naked capitalism

Anonymous says:

Why do the Republicans hate Americans?

I think this behavior if tantamount to being a sworn enemy of the welfare of the American people.

Already the dollar is dropping.

The Republican notion that free market ideological purity is the most important thing for the American economy – from this bunch of cronies, charlatans, and Christianist clowns – is both tragic and a farce. At the same moment. I heard one of these thugs on the radio last night that he would never bailout the industry unless the union were destroyed. God save us.

aw70 says:

This spoof ad presents the idiocy of bailing out the Big Three in wonderfully simple terms:

http://www.economistblog.com/2008/12/10/the-bailout-coming-this-january/

The problem is of course that you guys are also right about all the nasty knock-on effects if Detroit goes under, but the alternative is even worse. These companies ought to fail. No company should be able to flaunt common sense and market forces for so long, and still survive.

The Political and Financial Markets Commentator says:

Good post. I wrote on the same topic today as well.

Mike Haltman
The Political and Financial Markets Commentator
http://politicsandfinance.blogspot.com

John Haskell says:

@ Aiden-
Try paying attention. GM bonds are already in the teens. They should get 110c of paper because why?

If they get 30c as proposed by Corker they should jump at it, if they had any sense which they don’t (see GMAC restructuring for details).

As for Anonymous- rest assured there will be plenty of bankers put out on the street this year and next. However at the end of the process the banking system will have been downsized to something that should make a profit.

The entire premise of the Michigan bailout is to prevent these car companies from cutting down to a size that would be profitable. You make that explicit by pointing out that auto employees should have guaranteed employment because banks got cheap financing.

Well sorry, banks getting cheap financing (which they actually are able to pay back) is not the same as Michigan automakers getting loans which they cannot pay back, purely for the purpose of keeping workers around to do nothing.

Stuart says:

P.S. re: that last post, that was PER MONTH.

Richard says:

1) On this subject I recommend thetruthaboutcars.com, with which I am not in any way affiliated. They’ve been chronicling the slow failure of the unionized auto industry for 3-4 years or more. Dig back into the GM Death Watch and Chrysler Suicide Watch archives to see how good these guys are.

2) My own view is that that this industry has spent the last 30 years trying unsuccessfully to reconcile the unreconcilable: CAFE and the UAW. Simply, it is impossible to profitably build small cars in UAW factories. And the law mandating CAFE does not allow companies to count non-US-built small cars toward their corporate fuel average. Everything else–the cheap small-car interiors (to keep unit losses down and the reliance on SUVs and trucks (to subsidize money-losing Vegas, Neons and Cobalts) followed from that. Now we are at the end.

3) Congress’s stated demands will only make things worse. If a Cobalt has to give up $3,600 per unit (including rebates, etc.) to sell vs. the Civic (as a recent Eyes on the Road column in the WSJ calculated), how well is a $40K, 40-mile range-Volt going to do? Even if it comes, the bailout is the Green Death.

Anonymous says:

Congressman Dennis Kucinich (D-OH), who has been a vocal proponent for aid for domestic automakers, today made the following speech during debate on H.R. 7321, the Auto Industry Financing and Restructuring Act:

“I rise in support of the rule and the underlying bill. The underlying proposition is this: Should the United States have an auto manufacturing industry? That is really what we’re deciding here. Because if this rule and/or bill goes down, we are faced with an untenable condition which will lead to the collapse of our automotive making capacity and, according to some economic policy analysts, the elimination of over 3.3 million jobs across the economy; jobs that are affected directly and indirectly by the automotive industry.

“I think it is important to step back and look at the context of this. Are we intending to stay a great nation, a world power, or are suddenly we retreating from the world stage? Because an America without an automobile industry is also going to be an America without a steel industry. We are already seeing our aerospace and our shipping industry affected.

“It is time for us to have a national economic policy, which says that the maintenance of automotive, aerospace, steel and shipping is vital to our national security. Not just our economy, but our security. Sixty-seven years ago, when the U.S. was attacked it was those industries which enabled us to be able to defend ourselves. Now I am a person who stands for peace, but I also believe in preparedness. To me it is unthinkable that the U.S., which was able to mobilize its productive capacity, would suddenly throw it away.

