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Community => General Discussion => Topic started by: Pugnate on Saturday, November 08, 2008, 11:16:24 AM
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http://www.dailytech.com/article.aspx?newsid=13383
So what do you guys think? Should they get the bailout?
While I don't like the idea of bailing out companies that made sub standard products for the past decade, took lazy decisions, and spent money on lobbying for lower standards because it beat the alternative of spending more money on research for better products, I do realize how many people would be affected by the closure of these companies.
While letting the chips fall where they may would be a gutsy call, a better scenario would probably see these companies rescued, so that they have a chance to reach international standards with their products. Honestly though, I have no idea what should be done.
Thoughts?
edit:
I find this very interesting, from the comments section of that article:
On the Initial Quality Study (36 brands listed), here are the top 15:
1. Porsche
2. Infiniti
3. Lexus
4. Mercedes-Benz
5. Toyota
6. Mercury
7. Honda
8. Ford
9. Jaguar
10. Audi
11. Cadillac
12. Chevrolet
13. Hyundai
14. Pontiac
15. Lincoln
On the Dependability Study (37 brands listed), here are the Top 15:
1. Lexus
2. Mercury
3. Cadillac
4. Toyota
5. Acura
6. Buick
7. BMW
8. Lincoln
9. Honda
10. Jaguar
11. Porsche
12. Mitsubishi
13. Hyundai
14. Ford
15. Infiniti
The initial quality study shows how good a vehicle is after 90 days of use. The dependability study shows the vehicle's status after 3 years of use. Look at Ford... Goes from a decent no.8 to the bottom of the list.
Now look at Toyota... it was at no5 in the initial quality study, and actually went up a notch on the list after 3 years.
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You know, why don't they bail *me* out? I didn't do anything more wrong than GM or Ford. I did a lot less wrong than Fannie Mae and Freddie Mac. They keep throwing all this money at failing companies, yet they have no strings attached. Will that money go to create a climate where the country can get properly employed again, and where no more ground is lost on employment? That's supposed to be the focus of the government, no later than January 20th. That's what this election was all about, not enriching the richest. That was the agenda of the outgoing administration. To my knowledge--and I have been keeping an eye on this, there are no such requirements for the big corporations to get these billions.
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Are they merely throwing money at these companies, or are they actually buying percentages of them? If they are buying into them, then it means they have a bit more say in the bigger decisions -- Euro style.
You know, why don't they bail *me* out? I didn't do anything more wrong than GM or Ford.
Yup, that's what I've heard a lot of people say.
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If you think about it, you can multiply my situation by a very large number of individuals in trouble, and still come up with a smaller total than all the corporate bailout money. I was just kidding before, but now that I think about it . . .
;)
I honestly don't know all the details of the bailouts. Car companies are of course very different from banks, so I imagine the rules would be different. It seems that the financial-institution bailout money doesn't have any real strings, and it's already being misused. Instead of it going to ease the credit crunch (i.e., new loans) it's being used to buy up other banks to increase profitability for the institutions.
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The whole thing scares the dickens out of me, personally.
EDIT - Also, it looks like my next car is going to be a Lexus. Well... okay, it probably won't because I hate them, but still.
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What the heck? How is Mercury so high up the list on the dependability study and Ford so low? Mercuries are just Ford clones, made in the same factories.
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That's what someone else said as well.
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Because it's a crock of crap. Dependability is a model-by-model thing, not blanket across brand names. Hi-po Mustangs from last decade are extremely dependable if driven sanely, while Tauruses from the same period are 60K-mile pieces of shit. My mother's Mercedes-Benz is shit. That thing has been in the shop several times already, once for the mechanism on a rear window breaking with the window down, in the rain, and another for not being able to digest a higher-than-normal ethanol mix. It eats brake linings for breakfast. It's half the age of my car, which lived for over a decade with nothing but standard maintenance. I had to replace the radiator and a small throttle part last year, at the ripe old age of 12.
