situation the auto workers are currently facing, but this whole approach just seems contrary to the concept of capitalism and the American way in general. As unpleasant as the alternative may be, it would seem a far better option to put these failing companies out of their misery as quickly as possible so we could begin the process of rebuilding a viable presence in today's competitive global marketplace.

When the big three are paying more than $73 per hour in labor costs compared to Toyota's $48, something more than a short-term influx of cash is required. Toyota produces "American" cars, built in this country by American workers, but they're not saddled with astronomical legacy costs and unreasonable union demands.

Recent studies show that GM loses an average of $1,271 on every vehicle rolling off the assembly line compared to Toyota's profit of $1,715 or Nissan's $2,135. With monthly losses approaching $5 billion, how is a $25 billion bandage going to stop the hemorrhaging?

According to an editorial by Mitt Romney,

If General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won't go overnight, but its demise will be virtually guaranteed.

I'd have to agree. For whatever reason, Congress has postponed their decision and asked the big three executives to come back again to make a more convincing argument for our money. Democrats appear to be putting off a definitive decision until Mr. Obama's new administration is at the helm. They've not allowed the Republicans’ auto plan to even come up for a vote as White House press secretary Dana Perino stated on Thursday:

Unfortunately it looks like Sen. Reid just wants to pick up his ball and go home for the next two weeks — two months — for vacation.

These are uncertain times, particularly with the holiday season upon us and our economy desperate for the traditionally free-flowing Christmas cash. The world may be rejoicing in Obama's recent victory, but the market doesn't seem to share the enthusiasm as investors race to pocket what little profit may be available before the next administration comes into power. Holiday shoppers are predicted to spend about half of what they've doled out in previous years, and most financial wizards are prophesying that what we're seeing now is only the start of a long, slow process in which the market resets itself.

I wish Mr. Obama well — he certainly has his work cut out for him. While drastic action may be required, it must be the right action. Rash decisions and sweeping New Deal legislation will most likely send our economy spiraling down a whirlpool towards a fate known only to the Tidy-Bowl man of the 70s. Real courage and leadership in these times may well mean doing less rather than more — allowing the economy to reboot on its own. Triage for those that can be saved while others are made comfortable and allowed to die with dignity.

  • Bob

    First some disclosure, though I have never been directly employed by any of the big three my children have been feed at the Ford Family trough for most of my working life. When I see a nice big F250 or F350 drive down the road I feel the same pride I imagine a builder feels when driving by some building they helped to bring into existence. If you need a truck it is the best there is.

    I am no fan of government bailouts. That said let us recognize that a significant part of the blame for both the financial industry and the auto industries current plight can be laid at the feet of government policy. Neither industry is blameless. They were both complicit in their own downfall. The number of times I heard we need to get ready for when the price of gas goes up is too many to count. Yet they did not.

    The private jet circus is nonsense intended to distract. It is nothing more than the wave of the magician’s hand that obfuscates what is really going on. You would be hard pressed to find three business executives whose time is as critical as these three in the nation. I have seen the work that Mr. Mulally is doing including the sharp end of it that says in these times my fat American job there is one that has to be cut. I do not begrudge him a cent. If the others are kept from creating a vortex that that pulls everyone in he has a good shot at returning the Ford to the top again. I would prefer we do that by changing the national policies that are destroying manufacturing in this country rather than bailouts. If that won’t be done and I judge it won’t then bring on the bailouts.

    Mr. Romney is an asshat thank goodness Republican voters had the sense to send him packing. The notion that an intact American auto industry can emerge on the other side of bankruptcy is nonsense in spades.

    For those that would sanctify the foreign competitors and trash the US manufacturers I offer a bit of reading below.

    Toyota downgrade:
    http://www.bloomberg.com/apps/news?pid=20601087

    Ford Safety:
    http://www.google.com/hostednews/ap/article/ALe

    Ford quality:
    http://www.jdpower.com/autos/articles/2007-Init
    http://www.jdpower.com/autos/ratings/quality-ra
    http://www.jdpower.com/corporate/news/releases/

  • troykeith

    I think the concept of American cars being lemons went the way of the Edsel about 10 years ago. There was a time when foreign cars blew ours off the roads – in all categories such as mileage, safety and dependability, but many of those issues have since been addressed and consumers can expect a fair degree of reliability and longevity from the big three auto makers. That being said, we recently passed our 1997 Subaru with 230,000 miles down to our son and I’ve never done anything to it except basic maintenance. It’ll probably go for another 100k if he takes care of it.

