Loan not good idea for U.S. car makers
There's talk of a loan to GM and Chrysler to assist with a merger. But economics correspondent Chris Farrell tells Scott Jagow U.S. auto makers should avoid a government loan and just declare bankruptcy.
The Chrysler emblem at company headquarters (Bill Pugliano/Getty Images)
More on Auto Industry, Mergers/Acquisitions
TEXT OF INTERVIEW
Scott Jagow: Time to visit with our economics correspondent. Chris Farrell. And the topic this week is the auto industry. There's talk of a loan to help GM and Chrysler complete a merger, or some other direct assistance to American car makers. But Chris, based on the e-mail you sent me, I know you think the government should keep its hands in its pockets this time. Why?
Chris Farrell: Well for one thing, I mean this sounds harsh but if GM and Chrysler disappeared, we'd still be able to buy as a consumer, we'd get cars from Ford, Hyundai, Honda, Toyota. There's plenty of car makers out there, so the consumer's not going to get hurt. And secondly, it's a competitive market. GM and Chrysler have made a lot of strategic mistakes, management has made some terrible decisions. And finally, I mean if you just look at Chrysler, it's owned by Cerberus Capital Management, it's a private equity firm. So the American taxpayer is going to bail out a private equity firm?
Jagow: Well, there are a lot of jobs at stake here, Chris.
Farrell: Yes. So my notion is, let's not give the money to Chrysler and GM and the management. Let's give it to the workers. Now if I do the calculation right and we're talking about $10 billion, that's about $70,000 per worker. As a voucher, workers can use it to retrain, workers can use it to move to a different part of the country. And of course some of it might be wasted, but it is a waste of money to put it into the companies themselves. We've seen disaster after disaster, whether it's in the steel industry in the past, where companies have not done what we expect them to the do with the money. What I would prefer is look, go into bankruptcy. We don't need a taxpayer bailout, so just declare bankruptcy. But if the politics are such that we are going to do some form of bailout, let's not direct it to the companies. Let's protect who we're really worried about, which is the worker.
Jagow: All right, so are you basically saying to give up on the American auto industry?
Farrell: Whoever can survive, survives. Seems like Ford's going to be around, right? And maybe a smaller GM or a smaller Chrysler, or maybe Chrysler disappears, a small GM -- I don't know how it's going to shake out. But as far as I know, there's lots of auto plants here in the U.S., there's no shortage of cars. We have a lot of auto workers, they just happen to be working for companies with names like Toyota and Hyundai and Honda. Yeah, we're going to have a shrunken industry, which by the way, has been shrinking. Let the bankruptcy system deal with it.
Jagow: All right, Chris Farrell, our economics correspondent. Thanks.
Farrell: Thanks a lot.
Comments
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From Warsaw, NC, 11/17/2008
First, let me say that while we probably should do something in the way of assistance, I've not read or heard anything about how to stop this from happening again. Maybe we should start by adjusting wages to the rest of the other car makers who are not in trouble and changing retirements from pensions to 401 K's like the rest of the other car makers. There has to be a reason why they are not in trouble and Detroit is. Also, I will remind everyone that as Detroit rose in power and destroyed everything and everybody that got in it's way...the Government helped not one of them...Tucker, Railroads, trolley systems, local small bus companies,etc., etc., etc....Detroit destroyed many small companies on it's way up...give them the opportunity to get in step and that's more than they have done for anyone.
From san diego, CA, 11/05/2008
Why are we bailing out Detroit? The executives have shown they are not competant. That money should be going to where it would do the most good. Start ups like Aptera and Tesla are putting out 200 mile electric and 300 mpg hybrids that WE NEED. They are hurting the most from this credit crunch. They show the most promise and they deserve our aid. When Detroit goes through another round of lay offs, companies like Tesla will be the ones hiring. A little better forsight right now is what the taxpayers deserve.
From AR, 11/04/2008
Mr. Paulson worked for GoldmanSachs, not GM. : ) The US government is solving the credit crisis (or theft in other words) by pouring money to cover the theft. How are they getting all the money? They are 'borrowing' money! Yes, more credit to solve the credit crisis.