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How to avoid crying at the car repair shop:
http://www.cnn.com/2008/LIVING/wayoflife/11/07/aa.maintenance.is.key/index.html
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How to avoid crying at the car repair shop: stab your eyes out. With a knife.
And it's all a little subjective anyway. My wife's VW Golf has had very few problems of a major mechanical nature, but the thing's ELECTRICAL problems are INSANE. Everything from the alarm (which can't be disabled without paying upwards of $500, apparently) to the locks to the dash lighting to the windshield wipers. And since it's a VW, it's all unbelievably expensive, to the point where I sincerely wish the thing had no electrical problems and just broke down all the time instead. It'd be way effing cheaper if it were a Toyota or similar.
Moral of the story? I don't know, but I'm poor. So... don't be poor, because it sucks. Or something.
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Everything from the alarm (which can't be disabled without paying upwards of $500, apparently)
WTF?
Man, mechanics are a big rip off in North America. Surely you can find a way on the internet!
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Are they merely throwing money at these companies, or are they actually buying percentages of them?
The terms of the bailout (http://en.wikipedia.org/wiki/United_States_Emergency_Economic_Stabilization_fund) are that the Secretary of the Treasury may spend up to $250bn at his discretion (plus another $450bn, subject to approval from Congress and the President).
"At his discretion" means "without oversight," so they'll probably just throw money at the problem.
Henry Paulson is a graduate of Harvard Business School, and like most of their graduates, he is stupid, corrupt, and highly influential. I expect the bailout money will be wasted.
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On October 14, 2008, Secretary of the Treasury Paulson and President Bush separately announced revisions in the TARP program. The Treasury will buy equity stakes in nine American Banks, and potentially thousands of smaller banks, using the first $250 billion dollars allotted to the program
From that wiki link it seems like they are actually looking to buy ownership equity as a means to "bail out".
That sounds reasonable, and is what France did a few years ago -- and it worked. It is a bit ironic though, considering how the Republican campaign was trying to show Obama as having socialist views.
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From that wiki link it seems like they are actually looking to buy ownership equity as a means to "bail out".
That will apply to mortgages and other securities that the government buys. Where the money is spent, and what conditions are applied to it, will be at the discretion of the Secretary of the Treasury.*
I'm not holding my breath for responsible spending. So far, the bailout money has mostly been used on executive bonuses and fancy office chairs.
*I think this is still true; the bailout legislation has changed a bit since I read up on it.
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...and breast implants.
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From that wiki link it seems like they are actually looking to buy ownership equity as a means to "bail out".
That sounds reasonable, and is what France did a few years ago -- and it worked. It is a bit ironic though, considering how the Republican campaign was trying to show Obama as having socialist views.
That's the point. They buy from the bank cheap with the hope that the money lets the banks recover. Their share is then worth more and then they can sell it back to recover their costs. It'd be extremely unlikely they'd make a profit or even break even but the possibility is there.
At first glance I'd be completely against an auto bailout but the more I think about it, it seems like the best option. Without it, the economies of a lot of places will compleyelt die and create a whole lot of new socials. Bailing out the auto industry is a pretty sweet opportunity. Do it with lots of strings attached. Get rid of the CAW and the UAW or at least seriously cripple them, stop the ridiculous pensions and wages and actually make North America competitive again.
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That's the point. They buy from the bank cheap with the hope that the money lets the banks recover. Their share is then worth more and then they can sell it back to recover their costs. It'd be extremely unlikely they'd make a profit or even break even but the possibility is there.
You're confusing the FDIC's role as an insurance corporation with the TARP bailout.
Say you deposit $100,000 in the bank, and then you come back a month later to withdraw your money. Imagine your shock when the bank tells you that they made some bad purchases, and now they only have $10,000 left to pay you. This is where the FDIC steps in: They will take over the bank and supply the $90,000 needed to repay you. When this happens, the FDIC pays nothing to the bank, but only to the investors (i.e. you). Under no such circumstances does the FDIC buy stock in the bank. To date, all the bank bailouts have been of this sort.
