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US Auto industry collapses

Discussion in 'U.S. Politics' started by Stalin, Dec 4, 2008.

  1. Stalin

    Stalin Active Member

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    Looks like the same sort of myopic stupidity that dominates the finance industry is in the car industry in lavish amounts

    This should be re-run of Eastern Europe in 1989.

    In its submission to Congress, General Motors said it needs $4 billion before the end of December and another $4 billion by the end January as part of an $18 billion loan. "Absent such assistance, the company will default in the near term," GM said, "very likely precipitating a total collapse of the domestic industry and its extensive supply chain, with a ripple effect that will have severe, long-term consequences to the US economy."

    The company will eliminate up to 31,500 jobs, dropping its total number of hourly and salaried workers to as few as 65,000 by 2012. By contrast, at the time of the last major national strike against GM, in 1970, there were 350,000 union members at the company.

    The number one US car maker will retain only four core brands—Chevrolet, Cadillac, Buick and GMC—and will sell, eliminate or consolidate its Saturn, Saab, Hummer and Pontiac brands. Its North American factories will be reduced from 47 to 36, and the number of dealers will be cut from 6,450 to 4,700, eliminating thousands of jobs in towns, small and large, across America.

    Chrysler is asking for $7 billion and has indicated it will run out of money by the end of the year. The company, owned by private equity firm Cerberus, has already eliminated brands, disposed of a large number of industrial assets and slashed 32,000 jobs over the last two years, including 5,000 salaried workers who were forced out of their jobs the day before Thanksgiving. Chrysler, which has held merger talks with GM, Nissan and other companies, is widely expected to be absorbed by another auto maker, leading to thousands more layoffs.

    Ford, which claims it has enough money to last through 2009, is requesting a $9 billion "standby loan." The company, which has closed 17 plants since 2003 and wiped out 45,000 hourly and 12,000 salaried jobs in North America over the last three years, promises to shrink its operations further, selling off divisions such as Volvo and pushing through other cost-cutting measures.

    ...

    Those backing some form of bailout are insisting that it be contingent on the permanent shrinking of the industry and the destruction of the modest living standards for which generations of auto workers have fought. In a similar manner to the 1979-80 Chrysler bailout—but on a much larger scale—they are using the threat of mass unemployment to wrench concessions from auto workers and set a precedent for imposing the cost of the economic crisis on the backs of the entire working class.

    The further gutting of wages and benefits and contraction of the industry, however, will do nothing to reverse the underlying crisis of American and world capitalism, which is at the heart of the collapse of the industry. It will only intensify the crisis as millions of working people are stripped of the means to purchase a car.

    BusinessWeek magazine recently noted that the contracts signed by the UAW in 2007, which will cut new auto workers' wages in half—to $14 an hour—mean that "for the first time since World War I we will have people building automobiles in America who won't be able to afford the vehicles they build."

    The immediate cause of the collapse of the US auto makers is the global financial crisis precipitated by the frenzied speculation and financial manipulation of Wall Street over a period of decades, which has been accompanied by the dismantling of large sections of American industry. This immense growth of economic parasitism is itself an expression of the historic decline and internal decay of American capitalism.

    The resulting credit crunch has made it increasingly difficult for consumers to obtain auto loans and has more generally depressed consumer spending, leading to further declines in production and a worsening of the financial crisis.

    This was underscored by this week's reports on US auto sales, which fell to their lowest level in 26 years in November, with Detroit manufacturers suffering a 40 percent decline and even top-selling Toyota suffering a drop of 33 percent. Analysts predict that total 2008 US sales will be less than 11 million, down from 16 million the year before and a peak of 17 million. European and Japanese carmakers are also cutting production to meet declining global demand.

    http://www.wsws.org/articles/2008/dec2008/auto-d04.shtml

    Comrade Stalin of Detroitus
     
  2. Pidgey

    Pidgey Well-Known Member

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  3. Animekid

    Animekid New Member

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    The real question is " Do we Let The Auto Industry Collaspe? "

    " And Can Our Economy Withstand this collaspe? Could it handle the amount of unemployment, nation wide that this would cause?

    And what effect would the outcome of this happening have on our wallets, which are already a bit thin as of late...:cool:
     
  4. BigRob

    BigRob Well-Known Member

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    Yes. We can, and if we ever want a competitive auto industry we should.

    Yes.

    Little, unless you own GM stock or something.
     
  5. Chip

    Chip New Member

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    Why directly give the Big Three money? It is less likely they'll first become profitable than that they'll first run out of bailout money.

    Better is to give their bailout money to the taxpayers in a car lottery.

    The winners will get a voucher to buy a Big Three car of their choice and the government will pay for it.

    That way everyone wins: lucky taxpayers get a tax rebate and a new car, the Big Three get sales, their employees stay employed, these manufacturers will wind up with working capital through the normal way to do R&D to develop better vehicles, the CEOs can keep their humongous salaries ... -- what more could we ask from our government?!

    Indeed, all those who don't believe in euthanasia should support this kind of bailout.

    Those who do believe in euthanasia, I understand the transferable concept of your bailout reticence.
     
  6. Andy

    Andy Well-Known Member

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    No, bad idea.
    First, if the people receive a massive check from the government for a car, then they'll buy the biggest car they can.

    Second, this will cause billions in expenses that our government can't afford.

    Third, it will cause the car companies to build these expensive cars that have an artificial demand created by the vouchers. It will also eliminate the need for the painful cuts and changes to labor pay that are needed for long term profitability.

    Fourth, it will ultimately end up right back where we are because government at some point will end the vouchers, eliminating the artifical demand, and sending the big three right back to bankruptcy where we are now.
     