    As mentioned in the article, nearly all “foreign” cars are essentially American in terms of their production anyway.

    If you’re not in favor of bankruptcy, I wonder what you think the solution for the current problem would be? If not union/legacy/benefit/labor issues, what is causing American car manufacturers to go into the hole each month while competitors continue to flourish? GM still sells more cars than Toyota but they’re losing money on each transaction.

    According to a WSJ article, they were losing $181,000 per minute in the 2nd quarter.
    http://online.wsj.com/article/SB122722835387246

    I’d rather see any gov’t money applied towards settling out the bloated benefit packages that allow workers to retire in their early fifties instead of simply propping these failing corporations up for another 2 or 3 months only to be right back where they started.

    Bankruptcy is not the end – it’s simply a chance to reorganize. A way to start over and begin to take care of business the way it should be done now.. the way it should have been planned for and implemented 20 years ago.

    http://www.washingtonpost.com/wp-dyn/content/st

  • Bob

    TK, Anecdotally I am driving a pair of Caravans one with 240K (1999 and 2003) and I don’t expect to replace either one soon. I may take that back if I can find the right deal on an Excursion or a Yukon XL that some fool wants to get rid of due to the gas price scare.

    Tell yourself they are “essentially American” if it helps you sleep better at night, but saying so will not make it true. US based plants of foreign manufactures are as much about marketing and PR as they are about manufacturing.

    Foreign manufacturers not immune from the freefall:

    Toyota:
    http://www.bloomberg.com/apps/news?pid=20601101
    http://online.wsj.com/article/SB122782182980062
    http://www.bloomberg.com/apps/news?pid=20601087
    http://www.bloomberg.com/apps/news?pid=20601101
    http://www.reuters.com/article/rbssConsumerGood

    Honda:
    http://www.reuters.com/article/ousiv/idUSTRE4AR

    Nissan:
    http://finchannel.com/index.php?option=com_cont
    http://www.forbes.com/feeds/ap/2008/11/03/ap564

    Koreans:
    http://money.cnn.com/news/newsfeeds/articles/dj
    http://www.tradingmarkets.com/.site/news/Stock%

    You and Mitt are just wrong on this one. No operational car company will emerge from a big three bankruptcy. At best, small chunks will survive as parts of someone else.

    My preferred solution to recover manufacturing in America is a low across the board tariff managed for revenue with this income directly rebated quarterly to each American citizen. I would start this tariff by estimating the cost of all Federal, State, and Local regulation imposed on industry as a starting point. I would be inclined to cut Canada and Mexico a small discount as their problems are our problems. To the extent you are right that they are all “essentially American” they will be held blameless and I welcome them.

    My next proposal is that we craft Federal, State, and Local policy that encourages that the USA has the lowest cost of energy of any nation. We need to recognize that from an employment standpoint that manufacturing is a declining industry. It doesn’t matter where it is made it just doesn’t take as many people to make it. Take a look at agricultural employment over the last hundred years. It won’t take 100 years for manufacturing.

    Like I said, I think my preferences are not likely to be enacted and so reluctantly I conclude bring on the bailouts

  • troykeith

    Well, that’s definitely a well crafted response – infinitely better than the “you’re stupid, I’m right” approach so often seen in this type of format (but I still have to disagree). You say that your suggestions are not likely to be enacted so I'm not sure what sort of long term solution a temporary hand out will bring these companies that are losing billions every month.

    I can’t see a tariff approach ever getting any traction given the free trade mania that seems to be so prevalent these days – we’ve been ‘taking it’ from other nations that have a similar mindset for decades and yet we do nothing. It’s possible, but do you really see this coming from an Obama administration?

    As far as the buggy whip argument goes, manufacturing is a declining industry because we’ve let it become so. Agreed that it’s not the future, but we could have been doing much more up to this point if we hadn’t ceded our production capacities to foreign countries utilizing what amounts to little more than slave labor. If we’ve put all our eggs into the technology/information basket, you’d think we’d have some better alternatives to show for it at this point.