The TARP bailout is something else entirely. The details are still being worked out, but the plan is that the government will buy up faulty home mortgages and other debts. If the housing market recovers completely, and all these debts get paid, then the bailout won't cost a penny (and will actually make money for the government). On the other hand, if the market collapses entirely, then the government may never see those $700bn again.
In addition to buying up unwanted securities, the TARP bailout may also involve buying stock in various companies; but I haven't heard about this yet.
From that wiki link it seems like they are actually looking to buy ownership equity as a means to "bail out".
I think in the context of a bank, an "equity stake" is the bank's assets (mortgages, loans, CDOs, and other debts owed to the bank). This is different from stock in the bank. When they say the government will purchase an equity stake, that probably means they're buying crappy mortgages.
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Just read the beginning part of this thread: the bailout did have strings attached. A lot of the firms were forced to reduce the amount pof leverage they can use which is a primary reason that the states and europe got so out of hand as opposed to Canada with strict regulations regarding how much leverage can be used. Their weren't enough strings attached regarding what they can and can't do with the money but the new rules in place is a step in the right direction.
Wind: I don't understand what you're saying. By buying an equity stake in a bank with the intention of increasing the health of the bank, if successful that equity will eventually be worth more, no? As for what you said about the Fed preventing bank runs, all $700 billion did not go to that.
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Just read the beginning part of this thread: the bailout did have strings attached.
Correct. No one is disputing this.
A lot of the firms were forced to reduce the amount pof leverage they can use which is a primary reason that the states and europe got so out of hand as opposed to Canada with strict regulations regarding how much leverage can be used. Their weren't enough strings attached regarding what they can and can't do with the money but the new rules in place is a step in the right direction.
No comment on this section.
Wind: I don't understand what you're saying. By buying an equity stake in a bank
You're starting to confuse the FDIC bailouts with the TARP bailout. They are different.
with the intention of increasing the health of the bank,
This part is definitely incorrect. The intention of a bailout is never really to "increase the health of the bank," although that may happen incidentally. In the last several months, there have been two different categories of bailouts:
- FDIC bailouts, which happen whenever a bank becomes insolvent. These were established under Franklin Roosevelt, and are paid for out of a special reserve fund. In an FDIC bailout, the government pays the debt owed BY the bank TO its customers (depositors).
- The TARP bailout. This is the much-talked-about $700bn bailout. This one is authorized under legislation that was passed just last September. The plan is for the government to buy debts owed TO the bank BY its customers (debtors). These debts owed TO the bank are called equity because they equalize the debts owed BY the bank TO its depositors.
if successful that equity will eventually be worth more, no?
Actually, if successful, the equity will eventually be worth nothing, because debtors will repay their mortgages.
As for what you said about the Fed preventing bank runs,
I didn't say anything about bank runs. I was talking about the case where a bank becomes insolvent because its equity (debts owed to the bank, especially home mortgages) are insufficient to pay out the bank's deposits. (A bank run is when a lot of depositors all pull their money out at once; that's a whole different animal.)
all $700 billion did not go to that.
Hopefully, none of the $700bn will go to that. The point of the TARP bailout is to buy up bad debts so that the credit sector can recover; dealing with bank insolvency is the FDIC's job.
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In the conext of this thread, how is the bailout relevant? I wasn't aware that any of the money was going to help the automobile industry directly.
Edit: reading the thread helps. My answer to Pugs initial question is a resounding NO.
As for the bailout, I've heard a number of different things. The initial idea was simply to buy up mortgage-backed securities, but the Europeon approach (capital injection? I forget) was working well so we were considering that as well. But that was weeks ago, and I know very little about this, so I could be wrong.
