Bush's Legacy

[jamiche]

The demise of the car companies will shortly be added to W's legacy. I don't know if the bailout was a good idea but it is a sordid commentary on Bush's presidency that his own party bucked him once again on legislation.

My (perhaps unrealistic) hope is that his reputation will be so tarnished that his post presidential earnings will be minimal and that fundraising for his presidential library will be unsuccessful. Why contribute to a monument to ineptitude?

[diehard]

One monument of ineptitude that should be built, so that we never forget, is to the Big 3 US Auto-makers. Chrysler and probably GM should not be left any option but Chapter 11. Ford is OK for now, but lacks secondary financing. They can get lean and fit to survive. They have 7 dealerships for each Toyota dealership and sell about the same number of cars. Lots of inventory to sell with huge rebates. Huge rebates coming. It appears Chrysler may be hopeless. Maybe someone competitant should be allowed to buy them for $1.00 start over with a working business concept (starting by buying cars made by a foreign company manufacturing cars in the southern states and putting their name on them/like Ford). The rust belt is in deep kim chi. I hope they can get turned around some way because I am really sick of all these losers from Michigan moving down here. Even the immigrants from New York and New Jersey are preferable to the Michiganders.

[bga1]

Jamiche- The issue is deeper and more complex than the few lines about the bailout you may have read somewhere. As for Bush's part he must feel an obligation to patch things together for the auto companies so that Obama has a chance towork with something more long term when he arrives in office. Meanwhile the R's in Congress are seeing that doing something now is at the peril of the long term. The R's simply requested that the unions step up right now and offer concessions to assure that there will be a meaningful retructuring of the cost structure for the Big 3. Currently Big 3 average wages and benefits run $71 per hour compared with $47 an hour for the non-Big 3 domestic producers. Without a change in that, there is no hope that the Big 3 will produce a quality car at a competitive price. So are we to pump another 14 billion in a scenario that has no financial vability? This is not an easy question.

Personally, I favor a bailout if it can be properly framed such that it forces both the unions and management to make the same commitment to fundamental restructuring that a bankruptcy judge would require. If not, then let them proceed to bankruptcy and do it without public funds.

[diehard]

bga1, then why involved Congress when a bankruptcy judge will do the same thing? Why put the Federal government deeper into the nationalization of yet another industry? The big 3 have to want to survive and take those steps on their own without being nursed by the Bush and the Congress. Haven't they misspent enough mondy for 8 years? The big 3 will never be weaned off your tax dollar if they are bailed out now. One big mistake that will be very hard or impossible to reverse. It has been announced that this is just a little money to carry them to getting big money. I believe you know better.

[jamiche]

Jamiche- The issue is deeper and more complex than the few lines about the bailout you may have read somewhere. As for Bush's part he must feel an obligation to patch things together for the auto companies so that Obama has a chance towork with something more long term when he arrives in office. Meanwhile the R's in Congress are seeing that doing something now is at the peril of the long term. The R's simply requested that the unions step up right now and offer concessions to assure that there will be a meaningful retructuring of the cost structure for the Big 3. Currently Big 3 average wages and benefits run $71 per hour compared with $47 an hour for the non-Big 3 domestic producers. Without a change in that, there is no hope that the Big 3 will produce a quality car at a competitive price. So are we to pump another 14 billion in a scenario that has no financial vability? This is not an easy question.

Personally, I favor a bailout if it can be properly framed such that it forces both the unions and management to make the same commitment to fundamental restructuring that a bankruptcy judge would require. If not, then let them proceed to bankruptcy and do it without public funds.

I don't think that the repubs are necessarily wrong in opposing it. My comment had more to do with Bush's diminished stature.

If the UAW isn't willing to make wage concessions, the union should be decertified for doing a terrible job of representing its members. I think the car companies are going to file Chapter 11 eventually, whether they get the money or not. The two major questions are can they get bankruptcy financing and will consumers buy cars from a company that is in 11? I think the answer to both is yes as long as the price of the cars reflect the risk.

As Tom Friedman often says, there is an opportunity in this mess and somebody is going to innovate and make a fortune, so why not the Big Three?

[Gopher4Life]

bga1,

>>Personally, I favor a bailout if it can be properly framed such that it forces both the unions and management to make the same commitment to fundamental restructuring that a bankruptcy judge would require.<<

Before we know it, everything wll be nationalized and free enterprise as we've known it for hundreds of years will be a relic of the past.

Let the big three auto makers fall hard. They and the union brought it on themselves and they deserve nothing more from taxpayers.

Use no public bailout funds for greedy, short-sighted auto executives.

Use that money to cushion the blow to auto factory employees as they search for replacement jobs with more realistic salary/benefits packages. I'm sorry that they got themselves hooked on a fantasy world where factory assembly line workers are paid $75/hour (wages and benefits). Better yet, make the union provide this temporary cushion to empoyees.

