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| Home Front Economy |
| Yet Another GM Bailout |
| 2008-11-11 |
| General Motors has once again approached the federal government with its hand out. It should not be forgotten that in September of 2008, Congress gave the "big three" automakers a loan totaling $25 billion. Now they are back. This time they say that with a mere $50 billion they can turn things around and become profitable in the future. The management of GM and Ford as well as the UAW have been meeting with Nancy Pelosi to arrange a deal. GM claims that if the government does not give them the money they demand it will spell doom for the company and thus the entire US economy. Let's consider the impact of GM ceasing to exist highly unlikely even if they declare bankruptcy. Hypothetically, GM would close its doors and all 266,000 workers would be unemployed, never to find work again, or so GM would have the public believe. GM maintains that it is really in the best interest of the country and economy to continue to support their failing business model. After all, in what kind of a world would the government allow a company that employs 266,000 workers to fail? Descending into an abstract economics lesson about shifting resources to marginally more productive activities may be ineffective; therefore, I will approach this issue from a more philosophical angle. The basis of GM's claim is essentially that they are too big or too important to fail due to their massive labor force. But how massive is their labor force relative to other American companies? It may be surprising that the following companies employ a larger number of workers than GM: Target, AT&T, GE, IBM, McDonalds, Citigroup, Kroger, Sears, and Wal-Mart. It is also worth noting that Home Depot, United Technologies, and Verizon all employ nearly as many workers as GM. The question must be posed: Should the government bail out all 12 of these companies and, if so, at what cost? I doubt that if Wal-Mart, with their 2.1 million employees, went to the government or the American people and demanded a bailout that they would receive much sympathy, let alone money. But if we are going to base worthiness of bailout on number of employees alone, then Wal-Mart is almost 7 times more worthy than GM. (I have largely neglected Ford, whose executives are also demanding a bailout. I believe that it is enough to simply state that Abercrombie & Fitch employs almost 7,000 more workers than does Ford. Would the failure of Abercrombie & Fitch's threaten the economy? I think not.) It is unethical to force taxpayers to pay billions of dollars in order to bail out a company with a failing business model. After all, they cannot even claim, as banks did, that it is an industry-wide problem. Because if it were industry-wide, Toyota, Hyundai, Honda, Volkswagen, etc. would all be joining their American counterparts on Capitol Hill with their collective hands out. For years GM and Ford have produced a product that consumers do not value as much as the product provided by their competitors. Rather than changing their products or business model, they instead spent small fortunes on lobbyists. If the government does bail out GM, rest assured that this will not be the last time. But even if the government gives GM a check every week, there will come a time when no amount of government money will be enough to save them. What is the best solution? In a word, bankruptcy. By filing for bankruptcy protection, GM can escape the death grip the UAW has on the business. Bankruptcy would allow for restructuring on an unprecedented scale. There is a good chance that a highly competitive company could rise from the ashes of what we today call GM. Even if GM itself was unable to survive bankruptcy, the resources freed from its grasp could be hugely beneficial to other automotive companies that make products that American consumers value more. As taxpayers, we have a right to object to this misuse of our money. |
| Posted by:tipper |