    Energy conservation and the associated industries that arise are great, but many might argue that the cafe standards had much to do with this predicament. That’s not to say that we couldn’t have gotten ahead of the ball twenty years ago, but I’d prefer to see such things driven by the consumers rather than mandated from the top down.

    Create a reliable, competitively priced “American car” that gets 50+ mpg and lasts consistently for 12 years and we’d still be faced with the big 3 losing money on each deal. It’s not a question of not selling enough cars – it’s all of the hidden costs associated with the current production models. I don’t see that being addressed by the bail-out mentality.

    It’ll be interesting to see how it plays out, but I still just don’t understand how giving these companies what amounts to 2 or 3 months of operating expenses is going to solve anything in the long run. Without specific solutions or provisions attached to the money, they’ll be right back where they started before we know it.. and what then? I think they could all survive a bankruptcy situation if the enormous benefit stone could be lifted from their necks. I wouldn’t want to see those people left out in the cold, but I’d much rather see our gov’t bail-out money going towards settling those obligations and giving the big 3 a fresh start on a more level playing field than just passing out some quick cash for more of the same.

  • Bob

    TK and Ed

    I did not say the American jobs of the employees of the foreign manufacturers were not American jobs. I am an employee of a foreign company. TK said “nearly all “foreign” cars are essentially American in terms of their production anyway”. I called BS on that in perhaps an inelegant way. Let us take a step back and look at the data. This data is from the Level Field Institute which is not an unbiased source, if the data is wrong I am happy to be corrected. I don’t think the point they make that there is no actual balance or parity can actually be refuted.

    Jobs per car foreign vs. domestic:
    http://www.levelfieldinstitute.org/index.html
    http://www.levelfieldinstitute.org/files/scorec

    The foreign manufacturers have multiple reasons for locating design and production here. Marketing and PR to convince buyers and legislators that they are all the same and to maintain access to this market are not insignificant parts of those reasons.

    I don’t wish to stifle capitalism and I welcome any company foreign or domestic that wishes to compete here. That is why I like a low tariff as my preferred choice of solution it is neutral to all that compete here. Those domestic company products manufactured elsewhere will be punished just the same as those of foreign companies, and those foreign company products made here will have the same edge as that given to all who manufacture things here. That Toyota truck with 85% US based content will have the same edge over foreign production. Just the same as that GM car with 35% US based content will be penalized. I don’t wish to close our market. I just wish that we put our own interest above that of other nations. I would love an American auto industry with a dozen active competitors with most of them foreign corporations.

    The Big 3 of the 70s that made junk died long ago. It is a strawman.

    The energy policy I want has nothing to do with conservation. It is all about growth. No nation ever conserved their way to preeminence.

    The big 3 did not cause either the gas price spike or the financial crisis. Letting them die due to them is hurting your nose to spite your face. I think the linkage I have provided shows that this is not just a big 3 problem. You keep pointing to union/legacy issues as the proximate cause of the problem. I think they are exacerbating issues these companies were well on their way to addressing, but they are not the cause of the problem. Moving the legacy cost to the pension guarantee fund still leaves it in the taxpayer’s hands. I will no more be a defender of the unions, than I would be lured into being a defender of all of George Bush’s policies during the election.

    My description of Mr. Romney was intemperate and to the extent that it led to Troy feeling I said “you’re stupid, I’m right” I am sorry. I wouldn’t waste my time talking to you if I actually thought that was true. A car second only to a house is the longest term product commitment most people make. They will not do business with a company in bankruptcy except at fire sale prices. Look at the sales drop Chrysler took on the Daimler sale. That is small potatoes to what will happen in a bankruptcy.

  • troykeith

    There may be other issues to consider besides the cost of worker benefits (past and present), but when I see a disparity pushing $30 in the hourly expense per worker, I’m not sure what else it could be attributed to. Interesting links you provided, but when I see a statement like: “more than 80% of Detroit’s North American losses last year would have been wiped out – if only America had a healthcare system that was as affordable for employers and workers as the rest of the industrialized world.” It seems to all come back around to the benefit issue which must surely contribute to the continued loss of money on each auto produced. I’m not an expert in this field and don’t pretend to understand the nuances of the multi-billion dollar automotive industry, but that’s how I take it at face value.