11/02/2008
Your story about the auto industry was cursory at best, and demonstrates a poor degree of knowledge about international econimics, and at worst is a myopic outdated U.S. centric set of principles that guide your thinking. Yes, the U.S. auto companies have made some poor decisions. How about the Asians and Eropeans, who's most recent new product introductions have been large, gas-guzzling SUV's and full-size trucks? Did you know the Honda Pilot has among of the worst mileage in it's class? How come NPR didn't call the Asians out on there poor strategic decision in launching the QX, LX, Tundra and Titan? What about the fact that Japanese, Korean, and Chinese companies do have governament support and the U.S. companies don't? And what about Health care? Some of those companies don't have to fund it like the U.S. companies do. Also, did you know that the Japanese government invested in Hybrid battery development years ago? Where was the U.S. governement? Regarding Europe, did you know that the government institured a gas tax which drove consumers to buy smaller vehicles? U.S auto executives advocated for gas taxes for years. Why didn't you advocate that? The U.S. companies did not force consumers to buy large vehicles. And what about barries to trade? Korea limits U.S. vehicles to a pittance. Japan has so many hidden barries, like inspections, that gaining any volume there is almost impossible. And in China, the government owns 50% of any foreign investment. So, do you think it's a fair marketplace? Do you feel the U.S. governement has been responsible to it's basic industries? We need a basic economy that's more than "services." If you are going to profess to be a econmics expert, you really need to take a more integrated global view, and look at fairness in trade policies.
From Brighton, MI, 11/02/2008
Chris Farrell's comments led me to do a little economic homework of my own. Chrysler and GM comprise 44% of the installed capacity (approximately 18.6 million vehicles) for light duty vehicles in North America and an estimated 28% of the vehicle sales. While nobody may miss their brands if they were to fail, this capacity cannot simply be wiped off the slate. The remaining manufacturers cannot fill that void. More importantly, the supply base for all the vehicle manufacturers is very intertwined. My relatively small company ($200 million) supplies product to GM, Chrysler, Ford and Toyota. If GM or Chrysler runs out of cash or declares bankruptcy and stops paying their bills, we run out of cash and stop manufacturing without a major infusion of cash from the other manufacturers. This is the same situation at hundreds of other suppliers, many much larger than we. I am not thrilled about a loan to fund the merger. But bankruptcy is simply not an option. It's Armageddon.
From Detroit, MI, 10/31/2008
I was surprised at Chris Farrell's superficial analysis that GM and Chrysler should be allowed to fail and that Ford is "doing all right." Despite my address, I'm not involved in the auto industry, but I AM a manufacturer. I make real things -- tangible goods that need to be produced in a physical location by humans and machines, not "financial services" that can go anywhere and often should.
My suppliers are also auto suppliers. Several key services that used to be easy to obtain are now difficult or impossible. Some materials now have extended lead-times because the economies of scale that the auto industry sustained have collapsed. If I can't buy steel tubing because the mill won't roll it every week because GM isn't buying, well, then I can't satisfy my customer in Brazil or Toronto or Wisconsin. I may lose that sale to a company in another country.
The issue isn’t easy enough to dismiss the way Chris and many of my fellow listeners have done. As Holman Jenkins pointed out in the Wall Street Journal October 22, our Federal government has been "in the car business" for decades, distorting the market and driving many bad decisions. GM, Chrysler, and FOrd mamagement aren't geniuses, but they are not idiots, either. Marketplace owes it to the listeners to look at this complicated issue with more than the feather-dusting Chris Farrell gave us.
From St Louis, MO, 10/31/2008
OK so we let them fail and then we can not only buy all of our oil and energy from other countries but we can buy all of our vehicles to. How does that sound. Pretty soon we can import everything and none of us will have jobs. If we can bail out the greedy bastrds of Wall Street and the Banks why not bailout the people who really work fo a living.
From VIENNA, VA, 10/31/2008
I believe that the auto companies need a dose of reality with either being allowed to declare bankruptcy thus humbling their arrogance to refuse to market sub-liter autos (Chevy Matiz, Ford Ka, etc.) as in Europe or allow the loan to go through with the contingency to force them to market these cars in the US with a crash EPA program to approve them for import. Eventually they could be manufactured domestically.
From West Bloomfield, MI, 10/31/2008
Congrats Mike Farrell, you gave the MOST ignorant & uninformed "expert" opinion that I have EVER heard in my life! Manufacturing, not service is the engine that drives this economy & allows money to "turn" over multiple times.