| #28 GM to suspend production at Korean plants General Motors plans to suspend production at its factories in South Korea for about two weeks starting next month in one of the strongest signs yet that the crisis in carmaking has spread to Asia. The shutdown will take effect from late December and affect all five of GMâs Korean plants formerly owned by Daewoo, which form one of the loss making US carmakerâs best-performing business units. âThe economic crisis is truly global,â Jay Cooney, GM Daewooâs vice-president, said. âWhat weâre beginning to see here in Asia is no different from what is going on in Europe and what has already happened in the US.â Company officials said the temporary closure in Korea stemmed from slowing demand and GMâs need to manage production and rising inventories rather than a shortage of cash. GM said last week it had burned through $6.9bn of cash in the third quarter, and warned it might reach the minimum amount of money needed to stay in business by next year unless it received financial aid or car markets improved. However, slowing business at GMâs formerly money-spinning Asian arm will add to mounting troubles at GM, which is lobbying US lawmakers for funds to rescue it from financial failure. Separately PSA Peugeot Citroën on Tuesday confirmed it had dismissed about 1,000 temporary workers in China at its joint venture with local carmaker Dongfeng because of slower sales. The layoffs will reduce the headcount from 9,000 to about 8,000, a spokesman said. |
| Posted by: 3dc 2008-11-11 20:38 |
| #27 that's a noting but a Vega. As Shakespeare said, a Vega by any other name would rust as fast. |
| Posted by: SteveS 2008-11-11 19:20 |
| #26 GM really screwed the pooch when they killed Oldsmobile Nuss! Nuss! Ima need the saline fluids and the good stuff. Ifn you are catch mi drift |
| Posted by: .5mt 2008-11-11 15:54 |
| #25 GM really screwed the pooch when they killed Oldsmobile and continued to keep nursing the Buick along. If Ransom E. were alive today he would be rolling over in his grave..... |
| Posted by: USN, Ret. 2008-11-11 15:44 |
| #24 Obamalada (note Land of Lincoln plates) - if you have to ask how much it costs, you won't be able to afford it. Pictured is the 2010 thru 2020 model with windsheild and side window |
| Posted by: Besoeker 2008-11-11 14:09 |
| #23 3, some other company will get that debt and it will be owed to the new company. |
| Posted by: Mike N. 2008-11-11 13:14 |
| #22 If GM goes bankrupt what happens to GMAC financed auto purchases? Do all of us have to come up with the dough on the spot or lose our cars? |
| Posted by: 3dc 2008-11-11 13:07 |
| #21 $2.89/share @ 1:09 eastern time |
| Posted by: 3dc 2008-11-11 13:06 |
| #20 Seriously, I'm no fan of Managment, but they're NOT responsable for crappy design,just responsible for putting it together as well as possible. As well as the design allows. |
| Posted by: Redneck Jim 2008-11-11 11:45 |
| #19 The single best thing for GM, and Ford, is to take the bankruptcy tack. They then abort, with a judge's orders, their existing union agreements. Cleans the slate with regard to wages, health benefits, retirement benefits, contractual agreements with suppliers, et al. However, management still fears this route, cause the same judge could dump their dumb asses, force sales of all corporate assets both domestic and worldwide. So the Top Monkeys try to hold on, riding the backs of taxpayers. Either route places a tremendous burden on taxpayers. The next large injection of billions to the auto industry ought to be reserved for development towars enabling electrical plug-ins, dooming the shieks to camel f**king for the remainder of their days. Combined with the capital needed to upgrade electrical power infrastructure, this will require a coupla trillions. We need nukes and a superconducting power grid to support an electric auto transition. But at least we would be energy independent. |
| Posted by: Woozle Elmeter 2700 2008-11-11 10:58 |
| #18 .5MT: It was Vega sheet metal with Monza badging. That which we call a Vega, by any other name, is just as craptacular. |
| Posted by: Mike 2008-11-11 10:44 |
| #17 I can't wait for my Government designed and built car....long live THE HOMER! http://simpsons.wikia.com/wiki/Image:The_Homer.jpg |
| Posted by: Uncle Phester 2008-11-11 10:42 |
| #16 Let 'em fail. When the plants fall idle, someone can buy them for pennies on the dollar and start a new car company from scratch that is both viable and efficient. And one that preferably keeps the unions out. That's how the market's supposed to work, right?? |
