Unsettled Economy & The Bailout

[Kalalau]

Re: Unsettled Economy & The Bailout

The bailout may be expanded to keep Ford, GM, and Chrysler afloat. Mixed feelings. You do want hundreds of thousands of people to be able to continue being employed and making their payments, you want stockholders including pension funds, etc, to be able to continue collecting dividends, but...this is supposedly a Capitalist system. Is this the final proof that capitalism does not work? A fusion of private industry and government is technically "fascism", but it like "socialism" is only a word; whatever works, whatever is needed, is what you have to do, period--you should not sacrifice your entire economy on the altar of ideological purity. Yet if we admit that capitalism is not working in banking and the auto industry, don't we also have to accept the reality that it is not working in health care? Meaning, isn't a Canadian or Australian or English or German or Swedish or Danish (etc) style "socialized) medical system just as necessary as the fusion of public capital into the private banking and private auto industries? Should we draw a line, or not? GM, Ford, and Chrysler made some very poor decisions, they are paying the price, as they should under capitalism, but that does not change the fact that their demise would be a catastrophe for the economy. Your thoughts?

[Ron Whitfield]

Re: Unsettled Economy & The Bailout

Capitalism can work fine if regulated and restricted. But runaway profiteering and pure greed is it's downfall, and the US version has proved it.

This bailout is a worthless scam and isn't going to work.

The way to save this whole mess is to institute 'trickle up' policies, by giving every responsible head of household at least 50K in real $ to open/expand bank accounts (saving the banks), buying new cars (saving GM etc.), invest or become entreprenuers (a lasting stimulus for the economy), and nearly endless other positives instead of throwing fake $ down the toilet to those who are to blame for all this.

[tutusue]

Re: Unsettled Economy & The Bailout

[...]
Tutu and I are going to have a bake sale to rescue the economy.

Hang on! Help is on the way! YES WE CAN!

Count me in. I can make a mean dump cake. YES I CAN!

[matapule]

Re: Unsettled Economy & The Bailout

Should we draw a line, or not? GM, Ford, and Chrysler made some very poor decisions, they are paying the price, as they should under capitalism, but that does not change the fact that their demise would be a catastrophe for the economy. Your thoughts?

I think you have put your finger on the crux of the problem. I will support the Detroit bailout if the government can tell the automakers that they HAVE to plan for the future - small, fuel efficient cars using alternative sources of power. Will that happen, given Detroit's track record? I doubt it.

This bailout is a worthless scam and isn't going to work.

So far it doesn't look good.

The way to save this whole mess is to institute 'trickle up' policies, by giving every responsible head of household at least 50K in real $

Interesting concept, but will never work in practice. But I give you kudos for thinking outside the box. Keep the ideas coming!

[matapule]

Re: Unsettled Economy & The Bailout

Count me in. I can make a mean dump cake. YES I CAN!

YES! and I will make my patented "medicinal" brownies. YES ZIG ZAG MAN CAN! We're on our way to economic recovery!

[tutusue]

Re: Unsettled Economy & The Bailout

YES! and I will make my patented "medicinal" brownies. YES ZIG ZAG MAN CAN! We're on our way to economic recovery!

How 'bout setting up a bar with your special margaritas?!
Just leave it up to us ol' futs. We can get this economy up and running again. YES WE CAN!

[timkona]

Re: Unsettled Economy & The Bailout

Sounds to me like if poorly run companies go out of business, then that is capitalism working just fine. Detroit ignored the writing on the wall for over 3 decades. And anybody who invested, or depends upon their success, probably made some bad decisions with their "capital" at some point.

It is noteworthy that Ron and I agree completely on the folly of any bailout plan.

[craigwatanabe]

Re: Unsettled Economy & The Bailout

Detroit was only building what the automotive public wanted...BIG SUV's. If you were a manufacturer of goods, wouldn't you build what the people want?In a way, it's the US consumer that commands what the market will bear.

But as for bailing out the US auto industry? I think that's the wrong move. Having worked at Toyota and trying to finance people wanting to buy a car, it's the banks and other lending institutions that have clamped down on their lending practices. There was a time when you could be Tier 3 and buy a car with nothing down. Now you have to be a high Tier 2 if not a perfect Tier 1 to purchase a car and that's with at least $1,000 down.

Subprime lenders such as Drive, Beneficial, Citicorp and others have made these stipulations on financing Credit Challenged customers buying a used car: 1) the car cannot be more than three years old from date of manufacturer, and 2) the car has to have less than 50K miles. The reason is if the loan goes into default and the car needs to be repossessed, there is still value in the car at the wholesale auctions to recover most if not all of the loan value.

The problem with that is a car that fits these stipulations is about as much as a new car. The difference is that length of time you can finance a used vehicle is limited to 60-months with Tier 4 customers hitting a maximum 36-month limit. A new car can be taken out to as long as 72-80 months. This allows the consumer to purchase a car with reasonable monthly payments.

