Find Your Valentine
Slog
News & ArtsFriday, December 19, 2008
Economy Live for One More Day....
Posted by Jonathan Golob on Fri, Dec 19, 2008 at 12:12 PM
General Motors Corp. and Chrysler LLC will get $13.4 billion in emergency government loans in exchange for substantially restructuring their businesses, President George W. Bush announced.Another $4 billion will be available to GM in February provided Congress releases the second half of the $700 billion Troubled Asset Relief Program fund originally set up to bail out financial institutions. The automakers have until March 31 to meet the conditions of the loans, including demonstrating they have a plan to become profitable, or be forced to repay.
Compared to the money pits of AIG, Bank of America, JP Morgan Chase and the truly vile Citigroup, this is an unbearably cheap way to give a major chunk of the global economy a chance to rework itself.
Kudos to Ford for not needing a bailout.
2
At least the auto industry actually produces tangible goods and a failure of the American auto industry would practically eliminate the influence of labor unions which have buffered the working class from cost of living increases while unorganized workers have seen a steady decline in real wages over the last decade. It is entirely prudent to protect the jobs/spending power of these workers especially at this price.
I don't see the point of throwing more money at the black hole that is our banking industry, they're not actually creating wealth or doing work, they're just shuffling CDS around. Let them sink, let there be spin-offs and consolidation, or just federalize them, no more of this wishywashy hand over another stack-o-bills policy.
I don't see the point of throwing more money at the black hole that is our banking industry, they're not actually creating wealth or doing work, they're just shuffling CDS around. Let them sink, let there be spin-offs and consolidation, or just federalize them, no more of this wishywashy hand over another stack-o-bills policy.
4
Thomas Friedman recently called the idea of a bailout for the car companies comparable to a large government investment in typewriters in, say, 1990, right before the web and the internet took off. I see zero evidence that GM is paying the slightest bit of attention to the kinds of new car ideas that will make sense in the future. So far all they're talking about is stuff that the Japanese started talking about ten years ago. The goal here isn't to turn into Toyota; Toyota isn't the future either. If all GM comes out with is a few reasonably-built 30 MPG sedans, they're going to die anyways. Chrysler is going to die even if they discover the Fountain of Eternal Youth in their backyard.
Some of these folks need to read up on what happened to the British car industry in the 60s and 70s, and why. Seen any Hillmans or Rileys or Triumphs around lately? Any interest in a fully-nationalized auto company? I didn't think so.
Some of these folks need to read up on what happened to the British car industry in the 60s and 70s, and why. Seen any Hillmans or Rileys or Triumphs around lately? Any interest in a fully-nationalized auto company? I didn't think so.
5
I am so fucking torn on the idea of bailing out the auto industry in this county. They have not tried to build competitive vehicles, even when the market clearly indicated it was not buying what Detroit came up with.
But it is the last of our heavy manufacturing along with a huge number of jobs. I know we have to do it; I just wish the circumstances were different.
But Bush just set it up to fail on Obama's watch. That is all that happened today.
But it is the last of our heavy manufacturing along with a huge number of jobs. I know we have to do it; I just wish the circumstances were different.
But Bush just set it up to fail on Obama's watch. That is all that happened today.
6
The average interstate junction costs $25 million/year to maintain. Cars make our cities ugly. Parking lots drive down property values. There's your money pit.
7
Fnarf, that comment from Friedman made me giggle, for he missed the point of his own metaphor. The major typewriter manufacturer in 1990 was IBM. If they had been in economic trouble, a bailout would have improved IBM's ability to adapt to the internet. Which would have worked out just fine, no?
The careful reader best keep a wary eye on Friedman as he attempts to climb belatedly on the disaster-recovery economics bandwagon.
The careful reader best keep a wary eye on Friedman as he attempts to climb belatedly on the disaster-recovery economics bandwagon.
8
We can impose better fuel efficiency standards and they can play a role in infrastructure investment, our electric busses are GM, there's no reason we need to buy swiss or german tram cars, if our taxi fleet consisted of American hybrids we'd be moving in the right direction. I think they've gotten the message.
