rh13's Comments Stream Stats
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Why I Need a Government Bailout
Auto Woes: Legislation Won't Get People to Buy Cars
The Big Three Crisis: Stocks Plunge as Politicians Moralize
Cramer's Picks - Is GM Lehman's Twin? (11/14/08)
Nationalize the Automakers? On Tom Friedman's Op-Ed
There is also the basic question of fairness. The American Three pay salaries and benefits that are outside the limits of the market. Why should the government, that is, the rest of us, subsidize companies that overpay the favored few?
Finally, there is just no way the government can put up enough money to pay all the people in comparable jobs wages comparable to what the American Three make. Our economy does not produce that much money.
I think there is a fair chance one or two of the American Three will survive in some form without government subsidies. They have done a remarkable job of producing vehicles over the last hundred years and recently they are showing signs of adapting to current conditions.
Nationalize the Automakers? On Tom Friedman's Op-Ed
DHL, GM: Does Failure Have Consequences?
The phrase, "Too big to fail," was properly applied to financial institutions. Even there, the concept is arguable, but the idea was that, since people depend so heavily on a functioning financial system, the sudden, outright failure of a company big enough to be a critical part of the financial system might deprive people of services that allow the economy to hum.
That reasoning may be right or it may be wrong. (We'd have to guess it's wrong, since the decision was made by and for the financial industry.) Anyway, it does not apply to automobile manufacturers of any description. In Cuba, people are making do with cars manufactured in the 1950's. In New York and London, people get around by train. Even if I do need a car, I can get by with a Honda made in Tennessee, a Subaru made in Indiana, a Mazda made in Michigan, or perhaps a Tesla made in California.
Despite its failures, GM has done pretty well considering that its cost of employing people in union jobs is about twice what other auto makers experience. "Saving" GM without changing that doesn't fix anything, it just delays the day of reckoning.
Ford: Have You Driven a Convertible Preferred Lately?
Market for Electric Vehicle Batteries Is Heating Up
Will The White House Save GM?
Living Within Our Means: Automotive Edition
Ford: Kerkorian's Loss Could Be Your Win
One possibility is this: Consolidations and sales are being considered in the automobile industry. Maybe Kerkorian wanted to send a signal that he would not interfere with a sale or merger. If that were to happen, it would probably be good for his investment, particularly in the short term.
He hasn't sold a lot of his stock in Ford. He said he is considering selling all of it, but he did not say he would, or when.
Also, maybe he just got stretched thin and had to sell something. I don't know what else he might have in mind.
I haven't changed my mind about Ford. I think it is risky, but likely to pay off very well from its current levels. The current radical sales slump is probably due to the financial market freeze, and that will likely be corrected soon, especially for cars. Cars follow fairly predictable value patterns, notwithstanding the recent experience with SUV's. People aren't going to quit driving. They usually don't even cut down driving very much.
The Hedge Fund of America, LP
The piece of the puzzle I have not heard is this: how is the government going to assure the stuff they are buying is worth what they are paying for it? If that can be assured, there's no problem with the deal, financially. It still does not assure that it will have the desired effect of restarting the private capital markets. I also don't see any reason to think the capital markets won't restart by themselves. In order for buying and selling to take place, there needs to be a way for buyers to assure themselves they are getting what they are paying for. That's the same problem the government faces.
Political Energy Policy Just for Laughs
Are Some Companies Too Big to Let Fail?
Certainly when a big company fails there is some pain. The impact on the government is not the worst of it. The impact on the lives of the employees is far greater and more personal.
Nevertheless, failure of companies (and contraction of companies) plays such an important part in the welfare of us all that we cannot afford to prevent it. When companies face failure, there are reasons for it. It happens because they are inefficient or ineffective. They are not getting the goods and services to people at prices people want to pay. Preventing their failure preserves inefficiency and ineffectiveness.
If we had done enough to prevent failure of stagecoach companies, we would never have had trains and planes.
What if Chrysler had failed? What would have happened? Chrysler customers would have bought cars and trucks from other companies. Displaced Chrysler workers would have found work in other companies, not necessarily car companies. Other companies would have bought the usable assets of Chrysler and put them to use. That is what happens when companies fail.
There have been more than a thousand car manufacturers in the U.S. All but a few failed, and the cars today are much better.