Edmunds urges Congress to 'Vote YES!' on automaker loans

I agree with Orangutan. Edmunds, please explain the rationale. A reorganization at GM may be preferable to D.C. annointing certain lobbyists with taxpayer money. Where would the pan-handling end? We all love cars, but why should these companies become a protected class? And, are government handouts likely to damage our society more than a couple large bankruptcies?

Why don't we instead offer a bunch of taxpayer money to biotech or aerospace or sustainable fisheries? Who in the politburo is qualified to choose?

Further, I though our President Elect was against undue influence by lobbyists - so what's the deal?! Is this the end of fair and equitable governance in America?

Edmunds is walking a fine line with me, personally. Seriously.

"What exactly is the rationale for "voting yes"?"

To save their own jobs. That's it. It doesn't matter who you are. Principle goes out the window as soon as their own well-being is on the line.

Before I begin my arguments, I want to describe myself as traditionally wholly supportive of free market principles and I generally support Republican positions. However...

I am supportive 100% of this bailout. I have two arguments against points made in favor of letting the Big 3 crash:

1. The first argument against the bailout is free-market principles, which I wholly support. However, there is absolutely NOTHING free market about the union labor contracts, franchise laws, and foreign government intervention that work against the Big 3. Our government has supported a union demanding labor conditions entirely divorced from market realities. Our government has given us franchise laws that make it impossible to get rid of brands that are unsupportable under current market conditions. Our government has looked the other way when foreign governments have also violated free market principles and then has given foreign companies operating under favorable regulations even more incentive to operate here. The free-market is entirely irrelevant here.

2. "It won't effect me". Seriously? For this statement to be true you either have to be Amish or a survivalist living in a shelter in the woods. Do you work for a company that has customers who work for automakers, suppliers, or dealers? Do you depend on companies who have customers who fit into those categories? Do you have a job that isn't guaranteed for life with guaranteed raises? If you answered yes to any of those questions, then you absolutely, categorically will be affected by a Detroit collapse.

Now I don't support just giving them money to spend. I absolutely agree with Republicans that that will only postpone the inevitable. I agree with Republicans that the funding must start with the money already marked for the industry and the red tape and strings must be cut. Furthermore, the union should be dissolved immediately, franchise laws must be amended to allow excess brands to be shaved, and the executives must be purged, except for Mulally, and -maybe- Lutz and Press, but that's a big big maybe.

Your first argument shows exactly the reason why the automakers shouldn't be given a bailout, and should instead should be forced to file for chapter 11 bankruptcy.

Shame on you Edmunds. I expected MSN.com to be on the media gloom and doom bandwagon but this is an unpleasant surprise, especially given Karl's polar opposite position in his blog; though I appreciate Edmunds giving him the freedom to say what he said.

stovt001,

1. Ever hear of the saying "two wrongs don't make a right"? Well, it applies here.

2. Honestly, the people who make the argument "it won't effect me" are ill-informed and ignorant. So you have a point here. But, unfortunately, this isn't how economics works.

Read these two articles for further education:

http://www.mises.org/story/3202

http://www.mises.org/story/3194

I've posted these before, but I truly think that people that are pro-bailout need to read them to understand what's actually happening. It'll help them to discover the flaws behind their arguments.

I do like vettes, stangs, and challengers, but please don't give my money to those CEOs. Pleeeeeease!

Honestly, I'd be 100% for Chapter 11 IF I thought it wouldn't decimate sales. However, I just don't think that will work in this case. The American people have already shown that they'll stick their head in the sand and pretend that the collapse of American output won't effect them. Just like the financial bailout, I don't like it one bit and I'm insanely angry action wasn't taken sooner to prevent it, but I don't feel that our economy can take this hit without tanking HARD.

Airlines go bankrupt and planes continue to fly. If GM goes bankrupt they will continue to build cars.

Chapter 11 is also known as a reorganization. The management of the US Automakers would have to prepare a business plan that makes sense to the creditors and the bank that provides the reorganization funds (aka the US Government).

To give the Automakers 25 BILLION dollars without oversight or asking for a viable business plan is an irresponsible waste of taxpayers dollars.

stovt001: Perhaps you haven't noticed but auto sales, especially domestics, are already in the tank.

I must disagree with you on your outlook of the economy, stovt001.

Reading the articles I posted above will help to explain to you why I feel that way. But you won't understand my reasoning until you do so :-)

I say no to the bailout, and pretty much for the same reasons spelled out in Karl's blog.