1st off the auto companies are not looking for a freebie, they are looking for a LOAN. The bailout package for the banks set aside $250bil just for that purppose. GM is only trying to get that cash when it can do the most good, right now. If the Gov't moves at it's normal pace, it will take 2-3years to get that loan, which may be too late for GM & many business that depend on the OEMs.
2nd, if we look at the contribution that GM alone makes to the country's GNP, it's around 2-3%, not a trifling amount. However, if you include the rest of the manufacturing chain, then that pyramid quickly outstrips your $10bil estimate. The supply chain includes most states in the country. Then if you add Chrysler, it's vendors, & their vendors, into that pyramid, it grows about 30% bigger. This doesn't include the local stores that depend on all of these business for some portion of their income.
Farrell comments about the import brands & Ford Motor Co doing well, ignore the reality around us here in Michigan. The Ford family has been struggling with the same issues as GM & Chrysler. The imports have seen their cash flow dry up like the rest of us.
Farrell may dismiss the entire chain of automobile & manufacturing business as inconsequential, but I'd like to see him take a pay cut of that magnatude.
Larry
From Franklin, TN, 10/30/2008
I have to agree with Chris Farrel's idea of not bailing GM out of the mess it got itself into. Here's an idea - how about Exxon lending them the money to help the employee base? The two companies certainly have a symbiotic relationship - GM has helped Exxon's bottom line by producing gas-guzzling, inefficient vehicles for decades. Exxon had a STELLAR 3rd quarter - so why not?
From Apopka, FL, 10/30/2008
Hooray for Chris Ferrell and the voice of reason. How can we get our representatives and congressmen to stop this insanity and help the real victims of this wall street disaster - the workers who have been making their mortgage payments on time and supporting our economy, but now find themselves unemployed and with no one looking to help them surviive?
From Alexandria, VA, 10/30/2008
I must say that I do not have the answer to this problem, but, this solution is missing many elements of the problem. One of the biggest challenges of the auto industry is its legacy costs - also known as retirees. Last I heard - GM had 2.5 retirees for every employee. Similiar numbers for Ford and Chrysler. If the companies go under - what happens to these hundreds of thousands of people?
From MI, 10/30/2008
I think the jewel of this page is the 4th comment regarding a $450/month tax rebate for purchasing an American car. The economic stimulus would be off the charts. I wish our elected lawmakers would come up with these kinds of ideas. A sound free market solution.
10/30/2008
I whole heartedly agree with Chris Farrell. In fact, just the night before, I was saying the same thing to my husband. The only concern we should have is for the auto workers and to that end, we could offer those auto companies which have made good decisions such as Honda, BMW, etc. a tax incentive for hiring and/or taking over the failing auto companies. We all make decisions in life, and the majority of us in this country have to live with those decisions. I think it is high time that we make the large corporations in this country responsible for their decisions. I watched a show on the Environmental Energy on PBS a week ago, and they address the money that the Clinton administration gave to the American auto companies to retool and make more fuel efficient cars. Well, in fact GM did (the electric car), but then they decided to abandon this technology and they destroyed the cars. So, we gave them money back during the Clinton administration and they did not put it to good use. So, what I would say is fool me once shame on you, fool me twice ... well, lets not be fooled twice into thinking these companies know how to make good decisions.
From Clinton, IA, 10/30/2008
I would feel just as satisfied as everyone else with the idea of letting these companies fail if I didn't have this idea that I helped contribute to it.
Why was it so easy for us to believe that everyone just had to have some big monstrous sport utility just to haul one person back and forth to work everyday? Sure we can blame it all on marketing( the ads made me do it) But in the end, don't we bare at least some of the responsibility? Trucks and sport utes were the in thing just a year or two ago. Are we that shocked that when the market changed course as fast as it did that these companies were caught off guard. I don't like the merger idea at all, but some sort of help may be called for, to help atone for our own collective stupidity.
From Sylacauga, AL, 10/30/2008
I wholeheartedly agree with Chris Farrell about not bailing GM and Chrysler out with taxpayers money. I have said for years when the US auto industry began struggling that they needed to open their eyes and start making economical cars instead of the gas guzzling monstrosities they have continually made all these years. I like the idea of giving the $70,000 to the soon-to-be unemployed auto workers to re-train or re-locate to other auto industry areas. I really liked the idea of giving the $750 billion to the masses so they could pay their mortgages off to the banks and invest the remainder. Then everybody would win. But, that's just my opinion!