    We’ve gotten bogged down with the auto industry specifically, but I think the larger issue is the concept of justifying government/taxpayer bail outs like this in a supposedly capitalistic society. I know we’ve dabbled with it before (Chrysler and the airlines to name a couple), but if memory serves me, those were conditional “loans” and nowhere near the levels we’re seeing today. Maybe I’m just a skeptic, but it seems that there must be more to this than meets the eye. I’m hesitant to open the socialism topic again, but this is contrary to everything I’ve ever understood about business and how it operates in our country. I’m on my 4th business right now so maybe I should be getting in line before it’s too late.

    For what it’s worth, your comments were not taken in a negative way – at least not by me. I was trying to acknowledge the effort you put into your replies. It’s easy for people to make one line, inflammatory remarks (I can think of a few names), but this is supposed to be about ideas and disagreements – it’s hard to have either if people don’t take the time to offer their side of the argument effectively. I disagree, but I think your positions are well thought out and backed up w/specifics.

  • Jeff

    my responses are more than one line. usually two. sometime three. And, don't forget Ed Burley is always right.

  • http://www.michigantaxes.com/wordpress Ed Burley

    Thanks Jeff, it's good to see that you finally realize that.

  • Bob

    Another source for the data well documented.
    http://bigthreeauto.procon.org/

  • troykeith

    Jay Leno recently on the bailout(s):

    “Little bit of history trivia. It was this week, actually yesterday, in 1961, that Fidel Castro announced … he was a Marxist and would turn Cuba into a communist country where the government would take over all the major industries. Or as we call that today, a bailout.”

    “And A.I.G., you know the insurance company that's getting over $11 billion of our dollars in bailout money? Well, they announced they're giving 130 of their executives cash awards of up to $3 million. But they say, 'Oh, these are cash awards, not bonuses.' They say they are payments to guarantee that their top executives stay with the company. Oh, yeah, God forbid A.I.G. should lose any of these business geniuses. Imagine … what kind of shape they'd be in without these people?”

  • troykeith

    Jay Leno recently on the bailout(s):

    “Little bit of history trivia. It was this week, actually yesterday, in 1961, that Fidel Castro announced … he was a Marxist and would turn Cuba into a communist country where the government would take over all the major industries. Or as we call that today, a bailout.”

    “And A.I.G., you know the insurance company that’s getting over $11 billion of our dollars in bailout money? Well, they announced they’re giving 130 of their executives cash awards of up to $3 million. But they say, ‘Oh, these are cash awards, not bonuses.’ They say they are payments to guarantee that their top executives stay with the company. Oh, yeah, God forbid A.I.G. should lose any of these business geniuses. Imagine … what kind of shape they’d be in without these people?”

    • Bob

      Colbert on the Auto bailout:
      http://www.hulu.com/watch/47865/the-colbert-report-the-word—season-of-giving#s-p1-sr-i1

      I love his bailout Auto vs. banking analogies. My pinto was a hand me down from my parents not my Grandma. It was a brown wagon and 60 in a pinto felt like 90 in anything made today.

    • Bob

      Of course the problem is just that the US does not make cars that US consumers want, but then again how do you explain Toyota’s decision on their new Prius plant?

      Toyota delays new Prius plant:
      http://www.detnews.com/apps/pbcs.dll/article?AID=/20081216/AUTO01/812160365/1148

    • Bob

      Toyota $1.5 billion to $1.7 billion this fiscal year:
      http://money.cnn.com/2008/12/22/news/companies/toyota/?postversion=2008122212

      Perhaps we should recalculate those comparisons?

      • Jeff

        Where you hiding TK?

        • troykeith

          Hi Jeff.. still here, just a little busy with a family health issue these days. I’ve thought about posting quite a bit lately, but as recent events continue to unfold without criticism or evaluation by the media (or the masses), I find myself speechless more often than not.. The Middle East, bail outs, Blago the Destroyer, the Al Franken fiasco – all coupled with the underlying realization that Gov’t is now the answer for everything.. where do you begin?

          • Jeff

            ah, troy, take it easy. Nothing like a 3 hour walk in the snow to clear the mind. But first, put on a stew. big pot roast, tomatoes, carrots, garlic, onions. forget about middle east, Blago, and my pal Al Franken. In the big picture its not important. Your health, your life, your family, that’s where its at my man. Live it up.

