Automaker Bailout -- Heads They Win, Tails We Lose

Okay... this automaker bailout thing is really making me hot.

I get that if the car companies go out of business, many American workers will be without a job. And that doesn't make me feel good. But I'm sure the makers of bridles and bits were ticked off and fighting for their jobs when the first horseless carriage hit the scene. I'm sure the hay companies, carriage companies and other ancillary businesses were upset, too. But you know what... that's business. It's called progress, and the companies which are flexible enough to change with the times and move forward are the ones who survive.

So why haven't the Big Three done that? How is it that other countries figured out long ago that smaller, more gas-efficient vehicles are the way to save the environment and minimize dependence on foreign oil, all in one swoop? How is it that many foreign automakers have used innovation and efficiency in production to not only survive, but thrive? And don't say it's because they take all the jobs overseas, because Toyota produces more cars in the U.S. than the Ford company produces in North America, according to Dr. Herb London of the Hudson Institute.

Bad management and horrible future projection are just two of the reasons for the position American automakers are in. Oh, and let's not forget about greedy special interests. We know that our dependence upon foreign oil is a national security issue, yet the Big Three have been shamelessly marketing SUV's and gas-guzzlers at us for years. Hey, you don't do something that abhorrent unless somebody is making money off the deal.

And speaking of making money off the deal... here's what else that makes me hot. A New York Times article http://www.nytimes.com/2008/11/18/business/economy/18auto.html?th&emc=th
says that GM chief Richard Wagoner was paid $24 million in 2006 and 2007, in salary, stock options and other perks. And his 2008 salary base is $2.2 million. I'd be embarrassed as all hell if I were him! How can you think you deserve that kind of money when the company you are leading is begging for a bailout from the government?! What exactly did you do for all that cash? The honorable thing would be to give the money back.

That's why we middle-class taxpayers in America are ticked. You walk home with a $24 million paycheck and you want me to bailout your company? Tell you what, why don't you sell one of your multi-million dollar homes and meet me at the Dollar Tree and we'll talk while we shop.

Here's what I know: If I have a company that is not doing well, and I need an infusion of cash to get it out of the dumper, as an American business owner I have three options.

1- I submit a business and marketing plan to my financial institution and let them decide if my plan makes enough sense for them to be willing to risk giving me a loan.
2- I go into bankruptcy reorganization and make some major changes in my business.
3- I go out of business.

Mitt Romney thinks the bankruptcy idea is a good one (http://www.nytimes.com/2008/11/19/opinion/19romney.html?_r=1&th&emc=th).

It makes sense to me. In fact, many economists and business gurus are saying the same thing. On the flipside, going out of business isn't always a bad thing either. Take a look at history and many of the failed businesses of the past. Sometimes the fall of giants opens the door for innovation and progress.

What makes the automakers think that they deserve special treatment? What makes them think that they, above all other businesses, deserve to be bailed out by taxpayer dollars? There is no guarantee in America that a company you own will not go down the toilet. In fact, there are hundreds of thousands of past business owners in America who will tell you that. So why are the automakers asking us to keep them afloat? You own a company, you take a risk. But then, you also reap the rewards if the company succeeds. So I ask you... if we are to bailout the automakers in their time of distress, where is all our profit from the good years? That's the old Heads I win, Tails You Lose coin toss. And I'm ticked that Washington may fall for it.

Frankly, I'm tired of all these big businesses putting their hands out and trying to scare us into giving them money by threatening us with an economic disaster. Sounds like extortion to me. Hey, you wanted all those big bonuses and profits in the past, now it's time to put on your big girl underpants and get over it. Yes, our economy may suffer because of it, but it's happened before, and it will most likely happen again. It's American ingenuity that will pull us out. And frankly, I'm not seeing any of that right now coming from the American automakers.

Pam Atherton was Alaska's Energy Answerwoman during the oil crisis of the late 1970's

Read More:

Should the Government Bail Out the Big Three U.S. Automakers? HuffPost Bloggers Weigh In

Comments

[propax]

How about nationalizing the auto manufacturers (along with the banks), firing top management, and sellling the private jets on E-bay?
Check out the history of Renault on Wikipedia. Even though they have no presence in the American market, they are evidently very successful elsewhere and have partnerships with several other car manufacturers around the world. The same is probably true of the Big 3 as well (lots of foreign entanglements). Renault was nationalized, then re-privatized once it was stable and profitable. In the nationalization, top management was let go and the government installed its own guy, who was assassinated by radicals, presumably because he reduced the labor force significantly. The details of the re-privatization were not covered in Wikipedia's entry.
Are the car manufacturers sufficiently separate from all the other businesses they own or have partnerships with? I'm thinking particularly of GMAC as well as all the subsidiary defense contractors owned by GM, Ford, and Chrysler.

