Fables about the auto rescue, Republican and Democratic

pbrauer said:

Possibly. But when I said invest I meant a private investor. The POTUS and a private investor have two very different goals in mind. The private investor is seeking ROI whereas the POTUS is trying to not let the economy completely go into the dumpster. I believe that both Bush and Obama saw a glimmer of hope and committed tax money for a boost, so I praise them both. However I think Obama did a better job than Bush because he didn’t just throw money at the situation, he made sure that management was correct and had the right goals in mind.

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minnie616 said:

Here is a 2008 auto industry chart.
"
"The chart above shows the reach of the auto industry: When you add new-car dealerships, parts and wholesale jobs to the assembly jobs, auto-industry jobs are everywhere."


How many auto workers are in your state? - USATODAY.com

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Dickieboy said:

I'm confused on how a chart that includes Ford, Toyota, Honda, etal (who didn't get a bailout)is relevent to the disucussion. Please explain or is this a diversion tactic?

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Why Toyota wants GM to be saved
A GM failure would cause production problems, crush already weak demand and potentially open the door to low-cost competitors.

Last Updated: December 16, 2008: 9:53 AM ET


NEW YORK (CNNMoney.com) -- Detroit's Big Three aren't the only automotive companies that want to see the government step in with some much-needed financial help.

Overseas automakers, most notably Toyota Motor, all endorse some form of federal aid to keep General Motors (GM, Fortune 500), Chrysler LLC and possibly Ford Motor (F, Fortune 500) out of bankruptcy.

The Senate killed an effort to get the automakers a stopgap loan last week and now the Bush administration has said it is looking at providing the automakers help from the $700 billion approved to bail out banks and Wall Street firms.

"We support measures to help the industry," said Toyota Motor (TM) spokeswoman Mira Sleilati. "We just want a strong, competitive healthy industry."

This may seem surprising at first, especially considering that much of the opposition to the auto bailout was from senators from Southern states that are home to auto plants operated by Asian auto companies, such as Alabama and South Carolina. But the Asian automakers insist they never lobbied against such help for the Big Three.

And this makes sense after taking a closer look at the dynamics of the auto industry and the intertwined fates of its companies.

Here's why Toyota, Honda Motor (HMC) and other Asian auto manufacturers clearly believe they are all better off if GM and Chrysler survive.

Collateral damage

The overseas automakers, who between them produce more than 3 million vehicles a year at U.S. plants, all worry their production would be hurt if one of the U.S. automakers went under. That's because a Big Three failure would likely lead to widespread bankruptcies in the auto parts supplier industry.

Erich Merkle, lead auto analyst with the consulting firm Crowe Horwath LLP, said there is much overlap between the automakers' suppliers. Since most parts in an automobile have only a single supplier producing them, the disruptions in production will be severe and prolonged.

"It could take months for a Toyota to work through that and resume normal production," he said.

Merkle said the current network of auto suppliers, manufacturers and dealerships has worked well for the overseas automakers, who have posted steady gains in their U.S. market share during the past few years.

Besides sharing suppliers, many dealers sell both U.S. and overseas brands. So the failure of a U.S. automaker could hurt the overseas manufacturers' dealer network and their sales as well, Merkle said.

"There would be a severe disturbance in the force," he quipped.

Economic shockwaves
A collapse of one of the Big Three would also probably cause an even more severe hit to the U.S. economy. That would further eat into demand for U.S. auto sales, which hit a 26-year low in November.

"The U.S. economy would be in shambles," Merkle said. "The robust U.S. economy that Toyota and the others depend on would suddenly not be as lucrative." <SNIP>

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minnie616 said:

The Detroit 3 , US Honda , and Toyota are inter connected. They share the suppliers and if GM and Chrysler failed then the auto parts suppliers would most likely would have also failed causing the US Honda & US Toyota to close thier US factories.

In that scenario all of our autos would be imports.

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Dickieboy said:

Okay...so? Again how does that pertain to "Fables about the auto rescue, Republicans and Democrats"? I am still missing the point unless your underlying premise is that 'Bush saved them' and 'Obama restructured them' and this helped the others.

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minnie616 said:

Yes, I am thankful that Presidents Bush and Obama understood that we as a country needed to extend loans
to the Detroit automakers just like we did for the financial institutions to keep our whole economy from collapsing .
It was the credit crunch from the financial institutions that kept the auto companies from getting loans and kept potential buyers from buying cars.

We have had recessions in the past 50 years but we never had a crisis where people and businesses with top credit ratings could not borrow moneies.
Even during the Carter years people could get loans. The interest was very high but loans were available.

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Bronson said:

....

I also have to laugh at how you're now giving Bush credit for something.

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Lord Tammerlain said:

You are right, but then you did bring up the share price to say that GM has done poorly, That is truelly [sic] only if ford has done poorly as well

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Bronson said:

... Cash for Clunkers remember? Oh yea, it was a disaster too and waste of taxpayer money.

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Cash For Clunkers More Successful Than First Thought?

Just how much help was Cash for Clunkers for automakers and America? A new study by The Maritz Automotive Research Group suggests that the Cash for Clunkers program may have been more successful than first thought.

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Bob Blaylock said:

GM received a huge boost of taxpayer funds, while Ford did not. This ought to put GM at a huge advantage, and Ford, in competing against GM, at an equally significant disadvantage. Unlike GM, Ford is only in a position to succeed or fail based on the economy as a whole, and on the quality of their products and the soundness of their business decisions.

If the bailout of GM was a success, then GM ought to be doing much better than Ford, and Ford should be especially struggling now, to compete on its own merits against government-backed GM.

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Bronson said:

This is utter nonsense. Cash for Clunkers remember? Oh yea, it was a disaster too and waste of taxpayer money.

