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Harry Reid: Auto Bailout Probably Saved Ford

Lord Tammerlain said:
Given Ford's overhead costs it means bankruptcy
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For many yes. However there is still demand for their product. Nobody said that it would be the smoothest transition, but their would be plenty of demand from remaining car manufacturers to keep some of them in business. If breweries could survive prohibition, at least some parts manufacturers can survive losing GM and Chrysler (who would be absorbed by other companies anyway).
 
DrunkenAsparagus said:
For many yes. However there is still demand for their product. Nobody said that it would be the smoothest transition, but their would be plenty of demand from remaining car manufacturers to keep some of them in business. If breweries could survive prohibition, at least some parts manufacturers can survive losing GM and Chrysler (who would be absorbed by other companies anyway).
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In normal markets yes, but the time at which GM and Chrysler got the bailout, it was not a normal market or normal economy. A collapsing economy would have collapsed further with those two shutting their doors, along with plenty of parts suppliers
 
Lord Tammerlain said:
In normal markets yes, but the time at which GM and Chrysler got the bailout, it was not a normal market or normal economy. A collapsing economy would have collapsed further with those two shutting their doors, along with plenty of parts suppliers
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Even the collapsing economy had demand for auto parts.
 
Lord Tammerlain said:
In normal markets yes, but the time at which GM and Chrysler got the bailout, it was not a normal market or normal economy. A collapsing economy would have collapsed further with those two shutting their doors, along with plenty of parts suppliers
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You seem to be focusing in very much so on the impact the parts suppliers would undergo should one of these companies collapse. So rethink of it in a different industry. If drilling for oil suddenly becomes not profitable, should the government bail out oil companies and artificially produce demand just to keep oil field service workers employed?

I think you would find most people arguing in favor of saving GM, would argue against that in the oil industry... why?
 
DrunkenAsparagus said:
It does not mean that they go broke. It means that they have to downsize.
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and the term 'downsize' means?....MORE PEOPLE WOULD HAVE LOST JOBS...and it would not have stopped at the automotive suppliers...that would have had and effect on everyone.....think of how many jobs in communities that are home to the suppliers, would have been lost.
 
NolaMan said:
You seem to be focusing in very much so on the impact the parts suppliers would undergo should one of these companies collapse. So rethink of it in a different industry. If drilling for oil suddenly becomes not profitable, should the government bail out oil companies and artificially produce demand just to keep oil field service workers employed?

I think you would find most people arguing in favor of saving GM, would argue against that in the oil industry... why?
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Only during the economic crisis of 2008-2009 would I suggest the saving of GM and Chrysler would have been a reasonable thing to do, not for the unions or the parts suppliers but for the wider effects that would have occurred in the economy at the time. GM and Chyrsler directly employe somewhere around 1 million, provide pensions for at least the same. Indirectly through parts suppliers or contractors, along with spin off jobs they would be responsible for a few million people primary sources of income. Should one go bankrupt in a normal economy, not a problem, the economy will rebound fairly easily as the remains could be picked up by various companies getting loans from banks. In the economic crisis, such loans were not avaliable, the economic fallout would have put the US economy down another massive amount over what the banks did.

As for the oil industry, I have worked in it before here in Alberta, the government is extremely dependant on oil and gas revenues, and I have been at the Suncor Oil Sands plant a few times ( 8 years ago god does time fly). I have no problem with the oil and gas industry, and have seen the effects of the boom and bust cycle in the oil industry right here, once in the early 80's and again the early 90's. Provided the workers are intelligent, they wont need bailouts as the bonus's they get during the boom years are very significant, if they are not intelligent with their money well they can get unemployement like other people untill the boom comes again
 
DrunkenAsparagus said:
Even the collapsing economy had demand for auto parts.
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Do you have any understanding of corporate finances?

What do you think would happen to an autoparts supplier whose profit margin is 2% and is deeply in debt, when 50% of that companies orders/revenue dry up? It cant pay back its debt, cover the wages and salaries, rent etc. It might have some customers but the loss of business means it cant cover its debts and it goes broke. Remember the US auto sales dropped from 15 million or so to less then 10 million, even very profitable car companies like Toyota had massive loss's during the crisis
 
NolaMan said:
You seem to be focusing in very much so on the impact the parts suppliers would undergo should one of these companies collapse. So rethink of it in a different industry.
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Did you really suggest that? Why would we compare vastly different industries as if they were the same? What's the point of doing that?