[DubiousVoter]

Pam Atherton has hit the nail on the head! Thank you, Pam, for being a voice of reason and for calling-out these ego-maniacs. Their arrogance is only exceeded by their incompetence.

I feel for the workers; sadly, their efforts and dedication will be rewarded with a slap in the face and a swift kick in the pants.

We certainly won't be flying to our million dollar estates on a private jet with a golden parachute!

[therealredstateblues]

the rational and logical thing to do is prevent the economic collapse of the industrial midwest, and the much greater cost to taxpayers that such a collapse would cause, not to mention the long term economic health and national security ramifications

the rash and illogical thing to do is force the collapse of the US manufacturing infrastructure to punish workers for the sins of big oil and wall street

[Michale32086]

I disagree..

Rewarding greed, malfeasance and unscrupulous on the part of the CEOs, Management and Unions is highly illogical. It will simply lead to more greed, malfeasance and unscrupulous behavior.

It will further set the precedent that ANY industry that can scare the people into thinking they too, are indispensable, can simply fly to DC and receive billions in bailout funds..

It is illogical to establish such a precedence.

Further, if the 50 billion dollar bailout fails to save the auto industry, what happens then?? Is the auto industry going to fly to DC in their private jets and ask for ANOTHER 50 billion?? And then another?? And then another?? Using all the same hysterical fear mongering that was used to secure the FIRST 50 billion??

That is also illogical..

The clear and rational plan is to let the industry fail. This will make room for better run companies. These new companies will have the understanding of what can happen if they let greed determine the day. This will provide incentive to those companies to avoid the fate of their predecessors..

THIS is the logical and rational course of action.

Not bailout after bailout after bailout...

Michale.....

[therealredstateblues]

yadda yadda

now is not the time for moralizing and posturing when so many livlihoods and further distress to the economy hang in the balance

your premise fails to comprehend the magintude, time and costs involved in rebuilding the mfg capacity and infrastructure, something not likely to be done in the US by US companies, and the barriers to entry for new companies in such a mature industry

once again you continue to show your ignorance of the auto motive industry and how it works

[Michale32086]

"Obama Transition Said to Consider a ‘Prepack’ Auto Bankruptcy "

http://www.bloomberg.com/apps/news?pid=20601087&sid=aRfqFMhlj5lk&refer=worldwide

Now that's an interesting idea...

Michale.....

[Michale32086]

@therealre­dstateblue­s

}}}}
so you want to punish hundreds of thousands of hard working people trying to keep roofs over their heads and feed their families, and cripple or put out of business hundreds of small businesses run by decent honest people who service and supply the auto industry over the sins of a few bad management decisions, wall street greed and corruption and big oil
{{{{

No..

But I don't want to reward greedy and unscrupulous men for being greedy and unscrupulous..

It's sad that the employees are caught in the middle, but perhaps if THEY hadn't been so greedy and pushed their unions to push for more and more pay and more and more benefits then this might have been averted..

There is enough blame to spread around to everyone..

Michale.....

[therealredstateblues]

Your vindictiveness is appalling

[Michale32086]

What you see as vindictiveness is merely logical, rational and above all else, objective thinking..

Rewarding bad behavior simply encourages more bad behavior.. Just as rewarding terrorism simply encourages more terrorism...

If you could look at things logically and objectively, you would see that I am right.

Michale....

[Michale32086]

@therealre­dstateblue­s

}}}}
A LOAN that is 3.5% of what paulson gave wall street
{{{{

Linking this bad idea to ANOTHER bad idea is not the way to endear yourself to the rest of America...

Have the Automakers get rid of all their private jets. Have them get rid of the HUGE multi-million dollar bonuses and yearly salaries...

Get rid of ALL of that first.. THEN see about begging the American people to bail them out..

}}}}
As said before as a taxpayer I see this as a much more appropriate use of taxpayer money than handing out checks to wealthy (and mostly republican) business associates of Henry paulson
{{{{

In this we are in agreement. And, if the Democrats hadn't pushed that 700 Billion dollar bailout for Wall Street, I might have been more inclined to support the Automaker bailout..

But, we see what a disaster the Wall Street bailout has been.. The American people put up 700 billion dollars and things are STILL going to hellinahan­dbasket...

Who is to say that this won't happen with the Automakers??

Michale......

[therealredstateblues]

History

The chrylser loans were paid back with interest ahead of schedule - at a profit to the taxpayer.

