The Great Recession - post mortem

[SportsDino]

I would rather pay $700 billion for bank stock than $700 billion in voodoo paper. Unfortunately, there may be better investments at the moment, still there should be no excuse for the market having no liquidity, it would merely be full of people who no longer wanna play nice with each other (no amount of government handouts will change that really).

Automakers don't have a plan, its time to allow some competition in the market. Small automakers making U.S. designed luxury cars could probably build themselves up... plenty of cheap empty plants laying around, more coming soon to the market.

Perhaps a low cost economy car would be an idea too. Put everyone in a model T-2, if you can afford to be different from anyone else, then buy from some fancy pants luxury carmaker.

No need to lose 1 in 10 jobs, liquidate all the crap out of the industry, and use the ashes to subsidize diversification of the industry. Even the Big Three will probably survive, just as much smaller automakers probably running one or two of their valuable lines and killing the mass duplication.

[DanGarion]

I would rather pay $700 billion for bank stock than $700 billion in voodoo paper. Unfortunately, there may be better investments at the moment, still there should be no excuse for the market having no liquidity, it would merely be full of people who no longer wanna play nice with each other (no amount of government handouts will change that really).

Automakers don't have a plan, its time to allow some competition in the market. Small automakers making U.S. designed luxury cars could probably build themselves up... plenty of cheap empty plants laying around, more coming soon to the market.

Perhaps a low cost economy car would be an idea too. Put everyone in a model T-2, if you can afford to be different from anyone else, then buy from some fancy pants luxury carmaker.

No need to lose 1 in 10 jobs, liquidate all the crap out of the industry, and use the ashes to subsidize diversification of the industry. Even the Big Three will probably survive, just as much smaller automakers probably running one or two of their valuable lines and killing the mass duplication.

It's not really 700 billion though... $2.5 Trillion is the estimated final price... :)

[Logan]

Thought people would find this interesting, coming out of my agency:

Regulators nix credit card debt forgiveness plan - Yahoo! Finance (http://finance.yahoo.com/news/Regulators-nix-credit-card-apf-13553087.html)

Federal bank regulators have rejected a request by banks and consumer advocates for a program to let lenders forgive huge portions of credit card debt.

The Office of the Comptroller of the Currency rejected the request for a special program that would allow as much as 40 percent of credit card debt to be forgiven for consumers who don't qualify for existing repayment plans.

An unusual alliance of financial industry interests and consumer advocates, represented by the Financial Services Roundtable and the Consumer Federation of America, made the request to the Treasury Department agency on Oct. 29. It demonstrated the urgency of the situation in a deepening economic crisis: consumers -- even those with strong credit records -- defaulting at high levels on their credit cards, while banks battered by the credit crisis bleed tens of billions from the losses.

An agency official said the government objects to allowing banks to defer losses for several years on the forgiven debt, as would occur in accounting by lenders under the special program.

The agency "does not consider any plan that defers the timely recognition of loss as prudent, and any such proposal cannot be viewed favorably by us," Timothy Long, senior deputy comptroller for bank supervision policy, said in a letter to the two groups dated Monday and made public Wednesday.

"The timely identification, reporting and management of credit losses, along with adequate loan-loss reserves and capital levels, provide the public with ... confidence" in the banking system, Long wrote.

The Financial Services Roundtable, which represents more than 100 large banks, brokerage firms and insurance companies, will "continue to look for ways to help consumers in these extraordinary times," said the group's senior vice president, Scott Talbott.

Travis Plunkett, legislative director of Consumer Federation, said that with the number of deeply indebted consumers growing dramatically, "we still hope to work with bank regulators or Congress to create an alternative" to bankruptcy for them.

Under the proposal, borrowers would be able to defer payment of income taxes they owe on the forgiven part of the credit card debt until after the remainder was paid off. The lenders could wait until then to book their losses on the forgiven debt.

The two groups hoped such a pilot program would become permanent and that as many as 50,000 people struggling with credit card debt would be involved. On an individual basis, the amount of debt to be forgiven would rise according to the severity of the borrower's financial situation, up to a maximum of 40 percent. Consumers would be allowed to pay back the remainder over several years.

The largest credit-card banks each set aside between $1 billion and $3.5 billion in the third quarter for losses on card loans as their profits plummeted.

The biggest credit card lenders include Discover Financial Services LLC, Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Capital One Financial Corp., American Express Co. and HSBC Holdings.

Credit card charge-off rates, balances written off as unpaid, rose to 6.8 percent in August, up 48 percent from a year earlier, according to Moody's Investors Service.

Americans are weighed down by about $900 billion in credit card debt, according to the latest available Federal Reserve figures.

[SFL Cat]

Yep, lets bail out the big corporations, but by God, no mercy for the average joe's who have been doing on a personal level, what the fed govt. does.

[Flasch186]

it even more pisses me off that they pushed through such punitive bankruptcy measures just a few years ago.

[Logan]

Yep, lets bail out the big corporations, but by God, no mercy for the average joe's who have been doing on a personal level, what the fed govt. does.

You do realize that they are not bailing out the banks in this situation right?

[Tekneek]

You do realize that they are not bailing out the banks in this situation right?

Who are they bailing out by buying billions of dollars of preferred stock from? Not me. They are helping banks in their time of need. Where's the help in this time of need for individuals? Still off somewhere else...because we believe in helping out big business entities in this country, not individuals.

[Logan]

Are we back to this same debate? I'm supposed to have compassion for people who have gotten way over their head in credit card debt and can't pay?

[Flasch186]

separate issue. The CC companies made this bed a few years ago and now want a bail out while not unmaking the bed.

[Mizzou B-ball fan]

Are we back to this same debate? I'm supposed to have compassion for people who have gotten way over their head in credit card debt and can't pay?

I agree with that argument, though I also fault the credit card companies for giving high levels of credit to people who have no way of covering those kinds of limits. The limits are supposed to be there to cut those people off before it gets out of control.

[Logan]

separate issue. The CC companies made this bed a few years ago and now want a bail out while not unmaking the bed.

I don't disagree. I was just pointing out that in this case, the government said they won't be let off the hook.

[Fidatelo]

This whole credit thing pisses me off. If you can't afford something, don't buy it. If you decide to lend out money to a dude that is leveraged to the hilt, suck it up when the guy defaults.

I say no bailouts for anyone, I don't care what it does to the economy, I'm sick of this crap.

[molson]

I can't remember if it's Democrats or Republicans that are supposed to be for corporate welfare.

Or maybe now it's "everyone except Ron Paul and Ralph Nader".

[Poli]

I just can't fathom how baseball teams and the like can look at the direction our economy is headed and continue to offer eleventy billion dollar contracts to players.

If things get worse (and I sure hope they don't), I'd assume teams are going to eventually see a gradual dropoff in attendance and revenue.

I have to believe that our pro leagues and teams are eventually going to be in some financial hardship.

[Fidatelo]

I just can't fathom how baseball teams and the like can look at the direction our economy is headed and continue to offer eleventy billion dollar contracts to players.

If things get worse (and I sure hope they don't), I'd assume teams are going to eventually see a gradual dropoff in attendance and revenue.

I have to believe that our pro leagues and teams are eventually going to be in some financial hardship.

THE DALLAS COWBOYS ARE TOO BIG TO FAIL!

*signs cheque*

[lighthousekeeper]

This whole credit thing pisses me off. If you can't afford something, don't buy it. If you decide to lend out money to a dude that is leveraged to the hilt, suck it up when the guy defaults.

I say no bailouts for anyone, I don't care what it does to the economy, I'm sick of this crap.

+ $1,000,000,000


You just know that in a few years there is going to be the discovery that billions of dollars from this bailout, instead of going to the intended parties, actually went to friends, family, ex-lover-interns, shady business partners, insane executive severence packages, hookers, drugs, terrorists, losing-bets-on-the-Lions, or all of the above. Then there will be the outrage, finger-pointing, fruitless congressional hearings, and finally a massive nationwide *shurg*.

[path12]

I just can't fathom how baseball teams and the like can look at the direction our economy is headed and continue to offer eleventy billion dollar contracts to players.

If things get worse (and I sure hope they don't), I'd assume teams are going to eventually see a gradual dropoff in attendance and revenue.

I have to believe that our pro leagues and teams are eventually going to be in some financial hardship.

Attendance cratered in the thirties. Several major league teams almost went under. I wonder how broadcast contracts will affect that this time around?

[lighthousekeeper]

Attendance cratered in the thirties. Several major league teams almost went under. I wonder how broadcast contracts will affect that this time around?

Major US sports franchises all have a NAICS classification of TooBigToFail, and therefore fall under the protection of the US Bailout Program.

[Tekneek]

If any business is "too big to fail", it is simply too big.

I'm not saying anybody has to have compassion for anyone or anything. You can reconcile that within your own self. However, if the government is going to get into the rescue business, then we need to stop trying to hold individuals to a different standard.

[molson]

I just can't fathom how baseball teams and the like can look at the direction our economy is headed and continue to offer eleventy billion dollar contracts to players.

If things get worse (and I sure hope they don't), I'd assume teams are going to eventually see a gradual dropoff in attendance and revenue.

I have to believe that our pro leagues and teams are eventually going to be in some financial hardship.

Advertising revenue will plummet and that will hurt.

I think attendance will be fine at the highest levels of sports. Live events are for the well-off anyway.

And TV ratings might improve, as more people look for cheaper entertainment.

They'll be impacted, but not as much as lot of other industries.

[JPhillips]

Fuck Paulson and all of his millionaire welfare clients.

Federal bank regulators have rejected a request by banks and consumer advocates for a program to let lenders forgive huge portions of credit card debt.

The Office of the Comptroller of the Currency rejected the request for a special program that would allow as much as 40 percent of credit card debt to be forgiven for consumers who don't qualify for existing repayment plans.

An unusual alliance of financial industry interests and consumer advocates, represented by the Financial Services Roundtable and the Consumer Federation of America, made the request to the Treasury Department agency on Oct. 29. It demonstrated the urgency of the situation in a deepening economic crisis: consumers — even those with strong credit records — defaulting at high levels on their credit cards, while banks battered by the credit crisis bleed tens of billions from the losses.

[sterlingice]

If any business is "too big to fail", it is simply too big.

I agree 100% with this statement. The problem is that these businesses needed to be "trust busted" 5 years before they got too big to fail and we haven't had any president in my lifetime interested in doing that (well, I can't speak for Carter as I was alive about a half year of his presidency but I meant Reagan, Bush, Clinton, and Bush).

SI

[stevew]

In the end, did ANYONE on any side of the political spectrum here actually think this bailout was going to be a good idea?

Bueller?

[molson]

In the end, did ANYONE on any side of the political spectrum here actually think this bailout was going to be a good idea?

Bueller?

I'd say 90% of the posters in this thread thought it was a great idea. (And a couple told the dissenters that they just "didn't understand" that the bailout was for the "people", not for the banks).

We had to do SOMETHING, ANYTHING, it didn't matter what.

[st.cronin]

I'm terribly confused about what's happening. Is it too early for a summary?

[JonInMiddleGA]

I'm terribly confused about what's happening. Is it too early for a summary?

Summary: The economy is currently screwed, with or without anywhere from $250b to $2.1t worth of government bailout.

Please try your recovery again later or check to see if you have the correct number.

This is a recording.

[Edward64]

In the end, did ANYONE on any side of the political spectrum here actually think this bailout was going to be a good idea?

Bueller?
I thought it was a good idea. At that time I was concerned about widespread panic globally leading to 'someplace more severe than a US recession'. Although I fault Paulson/Bernanke for not stabilizing the markets better after 2+ months of this agony, I do think the announced bailout prevented a worse outcome.

If anything, it gave us time to work through the problem.

[sterlingice]

I'd say 90% of the posters in this thread thought it was a great idea. (And a couple told the dissenters that they just "didn't understand" that the bailout was for the "people", not for the banks).

We had to do SOMETHING, ANYTHING, it didn't matter what.

I dunno- it took me the week of learning about it for me to go from "good idea" to "horrible idea". You'll see a lot of that in this thread as people were educating themselves about this whole mess as it was happening.

SI

[Mizzou B-ball fan]

I do think the announced bailout prevented a worse outcome.

If anything, it gave us time to work through the problem.

Sounds like the PR arm of the Democratic congress did its job.

