patrick.net

errc says

The main purpose of the bailouts was to keep the aristocracy in power

How does keeping blue collar union workers employed help keep the aristocracy in power?

Quigley says

Or we could have bought twenty new fighter jets to give the chickenhawk neocons big boners and scrambling for an excuse to use them. What is more worthy?

First of all it would have been much fairer to send everybody a check from that money, probably also with better outcome since they would not have focused on failing businesses and distributed the risk evenly, instead of throwing good money after bad. Second if that would be working in any way with any positive outcome, the US would be allowing everybody to print their own money to get themselves out of "ruts" and jump-start their businesses. But it's not, and therefore it's illegal for most and only legal for a few, benefitting the first-in-line cronies.

mell says

Just the proceedings of bankruptcy. The auto-industry had been moving out of the US for quite a while, and now suddenly GM is the one that has to be rescued? The costs would have been far lower for everybody, rewarding and supporting failure is always the highest cost and hurts more people for the benefit of a few.

As we speak, many millions of US workers are employed either directly, or indirectly to the US auto industry. So even is some of that work had been moving overseas, that doesn't mean that nobody works for them in the US anymore. Quite the opposite actually. So you are wrong. The costs would have been far greater had they been allowed to fail if we only base this on the sheer costs of supporting millions of US workers on unemployment insurance.

Dan8267 says

GM recorded a profit of $4.3 billion for the first nine months of this year.

The answer is to tax the profits and the executive compensations until the entire amount, in real dollars, is paid back. Tax the executive compensation at 100% no matter where the execs work until this is paid back in full.

After the fact (since I could not prevent the bailouts), I agree with you on this.

mell says

Yes.

Reality says

That's what better run businesses do. If that's not the case, how would you
allow any bad business go bankrupt?

LOL. I want to go into M&A with these two. All it takes to add value to the end product is better ownership.

Dan8267 says

GM recorded a profit of $4.3 billion for the first nine months of this year.

The answer is to tax the profits and the executive compensations until the entire amount, in real dollars, is paid back. Tax the executive compensation at 100% no matter where the execs work until this is paid back in full.

You will never hear those who benefit from ill gotten gains, suggesting claw backs. Take those on this board who applaud the fraud and waste in government (its the republicans fault) while reveling in the shlop like pigs in shit.

The american way dies everytime someone says "if its within the rules, its kosher to me!" And "if you can't beat um, join um". No good has ever come from that type of attitude. Pioneers that forge a better way of life, don't bother to read someone elses rules book. they decide for themselves what is right and what is wrong, regardless of what the government says.

tatupu70 says

Reality says

What you are not seeing is that: the workers, parts suppliers and dealers would have been absorbed by other carmakers that turn out cars more profitably (to the extent that consumers need cars; the rest will find more profitable employment in other fields in the absence of government disincentive to work).

Because you say so. Right?

How big of a bailout did ford need?

errc says

tatupu70 says

Reality says

What you are not seeing is that: the workers, parts suppliers and dealers would have been absorbed by other carmakers that turn out cars more profitably (to the extent that consumers need cars; the rest will find more profitable employment in other fields in the absence of government disincentive to work).

Because you say so. Right?

How big of a bailout did ford need?

$6 Billion.

control point says

mell says

Yes.

Reality says

That's what better run businesses do. If that's not the case, how would you

allow any bad business go bankrupt?

LOL. I want to go into M&A with these two. All it takes to add value to the end product is better ownership.

That's literally what corporations are supposed to do: turning less valuable natural resoruces, intermediate inputs and labor into end products that are more valuable.

GM as a corporation was actually built on the principle of slapping different brands on the same underlying platform to achieve different end product values for cars.

errc says

You will never hear those who benefit from ill gotten gains, suggesting claw backs. Take those on this board who applaud the fraud and waste in government (its the republicans fault) while reveling in the shlop like pigs in shit.