9
Thomas Friedman is a low-grade moron barely able to predict the quality of his last bowel movement, let alone the future of the global economy. Fact.
With that said, Chrysler is toast. GM has good product and technology about to enter the market. I give them a fair chance of success on surviving as an independent company.
Remember, this isn't a nationalization, per-se. It's a loan, with the option of equity injection by the government. A loan that is much smaller than that given to any of the large and totally incompetent banks, that supports something like 3 million jobs. What have the banks done with their loans, beyond hand out bonuses and shovel the rest back into short-term US treasury bonds?
With that said, Chrysler is toast. GM has good product and technology about to enter the market. I give them a fair chance of success on surviving as an independent company.
Remember, this isn't a nationalization, per-se. It's a loan, with the option of equity injection by the government. A loan that is much smaller than that given to any of the large and totally incompetent banks, that supports something like 3 million jobs. What have the banks done with their loans, beyond hand out bonuses and shovel the rest back into short-term US treasury bonds?
10
@7 key difference is that IBM is run by amazing people, GM not so much. and IBM has adapted just fine. and as point of reference, only cisco remains a strong company in the internet infrastructure manufacture.
12
@7, a bailout of IBM in 1990, if they had needed one, would have been a disaster. What IBM needed in 1990, and what the car companies need in 2008, is not cash, but ideas. Note that IBM, who ruled the world with their PCs in 1990, didn't have a clue how to respond to the internet.
Jonathan, Friedman is a fool, but he understands globalization, and, you know, even a blind squirrel finds the occasional acorn. The point about GM is that they are purely reactive, not creative; they have made no real commitment to these new technologies until they absolutely had to, and if you look beyond the hype, they are STILL completely focused on improved Chevy Impalas as the way forward; these "new technologies" are simply a marketing tool to get some "green" attention and snake $ out of congress. In short, I'll believe it when I see it. They've had thirty years to show us where their real interests lie.
I would be more than happy to help out any car company that could show me where, in the last thirty years, they had cooperated even a tiny little bit in, say, increasing CAFE standards. What's GM's position on CAFE even today?
The Chevy Volt is window dressing. Before they get a penny they should COMMIT to manufacturing one million of the things by 2010. Actual sales are likely to be closer to zero.
Even shorter version: PROVE IT.
Jonathan, Friedman is a fool, but he understands globalization, and, you know, even a blind squirrel finds the occasional acorn. The point about GM is that they are purely reactive, not creative; they have made no real commitment to these new technologies until they absolutely had to, and if you look beyond the hype, they are STILL completely focused on improved Chevy Impalas as the way forward; these "new technologies" are simply a marketing tool to get some "green" attention and snake $ out of congress. In short, I'll believe it when I see it. They've had thirty years to show us where their real interests lie.
I would be more than happy to help out any car company that could show me where, in the last thirty years, they had cooperated even a tiny little bit in, say, increasing CAFE standards. What's GM's position on CAFE even today?
The Chevy Volt is window dressing. Before they get a penny they should COMMIT to manufacturing one million of the things by 2010. Actual sales are likely to be closer to zero.
Even shorter version: PROVE IT.
13
@11:
No, I'm rationally calculating cost-to-benefits. What benefit have we received from the $300,000,000,000 we've shoveled into the financial industry? Point to one single metric of success.
There aren't any. The TARP program has been a total, unmitigated, complete and abject failure. By any way you'd measure it. Lending on the commercial paper market? Lending to anything beyond the US Treasury? Number of foreclosures? Reform away from irresponsible financial derivatives? Deflation? Even preventing job loss in the financial industry? The banks (and other financial organizations that have become banks to get their handouts)
have totally failed, and failed after being given a second chance--with out tax dollars--to succeed at a trivially easy task. Every fucking credit union on the planet succeeds as non-profits at lending and securing deposits; these fuckers have failed us all in such a total way it's breathtaking, all while handing themselves obscene 'retention bonuses' for a job well done.
