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November 19, 2008


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I agree with Mitt Romney. You think you are helping the big 3 by giving them money but you are actually going to doom them.

It's bad enough that we have to bail out the banks, but we are going to bail out other industries too? Whatever happened to free market?

It's not a simple answer, helping them now may well cripple them in the future. They need to learn how to run a business and propping them up doesn't help with that. On the other hand, we need to have some type of domestic car manufacturer. I think giving up and leaving the auto industry to Japan and Europe will be bad in the long term. The big three were once great, they just got fat and lazy. They need Jillian from biggest loser to come whip them into shape.

I think it's ridiculous that we taxpayers be asked to subsidize failure. The "Big 3" have been hamstrung by incompetent management and absurd union demands for decades, and giving them taxpayer money would only delay the inevitable--or, worse, put them on taxpayer-funded life support for an unknown duration.

It's time for the management and the unions to address the mess they created without looking at all of us for handouts. It may be very painful, and one or more of the Big 3 may fail, but that's business. Someone else will be there to fill the void.

I truly believe that we should not bail out the big 3 and here is my reasoning: Some of histories best ideas have come about through adversity. It goes back to the old adage that "necessity is the mother of invention". If we let the big three fail, it would put them in the position of having to reorganize their business structure (possibly merging or otherwise creating some type of mutually beneficial partnerships/arrangements), killing off bad product lines, and possibly (and this is my point and my hope) creating the energy efficient vehicle technology we so desperately need AND WANT. I know it is probably a pipe dream, but I am holding on to the hope that the management of these companies aren't complete idiots and aren't solely after money like what we have seen so much in recent days with some of the other companies out there.

Romney has some great points. Especially the fact that just giving them more money now doesn't really give them any incentive to change. It will just delay the inevitable and cost taxpayers more money in the process.

Both sides - management and labor - have made this bed, they should be forced to lie in it, not have someone else buy them a brand new Tempur-pedic.

This morning on ABC's good mornning america, they had video footage of the big 3 CEO's arriving to Washington yesterday via thier private jets.

If they are still flying around in private jets, the situation is obviously not so bad yet that they have exhausted all internal cost cutting measures.

Until that happens, I think it is rediculous to ask the taxpayers to help out.

I saw an article this weekend in the WSJ, explaining how much capital has been destroyed by the US auto industry over the last number of years. The number was astronomical.

What makes anyone think bailout money will lead to any different results?

Dar said: "absurd union demands"

I am not familiar with absurd demands made by the union. What are some of those "absurd" demands?


My take on this is that there are big pros and cons to doing a bailout or not.

I think anything more than a loan would NOT be acceptable. We should not just be throwing money at failing companies without getting something back.

Various thoughts for and against:

The big 3 employ about 250,000 people directly. So there is the risk of losing those jobs. The ripple effect of that to the economy would be significant. Just think of the tax revenue alone. 250k jobs at $50k a year would be $12.5B Those people probably pay over $2B annually in taxes to the fed. Plus theres all the indirect impact of those jobs. I'm sure its not 1 in 10 like the NY Times article says some are citing but its undoubtedly more jobs than just those 250k.

The govt. had a bailout of Chrysler in 1979. That bailout worked then. The 'bailout' was in fact a loan which the government ended up making a profit on. Chrysler had a bit of success after that with the invention of the minivan.

Industrial capacity is important to the USA. During WWII the US automakers stopped producing consumer automobiles and instead turned their production to tanks and other military vehicles. What might happen if a similar scenario like WWII occurred in our future and all our manufacturing had died out or been taken over by foreign countries? Worth thinking about.

We'd be supporting companies that are failing on their own mistakes. This is a corporate handout pure and simple.

Do we need 3 US car makers? Why not let the weaker 1-2 fail. Then swoop in to bail out the remaining company? Or they could merge. Why throw money at all 3?


We poured 30 times the amount of money into the financial market with no/little oversite. The domestic automakers are asking for a 25 billion dollar loan (big money, but small compared to 700 billion). I don't understand the balking when compared to how fast we "bailed out" the financial industry.

Are you not from Michigan? Glad to see that you are thinking it through and not selling your soul to the big three.


Jim said: I am not familiar with absurd demands made by the union. What are some of those "absurd" demands?

I dunno maybe the salary demands for one. I hear that even the guy driving around in a golf cart and cleaning drinking fountains is pulling down $42.00hr. Now that I think is sort of adsurd! How can anyone expect the average Joe making say $20.00hr to buy cars made by people making $40.00 to $50.00hr? I have always said that the prices of autos would become out of reach and it's looking like that time has come. I myself was considering a new truck but after finding the price hovering around 37K I decided that the one I have now will suffice for many more years and they can keep their overpriced products.

