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Bail Outs For Auto Industry?


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I also say there should be no bailouts for the auto companys and financial ind. (we certantly can't justify one and not the other expecially when the financial crisis is a big part of the automakers problem)

I think that we should let them all fail and new companies will replace them that are stronger.

That will teach those greedy execs. I just look forward to the 90 percent poverty rate and the benifits of becoming a 3rd world country.

-Jeff

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i fully support an inflow of cash to those who show promise in creating new companies in the aftermath of the collapse.

What cash? where will it come from? the fast food industry?

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A real problem here that is not being addressed, but is aat the crux of the situation is "SALES".  The true problem is a cash flow problem with the companies.  This ties directly to fixed overhead.  The plant and equipment cost of running these plants is enormous. Even if the companies had the same cost structure as Toyota, Honda..., if htere sales go away, or shrink considerably, there is no money to pay bills.  The burn rate is quite high, with no revenue to replace it.

We can debate if it is too high, which it is, and this thread constantly addresses that issue.  Cost of a UAW employee versus competion, but the real issue and the need for cash is to pay bills, whci is not happening, because consumers have shut down or cannot get credit to buy.  This was the point by all particpants yesterday.

In addition, I expect, and I think the auto makers are aware, futre sales will be less, so the plants will be geared toward lower production runs, which should mean lower employee count, whcih in turn should bring total expense down, short of physical plant and equipment.

I was impressed by the comment of the professor from Maryland yesterday, stating the consumer will probably hang on to cars longer, maintain them, hence then eed for less prodcution.  Think about it, we as consumers are use to having a pick of EVERYTHING and waiting fr nothing.  Unfortunately, the automakers responded to our wishes and demands, and created this inventory, which is sitting out htere, waiting to be bought.  The automakers were "betting on the come".  Well, credit tightens to 0 (not a bad thing) and no sales, the rest is not hard to figure out.  

I do not think this is much different than the housing issue.  Huge inventory, no demand, but bills to pay.   The difference, home builders dont have huge plant and equipment, just inventory.  We got used to having it all, and the producers of these goods were more than happy to build it for us, assuming it would be bought.  Until the it all ended!  

Unfortunately, in the automakers case, their employees keep wanting to get paid (no blame here) and have made huge promises to people in the past, for which they need to keep the "machine" going, which reuqires huge amounts of cash inflows, which have all but gone away.  NOW WE HAVE A PROBLEM.

I was personally impressed that the BIG 3 leaders seem to be aware of this issue in the future.  If they are true to their word (credibility issue here I agree), they have these issues addressed in the future.  Herin lies the problem, can they wait for the future fixes that come in the next year or 2, (cost controls, retooling,cheaper employees...) to make them more competitive.  They say they will be, but will we believe them, and do they have the time to survive???

ONLY THE SHADOW KNOWS!

So to conclude my ramble, I think in some ways, the automakers while responsible, were only responding to our WANTS, more than our needs.  I think there is some responsibility that lies with us as the consumer as well.  Cheap money, instant gratification, and production runs to satisfy our whims, the AMERICAN WAY!

I find this an amazing situation, one that will unfold in front of our eyes, and will be interested to see the outcome.  I just hope we al learn from this and are better people for it in the future!

Lets all go buy a car and make the world a better place!

Happy Thanksgiving to all!  

Fuess

You are a smart guy, what are you doing here?

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I’m not an economic expert like some here, but I know two things about this.  One:  I’m glad I got entirely out of the market back in July and have not succumbed to temptation to get back in.  Two:  I REALLY resent the Big Three CEOs each flying to Washington separately in their private jets and then holding out tin cups for my tax money.  Just shows how disconnected from the rest of the world these thieves are – GGGGRRRR!!

I dread the day that I will need to lay off employees with families to support because of what these guys and their government and Wall Street equivalents wrought.  But I take comfort from know that they will be sitting in their $100 million mansions deciding which rare wine they want from their vast wine cellars, while I’m doing that.

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I posted something yesterday after the market closed that was deemed to be to political and thus it was deleted.  If I strayed too far I appologize to anyone who was offended by what I said or how I said it.  It was not intended to be a political or partisan statement.

I find it interesting that many of the talking heads in the media are reaching the same conclusion contained in my off color post after yesterday's close however they reached it  after today's record breaking losses.  That conclusion is that the drama going on in the media involving various elected and appointed officials is doing serious damage to a very fragile market situation.  What is needed is one person speaking with a calm clear plan.  I think who that person is is obvious.  Whether we like him or not it is going to be his load to carry.

I am not a big believer in technical analysis but I follow it just because so many believe in it.  Today we broke through some serious support levels and if you believe in this stuff it means that we have some very serious down side potential, some refer to it as cascade selling.  This is the sort of thing that creates a spiral of more forced selling, lower prices, and more belt tightening.  That results in lower corporate profits, more selling and on we go.  A technical analysis problem become a fundamental issue and jobs are lost and more pain is felt by all.

The point of this is we are on the edge and this is the issue of the moment.  We all need to put our personal partisan beliefs aside and look to find a practicle solution.  I believe that solution is a Chapter 11 filing that is done in a planned manner after hours on a Friday followed by some clear leadership by one voice.  I don't like bail outs but sometimes we have to look toward the greater good.  I believe that immediately after the filing there needs to be a promise of funding by the Gov.  

The above may not solve the problem, it may just put off the failure until the economy is in better shape to absorb it.

I hope this isn't too political.  I have said it as clearly as I can carefully trying to avoid upsetting anyone.