Also, Wind, FDIC coverage moved to a max of $250,000 from $100,000. Don't know if you were implying a maximum with you example or not.
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I didn't realize the different goals of the FDIC and TARP but that isn't where the confusion is coming from.
I was mixing up the bailout terms regarding the commercial banks and investment firms. With the banks they're buying up useless assets but with investment firms they were buying devalued shares. With AIG they bought somewhere close to an 80% stake and were going to force them to sell off some of their troubled assets. So presumably when AIG is in better shape they'd want to buy that stake back from the government and at that point the shares would be worth more giving the government a profit.
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Apparently, as of October 14, the government actually is planning to buy ownership in some banks. Evidently I missed that underneath all the coverage of Joe the Plumber.
With AIG they bought somewhere close to an 80% stake and were going to force them to sell off some of their troubled assets. So presumably when AIG is in better shape they'd want to buy that stake back from the government and at that point the shares would be worth more giving the government a profit.
That's also correct, it seems.
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OH MY GOD, HE'S NOT A REAL PLUMBER!!!!
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CNN on what losing GM would mean:
http://money.cnn.com/2008/11/14/autos/auto_failure_ripple_effect/index.htm?postversion=2008111412
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Losing GM and/or Ford would have major effects across the board. The thing is that it would take a hell of a lot to keep them viable at this point. They aren't competitive in any of the mainstream markets, and are quickly sinking in the traditionally dominated full size and commercial markets. I agree that initial dependability assessments are a joke, but you can't deny that there is a quality problem and instead of spending the money on infrastructure an restructuring to combat this they just increased the coverage and length of their warranties because "to the consumer they're the same thing". As a result, their committed costs are skyrocketing and the variance on the committed is bleak. The new European Fiesta was supposed to be their saving grace in North America, but it still hasn't hit and is becoming more and more irrelevant with every year. Especially now that they've announced that they won't be releasing the diesel Fiesta here at all. The labor and associated health care costs are astronomical and I don't think there's any way they can break the union before it's too late.
Sadly, Ford is probably in the best position of all three. Chrysler is fucked (Daimler recently announced that it's holdings in Chrystler have a book value of zero dollars after writeoffs and such), but they could possibly shut down some divisions, reduce a shitload of overhead and get by focusing on minivans and the Ram. GM does reasonably well in certain segments globally (but not in North America), but they aren't the segments that matter and they still burn cash at an alarming rate. They don't have enough profitable product to balance out their set capacity and overhead. They need to reduce that for any sort of longterm viability, but that costs a shitload of cash in the short term and it also hurts sales a lot more than you'd think. GM's probably going to be the first to succumb to Chapter 11 restructuring. Public perception is horrible already and even though they do have some very good products, who wants to buy a NEW $50,000 Cadillac CTS from a company on the verge of bankruptcy?
Chrysler is probably going to delay Chapter 11 for as long as possible, but it's basically an inevitability. Chances are there's going to be a major acquisition or merger and the Big Three will be The Big Two. Beyond that a bailout is probably going to have to happen for any to remain solvent as the Eurpoeans aren't going anywhere, the Japanese are holding ground in the traditional markets and starting to eat away at the light and full-size pickup market, and the Koreans are wrecking house in the entry level and mainstream markets. American auto needs another K-car and they need it fast.
I
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bye bye ford
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The trouble with Detroit is they never seemed to get the message that consumers want a car that lasts more than 115,000 miles before it becomes a complete shitbox that lasts no longer than 140,000 - 150,000 miles. I never really understood how Detroit never got the message. The Camry has been kicking ass and taking names since 1996 and the Accord ended up demolishing Detroit too. And then you have the Civic and not Fit absolutely crushing everyone in the compact market.
