Bailout BS: Fixing the US auto sector in 3 easy steps
Tough love for Big 3 includes giving the Prius some creditI've had enough automaker bailout talk. Let's be frank, US automakers deserve bankruptcy. Yes, in the last few years, automakers have made many important changes, but a few years doesn't rectify decades of bad decisions and unreliable automobiles. Of course, most US auto consumers need to have their gas-guzzlers repossessed as well.
Yet, what good would this destruction create? 10,000 new Tesla employees? Less foreign oil dependency? The end of CO2 emissions from autos?
No. So, here's what Congress should do in 3 simple steps. 1.) Bailout US automakers enough so that they can survive another 3 years. 2.) Add unlimited consumer tax credits through 2015 for hybrid vehicles, EVs, natural gas cars, and any vehicle that can achieve at least 35 mpg on the EPA's city - NOT HIGHWAY -cycle, and 3.) Create a scalable gas tax immediately. This puts a bottom on oil prices, funds the tax credits, and sends a message - more transparent than Congressional regulation - to automakers that gas-guzzling is dead.
Labels: Foreign Oil Dependency, Hybrid Vehicles
posted by Dahcredyns at
11:12 AM
11 Comments:
Just listened to Jim Cramer go off on the automaker bailout during Mad Money.
Cramer claimed that there will be no sustainable rebound in the US economy without a bailout for the Big 3. Roughly, Cramer said these jobs are too important. Losing 3 millions jobs could lead to a massive increase in mortgage defaults, credit defaults, as well as a huge drop in consumer spending.
Cramer is full of shit.
He's pretty stupid to think 3 million people with transferable skills are going to lose their jobs.
Yeah so what if consumer spending drops. Is that such a bad thing if it corrects things for the long run?
Does anyone in this country have the foresight that spans more than a quarter's profit and earnings?
The problem isn't people losing their jobs and finding others elsewhere, the problem is these companies are worried about the 3 million slaves they've manufactured who are about to realize there's more to life than the Big 3.
Besides...where did he get that figure? Most likely from the depths of his ass.
Since Woodrow Wilson traitorously signed the Federal Reserve Act on December 23rd, 1913 (Can you imagine a president signing legislation on December 23rd today?), has there ever been a major corporation or bank go under? Has any company like Chrysler or Rockwell or Chase or GM ever shuttered its doors since that fateful day?
I cannot think of any. My point is that we really do not know what would would happen to our economy if such an event were to occur.
Anyways, I like yer steps Dahc, but get nervous whenever we start adding a lot of sales tax. Remember, with the Federal Reserve, taxes are not needed to keep the government running...IOU's work just fine! :)
IOUs - we have plenty of those, don't we? LOL.
Noz - What number? The 3 million? That comes from a number of studies that have been talked about a lot on CNBC, not from Cramer.
Still, in the long run, maybe America would come out stronger if we just let everything work its way out naturally. However, the next few years would be extremely turbulent.
For fun, who is more worthy of a bailout? 50 billion for US automakers or 700 billion for Wall street?
If there could be only one, I'd go with automakers - easily.
Yea the problem is both are going to happen.
I don't believe the 3 million lost jobs number. This is a dynamic industry that has tentacles everywhere. Companies involved in auto business aren't going to stand idly by as the Big 3 go under...they aren't that stupid.
This is nothing more than fearmongering tactics.
GM is the biggest source of most US auto suppliers. Most of these suppliers are already struggling, losing GM would put them in bankruptcy.
I think the 3 million number is reliable.
That doesn't mean that bailout money couldn't instead be used on job retraining, for instance.
Still, it's a big gamble.
My take is give automakers one last chance. A gas tax and hybrid tax credits force automakers to only embrace fuel efficient technology as quickly as possiblle.
Inevitably this will mean downsizing, but over time, rather than all at once.
Ultimately, there isn't a painless solution. Any approach is, at best, the lesser of evils.
Why should my tax money go to support union contracts that contain bloated pensions the kind of which i will never see? I work in IT, where was the government when 7 million technology jobs went overseas?
Don't blame the unions...blame YOUR industry....yeah that one which is giving jobs to tens of thousands of foreigners worldwide.
If it wasn't for those unions you complain about, the auto industry in this country would also have jobs elsewhere as well at a far greater scale.
Bob-
That's a fair point.
Yet, whom covers those legacy pension funds if the Big 3 go under? Probably your taxpayer money.
Still, in 2010, the wages and benefits of new workers is reduced significantly, which might give US automakers a chance, a chance to then take care of their own pension funds - to even payback any bailout loans.
The other scenario is the loss of millions of jobs, resulting in many more foreclosures, less retail spending - will that help you find a better job? Will that increase the value of your home?
We're dealing with the lesser of evils here.
Hi!
We can spend BIG $ on the bailout, or BIG $ on the non-bailout, our choice.
If even just GM goes under, then all the outstanding pension liabilities from GM, is enough to bakrupt the PBGC, and the PBGC will have to be bailed out in a MASSIVE taxpayer-funded scheme.
If GM goes under, from what I've read, then ALL us auto production would cease, as a large number of major and minor suppliers would go under, and they are used by Chrysler/Ford/Toyota/Honda, etc. to make their cars.
I think the bailout is better.
Realize, that whatever you think is best, will come with a HUGE pricetag.
cliff
YIP
PS-The job numbers I've read were > 10,000,000 as a Big 3 collapse roils through the supplier/dealer/etc. chain.
Cliff -
10,000,000 seems pretty high. The number i've heard pretty regularly is 3,000,000. Obviously, it's a lot of jobs either way.
Overall, I agree with you in many ways, but here's some things to think about.
The legacy pension and health care debt is $12 billion I think - it's less than $20 billion. Having the government manage this now would be less than the bailout. Spend the rest on job retraining for those that don't survive reorganization.
And, you'd still have another $20 billion for job retraining and creation - since auto suppliers might now also need $20 billion in addition to the auto maker bailout.
At some point we have to ask how much is too much.
It's starting to look like automakers will need at least $30 b., and suppliers might need $20 b. Yet, GM's share $10 b isn't enough to even survive another year at their current cash burn. If next year is worse than this year, will they then need a another $10 b next year?
How much is saving the US auto industry worth? Is it worthy whatever it costs? $50 b, in addition to $25 b via CAFE, is looking like the minimum now required. Yet, I'll bet this is only phase 1 of the bailout, especially if this recession hits harder than expected.
I think automakers and Congress need to have a conversation about what happens if the next year is worse than this year, even far worse. What happens if the next 2 or 3 years are worse than this year.
US automakers are in this crisis because they've never had intelligent plans for the future. Everything was done to maximize profits for today, at the expense of tomorrow.
This bailout seems to be following that same kind of thinking. What will it take to survive today, but we aren't asking will this be enough money to survive until tomorrow. It seems to me we're acting as if this is a temporary recession. Things could be on the verge of becoming even far worse.
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