  7. Andy

    Andy Well-Known Member

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    There is a false presupposition here. It is the idea that somehow if they "collapse" then they will die and disband and not exist.

    That's simply not true. Will they shrink? Will they reduce? Will they downsize? Yes of course.

    But Enron still exists doesn't it? Yes it's a shell of a company, but even then, none of the power plants or other operations ceased... they were simply spun off into new companies, with new management, or new investors, and new contracts.

    Similarly, Chysler has been sold twice already. They lost of few manufacturing plants, spun off some companies, divested from some other companies, but they still make cars right?

    What will happen isn't totally known, and thats why people get all reactionary and spooked. But the idea that if they file bankruptcy, that tomorrow all the GM shops will close up, is not very likely, if not impossible. Hummer might change hands, Mazada will not likely be owned by Ford, and who knows what Chysler will do. But Chevy isn't going anywhere. Nor is Ford.

    We have far to many people who get all bent by companies in money troubles, and think that government has to fix it. No, sorry. Let the big three crash. A good bankruptcy will allow them to do what is needed to be competitive again. A bail out will only prolong the agony.
     
  8. foggedinn

    foggedinn New Member

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    I don't really expect the homegrown auto industry to survive without the bailouts. It may not even survive with them.

    I know that when a Toyota, Nissan, or Honda plant considers locating in this or that state, the various states under consideration "compete" by offering billions of dollars in incentives for the plant to be located in their state. I don't see any qualitative difference between that and a bailout.

    The auto companies being touted as competitive are actually already on the public dole. The various foreign brands are simply subsidized by the states rather than the federal govt. I fully expect these plants to be closed just about the time the workers in them start coming due for retirement. That certainly seems to be the historical experience. When the incentives run out or costs go up, they move on.

    As one very clever fellow put it: America is a first world country with third world aspirations.
     
  9. Animekid

    Animekid New Member

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    It's funny, but NBC Nightly News had a report about that little foreign car, that's just barely large enough for a " Hobbit " or a " Dwarf " to fit into comfortably...but the interesting part of the story had to do with how quick the vehicle was assembled, and what one of the average assembly workers were paid in comparison to an american worker...at least $10 less in pay and the average time to assemble one of these vehicles is around three to four hours vs around 12 hours to assemble the average american car.

    Are we our own worst enemies?

    I think this is a very difficult topic and I hate to say it but there is not a definite yes or no answer to what is a very large dilemma...My personal opinion is I do not think we can afford to just let the automakers fail...I just do not think it's the right move at the moment.:cool:
     
  10. Chip

    Chip New Member

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    Here's a car that really saves on gas: The Air Car.
     
  11. Andy

    Andy Well-Known Member

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    Yeah, that's the ticket. A car that can't survive a crash with a lawn mower. Might as well buy one of those golf carts they now sell in the US.

    That said, I couldn't find any data on how much electricity the air pump used, nor how long it required to charge. It also has a 100 mile max range, and very poor acceleration. I'd wager loading it up with the family would make it worse in all aspects, not to mention, most families won't fit in three seats.

    Geo Metro anyone? More seats, higher range, quick refuel.

    I suppose it could be useful for some specific situations. Boy they are ugly.
     
  12. Andy

    Andy Well-Known Member

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    Honda's home grown plants are doing fine. Why would you expect the big three to fail when the other plants are still profitable?

    No, a bail out fixes nothing. If they can't compete before, why would they be able to compete after?

    There is a massive difference between a bail out and the 'incentives' you are referring too, unless they changed how incentives work.

    Here's how it works in most states. If you bring your company to our state, we will give you a tax abatement, or a tax exemption for the next 5 or 10 years. In other words, we will not tax you for that time frame.

    A bail out, confiscates money from tax payers (us), and gives out big checks to the companies.

    In one situation they are simply not taxing something that was never there to tax before. The other they are taxing the hell out of us to give to them.

    Not being taxed, is not remotely like being subsidized. If your taxes are reduced, are you being subsidized by government allowing you to keep the money you rightfully earned? If so, then everyone in the entire nation is subsidized because all of them are allowed to keep some amount of money, right? The only one not subsidized would be those paying a 100% tax rate.

    Bush gave you a tax cut in 2001. Do you consider yourself subsidized now?

    They are not on the public dole, unless they are getting money doled out from public funds.

    BTW, it is true what you say that when the incentives run out, when taxes increase, they tend to move to a new location where they can get lower taxes. That happened here in my area recently. A large company had their HQ my suburb. When that abatement ran out, they got one in down town Columbus. When that run out, they moved to a nearby suburb.

    They had three locations in roughly 30 year time frame. Undoubtedly, if the other suburb doesn't lower taxes, or extend the abatement, they'll move again.

    Of course this is the cause and effect of taxes. The point that should be learned is that lower taxes allow and attract business. High taxes have the opposite effect.

    I agree. We are socializing our selves into third world status, while prior 3rd world countries, are capitalizing themselves into first world status.

    While former soviets, chinese and Indians are adopting American capitalist systems and ascending, we're adopting soviet, Chi-com, India style socialism, and failing.
     
  13. Andy

    Andy Well-Known Member

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    The only way to not let the automakers fail, is to have a continuous paying for their bills. In other words, to simply fund them from tax payers, or what's called "socialism".

    We need to let them fail, because they will anyway, or we can just start paying the 40% in taxes to fund their failing existence.

    That little car is a tiny plastic mobile. It's not surprising that it requires so few hours, nor surprising that the workers are paid so little to make such a tiny car.
     
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