  • Bob

    Colbert on the Auto bailout:
    http://www.hulu.com/watch/47865/the-colbert-rep

    I love his bailout Auto vs. banking analogies. My pinto was a hand me down from my parents not my Grandma. It was a brown wagon and 60 in a pinto felt like 90 in anything made today.

  • Bob

    Of course the problem is just that the US does not make cars that US consumers want, but then again how do you explain Toyota's decision on their new Prius plant?

    Toyota delays new Prius plant:
    http://www.detnews.com/apps/pbcs.dll/article?AI

  • Bob

    Toyota $1.5 billion to $1.7 billion this fiscal year:
    http://money.cnn.com/2008/12/22/news/companies/

    Perhaps we should recalculate those comparisons?

  • Jeff

    Where you hiding TK?

  • troykeith

    Hi Jeff.. still here, just a little busy with a family health issue these days. I've thought about posting quite a bit lately, but as recent events continue to unfold without criticism or evaluation by the media (or the masses), I find myself speechless more often than not.. The Middle East, bail outs, Blago the Destroyer, the Al Franken fiasco – all coupled with the underlying realization that Gov't is now the answer for everything.. where do you begin?

  • Jeff

    ah, troy, take it easy. Nothing like a 3 hour walk in the snow to clear the mind. But first, put on a stew. big pot roast, tomatoes, carrots, garlic, onions. forget about middle east, Blago, and my pal Al Franken. In the big picture its not important. Your health, your life, your family, that's where its at my man. Live it up.

  • troykeith

    I think the concept of American cars being lemons went the way of the Edsel about 10 years ago. There was a time when foreign cars blew ours off the roads – in all categories such as mileage, safety and dependability, but many of those issues have since been addressed and consumers can expect a fair degree of reliability and longevity from the big three auto makers. That being said, we recently passed our 1997 Subaru with 230,000 miles down to our son and I’ve never done anything to it except basic maintenance. It’ll probably go for another 100k if he takes care of it.

    As mentioned in the article, nearly all “foreign” cars are essentially American in terms of their production anyway.

    If you’re not in favor of bankruptcy, I wonder what you think the solution for the current problem would be? If not union/legacy/benefit/labor issues, what is causing American car manufacturers to go into the hole each month while competitors continue to flourish? GM still sells more cars than Toyota but they’re losing money on each transaction.

    According to a WSJ article, they were losing $181,000 per minute in the 2nd quarter.
    http://online.wsj.com/article/SB122722835387246299.html

    I’d rather see any gov’t money applied towards settling out the bloated benefit packages that allow workers to retire in their early fifties instead of simply propping these failing corporations up for another 2 or 3 months only to be right back where they started.

    Bankruptcy is not the end – it’s simply a chance to reorganize. A way to start over and begin to take care of business the way it should be done now.. the way it should have been planned for and implemented 20 years ago.

    http://www.washingtonpost.com/wp-dyn/content/story/2008/11/18/ST2008111801104.html

  • http://www.michigantaxes.com/wordpress Ed Burley

    I wasn’t planning on commenting on this thread, but I’m afraid that your inaccurate information has to be confronted. You say, “Tell yourself they are “essentially American” if it helps you sleep better at night, but saying so will not make it true. US based plants of foreign manufactures are as much about marketing and PR as they are about manufacturing.”

    You would be hard pressed to convince the thousands and thousands of employees of these companies, as well as the employees of all the US based suppliers, of this. In fact, I was once one of those employees, for two different suppliers – one Tier One and the other Tier Two. Those are REAL jobs, not “marketing and PR” inventions.

    With all the talk about manufacturing, one only needs to consider that back in the late ’70s, the Big 3 was making, for the most part, JUNK. Except for trucks, which have always been pretty solid, the car market produced garbage. The unions were protecting drunks and drug addicts that worked in those plants, while convincing those poor saps who actually gave a damn about building a quality product that it was in their best interest to protect them. The foreign cars were already here as imports. In the ’80s, the Japanese started improving their quality (mostly their undercarriage protection), and they also realized that building plants here in the US was beneficial to them (due to the onerous laws and regulations that stifled them in their own countries).