[StPaulHawkeye]

Redistribution of wealth - taking taxpayer money and giving it to people who don't have jobs. What a novel idea.

[bga1]

G4L- again, it's more complicated than that. If this were done in a vacuum I think 90% would agree that we should let the big three go into bankruptcy. Unfortunately that would leave a ton of well run businesses that have not been living in excess, up a creek without a paddle. If GM goes bankrupt a huge network of suppliers will be hit hard financially taking X amount on the dollar for work that has been completed but not paid. The next step will be massive layoffs and even bankruptcies in this network of key suppliers.

That's what happens if it goes to bankruptcy court. If it doesn't, a good loan program that forced the union and the execs to retool their stances, could still save the industry and the supplier network.

The worst case scenario is a straight bailout without any teeth -just as the Dems propose. Thsi would simply result in the taxpayers losing their money.

[jamiche]

I don't think the dems are propoosing a staright bailout without any teeth, beej. There are a lot of strings attached to their plan.

[Moonlight]

Yet one of the things I heard yesterday regarding the Big 3 is that streamlining would mean cutting R&D and simply focusing on the vehicles they are currently set up to make. WHAT? How is this a solution of any kind? Innovation will be key to the future success.

My situation probably reflects much of the problem. I'm hoping to hold off on a new car til the ie. Volt comes out. My car is almost 9 years old, about 90,000 miles and I've thought about selling it to my 17 year old who needs a used car now and getting a new one now. I tend to keep my cars 10-12 years and yet am wondering how low the current prices will go. On the other hand, we aren't many years away from some pretty important changes and innovations in vehicles...thoughts?

[Schnoodler]

redistribution of wealth 1980-2008 style: Taking tax payer money and giving it to people who make way more money than said tax payer.

[bigtenchamps1899]

The demise of the car companies will shortly be added to W's legacy. I don't know if the bailout was a good idea but it is a sordid commentary on Bush's presidency that his own party bucked him once again on legislation.

My (perhaps unrealistic) hope is that his reputation will be so tarnished that his post presidential earnings will be minimal and that fundraising for his presidential library will be unsuccessful. Why contribute to a monument to ineptitude?

bush's legacy is going to pinned on the war in iraq and the larger war on terror. i don't think that anyone can personally do anything to define what their legacy is going to be and the war loomed over his entire presidency. that said, i read once that ironically obama's decisions will affect bush's legacy more than bush's decisions. if obama is able to keep things on an upward trajectory in iraq, then iraq could emerge as a truly paradigm shifting nation in the middle east and will make bush look good. if obama pulls troops out prematurely and things turn pear-shaped then that will weigh on obama's legacy as well as bush's. most people forget that vietnam was started by JFK and that doesn't seem to have tarnished the glossy sheen of his legacy.

of course the mistakes made in iraq will always be remembered. no amount of memoirs and autobiographies will erase the misteps.

[Schnoodler]

I think though that LBJ made the decision to escalate the war in Vietnam. It's a very different history without LBJ. Not that I'm saying he made the wrong decision, but that he played a much stronger role than suggested in how things worked out.

[bga1]

Jamiche- I'm listening- what are the strings? My understanding is that the Car Czar powers were vague and that the recovery plan was not required until March- by which time the money could be spent. It is for that reason the R's began to ask for commitments up front- thus killing the deal for the Dems who are in the pockets of the unions.

[bga1]

redistribution of wealth 1980-2008 style: Taking tax payer money and giving it to people who make way more money than said tax payer.


Correction: Tax payers were allowed to keep a greater percentage of what they made. In response producers produced even more than they had before. Meanwhile non-producers continued, of their own volition, to not produce. Thus a widened income gap based upon actual production. Meanwhile high earners continue to pay more and more of the taxes.

[ilovethebarn]

bga1,

>>Personally, I favor a bailout if it can be properly framed such that it forces both the unions and management to make the same commitment to fundamental restructuring that a bankruptcy judge would require.<<

Before we know it, everything wll be nationalized and free enterprise as we've known it for hundreds of years will be a relic of the past.

Let the big three auto makers fall hard. They and the union brought it on themselves and they deserve nothing more from taxpayers.

Use no public bailout funds for greedy, short-sighted auto executives.

Use that money to cushion the blow to auto factory employees as they search for replacement jobs with more realistic salary/benefits packages. I'm sorry that they got themselves hooked on a fantasy world where factory assembly line workers are paid $75/hour (wages and benefits). Better yet, make the union provide this temporary cushion to empoyees.

Agreed.