I have more sympathy for the auto companies than all of the finance companies that are getting billions in taxpayer money.

I do buy into the auto industries arguement that the problems in the credit market are affecting them.

I have sympathy for those who are in their late working years and have been in the "car world". OTOH, I've also been in three companies that failed in the past ten years, and it wasn't the end of the world. Also, there's enough new stuff happening in car-world that there may well be new startups as well as other manufacturers hiring the better employees.

For Michigan at least, the problem with this scenario is that nobody starting a new company would want anything to do with the UAW. Michigan needs to become a right-to-work state and forget about the idea that high-paid, unionized labor in big factories is ever coming back - especially if they want auto-industry startups to open nontrivial operations there.

After seeing the documentary "Who Killed the Electric Car" I have no sympathy nor desire to help out the Big 3 automakers. They've stifled innovation for years and now it's time to face the music. I say let them fail and instead invest the money into start-ups doing interesting things with alternative fuel vehicles.


If you want an example of absurd demands, the first and foremost example is the "Job Bank". This Job Bank was established to ensure that laid-off workers could retain as much of 90% of their salary and keep their benefits while they were out of work:

As you might expect, there are quite a few people out there who would be more than happy to be out of work PERMANENTLY if they could keep their benefits and up to 90% of their current salaries. Near as I can tell from similar and more recent articles, the 2007 contracts left this Job Bank in place, so we can expect there are still several thousand such recipients of corporate welfare continuing to collect for doing nothing.

Of course, I don't blame the union exclusively for this--the company management that agreed to this was equally at fault, and watching them fly to D.C. in personal jets to beg for handouts is just as insulting. But as long as programs such as this "Job Bank" exist, there is no way anyone can convince me that handing out one red cent of taxpayer money to these institutions could help the situation.


Where do you get $40-50 / hour from?

Scale for UAW is in the $20-30 range:

Thats not far off from what Honda or Toyota pay at non union auto plants here in the USA.

Honda paying $24/hr:

Toyota getting $30/hr if you include their profit bonus:

Labor is only a fraction of the total cost of a vehicle. Total labor costs are about $1000 to $2000 per car. The Japanese manufacturers are less than the US makers but a lot of that is due to efficiency in their production. It takes about 30 hours and $1000 for the Japanese but about 35-45 hours and $1500 to $2000 for the US.
This data is a bit old but probably not much differant than today:


Dar, looks like we posted at the same time. Yes that job bank thing definitely looks "absurd". Thats a good example.

I agree that its a 2 party system though and the management at the US auto makers agreed to that system. Why they would agree to that is beyond me.


Hate to say it, but this would be less of a problem if we had (a) universal health care and (b) adequate retirement provisions. There are so many auto-industry retirees dependent on their company pensions and health insurance who would be ruined if the companies go bankrupt. This illustrates why our current system is a ludicrous jerryrig.

Heck, for a lot less than $25 billion the US could just outright buy the big 3! Seriously their stock is in the tank. Now that is real socialism (vs what they people about Obama's tax plan) but in some ways, it seems preferable to seeing them fail outright (3 million jobs lost in this economy would be depression inducing) or propping them up as is with a bail out loan.

Perhaps buying them would be like a kind of government run chapter 11, since chapter 11 does not seem to be an option for the car makers (chapter 7 liquidation is there future if nothing is done). That way we can fire all their executives, use the government's AAA credit rating to keep it going, and then once it is fixed sell the shares back, making it private again.

Would that work? I have no idea. Probably not well. But at this point we are damed if we do, and damed if we don't!

Maybe the current "credit crises" has really hurt the car makers, but didn't we see that coming? Also, why is it not affecting Nissan, Toyota, Honda?

First, there was a tremendous amount of people that have been receiving credit that shouldn't have - which couldn't sustain itself.

So, maybe the "credit crises" did have an effect on the automakers since now only credit worthy customers can get a loan - Which is exactly what the doctor ordered.

How could the detroit automakers move forward (ie sell cars to people) after they get this loan if those that were propping their business up are now gone for good?


Whatever happened to Equal Protection Under the Law? :) The bailout is absurd on so many level. Sigh.

