With all the bail outs and loans the government is giving out how far behind can the auto makers be? It would be easy to justify considering how many jobs and businesses would be destroyed if they went belly-up.

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1993 300E 2.8 185k miles
2006 Mustang Convertible 4.0 Eaton Supercharged

^^ Yep, they will be next.

Saw a discussion last night and the number was 25 billion. Over the last couple of months the number of 50 billion has also been discussed.

Both candidates want to win Michigan. Neither will publicly object to this.
I'm a cynic, but I'm paid to be cynical.

Gotta put some strings on executive compensation though.
Chevy Volt is gonna cost $35,000. ARE PEOPLE GONNA BUY IT?

I like the idea of NG fueled engines in cars. Tap into your home's gas line as often as you need it. I'd like to hear this discussed and supported more.

They've been destroying jobs for years to keep the CEO's and share holders happy. Now they want a hand out. They've done nothing but build bigger & less efficient vehicles because they're was no regulation to force them to do otherwise. Lease deals to entice people into vehicles they couldn't otherwise afford. I started to see it 4 years ago. The calls from Mercedes Credit, VW Credit,etc looking for client's vehicles have been on a sharp increase. In my dealings with these financial institutions as well as a few repo men that have shown up at my dealerships, the dealership is the second place they look. If the car happens to be here, they just show up with the repo order and take the car. I myself have received nearly 2 dozen calls in the last 5 months from both the lenders and repo men. I just got another call 15 minutes ago looking for a client's A6. I know a few guys that work with "Big 3" service departments who have the same situations with cars ranging from Town & Country's to Corvettes....

I'm really on the fence as to whether it's a good idea. It's like we're saying that there should be no repercussions to corporations for making bad financial decisions but people caught up in the sub-prime fiasco "deserve what they get."

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Sharing my partner's 2012 Forte 5dr SX til I find my next 123 or 126..
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Do I miss being a service advisor ???

The Chrysler bailout had it's critics too.... It repaid it's loan ahead of time and has survived for another 25 years...
This analysis agrues against the bailout...in 1980.

January 15, 1980
Policy Analysis no. A



A Step Toward Feudalism: The Chrysler Bailout
by David R. Henderson


David R. Henderson is a senior policy analyst with the Cato Institute.

Published on January 15, 1980

I. Should Chrysler Keep Going?

David R. Henderson is a senior policy analyst with the Cato Institute.

Since the summer of 1979, Chrysler executives have sought a federal subsidy to save their company from possible bankruptcy, and they appear to be near their goal. (Because the subsidy Congress passed December 21, 1979, will be given only if Chrysler receives private financing and reduces employees' wages, whether the company will get the subsidy is uncertain at this writing.) They have talked throughout their negotiations with the government as if a bankruptcy would necessarily cause them to shut down, but if Chrysler went bankrupt it would agree with its creditors on a future repayment scheme and could survive and even thrive. The company's survival would depend on whether projected revenues exceeded or fell short of projected costs. However, Chrysler executives have talked as if the company would necessarily fail, and therefore I will take them at their word and assume that it will indeed go out of business if the government does not subsidize it.

Should the U.S. government let Chrysler fail? Let's reword the question: Should the government force taxpayers to subsidize a company whose products do not meet the market test? The answer becomes clear: No. Why should taxpayers have to pay to keep a firm in business? As consumers and producers, they have shown that they do not want to keep it going. Consumers are not willing to pay enough for Chrysler's products to cover the company's costs; producers -- including suppliers to Chrysler and Chrysler employees -- are not willing to sell their goods and services at a cost below Chrysler's projected revenues. Consumers and producers have spoken, and that should be the end of it.

Chrysler executives reply that if the company fails their workers will be unemployed and their suppliers will lose business and lay people off. But surely this unemployment of resources cannot last long: if this were a likely prospect, Chrysler would not be in its present bind. Precisely because the resources have higher-valued alternate uses, Chrysler cannot afford to pay them out of projected revenues. Other potential users of the resources are willing to pay more than Chrysler can. The cost of a resource is its value in the highest-valued alternate use, and therefore to say that Chrysler's costs exceed its revenues is to say that Chrysler resources are worth more elsewhere.

In the event the company fails, Chrysler employees and suppliers would be unemployed for sometime -- not, however, because they could not find jobs but because they would want the right job. They would be willing to go without work while searching for the right job because they expect to gain more in income and job satisfaction than they lose in current income.

Evidence supports the contention that unemployment is not permanent when a firm lays off workers. Many firms have failed in the past, and their employees have found other jobs. The example of Boeing is instructive: After Boeing, with about the same number of employees as Chrysler (Boeing had 147,700 workers in 1967; Chrysler had 140,000 workers in 1979), reduced its labor force by nearly two-thirds between 1967 and 1971, the Seattle-area unemployment rate rose from a low of 3.0 percent in November 1967 to a high of 15.1 percent in June 1971 -- and was back to 8.0 percent by November 1972. One could reasonably expect Chrysler workers' unemployment to be shorter because they are not as specialized as Boeing workers.