If by chance it doesn't work there are still hard assets that can be siezed - plants, equipment, trademarks and patents, inventory, recievables etc

[Michale32086]

So??

Even with all those assets, won't the same "oh the poor employees!!!" argument still be valid???

My point is, if this batch of 50 billion fails (as the 700 billion plan is failing) won't your SAME exact arguments be valid then??

Michale.....

[Michale32086]

@therealre­dstateblue­s

}}}}
I'll take the opinion of some one who has years of knowledge and experience in the auto industy over someone who does not know much of anything about it any day of the week thank you

as would any reasonable thinking person
}}}}

So, you would take a biased and self-serving opinion over a completely objective and reality-based opinion.

It is THAT exact attitude that has brought the Automakers to this point. Going the self-serving and short-sighted route instead of listening to the objective and reality-based side of things..

That is why there is no pity to be found for the Automakers. They did this to themselves and now will have to pay the price..

Michale.....

[therealredstateblues]

obviously a waste of time trying to discuss anythign with somneone with NO knowledge of the automobile industry

You make it sound as though i have some big "financial" stake - just a middle manager at a tooling and equipment supplier (that sells to the japanese and europeans by the way in addition to detroit) who is concerned about preserving my industry, our economic health and national security, and most importantly keeping my friends, neighbors customers and vendors employed in this economic downturn brought to us by big oil and wall street

My only "finacial stake" is my job - along with the thousands of other people who do the same thing

[Michale32086]

I understand and respect your dilemma..

But, factually and objectively speaking, your opinions are colored by your stake in the outcome. In that regard, you are no different than the CEOs flying around in their private jets and enjoying their multi-million dollar pay and bonuses.. You have their opinions for the same reasons. A financial stake. Granted their stake is bigger than yours, but it IS a stake, nonetheless..

My opinions are completely un-biased and objective..

It's that simple...

Michale.....

[Michale32086]

This was posted to a similar commentary, but it has merit here as well..

}}}}}
It is almost irrational to give finance the instruments to do more of what has brought us to the brink.
{{{{{

This is so factual, it needs repeating over and over and over again..

Simply pumping more money into Wall Street and the Automakers will not fix the problem. It's like putting a bandaid on a man suffering from a heart attack..

We have to change the mindset of those in charge. If it takes a total collapse of their business to pound that message home, then so be it..

Michale.....

[Michale32086]

@therealre­dstateblue­s

}}}}
The republicans were posturing, and they sensed an opportunity to try to pin the blame for the unpopular bill on the democrats -
{{{{

That's your opinion and the ONLY evidence you have to support it is your own partisan bigotry..

Ergo, it's not the reality..

But at least you concede the point that it was the Democrats who pushed it thru..

Michale.....

[therealredstateblues]

No - Paulson benranke and Bush pushed this thru

sadly with the helpp of some democrats

and republicans who joined in when the pork was added

[therealredstateblues]

I am not the only one saying this - even conservative commentators have suggested this like Brooks that is where I first heard it

[Michale32086]

The bottom line is the Auto makers ran their companies in a piss-poor manner. They were more concerned about flying around in private jets and making millions of dollars a year, than they were interested in staying up with the times.

Now, the companies and the workers are going to have to pay the price for their greed and shortsightedness.

Yes, it's sad and it's unfair.. But no one ever said that life is a bunch of roses and is fair..

Michale.....

[therealredstateblues]

You think the economy sucks now wait till you put half the midwest out of work

the cost to the taxpayers in the event of a failure to cover the unemployment, retiremenst and health care will 10s if not 100s of times greater thatn LOANING them some money to keep going

[Michale32086]

And once again, I am constrained to point out that the Automakers should have kept that in mind when they ran their companies into the ground..

They only have themselves to blame..

Michale....

[Michale32086]

@therealre­dstateblue­s

}}}}
Lots of opinions (mostly wrong ones) from folks who know nothing about the automobile industry
{{{{

And your opinions are based on a financial interest in seeing their bailout go thru..

Therefore, your opinions are a lot more suspect than mine. As I have absolutely NO dog in the hunt. I have absolutely NO cause or incentive to influence the matter either way...

You cannot make the same claim..

Michale.....

[therealredstateblues]

I'll take the opinion of some one who has years of knowledge and experience in the auto industy over someone who does not know much of anything about it any day of the week thank you

as would any reasonable thinking person

[Michale32086]

@therealre­dstateblue­s

}}}}
Nope - it is you who is the revisionist

see jp5472's post above
{{{{{

All his post says is that Paulson asked for the Wall Street bailout.