Another thing I found interesting is that in North America (or maybe it's just the U.S., I'm not sure) we get a pile of garbage when we buy an American car compared to what's offered in other countries from the same companies. I worked briefly with a Canadian guy who at the time had just returned from living in Spain for three years who was a car buff. This was right about the time the Ford Focus came out in the U.S. for the first time. He was telling me that in Europe the Focus had several engine choices, including a diesel. In the U.S. there was just one choice. He also said the entire drivetrain is different in Europe and the stuff they have on the U.S. version was just a bunch of crap that won't last.
I guess the UAW has something to do with the crisis in the U.S. auto industry. I mean don't those guys make like 60,000 a year? They've been bleeding the industry dry. Things might have different if the stuff these guys build was a little nicer, but alas it is what it is.
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Yeah, that's fucking retarded. I don't know why small diesel engines are so faux pas in North America. More mileage (although the fuel isn't really cheaper anymore here at least), and engine life longevity? Yes please.
As for that UAW, that has to be broken up either way. It's a giant fucking anchor. It's interesting because I was reading an article on digg and the comments were just ridiculous. I don't think it's (generally) as cut and dry as being right or wrong when you're dealing with a bailout like this (generally, although a lot of people know shit all). There's costs either way and it's just a matter of how you want to weigh them. All that aside, I was absolutely a-fucking-mazed at how the vast majority of people there seemed to assume that most of the 300,000 or so UAW members which would be affected in a worst case scenario would "find work with the now expanding competitors" anyways*. Retarded. There's a very small vacuum to be filled here ...that's why this is an issue and that potential market vacuum is shrinking by the day. Beyond that, who the fuck do these guys think the competition is? No one else is going to start retrofitting factories and hiring vastly overpriced labor in a bid for competitive expansion. I don't even think it's pure naivety. I think a lot of it is "I don't want to think about it but I'm against government involvement, so here's what I'm going to trick myself into believing."
* GM still sells a shitload of vehicles, I think only behind Toyota. Nevertheless, I don't believe that in a situation where GM was not going to exist tomorrow (not likely) there'd be a scramble to fill the spot. The market is correcting itself on it's own and people aren't buying or leasing cars like they have been for the past ten or so years.
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We have 2 choices. We can allow the freefall of the American standard of living until we're another struggling 3rd-world country. Big business without imposed social mandates won't have it any other way. Or we can take radical steps to protect what we have. Globalization is the mortal enemy right now. What we need is all here. Resources, check. People, check. Experience and know-how, check. Infrastructure, check. Security, check. Fuck the rest of world. Fuck competing with slave labor in some toilet of a country. Fuck that shit.
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GM and Ford aren't going to close overnight if they don't get the money. They'll file for Chapter 11 and go through heavy restructuring/reorganizing. That is what Chapter 11 was designed for, and it does generally work. The worst thing we can do is throw money at them now and let them maintain their autonomy and crappy policies. We will only have to bail them out in another 6 months.
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It's not that simple. The fear is that if Ford and GM both file for chapter 11 bankruptcy, the suppliers will collapse because many of them will lose out on a ton of money they are owed.
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Just read this in a NYT editorial:
The heads of America’s great carmaking corporations are so dim that they couldn’t even survive hearings run by members of Congress who actually wanted to help them. Really, when somebody asks you exactly how much money you need, the answer should not be something along the line of “a whole bunch.”
They can't even say how they will appropriate the money that they might be given. It's absurd.
Edit: As far as the bailout is concerned.
As for the bailout, I've heard a number of different things. The initial idea was simply to buy up mortgage-backed securities, but the Europeon approach (capital injection? I forget) was working well so we were considering that as well.
This is what we are doing now, as was proposed in the past week. We've abandoned the other approach. Will it work? Who the hell knows. I'm not exactly reassured.
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GM and Ford aren't going to close overnight if they don't get the money. They'll file for Chapter 11 and go through heavy restructuring/reorganizing. That is what Chapter 11 was designed for, and it does generally work. The worst thing we can do is throw money at them now and let them maintain their autonomy and crappy policies. We will only have to bail them out in another 6 months.