If drilling for oil suddenly becomes not profitable, should the government bail out oil companies and artificially produce demand just to keep oil field service workers employed?
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The oil industry is hardly the same as car companies. Furthermore, what you are talking about isn't relevant to Lord T's post.

I think you would find most people arguing in favor of saving GM, would argue against that in the oil industry... why?
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You are comparing a cyclical event to a structural paradigm shift in the economy. Please spend some time thinking about why that is a poor argument.
 
obvious Child said:
Did you really suggest that? Why would we compare vastly different industries as if they were the same? What's the point of doing that?
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To make a point...

The oil industry is hardly the same as car companies. Furthermore, what you are talking about isn't relevant to Lord T's post.
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Yes it is... he argued more or less that we needed to bail out car companies to save the jobs of the suppliers...My point is that every industry will have multiple companies, people etc that rely on it, but that is no reason to keep a company in business that is not profitable.

You are comparing a cyclical event to a structural paradigm shift in the economy. Please spend some time thinking about why that is a poor argument.
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I made a comparison to make a point. "Jobs" are not a good reason to maintain an industry that cannot compete.
 
NolaMan said:
To make a point.
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Which would be....? To make a point, the two points of comparison must share some basic characteristics. Your argument does not.

Yes it is... he argued more or less that we needed to bail out car companies to save the jobs of the suppliers.
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Yes...

My point is that every industry will have multiple companies, people etc that rely on it, but that is no reason to keep a company in business that is not profitable.
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Except that your point is wrong. The oil industry uses much of the same practices and equipment. Furthermore, the number of large oil companies is quite numerous so one going under does not pose a significant threat. Car companies however, design cars specifically and with their suppliers. And because of the consolidation of power from buyers and the integration with specific models, suppliers cannot quickly turn around and find new buyers for model specific parts. Letting GM and Chrysler go down would remove a huge amount of demand as the models being supplied would no longer need supplies. Unlike relatively standard oil equipment, you can't take a part designed specifically for one model and slap it on another. Your analogy fails because you are comparing two very different industries.

I made a comparison to make a point. "Jobs" are not a good reason to maintain an industry that cannot compete.
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Your comparison sucks. Comparing cyclic problems to structural is not a good foundation for this thread.
 
obvious Child said:
Which would be....? To make a point, the two points of comparison must share some basic characteristics. Your argument does not.



Yes...



Except that your point is wrong. The oil industry uses much of the same practices and equipment. Furthermore, the number of large oil companies is quite numerous so one going under does not pose a significant threat. Car companies however, design cars specifically and with their suppliers. And because of the consolidation of power from buyers and the integration with specific models, suppliers cannot quickly turn around and find new buyers for model specific parts. Letting GM and Chrysler go down would remove a huge amount of demand as the models being supplied would no longer need supplies. Unlike relatively standard oil equipment, you can't take a part designed specifically for one model and slap it on another. Your analogy fails because you are comparing two very different industries.



Your comparison sucks. Comparing cyclic problems to structural is not a good foundation for this thread.
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Care to go into some detail?
 
obvious Child said:
Care to explain how equipment each companies uses cannot be used by another company in the same fashion as parts for car models?
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There's more than one company that makes pipe, BOP's, risers, cement, packers, mud engineers.

care to go into detail? Do you even know what any of that is?
 
apdst said:
There's more than one company that makes pipe, BOP's, risers, cement, packers, mud engineers.

care to go into detail? Do you even know what any of that is?
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And absolutely none of these parts can be used with any other?

Yes, I know what those parts are. Furthermore, I'm not aware that many of the oil equipment manufacters are tied heavily to one company buying a few specific models.
 
obvious Child said:
And absolutely none of these parts can be used with any other?