This teeny bit of money (compared to the total thrown out so far) handed to the auto industry might be the solitary good to come of the entire TARP program--even if a small portion of the 3,000,000 jobs can be retained, if a small percentage of the R&D done on transportation in this country remains.
You know how smart this is? Even competitors to the US automakers want them to be tided over. The loss of vibrancy in the industry, the loss of the new technology developed by GM and Ford, would be devastating to the the entire sector.
Egads. You seriously need to pick up a history book on the auto industry plus a book on industrial engineering, just you you can reach the level of ignorance on this subject.
No, I'm rationally calculating cost-to-benefits. What benefit have we received from the $300,000,000,000 we've shoveled into the financial industry? Point to one single metric of success.
There aren't any. The TARP program has been a total, unmitigated, complete and abject failure. By any way you'd measure it. Lending on the commercial paper market? Lending to anything beyond the US Treasury? Number of foreclosures? Reform away from irresponsible financial derivatives? Deflation? Even preventing job loss in the financial industry? The banks (and other financial organizations that have become banks to get their handouts)
have totally failed, and failed after being given a second chance--with out tax dollars--to succeed at a trivially easy task. Every fucking credit union on the planet succeeds as non-profits at lending and securing deposits; these fuckers have failed us all in such a total way it's breathtaking, all while handing themselves obscene 'retention bonuses' for a job well done.
This teeny bit of money (compared to the total thrown out so far) handed to the auto industry might be the solitary good to come of the entire TARP program--even if a small portion of the 3,000,000 jobs can be retained, if a small percentage of the R&D done on transportation in this country remains.
You know how smart this is? Even competitors to the US automakers want them to be tided over. The loss of vibrancy in the industry, the loss of the new technology developed by GM and Ford, would be devastating to the the entire sector.
Egads. You seriously need to pick up a history book on the auto industry plus a book on industrial engineering, just you you can reach the level of ignorance on this subject.
14
@10, not to belabor what was a minor point in what I meant as a mere metaphor-beatdown of the worst mustache in New York: every serious economic analyst spent all of the late 1980s noticing that IBM underperformed expectations every quarter, expected IBM would have to fail, and said it was unsalvageable because its people were so stupid and well-paid, its management so out of touch, its structure too top-heavy. Familiar?
The money IBM needed to get through its anni horribili and retool its whole business model came from investment funds chasing the incipient tech bubble. Detroit's got no imaginary bubble money to leverage with, so this a way--not the best way, but a way--to give them a shot to turn themselves around, the same way IBM did.
My horse is dead now, so I will go find something else to beat.
The money IBM needed to get through its anni horribili and retool its whole business model came from investment funds chasing the incipient tech bubble. Detroit's got no imaginary bubble money to leverage with, so this a way--not the best way, but a way--to give them a shot to turn themselves around, the same way IBM did.
My horse is dead now, so I will go find something else to beat.
15
Ford only doesn't need a bailout right now due to luck. They are surviving on the money they made selling off Jaguar and Land Rover to Tata. If some smart (meaning fucking stupid) company came along to take Saab and Hummer of of GM's hands they'd be in the same situation as Ford.
16
Jonathan, your faith in GM's "new technology" would be more encouraging if it wasn't patently obvious EVEN NOW that GM is STILL thinking more about Hummers than Volts. I HAVE read books on the history of the auto industry, and I've been watching the US companies fail for thirty years.
The real culprit, of course, is the American consumer, who DEMANDS crappy vehicles. GM and Ford make great cars in other parts of the world, and sell tons of them, but the kinds of cars they make here are unsalable anywhere else, just as the foreign companies manufacture different vehicles here for the US market than they do overseas. The official government policy of FREE GAS is to blame; yes, gas is virtually free in this country, and the only time we started to wake up was for a few months earlier this year when the price started to approach sense. The only thing that is going to save the US car companies, bailout or no, is $6 a gallon gas, or higher -- as crazy at that sounds.
