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Bail Outs For Auto Industry?


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I was joking oith some co-wrokers over lunch yesterday about the Big 3, and one commented that the Big 3 should have simply become a big holding company about a year ago, taken their cash on hand (which was something a like $400 billion)and bought majority stakes in Toyota, Honda, and Nissan.
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That was our collective conclusion too -- they could maybe function as a holding company only.  Granted, that would only save the companies' shareholders, and all the workers would be out on the street. But hey, who really cares about the workin' man?
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The following is what I suspect is happening:

Chapter 11 is a very real possibility.  Todays news along with the presentation planned for Monday would all fit in perfectly.  If that is the plan the automakers would be holding all the cards to extort concessions by delaying and causing more damage to the public.

The next administration would not like to have a Chapter 11 without some agreement to benefit the union.  It would be much simpler to just have the new adminstration work with only the automakers to reach an agreement.  That would be considered a betrayal to the union, thus a three way agreement regarding a Chapter 11 would be best as it would give the new administration cover from charges that they betrayed their union supporters.  I imagine all three are sweating out the final details.  There will be the normal bluffs, etc that always happen right at the end.  Although none will admit it, all three parties need the protection of an agreement and a Chapter 11 filing.  At the end of the day the union will realize that going along would be better than risking what a judge would order.  The new administration would get cover from the betrayal charges due to an agreement and the fact that they would not be responsible for future actions by the court.  The automakers would be able to keep functioning for at least the near term and they would get some protection against their creditors.  A win, win and not a total loss to the union.

With Congress being quiet and taking a break until early December there is now a gap to allow such an agreement to be made and quickly passed when Congress comes back.  The President Elect would be the hero of the day.

The Citi mess errupting right now also makes an agreement on the auto bail out now even more vital due to market conditions.  Wouldn't it be nice if the Citi problem was a mere footnote in Monday's news.

On the otherhand, it could be that nothing happens over the week end on the bail out and we are all in for another week from hell compounded by the Citi mess.

Dave

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I favor something to both help the American Auto industry and consumers.

Why not a $4000 voucher(No money to the Big 3 directly). The bailout figure was given at $25 BILLION. Do the math, Detroit could be working overtime selling vehicles, consumers/taxpayers get a break. (if people wind up not buying, tax money wont be spent)

The UAW cant complain, they are working, White collars have a job. Advertising is buying time in all the media.

Its a win/win/win. JOBS and money moving around again.

Give the Big 3 the money, and it will at best be used to fill storage lots full of unsold vehicles and wont do one bit of good. At worst, the big shots will build a golden parachutes and give bonuses to each other.

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Probably wouldn't have been a bad idea, as long as they weren't given any managerial or product design input... (ha)

We wouldn't want to see something as bad as a Suburban or Silverado ever again. They duped the consumers into buying millions of them.

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Probably wouldn't have been a bad idea, as long as they weren't given any managerial or product design input... (ha)

We wouldn't want to see something as bad as a Suburban or Silverado ever again. They duped the consumers into buying millions of them.

Wouldn't be so bad if they could figure out how to make them get more than 8 miles to the gallon. And if they could ban soccer moms trying to manage 6 kids while talking on the cell phone and driving them at the same time.

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Probably wouldn't have been a bad idea, as long as they weren't given any managerial or product design input... (ha)

We wouldn't want to see something as bad as a Suburban or Silverado ever again. They duped the consumers into buying millions of them.

Wouldn't be so bad if they could figure out how to make them get more than 8 miles to the gallon. And if they could ban soccer moms trying to manage 6 kids while talking on the cell phone and driving them at the same time.

Silverado EPA 18/21, Suburban EPA 19/20. Can't help with your soccer Mom problem though.

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Silverado EPA 18/21, Suburban EPA 19/20. Can't help with your soccer Mom problem though.

Wow - well if that's the case, they've come a long way with the newer models, but manufacturer's EPA estimates are known to often be wildly inaccurate. Do you have one that actually gets that kind of mileage?

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My 2007 Silverado Classic V8 gets 20-21 highway and averages 17.5 all around...even with driveway warm-ups in the winter.

I have no problem with the quality.

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I still hope to hear news on a deal but nothing so far.

In regards to vouchers the whole idea is probably killing sales since everyone will wait to see if they happen before buying.

Nice article in the NY times today about the plight of those in the greater Detroit area and their suffering.  It really humanized the situation.

There are so many problems in the economy right now and so many "shoes" about to drop that I think people are just starting to wake up from the shock of the last month and a half.  Looking at a chart of the S&P makes last July look like the good old days.  It is bad.  I think at this point people are just adjusting to the idea of long term adjusting going forward after shoe after shoe drops.

No easy answers and my heart goes out to those stuck at ground zero in this mess.

Dave

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What if rather than outsourcing labor, they outsourced executives? I'm sure there are people in other countries that are just as qualified and willing to work for 1/10th of what your typical U.S. executive makes. I mean, what's the worst that could happen? That they'd run the company into the ground? Oh, wait....
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