American Auto Industry needs billions to survive

[Kratos]

http://www.msnbc.msn.com/id/27824057

[SMCengineer]

^^it was AIG not AEG and they didn't get $500 mill brotha. But I see your point. LoL!

I am just as fustrated with the government bailing out these giant corps. But the alternative is just as devastating, right? 1 in 10 jobs in this country is connected to the auto industry. Not to mention the pensions many retirees count on from the auto industry. Many of these people are too old, frail, sick to go back to work. Can we afford 10-20 million unemployed? Can you imagine the strain on the social welfare system? The already tanking housing market would completely collapse. Again, not to mention the dominoe effect it will have on other industries.

So while we bitch about the government bailing out the big 3, no one here has come up with a viable alternative. I don't have any theories either, but the question remains, do we allow these giants to fail and sacrifice millions of jobs to 'teach these guys a lesson', or do we burden an already tax strained public to make up for these guys fvck ups? One thing for sure if any bail out is to happen, the government should absolutely require the unions to renegotiate their contracts and kill the absurd $27 an hour starting salary and bring it closer to the $12-$14/hr the Asian and European carmakers pay their employees.

Just my .02!

To understand why doing nothing is better than "doing something," you need to read about the great depression. Not just what you've read in text books, but actual accounts of what the causes were and what kept us in it for so long (hint: it wasn't free market capitalism). Herbert Hoover's 1932 acceptance speech for renomination is a decent starting point:

"We might have done nothing… Instead, we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic. We put it into action… No government in Washington has hitherto considered that it held so broad a responsibility for leadership in such times."

Sound familiar? Your assumption that "the alternative is just as devasting" is exactly what led to the Great depression (I put emphasis on great because it was goverment intervention that made it great). We finally came out of the depression in spite of the policies that FDR enacted not because of them.

If the auto indutries aren't bailed out they will not cease to exist even if they do go into bankruptcy. They'll have the option of either streamlining their management/fiscal policies or continue to see diminishing returns. This means they'll have to drastically reduce their size (yes, jobs will be lost, but if they aren't than capital and labor is being malinvested into inefficient companies where they could have been used in more efficient/deserving companies, thus there is no net gain in employment for the economy), freeing themselves of unions, and focusing on more desirable cars that consumers want.

As for a viable alternative, there is none short of letting them restructure their management or face failure, which is good for the economy, but bad for politics. This isn't about "teaching them a lesson" it's about inefficeint companies that are pulling down the overall ecomony. You have to remember that a government cannot give to a business without taking away from another business. Let the automobile industry thrive instead of flounder. In order for this to happen, some companies are going to need to shrink or cease to exist so that the capital and labor resources can be directed to the more efficient companies. If that means that the US car industry is temporarily beat out in order for them to come back stronger than before than that's what needs to happen. However, the path we're on will most likely lead to a stagnant automobile industry because the government will inevitably get involved.

Not many people would assert that a new technology should be held back in order that the amount of jobs involved in the production of the older technology be preserved. It would be assine to follow such policies and would greatly retard economic and scientific progress, but in saving a failing industry we are essentially doing the exact same thing.

http://www.msnbc.msn.com/id/27824057

If the auto industries come up with a decent business plan that addresses their current problems and provides a profitable outlook, a government bailout would be unnecessary because private firms/investors will eagerly risk their own capital if they saw potential for future profits. The bottom line is this: the auto industries will get money, but it's not because they need it to survive or because they need it to "save" the economy. They'll get it because of lobbyists and special interests groups who have a lot vested in them. However, congress cannot just hand out the money (as they had planned) after the ceo's came to the hearings in jet plans. They would've been derided for handing out bailouts to rich ceo's that didn't deserve it. So the hoop congress has to jump through to make it palatable to the public is to "demand" a business plan from the big three, but it's only a matter of time before they get their "share."