It is for these reasons is why the bailout should be limited to just the lending institutions so they can relax lending limitations and allow the consumer to borrow again. That will in turn allow auto dealers to sell cars.

If the bailout is used to subsidize the auto manufacturers, it does nothing to allow them to sell their cars at the dealerships if the banks don't loosen their grip. Suddenly these manufacturers will find a huge surplus of unsold vehicles and the plants will have to shut down until the demand for those vehicles picks up. If thebailout does go to the auto manufacturers, the hardest hit will be the unionized work force. Toyota incorporates a non-unionized labor force resulting in a cost savings of over a $1000 per vehicle. That savings goes back into the quality build of it's products. 1-in-4 vehicles driving on the roads here in Hawaii are typically Toyotas.

But even with fantastic year end incentives such as 0% interest, 2.9% interest, cash back rebates, Toyota still has a huge overstock of unsold Tacoma pick up trucks...the number one small truck sold here in Hawaii and Toyota has too many of them. You want great value? You'll find them in the 08 Tacoma trucks that are still sitting in the lots as 2009 looms two months away.

This may sound like a plug for Toyota, but this is an insight to just how troubling even a solid car company such as Toyota cannot move metal fast enough to pay the banks back and the kinds of incentives to move old stock that will be needed to save their bottom lines.

It comes down to the banks allowing auto dealers to finance and close deals with customers. The bank wins, the dealership wins, and the customer gets a great deal. Leave the bailout to the banks.

On another note I had a conversation with my kid's A+ councellor. She said she heard that if the Feds gave every taxpayer an equal portion of the total amount of the bailout, we'd get a friggin' huge amount of money per person in the hundreds of thousands of dollars. That kind of stimulus check would definately boost consumer spending confidence and would have kick started our economy back into a bull market again.

[Ron Whitfield]

See!

On another note I had a conversation with my kid's A+ councellor. She said she heard that if the Feds gave every taxpayer an equal portion of the total amount of the bailout, we'd get a friggin' huge amount of money per person in the hundreds of thousands of dollars. That kind of stimulus check would definately boost consumer spending confidence and would have kick started our economy back into a bull market again.

Like I mentioned above, a 'measly' 50K would be enuf for any middle/lower class person to do various things to help themselves and the institutions/economy, and save our butts.

However, the negative me say's the powers that be don't want to actually solve the problems we face, and would never consider giving us the $.

[matapule]

Re: Unsettled Economy & The Bailout

Detroit was only building what the automotive public wanted...BIG SUV's. If you were a manufacturer of goods, wouldn't you build what the people want?In a way, it's the US consumer that commands what the market will bear.

More truth than poetry in what you say. But the problem is that Detroit did not look toward the future to build a car that was energy efficient, used alternative energy, AND was what the automotive public wanted. It takes no more energy to design and build an Escalade that some of the public wanted as it does to build the car of the future that the public wanted.

It is for these reasons is why the bailout should be limited to just the lending institutions so they can relax lending limitations and allow the consumer to borrow again. That will in turn allow auto dealers to sell cars.

Excellent point! but credit should not be relaxed to the point where a consumer cannot afford the payments on the vehicle. In other words the consumer is allowed to purchase something greater than he can realistically afford on his current income, much like what happened in the housing market.

That kind of stimulus check would definately boost consumer spending confidence and would have kick started our economy back into a bull market again.

It would also be highly inflationary. What the economy needs right now is more saving and paying off existing debt, not more spending. I suppose that is bad news for car sales.

[craigwatanabe]

Re: Unsettled Economy & The Bailout

Working in car sales, there are two types of salespeople: 1) the jerk that wants to sell you too much car where your payments are unrealistic, and 2) the qualifier who helps you find the right vehicle for the right price.

The difference in the two is that the jerk salesman will never garner your business ever again and in this biz, you need to establish a repeat and referral customer base in order to do good, otherwise you'll be working harder to get new clientele to replace the one you just screwed over.

The qualifier is actually your best friend in the auto sales business. Sometimes a customer will walk in wanting champagne but can only afford water. I ask the qualifying questions that help me determine how much you can comfortably afford and find the right vehicle or trim package that will work for you. Then I talk with the manager or the desk to negotiate the best compromise between dealer and buyer.


A good car salesperson shouldn't put you into deeper financial debt. Unfortunately some do to fatten their commission checks. But if you trust the guy who sold you your last car, you'll go back to him when you need another or would refer a friend or family member to that person as a trusted salesman. This is how the car sales biz works. If you catch a salesman lying to you he could lose his job or the FTC could slap huge fines on that auto dealership.

There are ethics in car sales, you just gotta hook up with the right person that will broker you with the right purchase.

[timkona]

Re: Unsettled Economy & The Bailout

Mata is dead on when talking about Americans paying off their personal debt to help the national economy. Many hands make light work, and all that.

Every bailout plan carries with it the implied lack of belief in a capitalistic economy. To support govt rescue of private business is to embrace bad business practice. I say ..... Let'em suffer.

