Strengthening Constitutional Self-Government

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Thought for the Day

So, we’re thinking of bailing out the Detroit auto industry to the tune of something like $25 billion. Hmm. I notice at at present stock market values, GM--the whole thing--is now worth less than $2 billion, and Ford is worth less than $5 billion.

Why doesn’t the feddle guvmint just buy up GM and Ford lock, stock, and barrell (and union contracts), and save the taxpayers money (at least for a while). I’m sure the feddle guvmint can run the auto industry at least as well as Amtrak and the Post Office.

Discussions - 19 Comments

GM common stock is I think worth less than 2 billion(or trending that way). I think Goldman put out a price target of $0 a share...but they have about 72 billion in bonds which is why the stock valuation is so horrid. GM is obviously worth more than 2 billion, but the bond holders will get paid first so if the company is worth less than 72 billion the common stock is worthless or at least highly speculative.

Outright buying would be far better, because once the companies right themselves, {which they will, unless Congress and Obama hinder them doing so}, the government would be able to sell the stock.

I hope you are being sarcastic Dan. How can a company "right itself" when owned by the government. So does a Senate committee appoint the board of directors? Good grief. No company is too big to fail.

No company is too big to fail.

Some are, though, and that's the problem. If they fail, then the economy collapses (think airline companies - which have been bailed out for YEARS).

Jamie, there is a sharp distinction between "owning" the thing and actually running it. If the Obama administration and the Democrat run Congress actually try to enact the insane green agenda, ---------------- it doesn't matter what happens, because our economy will go over into a nosedive, then into a spin, a non-recoverable spin.

Compared to the likely consequences of the American economy being forced to go "green," the question of whether to bailout GM is an irrelevancy.

And Matt is right to observe that some companies are too big to be allowed to fail. As well as too important. We should be mindful too that there is a national security aspect present with any decision relating to Ford and GM, as there would be with Lockheed Martin, General Dynamics, Newport News and Boeing.

I'm not so much a purist regarding Capitalism that I'll see the national security interest of my country emperiled thereby.

Think too of the practical consequences of allowing Ford and GM to detonate. Subsequent to their going under, any new American automotive concern that might arise, and there's no guarantee one would, --------------- would find hard going against a predatory competition from Europe and Japan, as well as Korea and China. How long would such an American automotive company take to get off the ground? A decade? More than a decade? Ponder too the regulatory nightmare that such a company would encounter. The left would fight them every step of the way. Multiple lawsuits in multiple venues, fighting off one injunction after another. Where would such a company find the financial wherewithall to wage that legal battle, which would swiftly rise to the tens of millions, when no product is on the market, and no income forthcoming?

Give a thought to the difficulties such a company would have building its first plant, in a country that hasn't built a refinery in 20 years.

All the while, foreign automakers, finding the field wholly open to them, seeing before them an unparalled opportunity, would be moving product to Americans and making serious inroads into American consumer confidence. And studies have demonstrated that such confidence often dictates future purchases.

Thus the real world, practical results of allowing GM and Ford to go under are unthinkable. So we're going to have to do something, and playing political football won't cut it.

One real problem with Ford and GM are their legacy costs - what they owe their union employees. Their pensions are unfunded, thanks to a deal with the Gov. a while back. Yet, they, or the taxpayers, someone, is responsible for the pension benefits of those autoworkers. I do not have time to find the figures, and am merely offering an, "Oh, by the way..." to what is also true, above.

Anyway, a billion here, a billion there, pretty soon you are talking about real money. Except that talking about billions doesn't seem like talking about real money. Can anyone run up a billion dollars worth of debt on a credit card? The word "incomprehensible" just about fits the situation, which has to be why Mr. Paulsen can throw around numbers and speak so cavalierly about what used to be taxpayer's money, or someone's money, or is it really no one's money, because such a vast abstraction?

The automakers can declare bankruptcy and renegotiate their debt and contracts. The writing on the wall about the shrinking industrial capacity of the United States (pricing itself out of the market, so to speak) has been around for over 30 years, yet we have refused to see it, plan for it or adjust our thinking because of it. No more bailouts to those who have not handled their finances responsibly. We are so short-sighted in terms of our economy. We bailed out Chrysler 30 years ago and Congress is bailing them out again? I think not.

I suggest the government buy them, and immediately hand them over to the UAW for free. Then the unions can run them as they see fit, and the workers should not longer have to worry about getting screwed over by management or the ownership.

Don't forget about the new emissions standards from last year. Meeting the new standards was supposed to cost something like $115b (can't remember the exact figure since I heard it on the radio) and the $25b we've (taxpayers, that is) already lent them was supposed to help with that. Not that I'm anti-green, but mightn't it make sense to roll back some of the environmental requirements to help weather the crisis?