Joan
From Dallas, TX, 10/30/2008
I whole heartedly agree with Chris Farrell. If the automakers were relevant in the market they wouldn't be in this place. They continued to invest in less fuel efficient cars and trucks that the market was not interested in. Let the free market economy determine this. Yes this is bad for workers but this should give them an opportunity to re-train for a more relavant position in this new world economy.
From MI, 10/30/2008
Instead of a bailout in the traditional sense, why not spur spending by the consumers by allowing for a tax credit for two years after purchasing a vehicle (not leasing) from Ford, GM, or Chrysler. The tax credit would be equivalent to $450.00 / Month / vehicle. The duration of the program would be three years and unlimited number of vehicles per family.
From Camp Hill, PA, 10/30/2008
Why should we step in and save GM and Chrysler? If they are too big to fail then they shouldn't be that big. No one corporation should be allowed to have the much influence over the enconomy. I suggest we take the money and place it in the hands of GM workers. Then give them the choice, they can hand it over to GM to save the company or receive $70,000 in the form of tuition/education vouchers. I don't think many of them would give their money to GM management, so why should we give ours?
From Toledo, OH, 10/30/2008
Dear Mr. Farrell:
Well for one thing, I mean this sounds harsh but if Goldman Sachs and Morgan Stanley, disappeared, we'd still be able to bank as a consumer, we'd do our banking at Mitsubishi Bank, Royal Bank of Scotland, Deutsche Bank. There's plenty of financial institutions out there, so the consumer's not going to get hurt. And secondly, it's a competitive market. Goldman Sachs and Morgan Stanley have made a lot of strategic mistakes, management has made some terrible decisions.
What I would prefer is look, go into bankruptcy. We don't need a taxpayer bailout, so just declare bankruptcy. But if the politics are such that we are going to do some form of bailout, let's not direct it to the companies. Let's protect who we're really worried about, which is the worker.
Whoever can survive, survives. Seems like Mitsubishi Bank, going to be around, right? And maybe a smaller Goldman Sachs and Morgan Stanley, or maybe Morgan Stanley disappears, a small Goldman Sachs -- I don't know how it's going to shake out. But as far as I know, there's lots of banks here in the U.S., there's no shortage of bankers. We have a lot of bank workers, they just could be working for companies with names like Mitsubishi Bank, Royal Bank of Scotland and Deutsche Bank. Yeah, we're going to have a shrunken industry, which by the way, has been shrinking. Let the bankruptcy system deal with it.
10/30/2008
Hearty thanks to Chris Farrell.
Your solution for the auto industry should be applied, in principle, to the housing market as well---let the lending companies die without killing the employees or the borrowing customers.
(Recent news about an FDIC plan suggests that purchasers of bad loans may actually be rescued, if they are sincere about payments.)
We are not talking about letting the entire US auto industry die, only letting it shrink, re-organize, and transform itself into a modern growth industry. There are many people at GM, Chrysler, and their suppliers whose labor and management skills could be redirected, either immediately or after minimal re-training, toward design and development of modern transportation solutions with consumer appeal.
Attempts to preserve those jobs, exactly are they are, will worsen the situation by allowing nimble competitors to take market share away from domestic producers.
From Schaumburg, IL, 10/30/2008
Chris Farrell is right. The market has spoken, the automakers have failed us and it's not the first time. I'm generally a union supporter but these unions took too much. There will be a lot of collateral damage as plants close and suppliers follow, but we must let business and workers know that it's a competitive world, it's nasty out there and we must all constantly watch our backs. They’ve been dying a slow death for decades and we must end the charade. Shelter the workers somewhat and get it over with. Putting money in just puts government in as another layer of management: one without a profit motive.
Harsh? Yes, but real world. Do we want to baby them again when they fail to respond to the coming Chinese competition? How much for that? And then the next failure... Better to spend much more directly retraining, relocating and remotivating the employees.
These companies have no qualms about invoking free market claims when it suits them. The rest of us should not, either. If we don’t, the market itself will.