Government has become too expensive for its own good in the last 35 years. Red Tape, EIS, Public Hearings, Beauracracy, Layers of Command, Redundant Processes, Expiration of decisions, Entitlements without expirations or conditions, fraud, corruption, lack of oversight, embezzlement, etc. etc. We have spent so much time making laws to protect us from ourselves that we cannot even build a home anymore for less than a kings ransom. Let alone a road, a govt building, or a park.

We are imploding in upon ourselves just exactly the same way the Roman Empire collapsed.

The weight of the DOLE.

[Leo Lakio]

Re: Unsettled Economy & The Bailout

What the economy needs right now is more saving and paying off existing debt, not more spending.

Mata is dead on when talking about Americans paying off their personal debt to help the national economy.

Yep. Did it a couple years ago, before the current tanking, and just before I was unexpectedly unemployed. I was glad, at the time of my layoff, that I had finally built up my savings and paid off all my debt, save a mortgage.

Oh, and regarding Tim's dire damnation of Democrats, President-Elect Obama specifically, for the tanking of the markets? Here's what the AP reported about the Dow today:

Wall Street launched a massive rebound Thursday, muscling the Dow Jones industrial average up nearly 553 points after driving it down near its lows for the year...According to preliminary calculations, the Dow rose 552.59, or 6.67 percent, to 8,835.25, after falling as low as 7,965.42 and rising as high as 8,876.59. That's a trading range of 911 points. The Dow did not sink below its Oct. 10 trading low of 7,882.51.

See, Tim? So many factors involved - it's not as simple as "the markets hate the election results." But you know that ... don't you?

[escondido100]

Re: Unsettled Economy & The Bailout

this is an interesting article from the natinal review, i think it sums it up pretty well in regards to the bailout scheme:

The auto companies argue that they have been caught up in the credit crunch, and therefore deserve a piece of the financial bailout. General Motors’ sales dropped 45 percent in October. Ford and GM lost nearly $15 billion in cash between July and September, and GM says it might not have enough cash to operate by early next year.

But this crisis is only the punctuation mark on decades of decline. Once a market-dominating behemoth, GM had 50 percent of the U.S. market in the 1960s. It is down to almost 20 percent now. U.S. consumers have long been voting against U.S. automakers. Now, they’ll be asked to put their tax dollars at risk to preserve the very companies from which they don’t want cars.

The bailout would be of the United Auto Workers as much as of the automakers. It’s the UAW that saddled the Big Three with unsustainable labor costs and obligations to retirees. Detroit has desperately been trying to get out from under this burden, but Ford still lost $1,467 per vehicle in 2007, while GM lost $729 and Chrysler lost $412. Where the UAW doesn’t reign, the industry thrives. Toyota and others profitably manufacture almost 4 million cars in nonunionized states in the South.

The case for the bailout is that the job losses from a GM going down — 100,000 directly, and many more indirectly — would be too painful to bear, and the government would be left holding the bag on GM’s pensions. This line of reasoning conceives of GM essentially as a job programs and welfare agency.

The cost of the government keeping the Big Three afloat would surely be more mandates for politically correct “green” cars. Holman Jenkins of The Wall Street Journal has pointed out the damage of already-existing mandates: “The Detroit Three have been effectively required to build small cars in high-wage, UAW factories, though it means losing money on every car.” If the Big Three have been inefficient until now, just wait until the Sierra Club is in charge.

A bailout of the automakers would signal a new era of government protection from competitive failures. Every other troubled business would show up in Washington, in the spirit of folk singer Tom Paxton’s lines after the Chrysler bailout in 1979:

“I am changing my name to ‘Chrysler.’

I am leaving for that great receiving line,

And when they hand a million grand out,

I’ll be standing with my hand out.

Yes, sir, I’ll get mine.”

The Paulson financial rescue obviously created a dangerous predicate. But the financial system is uniquely fragile. Banks that are otherwise sound, and have been run profitably for decades, can go under in a panic. Wells Fargo, which took an equity injection under duress, shouldn’t be confused with GM.

Washington Post business writer Steven Pearlstein suggests a compromise: Only commit government funds if the auto companies taking them go bankrupt. A bankruptcy court can reduce the obligations to retirees, make it possible for Chrysler and GM to pare back their unnecessary dealerships, and scale back wages and benefits. Top management should be fired. All of this can be set in a “prepackaged” bankruptcy that won’t disrupt operations.

But that probably makes too much sense. We’re a long way from the 1950s, when G.M. President Charles Wilson said, “What is good for General Motors is good for the country.” In a bailout nation, it’s the opposite.

© 2008 by King Features Syndicate

[timkona]

Re: Unsettled Economy & The Bailout

Naaaaahhhh, couldn't be the Unions. Glurg.

My American Made Toyota is a perfectly American car, made by hardworking Americans in Ohio and Kentucky.

How could Detroit NOT look to the future of more efficient cars when their market share has been plummeting for 25 years? People have been predicting the death of the US auto industry for years based upon their lack of vision.