[jamiche]

Jamiche- I'm listening- what are the strings? My understanding is that the Car Czar powers were vague and that the recovery plan was not required until March- by which time the money could be spent. It is for that reason the R's began to ask for commitments up front- thus killing the deal for the Dems who are in the pockets of the unions.

No prob, beej. The democratic strings were that the auto companies would drop their opposition to environmental regulations and mileage standards. the repubs were trying to break the UAW, which doesn't contribute to them, and protect the jobs in the south generated by Honda, Hyundai,and the other foreign auto makers.

Always follow the money.

[Gopher4Life]

jamiche,

>>...the repubs were trying to break the UAW...<<

All Americans should be united in doing the same. Not all unions are so blatantly unrealistic, but look what happens when a shortsighted, greedy union meets shortsighted, greedy executives. Consumers pay the outrageous bills.

Let the industry and the union collapse. The hole in the market will be quickly filled. That, not incessant bailouts, is the American way.

And in the end, Bush is proving once again that he has been anything but a conservative.

[diehard]

As ugly as it is, perhaps foreign auto makers should be the only one manufacturing autos in the US. The UAW didn't set out to destroy the goose that has been laying their golden egg, but they had a big hand in it. Times have changed. The big 3 died because they had to stay with the old labor agreements that are not survivable considering their competitor's labor costs and lack of legacy costs. They didn't engineer the 'right' cars. They suffered more from unreliable junk on the road than from lower fuel efficiency. When $4.00 gas hit their SUV and truck divisions had unmarketable products. Their system of dealers is bloated and ties up incredible assets in floorplanning and assets that lost their liquidity with the price of gas. We are all sitting around waiting for gas prices to explode again because we all know we have no valid national energy policy. There is a lot going on here. It isn't so easy.

[Costa Rican Gopher]

"Currently Big 3 average wages and benefits run $71 per hour compared with $47 an hour for the non-Big 3 domestic producers. Without a change in that, there is no hope that the Big 3 will produce a quality car at a competitive price. So are we to pump another 14 billion in a scenario that has no financial vability? This is not an easy question."

For me it's an easy question. All the partisan finger pointing is just a mumbo-jumbo, smoke screen. Simple. You don't throw good money after bad. It's really like an ongoing, corporate run ponzi scheme. They knew this day was coming and chose not to address the situation until now. Let them die, as G4L said someone else will step in and fill the void, it's the American way.

[diehard]

We have a solutiion at hand to the massive layoffs that are coming. Only 2% of the current work force is working for the federal government. Certainly we can have the government take over enough industries to get that up around 90%.

[Gopher4Life]

And some continue to claim we're not moving toward socialism.

[bigtenchamps1899]

a picture is worth a thousand words:
http://www.marginalrevolution.com/marginalrevolution/2008/12/fords-uaw-contr.html

[grunkiejr]

I don't believe the conspiracy that a failure of the Big 3 means all the suppliers will file bankruptcy.

Rationale: The issue for the suppliers is the same issue for the Big 3. All suppliers make money when auto makers buy parts to make cars that are being purchased by consumer. Without people buying cars there is no need for new cars and there is no need for new parts to make cars.

If the Big 3 file bankruptcy they will continue making cars as long as there is still a market for the cars and there is money to fund the company during bankruptcy (DIP lending). Chapter 11 reorganization is a process allows companies to renegotiate contracts (union contracts, retirement obligations, obligations to lenders, real estate leases, supplier contracts,etc).

The people in favor of a bailout have changed from "you need to do this or all the companies will go away in chapter 7 liquidation" to "you need to do this or all of the suppliers will file bankruptcy."

The primary impact of a Big 3 bankruptcy to suppliers is that any trade payables to an automaker that is older than 20 days will be treated as an unsecured claim (likely 10 cents on the dollar or less recovery) while trade payables less than 20 days old will receive a priority claim (likely 100% recovery). To mitigate the risk for suppliers they should either be asking for a letter of credit from the banks for "aged receivables" or demanding shorter payment terms from auto makers to ensure a priority claim.

Put me in the camp of I am anti-pre-bankruptcy bailout but pro post-bankruptcy bailout if a DIP lender is required.

[Schnoodler]

I'm not arguing against the sentiment, as I largely agree, but the problem with such large industry is that what is likely to replace them isn't an American owned start up. At best a new American make owned by Japanese and Korean companies.

Is that a bad thing? I don't like it, but I don't really have the answer.

But we should understand what the alternative is likely to look like.

[Gopher4Life]

Schnoodler,

Here's what we should probably understand:

Some people automatically look inward for solutions to problems. It's called personal responsibility.

Others have been led to look outward for solutions to nearly every problem they face. Sometimes they rely on neighbors, relatives, or churches, but usually it's taxpayers and an ever-expanding federal government.

The framers of our Constitution would never recognize the land of entitlement that America has become.