It pays to remember that it wasn't just the Obama administration that supported the bailout, but Bush as well. People need to put the politics aside for a moment and look at this as a purely economic exercise. At the time, neither side felt "good" about the decision and you can also bet that I wasn't totally thrilled either. Sure- it stank. But it had to be done because otherwise the costs would have been enormous otherwise. This all boiled down to economics.

Lastly, there is hardly an auto manufacture on earth that has not at one time gotten some sort of government bailout. Auto companies are important because they have an enormous economic impact on the countries the exist in and in each instance of those bailouts the decision was made not because of political ideology, but because of picking the better financial outcome of a bad financial situation.

tatupu70 says

errc says

tatupu70 says

Reality says

What you are not seeing is that: the workers, parts suppliers and dealers would have been absorbed by other carmakers that turn out cars more profitably (to the extent that consumers need cars; the rest will find more profitable employment in other fields in the absence of government disincentive to work).

Because you say so. Right?

How big of a bailout did ford need?

$6 Billion.

No, that's not what Ford needed to survive when GM was bailed out. That was the pay-off money (and similarly to every other major carmakers in the world) for not letting the other carmakers take a dib on carving up GM. In other words, those payouts should also be added to the cost of bailing out the union members at GM.

Reality says

That's literally what corporations are supposed to do: turning less valuable
natural resoruces, intermediate inputs and labor into end products that are more
valuable.

Yes, but you are saying taking the same all of the above, only changing the ownership, and the ownership change alone will add value.

edvard2 says

You are making a lot of really simple assumptions. First of all, if you are a supplier of car parts to a particular company, then that means you as a supplier have invested what likely amounts to many millions of dollars in research, tooling, stamping, equipment, CNC machinery, facilities, employees and training that were all geared specifically to making said parts for that particular company. The loss of the company that those companies were supplying would have easily bankrupted many, many of those suppliers.

What are you saying? That no car model should ever go out of production? You should feel right at home in the 1980's USSR, when their factories were still churning out copies of American cars made in the 1950's . . . because when the bureaucrats are the sole decision maker on capital obsolescence, nothing is ever allowed to be obsolete!

edvard2 says

The problem with your assertion is that your "solution" is tied to gross assumptions and guesses. When it comes down to investments, risk, and financial planning, basing said investment on assumption is an almost assured means to LOSE a lot of money. Investments are made on the basis of more predictable outcomes. Simply put, saving two companies with large intact chains of suppliers, trained workers, and the entire network of inter-related enterprises tied to them and leaving this system intact has way LESS risk then doing what you were suggesting, which was to let em' fail and "Assume" that somehow other auto manufactures would have picked up the slack. Had something like what were suggesting been done the net loss would have almost assuredly been many, many times greater in overall cost then what it wound up being.

No, you are the one making unfounded and counter-factual guesses. Overhauling automakers, and even entire auto industries, have been taking place in many parts of the world many times over. The result is always leaner operation, higher productivity, and better products for consumers.

control point says

Reality says

That's literally what corporations are supposed to do: turning less valuable

natural resoruces, intermediate inputs and labor into end products that are more

valuable.

Yes, but you are saying taking the same all of the above, only changing the ownership, and the ownership change alone will add value.

Ownership takeover by another car maker means management decisions to be made by people who have track record of actually making good management decisions! in capital structure and labor-relationships that have a track record of turning out cars that consumers want to buy!

Reality says

No, that's not what Ford needed to survive when GM was bailed out. That was the pay-off money (and similarly to every other major carmakers in the world) for not letting the other carmakers take a dib on carving up GM. In other words, those payouts should also be added to the cost of bailing out the union members at GM.

lol--was the $16B that the Fed gave them also a payoff?

http://jalopnik.com/5704575/ford-bmw-toyota-took-secret-government-money

Sometimes I wonder how/where you come up with this BS.

tatupu70 says

Reality says

No, that's not what Ford needed to survive when GM was bailed out. That was the pay-off money (and similarly to every other major carmakers in the world) for not letting the other carmakers take a dib on carving up GM. In other words, those payouts should also be added to the cost of bailing out the union members at GM.

lol--was the $16B that the Fed gave them also a payoff?

http://jalopnik.com/5704575/ford-bmw-toyota-took-secret-government-money

Of course it was. That was what I was referring to as "similar handouts to almost every other major caramaker in the world." That was hush money paid out at the big boys table to make it "fair to everyone," everyone at the big boys table, that is. Of course all at the expense of people who were not at the table!