This is a tough call because it not only effects the entire auto mfg supply chain, but hundreds of thousands of people whose livelihood depends indirectly on the big 3. However, the people managing these 3 companies have demonstrated for many years, perhaps since the 1950s, that they are incompetent when compared to the Japanese and most recently the Koreans. Sowing up via corporate jet with "hat in hand" looking for the American tax payer to bail them out is the latest example of their narcissism and extremely poor judgment.

The single biggest representative data point on this situation is the fact that Ford's CEO, Mullaly, pays himself $28M annually while the CEO of Toyota makes about $1M. Chrysler's GE trained Robert Nardeli almost ran Home Depot into the ground before they gave him a $200M+ "golden parachute" to get out of dodge. Based on this impressive track record, Chrysler hired him. Any bailout money would be best used to pay the likes of Honda, Nissan, Toyota, and Subaru to buy the factory assets, rehire the auto workers on a non-union basis, and put the CEO and other over paid executive failures out of work. Hell they can all afford to take the rest of their natural lives off, can't they. This insanity has gone on long enough.

At some point, the bailouts have to stop. We cannot afford to give money to every single company/industry. If you bailout the automakers, who will be next? Look at how many are standing in line just to get the financial firm funds.

Re: J-Mike's comment. Robert Nardeli was forced to "get out of dodge" and became Chrysler's CEO. LOL. I don't know if the pun was intended, but that was a good one.

Concerning the bailout. I learned economics Milton Friedman/Ronald Reagan style. No way!


Here is the best article I could find with a quick search:

"Under a four-year accord reached Sept. 26, all new employees would start in so-called non-core jobs such as janitorial and maintenance work and make about $28 an hour in pay and benefits, compared with $51 for present employees, the people said. They asked not to be identified because contract details haven't been released."

So let me get this right, the new hire janitor starts at $28 now, but the old guy who's been there still makes his $51/hr for the next thirty years? The UAW selling out their future members isn't much of a concession - more can be done.

"The Detroit-based automaker's current assembly workers get $31.75 an hour in pay, including overtime and bonuses, and $19.25 in benefits, according to an analysis by Laurie Harbour-Felax, president of Chicago-based Stout Risius Ross Inc. Adding pensions and other retiree costs raises the total to about $73.

Toyota's U.S. workers cost about $47.25 an hour, including $31.50 in pay and $15.75 in benefits, the study found."

So there's the ~$75 number everyone has been talking about. And don't get me started on the Job bank. Care to comment?

Don't get me wrong, management is awful too but you seem focused on the labor not being a problem when it clearly is.

You are forgetting that the landscape of the world is changing. In the next few decades we need to end our dependence on foreign oil and build VERY fuel efficient vehicles.

Do we want that technology to be developed here in the US by US engineers, or do we want to be dependent on other nations AGAIN for our energy needs?

Why does no one bash the financial companies that are getting $700b after making poor management decisions, while everyone bashes Detroit for asking for $25b?

Alan Mulally was paid big $$$ to leave a very lucrative job at Boeing and come save Ford. He has done a tremendous job in 2 years of turning Ford into a competitive core brand. However, the tanking economy was too much to overcome this early in the turnaround.

I do think that one of the Big 3 needs to go (probably Chrysler - sold in pieces).

However, a strong Detroit Big 2 would be very healhy for our economy and the auto industry.

Ford has positioned themselves VERY WELL for a turnaround, however, if GM files bankruptcy and cancels their union contracts, then Ford has no choice, they would have to do the same to stay competitive.

Sarah --

Knowing you, I really doubt that you "hate to say it." ;-)


We would still have those costs. It would just be directly on the backs of the taxpayers versus an number that is inputed into the price of products we buy.

I've written in length elsewhere about my support for the financial bailout, but not any government assistance for the automakers. The reasoning have already been stated here, so I'm not going to repeat it.

Dump the Unions, Fire Chief executives, restructure to get back in profit making mode and make a quality, fuel efficient, vehicle people WANT to buy without giving up their first born!!

Ok the numbers from BobL are pay AND benefits. I thought Ron was talking just pay. There is a big difference between saying someone is paid $50 an hour and saying someone gets pay + benefits of $50 an hour.

If you add medical insurance, pension plan, and other benefits then it definitely increases the costs. I don't argue about that. THe union auto workers have good benefits.

But some of the figures you cite add other costs. One point it says "including overtime and bonuses". Overtime is not base pay, its overtime. Overtime is under control of management and its due to working extra hours. Retiree costs should be covered in a properly funded pension. If the pension fund is not properly funded then that is the companies fault and basically a sign of mismanagement.