I do agree to a point. Both are fucked if they get this money or not - giving them money with no strings attached just delays the inevitable. What they need is a forced restructuring BEFORE chapter 11 is a necessity.
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I'm reading Catch-22 for the umpteenth time. And a passage made me post here. Just go with it.
"Major Major's father was a sober God-fearing man whose idea of a good joke was to lie about his age. He was a long-limbed farmer, a God-fearing, freedom-loving, law-abiding rugged individualist who held that federal aid to anyone but farmers was creeping socialism. He advocated thrift and hard work and disapproved of loose women who turned him down. His specialty was alfalfa, and he made a good thing out of not growing any. The government paid him well for every bushel of alfalfa he did not grow. The more alfalfa he did not grow, the more money the government gave him, and he spent every penny he didn't earn on new land to increase the amount of alfalfa he did not produce. Major Major's father worked without rest at not growing alfalfa. On long winter evenings he remained indoors and did not mend harness, and he sprang out of bed at the crack of noon every day just to make certain the the chores would not be done. He invested in land wisely and soon was not growing more alfalfa than any other man in the country. Neighbors sought him out for advice on all subjects, for he had made much money and was therefore wise. "As ye sow, so shall ye reap," he counseled one and all, and everyone said, "Amen."
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That is a great book.
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"I do agree to a point. Both are fucked if they get this money or not - giving them money with no strings attached just delays the inevitable. What they need is a forced restructuring BEFORE chapter 11 is a necessity."
They've had that opportunity for years, though, and haven't done a damn thing about it. We've all talked over and over about how shitty they are doing and how they need to change. What do they do? Vamp up their advertising campaign for Ford trucks and refuse to adapt to the modern world.
I think too many people have a really negative ideas about Chapter 11. I haven't checked the numbers recently, but at least half of the airlines were operating under Chapter 11. Was this causing all kind of ripple effects throughout the economy and suppliers? No. Why? Because people still need to fly. People still need cars in the foreseeable future, and there isn't enough foreign supply to provide it all. The demand is there. They've all just gotten WAY off track in terms of business plans and need serious restructuring, which is exactly what Chapter 11 is made for.
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They've had that opportunity for years, though, and haven't done a damn thing about it.
Yeah, that's essentially why it needs to be forced, either by chapter 11 or other means.
I haven't checked the numbers recently, but at least half of the airlines were operating under Chapter 11. Was this causing all kind of ripple effects throughout the economy and suppliers? No. Why? Because people still need to fly.
I know it was that way when I was an economics major, but the only reason I know that is because we had to look at a report that argued that it was a vicious circle. The main argument behind it being that overall effect was very detrimental to the industry as a whole.
As far as people still needing to fly vs. people needing cars, it's not entirely the same thing. One's a service where the only REAL distinguishing feature between competitors for the most part is price. The other is a good with multi-faceted variation as well as equally distributed price differentials. Yes, people still need cars, but people needing NEW and AMERICAN cars is very arguable. I don't think it's any less improbable to see the Europeans, Japanese, Koreans, and even the Chinese ramping up production in the next 5 years rather than seeing GM, Ford, and Chrysler all of a sudden becoming both competitive and profitable in the markets and categories they're getting killed in. I don't think any of them have anything close to the K-car hitting in the next 5-8 years, but who knows.
I don't think American auto is completely doomed, but it certainly has to change. The more I think about it, Chapter 11 is probably the way that's going to happen.
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So, uh, what's the deal now? The UAW rejected part of the governments terms and now the bailout isn't going on? Isn't that kind of a bad idea? A paycut is a paycut, but can't you still use chapter 11 as a union-busting tool?
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The UAW rejected the terms as laid out by the Senate. But as I understand it, the president of the UAW did so knowing that he had support from the White House. And the White House today came out and said that they are thinking of using some of the $700 billion to rescue the two companies.