Considering the average new car cost more than $30k nowadays, who do you think benefit the most from those handouts to the financing arms? Besides the executives and finance guys, those who can afford to buy/lease new cars frequently benefit at the expense of those who buy used cars and/or keep cars for a long time. In other words, another instance of ripping off the poor and the middle class to enrich the already wealthy.

Reality says

What are you saying? That no car model should ever go out of production? You should feel right at home in the 1980's USSR, when their factories were still churning out copies of American cars made in the 1950's . . . because when the bureaucrats are the sole decision maker on capital obsolescence, nothing is ever allowed to be obsolete!

Again- some simple assumptions. Every time a new redesign of a model comes out its not like the entire car is actually new. All automakers have what are known as "platforms", which is to say a basic chassis or vehicular configuration that is used for the underlying structure of sometimes multiple models. On top of that those models might undergo several model redesigns but still use the same generation of platform. Some platforms are used for decades. For example, Chrysler was using some platforms that had been developed by AMC ( American Motor Corporation) in the 70's and early 80's right up until not too long ago.

So in that case, many suppliers will make what amounts to the exact same part for decades. Perhaps the sheetmetal, engine, and interiors might change, but things like body panel clips, swing arms, steering wheel hubs, spindles, brake calipers, and power steering pumps can be in production for a very long time. Its also not just platforms but engines, transmissions, and suspension components.

So you see, its not like with every model change those suppliers suddenly all re-tool. They are often setup creating the same parts for decades and to assume they would suddenly totally change overnight is a simplistic assumption.Reality says

No, you are the one making unfounded and counter-factual guesses. Overhauling automakers, and even entire auto industries, have been taking place in many parts of the world many times over. The result is always leaner operation, higher productivity, and better products for consumers.

How was I making a "guess"? If you had made the choice then millions of people would have immediately been out of work and what would have definitely happened would be a huge cost in the form of unemployment insurance.

As far as leaner operations, higher productivity, and better products, both GM and Ford had been doing exactly that leading up to the recession. Most of the products GM currently sells- of which many are selling very well- were developed well before the recession. That the recession came along was poor timing on a well-orchestrated turnaround in the works.

Call it Crazy says

No, that is what has happened in every other industry where a company goes bankrupt... All the workers, suppliers, dealers switch over to a different company...

I see. That's why unemployment is still stubbornly high and worker participation is low. Because the workers seemly moved to a different company. Do you live in the real world??

Call it Crazy says

Exactly.... Just look at the auto industry, how many other car makers or start-ups have moved into buildings formerly run by a competitor?

Of course. Nobody is arguing that companies should never go bankrupt. Implying otherwise is typical for you and Reality though.

tatupu70 says

Reality says

Companies that can not meet payroll should be bankrupted because they leverage too much and take too much risk with their worker's well being. The corporate officers engaged in such behavior should be arrested if any dereliction of duty is found.

That's fine. Like I said--don't cry when you're in the unemployment line or eating at the soup kitchen when your benefits run out.

LOL. You think I pay myself "benefits"? Why go to an "unemployment line"? What is an "unemployment line"? Sounds like a waste of time to gravitate towards where there is already a surplus of people looking for jobs. Go find something you can do for your neighbors and get paid for it! Hopefully get paid handsomely for it because nobody else has yet thought of offering such a service at such a "great price" that is appealing to your customers yet highly profitable for yourself! That's how new jobs are created, not filing paper wasting time at the unemployment line waiting for a government pacifier to suck on.

Why do we allow some businesses to fail? Put the politics aside? Just end the discussion, its purely political

Reality says

Go find something you can do for your neighbors and get paid for it!

