Auto Industry - USA

Recently the 3 biggest auto industries in the USA have gone bankrupt, so they are asking the bank for a 25 billion dollar loan.

The bank has to decide between these pros and cons:

The bank may not want to give them the loan because American's don't want to buy SUV's or Trucks' (gas hogs.) Although the price of gas is going down, American's are starting to realize that things from Toyota give a lot better gas mileage. Toyota isn't in debt neither, therefore they can upkeep a fair warranty and down payment deals on vehicles.

But,

The bank may want to give them a loan because these industries have been with them for more than 50 years. This is only the 2nd crisis in these industries since 1970's.

The reason that the 3 big industries are in debt is because they pay their employees a huge amount of salary, give them full health benefits, give them a full pension after they are 45 years old, and multiple other discounts on certain products (almost anything over $1000 that isn't foreign)

Employees at these industries complain, "Hey, we are not lazy, nor are we babies. We have worked for these benefits and pay"


What are you thoughts over this?

If I haven't provided enough detail, let me know what I can add.

 

Honestly its their faults. They were told to compete with foreign auto trade but they never did and kept with their big gas hogging vehicles. Now they are paying for it. They expect to have the government bail them out but they can't even be trusted to have the money go completely to the business and not off in the peoples pockets.

 

As you may know, American's like big, luxurious vehicles. (mark me if I spelled that wrong)

Gas prices were intended on falling, although they didn't.

It took them forever to fall, and now that they are fallen they are in debt.

Yes, I agree with you to an extent that they should of tooken that warning to their advantage.


But, could you see GM making a pussy ass wind-up-toy?

 

They are in the "decline" stage of the business cycle, which is completely normal and natural in our capitalist economy. Let the businesses go bankrupt, what's the big deal? Small businesses will be finally be able to compete because the giants are gone, and eventually some of these small businesses will become giants, and the cycle will continue.

I don't understand why there has to be a debate about this, to hell with the companies, there will always be new ones.

 

This is true, "they" (whoever they are, exactly) pay their employees money. If they didn't pay those greedy employees any money, then the industry would be booming. Great point.

The 2008 crisis is mainly due to the financial problems and high gas prices.

 

they should give the banks loan... and they havent gone bankrupt but thier in alot of hurt from what i understand. but if just one major auto compnay goes out of business, then over 1 million people will lose their jobs putting a huge hurt on the economy.

 

They should not be helped by the goverment. It's completly their fault. They were the ones making big SUV's and gas wasting cars. The Japanese are doing great by making cars that are very fuel efficient, those are the cars of the future.
The CEO's claimed they didn't loose money because of their products, but that statement is completely false. You produce a good, and if the good is not selling anymore, you need to change tactics and develop a good that consumers do want to buy. They could have seen this coming*, the economy is now in a recession and something like this does not happen from one day to another. If one of the three companies will go bankrupt, it gives smaller bussinesses or competiting companies the chance to grow. It's the law of the jungle and the law of the free market; the strongest survives.
Maybe 3 million people will loose their jobs, but this gives European or Japanese companies the chance to move production to the US and expanding their market.


*At the "e" of recession, there is where GM, Ford and Chrysler should have changed their bussiness plans. If you see a downfall in profits, you must be doing something wrong that is keeping people away from buying your product.

 

Sythe, I was being sarcastic, I even included the rolly eyes smily for you. I'm not that dense.

Without going into the detail of it, a main reason I see behind the immediate crisis is the collapse of the housing bubble which the Federal Reserve failed to address due to a fervent belief in self-regulating markets.

 

The employees were certainly overpaid. The union is a strong force that the auto companies had to respect. It's not like there's a lack of possible workers, but choosing non-unionized workers may not have necessarily been a better solution.

About the housing crisis - it was driven by a lack or regulation on capitalistic greed. Each broker/lender made a profit lending the money until the loans were sold as strong securities on the global market, which crashed the economy. If the house market was strong, there would be no problems, the house values would rise and the loans would hold. But a decrease in value (which is less likely in typical situations) leads to an upside down deficit maker.

 

Read mine.

I do not see strong evidence for your post; the economy goes in cycles of ups and downs, and I don't see a correlation between the down of the market and low interest rates.

The government certainly has some fault in what's occurring, but we would not be where we are today if private interests hadn't taken a major role. The government gives the loans to the bank, but the stupidity and greed of the bank,brokers, and whatever other middleman certainly played their part.

I don't see why you have to lose your civility. I did read your post. The truth is the "government" doesn't just loan to average Joe.

 

Fine with me. Show me evidence of such correlation on a timed basis. Explain why we are failing now but we were quite strong a decade ago. Perhaps then I'll correct my "ignorance".

And bull shit, blaming people who want to do the right thing? I'm blaming the middleman who gave out these loans (privately contracted), and knew they couldn't be repaid - not the idiots at the top who unknowing bought out the shithole they got into.

 

I've done my research already, I do a lot of debating. By government regulation you're probably referring in the main to the Community Reinvestment Act. Now - what's most amusing about your excuses for failure of the market is that lenders themselves don't even make them. Can you explain why they don't? Could it possibly have to do with the fact that the worst offenders, independent mortgage companies, were never even subject to any federal regulator?

The independent mortgage companies weren't even subject to any federal regulator. The profit motive was the driving force.

The main factor was Greenspan setting rates to 1% and leaving them for a year. So the crisis was caused by the Federal Reserve's lack of regulation.

 

It is quite long.

I WILL listen to all 30 minutes of it, and will respond more in depth later. I'm about 6 minutes in.

From what I'm hearing, it's obviously a balance. US economy booms, with Fed driving, but large booms will bust.

Greenspan may have made a mistake, I never denied that. NOT blaming the non government vendors however also seems silly.