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So, uh, what's the deal now? The UAW rejected part of the governments terms and now the bailout isn't going on? Isn't that kind of a bad idea? A paycut is a paycut, but can't you still use chapter 11 as a union-busting tool?
* Union-busting tool
* Pension-stealing tool
* Encouraged by creditors, particularly banks
* Needs to be reformed if justice is at all desirable
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The UAW rejected the terms as laid out by the Senate. But as I understand it, the president of the UAW did so knowing that he had support from the White House. And the White House today came out and said that they are thinking of using some of the $700 billion to rescue the two companies.
Whaaat the fuck?!
* Union-busting tool
* Pension-stealing tool
* Encouraged by creditors, particularly banks
* Needs to be reformed if justice is at all desirable
I don't disagree with that really, but there does need to be some measure for you to jettison expensive union labour before the company slips into chapter 7 and the whole ship sinks. I suppose it could always be done by union vote. Pensions, on the other hand, just should not be touched ever.
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This is a tough spot for the UAW because they are stubborn as fuck but it's apparent that they are going to have to give up more before it's all said and done. I mean, the bill from Congress was only for $17 billion (or $14? I forget) and these companies are $50 billion in debt. This is just the tip of the iceberg.
On the one hand I feel bad for the workers, but in reality the failure of these companies is just part of the economic system that we live in. Companies fail. People get laid off. Bailing them out is literally giving them money for failure. Explain how that equates to capitalism, and I'll be all for this bullshit.
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The debt isn't really all that large of an issue, it's more of the cash forecasts (although too much debt CAN have a major impact on cash forecasts). You can operate a profitable company with a large amount of debt for years as long as you have a somewhat reasonable debt-to-equity ratio , but one negative cash forecast can mean you're totally fucked. That said, I haven't really looked at the numbers in depth so I don't know what the specifics of the situation is for any of them. I glanced by something the other day claiming that both GM (actually maybe it was Chrysler) and Ford are fine as far as cashflow and just kind of jumping on board with the bailout. I don't know if I believe it because at one point or another I've read that each one of those companies is more fucked than the next.
As for the UAW, that's kind of a sinking ship either way you look at it.
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Well I don't know a whole lot about debt management, to be honest. All I know is that apparently GM and Chrysler have said that they will have to seek chapter 7 without a bailout, and I assume this is because of the debt. But I should note that Ford has decided to opt-out of any bailout. They think they can weather the storm.
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Interesting. I wonder if that's a bluff or if they really mean it. I personally find it a bit hard to get a firm grasp of the overall situation because it seems that different sources all seem to have completely different theories on who's fucked or not and why.
I think what it comes down to is just poor management, lower marketshare in the most profitable categories, and retarded high prices for factors of production. To be honest, I didn't think the main terms for the bailout were all that unreasonable (or at least the ones that I saw). 1$/year CEO, 20% paycut to management, price match Toyota and Honda domestic workers wages (I thought these actually matched or even surpassed those of the big three in many cases a few years ago, but I guess I was wrong on that), and to make UAW take over healthcare (this is probably the biggest issue if it's even correct. I've seen two different stats - one that this was the terms of the buyout, the other that this was the deal Ford cut in 2007. I haven't done the legwork). What else do they want really? Either way you look at it the UAW is going to take a hit and it's not really beneficial to anyone to have a whole shitload of people laid off because the most stubborn private sector union in the world was typically inflexible. I suspect that chapter 7 won't happen and it will just purely be a chapter 11 issue. GM still has quite a bit of room to work with and is in dire need of restructuring (12 brands?).
What I haven't been able to find was the financing terms of the bailout. Is it purely a flat loan, or do WTO regulations dictate interest actually has to be involved?
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Well it's not a flat loan and the terms are obviously being negotiated. I don't know how the WTO is involved in it, though. There's no telling right now how the bailout will work, since the funds are being diverted from the $700 billion - not the Senate. And since much of that $700 billion has already been spent with little oversight, I'm a little wary of the auto industry being bailed out through the White House.