We didn't do anything with the bailout other than delay the inevitable. I was openly critical of this plan from the very start. It's blatently obvious the effect it had. Company after company is now playing the role of 'corporation in need'. They're outstretching their hand and hoping for a few billion to revive their business. They don't need a handout, they need a dose of reality. Meanwhile the lobbyists and the politicians will continue to run their 'sky is falling' argument out there in the hopes that people like Edward will continue to scoop it up and eat it whole and hand them more corporate welfare dollars.

This just in: the sky is falling either way. The only difference is that we'd be much better off taking our medicine now to right the ship and straighten out our economy's future.

[sterlingice]

I disagree 100% with that- you can't just go "we'll let the chips fall where they may". The $700B was basically to stop a panic and it did that. We're still screwed because the economy was already headed into the crapper.

The problem with the bailout is mainly twofold in my eyes. One, it could have been done for a lot cheaper to stop the panic- someone needed to do something but you throw the number $100B out there and people probably still go "wow, that's a lot of money, something is being done".

Two, it didn't address the problems that got us in here in the first place. No, unfettered capitalism is not the answer to the mess as it was pretty much what got us into it. There needs to be regulation so that this doesn't happen again and so that we don't have every ma and pa giant corporation lining up in the bread line for a handout now, or, just as importantly, 10 years from now.

Greenspan's fundamental flaw of "Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself especially, are in a state of shock and disbelief" completely ignores the reality of the situation. You base your whole economic belief system on the idea that people will do what is right for themselves and completely miss that these companies are run by management from the bottom all the way up to the top by people who have interests that are divergent from the company's. The company is not a thinking entity, it's run by a CEO who makes more and more money based on short term goals at the expense of long term gains since he won't be there by that time.

By that same sentiment- anyone saying "let capitalism take its course" fails to grasp what isn't a very complex sentiment of the previous paragraph. No, magically saying "let everyone do what is best for themselves" usually ends up screwing us all, not helping us.

SI

[Mizzou B-ball fan]

The problem with the bailout is mainly twofold in my eyes. One, it could have been done for a lot cheaper to stop the panic- someone needed to do something but you throw the number $100B out there and people probably still go "wow, that's a lot of money, something is being done".

Two, it didn't address the problems that got us in here in the first place. No, unfettered capitalism is not the answer to the mess as it was pretty much what got us into it. There needs to be regulation so that this doesn't happen again and so that we don't have every ma and pa giant corporation lining up in the bread line for a handout now, or, just as importantly, 10 years from now.

The only way that these corporations learn to stop making stupid, self-motivated mistakes is to let them fall flat on their face. They aren't learning anything other than to get a handout under the current political setup. They're heavily overexaggerating the effect that a failure would have on the company to secure sympathy from the politicians. There's far too many Pollyanna's in corporate America.

Prime example is the auto industry. They shouldn't give a dime to those companies. How many years have people been saying that those corporations are letting the unions bleed them dry? Now we have union auto workers making $100-150K per year and we're left wondering why they're losing money? That's a joke.

They aren't losing money because of the economy. They're losing money because they're poorly managed and failed to make good business decisions when times were good. As a result, when things go bad, their past decisions come back to haunt them.

[SFL Cat]

Are we back to this same debate? I'm supposed to have compassion for people who have gotten way over their head in credit card debt and can't pay?

No, but I do have a problem with "bail out" money going to pay obscene bonuses and frills for executives who have been the ones running these corporations into the ground.

If a company is cutting work force, giving 1-2% cost-of-living increases in wages, or asking workers to accept wage freezes or cuts, the last thing its CEO should be doing is taking a six or seven figure bonus.

[JPhillips]

The only way that these corporations learn to stop making stupid, self-motivated mistakes is to let them fall flat on their face. They aren't learning anything other than to get a handout under the current political setup. They're heavily overexaggerating the effect that a failure would have on the company to secure sympathy from the politicians. There's far too many Pollyanna's in corporate America.

Prime example is the auto industry. They shouldn't give a dime to those companies. How many years have people been saying that those corporations are letting the unions bleed them dry? Now we have union auto workers making $100-150K per year and we're left wondering why they're losing money? That's a joke.

They aren't losing money because of the economy. They're losing money because they're poorly managed and failed to make good business decisions when times were good. As a result, when things go bad, their past decisions come back to haunt them.

I think the salary figure you cite is actually based on total labor costs per hour, which include current and legacy benefits. The best rescue plan for the auto companies would be single payer health care. That change would save them well more than a 25 bil bailout.

[JonInMiddleGA]

If a company is cutting work force, giving 1-2% cost-of-living increases in wages, or asking workers to accept wage freezes or cuts, the last thing its CEO should be doing is taking a six or seven figure bonus.

Unless of course reducing a bloated work force & adjusting wages back in line with the value of the workers is precisely what said company needed. Not always the case naturally, but in some instances that's precisely what a good CEO be doing.

[Mizzou B-ball fan]

No, but I do have a problem with "bail out" money going to pay obscene bonuses and frills for executives who have been the ones running these corporations into the ground.

If a company is cutting work force, giving 1-2% cost-of-living increases in wages, or asking workers to accept wage freezes or cuts, the last thing its CEO should be doing is taking a six or seven figure bonus.

Isn't this a strawman argument at best? I'm not sure there's a person in this thread that thinks that a CEO of a failing business should receive a bonus.

With that said, I totally agree with the argument that the people that put themselves into a credit mess should find a way to get out of it through conventional means.

[Mizzou B-ball fan]

Unless of course reducing a bloated work force & adjusting wages back in line with the value of the workers is precisely what said company needed. Not always the case naturally, but in some instances that's precisely what a good CEO be doing.

But if the CEO does that well, the company will eventually return to profitability and then the bonus will be restored. FWIW, I don't know many CEO's that would be homeless without their bonus.

[JonInMiddleGA]

FWIW, I don't know many CEO's that would be homeless without their bonus.

Which has nothing to do with anything.

Make no mistake, there's countless billions thrown away on guys who aren't worth a bucket of warm spit. I've seen more than my fair share of that type up close & personal over the past 10-15 years and can only shake my head sadly when I know how much money is wasted on people who could justifiably be replaced with no decrease in performance by picking someone from a random pool from monster.com

At the same time, given the lack of damned good management that's out there today, I have no problem at all with compensating them extremely well.

[Tekneek]

At the same time, given the lack of damned good management that's out there today, I have no problem at all with compensating them extremely well.

Where are they at right now? I have every reason to expect that the good managers are at companies that we don't hear about in the news. So how did the bad ones end up at many of the biggest names in the business world and pull down tens of millions of dollars in the process?

[JonInMiddleGA]

So how did the bad ones end up at many of the biggest names in the business world and pull down tens of millions of dollars in the process?

Sometimes the top skill someone possesses is the ability to sell themselves.

[SportsDino]

To agree with Jon(imga), a great CEO is worth their compensation easily.

As a shareholder group I would eagerly pay a one billion dollar bonus to someone who comes in and turns an automaker from a giant mess to a strong company in say five years. It would make me billions I wouldn't get without their brilliance, so sure, shave off a billion and give it to the genius.


The problem currently is the entire economy of shareholders has propped up a system of low checks on CEO performance (the whole incestuous board of directors argument), ultra-critical hype of short term performance, and ignorant chasing of the latest hot dollar rather than building something to last and grow.

Many of these craptacular CEOs looked great in the days where the more you pumped up your companies leverage, the better you looked because you turned the year one return from 5% to 50% (using 10 times leverage on top of your existing leverage). Everyone looks at the 50% and shouts their praises, everyone wants to give the CEO millions for their 'brilliance', and the CEO bails out a winner to let the next guy handle the deleveraging.

We have been encouraging these bad CEOs because they were the wunderkids of yesterday. They talked and PLAYED a big game when the game they were told to play had nothing to do with reality, and all to do with spot price on the computer screen.

I don't thing regulation is the answer, we need strong investors to realize that the sure money is in steady growth, and that flash in the pan speculation is really just a gambling based sporting event, or outright depending on someone being very stupid. Regulate things that make sense, like transparency, enforce fraud law, remove unnecessary barriers that are just giant props to these 'corporations that are too big to fail'.... there is no law that can be formed that makes a CEO perform well. You can only restrict evil actions, you cannot create creativity.

[SFL Cat]

Which has nothing to do with anything.

Make no mistake, there's countless billions thrown away on guys who aren't worth a bucket of warm spit. I've seen more than my fair share of that type up close & personal over the past 10-15 years and can only shake my head sadly when I know how much money is wasted on people who could justifiably be replaced with no decrease in performance by picking someone from a random pool from monster.com

At the same time, given the lack of damned good management that's out there today, I have no problem at all with compensating them extremely well.


No arguments with this. One of the things that drives me crazy is when they cut staffing to the bare bone so they can improve the company's bottom line (employee compensation is the NO. 1 expense for most corps) and get their nice juicy bonus based on those numbers. Unfortunately, in the long run, it usually hurts the company because the quality of service just isn't the same, which causes customers to walk away, which negatively impacts revenue, which leads to even more reductions. This is especially true when important functions that should be handled inhouse are outsourced.

[sterlingice]

The only way that these corporations learn to stop making stupid, self-motivated mistakes is to let them fall flat on their face. They aren't learning anything other than to get a handout under the current political setup. They're heavily overexaggerating the effect that a failure would have on the company to secure sympathy from the politicians. There's far too many Pollyanna's in corporate America.

And, in the first few words, you completely missed what might have been the most important line in everything I said: "The company is not a thinking entity, it's run by a CEO who makes more and more money based on short term goals at the expense of long term gains since he won't be there by that time." If a company were a thinking entity, yes, it would most likely try to survive as long as possible and make good long term decisions.

However, it's run by a CEO and management who have their worth tied to short term goals so why would any CEO/manager who is guided solely by their own personal interest work towards long term goals unless it was completely in-line with their short term goals, which is very rarely the case.

So, how is allowing this non-thinking "company" entity to fall flat on its face going to make anyone learn anything?

SI

[sterlingice]

I don't thing regulation is the answer, we need strong investors to realize that the sure money is in steady growth, and that flash in the pan speculation is really just a gambling based sporting event, or outright depending on someone being very stupid. Regulate things that make sense, like transparency, enforce fraud law, remove unnecessary barriers that are just giant props to these 'corporations that are too big to fail'.... there is no law that can be formed that makes a CEO perform well. You can only restrict evil actions, you cannot create creativity.

I don't necessarily disagree but this also goes back to what I have said previously. The majority of investors are not strong investors so unless you bar all but the strongest, this is what will happen. Think about it- the retirements of millions of people, containing trillions of dollars, are managed by people who aren't the cream of the investing crop to begin with- otherwise they wouldn't be a low level grunt at Fidelity (or wherever), making trades for people's 401K's.

By that same token, if there's money to be made by gaming the system, the system will be gamed. This is the financial business, not charity. These are people who value money as much as anything in their life, for the most part. So, if there is money to be made by artificially inflating the price of X, regardless of the consequences, then the price of X will be inflated unless there is a disincentive to do so (illegality or risk of monetary loss that is greater than likely gain).

SI

[Marc Vaughan]

I think regulation is important in specific industries; that is ones which:

* Are fundamentally positioned to exploit people in weak positions. For instance the cost of America's private health system which only covers a fraction of its population is actually higher than if America had a nationalised health care system like in Europe (which would cover ALL citizens).
* Industries which ae central to society itself, there is an essential infrastructure within any country without which that country cannot function.
Leaving this in the hands of private individuals with short-term goals is not compatible with the best interests of a society imho unless there is sufficient regulation to ensure they are run safely.

[Flasch186]

here here

[SirFozzie]

Interesting story on why GM CAN'T go into Chapter 11 bankruptcy (if they do, it's, according to this article, to Chapter 7, which is dissolve the company time.

THE NEW REPUBLIC | Article (http://www.tnr.com/politics/story.html?id=a4893b49-36df-4784-9859-2dfa3a3211bf)

[Cringer]

You know what we need more of? People going into foreclosure who sell their house to someone not intelligent enough to make sure they get a deed of some kind so that way the people run off with the cash from the 'buyer' and then let their house go into foreclosure, totally screwing someone out of their money and what they thought was their home.

Have come across this twice in the last month or so.

[GrantDawg]

Interesting story on why GM CAN'T go into Chapter 11 bankruptcy (if they do, it's, according to this article, to Chapter 7, which is dissolve the company time.

THE NEW REPUBLIC | Article (http://www.tnr.com/politics/story.html?id=a4893b49-36df-4784-9859-2dfa3a3211bf)


Interesting read and makes sense. It says basically that the credit that companies under bankruptcy (ie. the credit the airlines used to survive while in chapter 13) doesn't exist right now. So, chapter 13 is not an option, since GM could not operate without credit. It also points out that if GM fails, then most American parts suppliers would fail, so then would Ford and Chrysler, because without parts they cannot operate.