1. While yes, a bailout might save some jobs, the benefits are only temporary and in 3 ways:
-- First, the massive layoff scenario developed by CAR would only be temporary. While demand is down now, it will return to normal levels.
-- Second, infusing cash in a failed business model does not solve the problem, much the same way as give an alcoholic another beer doesn't solve anything. The only way Detroit can change is through bankruptcy and this is a perfect opportunity.
-- Third, the situation is only going to get worse. $25B sounds like a drop in the hat, but what about next quarter when Detroit needs $75B?
-- Fourth, where do you draw the line? Must Detroit be permanently subsidized until they can pay off their debt? We could be talking several decades AT BEST!

2. We have a free market for a reason. Survival of the fittest is an important attribute to capitalism. Detroit is about as unfit as any industry. If we bail out Detroit, we're telling the world that a free market works as long as times are good. But this really goes beyond perception. If we cater to the weak, you relinquish any sense of corporate responsibility.

3. We've been here before. Obviously, Chrysler went through this years ago. Just as obvious is the fact that Chrysler hasn't learned. But we need to look at companies like Delphi, American Axel, and several other suppliers. Delphi in particular is a sad case. Last year, Delphi was trading at $3/share. Then Delphi underwent a brand new ticker starting at $67/share. It is now trading at $12/share and will probably hit bottom again. If GM can't even help it's primary supplier, how can it help itself?

4. Someone in Detroit needs to go under. We cannot support 3 automakers. Even with a competitive restructuring, Detroit needs more momentum than is currently available.

5. Finally, $25B won't be enough. The credit crisis will far outlast that. $8B might last GM 2 months. I can guarantee you we'll still be right where we're at in 2 months.

The funny part of how people argue about free economy is that the congress has already assigned 700 billion USD to SAVE the economy. If GM is going to bankruptcy in 2006, I won't be please to see taxpayers' money to go to the big 3 too. However, In 2008, an additonal 3 million job loss will significantly slowdown the recovery process. In the end, even though UAW and Big 3 managements all have fair share in this mess, but it was the mistakes of the government to allow a financal meltdown in the first place. 25 Billion USD to save jobs and auto icons in the time of the worst economic breakdown in recent history is just a lost penny compare to the lost of CDS and CDO of the banking system that ACTUALLY receiving federal funding for its recovery. Of course, we CAN leave GM to die, but all Americans need to know the conseqences: prepare to buy more Toyota and Honda and to withstand 8 - 12 months more of the winterstorm of recession.

n-tesla, I don't buy the "it worked for the airlines" argument. Consumers worry more about a car purchase they'll have for years and then resell more than a plane ticket they use once. Secondly, the government does not finance a bankruptcy. Financiers do, and at the moment nobody is financing anything.

orangutan, I never said auto sales weren't tanking. But in a Ch 11 Bankruptcy sales would go from weak to zero. As I said above, no one will finance that and Detroit will go under.

I think we're all sorta going for the same result here, just in different ways. I agree 100% that Detroit needs to reorganize. They need to de-Unionize, change leadership, and shed brands. Ch. 11 would allow that, but Ch 11 requires financing and that just won't happen. There needs to be some form of funding for Detroit to reorganize under.

gm is buring what? a billion dollars a month.

if they get a 3rd of that 15 billion, that buys that a whole 15 more months.

brilliant.

please tell me why the current ceo and board are still in charge of GM?

we'd get more traction out of printing 15 billion, and lighting it on fire then giving it to gm and their unions.

Chapter 11, will help gm get rid of their pensions and unions and make them competative again. If theres a bailout, its easier to swallow the insurance payout on the pensions for retires, then to continue funding the same money pit.

but its cute how edmunds is scared of its ad budget going poof if the big 3 go under.

15 / 3 != 15
15 / 3 = 5

let them go down in flames if they can't work it out themselves. its their fault for building such crappy cars. why should we give them money to continue building crappy cars?

as for factory workers losing jobs... a lot of companies are looking to enter the US market, but are holding off due to the poor dollar. having a US factory is their only logical way in. they can still have jobs, just for another company. as for the fatcats that sit around and make stupid decisions to cause the downfall of their company... can you say "you want fries with that?" i wouldn't even trust them to get my order right.

for those who love the corvette, mustang, viper, or whatever... its likely that they will sell off their brands and they will live on. like the TATA owned Jaguar/ Land Rover or the Prodrive owned Aston Martin. they're still around for us to enjoy.