Someone above mentioned the bank bailout as a reason to bail out GM & Cerberus. No. What we need to do now is split the uberbanks up until they are not too big to fail. We've done breakups before and we should do it again. Let BoA/Chase/Citi/Wells Fargo become thirty banks and put competition back to work. Personally, I'd like stock in many competing banks. There would be some sure winners in there.
Mark
From SC, 10/30/2008
I beleive that, for the ultimate good of the workers, that if any business get's into financial trouble, that it should be allowed to fail. I say "the ultimate good of the workers", because this is a hole which the workers at the Big Three automakers have dug for themselves.
I remember when Japanese carmakers switched to robotics in an effort to both cut costs and, more importantly, to dramatically increase quality control. The unions went beserk when the Big Three wanted to follow suit. The unions cut off their proverbial noses and delayed the eventual use of robotics until the U.S. automakers were so far behind that they have never caught up.
Read what happenned after the Pilgrims landed at Plymouth. The original plan was one for a socialist utopia - everything would be shared. It took one year before Governor Bradford saw it couldn't work and divided the available land between the residents and let them compete. The rest is history (probably not taught in today's union run schools).
From Detroit, MI, 10/30/2008
As a fan and financial supporter of Public Radio and a HUGE fan of Marketplace, I was disheartened by the simplistic examination of the auto industry's woes this morning.
I am generally in favor of free market capitalism, but recognize that there are circumstances that require additional consideration when all of the related costs may not be obvious. Mr. Farrell's arguments are superficial and faulty in several ways that are similar to the faulty arguments against the financial bailout (which is considered a necessary evil by most economists).
The U.S. auto industry has been dying a slow death, somewhat by its own hand as well as the hand of the UAW and its political cronies. Should this continue, over time, the economy can and will adjust.
In the spirit of Mr. Farrell's argument, the U.S. government has been allowing this slow death, despite the FACT that the Japanese government (and especially the Chinese governement) manipulates its currency value in support of its corporations ("bailout?").
However, the most recent issues facing the Big 3 are the result of the credit crisis and not poor quality nor cars that people don't want. There are still many people who buy millions of domestic vehicles quite happily.
The reason for providing assistance to the auto industry should be considered based upon the RELATIVE cost between assisting and not assisting. If Mr. Farrell were to correctly estimate the number of people employed directly AND INDIRECTLY he would see that the potential cost to the economy and governemnt would be much higher. Most estimates suggest that there are 5-10 jobs for every direct employee at the Big 3. The shock to the economy of the rapid loss of jobs of that magnitude would be far more than his $10 billion estimate.
This is why the government is helping Financial Companies. Not because it wants to, but because the perceived cost of a rapid failure is GREATER than the expected cost of the "Bailout".
Furthermore, the government supports many "non-competitive" institutions it deems worthy for the benefit of the greater good (i.e. "value"). These would include Research Institutions, Hospitals, Schools, Libraries, Public Transportation, etc. Indeed, Mr. Farrell does not rail against the $2.5++ Billion that Public Broadcasting has received since 2001 (which I support, but offer as counterpoint).
Following his logic, there are plenty of radio stations for us to listen and enjoy.
Perhaps we should consider the costs and risks associated with not having a domestic auto industry...
Who will produce military vehicles such as JEEPs? I suppose Toyota could.
Who will replace GM for more than 50% of the non-tactical military vehicles? Perhaps Daimler could.
Who will have the assembly capacity to produce planes as Ford did, if we need them? China has lots of capacity, I guess.
If we as American ultimatley decide that we want no domestic auto industry, that should happen following a great deal of debate and at a measured pace based upon continued loss of market share in a normal market environment.
Letting the industry die because of turmoil in the credit markets, and risking the costs associated with such a drastic move, at this point would be foolish.
From Detroit, MI, 10/30/2008
Meanwhile, the administration announced that the spigot had been opened on the $700 billion fund created by Congress Oct. 3 to rescue the U.S. financial system. Treasury issued a report showing checks had been disbursed for $125 billion in payments to nine major banks, including Bank of America, Citigroup, JPMorgan Chase, Goldman Sachs and Morgan Stanley. The goal is to bolster their balance sheets so they will resume more normal lending......