“We have to remember that our ability to make things is vital to being a great nation, and we have to remember that this is a moment that we should be able to rise to this occasion. It is a tragedy that we have to debate something that is a proposition about whether or not we remain a strong nation. You know we’re actually talking only about 2% of the amount of money that was given for the Wall Street bailout, which I spoke against and voted against. This is an altogether different proposition. We cannot totally reject industrial capitalism and remain a great nation. There are a lot of questions about finance capitalism which the $700 billion bailout brought out, but we have to have the ability to make things. And we can’t ask the autoworkers to work for nothing.

“We have to have the ability to make things. We also have to have the ability to see automotive in the scheme of a broader industrial policy. Let’s remember who we are as a nation. With all of our troubles, trials and tribulations, this is still the greatest nation in the world. What keeps us there? Our ability to make things. To make cars, to make steel, to make planes, to create ships- that’s what help makes America great. Let’s not give that up. Let’s not let this moment pass and decide this is just a trivial matter of just $14-15 billion. This is a question of who we are as a nation. Let’s be strong. Let’s vote for this bill.”

Anonymous says:

Herbert Hoover is so proud of Mitch McConnell.

Anonymous says:

Parts of Ford Motor Company understand very well how to manufacture small cars with hyper-efficiency…

http://info.detnews.com/video/index.cfm?id=1189

…outside the UAW’s reach.

Anonymous says:

What is that supposed to mean?

Don’t get too hard on him. He sounds like an Ivy League grad mindlessly sheep bleating the slogans programmed into him at his Maoist indoctrination sessions. Here’s a very good essay on the real Herbert Hoover, the true father of the “New Deal”.

http://www.acting-man.com/2008/12/hoovers-heirs-at-work.html

And for the record, I am not “Acting Man”, who claims to be a hedge fund trader.

Anonymous says:

This advocacy of bankruptcy is more than a bit naive. A car is a very big commitment, particularly in our brave new world of less financing. Ask your buddies. Would they buy a car from a company that had filed for bankruptcy? You’ll be surprised how negative the reaction is.

No buyers, no GM. Not hard to understand.

Plus the idea you can take out GM and still have an US auto industry is also wrongheaded. GM is a very big customer to a lot of auto parts suppliers. In bankruptcy, they are unsecured creditors, and get nada until the Ch. 11 is final. A lot of them die in this process. The foreign transplants need them too, so they shutter.

Just like finance, more integrated than you think, thanks to these extended supplier nets , and if one big player goes, they all eventually go.

artichoke says:

I would buy a car from a company that is reorganizing under bankruptcy protection, with stable DIP financing, before I would buy from a company that did not clearly have a future at all.

Look we all know these companies are bust and need a lot of help to survive. Nobody is being fooled any more. We need to see that there is a sustainable future for them. The way to get there is Ch. 11 reorganization, so that the costs can really be rationalized.

Furthermore, if there is a requirement that GM cannot build normal large cars, I am unlikely to buy from them, because I like to buy large vehicles. A way to make their future even tougher is to cripple them by not allowing them to build what the market wants, while Toyota, Honda etc. have more freedom.

They build good cars now. People are learning that. I love my 2006 Chrysler, and the only reason I won’t buy another soon is that I plan to keep this one a long time. But the financial situation needs to be stabilized, and really stabilized.

Anonymous says:

Gawd the blowhards here, who love to stick it to the unions as the country goes down.

Don’t you see you’re knocking holes in the ship – that you also sail in?

Anyway, the notion that the UAW has uncompetitive wages is nothing more than one of those Republican farts that passes for insight.

Fact is, auto workers in the industrialized world (all countries much friendlier to the unions than the US of A, you ditto heads!) make more than the UAW.

The difference is not the UAW.

The difference is that the employers in this country pay for benefits, pensions and health care. In other industrialized countries, the govt picks up the tab. It makes it much easier for manufacturing to be competitive in those countries.

Maybe those hordes of unemployed UAW folks will take to the streets and drag the lot of youse out of your cozy kitchens, and into the rough & tough world that you obviously could stand to use a thing or two about. At the point of a pitchfork, I hope not.