I also agree with comment 6 by Dan. Our main concern with these companies should be the national security interest. The foreign car makers have already made significant inroads with consumers and that's part of the reason why the UAW is such significant baggage for the Big Three. We don't need to worry about future American consumers driving snazzy, fuel-efficient, foreign cars (many are made here locally anyway - Marysville, OH, Georgetown, KY, and Greenfield, IN), we need to worry about who's going to build our tanks.

Betsey, the tip of your barb is well honed.

But have you considered the amount of help foreign automakers have consistently received from their governments over the last 3 to 4 decades. Who assisted Japanese car makers getting off the ground?

The government is either going to help the existing auto concerns stay on their feet, OR they'll be helping new car makers try to rise to stand on their own two feet. But they're going to be assisting, they're going to be helping, and it's only a matter of when and where.

And do you have a problem with American tanks being designed and made by Americans? Or would you prefer we purchase from Russia, or maybe buy the Leopard II from Germany? And it's not just tanks, it's the entire vehicular needs of the Army, the Navy, the Marines and the Coast Guard. Have you any idea how many vehicles your government purchases in any given year, outside of those related to the military? Are you content to see foreign automakers get those contracts?

There's something surreal about all of this.

Here some of you are worried about the relative chump change involved in a bailout of Detroit, while not batting an eye earlier about the bailout of Wall Street that the Democrat Paulson insisted on prior to the election.

Right now, it's all about energy. If the new Democrat administration really believes the green nonsense they've been pushing for over a decade, and if they're intent to really implement a radical green agenda, driving American coal right out of business, if they're going to do that, ------------------------------ we're screwed people. It will be akin to a stake through the heart of the American economy.

Dan, I thought I was talking about that in #8.

mgarbowski, I have read that about an ESOP as a serious proposal. For the price of their pensions and benefits, invested in the stock, the workers can own the companies. Taxpayers would not actually have to be involved. Sounds awfully good to me.

Yea, let the workers have it. Given what I know about union mentality, waking up to find themselves management will serve as a splash of cold water. The sooner they realize that "profit" is as legitimate as "payroll," the sooner we can dig ourselves out of this mess. But I'm not holding my breath; rank-and-file Americans specialize in delusional thinking.

And no good can come of these bailout programs. Sheltering firms from risk is just another form of delusion, and capitalism cannot function properly when government chronically steps in to save the bottom line (have we learned NOTHING from Fannie Mae and Freddie Mac?).

You guys are dead wrong about our industrial creativity (manufactureing' future in America) and our national security being tied up with the auto industry.

Our manufacturing base - the real future - is represented by companies such as Lantech. It has nothing to do with the auto industry that has been a government boondoggle since the 1930's. The combinations of the Fed's that protected the unions and their unrealistic compensation and protection and the states and their franchise laws doomed the "Big three" from the 70's on. Combine that with the lack of quality product (basically managements doing) you have what you have today - three companies that can not even begin to compete with the competition.

It's just silly to say that our national security has anything to do with these dead companies. The have not been real companies for a while, they are public/private monstrosities and this latest round of "bailouts" simply proves it. They are a hole to pour yet more tax payer money down.

Will the real conservatives please stand up to this nonsense!!!

Thus the real world, practical results of allowing GM and Ford to go under are unthinkable.

This is just ignorant. The "practical results" of the dead being allowed to die would be:

1) Less drain on the Treasury (i.e. American taxpayer)

2) Less political influence of UAW and the like (always a good thing).

3) The further growth of the REAL American auto industry, which is located in the south by non-unionized and well run "foreign" companies such as Honda, Toyota, etc.

4) A realization in the publics mind that our manufacturing base is represented by smaller, well run companies (such as Lantech) and thus less panicked political decisions.

The market already knows all this (read the WSJ comments on these dead companies going back 30 years), thus market caps are going to $0, exactly as they should...

Dan, sorry if I was unclear. I wholeheartedly agree with you about the nat'l security point. I most certainly want Americans building the tanks, even if it means doing so at obnoxious, unfair UAW rates.

Since it seems there's little hope of a profitable Big Three in their current manifestation, it would be great if we could somehow reduce them down to the minimum necessary to maintain our safety and then let Honda, Toyota, and the others duke it out for our consumer dollars.

I wholeheartedly agree with you about the nat'l security point. I most certainly want Americans building the tanks,

Since most of our tanks and other heavy military equipment come from other (smaller, non UAW) manufactures now, where do you get the notion that we need GM/Ford/Chrysler for national security?

it would be great if we could somehow reduce them down to the minimum necessary to maintain our safety

What, exactly, does GM/Ford/Chrysler have to do with "safety", national or otherwise. Answer: nothing, zip, nada.

Where do you good folks get these delusions? The MSM? Some unexamined assumption that was kindled by some high school history book on WWII and our "industrial might" being somehow dependant on these and only these companies??

PLEASE do a little fact checking before asserting that these companies are crucial...

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