Yes, I know what those parts are. Furthermore, I'm not aware that many of the oil equipment manufacters are tied heavily to one company buying a few specific models.
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Go into more detail, please. Your personal crediblity depends on it.
 
apdst said:
Go into more detail, please. Your personal crediblity depends on it.
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To placate you? Try again. I see you never answered my question. And the last sentence is all that is truly relevant.

Btw, it's blatantly obvious you're trying to hunt for anything you get ding me with. Try to be more subtle next time.

As for personal credibility, should you really be talking about that?

http://en.wikipedia.org/wiki/Profit
 
obvious Child said:
To placate you? Try again. I see you never answered my question. And the last sentence is all that is truly relevant.

Btw, it's blatantly obvious you're trying to hunt for anything you get ding me with. Try to be more subtle next time.

As for personal credibility, should you really be talking about that?

Profit - Wikipedia, the free encyclopedia
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Let's see; profit has what to do with what equipment is used on an oil rig? Care to go into detail? Again, your credibility depends on your answer. Nothin' but luck to ya.
 
obvious Child said:
Which would be....? To make a point, the two points of comparison must share some basic characteristics. Your argument does not.

Yes...

Except that your point is wrong. The oil industry uses much of the same practices and equipment. Furthermore, the number of large oil companies is quite numerous so one going under does not pose a significant threat. Car companies however, design cars specifically and with their suppliers. And because of the consolidation of power from buyers and the integration with specific models, suppliers cannot quickly turn around and find new buyers for model specific parts. Letting GM and Chrysler go down would remove a huge amount of demand as the models being supplied would no longer need supplies. Unlike relatively standard oil equipment, you can't take a part designed specifically for one model and slap it on another. Your analogy fails because you are comparing two very different industries.
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It does not matter. How about this scenario then, imagine Exxon (for example) has suppliers that specilize in equipment that only Exxon needs. If Exxon makes a new advancement, or no longer needs that product, are we to artificially prop up a supply company because demand has changed? No.

I am sorry if a company developed a specilaized business model which was 100% reliant on another company maintaining some level of production...If the company they are reliant on goes under, change your business model, or go under as well. That is no reason to save a company. It would be like paying to keep propeller manufacturors open even though the demand has plummetted with the rolling out of the jet engine.


Your comparison sucks. Comparing cyclic problems to structural is not a good foundation for this thread.
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Sorry you feel that way.
 
apdst said:
Let's see; profit has what to do with what equipment is used on an oil rig? Care to go into detail? Again, your credibility depends on your answer. Nothin' but luck to ya.
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Forgetting your profit=liquidity line eh?

I see you never answered my question.
 
NolaMan said:
To make a point...



Yes it is... he argued more or less that we needed to bail out car companies to save the jobs of the suppliers...My point is that every industry will have multiple companies, people etc that rely on it, but that is no reason to keep a company in business that is not profitable.



I made a comparison to make a point. "Jobs" are not a good reason to maintain an industry that cannot compete.
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Wrong, I did not argue it was important to save the parts suppliers to save the parts suppliers job. It is meaningless if one parts supplier shuts down.

I was argueing that

Should GM and Chrysler have shut down in the middle of the economic crisis, the cascading effect would have been drastic. Not only would GM and Chrysler have been shut down, but the parts suppliers as well. The closures of the parts suppliers would have caused Fords production to tank as they would not have been able to get parts for many months untill the problems were worked out. Many Japanese plants would have been shut down as well due to the lack of parts.

Overall the number of permanent and temporary layoffs just in the auto sector (parts, contractors, truckers, those directly working for GM, Chrysler, those that receive pensions from the above would have seen incomes either go away in full or drop off drastically. In the middle of an economic crisis like the one the US had in late 2008, having the above occur would be catastrophic. If it occured in 2005 or possibly in 2014, it would not be so bad.

Personally I would have provided a bridge loan (with primary rights during bankruptcty) that would have taken them untill 2011. If GM and Chrysler at that time were not capable of being ongoing concerns shut them down through normal bankruptcy rules, with the government getting first dibs on their assets untill the bridge loan was covered
 
NolaMan said:
It does not matter.
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Because....