Also interesting in the article is the fact that UAW has already helped the auto industry with one of its biggest hurdles when it took over retirement benefits from the big three and created a separate fund. It sounds as if this credit crunch along with the huge gas-price fluctuation hadn't have happened, that GM was well on its way to a rebound.

I think it would be a big mistake to let the American auto industry fail. It would not be "allow the market to correct itself," but more a cutting off your nose to despite your face. Instead of delaying the inevitable, it would be creating a much deeper recession (heck, quite possibly a depression at that point) than would be necessary. If anything, we shouldn't have bailed out the banks and instead have propped up GM and Ford in the first place.

[Fidatelo]

It would not be "allow the market to correct itself," but more a cutting off your nose to despite your face.

I've seen this a couple times on this board recently (I don't know if both were by you GD), but the phrase is supposed to be "cut off your nose to spite your face". Sorry to be a grammar nazi, but once it happens a couple times it no longer seems to be a typo but a misunderstanding.

[Mac Howard]

I think regulation is important in specific industries; that is ones which:

* Are fundamentally positioned to exploit people in weak positions. For instance the cost of America's private health system which only covers a fraction of its population is actually higher than if America had a nationalised health care system like in Europe (which would cover ALL citizens).
* Industries which ae central to society itself, there is an essential infrastructure within any country without which that country cannot function.
Leaving this in the hands of private individuals with short-term goals is not compatible with the best interests of a society imho unless there is sufficient regulation to ensure they are run safely.

Commie European ;)

[Galaxy]

Interesting read and makes sense. It says basically that the credit that companies under bankruptcy (ie. the credit the airlines used to survive while in chapter 13) doesn't exist right now. So, chapter 13 is not an option, since GM could not operate without credit. It also points out that if GM fails, then most American parts suppliers would fail, so then would Ford and Chrysler, because without parts they cannot operate.

Also interesting in the article is the fact that UAW has already helped the auto industry with one of its biggest hurdles when it took over retirement benefits from the big three and created a separate fund. It sounds as if this credit crunch along with the huge gas-price fluctuation hadn't have happened, that GM was well on its way to a rebound.

I think it would be a big mistake to let the American auto industry fail. It would not be "allow the market to correct itself," but more a cutting off your nose to despite your face. Instead of delaying the inevitable, it would be creating a much deeper recession (heck, quite possibly a depression at that point) than would be necessary. If anything, we shouldn't have bailed out the banks and instead have propped up GM and Ford in the first place.


UAW leader says blame economy for Detroit 3 woes - Yahoo! News (http://news.yahoo.com/s/ap/20081115/ap_on_bi_ge/auto_bailout_gettelfinger)

[Anthony]

someone losing their job, or many people losing their job, in Michigan does not affect me in New York. their taxes do not go towards repairing my roads in Long Island, maintaining my county's parks or any other social projects. bailing out a bank - which is national and where people go for credit - is different than bailing out a company that employs many people. i can't go to GM for a loan. they won't refinance my mortage. they don't provide me with life or home insurance. its a company. this is no different than being in a town where one big corporation employs a majority of the citizens of that town. this is no different than how ghost towns were created - when the main attraction/feature that supports a town disappears, so do the people in that town. they find employment elsewhere. they survive. they manage. obviously Detroit isn't going to become a ghost town, but the point is, yeah, its devastating - for those people. not for everyone. if people in Detroit can show me how their money somehow makes it to New York - spending money here, supporting our merchants and stores - then i'll join their cause. right now a company in Oregon is going out of business, a few hundred people are gonna lose their jobs and tonite i'll sleep like a baby cuz none of it will affect me. companies go out of business all the time and the only ones affected are the residents of the town where that company was located.

these auto workers have a higher per hour cost to their company than i do, and i actually have a college degree and numerous financial licenses in my field. the only difference is if i ever lose my job i can pick up a phone and get 10 interviews and 10 offers (albeit from companies i wouldn't want to work for and doing a role i wouldn't want to do) cuz i have a variety of options with my qualifications, and they'd have a high school education and have to find some other menial blue collar task to get paid for.

i always say if a company gets too big that it can't be allowed to fail then it shouldn't have never been allowed to get that big in the first place. instead of paying for lobbyists to encourage a hands-off role by the government these carmakers should've put those millions into R&D and rolled out huge fleets of hybrid/fuel efficient cars or tried to usher in a new era of electric cars. GM got too big to be able to take advantage of changing customer demands and that's their fault and their problem and something workers of GM need to be worried about, not me.

[flere-imsaho]

i can't go to GM for a loan. they won't refinance my mortage. they don't provide me with life or home insurance.

Not (http://www.gmacmortgage.com/index.html?seg=br_p&CP=GB)true (http://www.gmacbank.com/products-and-services.html), actually (http://www.gmacinsurance.com/).

if people in Detroit can show me how their money somehow makes it to New York - spending money here, supporting our merchants and stores - then i'll join their cause.

Parts suppliers for the Big 3 auto companies are spread throughout the U.S. They'll be tremendously affected.

i always say if a company gets too big that it can't be allowed to fail then it shouldn't have never been allowed to get that big in the first place. instead of paying for lobbyists to encourage a hands-off role by the government these carmakers should've put those millions into R&D and rolled out huge fleets of hybrid/fuel efficient cars or tried to usher in a new era of electric cars. GM got too big to be able to take advantage of changing customer demands and that's their fault and their problem and something workers of GM need to be worried about, not me.

I'll actually agree with this. Aside from just the "make mostly SUVs" issue, GM in particular has spent the better part of 30 years not getting flexible and competitive for the future. Maybe the lesson is that companies that get this big in the future shouldn't be allowed to be so mismanaged.

[SteveMax58]

i always say if a company gets too big that it can't be allowed to fail then it shouldn't have never been allowed to get that big in the first place. instead of paying for lobbyists to encourage a hands-off role by the government these carmakers should've put those millions into R&D and rolled out huge fleets of hybrid/fuel efficient cars or tried to usher in a new era of electric cars. GM got too big to be able to take advantage of changing customer demands and that's their fault and their problem and something workers of GM need to be worried about, not me.

Absolutely agreed. And I would add that the people who should have not allowed them to get that big are what we lay people call "investors". The problem, much like a lot of unintended consequences of government interventions, is that these investors have known for years the government would not allow them to fail and so they continue to reward mismanagement with more investment to continue...bad company management. Rinse and repeat this in 3-5 years. While we're at it...add the airlines to this artificially propped status as well.

I really do sympathize with the workers of these companies. But the fact is that they work for a company with an unsustainable model. They cannot move and adapt quickly enough, or offer products that are profitable enough, so they fail. I've been there myself. Other companies come in, buy up whats worth something, and some of these workers now work for somebody else. Some will need to move on. Happens every day in lots of other industries and towns. Same goes for airlines in my book. They sell a service that relies upon "X" number of travellers at "$Y" price. Well...if you cant get people to fly at "$Y" rates any more, you have to trim back expenses, cut flights, and try to run a business that can survive.

Not allowing them to fail only continues to perpetuate the reasons they are failing. Using ancillary economic fallout as a reason to keep bailing them out just leads to larger leveraging and hedging by the ancillary businesses, and thats how you end up with major economic problems (not too dissimilar to what we have now, or will have more widespread in 2009, IMHO).

[Buccaneer]

It is nothing about getting "too big" and we should definitely not discourage any private companies or industries from getting too big. Walmart and Exxon/Mobil are huge, same with Microsoft (same thing with Toyota and Honda, in another country), and they can adjust to market conditions easier than GM or Ford. I believe it is more about management and being saddled with overpaid union workers/retirees. However, I don't apply this thought to airlines, to some extent. It seems that so much business and commerce depend upon a good air transportation system. With autos and trucks, there are many other companies and options.

[SportsDino]

We never really need a company to 'get big', and often we should not want it. Less companies = less competition, and in general that means higher consumer prices right?

What happens when you go with the 'big is better' model? You get your competition from FOREIGN sources, they provide the competition that keeps the consumer market alive and if you look at autos you see that... we have foreign companies that dominate the economy and quality portions of the spectrum.

If we did not have super huge automakers, if there were not massive barriers to entry, you would have had the U.S. version of BMW and the U.S. version of Honda or Toyota. Some of those barriers are our own government and public loyalty to the Big Three, others include the difficulty of starting a business where there are massive established players (foreign automakers obviously grew from a base in their home countries).

Big only helps with economies of scale, instead of having the overhead of five companies, you have a slightly larger single company overhead, but all the production and profit of five smaller companies. That situation is a net gain for the economy, its the difference between every car being custom made and the Ford assembly line.

But this 'too big to fail' nonsense is driving me up the wall. Capitalism is based on failure and success people, if you eliminate the chance for failure you destroy the incentives for success. You end up with mediocrity in the short term and long term death of the economy. We may be at that point now.

Others have brought up Walmart or Microsoft, well what if the same thing happens there? Walmart or a oligarchy of two other supermarts, owns 95% of everything. If their credit starts to tank do we bail them out? Do we hear the lines of "Think of the people unable to buy cheap milk, or the thousands losing their minimum wage jobs! We can't let this happen?". And if anyone can say that Microsoft with their 90% share of the market is an innovative force in the software economy, obviously they are ignoring the massive piles of shovelware (or shovel frameworks!) that the company spits out, and the massive lack of creativity in their big product lines. Heck, they are an OS company that seems to be basically copying whatever Apple does lately, how long is that going to survive?

A few big companies is a sign of weakness in the economy, not a great thing. It is another reason I was against the bailout being used to buy TARP instead of anything else, I'm afraid of the U.S. buying all the crap assets off the books, and all these troubled banks being gobbled up as tasty morsels in bank mega mergers. We are already seeing this happen BTW, we'll see more of it as the bailout money disperses. Are we going to turn around in three years and say that the new megabanks are too large to fail again, in fact even larger than last time, so its even more imperative to bail them out?!

The road to total economic collapse is complete stagnation of the economy, not GM or Ford or Lehman Brothers holding X number of jobs for ransom 'OR ELSE'. If a loan is what GM needs, and they can't get credit elsewhere, than if the government decides to go through with it, why don't they charge a sky high interest rate like anyone else looking for credit right now has to go through? Would GM still accept such a loan? Even if the alternative is economic collapse? I'm doubting it, they'll look at the other bailouts and expect charity right up until the point the economy falls apart.

[Galaxy]

Of course, paying a dozen execs $30 million in bonuses while your asking for a bailout doesn't help get my support.

http://blogs.moneycentral.msn.com/topstocks/archive/2008/11/14/chrysler-gives-bonuses-asks-for-bailout.aspx

[Logan]

Of course, paying a dozen execs $30 million in bonuses while your asking for a bailout doesn't help get my support.

http://blogs.moneycentral.msn.com/topstocks/archive/2008/11/14/chrysler-gives-bonuses-asks-for-bailout.aspx

Obviously you can chalk it up to horribly poor planning (probably not a good idea to contractually guarantee bonuses when your industry is bleeding, even if it means you'll lose the talent that could get you out of the mess), but it's because of articles like these that so many people are completely misinformed as to what is going on in this economy.

[CamEdwards]

It is nothing about getting "too big" and we should definitely not discourage any private companies or industries from getting too big. Walmart and Exxon/Mobil are huge, same with Microsoft (same thing with Toyota and Honda, in another country), and they can adjust to market conditions easier than GM or Ford. I believe it is more about management and being saddled with overpaid union workers/retirees. However, I don't apply this thought to airlines, to some extent. It seems that so much business and commerce depend upon a good air transportation system. With autos and trucks, there are many other companies and options.

I'd like to hear more of your thoughts on this. As a libertarian opposed to big government, I would think you would be inclined to be opposed to big business as well. Why would government become less effective the bigger it gets, but business more effective?

[CamEdwards]

But this 'too big to fail' nonsense is driving me up the wall. Capitalism is based on failure and success people, if you eliminate the chance for failure you destroy the incentives for success. You end up with mediocrity in the short term and long term death of the economy. We may be at that point now.



Couldn't agree more. I would think that the more risk involved in a venture, the more "conservative" those participating in the venture would be. By removing the moral hazard, risky behavior is encouraged, and eventually even those who didn't engage in the risky behavior become a part of the bailout.