BFD...

It's a documented fact that your Democrats pushed the 700 Billion bailout thru Congress. When a few Democrats resisted, Democrats added a bunch of pork to appease them. When the Republicans resisted, Democrats added a bunch of Patriot Act stuff to get them on board.

Like I said, I won't allow you to re-write ancient history.

These are the facts, whether you want to acknowledge them or not.

Michale.....

[therealredstateblues]

See again jp5472s post

""It was a progression of requests from Paulson, Bernacke, and Bush, culminating in the September 24th big speech that pushed this bailout. Paulson especially looked like his head would just explode if he didn't get it. If you recall, Paulson wanted a blank check with NO oversight.

Maybe these will refresh you memory:

http://www.guardian.co.uk/business/2008/sep/24/wallstreet.georgebush
ttp://www.youtube.com/watch?v=YsDmPEeurfA

In his address, George touts the whole plan in great detail. It was then left to Congress, where the Dems have a slight majority, to give the trio what they asked for to save us from collapse. Of course, it would have been "rubber stamped" as practically everything GWB asked for was if it had been from 2001 through 2006.

So if the credit isn't flowing to keep businesses open and people employed, why is the Bush Administration turning a cold shoulder? Granted, I have been an engineer at GM and Ford in the eighties and know these companies are their own worst enemies, but this is counter to the big September 24th speech.

Reply Favorite Flag as abusive Posted 06:53 PM on 11/20/2008 ""

[Michale32086]

So??

That doesn't change the fact that it was DEMOCRATS who pushed the 700 billion dollar bailout, in collusion with President Bush..

No matter how many times you try to play up Bush, Paulson et al, the one simple fact you CANNOT change is that it was the Democrats who pushed that bailout thru Congress.

Just as it's the DEMOCRAT who are pushing this SECOND wasteful, ludicrous and completely unnecessary bailout for the Automakers..

And it's all because of greed....

Michale.....

[Michale32086]

DOH!!

"Like I said, I won't allow you to re-write ancient history."

That should read RECENT history...

My bust...

Michale.....

[therealredstateblues]

The republicans were posturing, and they sensed an opportunity to try to pin the blame for the unpopular bill on the democrats - politics 101

Paulson, Bernanke crafted this plan, Bush sold it

[Michale32086]

From another commentary:

GM, Ford, and Chrysler are not "domestic auto companies", and have not
been for over a generation. That concept is nothing but a myth perpetrated by
those companies, their unions, and the political class. What the are is
multinational corporations that source a significant portion of their vehicles
and parts destined for the US market from foreign locations. Ford has major
manufacturing operations in Canada, Mexico, the United Kingdom, Germany,
Turkey, Brazil, Argentina, Australia, the People's Republic of China, and
South Africa. GM currently manufactures cars and trucks in 34 foreign
countries, and engine blocks have been made in Mexico for many years.
Chrysler, even after the recent divestiture by Daimler-Benz, is still building
vehicles in Argentina.

The so-called "import manufacturers" are every bit as domestic to the US as
are the "big 3", perhaps more so. Those 8 foreign auto manufacturers have
operations at 25 locations in 12 US states, and employ >49,000 US workers.
BMW, Honda, Hyundai, Mercedes, Mitsubishi, Nissan, Subaru, and Toyota
build virtually every car and truck that they sell in the US, in the US. Last I
heard, the officers of those manufacturers were not queued up in DC, hat in
hand, begging for handouts like incompetent fools.

-iHATEmorons

[therealredstateblues]

No the japanese automakers get assistance from their own govt

As do the koreans

[therealredstateblues]

The point is the auto industry is interdependent - they all share the same supply base. trouble for one or more of the makers spells even bigger trouble for the supply chain, which ultimately hurts them all

like I explained in my muffler supplier example

[therealredstateblues]

All of the transpnat brands production capacity and employment is still a small fraction of the amount employd by the domestics and their suppliers

[therealredstateblues]

When AMC went into bankrupcy they stopped paying us suppliers

when they stopped paying us, we stopped making parts for them

without parts they couldn't build cars, and customers could not get service parts.

It turned into a vicious circle that ultimately led to liquidation

this is why people won't buy cars from a bankrupt maker

[kimp]

I'm incensed that the big 3 just want a handout with little effort on their part. Fear tactics by fat cats is never a pleasant strategy.

[therealredstateblues]

They want a LOAN that is 3.5% of the handout that Wall street got - the same wall streeters whose credit crisi is contributing to detroits problems

Chrysler paid their loans back with interest ahead of scehdule at a profit to the taxpayers