From Tucson, AZ, 10/30/2008
Why should we bail out GM? They made electric cars and crushed them. Now they want a loan to reinvent the wheel. If we need to do anything is should be to help innovative US companies like Tesla and Aptera that have led the way in the electric auto industry. They could use the much needed capital to ramp up production of the cars of our future. If we subsidize the big three, we are giving an unfair advantage to companies that have made poor decisions and actually deserve to fail. Fair competition is good for the consumer.
From Carrollton, TX, 10/30/2008
While I agree with Mr. Farrel,the US auto industry is to big to allow it to just fail. However, it is clear that with whatever happens, a new focus is in order, and not just in the auto industry. We American consumers need to get over the "living large" attitude we have. This, in my opinion is the reason American manufacturers find it difficult competing with foreign firms. We demand excesses (and they are all too happy to supply), and then we whine and cry for bailouts when those excesses cause us to fall behind or fail. Let's ratchet down our cost of living, it will be better for all of us.
From Astoria, IL, 10/30/2008
Of course Mr. Farrell is correct. Bailing out a failing business like GM is not fair to the automakers who made the right moves. It will hurt competitiveness. It is essential to the health of the free market that companies make risky decisions and live or die by the results. That is the mechanism that drives a healthy, functional market. The role of the government is to provide assistance to the displaced workers and create an environment where responsible companies can prosper and provide jobs to replace the lost ones. It is a government of the people, by the people, and for the people. The People, not greedy executives that CHOSE to get in bed with the oil companies instead of looking out for the future of their employees and fellow citizens.
From Livonia, MI, 10/30/2008
Next, Mr. Farrell is going to suggest that Michigan & all of its problems just succeed from the union. Single state recession for 8 years and now this...
From Ann Arbor, MI, 10/30/2008
I 100% agree with Mr. Farrell. I'm so angry that I have to pay taxes and common man's tax dollars are used like this. GM is a private company. Taxpayer should not bail this out. Honda, Toyota they manufacture cars in the U.S. So, but since they did smart business and unions did not misuse them these companies can do OK during this financial crisis. If this goes through, and they get a loan, I will never ever buy any car from this tax money recipients. What kind of free economy is this?
From AR, 10/30/2008
I was somewhat dismayed at the report on loaning to the auto industry. We as a country have been so quick off load our manufacturing. "After all there are other manufacturer" was the implication your reporter made. And yet we bail out all these finacial firms. Your reporter pointed out each auto worker could be given $70K in place of the loan. How much could each american taxpayer be given if we divided out the $700 billion finiacial services. I have seen numbers around $500K each. If any industry should be offshored or given to die it should be the finacial services industry. Standard of living is generated by increasing the value of something material ( manufacturing, agriculture ...) All of the others are but support players. When we continue to grow the support players (finacial services, medical, government, lawyers ..) and shrink the base of creating value we are doomed to lower our standard of living. Yes we can buy it somewhere else till we no longer have the money to. because when no one is creating real value in this country our money will soon follow. Just look at China's strength and our current weakness. It will only continue if we stay on this course. Yes let the bad finiacial services go under, they deserve to. But to bail those gamblers out and then look the other way for those that do create value is just plain STUPID.
From Philadelphia, PA, 10/30/2008
Bravo to Chris Farrell!! The American automakers are dinosaurs who have time and time again have failed to learn what's important to consumers -- reliable well built vehicles. Time for the government to stop throwing good money after bad.
10/30/2008
I have to disagree largely. Simple fact of the matter is that the economy needs those jobs. The jobs that typically replace factory jobs pay less than 66% of what they were making. The impact would be far reaching, much further than most realize.
That being said however, the government, if they were to give a loan, needs to be more hands on. The same with all these financial institutions.
The US needs a serious reinvestment into their base. We have lost so much in the terms of salary.
Many people seem to have the idea that the housing crisis was poor people buying houses that cost too much. A false impression. It largely was caused by people buying MULTIPLE houses. That drove the home values higher, making home values as well as rent higher. This made property taxes higher as well.
Now, in the middle of all this you have the blue collar worker. Shrinking salaries combined with higher expenses in every corner of life. To eliminate, not only the massive employers of GM and Chrysler, but also all the companies that supply parts to them? The effect would be more devastating than this financial crisis by many fold.
I don't care for "bailouts" but to steady the top while ignoring the base would be a foolish move, if a depression is to be avoided.