    Since the ’70s, in spite of increasing quality, the Big 3 have been unable to create jobs. Those companies, and their suppliers, have seen on overall net decrease of jobs. The unions bucked automation which has been, contrary to those who protest, a net creator of jobs. Increased productivity should have resulted in a net job gain, but due to the union’s reluctance, has had the opposite effect.

    The Japanese, on the other hand, have built new plant after new plant (and notice that none of them are in Michigan – due to unions). In addition, these Japanese transplants, and their German and Korean counterparts, have bought parts from American manufacturers that have shown a continual job gain over that same time period.

    So, in light of the fact that the unions and the Big 3 have net job losses, and the transplants have resulted in job gains, why should we use our tax money to help the Big 3 continue their downward spiral?

    Ultimately, the whole idea of capitalism is the risk that is built into the system. Only government continues on despite continued failure. Now, thanks to the corporatism that we are seeing – Big Business and Big Government in bed together, with their offspring, Economic Failure – we are asked to eliminate the risk of bad business practice. Why should we do it? I see no good reason to do so. I oppose this bailout as much as I opposed the financial bailout.

  • troykeith

    Well, that’s definitely a well crafted response – infinitely better than the “you’re stupid, I’m right” approach so often seen in this type of format (but I still have to disagree). You say that your suggestions are not likely to be enacted so I’m not sure what sort of long term solution a temporary hand out will bring these companies that are losing billions every month.

    I can’t see a tariff approach ever getting any traction given the free trade mania that seems to be so prevalent these days – we’ve been ‘taking it’ from other nations that have a similar mindset for decades and yet we do nothing. It’s possible, but do you really see this coming from an Obama administration?

    As far as the buggy whip argument goes, manufacturing is a declining industry because we’ve let it become so. Agreed that it’s not the future, but we could have been doing much more up to this point if we hadn’t ceded our production capacities to foreign countries utilizing what amounts to little more than slave labor. If we’ve put all our eggs into the technology/information basket, you’d think we’d have some better alternatives to show for it at this point.

    Energy conservation and the associated industries that arise are great, but many might argue that the cafe standards had much to do with this predicament. That’s not to say that we couldn’t have gotten ahead of the ball twenty years ago, but I’d prefer to see such things driven by the consumers rather than mandated from the top down.

    Create a reliable, competitively priced “American car” that gets 50+ mpg and lasts consistently for 12 years and we’d still be faced with the big 3 losing money on each deal. It’s not a question of not selling enough cars – it’s all of the hidden costs associated with the current production models. I don’t see that being addressed by the bail-out mentality.

    It’ll be interesting to see how it plays out, but I still just don’t understand how giving these companies what amounts to 2 or 3 months of operating expenses is going to solve anything in the long run. Without specific solutions or provisions attached to the money, they’ll be right back where they started before we know it.. and what then? I think they could all survive a bankruptcy situation if the enormous benefit stone could be lifted from their necks. I wouldn’t want to see those people left out in the cold, but I’d much rather see our gov’t bail-out money going towards settling those obligations and giving the big 3 a fresh start on a more level playing field than just passing out some quick cash for more of the same.

  • Bob

    TK and Ed

    I did not say the American jobs of the employees of the foreign manufacturers were not American jobs. I am an employee of a foreign company. TK said “nearly all “foreign” cars are essentially American in terms of their production anyway”. I called BS on that in perhaps an inelegant way. Let us take a step back and look at the data. This data is from the Level Field Institute which is not an unbiased source, if the data is wrong I am happy to be corrected. I don’t think the point they make that there is no actual balance or parity can actually be refuted.

    Jobs per car foreign vs. domestic:
    http://www.levelfieldinstitute.org/index.html
    http://www.levelfieldinstitute.org/files/scorecards/US_v_Foreign.pdf

    The foreign manufacturers have multiple reasons for locating design and production here. Marketing and PR to convince buyers and legislators that they are all the same and to maintain access to this market are not insignificant parts of those reasons.