If you just look at current employees then the source you cite says: US at "$31.75 an hour in pay, including overtime and bonuses, and $19.25 in benefits" versus "Toyota's U.S. workers cost about $47.25 an hour, including $31.50 in pay and $15.75 in benefits"

So thats 31.75 + 19.25 = $51 versus $31.5 + 15.75 = $47.25 Thats a $3.75 hourly difference. Its not insignificant for sure. But its not like GM pays people $80 /hour and Toyota pays $15 /hr as some people seem to think.

OK so lets say that the union employees at the US makers take a $4 pay cut to put wages on par with Toyota. Fair enough. I'd be all for that. I certainly expect the union to make some concessions right now. Its in the best interest for the union that the company stay alive and taking cuts would help that happen.

Lets look at Ford. They have around 90k employees in North America. If all of them work 2000 hours a year and take a $4/hr pay cut then that equates to $720 Million / year. The "Job Bank" would be another legitimate cost to cut. In 2007 it cost Ford about $74M. So looks to me like theres almost $1.5B in employee costs that could be cut at Ford. Lets put that into perspective. Ford has posted losses of over $10 Billion in the past 12 months.

Let me ask people this, if your boss paid you $4 more than someone doing the same job at another company would you feel guilty and voluntarily ask for less pay? Or if the company took a big financial loss would you blame yourself for it?

Now back to retiree costs. IF there is substantial costs for retirees then that IS a problem. Its difficult for a company to shoulder increasing costs for healthcare plans for retired employees. Plus if their pension funds are under funded then they may have to put more money into the plans. Legally the pension is supposed to be fully funded and pension costs for currently retired employes should not really be hurting current operations. But they may have underfunded pensions. Again lets look at Ford. Their 2007 annual report says they spent $1.2 Billion in health care costs for retirees. But Ford and the UAW recently agreed to shift the costs of retiree health care to an independent trust. So this liability should not hamper Fords ongoing finances in the future. So it seems to me that Ford took a long term view to fix that problem (good). What about pension costs? Looks like Ford spent about $1.6B to fund their pension system in 2007 but I can't tell how much of that is in the US versus overseas and how much is to fund pensions for current workers and how much is to compensate for underfunded pension accounts.


"Let me ask people this, if your boss paid you $4 more than someone doing the same job at another company would you feel guilty and voluntarily ask for less pay?"

No, but I wouldn't threaten to go on strike every few years. And I wouldn't ask the company to be paid for doing crossword puzzles.

Jim you make some pretty good points about finances. I don't have time to check your numbers. Yes, these numbers aren't as large as the losses, but it is still the money that these companies don't have. So, maybe cutting most of these benefits wouldn't solve the problem, but they still hurt the company.

Keep in mind that most taxpayers don't have these benefits. I am sorry, but while I am on the fence about the bailout - I do worry about the ripple effect on the economy, I don't want to pay for somebody else's retirement benefits that I no longer have.

"There are so many auto-industry retirees dependent on their company pensions and health insurance who would be ruined if the companies go bankrupt."

There are many people in this country who don't have these benefits. Most people in fact. My company used to offer these benefits too. Health benefits were gone 10 years ago for those who were younger than 50 at the time and had less than 25 years with the company (at the time). All pension plans - we ended up having several based on when one was hired - were frozen at last year's level. Why should I pay for someone else's benefits instead of saving for my retirement? At least I'll get some pension. What about those who don't have any pension at all?

Besides, there is a government insurance for pensions, so the pensions will still be paid - up to some level. Of course it means we'll pay either way... One of the reasons I haven't made up my mind about this bailout.

I can not believe some of the things I am hearing. As an AMERICAN TAX PAYING citizen I am just beside myself.

I have NO problem with them spending my tax dollar to save The Big 3. My tax dollar has been spent far to long on so many "American Hating" countries. Why not use it to help the people who in reality help us.

Let the foreign car companies take over????? They are part the reason we are in this position now. Yes, they make less money but lets not forget that in China part of their employment contract there includes: housing, health care and food at resturants for $1.00 per person. In Japan the cost of bread remained the same for 24 years as did the cost of milk for 30 years. They are just now this year seeing an increase of 10% on everyday staples. Our cost of living is much different than theirs.

Congress did not slap the face of the financial guru's who put us in such a bad situation $700 billion "free" dollars. Does anyone have any idea how much the average financial CEO makes? I can't even imagine. We all know they use private jets and go on luxury meetings too! which brings us right to greed.

Yes, things need to change with the Big 3 but things need to change all over this country. We need to take a chance on a loan that will save many, many American jobs.

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