GM & Chrysler on the Brink -- Part 3

[Dinner]

Originally posted by Imran Siddiqui
@ calling GM a "healthy company"

Who did that dumb ass? Put the crack pipe down because your limited brain cells are getting damaged.

[Dinner]

Never mind.

[Imran Siddiqui]

Never mind because you were the one who said this?:

GM got raided in just such a fashion. It's $25 billion rainy day fund got stolen by hedge funds doing just that. It would never have needed a bailout except pieces of dog **** like DanS approved of the corporate raiders who deliberately kill healthy companies.

but no facts

Let us not get the links and valid questions get in the way of your reality distortion field, eh?

[Ming]

I think some people need to chill... Enough with the personal insults. Discuss the topic and NOT the posters.

[Arrian]

So much sound and fury about attempting to reanimate a corpse.

-Arrian

[Vanguard]

Originally posted by Imran Siddiqui


So what, a bailout for GM every time we hit a recession? May get a bit expensive.

No, only when the markets stop working completely.

Which is to say, only after Republicans have been running the country for a while.

Recessions tend to clear out of the inefficiencies in the market.

So growth causes inefficiencies in the market?

Why did we give all those tax cuts then? Why do Republicans still want them now?

Trying to stimulate inefficiency?

The problem ain't that there is unfair competition or whatever, but that no one wants to buy American cars due to the crap reputation that these companies have received due to the utter **** they put out in the late 70s and early 80s. Brand reputation means something. Where is that lesson if the government keeps bailing out the industries too lobbied up to fail?

Yes, this is part of the problem.

But there is no economic reason to drive GM out of business because people wrongly believe their cars are bad because they were bad thirty years ago. That sort of irrational buying decision is exactly what we want to avoid.

If we don't, then we are just allowing Toyota to extract rent from their undeserved reputation for making higher quality cars.

[Arrian]

People do not wrongly believe their cars are crap. Their cars ARE crap. Maybe you can convince me that their cars are better than they once were, but they remain inferior products.

-Arrian

[DinoDoc]

Originally posted by Arrian
So much sound and fury about attempting to reanimate a corpse.

You'd think people would learn from Ash's example and realize that what's dead should stay that way.

[Imran Siddiqui]

So growth causes inefficiencies in the market?

Plenty of inefficiences develop during growth periods. Lots of people try to jump in and get a piece of the pie. It's a by product of the growth and why recessions are referred to as "market corrections".

Why did we give all those tax cuts then? Why do Republicans still want them now?

Trying to stimulate inefficiency?

Don't be deliberately obtuse.

But there is no economic reason to drive GM out of business because people wrongly believe their cars are bad because they were bad thirty years ago. That sort of irrational buying decision is exactly what we want to avoid.

Brand name matters quite a bit. It's not irrational, it is risk avoidance. And it is not unjustified. Japanese cars are still far more reliable. They are, obviously, more gas efficient.

[DinoDoc]

Furthermore, why should we give the Big 3 any money with the unions resisting even the criminally minimal conditions imposed by Bush? This is the reason to shove them before a Bankrptcy judge because the longer this stays in the political realm the more all parties seem to think that they can avoid the painful reforms needed to avoid this in the future.

[Saras]

nice article about how the really bad Ford was/is, via its relationship with Hertz:

http://equityprivate.typepad.com/ep/2006/12/bourgeois_pigs.html

one quote:

Ford, as most of the big three had for decades, treated Hertz as a captive revenue machine (by selling, albeit for not much revenue, cars that couldn't compete in the consumer markets straight to Hertz). Because of the nuances of "total fleet fuel efficiency laws," this also helped Ford meet fuel standards, dumping fuel efficient but undesirable sedans into Hertz while still selling guzzlers to the lucrative consumer truck and SUV market. Decades of selling second-rate Tauruses to a captive customer who didn't much care what they looked or drove like didn't exactly prepare Ford to offer a decent car to the mainstream consumer market if something ugly were to happen to consumer tastes or (god forbid) gas prices.

While they couldn't sell well in the consumer markets, as former rental cars the sedans poured by the thousands into the used car market which meant those models had no resale value (a key metric for increasingly value oriented car buyers) compared to e.g., the Toyotas of the world. Once on the used car market they also canibalized the higher margin new cars the big three were trying to hock.

[Saras]

This is two years old, btw. That gal's got brains.

[Vanguard]

Originally posted by Imran Siddiqui

Plenty of inefficiences develop during growth periods. Lots of people try to jump in and get a piece of the pie. It's a by product of the growth and why recessions are referred to as "market corrections".

Well, it is probably true that growth in excess of some figure results in economic inefficiency---ie, there is an optimal rate of growth.

But, assuming that recessions "correct" this inefficiency (which isn't proven by the way), it is still only correcting the inefficiency that came about because we drove growth up too high.

But in that case, the problem is systemic. The deep recession has been caused by the policy of driving up the GDP number by running up the deficit.

Which means that there is no evidence that GM's problems are caused by its own inefficiency. It could simply be the eventuation of an anomaly inherent to the current programming of the economic matrix.

Why did we give all those tax cuts then? Why do Republicans still want them now?

Trying to stimulate inefficiency?

Don't be deliberately obtuse.

It is called sarcasm actually.

Brand name matters quite a bit. It's not irrational, it is risk avoidance. And it is not unjustified. Japanese cars are still far more reliable. They are, obviously, more gas efficient.

Not according to reliability surveys.

Irrational risk avoidance is still irrationality.

[Kuciwalker]

Dude, it's simple. When capital is slack and labor is tight you get some less efficient allocations of capital (along with plenty of growth). When capital is tight and labor is slack you get inefficient allocations of labor (people unemployed).

[Vanguard]

Originally posted by DinoDoc
Furthermore, why should we give the Big 3 any money with the unions resisting even the criminally minimal conditions imposed by Bush? This is the reason to shove them before a Bankrptcy judge because the longer this stays in the political realm the more all parties seem to think that they can avoid the painful reforms needed to avoid this in the future.

The union has no option. Their VEBA has assumed responsibility for providing health care for UAW workers. If they allow GM to default on its future promises, they will not have enough money to fulfill that obligation.

GM could have paid cash up front. The union certainly would have preferred that (who wouldn't?). But the union agreed that GM could not afford that. So they allowed GM to substitute multiple payments funded by bonds.

But once GM has got that concession, they can't turn around and say, "Oh, by the way, we are going bankrupt, so we don't have to give you your payments."