    I don’t wish to stifle capitalism and I welcome any company foreign or domestic that wishes to compete here. That is why I like a low tariff as my preferred choice of solution it is neutral to all that compete here. Those domestic company products manufactured elsewhere will be punished just the same as those of foreign companies, and those foreign company products made here will have the same edge as that given to all who manufacture things here. That Toyota truck with 85% US based content will have the same edge over foreign production. Just the same as that GM car with 35% US based content will be penalized. I don’t wish to close our market. I just wish that we put our own interest above that of other nations. I would love an American auto industry with a dozen active competitors with most of them foreign corporations.

    The Big 3 of the 70s that made junk died long ago. It is a strawman.

    The energy policy I want has nothing to do with conservation. It is all about growth. No nation ever conserved their way to preeminence.

    The big 3 did not cause either the gas price spike or the financial crisis. Letting them die due to them is hurting your nose to spite your face. I think the linkage I have provided shows that this is not just a big 3 problem. You keep pointing to union/legacy issues as the proximate cause of the problem. I think they are exacerbating issues these companies were well on their way to addressing, but they are not the cause of the problem. Moving the legacy cost to the pension guarantee fund still leaves it in the taxpayer’s hands. I will no more be a defender of the unions, than I would be lured into being a defender of all of George Bush’s policies during the election.

    My description of Mr. Romney was intemperate and to the extent that it led to Troy feeling I said “you’re stupid, I’m right” I am sorry. I wouldn’t waste my time talking to you if I actually thought that was true. A car second only to a house is the longest term product commitment most people make. They will not do business with a company in bankruptcy except at fire sale prices. Look at the sales drop Chrysler took on the Daimler sale. That is small potatoes to what will happen in a bankruptcy.

  • http://www.michigantaxes.com/wordpress Ed Burley

    Bob,
    My background, and the knowledge that I obtained while doing that job, is sufficient, in my mind, to make the argument. As you pointed out, The Level Field Institute is a biased organization, by it’s own name – level playing field.

    The Big 3′s problems were not the result of the gas price spike (which is a thing of the past now – so that should fix the Big 3′s problems, if it were indeed true), nor the banking crisis. These things certainly exacerbated the Big 3′s financial situation, but they have been struggling for years.

    Probably one of the biggest issues that the Big 3 has to deal with is the so-called “Jobs Bank.” Here, laid off workers are paid their full pay to sit on their butt and play cards, or watch TV. What nonsense!

    Until the unions agree to help the Big 3 to compete on the so-called “level playing field,” I will not back any bailout.

  • troykeith

    There may be other issues to consider besides the cost of worker benefits (past and present), but when I see a disparity pushing $30 in the hourly expense per worker, I’m not sure what else it could be attributed to. Interesting links you provided, but when I see a statement like: “more than 80% of Detroit’s North American losses last year would have been wiped out – if only America had a healthcare system that was as affordable for employers and workers as the rest of the industrialized world.” It seems to all come back around to the benefit issue which must surely contribute to the continued loss of money on each auto produced. I’m not an expert in this field and don’t pretend to understand the nuances of the multi-billion dollar automotive industry, but that’s how I take it at face value.

    We’ve gotten bogged down with the auto industry specifically, but I think the larger issue is the concept of justifying government/taxpayer bail outs like this in a supposedly capitalistic society. I know we’ve dabbled with it before (Chrysler and the airlines to name a couple), but if memory serves me, those were conditional “loans” and nowhere near the levels we’re seeing today. Maybe I’m just a skeptic, but it seems that there must be more to this than meets the eye. I’m hesitant to open the socialism topic again, but this is contrary to everything I’ve ever understood about business and how it operates in our country. I’m on my 4th business right now so maybe I should be getting in line before it’s too late.

    For what it’s worth, your comments were not taken in a negative way – at least not by me. I was trying to acknowledge the effort you put into your replies. It’s easy for people to make one line, inflammatory remarks (I can think of a few names), but this is supposed to be about ideas and disagreements – it’s hard to have either if people don’t take the time to offer their side of the argument effectively. I disagree, but I think your positions are well thought out and backed up w/specifics.

  • Jeff

    my responses are more than one line. usually two. sometime three. And, don’t forget Ed Burley is always right.

  • http://www.michigantaxes.com/wordpress Ed Burley

    Thanks Jeff, it’s good to see that you finally realize that.

  • Bob

    Another source for the data well documented.
    http://bigthreeauto.procon.org/

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