Why yes, I am annoyed that I didn't buy a home beyond my means. Why do you ask? :p

[Fighter of Foo]

Why would government become less effective the bigger it gets, but business more effective?

Take WalMart as an example. Their ability to deliver value is strictly based on their size and ability to keep costs to a minimum. They can get better prices because they buy in such mass quantity. If more local stores were as competitive on price, WalMart wouldn't exist in the same way.

Unfortunately, governments don't have competition, so 99% of the time, more of it is a bad thing.

[Fighter of Foo]

Couldn't agree more. I would think that the more risk involved in a venture, the more "conservative" those participating in the venture would be. By removing the moral hazard, risky behavior is encouraged, and eventually even those who didn't engage in the risky behavior become a part of the bailout.

Why yes, I am annoyed that I didn't buy a home beyond my means. Why do you ask? :p

The people you speak of only want to socialize the losses. The winnings they want to keep for themselves. :)

[Buccaneer]

I'd like to hear more of your thoughts on this. As a libertarian opposed to big government, I would think you would be inclined to be opposed to big business as well. Why would government become less effective the bigger it gets, but business more effective?

A quick answer would be in the legislation and regulation by the government in preventing a company from getting "too big" (in non-monopolistic way). What would such legislation and regulation look like? Since it has to apply across the board, aren't you limiting the expansion of entreprenourship and free enterprise? I agree about the ineffeciency arguments but that was not my point. You don't want to artificially discourage growth through governmental edicts but you do want to make sure that such growth is done smartly, legally, cleanly and non-monopolistic. Market conditions, free trade, supply and demand, and inventiveness should be the driving factors. If a company makes a product that is in such high demand all over the world, why not encourage that (as we have throughout history)? There will come a time when other similar products will be more popular instead and that should be encouraged too. I believe in encouraging legislations, not punitive ones.

[SportsDino]

I don't want government restriction on businesses becoming too big, or at least, nothing more than the appropriate trust-busting legislation that was created for good reason. I just want anything that is a barrier to smaller businesses to be removed, this includes regulations clearly favoring established companies, corporate pork earmarked for an obvious business, subsidies in general are suspect, and the tax code is a mess.

As for encouraging business, bailouts are bad, it rewards stupidity of the highest degree. Go direct to the assets and encourage those somehow... in mortgage world that means government taking land, not worthless paper... in autos that means government giving employment credits and decent interest loans (not low-cost which is another word for subsidy)... in credit markets it may mean the government greases short term transactions directly, rather than injecting megaloads of money into the system that gets eaten up and the market still fears trading with the other idiots.

I think the capital gains tax should certainly not be decreased in the short term, in my opinion if anyone has a gain this year its because they either were one of the crooks in the system, absurdly lucky (and therefore not likely to repeat), or a mad speculator (generally not the sort of creature that creates real economic growth). I think the push for gains rate tax cuts has been coming from the mega-wealthy crowd trying to lock in even more of their parachute money to weather the coming crapstorm.

Since it is inevitable the government is going to throw money at the problem, I would likely to see as much of it land at positive incentive areas as possible. So if anyone has any suggestions other than throwing billions of dollars at giant failures like GM or AIG, I'd like to hear them.

[SFL Cat]

The unions say no concessions...so all I can say is, after we throw $25-$50 billion at the problem...what happens 2-4 years down the road when we're back at the same place again?

[Anthony]

if the UAW isn't willing to budge then i openly wish for GMs failure now.

[flere-imsaho]

I'll throw a wild idea out here for fun. This applies to GM & Chrysler, but not to Ford, since Alan Mulally at Ford seems to have been doing a good job changing the company around. Maybe just float Ford a $25 billion loan.

GM & Chrysler:

1. Tell them to enter bankruptcy. If they refuse, nationalize them, and then take them into bankruptcy.

2. Transfer their pension obligations to the government. (This has been done before.) (http://www.whitehouse.gov/news/releases/2006/08/20060817.html) Resulting from this, only pay out pensions fully for workers over the age of 50 with 20+ years with the company. Maybe do a sliding scale for younger/less senior workers so you don't automatically screw the 49-year-old with 19 years at GM.

3. Break all existing contracts (labor, parts, dealerships).

4. Assemble a team of objective pragmatists to determine what to do with the two companies. Leave nothing off the table, from bringing them out of bankruptcy as whole companies minus all the previous obligations, to selling off the assets to foreign auto companies.

Of course, it'll never happen.

[Mizzou B-ball fan]

GM appears to be getting pretty desparate. They're now sending out propaganda e-mails to associated suppliers/dealers to pressure lawmakers............

"Because our futures are linked, I want you to know that General Motors is doing everything possible to deal with the impact the financial crisis is having on the domestic auto industry. Yet despite our successful efforts to restructure, reduce costs and enhance liquidity, we are facing an uphill battle with the current administration and Congress in securing a bridge loan.

That's why we need your help now. Simply put, we need you to join us to let Congress know that a bridge loan to help U.S. automakers also helps strengthen the U.S. economy and preserve millions of American jobs.

Despite what you may be hearing, we are not asking Congress for a bailout but rather a loan that will be repaid.

The consequences of the domestic auto industry collapsing would far exceed the $25 billion loan needed to bridge the current crisis. According to a recent study by the Center for Automotive Research:

• One in 10 American jobs depends on U.S. automakers
• Nearly 3 million jobs are at immediate risk
• U.S. personal income could be reduced by $150 billion
• The tax revenue lost over 3 years would be more than $156 billion

Discussions are now underway in Washington, D.C., concerning loans to support U.S. carmakers. I am asking you to support this vital effort by contacting your representatives.

Please take a few minutes to call your representatives by dialing 1-866-471-5332. Just state your name and address, and your message will reach your legislators. You can review a script that will help you state your support at www.gmfactsandfiction.com. Under the "Mobilize Now" section, click on "I'm a Supplier." If you would rather e-mail your representatives, use the link "I'm a Concerned American."

Please share this information with friends and family using the link on the site.

Thank you for helping keep our economy viable.

Sincerely,

Troy Clarke"

[flere-imsaho]

Interesting related Op-Ed in the New York Times by Mitt Romney (http://www.nytimes.com/2008/11/19/opinion/19romney.html?hp=&pagewanted=print):

Let Detroit Go Bankrupt

By MITT ROMNEY

IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.

Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.

I love cars, American cars. I was born in Detroit, the son of an auto chief executive. In 1954, my dad, George Romney, was tapped to run American Motors when its president suddenly died. The company itself was on life support — banks were threatening to deal it a death blow. The stock collapsed. I watched Dad work to turn the company around — and years later at business school, they were still talking about it. From the lessons of that turnaround, and from my own experiences, I have several prescriptions for Detroit’s automakers.

First, their huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota. Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers.

That extra burden is estimated to be more than $2,000 per car. Think what that means: Ford, for example, needs to cut $2,000 worth of features and quality out of its Taurus to compete with Toyota’s Avalon. Of course the Avalon feels like a better product — it has $2,000 more put into it. Considering this disadvantage, Detroit has done a remarkable job of designing and engineering its cars. But if this cost penalty persists, any bailout will only delay the inevitable.

Second, management as is must go. New faces should be recruited from unrelated industries — from companies widely respected for excellence in marketing, innovation, creativity and labor relations.

The new management must work with labor leaders to see that the enmity between labor and management comes to an end. This division is a holdover from the early years of the last century, when unions brought workers job security and better wages and benefits. But as Walter Reuther, the former head of the United Automobile Workers, said to my father, “Getting more and more pay for less and less work is a dead-end street.”

You don’t have to look far for industries with unions that went down that road. Companies in the 21st century cannot perpetuate the destructive labor relations of the 20th. This will mean a new direction for the U.A.W., profit sharing or stock grants to all employees and a change in Big Three management culture.

The need for collaboration will mean accepting sanity in salaries and perks. At American Motors, my dad cut his pay and that of his executive team, he bought stock in the company, and he went out to factories to talk to workers directly. Get rid of the planes, the executive dining rooms — all the symbols that breed resentment among the hundreds of thousands who will also be sacrificing to keep the companies afloat.

Investments must be made for the future. No more focus on quarterly earnings or the kind of short-term stock appreciation that means quick riches for executives with options. Manage with an eye on cash flow, balance sheets and long-term appreciation. Invest in truly competitive products and innovative technologies — especially fuel-saving designs — that may not arrive for years. Starving research and development is like eating the seed corn.

Just as important to the future of American carmakers is the sales force. When sales are down, you don’t want to lose the only people who can get them to grow. So don’t fire the best dealers, and don’t crush them with new financial or performance demands they can’t meet.

It is not wrong to ask for government help, but the automakers should come up with a win-win proposition. I believe the federal government should invest substantially more in basic research — on new energy sources, fuel-economy technology, materials science and the like — that will ultimately benefit the automotive industry, along with many others. I believe Washington should raise energy research spending to $20 billion a year, from the $4 billion that is spent today. The research could be done at universities, at research labs and even through public-private collaboration. The federal government should also rectify the imbedded tax penalties that favor foreign carmakers.

But don’t ask Washington to give shareholders and bondholders a free pass — they bet on management and they lost.

The American auto industry is vital to our national interest as an employer and as a hub for manufacturing. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs. It would permit the companies to shed excess labor, pension and real estate costs. The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.

In a managed bankruptcy, the federal government would propel newly competitive and viable automakers, rather than seal their fate with a bailout check.

[Galaxy]

I'll throw a wild idea out here for fun. This applies to GM & Chrysler, but not to Ford, since Alan Mulally at Ford seems to have been doing a good job changing the company around. Maybe just float Ford a $25 billion loan.

GM & Chrysler:

1. Tell them to enter bankruptcy. If they refuse, nationalize them, and then take them into bankruptcy.

2. Transfer their pension obligations to the government. (This has been done before.) (http://www.whitehouse.gov/news/releases/2006/08/20060817.html) Resulting from this, only pay out pensions fully for workers over the age of 50 with 20+ years with the company. Maybe do a sliding scale for younger/less senior workers so you don't automatically screw the 49-year-old with 19 years at GM.

3. Break all existing contracts (labor, parts, dealerships).

4. Assemble a team of objective pragmatists to determine what to do with the two companies. Leave nothing off the table, from bringing them out of bankruptcy as whole companies minus all the previous obligations, to selling off the assets to foreign auto companies.

Of course, it'll never happen.

Why should taxpayers have to cover the pensions for private workers? If the UAW is unwilling to give anything up and Big 3 management can't manage, they deserve to go bankrupt. I'm so stick of the "Made in America" crap. Toyota, BMW, Honda, ect. make cars in the US (I believe Toyota has a marketing campaign built around this). They understand how to manage, understand what the market wants, and builds and markets it cars as commodities, not as toys (not that automakers shouldn't build appealing, sporty cars that people can afford, but that's not what will make automakers profitable).

I do think that Ford, Chrysler, GM have much better management now (Ford has a lot nepotism). They seem to understand the problems. However, they can't erase the past mistakes of poor management with the UAW contracts (a biggie in my book, and one that can't easily be changed), the supply chain, quality control, and cost management.

[flere-imsaho]

Why should taxpayers have to cover the pensions for private workers?

Partly as a means to an end, partly so those people don't get immediately dumped into welfare, and partly because for the long-serving employees, it's the right thing to do.


I do think that Ford, Chrysler, GM have much better management now (Ford has a lot nepotism).

I disagree. Only Mulally at Ford has shown any comprehension of the considerable strategic change that has to happen to become competitive.

Wagoner at GM has held some sort of leadership position (COO, CEO) for 10 years, and in those 10 years GM has continued to hemmorhage money and shown barely any proclivity to change directions.

Bob Nardelli is even worse. Following a very mixed tenure at Home Depot, he's done very little at Chrysler so far to address its core issues, aside from bringing in management loyal to him. Plus, his public statements have seemed to show him out of his depth when trying to understand the industry.

[Galaxy]

I think Nardelli got a bad rap as the CEO at Home Depot. Aside from his insane package, he just couldn't get the stock to up. He increase return on capital, revenues, and profits; but investors didn't buy into his management style and ideas.

[flere-imsaho]

The fact is, though, that Nardelli couldn't get the share price to budge in 7 years despite aggressively pursuing the bottom-line at the expense of a) turning over basically the entire management structure, b) alienating workers in part by switching from full-time to part-time later, c) alienating customers in part by understaffing so much of the retail operation and d) spending a huge amount of money in a stock buyback.