I think the real future of cars in America is going to come from companies that no one has heard of yet -- and probably not from an American company. The Google of the automobile industry is probably working in an Indian garage right now.
The real culprit, of course, is the American consumer, who DEMANDS crappy vehicles. GM and Ford make great cars in other parts of the world, and sell tons of them, but the kinds of cars they make here are unsalable anywhere else, just as the foreign companies manufacture different vehicles here for the US market than they do overseas. The official government policy of FREE GAS is to blame; yes, gas is virtually free in this country, and the only time we started to wake up was for a few months earlier this year when the price started to approach sense. The only thing that is going to save the US car companies, bailout or no, is $6 a gallon gas, or higher -- as crazy at that sounds.
I think the real future of cars in America is going to come from companies that no one has heard of yet -- and probably not from an American company. The Google of the automobile industry is probably working in an Indian garage right now.
17
Fnarf:
I think we're into the prove it time. GM, even with this bailout, won't survive without a successful launch of something like the volt. The money is enough to, perhaps, keep the company afloat long enough to retool a few plants and start churning these guys out.
More broadly, I think you could replace GM in your comment #12 with "the global auto industry" and have it be just as accurate. Even the beloved Japanese automakers have fought efficiency standards. The vaunted hybrids are more marketing gauze than actual improvements in efficiency--particularly when you consider the terrifying environmental impact of building the damn things.
Holding GM accountable for what has been an industry failure is irrational in the extreme. Just about every industrial country on the planet coddles and subsidizes its auto industry--the EU countries, Japan, China, Korea, India, Brazil and so on. Of course there is overproduction. You're kicking the US makers for losing at poker, when everyone around the table is playing with a stacked deck--four aces in every hand.
The metaphor with IBM and typewriters is specious. There is no more complicated industrial product than an automobile, requiring a vast network of suppliers, dealers, part manufactures and decades of industrial experience to even produce a mediocre product. For IBM, it was as simple as choosing to focus on software. For GM to move this entire gigantic structure is far from trivial.
Consider Ford. They don't need a bailout because they made some small changes a few years ago to bring themselves into a more competitive position--investment in higher efficiency without having to use hybrids, trimming product lines, modernizing plants to decrease cycle times and the such. They're suffering, but will probably make it. GM was starting from an even larger and more atrophied base.
I think GM is scared enough right now to take the change seriously. If not, they'll die, and no bailout can stop that.
More...
I think we're into the prove it time. GM, even with this bailout, won't survive without a successful launch of something like the volt. The money is enough to, perhaps, keep the company afloat long enough to retool a few plants and start churning these guys out.
More broadly, I think you could replace GM in your comment #12 with "the global auto industry" and have it be just as accurate. Even the beloved Japanese automakers have fought efficiency standards. The vaunted hybrids are more marketing gauze than actual improvements in efficiency--particularly when you consider the terrifying environmental impact of building the damn things.
Holding GM accountable for what has been an industry failure is irrational in the extreme. Just about every industrial country on the planet coddles and subsidizes its auto industry--the EU countries, Japan, China, Korea, India, Brazil and so on. Of course there is overproduction. You're kicking the US makers for losing at poker, when everyone around the table is playing with a stacked deck--four aces in every hand.
The metaphor with IBM and typewriters is specious. There is no more complicated industrial product than an automobile, requiring a vast network of suppliers, dealers, part manufactures and decades of industrial experience to even produce a mediocre product. For IBM, it was as simple as choosing to focus on software. For GM to move this entire gigantic structure is far from trivial.
Consider Ford. They don't need a bailout because they made some small changes a few years ago to bring themselves into a more competitive position--investment in higher efficiency without having to use hybrids, trimming product lines, modernizing plants to decrease cycle times and the such. They're suffering, but will probably make it. GM was starting from an even larger and more atrophied base.
I think GM is scared enough right now to take the change seriously. If not, they'll die, and no bailout can stop that.