I should note that the $1/year CEO salary was voluntary by the CEO's themselves, and was not a term of the bailout.
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The WTO gets involved if enough members raise question as to whether or not it's an unfair advantage/illegal state aid.
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I'm going to act like I didn't take a course with heavy emphasis on the WTO last year. And we totally didn't have a mock WTO.
So my ignorance is well set.
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Just out of curiosity, how gay was your fake WTO? Wait a second...did you even go?
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It was highly amusing.
The class itself was actually one of my favorite in college thus far, minus the mock WTO. It was highly informative.
But let me explain the mock WTO: We were assigned to groups, each representing a country. And we had to come to a consensus on trade and what have you. Well, at one spectrum you had the little blonde girls who didn't know a damn thing and were just saying stuff to make the teacher happy. Then you had the kids who took shit seriously and were trying to impress the teacher, who were the most amusing. Then you had the kids who weren't there the past few weeks and didn't know what the hell was going on. Then you had me and a few others who were making deals purely to fuck over the countries that we were supposed to represent.
All in all, it was quite representative of the real world, I'm afraid.
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Then you had the kids who took shit seriously and were trying to impress the teacher, who were the most amusing. Then you had the kids who weren't there the past few weeks and didn't know what the hell was going on. Then you had me and a few others who were making deals purely to fuck over the countries that we were supposed to represent.
All in all, it was quite representative of the real world, I'm afraid.
Ahaha. Sounds exactly like a model UN I had to do in first year. I was China with two other guys who I always did these projects with in this class. For whatever reason, we were all really 'hungover' (at the time I didn't know what a real hang over was) for the the first presentation we did and we kind of just kept up with that. Our model UN consisted entirely of us passing little notes to people trying to get major countries to let us bomb the shit out of their allies. We convinced most all the important NATO and security council members that North Korea for Taiwan was a wicked deal through stickmen diagrams and fake Chinese letters.
This was not part of the project at all, but it went much better than the project on the implications of German reunification on the standard of living...which I completely made up on the spot and got away with until the very end.
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Haha, the stickmen diagrams I would be quite impressed with. My threats mainly dealt with veiled threats about destroying a particular banana crop.
In reality, I'm pretty sure that our actions only highlight the fact that we are the only sane people amongst them.
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I went to a UAW local to work on their computer system a few weeks back. While I was waiting for the local president to get out of a meeting, I was reading a sign in their reception area. It basically listed the benefits that unions gave its workers. The list started out saying things like:
Without the UAW...
- There were no job tiers
- There was no chance for promotion
- There were no benefits
- There was no pension
- People worked overtime without compensation
I'm like... "Hm. Okay these are all fine." Then I keep reading:
- There was no double time for overtime
- There was no triple time on holidays
I stopped reading shortly after that but they all became ridiculous. Triple time?! Who even gets double time anymore?
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Maybe they put the list together 50 years ago?
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When was the UAW formed by the way? I'm just wondering because of the "People worked overtime without compensation". I don't doubt that in the least, but it's been strictly illegal to force that on wage slaves for at least 50 years, probably longer.
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When was the UAW formed by the way?
1935
....I'm bored.
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1935-2012?
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They've got members in Canada as well. And that's where all the plants are going.
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I read the stats on that. CAW workers in Canada cost an estimated $6/hr less than UAW workers. Interestingly enough, it's not because of wages (which on average are much higher in Canada), but because they don't have to throw as much money into health care and pensions. As for the plants all moving up here, I don't know about that. Most of the ones operating are old branch plants, and recently the truck manufacturing plants have been given close-down or scale back notice. Honda and Toyota workers here definitely make more than domestic workers as well.
Foreign producers are opening more plants here than in the states though.
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Fred Thompson's good news on the economy. (http://blip.tv/file/1528079)