It's clear that there's a lot about both retail companies and public companies that Nardelli just doesn't understand, or doesn't understand well.

[Fighter of Foo]

Namely, that trying to manipulate stock price is a fool's errand.

[Flasch186]

I'd like to say that going back to my support of the 750$ tarp plan and my continual hammering home that it was more about confidence than anything else, by Paulson making his most recent statements regarding NOT purchasing bad assets he has completely undermined the #1 purpose of the Tarp (regardless of whether or not they spent a dime). {shaking head} Now we will see what a lack of confidence looks like when you put a nice deep slice in the parachute. Get ready for ugly.

[SportsDino]

I'm not sure what exactly is going on with the massive bailout money, I don't think it ever truly inspired confidence in the market, unless your talking about the sheep watching CNBC.

In the world of autos, I agree with some of what Mitt Romney is saying. We need a shakedown of the broken culture in autos, and I particularly liked the line about eating the seed corn. I think a lot of CEO-culture has been eating up massive capital built up over decades since they thought it was too huge to notice... and now we are seeing the result, supposedly 25 billion necessary in external funding to keep the companies afloat (we know that number is going to explode too, thats just the starter number to test the waters).

[Flasch186]

most of the people spending money are sheep and will react to the verbiage and effort taking place. If you roll out a 'bail out' this will instill confidence no matter who in those you discount as being unaffected. When the same person asking for the bailout money to 'save the day' and then he says we're not going to buy the 'bad' assets that we said we would the 'sheep' are going to be scared. The headlines pile up.

Call them sheep if it makes you feel better but the masses, the GREAT majority of those driving this economy fall under whatever category you want to lump them into and they take their direction from the stimuli they get no matter the 15 second source or headline. This is proven time and time again.

Those that argued for a bailout stated that we'd be able to put in a floor in the confidence of the economy, within weeks of its passage we had a range put in, we have now efficiently killed the range through this new tact and we're in essence fucked without spending hardly a pittance of what will be needed. Bond yields in the tank, spreads widen, confidence is tanking along with the stock market(s).

BTW St. Cronin was right a year ago, i was wrong.

my .02, which by the time youre done reading that will be .01

[SportsDino]

I'm sorry for belittling the problem.

I think there is something very wrong with the economy when it oscillates wildly based on the actions or inaction of a Treasury Secretary, Fed Chairman, President, etc. To me CNBC and the media in general, our government, and corporations are fostering what I consider panic economics... extreme short term fixation, irrational explanations for every market change, flipflopping or outright lying in public that gets exposed eventually and is almost ignored, or further explained away.

That is not an economic system, it is madness, at least to me. I'm concerned a lot of 'investors' don't have a plan, and therefore are susceptible to less than optimal behaviors based off things like bailout bills or sound bytes. Eventually that behavior limits my own ability to predict what is going on, leading me to be annoyed and throw out insults, so I should apologize.

I am personally hoping that by not spending the 750 billion right away, it will still be around so that when the next scandal hits, instead of passing more money through the printing press, the existing bundle will be used. I'm hopeful that the economy will get out of this choking phase eventually, although I'm distressed that I'm still not seeing any leadership showing up.... business as usual at the giants, even those running on public funds now.

[st.cronin]

BTW St. Cronin was right a year ago, i was wrong.


This is very surprising, what was I right about?

[Marc Vaughan]

My personal feel at the moment is that things will start to turn around so long as companies manage to stay afloat just a little longer.

Reason being simply the lower gas prices - a year ago people were paying $70 to fill up their SUV, today they're only spending $35 ....

Considering for most commuters filling up as at LEAST a weekly occurance thats $140/month extra they have to spend on something other than gas.

To put this in perspective over a year and presuming a 2 car household (as most have at least this) thats $3,360 per annum extra being spent on something other than gas.

(the other way to look at this is that a large part of the consumer spending downturn at retail etc. could probably be attributed to that $3.5k having had to be spent on gas instead of other retail items)

[GrantDawg]

My personal feel at the moment is that things will start to turn around so long as companies manage to stay afloat just a little longer.

Reason being simply the lower gas prices - a year ago people were paying $70 to fill up their SUV, today they're only spending $35 ....

Considering for most commuters filling up as at LEAST a weekly occurance thats $140/month extra they have to spend on something other than gas.

To put this in perspective over a year and presuming a 2 car household (as most have at least this) thats $3,360 per annum extra being spent on something other than gas.

(the other way to look at this is that a large part of the consumer spending downturn at retail etc. could probably be attributed to that $3.5k having had to be spent on gas instead of other retail items)

My company was paying a half a million more a month two months ago as the same time last year. My guess is they are looking at almost a 3/4 million dollars swing down now. Pretty good cabbage.

[Galaxy]

My personal feel at the moment is that things will start to turn around so long as companies manage to stay afloat just a little longer.

Reason being simply the lower gas prices - a year ago people were paying $70 to fill up their SUV, today they're only spending $35 ....

Considering for most commuters filling up as at LEAST a weekly occurance thats $140/month extra they have to spend on something other than gas.

To put this in perspective over a year and presuming a 2 car household (as most have at least this) thats $3,360 per annum extra being spent on something other than gas.

(the other way to look at this is that a large part of the consumer spending downturn at retail etc. could probably be attributed to that $3.5k hhttp://www.operationsports.com/fofc/editpost.php?do=editpost&p=1890550aving had to be spent on gas instead of other retail items)

I like the use of annum. :)

Good point about the extra income from lower prices. Do you think Americans (and others around the world) are realizing this? How long do you think prices will stay this low?If so, are they using it? I just hope drivers move towards more fuel-friendly automobiles so they don't whine when prices go up.

Airlines should start seeing the red stop bleeding a little.

[st.cronin]

Gas prices make a tremendous difference to our finances, as we live about 30 miles from anything. We drive about 1000 miles a week. The change in gas prices is @ $200 a month in our budget.

[Flasch186]

This is very surprising, what was I right about?

you inferred that we were in bigger trouble than even I thought encouraging us to stay on the sideline(s) in cash.

[Galaxy]

Interesting article:

It's North vs. South in Big Three bailout fight - Capitol Hill- msnbc.com (http://www.msnbc.msn.com/id/27806336)

[SportsDino]

The gas prices are a shocker to me, my only guess is that speculation is a crazy powerful force if it can swing the price of oil up to over 140 and down to 50 in the span of a year. I think its being pushed lower than it would be because of the fear of economic downturn, but nothing indicates it will be more than temporary so I'd say enjoy the cheap gas while you can get it, but don't plan on it being their for long.

I'm concerned we might get to where we are about to turn the corner in the economy and then the oil price corrects too dramatically and it blows out the fire before it gets going.

As for the south being against the bailout, I don't like their reason because I think its as short sighted as the proponents of the bailout... but if it kills the auto bailout, yippee. Although I think I wouldn't mind giving a $25 billion dollar loan if the government will charge an interest rate with some teeth. At least comparable to what they would have to pay to get funding through the bond market in normal times.

Really though, we shouldn't be voting on this based on which state gets the most grease from the Big Three, it should really come down to staying out of business in general, and not subsidizing losers who are giving us the finger whenever you ask them to not do something. (like give bonuses for bad behavior, build inefficient cars, manipulate carbon credits to pay them for polluting, strongarm for tax breaks every time they open a plant)

[SportsDino]

Ouch, that North vs South article on the second page is a fun read. The senator from Tennesee is mentioning 'fund the ones that were going to succeed' and mentioning the plant in Tennessee as very competitive so it would survive. I would really hate to see the government create some patchwork bailout custom fit to spread pork to states in a completely new way.

Imagine, rather than just silly social spending disparity, you can bailout and own parts of big industry, and control where they build plants as yet another political bargaining chip.

Man we're about to have the most messed up socialist state in existence if this trend continues.

[Buccaneer]

Did I read right that Toyota and Honda opened up two new plants last week?

[Mizzou B-ball fan]

Did I read right that Toyota and Honda opened up two new plants last week?

Amazing what happens when you make a quality car that people want to buy and you aren't burdened with outdated union contracts.

[sterlingice]

I think there is something very wrong with the economy when it oscillates wildly based on the actions or inaction of a Treasury Secretary, Fed Chairman, President, etc. To me CNBC and the media in general, our government, and corporations are fostering what I consider panic economics... extreme short term fixation, irrational explanations for every market change, flipflopping or outright lying in public that gets exposed eventually and is almost ignored, or further explained away.

That is not an economic system, it is madness, at least to me. I'm concerned a lot of 'investors' don't have a plan, and therefore are susceptible to less than optimal behaviors based off things like bailout bills or sound bytes. Eventually that behavior limits my own ability to predict what is going on, leading me to be annoyed and throw out insults, so I should apologize.

I think you have to divide 'investors' into more than one category and I'm just going to make 2 but I know there are more. There are those of us in it for the long haul, invested in our 401K's, hoping the people who manage our money like Fidelity (I just use them since that's who does ours), know what they are doing and this is looking more and more like a bad decision.

Then there are those who just look to game the system to make a quick buck, who take advantage of how they know the previous group, the slower moving group, are going to behave, and take advantage of it. If there's money to be made by artificially lowering prices, then why would they act otherwise?

SI

[Warhammer]

Ouch, that North vs South article on the second page is a fun read. The senator from Tennesee is mentioning 'fund the ones that were going to succeed' and mentioning the plant in Tennessee as very competitive so it would survive. I would really hate to see the government create some patchwork bailout custom fit to spread pork to states in a completely new way.

Yeah, but that TN plant is one of the newer plants. It actually does make sense. You don't want to fund plants that have been losing money because they are old and inefficient.

[Edward64]

In today's AJC, there was a full page ad/article from the car dealership association pointing out that if wasn't just the big 3 but thousand's of dealerships that would also be impacted by a failed bailout.

I am somewhat torn. IMO the big 3 and unions have it coming. Joe the mechanic at a dealership or Bob the service desk manager does not.

I am leaning towards some sort of bailout but would like comprehensive changes etc and government taking some equity stake/ownership.

[Flasch186]

hence the above job estimates that, while a range, are scary nonetheless.

[Marc Vaughan]

Nationalise the three main car manufacturers.

Lay off any incompetant management, take pension legacies of them and into the goverment domain then turn them around producing hybrid/alternative fuel cars ... then privatise them again, in effect the goverment would buy low (they're near bust) and sell high (if they can make them profitable).

Giving them money without a plan of turnaround would be very silly imho - flushing good money after bad comes to mind.

[Edward64]

Nationalise the three main car manufacturers.

Lay off any incompetant management, take pension legacies of them and into the goverment domain then turn them around producing hybrid/alternative fuel cars ... then privatise them again, in effect the goverment would buy low (they're near bust) and sell high (if they can make them profitable).

Giving them money without a plan of turnaround would be very silly imho - flushing good money after bad comes to mind.

Yup, I agree. The biggest problem in implementing is the unions. Once some bailout/nationalization is underway and they are no longer staring down a gun barrel, suspect the unions will fight to maximize their benefits (as they are suppose to do) and lose sight of the better good. With the historical union support of democrats, I think Obama and co. will have special interests fighting them all the way.

[GrantDawg]

Yup, I agree. The biggest problem in implementing is the unions. Once some bailout/nationalization is underway and they are no longer staring down a gun barrel, suspect the unions will fight to maximize their benefits (as they are suppose to do) and lose sight of the better good. With the historical union support of democrats, I think Obama and co. will have special interests fighting them all the way.


Yeah, this is one area were the new President is going to have a very difficult time walking the tight-rope. There is no chance he is going to end making anyone happy.

[Marc Vaughan]

Yup, I agree. The biggest problem in implementing is the unions. Once some bailout/nationalization is underway and they are no longer staring down a gun barrel, suspect the unions will fight to maximize their benefits (as they are suppose to do) and lose sight of the better good. With the historical union support of democrats, I think Obama and co. will have special interests fighting them all the way.

Unions only have power if they're allowed to by the goverment - in the present circumstances they SHOULD have next to none.

Unions are designed to protect workers against unfair management practices not to create a situation where the rest of society subsidises an inefficient industry.

The goverment if it has any sense will negotiate with the unions before the companies are nationalised, using the stick of 'well if you mess about we'll let the whole lot collapse' ... but if they take that route they had better mean it as if the unions are as stupid as the coal miner unions in the UK were (which is the nearest equivalent to the present situation imho) they might need a fair bit of persuasion.

[JPhillips]

The big problem isn't current workers, but legacy benefits. Much of the labor cost issue goes away with nationalized health care. It wouldn't fix everything, but taking away health care expenses would do a lot more good than a bailout.