From wildwood, MO, 10/30/2008
Chris Farrel should be fired today. His totally sophomoric approach to this highly critical issue at hand is outrageous. He sounded like a Middle School child saying"let the bankruptcy courts handle this' & "give the money to the workers". His report was like more of this Marxist bologna that is coming out of the mouths of the lefties. What about all the supply chain & distribution lines that depend on the American auto makers. He states, "Ford is doing OK". Where the hell has he been? Ford is in the tank also. The major troubles of the US Automakers come from the UAW & their ridiculous contractual demands that were made over the last 50 years. Some of the workers make in excess of 100K a year plus retirement. Are you kidding??????????? He wants to give these guys $70,000 buyouts for re-traing? To do what, becomed dental hygienists? You better start hiring some correspondants with substance. Maybe that Orlando anchor who had her head screwed on straight when she asked all the right questions. Shame on you!
From Grafton, WI, 10/30/2008
It seems to me that Mr. Farrell is forgetting one large component to the equation - the supporting cast of business that provide services and products to GM & Chrysler - from the a agencies to component manufacturers. The workers having to receive the compensation from the government are more numerous than Mr. Farrell leads one to believe. Its not that I am not in favor of having the market work itself out, however, there would be huge ripple effect throughout the US and International economy if we were to settle on having GM and Chrysler declare bankrupcy - it would have a greater cost to the US tax payer than the current dollars GM and Chrysler are looking for to help them wade through a rather turbulent time. I say lets remove the existing managment and place those more capabable in the driver seats.
From Lexington, KY, 10/30/2008
It is refreshing to hear some common sense from Chris Ferrall about how GM does not deserve a "bailout". They refused to make efficient cars and we need efficient cars. I think that history will quote "Who Killed the Electric Car" as to why GM and Chrysler dissappeared from the planet. In the article, no one mentioned that a new AMERICAN Green Plug-in Lightweight car company with New Battery tech WILL spring up in the US (with Obama's wise leadership) and hire all the workers who lost jobs because of the missmanagement of the maker of the the Hummer, the Suburban, the Eschalade and other boondogles.
Let Capitalism work!
From Detroit, MI, 10/30/2008
It seems from reading these comments,
that anyone not associated with the US auto industry, agrees with Mr. Farrell.
But, I have trouble listening to someone talking about using taxpayers money to 'bailout' the auto industry, when we been do it for a year with the banking industry.
From Philadelphia, PA, 10/30/2008
It seems to me that the falling market has created great potential to steer the country in a new direction. I agree with the story - no bail out for carmakers. That's the crux of bad management. So instead, how about investing in converting the plant to manufacture green energy products like wind mills or solar panels?..or produce more public transportation vehicles like trains or tracks or natural gas buses? I'd prefer taking public transportation to work everyday anyway, but do not have that luxury.
From Greensboro, NC, 10/30/2008
I agree entirely with Chris Farrell. While Totyota was making the Prius - not fast enough for the demand - GM was pushing the Hummer on us. I am concerned for the hard working men and women of GM who get up every morning and go to work in their cubicle or on the assembly line, but Management has to take responsibility for bad decisions; let them go bankrupt. If we are, as Goeorge W. Bush once said, addicted to oil, GM has been little more than a drug pusher. You don't have to be a kookie tree hugger to want to spend less on gasoline and reduce the amount of carbon emissions released into the air. I like the idea of giving the workers some sort of resonable severence package to re-train or relocate. Let those responsible for the failure accept the consequences for their calamitous decisions.
From Bingham Farms, MI, 10/30/2008
What an incredibly irresponsible, hip-shooting report from your economics correspondence. Mr. Farrell oversimplifies the situation and suggests you just give the workers $70k a piece - what would appear to me as an attempt to buy off the rabble for a mere pittance to assuage the guilt of those associated with the financial sector. Very short-sighted. No mention of these workers pensions (which will have to be picked up by the taxpayer). No mention the enormous amount of other jobs dependent on these two companies that will not be replaced, not just blue-collared jobs, but white collar and highly skilled level jobs for companies that are efficient and productive. No mention of the huge portion of market share that would be lost forever or the fact that GM was going through a major restructuring and poised to be in very good shape soon until this financial market meltdown - that was precipitated by lax oversight and abuses in the financial services industry. But the financial sector gets a $700 billion bailout - 70 times what is being asked for as a loan - but their customers who actually employ tens of thousands people who sweat it out every day are not good enough for it? I don't agree with what has been proposed, but Mr. Farrell's lack of understanding of- or at least the failure to convey- the depth and breadth of the problem, far beyond the jobs lost at GM & Chrysler, is astonishing for someone labeled an economics correspondent. There may be good reasons to let GM go into bankruptcy and I think Chrysler should be nudged into a deal with Nissan-Renault instead of GM, but don't patronize the fly-over state denizens with your $70k pay-out to "go away." There are very serious economic, social and political implications of giving up on the domestic auto industry, which would devastate parts of the Midwest beyond repair. And one last note, Mr. Farrell betrays his ignorance of the situation when he says that Ford will still be here. Many astute observers are more concerned about Ford than the the other two.