I read the analysis. What it doesn't state is that Chrysler decided to turn itself around immediately by introducing products that actually would meet buyer's needs! Their (then) product offerings fell far short of the other makers, especially in light of the "rising sun" gaining ground.

I remember Lee Iacocca's commercials touting the new "K" cars. They are laughable by today's standards, but back then, it was exactly what the market needed, and helped to turn the company around rapidly.

Will the car makers today introduce products to turn their situation around after a bailout? Or will they continue to churn out "big American iron"?

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2009 ML350 (106K) - Family vehicle
2001 CLK430 Cabriolet (80K) - Wife's car
2005 BMW 645CI (138K) - My daily driver
2016 Mustang (32K) - Daughter's car

They built bigger less efficient vehicles because that's what the people wanted. The problems only started for them when the combo of the recession plus the apparent inability of folks to pay about 4 bucks per gallon hit.

- Peter.

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2021 Chevrolet Spark
Formerly...
2000 GMC Sonoma
1981 240D 4spd stick. 347000 miles. Deceased Feb 14 2021
2002 Kia Rio. Worst crap on four wheels
1981 240D 4spd stick. 389000 miles.
1984 123 200
1979 116 280S
1972 Cadillac Sedan DeVille
1971 108 280S

Its a never ending drama with them, let it play out.

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1999 SL500
1969 280SE
2023 Ram 1500
2007 Tiara 3200

Yes, that is the question.. Will they make good business decisions (smart products that customers will buy) If they do, like Chrysler did with the K, they will survive. If not, been nice knowin' ya!

I think that the govt., as conditions for loans should mandate that all stock bonus arrangements be suspended and standards for compensation be reviewed and adjusted. Don't ask me how. But these execs can't go on getting hundreds of millions in return for running these companies into the ground. The taxpayer/stockholders demand better management.

You know, Detroit has been making cars for 100 years. They DO know how to make cars:
http://articles.moneycentral.msn.com/Investing/Extra/the-65-mpg-car-ford-won't-sell-in-us.aspx

my $.02.

I think they have to be bailed out.

I read the book "Reminiscences of a Stock Operator" which is a biography about a successful investor. Part of the book is about the 1929 crash, and to really over-simplify it, what happened is credit dried up and things crashed. I think TPTB learned from that and are trying to keep things liquid by buying out and bailing out the failing companies of today. I imagine they are trying to slowly deflate the bubble, rather than pop it.

The real **** will hit the fan if the new PTB on Jan 1st start to raise interest rates to protect the dollar.

Yes and no in my humble opinion. The marketing departments CONVINCED "you"(collective not you personally) that you needed a 6,000lb vehicle to drive you back n forth to work. And "you" fell for it. In it's production time, the Excursion had the highest profit margin in the business. There was no real development involved. They took an F250 and enclosed it the same way they took an F150, enclosed the bed, threw some leather at it and called it an Expedition. Can you imagine that something the size & weight of an Expedition, wearing 265/70R17 balloons called for factory tire pressure specs of 29 psi ?!?! Why ? Because when your wife drives it and it bounces all over the road, she's gonna say: Honey, it rides like a truck !! At 29psi and 10 inches of sidewall, it's gonna "float". See Honey ? It's not that bad !!

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Sharing my partner's 2012 Forte 5dr SX til I find my next 123 or 126..
-
Do I miss being a service advisor ???

Fords Marketing Departments=Two Drink minimum and one really cynical attitude.

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1982 300GD Carmine Red (DB3535) Cabriolet Parting Out
1990 300SEL Smoke Silver (Parting out)
1991 350SDL Blackberry Metallic (481)

"The thing is Bob, its not that I'm lazy...its that I just don't care."

I don't think their marketing department is that good. If it was, why is the F150 having it's sales eroded by the Japanese stuff like the Tundra? Didn't F150s use to be king of the road in their class just like the big 3 used to be? Slowly but surely the Jap stuff is edging in. The way you make it out to be, their marketing department can sell us a Yugo at S-class prices. If what you say is true, why is it they cannot influence us into buying their stuff instead of the Jap stuff?

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01 Ford Excursion Powerstroke
99 E300 Turbodiesel
91 Vette with 383 motor
05 Polaris Sportsman 800 EFI
06 Polaris Sportsman 500 EFI
03 SeaDoo GTX SC Red
03 SeaDoo GTX SC Yellow
04 Tailgator 21 ft Toy Hauler
11 Harley Davidson 883 SuperLow

Dinosaurs were wonderful creatures but their time has passed.

Not true. They avoided Carter Administration fuel economy rules by building SUVs on truck platforms and qualifying them as trucks. Trucks were covered by the new standards. Like AdvisorGuy said, they marketed their new creations to perfection. They pitched their ruggedness combined with minivan scorn combined with extra seating to Americans, and they bought it.


Because they have not found a way to do so effectively. Sometimes marketing works and sometimes it doesn't.
In the 80s, Pepsi ran blind taste tests and more people picked Pepsi than Coke. Yet, on the survey they indicated they would still buy Coke over Pepsi. Do not underestimate the power of manipulation, which is the business of marketing.

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1984 300TD

What we should all keep in mind in regards to sales and politics.