[Flasch186]

unfortunately the timelines arent in sync to save them.

[Edward64]

Just heard Bill Kristol on Fox Sunday roundtable say (paraphrased) people he has spoken with (economists?) are concerned about a Depression.

He sounded concerned. Bill has always seemed to be even handed (as opposed to Britt and Juan) and I like him.

Consensus is some sort of huge stimulus package.

[Galaxy]

The big problem isn't current workers, but legacy benefits. Much of the labor cost issue goes away with nationalized health care. It wouldn't fix everything, but taking away health care expenses would do a lot more good than a bailout.

Nationalized health care would just shift the expenses and creates a whole new set of problems.

[Raiders Army]

In today's AJC, there was a full page ad/article from the car dealership association pointing out that if wasn't just the big 3 but thousand's of dealerships that would also be impacted by a failed bailout.

I am somewhat torn. IMO the big 3 and unions have it coming. Joe the mechanic at a dealership or Bob the service desk manager does not.

I am leaning towards some sort of bailout but would like comprehensive changes etc and government taking some equity stake/ownership.

Although Joe the mechanic at the dealership or Bob the service desk maanger don't have it coming, that's life.

I shouldn't have it coming that my taxes are going to bail them out.

[Galaxy]

Do people really think that the Big 3 will just shut down? Or do you see them filing for Chapter 11 instead?

[Marc Vaughan]

Nationalized health care would just shift the expenses and creates a whole new set of problems.

Actually nationalised health care would largely REMOVE a lot of the expenses.

The European system of nationalised health care would provide adequate health care for the entire population of America (unemployed, elderly, young everyone) for what the country is currently paying for its private system. Thats WITHOUT contributing any more money that is presently being done (ie. America is currently heavily overpaying for the health service they have - despite you not having what I'd consider 'basic' services like being able to call a doctor out to your house to see your son when he's ill etc.).

The privatised American Health Care system is a joke from what I've seen of it, its incredibly inefficient and setup purely as a fiscal enterprice to make money.

Whenever you see a doctor you're encouraged to take numerous tests which are worthless at best and at worst harmful, sprained an ankle ... feel sick there are dozens of tests we can run just in case, bah humbug.

(sorry but while its not 'my' money paying for the individual tests - in the long run that bumps up the insurance and thus eventually that money does come from average joes - in the form of the companies paying for the cover having fewer workers)

PS - Sorry if that comes across as vehement but its been one of the biggest differences I've seen since moving over here, I was shocked that a country which considers itself a world leader has such a poor setup).

[molson]

Actually nationalised health care would largely REMOVE a lot of the expenses.


The United States already spends more money per capita on health care (including as % of GDP) than any other country.

What's needed is reform, not just "nationalization". The United States government can't possibly run something on this kind of scale well. Full nationalization would be a disaster on the scale of Freddie Mac/The Tax Code/The Military, etc.

[Buccaneer]

Marc, the thing that I keep going back to is quality. We have most of the world's leading specialists and people come from all over the world to some of our specialists and clinics. I fully know very well about add-on costs (e.g., when my wife had her surgery this summer, I got bills from seven different entities) and the need to many tests (shouldn't we look at why doctors need to do so much to cover their butts?).

But it's like the adage: service, quality, price - choose 2 of 3 (or something like that). I, for one, would not suffer quality when it comes to specialized care. There is already an acute shortage of certain specialists in this country (like ob-gyn doctors) because of external forces driving them away. Like in most professions, there is the incentive to excel (re: $$$) and to be the best, adding the factor that many put a high value of health regardless of cost.

I do not my private health care to change, I have been extremely happy with the quality of service I and my family have received over the years. Let's work on getting coverage to those that need it but don't provide a one-size-fits-all solution to those that value quality over price.

[Buccaneer]

The United States already spends more money per capita on health care (including as % of GDP) than any other country.

What's needed is reform, not just "nationalization". The United States government can't possibly run something on this kind of scale well. Full nationalization would be a disaster on the scale of Freddie Mac/The Tax Code/The Military, etc.

Not to mention turning private professionals into bureaucratic-laden government workers. That's probably alright for some professions, but not for something important like our individual health.

[Tekneek]

If Walmart gets a better deal from suppliers because it is so large, why wouldn't nationalized health care, with such a massive customer base, not be able to strongarm better prices?

After being opposed to it for years, while watching insurance companies make profits while raising rates and reducing benefits, I am left wondering why letting more people into a nationalized health insurance system would be bad for anyone other than the providers (who would naturally be forced into reduced "contract prices" for those people, just the same as Walmart suppliers end up doing that as well).

As far as the Big Three goes, they can go under. If they had rolled into DC saying they needed this capital injection because they were not going to make any purely-gasoline fueled vehicles in the future and needed help transitioning all of their production facilities to make hybrids, electric vehicles, and other alternative energy vehicles, I would be more inclined to green light it. Instead, they came in and pretty much want to keep business as usual. No dice, guys. Enjoy the flight back on your posh corporate jet. The next time you want to beg for money, you should fly coach/economy class, rent a small car and drive yourself to the hearing, bringing a commitment to reduce your salary and a "paradigm changing plan." Everyone is quick to blame the UAW for the woes of the Big Three, but upper management is ALSO compensated at much higher levels than their competition. If there is a problem there with compensation, it starts at the top.

[molson]

If Walmart gets a better deal from suppliers because it is so large, why wouldn't nationalized health care, with such a massive customer base, not be able to strongarm better prices?



If the government could run healtcare as well as Walmart runs its business, I'd be all for it.

[Tekneek]

If the government could run healtcare as well as Walmart runs its business, I'd be all for it.

If all they have to do is negotiate "contract fees" like the other insurance companies, I don't see the problem. Why wouldn't they be able to negotiate great rates with the providers? If the choice is getting paid these contract prices for providing care to a group that is otherwise uninsured (and subsequently would likely default on their uninsured charges anyway (which tend to be larger than insured rates)), why wouldn't they choose something over nothing?

If they can keep the lobbyists out of the system, it could work.

[molson]

If all they have to do is negotiate "contract fees" like the other insurance companies, I don't see the problem. Why wouldn't they be able to negotiate great rates with the providers? If the choice is getting paid these contract prices for providing care to a group that is otherwise uninsured (and subsequently would likely default on their uninsured charges anyway (which tend to be larger than insured rates)), why wouldn't they choose something over nothing?

If they can keep the lobbyists out of the system, it could work.

I guess the same reason the military can't negotiate "great rates" for military contracts. Maybe Haliburton gets into the medical care game.

[Tekneek]

I guess the same reason the military can't negotiate "great rates" for military contracts. Maybe Haliburton gets into the medical care game.

It is because they don't want to. The DOD process is highly flawed and is not even a reasonable comparison. I'm not talking about putting the "healthcare for the nation" out as a contract bid. I am talking about a system that negotiates fees for products and services just like a private provider does, but as a non-profit entity.

If it was ran just like any other insurance company on that side of the business, where is the problem?

[GrantDawg]

It is because they don't want to. The DOD process is highly flawed and is not even a reasonable comparison. I'm not talking about putting the "healthcare for the nation" out as a contract bid. I am talking about a system that negotiates fees for products and services just like a private provider does, but as a non-profit entity.

If it was ran just like any other insurance company on that side of the business, where is the problem?


The idea is to use the existing healthcare the Feds already have and open it for everyone. I think they have a pretty good package, and with even more buying power could probably get even better. The question is implementation, of course.

[Raiders Army]

The problem if they contract out healthcare, I can see crap "professionals" become providers because the government would give out contracts to minority businesses as part of quotas.

We lost a contract to an Alaskan Native American owned company and they hired all of our instructors. The government is paying them 150% of what they were paying us for the same product. As a taxpayer, it just doesn't make any sense.

[Tekneek]

Ok. So the fear is that the only hospital that those with the government plan would be able to go to is the one owned and operated by minorities? That the only doctors you will be able to see are minorities? Sounds like Aetna to me. Seems like a majority of the medical professionals on any plan I've had over the past several years have not been white (or even male, so they're already predominantly minority without a government plan...).

[GrantDawg]

Ok. So the fear is that the only hospital that those with the government plan would be able to go to is the one owned and operated by minorities? That the only doctors you will be able to see are minorities? Sounds like Aetna to me. Seems like a majority of the medical professionals on any plan I've had over the past several years have not been white (or even male, so they're already predominantly minority without a government plan...).


Actually, that is a symptom of one of the many problems with our current system. Many, many primary care doctors are coming from over-seas, because home grown doctors are going to specialties because that is where the money is. Same with Ob-Gyn's.

[bhlloy]

Actually nationalised health care would largely REMOVE a lot of the expenses.

The European system of nationalised health care would provide adequate health care for the entire population of America (unemployed, elderly, young everyone) for what the country is currently paying for its private system. Thats WITHOUT contributing any more money that is presently being done (ie. America is currently heavily overpaying for the health service they have - despite you not having what I'd consider 'basic' services like being able to call a doctor out to your house to see your son when he's ill etc.).

The privatised American Health Care system is a joke from what I've seen of it, its incredibly inefficient and setup purely as a fiscal enterprice to make money.

Whenever you see a doctor you're encouraged to take numerous tests which are worthless at best and at worst harmful, sprained an ankle ... feel sick there are dozens of tests we can run just in case, bah humbug.

(sorry but while its not 'my' money paying for the individual tests - in the long run that bumps up the insurance and thus eventually that money does come from average joes - in the form of the companies paying for the cover having fewer workers)

PS - Sorry if that comes across as vehement but its been one of the biggest differences I've seen since moving over here, I was shocked that a country which considers itself a world leader has such a poor setup).


FWIW - my experience as an immigrant from the UK is pretty much exactly the same as Marc's. The NHS isn't perfect but it's a hell of a lot better than the situation I am in right now (and I have the money to pay for a decent health plan)

A guy at work has been forced by his health plan to take an MRI and some other ridiculously expensive test for knee pain, and all the guy wants is some painkillers. It's a crazy system where the people that are providing the care have absolutely no incentive to keep costs down.

[Raiders Army]

Ok. So the fear is that the only hospital that those with the government plan would be able to go to is the one owned and operated by minorities? That the only doctors you will be able to see are minorities? Sounds like Aetna to me. Seems like a majority of the medical professionals on any plan I've had over the past several years have not been white (or even male, so they're already predominantly minority without a government plan...).
To clarify, it is not the fear that a hospital will be owned and operated by minorities, but it will be owned and operated by personnel who are not the most competent.

[Tekneek]

To clarify, it is not the fear that a hospital will be owned and operated by minorities, but it will be owned and operated by personnel who are not the most competent.

Oh. And that the government will only negotiate network services with those entities? Are you sure these incompetent medical professionals will setup shop in every community of the nation? You do realize they won't be able to force everybody to go to "Quack Doctors 'R Us" in backwoods Alaska, right?

[Flasch186]

If the government could run healtcare as well as Walmart runs its business, I'd be all for it.

Im confused, some on here were saying the TARP was a bad thing cuz the govt would botch it. They then didnt spend the monoey which should please those against the TARP to begin with thereby giving credit where it's due but I havnt heard anything of the sort. Now I know that isn't necessarily what we're talking about now but, IMO, they botched the TARP but 'saying' theyre not going to buy the bad assets so why arent the opponents of it giving Paulson credit and thereby earning some, even a tiny bit of credibility for other govt run systems going forward?

[Raiders Army]

Oh. And that the government will only negotiate network services with those entities? Are you sure these incompetent medical professionals will setup shop in every community of the nation? You do realize they won't be able to force everybody to go to "Quack Doctors 'R Us" in backwoods Alaska, right?

I never said the government will ONLY negotiate with these entities. Furthermore, I never said they were incompetent.

[JediKooter]

Actually nationalised health care would largely REMOVE a lot of the expenses.

The European system of nationalised health care would provide adequate health care for the entire population of America (unemployed, elderly, young everyone) for what the country is currently paying for its private system. Thats WITHOUT contributing any more money that is presently being done (ie. America is currently heavily overpaying for the health service they have - despite you not having what I'd consider 'basic' services like being able to call a doctor out to your house to see your son when he's ill etc.).

The privatised American Health Care system is a joke from what I've seen of it, its incredibly inefficient and setup purely as a fiscal enterprice to make money.

Whenever you see a doctor you're encouraged to take numerous tests which are worthless at best and at worst harmful, sprained an ankle ... feel sick there are dozens of tests we can run just in case, bah humbug.