Good luck with that. All your neighbors are in the unemployement line that you are unfamilar with. None of them have any money to pay you, despite your admirable attitude.

Let me know how Says "Law" works when everyone is broke.

RentingForHalfTheCost says

10B is nothing! We burn though that in 10/85th of a month (or less than 4 days). What the hell is everyone complaining about. The Fed could buy GM every 3 weeks (market cap of 56B). Geez

Good point. But the fed and their actions are just the boogeyman. No effect on anything, whatsoever

Call it Crazy says

How long have you been living under that rock?? Workers don't move to another company when their current company closes?? Really??

Clearly not. You're the one who talks about the worker participation rate. Do you disagree that there are lots of people out there looking for jobs right now?

Do you think if GM went bankrupt, that number would be larger?

Call it Crazy says

Well, who gets to "cherry pick" which one lives or dies through bankruptcy... The government??

Well, really we do. We elect our representatives.

errc says

Why do we allow some businesses to fail? Put the politics aside? Just end the discussion, its purely political

Because this was all about money. LOTS and lots of money. The simple question is:

Would you rather have paid more or less?

Its really that simple. Sure- had GM and Chrysler been allowed to fail maybe some right-wingers would have felt all warm and fuzzy inside... until the costs of having allowed that to happen would have been recognized.

edvard2 says

All automakers have what are known as "platforms", which is to say a basic chassis or vehicular configuration that is used for the underlying structure of sometimes multiple models. On top of that those models might undergo several model redesigns but still use the same generation of platform. Some platforms are used for decades. For example, Chrysler was using some platforms that had been developed by AMC ( American Motor Corporation) in the 70's and early 80's right up until not too long ago.

Thank you for the gratuitous lecture on car platforms. I have no idea what you mean by "not too long ago." The change over was in the mid-1990's. How long have you been hiding under a rock? two decades? Platforms updates are becoming more frequent in the last decade and half. Platform engineering is gradually giving way to modular engineering that can be updated much quicker. Including for engines, even each cylinder as a module. If a supplier is still stuck in the platform business model, it is indeed a good time to go bankrupt, as the tooling would be quite obsolete already.

edvard2 says

How was I making a "guess"? If you had made the choice then millions of people would have immediately been out of work and what would have definitely happened would be a huge cost in the form of unemployment insurance.

Or get rid of "unemployment insurance" altogether. It's just a system that attract people gaming the system and take 6mo to a year vacations.

edvard2 says

As far as leaner operations, higher productivity, and better products, both GM and Ford had been doing exactly that leading up to the recession. Most of the products GM currently sells- of which many are selling very well- were developed well before the recession. That the recession came along was poor timing on a well-orchestrated turnaround in the works.

LOL, I suppose you would consider farmers who failed to harvest quickly enough and lost crop to the arrival of winter just a case of bad timing for the earth's tilted axis.

errc says

RentingForHalfTheCost says

10B is nothing! We burn though that in 10/85th of a month (or less than 4 days). What the hell is everyone complaining about. The Fed could buy GM every 3 weeks (market cap of 56B). Geez

Good point. But the fed and their actions are just the boogeyman. No effect on anything, whatsoever

Hehehe.

Reality says

LOL, I suppose you would consider farmers who failed to harvest quickly enough and lost crop to the arrival of winter just a case of bad timing for the earth's tilted axis.

Yes, because the timing of recessions is just as well known as the seasons.

I'll give you this--at least you are consistent with your poor analogies.

edvard2 says

errc says

Why do we allow some businesses to fail? Put the politics aside? Just end the discussion, its purely political

Because this was all about money. LOTS and lots of money. The simple question is:

Would you rather have paid more or less?

Its really that simple. Sure- had GM and Chrysler been allowed to fail maybe some right-wingers would have felt all warm and fuzzy inside... until the costs of having allowed that to happen would have been recognized.