In theory I really do agree with everyone here who says Ch. 11 would be the perfect opportunity to reorganize and be sustainable. I'd love nothing more to see Detroit-based automakers with labor costs equivalent to everyone else, only 2 brands per (maybe 3 for GM, not counting foreign market only brands, just to go a little easier, though I can't pick a 3rd worth saving...) and a moderately sized dealer network. Under those conditions, we'd see American cars to be proud of for sure (not that there aren't plenty of American cars to be proud of now). My only concern is that sales would drop too low and financing would be too scarce during a bankruptcy. The result shock to the economy with the loss of jobs and income would certainly recover with time, but coming with the other economic problems would cause an economic hit that would be about fatal. It would be a long and painful recovery to everyone. I'm hoping everyone thinking Ch 11 will do the trick is right. We'll all be a lot better off if it works. I'm just worried that it won't.

Also, I'm curious. I think I'm the only one that mentioned loosening restrictions on the $25B already authorized but held up by red tape and restricted to plant enhancements to build fuel efficient cars. What are the thoughts here regarding changing the rules to let those funds be used for general "staying alive" or restructuring purposes?

Your an idiot if you think the big three got into this mess by themselves. We are the only one practicing "free Trade". When you export you make money hand over fist. When you export and highly tax imports so selling them is almost impossible, its called Asia.

Everyone thats for the bailout is missing the biggest problem the big 3 have. : Legacy costs.

If GM is spending 70-80 dollars per hour per worker, to build a car, but the imports are spending a 3rd or half that. How can gm compete? If labour on your car is 3000 grand more then your competitor, then how are you going to make money?

The big 3 are broken past current repair. The goverment should offer money, but only AFTER they are bankrupt.

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estreka

opps.

It was late. The big 3 are asking for 50 billion in new money. So it was supposd to be 50/3 which is still more like 16 billion.

Ethier way. GM will burn through it at more then 1 billion a month.

dvsutton. No they didn't get into this mess by themselves. However, once they saw the whole they never stopped digging.

What happened to all that SUV cash?

---------

Everyone thats for the bailout is missing the biggest problem the big 3 have. : Legacy costs.

If GM is spending 70-80 dollars per hour per worker, to build a car, but the imports are spending a 3rd or half that. How can gm compete? If labour on your car is 3000 grand more then your competitor, then how are you going to make money?

The big 3 are broken past current repair. The goverment should offer money, but only AFTER they are bankrupt.

--------------------------------------------------
estreka

opps.

It was late. The big 3 are asking for 50 billion in new money. So it was supposd to be 50/3 which is still more like 16 billion.

Ethier way. GM will burn through it at more then 1 billion a month.

dvsutton. No they didn't get into this mess by themselves. However, once they saw the whole they never stopped digging.

What happened to all that SUV cash?

---------

Correct you are, dvsutton. I'm pro-free-market, but I'll be the first (well, the second in this case) to tell you that America is anything BUT a free economy, let alone a free society. And exactly because of the example that dvsutton gave is why we're NOT a free economy.

We're more fascist than anything, honestly, and the bailout proves that. It's exactly what Hitler did when he was organizing the Third Reich throughout the 1930's by buying (with taxpayer money) companies like Krupp Steel and others.

Fascist? Really? I'll have to ponder that. The government has been muddling more and more with the mortgage industry. But, our tranportation system is falling apart (it's no modern-day autobahn), and we haven't had a national "people's car" since the K-car. But, coming to think of it, the K-car resulted from the first Chrysler bailout. Hmmm....

jederino,

Don't think in terms of physical things like the Autobahn (although some would consider the interstate highway system an equivalent). You need to look at the policies that the federal government has made over the past 100 years or so.

Some examples are the increased military state (ie. war on terror, war in Iraq, etc.), the statist policies (ie. talk of a civilian national security force, the fear-mongering that both parties partake of, etc.), and the revoking of civil liberties (ie. the so-called PATRIOT Act, the FISA Act, etc.).

I appreciate your open mind on the issue. Most people would denounce me as a heretic or traitor and call me stupid without even so much as pondering the thought or researching it more on their own.

My daughter just bought 100 or so shares of GM, Ford, and Chrysler with her weekly allowance. LOL

LOL ateixeira. This should be a good lesson for her :-)

She get's a $200 allowance!?

flicmod, only 23 posts (22 if you don't count opfreak's double post) until you fulfilled Godwin's law. I think that's a new record for Inside Line. Actually fulfilling Godwin's law is pretty rare at all around here. Good job mixing it up a little.