How about this scenario then, imagine Exxon (for example) has suppliers that specilize in equipment that only Exxon needs. If Exxon makes a new advancement, or no longer needs that product, are we to artificially prop up a supply company because demand has changed? No.
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To be valid, we'd first need to strip out at least 80% of the other competitors, consolidate them into a few big buyers and then structure the supply chain to where each supplier was extremely beholden to individual firms on individual equipment pieces. This is why your current and earlier oil comparison doesn't make any sense. Because that's not how the oil equipment market is run.

I agree that propping up individual firms is a bad idea, however, the argument that nothing drastic would have changed doesn't make sense when you look at the integration of the supply chain. Without at least GM, there likely wouldn't be enough demand to support the supply chain. That's what got some of the other suppliers in trouble. They specialized too much.

I am sorry if a company developed a specilaized business model which was 100% reliant on another company maintaining some level of production...If the company they are reliant on goes under, change your business model, or go under as well. That is no reason to save a company. It would be like paying to keep propeller manufacturors open even though the demand has plummetted with the rolling out of the jet engine.
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Yes, but Lord T and I are talking about an entire industry not just one firm as you are.

Sorry you feel that way.
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I'm sorry you don't understand the difference between cyclical and structural.
 
Lord Tammerlain said:
Many Japanese plants would have been shut down as well due to the lack of parts
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Is that true? As I understand at least how Mitsubishi runs, when they open a new plant, their suppliers follow them and set up shop nearby. And these suppliers generally don't sell to the Big Three. So any slow down on Detroit Sales and their respective supply chains wouldn't necessary affect the supplies for Mitsubishi. In some ways this is superior design as it locks in suppliers but without the negative impact of other firms buying parts from your suppliers.
 
NolaMan said:
It does not matter. How about this scenario then, imagine Exxon (for example) has suppliers that specilize in equipment that only Exxon needs. If Exxon makes a new advancement, or no longer needs that product, are we to artificially prop up a supply company because demand has changed? No.

I am sorry if a company developed a specilaized business model which was 100% reliant on another company maintaining some level of production...If the company they are reliant on goes under, change your business model, or go under as well. That is no reason to save a company. It would be like paying to keep propeller manufacturors open even though the demand has plummetted with the rolling out of the jet engine.




Sorry you feel that way.
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Most of the independant parts suppliers supply to a few different auto companies, Lear, Johnson Controls, Magna among others auto parts suppliers. Due to the nature of the business, they will typically have customers that they derive 30+% of their revenues from. The loss of that 30% would in the majority of parts suppliers mean bankruptcy (most have high debt loads). As such the auto companies that did not close would not be able to get parts to manufacture for a few months at least. Which during an economic crisis is not a good thing
 
Lord Tammerlain said:
Most of the independant parts suppliers supply to a few different auto companies, Lear, Johnson Controls, Magna among others auto parts suppliers. Due to the nature of the business, they will typically have customers that they derive 30+% of their revenues from. The loss of that 30% would in the majority of parts suppliers mean bankruptcy (most have high debt loads). As such the auto companies that did not close would not be able to get parts to manufacture for a few months at least. Which during an economic crisis is not a good thing
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exactly...i work for a parts supplier, and a 30 percent loss would cripple my company.
 
obvious Child said:
Is that true? As I understand at least how Mitsubishi runs, when they open a new plant, their suppliers follow them and set up shop nearby. And these suppliers generally don't sell to the Big Three. So any slow down on Detroit Sales and their respective supply chains wouldn't necessary affect the supplies for Mitsubishi. In some ways this is superior design as it locks in suppliers but without the negative impact of other firms buying parts from your suppliers.
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To a point

Magna manufactures auto parts that are primarily supplied to all major automakers including General Motors, Ford Motor Company, Chrysler Group LLC, Volkswagen, BMW, Mercedes, Nissan, Toyota, Honda and Hyundai. In Europe, Magna Steyr holds contracts for the assembly of the Jeep Grand Cherokee, Chrysler Voyager minivan and BMW X3 SUV.
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Magna International - Wikipedia, the free encyclopedia

Of course Magna's biggest customer has been Chrysler and GM, but it does supply most others, along with the other big independant suppliers
 
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