I also have to laugh at how you're now giving Bush credit for something. Irony at it's finest.

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Bob Blaylock said:

GM received a huge boost of taxpayer funds, while Ford did not. ....

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Although Ford did not need money from the $80 billion bailout program, Ford did receive $5.9 billion in government loans in 2009 to retool its manufacturing plants to produce more fuel-efficient cars, and the company lobbied for and benefited from the cash-for-clunkers program — contrary to the ad’s testimonial that Ford is “standing on their own.”

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minnie616 said:

It was the credit crunch from the financial institutions that kept the auto companies from getting loans and kept potential buyers from buying cars.

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We have had recessions in the past 50 years but we never had a crisis where people and businesses with top credit ratings could not borrow moneies.

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Dickieboy said:

Given the independent capital lying around finding the resources COULD have been done but would have been expensive. The larger issue is that the agent loaning the money becomes the debtor in possession in a bankruptcy. They move to the head of the line of creditors in front of the unions. A major issue with GM and Chrysler were their union obligations, specifically retiree healthcare. The DIP would have moved in front of these union obligations. The companies NOR the Federal government could allow this to happen. A federal intervention was an ABSOLUTE necessity to ensure the solvency of these retiree pension/healthcare benefits as they would be significantly reduced in bankruptcy. Individuals had issues securing auto loans as the credit market had lowered standards beyond reason hence the increase in default (the initiator of the crisis). The tightening of the credit market was inevitable...

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The world automobile industry is being hard hit by the current credit crisis, it was reported Friday, with manufacturing giants Ford and General Motors (GM) singled out as facing difficulties financing their operations.
According to the report, which appeared in the New York Times, GM and Ford have been hit by the perfect storm of diminished cash flow due to falling sales and an inability to raise funds in the credit crunch.

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Urgency colored every conversation because Michigan knows what other states may not -- that good auto jobs can indeed go away forever.

"I think the numbers are so big that it's hard to get your head around it," said Sarah Hubbard, vice president for government relations for the Detroit Regional Chamber. "This state has lost so many jobs already. We know this can happen."

Wayne County Executive Robert Ficano said a GM or Chrysler bankruptcy filing would devastate services.


"It would affect their ability to pay taxes. That impacts teachers, firefighters and police officers, just to name some of them," Ficano said. "This is serious business, and I hope there's not a lot of showboating by those in Congress. They're playing with real peoples' lives."

Oakland County Executive L. Brooks Patterson echoed that, calling the situation especially dire in Oakland County where auto companies are a major employer and Chrysler LLC is headquartered.

Like many, Patterson said Congress bears much of the blame for allowing the subprime mortgage crisis to swell into the credit crunch.

"If this was the result of bad management, you could afford to play hardball," he said. "But they're here today in this financial crisis because of the bumbling of Congress."



"The numbers they are sharing only underscore the severity of the economic crisis. On the state level, we're feeling it. Michigan is so connected to the auto industry that wherever it goes, there goes Michigan's economy."

<SNIP>
"These people are trying to keep the middle class of America alive, and they can't hardly get a dime out of Congress," ....... "This was a lame-duck Congress that was showboating."

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Dickieboy said:

...



If those STABLE, PROVEN and SUCCESSFUL businesses had issues securing credit wouldn’t many more have failed? Care to list any?
NOW, individual credit is a different issue. As stated above the lack of it was more based on tightened standards…as they needed to be.

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minnie616 said:

I disagree GM and Chrysler were in unable to get loans because lending institutions did not not have the monies to loan them.

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The credit crisis is was directly responsible for the Detroit 3 auto crisis.

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minnie616 said:

Here is a list of a few of the retail chains that closed all or some of their stores during the credit crunch in late 2008 early 2009:

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Dickieboy said:

Please point out in your source where they claim these companies were 'STABLE, PROVEN and SUCCESSFUL' OR where their inablity to secure credit caused their closure/reduction.

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justabubba said:

why would a 'stable' business cut back operations?

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now instead of asking him to prove a negative - "inability to secure credit caused their closure/reduction" - why don't you instead show us that they continued to have access to any of their credit needs

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Dickieboy said:

EXACTLY!



How is that 'proving a negative'? If these stores were changing/closing due to 'inability to secure credit' that should be documentable as is another reason for their modifications...for example:

"The Cashe chain of women's specialty apparal stores closed 14 underperforming outlets (out of 295 stores) but is still opening new locations" (Not due to 'lack of credit')

See other 'causes':snopes.com: Store Closings
Note how similar this list is to the original post

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justabubba said:

good
then point out for us which of those stores closing operations did so for reasons other than inaccessible credit or weak demand

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Dickieboy said:

Please point out in your source where they claim these companies were 'STABLE, PROVEN and SUCCESSFUL' OR where their inablity to secure credit caused their closure/reduction.

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minnie616 said:

We have had recessions in the past 50 years but we never had a crisis where people and businesses with top credit ratings could not borrow moneies.
Even during the Carter years people could get loans. The interest was very high but loans were available.

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Dickieboy said:

If those STABLE, PROVEN and SUCCESSFUL businesses had issues securing credit wouldn’t many more have failed?

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There's no question some companies are having credit cut off. In Ohio, banks are refusing to renew lines of credit and calling in loans made to decades-old family businesses that are current on payments, according to Dayton bankruptcy and workout attorney John Rieser. He says it's the worst borrowing environment he has seen in 20 years. The pullback began early in 2008 and accelerated in the last four or five months. "They're pulling the triggers and saying you're done," Rieser says. "It's not just sick businesses. These are healthy businesses, and that's the surprising thing."





<SNIP>



a membership survey in August [2008}by the National Small Business Association found that two-thirds of business owners had been affected by the credit crunch.

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