(sorry but while its not 'my' money paying for the individual tests - in the long run that bumps up the insurance and thus eventually that money does come from average joes - in the form of the companies paying for the cover having fewer workers)

PS - Sorry if that comes across as vehement but its been one of the biggest differences I've seen since moving over here, I was shocked that a country which considers itself a world leader has such a poor setup).

Marc, I've never experienced any of the issues you just described.

If I'm sick enough, I go to Urgent Care, I see a doctor, they may or may not prescribe something, but, I can't ever remember having any extra tests or anything like that.

Even when I've had more serious issues (kidney stones, busted knee, dislocated shoulder...) I had nothing but good service. I've had several different health care providers and the only issues I've ever had are with billing.

There's horror stories regardless of what system is being used and I'd like to say you get what you pay for, but, I don't think that's the case. I pay about 100 a month for my insurance, 10 dollar co-pay for doctor's visits and presriptions.

I'm sorry that you've had nothing but horrible experiences with our health care system here.

[Tekneek]

There's horror stories regardless of what system is being used and I'd like to say you get what you pay for, but, I don't think that's the case. I pay about 100 a month for my insurance, 10 dollar co-pay for doctor's visits and presriptions.

You have your own insurance for $100 a month w/ $10 dollar co-pays? What is your deductible? Who is the provider?

Or is this through an employer that is picking up the rest of your premium?

[flere-imsaho]

PS - Sorry if that comes across as vehement but its been one of the biggest differences I've seen since moving over here, I was shocked that a country which considers itself a world leader has such a poor setup).

The five years I spent as a student in the UK made me realize what a huge clusterfuck American health care is, and I've always been able to afford good health care in the U.S.

Marc, the thing that I keep going back to is quality. We have most of the world's leading specialists and people come from all over the world to some of our specialists and clinics.

What percentage of Americans do you think are able to afford these specialists, Bucc? Even those who have good health care? You're also talking about a very small percentage of cases that need these specialists, in fact, I'd bet the number of Americans going abroad to places like India to save money on routine surgeries (yes, it happens) is actually larger than the number of people coming to America to see specialists (or at least close).

Furthermore, where do you think most of these specialists are? They're at institutions affiliated with hospitals or universities, not at insurance companies. And how are these institutions funded? By the government and by private donations (quite a bit of the latter, in many cases). These specialists aren't going to go away if the health care system changes.

I, for one, would not suffer quality when it comes to specialized care.

Well, I hope you don't have an HMO, then, because if you do, it's unlikely to be your choice, in the end. In fact, it's likely to be the choice of some bureaucrat at the insurance company. Heck, even if you have a PPO, your insurance company may decide you don't need to see a specific specialist, and refuse to pay, or refuse to pay in full.

Not to mention turning private professionals into bureaucratic-laden government workers. That's probably alright for some professions, but not for something important like our individual health.

Most health insurance in the U.S. is already run by massive bureaucracies. They're just called Blue Cross Blue Shield, Humana, Guardian, etc... instead of the U.S. Government. Don't kid yourself here.

[JonInMiddleGA]

Most health insurance in the U.S. is already run by massive bureaucracies. They're just called Blue Cross Blue Shield, Humana, Guardian, etc... instead of the U.S. Government.

Any of whom I trust (as little though that may be) exponentially more to get something right than I do the U.S. Government (or any state/local government for that matter).

[Marc Vaughan]

Marc, the thing that I keep going back to is quality. We have most of the world's leading specialists and people come from all over the world to some of our specialists and clinics. I fully know very well about add-on costs (e.g., when my wife had her surgery this summer, I got bills from seven different entities) and the need to many tests (shouldn't we look at why doctors need to do so much to cover their butts?).

If you look around the world a lot of countries have 'leading specialists' in various areas - land mass/population-wise its not particularly surprising that America has a lot of 'leading specialists' really to be honest.

One of the reasons I lived near Cambridge when I was in England is that Addenbrookes hospital which is world reknowned for its maternity/child surgery side of things.

I do not my private health care to change, I have been extremely happy with the quality of service I and my family have received over the years. Let's work on getting coverage to those that need it but don't provide a one-size-fits-all solution to those that value quality over price.
But surely thats an aside - in England we have a nationalised health system BUT you can take up private health care if you want to yourself ....

The difference is that the private health care is dirt cheap because they know most people will still use the NHS for minor ailments and so while they're covered under private cover the actual cost to the customer is far cheaper than in America (for instance the cover here for my family if I wasn't covered by work is a princely $1800/month (shocked the heck out of me, although I do have a family of 5) - back home it was about £80/month for better cover privately - ie. less in the way of excess charges and much higher caps on dental work etc. - oh and don't get me started on Opticians bills, put it this way I wait to see an optician until I travel back to the UK where the eyesight test is FREE rather than $100+).

[Marc Vaughan]

Not to mention turning private professionals into bureaucratic-laden government workers. That's probably alright for some professions, but not for something important like our individual health.
The amount of bureaucratic stuff in the health system over here is unbelievable compared to the UK to be honest, back home you go in - see someone, get given a prescription and thats it (I can't ever recall being asked for ID come to think of it apart from when you initially sign up to the practice, but then who'd want to fake being me and besides generally they roughly 'know' their patients as you stay with the same doctor for years).

Over here you fill out a form, see someone, give id, fill out a few more forms and ... then you get a prescription. But wait we're not finished several weeks later I'll get sent a stack of paperwork to file from the Health insurance company and also from the company who ran tests/whatever .... all of this 'bumpf' has to be paid for and is ultimately increasing the cost of medical coverage.

[Marc Vaughan]

You have your own insurance for $100 a month w/ $10 dollar co-pays? What is your deductible? Who is the provider?

Or is this through an employer that is picking up the rest of your premium?

I'd expect its a company provided scheme like the one I'm on - I think I pay a similar amount, however because I moved 'divisions' within SEGA I know how much it'd cost to continue that cover outside of the company (for some legal reason they had to switch the cover when they switched departments which lead to the company involved sending a letter offering to allow me to continue the coverage ... presumably by selling my house to gover the first months charge ;) ).

As an aside Jedi - do you have kids and/or a wife? .. as I'm lucky enough to be generally fairly healthy and so for me the American system would be fine, its my missus and kids who cost a fortune under the American system, kids pick up illnesses from school all the time which you feel obliged to get checked by a doctor just in case and having had kids has left my wife with weak enamel on her teeth (and every filling or whatever has a deductable on it, yay ;) ).

[PurdueBrad]

Wow, I'm amazed at some of the health care experiences you guys are having. I have BC/BS of Illinois, have been put on numerous trial drugs for my illness, seen numerous specialists, and currently have a nurse coming to my home from an hour and a half away twice a month to simply give me a shot and I have never had to fill out any paperwork nor have I ever had to pay more than co-pay ($20 for office visits, $10 for 3 month supplies of most of my meds, and $75 for a $8800 shot that I take). I enjoy our current health care system, always have, particularly after hearing how many problems several of my British friends had in England with their system.

[JPhillips]

I guess the same reason the military can't negotiate "great rates" for military contracts. Maybe Haliburton gets into the medical care game.

The big difference is that most defense contracts don't have other purchasers. With healthcare, there are numerous entities around the globe paying for services. The best way to deal with prices IMO is to demand that the government get the lowest available price. Big corporations already demand this, but the government has allowed companies to charge excessive prices.

[Marc Vaughan]

Wow, I'm amazed at some of the health care experiences you guys are having. I have BC/BS of Illinois, have been put on numerous trial drugs for my illness, seen numerous specialists, and currently have a nurse coming to my home from an hour and a half away twice a month to simply give me a shot and I have never had to fill out any paperwork nor have I ever had to pay more than co-pay ($20 for office visits, $10 for 3 month supplies of most of my meds, and $75 for a $8800 shot that I take). I enjoy our current health care system, always have, particularly after hearing how many problems several of my British friends had in England with their system.

Is very possibly partially a regional thing - especially with a country the size of America standards and service can vary hugely (its similar back home there are 'problem' NHS areas, particularly in some regions of larger cities).

As with most things in life I think you tend to associate your own experiences with whether something is 'good/bad' in life - for instance I love my Chysler Aspen, its the right size for me and has never had anything wrong with it since I've got it ... but I've spoken to people who've had real hassles with their ones. Now I'd buy one again without a second thought, but if it'd had serious mechanical issues with it continually like some of the people I've spoken to I'd have branded it a bad vehicle and never had one again.

(so in essence I don't think there's a right or wrong perspective as far as is the UK or American setup better worse as far as providing care, I'm sure there is good and bad coverage in both systems .... I prefer the UK one because I've always thought providing free health coverage to all people is something that should be a 'right' - but then again I've been brought up with that mentality because of where I was born and raised).

[PurdueBrad]

That could be true Marc, I hadn't considered that.

[Galaxy]

I just see a lot of problems with our health care from all aspects.

1) A deeper, broader pool of state-of-the-art technology, specialists, and hospitals. All that costs more. If you want the best, you got pay for it. Throw in the high costs of schools (8-9 years-Undergraduate and Med school) and a rather low wage during your residency, doctors aren't making real money until they hit their mid-to-late 30s/even 40's.

2) A lack of malpractice protection for doctors. I think one of the major problems that doctors/surgeons subscribe so many tests, drugs, and treatments is to prevent themselves from getting sued. Face us, Americans (in general) are lawsuit, get-rich-quick, happy. When doctors are paying six-figures just for insurance, we have a problem. The UK (not sure on other countries) has a very strong system in preventing this (if you lose a civil case, you have to pay, correct?).

3) I believe doctors/surgeons are losing money now on to see patients on Medicare/Medicaid. That is why you are having a major problem coming with doctors/specialists not accepting it. When they do, they have to make up those costs elsewheres.

4) Patients-As noted in my first paragraph, I think doctors have lost control to demanding patients who want the best, all the tests, are lawsuit-happy, but want someone else to pay for it. Everyone wants to lastest $200-a-pill drug or the lastest treatment that just came out, but they won't pay for it. A MRI machine alone costs around a million bucks. Doctors need to be given back control. Also, we need to start taking care of ourselves better. If a smoker gets lung cancer, should taxpayers really be responsible to pay for the very expensive care they'll get due to their poor actions?

5) Insurance companies, paperwork, and high overhead costs. Insurance companies are telling doctors what they need to do, what they can't do, and what they will pay. They have to fill out so much paperwork that requires a high overhead cost, they are having trouble.


A universal health care system is useless if you don't fix the problems. I also would hate the idea of a system like Canada which outlaws practice, non-governmental practices. If a skilled surgeon wants to be a private practice, then he should.

[sterlingice]

Bush says Citigroup deal needed to protect system - Yahoo! News (http://news.yahoo.com/s/ap/20081124/ap_on_go_pr_wh/bush_paulson)
Fratto said companies like Citigroup are so "systemically large" that they could "bring down not just the entire U.S. financial system but the global financial system."

So, yeah, Citigroup is being bailed out, under the guise of "too big to fail". It's time to bring a big trust busting stick out on all of these companies

SI

[Bigsmooth]

Check this out:

"Hill City, Lakota - November 24, 2008 - In a stunning development, the Free & Independent People of Lakota announced today the introduction of the world's first non-reserve, non-fractional bank that accepts only silver and gold currencies for deposit. Indian Tribe N. Dakota> http://press.freelakotabank.com/ (http://press.freelakotabank.com/)


Welcome to Free Lakota Bank The Free Lakota Bank is the world's first non-reserve, non-fractional bank that issues, accepts for deposit, and circulates REAL money...silver and gold. All of our deposits are liquid, meaning they can be withdrawn at any time in minted rounds.

"Money is the barometer of a society's virtue. When you see that trading is done, not by consent, but by compulsion...when you see that in order to produce, you need to obtain permission from men who produce nothing...when you see your laws don't protect you against them, but protect them against you...when you see corruption being rewarded and honesty becoming a self-sacrifice...you may know that your society is doomed.''
At the Free Lakota Bank, we issue, circulate and accept for deposit only AOCS-Approved silver and gold currencies. Silver & gold are a store of value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Since we deal only in real money, we do not participate in any central bank looting schemes.

Money is made possible only by those who produce. Paper is not money, instead merely a promise to pay. We hope that some day the rest of the world will awaken from the American Dream: the dream that a person can sustain life by consuming more than producing. We call it the American Dream because you must be asleep to believe it. Well, that dream now has a silver lining; as people discover the dream is really a nightmare, the only solution is a return to value: value that comes from production and honest trade."