Addressed this issue already: the bailout was merely a kick of the can down the road. It will come up soon enough again, given the industrial over-capacity and channel stuffing.

tatupu70 says

Reality says

LOL, I suppose you would consider farmers who failed to harvest quickly enough and lost crop to the arrival of winter just a case of bad timing for the earth's tilted axis.

Yes, because the timing of recessions is just as well know as the seasons.

Longer seasonal cycles. GM financing arm was on the frontline of making car loans and home loans to uncreditworthy borrowers. What do you think would come next? If the practitioner could not expect what was bound to come next as consequence of those uncreditworthy loans, they deserved to go bankrupt.

edvard2 says

errc says

Why do we allow some businesses to fail? Put the politics aside? Just end the discussion, its purely political

Because this was all about money. LOTS and lots of money. The simple question is:

Would you rather have paid more or less?

Its really that simple. Sure- had GM and Chrysler been allowed to fail maybe some right-wingers would have felt all warm and fuzzy inside... until the costs of having allowed that to happen would have been recognized.

Unemployment insurance is paid by payroll taxes, by people that work, just in case they find themselves out of work. It wouldn't have been so great unthinkable cost an order of magnitude greater than the bailouts.

Don't confuse unemployment insurance as some sort of welfare.

Reality says

Thank you for the gratuitous lecture on car platforms. I have no idea what you mean by "not too long ago." The change over was in the mid-1990's. How long have you been hiding under a rock? two decades? Platforms updates are becoming more frequent in the last decade and half. Platform engineering is gradually giving way to modular engineering that can be updated much quicker. Including for engines, even each cylinder as a module. If a supplier is still stuck in the platform business model, it is indeed a good time to go bankrupt, as the tooling would be quite obsolete already.

Clearly you don't given that some platforms that Chrysler used in the 70's and 80's were still being used into the 2000's. The Ford Panther platform was used from 1978-2011, a full 30+ years. Not sure what you mean by "platform engineering is giving way to modular engineering" seeing as how every single current product model car on the planet utilizes some sort of platform. The term "platform" is generic. That would be like someone saying: " Oh yeah? Well frames in houses are now giving way to modular design." So exactly what do you think a "module" is anyway? Technically speaking its about making components in advance for a product- so in other words- mass manufacturing akin to an assembly line. I believe Henry Ford had this whole... " Modular design" thing down pat about 100 years ago. So pleased to find that you have discovered this unique concept. Reality says

Or get rid of "unemployment insurance" altogether. It's just a system that attract people gaming the system and take 6mo to a year vacations.

Your argument has now jumped the shark.

tatupu70 says

Call it Crazy says

How long have you been living under that rock?? Workers don't move to another company when their current company closes?? Really??

Clearly not. You're the one who talks about the worker participation rate. Do you disagree that there are lots of people out there looking for jobs right now?

Do you think if GM went bankrupt, that number would be larger?

First of all, GM did go bankrupt, for the conventional creditors. So the old folks who had savings in GM bonds were shacked without getting anything from the sale of GM plants to would-be buyers. Having lost that principle, along with the loss of interest income thanks to FED ZIRP policy, the oldster savers are having less money to spend . . . therefore less jobs for the youngsters who would otherwise have jobs working for the oldster savers. On top of that, the oldster savers may have to look for Walmart greeter jobs, in direct competition against the youngsters! All this for what? To save the privileged income of banksters and some union members.

Mark D says

whatever happened to that perma-bear theory that rents only go up with income (chart #1)?

wait until the dollar bubble bursts (within 10 years according to my estimate) then watch the rents skyrocket when my mortgage remains the same.

If the dollar bursts, within 10 years, as you say; where will Japan, Europe and China be?

edvard2 says

Clearly you don't given that some platforms that Chrysler used in the 70's and 80's were still being used into the 2000's. The Ford Panther platform was used from 1978-2011, a full 30+ years.