Dave

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 I REALLY resent the Big Three CEOs each flying to Washington separately in their private jets and then holding out tin cups for my tax money.  Just shows how disconnected from the rest of the world these thieves are – GGGGRRRR!!

C'mon Greg, you're WAY smarter than this.

Those jets were paid for, the pilots are salaried employees. There was probably a gaggle of at least 12 folks going along from each company, including certainly internal and possibly external counsel.  

The only direct expense, other than ramp fees, would have been fuel.  Even before you take into account the productivity savings by going corporate, using the company jet was probably more cost effective than flying commercial.

The dust up about flying corporate is just another example of how we obsess about the window dressing and not the core problems.  The fact that the question was asked was nothing more than political grandstanding. And the fact that so many people fell for it is really sad.

Wanna be pissed?  How about being pissed at the Congress for hauling these guys in for a "hearing" which wasn't an actual hearing (where the witnesses do the talking and the legislatures doing the listening) but an opportunity for each member to pontificate about the subject on TV in hopes of getting a few clips played on the local news back in the home state.  How many tens of thousands of dollars was spent on that "hearing"? Certainly an exponentially greater amount than any theoretical cost saving of flying commercial.

We have FAR too many problems to worry about the window dressing.

JMO,

Dave

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Wanna be pissed?  How about being pissed at the Congress for hauling these guys in for a "hearing" which wasn't an actual hearing (where the witnesses do the talking and the legislatures doing the listening) but an opportunity for each member to pontificate about the subject on TV in hopes of getting a few clips played on the local news back in the home state.  How many tens of thousands of dollars was spent on that "hearing"? Certainly an exponentially greater amount than any theoretical cost saving of flying commercial.

We have FAR too many problems to worry about the window dressing.

JMO,

Dave

Want ot be even more pissed, I listened to both set of hearings.  I basically agree with "problems" presented, I almost think anyone everyone knew the basics, BUT, there were really no concrete solutions presented.  It was more like a state of the union, with little vision for the future.

I thought the "smart ballsy" guys that flew in private jets would have some idea what would save the day, but, alas, smae old same old.

In the beginning I was optimistic, nw I am fqar from that!  We need to use Chap 11 to restructure, but where will we find the guys with the balss and vision to get it done!

When we do, then you will see someone deserving to fly in the private jet!

FUess

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The new administration is being awful quiet at a time of need.

I think under "normal" circumstances, it is protocol until sworn in, but we are far from normal.  I ould think this is agreat chance for Obama to take a stance, but I do not know anything as far as this is concerned.

I hope it is not fear!

Thoughts from the field?

Fuess

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Fuess, that is exactly the point I have been making.  In regards to tradition, I believe the current administration wouldn't mind getting a little relief.  They have already made it clear that they aren't planning on doing anything more with TARP.

I have been hearing various names of people working on the economic transition team.  They are extremely smart people from both parties with varied backgrounds.  It is really encouraging.  These people couldn't possibly be blind as to what is happening in the markets that is directly related to the current uncertainty.  

It is really unexcusable to allow what is happening to many individual investors to continue a minute longer than necessary.  I am hearing really tragic stories about forced sales to meet margin obligations from brokers everyday.

I am probably really reaching here but silence under the circumstances makes me think a deal may be near.  Lets hope so.

Dave

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Normally I'd hesitate on a new board to dive into a topic like this, but that the heck -

Yes, not bailing out the auto industry will likely be disastrous (at least in the short term) for our economy. On the other hand, bailing them out will also be disastrous, in that it's another huge tab being added to our already massive debt that our grandchildren will still be paying off. It also completely usurps the principles of a free market. Without any assurance that these companies are really serious about turning themselves around (instead of just counting on yet another bailout in 20 years...), and without Congress seeing a very specific, detailed plan of how they plan to do that, they shouldn't get anything. This notion of, "just give us the money, no strings attached" is ridiculous.

I'd also say that while I'm not a big fan of what unions have become these days, I find it funny that corporate types are always quick to blame unions and the "high cost of doing business in the U.S." with taxes, regulations, worker benefits, etc. as the reasons why they're having to outsource jobs, and are verging on bankruptcy. How about taking a hard look at ridiculously bloated CEO salaries? How can they continue to receive the salaries that they do when their companies are going down the tubes, and the most significant thing they've done while in the job is send most of the company overseas? When I see one of these CEO's willing to take a pay cut from $40 million dollars a year to a mere $4 million, prior to layoffs and outsourcing, then maybe I'll start to have a little sympathy for them.

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I have to disagree with Smithhammer (of the 'Hammer of BWTF?).  I think that the tax revenue from keeping the Big 3 moving along is significant, when you factor in what the companies and their employees pay.  I don't think my daughters will be saddled with that debt.  The tax revenue number will really shrink if they go into bankruptcy.  

Also, GM gets our from under its pension obligations w/o bankruptcy in less than 2 years (I forget the date) and allowing them to hold on I think is a good thing.   Sutre, they need to take some radical steps, but their cars are getting better, more fuel efficient,  and they employ a hell of a lot of folks.

I do agree wholeheartedly that upper management needs to take a pay cut -- make your money on options if you can turn it around.

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I hear ya, and I'm not saying that there aren't significant costs, such as taxes, involved that are affecting the overall health of those industries. Just saying I think it's pretty ironic when you hear the top executives give a list of reasons why their company is failing and nowhere do they mention their own exorbitant salaries. But corporate salaries, benefit packages, etc. that are vastly disproportionate to the rest of the company just seem to have become an ingrained part of U.S. corporate culture. and more often than not, it doesn't even seem to be reflective of the job they're doing. The company can be going down the tubes and at worst, they'll likely get a $50 million severance package.
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