From Williamsport, PA, 10/30/2008
At what point does the government stop leveraging the present and future economy for the sake of irresponsible management? This will only add to the the increasing debt and deficit which in turns chokes the possibilty of economic health.
From Sparta, IL, 10/30/2008
I agree. Do not bail out GM, Chrysler, or Ford either. They keep saying they are trying to make/sell the kind of cars the public wants. In fact they sold us "unsafe at any speed" "fins" "gas guzzlers" and polution machines.
From Rockland, ME, 10/30/2008
I agree with Chris on this one. GM has had unbelievably incompetent management for over 30 years. They have focused on, and tried just about everything *but* building cars that their customers want, with the exception of SUV's and full size trucks. I have watched them flail around in the market while their share of it has steadily eroded over the years.
It seems like every time you turn around there is some new sweeping reorganization that is supposed to bring GM back to prosperity. At one point they actually tried to bring in *brand* managers to save the company, as if somehow it was just a matter of managing their brand better. I'm not quite sure why it never occurred to them to try and actually build cars that people would be interested in buying. They should have brought in Bob Lutz twenty years ago, when they were actually in a position to turn things around.
Give the money to their employees and let them remake their lives. GM and Chrysler deserve to fade into obscurity, not be handed a life line at tax payer's expense so we can go through this again in ten years.
10/30/2008
Instead of a direct bailout, have government take over the health care responsibilities of GM, Ford, and Chrysler. Make everyone now covered by their employee health insurance plans eligible for Medicare. At a stroke the car companies' expenses would be slashed at a near-term cost to government much less than that of the proposed bailout. Any US automakers that can't compete with foreign automakers after leveling the playing field in this way deserve to fail. Besides, we all know we're going to have some form of universal health care within a few years anyway; this would serve as a limited test case of one version of it while simultaneously giving an important industry some assistance.
From Freeport, ME, 10/30/2008
Yes, this companu does NOT deserve to be bailed out.It is time that all automakers who fail to realize we need smaller safer economical vehicles and GM/Chy has failed miserably in this regard. I agree giving the workers something, but would like to see a program that does serious career/financial counseling along with giving money. I am not optimistic anything as rational as this would happen, but one could hope. By they way, EVERYBODY VOTE!
From Detroit, MI, 10/30/2008
Incredible Mr. Farrell! One in ten jobs in the US is in some way, shape or form related to the domestic auto industry. It is manufacturing. If any one of the big three is allowed to fail, countless jobs will be lost. And not just in the US I might add. Due to the global market and today's penchant for out sourcing, huge numbers of people the world over will be thrown onto the street. It cannot be allowed to happen.
From Manchester, MD, 10/30/2008
Chris Farrell head the nail on the head!
As an avid Consumer Reports Magazine subscriber, I have known for at least the past 20 years that GM & Chrysler products have the worst reliability ratings. I have steered away from, and have encouraged others to do the same, purchasing their products. Not only reliability, but their constant financial struggles, should be reason enough NOT to put any more $ in to a failing product.
From Chicago, IL, 10/30/2008
Thank You Chris Farrell,
I agree.....do NOT bailout GM..What ever happened to 'Take responsibility for your own actions"? Bad management non forward thinking etc etc, focused on quarterly reports as opposed taking the LONG view...survival of the FITTEST not survival of the STUPID & GREEDY at MY expense.
And I extend the same ethos 'across the board' to perspective home owners who thought they could live in a 'Mc Mansion' on a Mc Donalds' salary.
Sincerely, Grandma Winnie
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