| Posted by: IG-88 2008-11-11 10:40 |
| #15 Or jobs disappear and wages go so low that the gov can't cut your pension check each month. |
| Posted by: ed 2008-11-11 10:07 |
| #14 No big deal. We can just triple the minimum wage. |
| Posted by: .5mt 2008-11-11 10:01 |
| #13 Should We Really Bail Out the Big Three Automakers with $73.20 Per Hour Labor? Even though this article is anti big three auto, the first chart explains why having a domestic auto industry is important. It's important at even 1/2 the hourly wage, esp now that high school graduates are limited to working for Walmart wages. For the health of the economy, bring auto production back home. |
| Posted by: ed 2008-11-11 09:14 |
| #12 Like I said yesterday, what's the UAW giving up to save their jobs? |
| Posted by: tu3031 2008-11-11 09:12 |
| #11 I guess the marginal tax rate would go up to 70% in states w/ income tax, like California. |
| Posted by: ed 2008-11-11 08:18 |
| #10 top rate to 39.6% in 2011 |
| Posted by: ed 2008-11-11 08:11 |
| #9 There will plenty of Gov money when all income tax rates goes up including the top rate to 39.6% in 2001 w/ the expiration of the Bush tax cuts. In Jan 2009, capital gains tax goes from 10% to 20%, though it looks like few will have any to report. In addition the Marxists Obamists is already letting the word out of another 5% surcharge for a max rate of 44.6%. Why the fuck w/ property, sales, FICA, Medicare taxes a high earner wants to give away 60% of his earnings is beyond me. Better to take it easy, earn a few bucks less, and spend more time on holiday. And it you are going to die, do it before 2011 when the estate tax goes back up to 60% and $1 million. |
| Posted by: ed 2008-11-11 08:11 |
| #8 Mike Dawg... Ima not know how to tell you dis.... that's a noting but a Vega... AIYEEEEEEEEEEEEEEEEE! |
| Posted by: .5MT 2008-11-11 08:08 |
| #7 Wrong again 'zerker What he said what "has goes the nation so goes GM" you've been fed to much conventional pap. |
| Posted by: .5MT 2008-11-11 08:06 |
| #6 .5MT: not quite. What's happening to GM now, it's cosmic payback for my '78 Monza Wagon. KARMA, Mister UAW dude! |
| Posted by: Mike 2008-11-11 08:06 |
| #5 "As GM goes, so goes the nation." Who will bail US out? |
| Posted by: Besoeker 2008-11-11 08:00 |
| #4 Because we're all wrapped up in 'measuring'. Someone can tag a 'car'[unit] to a sale. If there is no sale then the need for a unit is not there. Thus the resources needed to produce such a unit no longer exits. However, if you're a manager it magically becomes iffy nebulous as to how it is tied to each unit. While they can tie whole blocks of management by divisions [that produce or not produce] those working inside are able to a greater degree fudge their accountability to the unit. So, you kill whole divisions [but the fraternity of good o'boy managers is reluctant to cut off whole limbs of like minded fellow travelers - thus GM maintaining duplicate production lines and divisions for decades]. The organization has failed because it couldn't do that for so long. Time for it to die as a whole. |
| Posted by: Procopius2k 2008-11-11 07:30 |
| #3 How come they never fire managers? Its ALWAYS hourly guys, you know, the people who actually do the work. |
| Posted by: bigjim-ky 2008-11-11 07:05 |
#2 Let 'em croak, the good parts will survive.BWAHHAHAHHAHAHAH YOUZE BASTIDS, THOUGHT YOU'D GET AWAY WITH THAT 1978 MALIBU STATION WAGON DID 'YE? NO! IMA SWORE THEN... DIE, DIE, DIE, DIE, |
| Posted by: .5MT 2008-11-11 06:56 |
| #1 Link GM to cut production, idle 5,500 hourly employees CHICAGO (Reuters) - General Motors Corp said on Monday it will cut production in North America due to declining demand through the first quarter of 2009. Highlights: * Says production cuts to result in idling of 5,500 hourly employees * Says to record a charge of at least $300 million in Q4, 2008, for capacity actions * Says have started providing materials for the Strasbourg transmission plant to interested parties * Says GMAC will cease wholesale originations to dealers in Australia, New Zealand by December 31 and transition out of business * Expects $1.4 billion cash expenditures for 2008 capacity reductions in U.S., Canada of which $0.1 billion to be spent in 2008, $0.6 billion in 2009, $0.7 billion beyond 2009 |
| Posted by: 3dc 2008-11-11 04:05 |