These are rare extreme exceptions for special purpose vehicles, like the the Crown Vic taxi car. There are always old tech special purpose vehicles. If a company's business model consistes of living off those extremely aged platforms selling as new cars, it deserves to go bankrupt at any time. The AMC platforms that you were talking about in your previous post were replaced in the mid-1990's, two decades ago.

Not sure what you mean by "platform engineering is giving way to modular engineering" seeing as how every single current product model car on the planet utilizes some sort of platform. The term "platform" is generic. That would be like someone saying: " Oh yeah? Well frames in houses are now giving way to modular design." So exactly what do you think a "module" is anyway? Curious minds want to know.

Modular engineering in carmaking means major components that are interchangeable and independently upgradable, unlike the previous platform engineering approach. BMW's "flexible manufacturing" led the new engineering approach.

edvard2 says

Lastly, there is hardly an auto manufacture on earth that has not at one time gotten some sort of government bailout. Auto companies are important because they have an enormous economic impact on the countries the exist in and in each instance of those bailouts the decision was made not because of political ideology, but because of picking the better financial outcome of a bad financial situation.

Governments record of picking better financial outcomes is not what I would call great. The makers of horse drawn wagons had an enormous impact in the countries they existed. Should the ones that failed to make the decision to switch to cars have been bailed out? Companies that make bad business decisions should be in bankruptcy. If they can't work out a plan with the creditors to emerge then they should cease to exist.

You guys are all missing the point anyway. The 10.5 billion didn't save GM, it allowed the gm UAW workers to continue to have higher compensation than at the other automakers. Read up on the bailout and who got what. The UAW as a creditor got a very skewed percentage of the bailout at the expense of other creditors. Had the gm workers been cut to the industry average compensation the government wouldn't have lost a dime. That makes the bailout a calculated political play rather than any kind of altruistic concern for workers's jobs. Follow the money.

Anyone (there are many right here on patnet) who thinks that all the bailouts, auto and financial, were done on some kind of carefully considered basis after large amounts of analysis by industry experts needs to read neil barofsky's book. He was the ig for tarp. The amount of fast and loose playing with huge amounts of taxpayers money under paulson and geitner is pretty shocking. There are many times when word handout is more appropriate than than the word bailout. Want even better reading try Billionaires & Ballot Bandits: How to Steal an Election in 9 Easy Steps. Especially the parts about how romney made millions on the bailouts he condemned. and his hedge fund campaign contriibuters made billions. Follow the money.

Reality says

First of all, GM did go bankrupt, for the conventional creditors

True--poor choice of words.

Reality says

Having lost that principle, along with the loss of interest income thanks to FED ZIRP policy, the oldster savers are having less money to spend

The interest income is low but so is the inflation rate. That's what happens during a recession. Oldster savers are not the drivers of an economy anyway.

bob2356 says

Companies that make bad business decisions should be in bankruptcy.

No kidding. Why do people keep arguing this as if anyone disagreed???

tatupu70 says

bob2356 says

Companies that make bad business decisions should be in bankruptcy.

No kidding. Why do people keep arguing this as if anyone disagreed???

Because they aren't, and a whole bunch of them.

Reality says

These are rare extreme exceptions for special purpose vehicles, like the the Crown Vic taxi car. There are always old tech special purpose vehicles. If a company's business model consistes of living off those extremely aged platforms selling as new cars, it deserves to go bankrupt at any time. The AMC platforms that you were talking about in your previous post were replaced in the mid-1990's, two decades ago.

Those were two examples of many others. You are incorrect about some of AMC's platforms as well, with one, for example used in the Dodge Intrepid well into the 2000's. Reality says

Modular engineering in carmaking means major components that are interchangeable and independently upgradable, unlike the previous platform engineering approach. BMW's "flexible manufacturing" led the new engineering approach.

This is nothing new. This in fact has almost always been the case right up to the advent of the auto assembly line. For example, Ford made numerous versions of the "Windsor" family of engines that ranged from V6 and V8 models and in many cases the same components were used. As a classic car owner myself I can attest to this, seeing as how many parts that will fit a 302 also happens to fit the 289, 351, and others.