18
And yet, the F150 and Silverado were #1 and #2 in sales with nearly a million sold this past year. I think Ford and GM should cede control of the sedan market to Honda and Toyota and simply make trucks. It's what they do best.
19
@13 fail. You start off saying it is cost-benefit analysis, but then fall back on "MOMMY! THE BIG BAD BANKS GOT A COOKIE! I WANT ONE TOO!"
There are compelling reasons for an automaker bailout but one of them isn't that a bad decision was made for another sector. Sure, jobs could be saved in the short term, but without a quantum shift in how the company is run (and executive salary isn't the primary issue. You could pay execs 60k a year and the company would still flounder on the balance sheet.)
Fnarf is right though; you essentially want a zombie company because the idea of such a zombie going under is too cataclysmic to you. Without a brain the company will be hitting up tax payers again, and again, and again.
And I was opposed to the bailout for banks, etc. from the start. Two wrongs dont make a right.
@14
How can GM adjust their business model without pain to workers? IBM laid off thousands in its effort to change their business model, sold off units that were profitable, and it hasn't been painless.
There are compelling reasons for an automaker bailout but one of them isn't that a bad decision was made for another sector. Sure, jobs could be saved in the short term, but without a quantum shift in how the company is run (and executive salary isn't the primary issue. You could pay execs 60k a year and the company would still flounder on the balance sheet.)
Fnarf is right though; you essentially want a zombie company because the idea of such a zombie going under is too cataclysmic to you. Without a brain the company will be hitting up tax payers again, and again, and again.
And I was opposed to the bailout for banks, etc. from the start. Two wrongs dont make a right.
@14
How can GM adjust their business model without pain to workers? IBM laid off thousands in its effort to change their business model, sold off units that were profitable, and it hasn't been painless.
20
@19 there's no chance Detroit can make it through painlessly, of course. Many many layoffs seem inevitable, units may in fact be mothballed rather than sold (no buyers exist), but there may be a chance of painful survival at least. A chance.
21
Not surprisingly, one of the conditions of Bush's loan is that union workers have to cut pay & benefits to match those of workers in Japanese car plants. Nice to know he's screwing the working middle class right to the end.
I would actually be fine with that idea if the executives were also required to reduce their pay and benefits to match those of Honda or Toyota execs. I believe the CEO of Toyota makes less than $300k a year, including benefits.
I would actually be fine with that idea if the executives were also required to reduce their pay and benefits to match those of Honda or Toyota execs. I believe the CEO of Toyota makes less than $300k a year, including benefits.
22
@21 Nardelli (sp?) at Chrysler and Waggoner at GM work for free and $1, respectively. Of course, there are a ton of conditions, but that is their pay.
23
cowboy @ 22,
Their base salary may have been reduced to $1 a year, but that is completely symbolic. They are still getting extraordinarily generous investment, pension, and other perks (although I understand they will have to sell the corporate jets). Lee Iacocca also famously worked for $1, but later made millions off the stock options he was given in lieu of actual pay.
Their base salary may have been reduced to $1 a year, but that is completely symbolic. They are still getting extraordinarily generous investment, pension, and other perks (although I understand they will have to sell the corporate jets). Lee Iacocca also famously worked for $1, but later made millions off the stock options he was given in lieu of actual pay.
Advertisement
Most Commented on Slog
-
SL Letter of the Day: Pill The Homos! by Dan Savage
-
Dear Huffington Post... by Dan Savage
-
Slog Bible Study: Deuteronomy 21:10-14 by Goldy
-
The AP Is Reporting That Whitney Houston Is Dead by Paul Constant
-
The Rick Santorum Rally in Tacoma Probably Could Have Gone Better by Paul Constant
-
Because Guns Make Us Safer by Goldy
-
SL Letter of the Day: Daddy Loves Who? by Dan Savage
-
Because Guns Make Us More Safer by Goldy
-
Gay Kids Are Still Killing Themselves by Dan Savage
-
Gregoire: "This is signed!" by Eli Sanders
RSS
Facebook
Twitter
Comments (25) RSS