[JonInMiddleGA]

I got a quarter that says something in the Lakota press release is illegal.

[SportsDino]

Use of the term 'too big to fail' is becoming too big too fail, it must now be applied to all situations.

In other news, yay for shorting Citigroup a few months ago, 4 times return after the cover. Wondering if I'm ever gonna run out of banks to short at this rate. Bah humbug bailouts and mega mergers, killing the economy slowly.

[Fighter of Foo]

"If you had any doubt at all about the primacy of Wall Street over Main Street; the utter lack of transparency behind the biggest government giveaway in history to financial executives, and their shareholders, directors, and creditors; and the intimate connections the lie between Administrations — both Republican and Democratic — and the heavyweights on Wall Street, your doubts should be laid to rest. Today it was decided the government will guarantee more than $300 billion of troubled mortgages and other assets of Citigroup under a federal plan to stabilize the lender after its stock fell 60 percent last week. The company will also will get a $20 billion cash infusion from the Treasury Department, adding to the $25 billion the bank received last month under the Troubled Asset Relief Program.


This is not a particularly good deal for American taxpayers, but it is a marvelous deal for Citi. In return for all the cash and guarantees they are giving away, taxpayers will get only $27 billion of preferred shares paying an 8 percent dividend. No other strings are attached. The senior executives of Citi, including those who have served at the highest levels in the US government, have done their jobs exceedingly well. The American public, including the media, have not the slightest clue what just happened."


link (http://robertreich.blogspot.com/2008/11/citibank-scores.html)

[Marc Vaughan]

. A MRI machine alone costs around a million bucks. Doctors need to be given back control. Also, we need to start taking care of ourselves better. If a smoker gets lung cancer, should taxpayers really be responsible to pay for the very expensive care they'll get due to their poor actions?
This is something I find interesting - do insurance companies charge considerably more to smokers in America?

In England the goverment gets around this due to the huge tax on smoking (packets of cigarettes are in excess of £5 ($8) for 20 smokes of which something like £3-4 is tax I believe).

I remember watching a debate on smokers and the NHS and actually the tax from smoking in England more than covers the costs of medical care for their illnesses.

[Buccaneer]

Do a majority of private and public employees (at least working for a non-small business) get covered by plans where the employers pick up most of the premiums? I have never belonged to an HMO or have had to go through a government program like VA or Medicare. It's always been an EPO for me and my family. That was my point about specialists. I have the same deductable whether I go to my family doctor once a week or to a specialist. The only thing that's not covered by the 85% rule is MRI. The experience that I have had was that regardless if I had a $60,000 surgery like I had in 2004 or my wife's surgery this summer or simply office visits, the administrator of our plan (the plan was locally-owned/participated and not one of the big bureaucracies) lowers the billed fees by half and then pays for 85%, minus the $20-25 copay. I have not been turned down for any specialists we have seen (about 8-10 different ones over the years).

[Tekneek]

Apparently, in preparation for their big bailout from the taxpayers of America, my wife received a letter informing her that her interest rate on our lone Citibank credit card was going to 17.99% for new purchases. This has nothing to do with late payments (which never happened), or a credit score issue (her score is 815 as of this past July). Upon being called, they admit as much, and basically say they are doubling it because they can and she can choose to not accept the change and they will close the account when the card expires.

If they are treating excellent credit risks this way, just what business are they intending to be in?

[DanGarion]

Apparently, in preparation for their big bailout from the taxpayers of America, my wife received a letter informing her that her interest rate on our lone Citibank credit card was going to 17.99% for new purchases. This has nothing to do with late payments (which never happened), or a credit score issue (her score is 815 as of this past July). Upon being called, they admit as much, and basically say they are doubling it because they can and she can choose to not accept the change and they will close the account when the card expires.

If they are treating excellent credit risks this way, just what business are they intending to be in?
Citibank is the worst company in the world. I never once missed a credit card payment and they raised my interest rate to 29.9% based upon my credit report. I canceled my account the day I found out they raised it and will never deal with them again.

[Marc Vaughan]

I think the reason for banks raising their rates is simple.

* America has a cosy cartel of banks within it (no foreign institutions are allowed).
* The number of banks in this cartel has dropped with the mergers leading to less competition and easier price fixing between the few remaining.

Simple as that really, they don't care if they lose sensible customers - they're after the ones with balances who'll pay interest - thats where their profit is.

If America opened up the country to foreign banks then instantly you'd have a MUCH more customer orientated system which would provide a much better and more competitive service for people.

Apart from the health care the main thing I miss about England on the 'financial' front is the banking system back home - NO bank charges, a grace £50 overdraft limit at most banks (within which the bank consider it a minor mistake on your behalf no letters or hassle), banks being happy to give you a resonable over-draft facility and work with you if you anticipate a hard patch coming up (I've done this a few times in the past myself back home - the banks actually reward sensible planning heaven forbid ;)), a DECENT level of interest on savings (normally between 5 and 8% depending on the account at present) finaly a sensible setup where if you try to use your card without funds in the account it bounces the card usage rather than putting it through.

[Tekneek]

So now we are facing a future with a banking system that attempts to get over on all their personal banking (and small business) customers. A banking system composed of a handful of banks, with all the mega-consolidation driven by the hands of government.

So, once again, we pay for it on one end with our own money saving these terrible businesses, and we pay for it on the other end with more draconian policies and fees. I'd still like to know why this is really better for the individuals of this nation. As each new bailout happens, this seems much worse for the average individual than it was the day before.

[Mizzou B-ball fan]

Looks like the National Insurance premiums and taxes in Britain are going to see a big increase. That's a shame because it's only going to make the economic situation worse than it already is in that region.

Pre-Budget report: National Insurance rise adds to high earners' woes - Telegraph (http://www.telegraph.co.uk/finance/financetopics/budget/3513516/Pre-Budget-report-National-Insurance-rise-adds-to-high-earners-woes.html)

[Marc Vaughan]

So now we are facing a future with a banking system that attempts to get over on all their personal banking (and small business) customers. A banking system composed of a handful of banks, with all the mega-consolidation driven by the hands of government.

So, once again, we pay for it on one end with our own money saving these terrible businesses, and we pay for it on the other end with more draconian policies and fees. I'd still like to know why this is really better for the individuals of this nation. As each new bailout happens, this seems much worse for the average individual than it was the day before.

If the American goverment were brave enough to open up your banking to foreign banks then it'd have a huge positive effect on things for the consumer imho.

(The reason banks are competitive in the UK is simply that there are lots of them and only the decent ones survive, others lose customers and get bought up by the larger banks. A UK bank wouldn't get off the ground if they tried to put in place American banking style charges - simply put no one would stand for it.)

The old 'reasoning' for only having American banks from what I understand was a fear of relying upon foreign institutions for assets - but seeing as most of the American banks are heavily owned by the middle east these days I don't really think thats a huge issue now ;)

[Marc Vaughan]

Looks like the National Insurance premiums and taxes in Britain are going to see a big increase. That's a shame because it's only going to make the economic situation worse than it already is in that region.

Pre-Budget report: National Insurance rise adds to high earners' woes - Telegraph (http://www.telegraph.co.uk/finance/financetopics/budget/3513516/Pre-Budget-report-National-Insurance-rise-adds-to-high-earners-woes.html)

Its swings and roundabouts - they've also cut the level of VAT by 2.5% which effectively balances things for high earners and ensures that low wage earners end up better off (as they're the ones worst hit by the recession).

To be honest the UK has always had a high income tax rate compared to America - thats the price you pay for the facilities provided for society (ie. nationalised health care, social security etc.) .... also take into account the levels at which they kick in - if you earn £150,000 ($225,000) then to be honest paying a little extra in national insurance tax isn't going to kill you imho (especially when you're getting an extra 2.5% for your money via. the VAT cut).

PS - Yes I know I always come across in support of England, can't help it ... natural bias :D

[Galaxy]

One problem with the UK adding this new tax rate. They'll just drive even more of these high tax earners, and businesses, to tax-friendly countries like Switzerland, Monaco, Singapore, or the United Arab Emirates (Dubai). Unlike the US where citizens are tax on their global income regardless of where they like, Britain doesn't have this.

[Galaxy]

Interesting news is the battle between the US government/IRS and UBS.

I wonder if US government will win? http://www.guardian.co.uk/business/2008/nov/14/ubs-switzerland

Also, I'm guessing the Swiss government will be aggressive in protecting its laws.

[Grammaticus]

If the American goverment were brave enough to open up your banking to foreign banks then it'd have a huge positive effect on things for the consumer imho.

(The reason banks are competitive in the UK is simply that there are lots of them and only the decent ones survive, others lose customers and get bought up by the larger banks. A UK bank wouldn't get off the ground if they tried to put in place American banking style charges - simply put no one would stand for it.)

The old 'reasoning' for only having American banks from what I understand was a fear of relying upon foreign institutions for assets - but seeing as most of the American banks are heavily owned by the middle east these days I don't really think thats a huge issue now ;)


The Wiki disagrees, see below. I don't know if there is a list of banks per capita by country or something like that. I really don't think the UK has more banking options than the US. It seems like HSBC and Barclays issue about every credit card in the UK. I don't know enough about consumer services offered by the banks in the UK, but I can vouch for getting pretty much free banking (checking account) everywhere I have lived in the US.

If you live in the US and you are paying a bunch of banking fees, you are not looking very hard.

Independent British banks
The table shows the main independent British banks, in order of market capitalisation. The list is quite short as British banking has been highly consolidated since the early 20th century. Unlike some other major economies, the UK does not have a major stratum of independent local banks. The list has shrunk further during 2008: Northern Rock was nationalised by the UK Government, followed by Bradford & Bingley; Alliance & Leicester has been acquired by Banco Santander, owners of Abbey National; Lloyds TSB plc announced, on 18 September 2008, a confirmed agreement to take over HBOS plc[1][2][3].

Bank-Headquarters-Market value(£bn)-Assets(£bn)-Assets($bn)

HSBC Bank London 109.91 1,319.65 2,348.98
Royal Bank of Scotland Edinburgh 29.12 2,139.05 3,807.51
Barclays Bank London 28.29 1,366.48 2,432.34
Standard Chartered London 19.35 184.63 328.65
Lloyds TSB London 15.65 393.87 701.08
HBOS Edinburgh, Halifax (operational) 8.96 750.66 1,336.17
Co-operative Bank Manchester — 39.00 71.33

Note: Market values retrieved on 4th October 2008 from Times Online [4]. Assets listed as of 2nd April 2008, apart from Co-operative Bank which are listed as of[update] 31 December 2004, and are listed in billions of pounds sterling and U.S. dollars.[5] Also note that market values have been highly volatile in 2008, due to the Sub-prime mortgage crisis.

There are however a small number of independent specialist or local banks. They are all just a small fraction of the size of the smallest of the banks in the table above: Airdrie Savings Bank, C. Hoare & Co, Close Brothers Group, Julian Hodge Bank, N M Rothschild & Sons. There is also a government-run savings bank called National Savings and Investments.

The other main class of consumer financial service organisation in the United Kingdom is the building society, but the building society sector is much smaller than it used to be as many major building societies demutualised in the 1980s and 1990s. Halifax (now part of HBOS) and Abbey National (now foreign owned) were the two largest building societies. The remaining building societies which demutualised have all subsequently been acquired, either through nationalisation or acquisition by other banks. See the building society article for a list of the largest remaining building societies. Only the Nationwide is large enough to appear in the table above if it were a bank.

List of banks in the United Kingdom - Wikipedia, the free encyclopedia (http://en.wikipedia.org/wiki/Banks_of_the_United_Kingdom)

[SteveMax58]

If you live in the US and you are paying a bunch of banking fees, you are not looking very hard.


This is what I was thinking. I havent paid fees or charges since...well, I can't really recall exactly. Maybe 1997-ish?

I've been with Wachovia since they bought First Union, which I had accounts with. While I've heard negative things from others that I know, I have to say I've been more than happy with Wachovia's (lack of) fees, pleasant customer service, and uncommonly helpful representatives who always seem to point me towards some helpful direction which benefits me every time I call up with a need/request/etc.

[Flasch186]

Mortgage rates plummeted today which is a very very good thing. If this direction can hold this could help navigate through the spring selling season and help get the mud to begin to dry. We'll see as everything theyve done so far has lacked endurance.

[Mac Howard]

Its swings and roundabouts - they've also cut the level of VAT by 2.5% which effectively balances things for high earners and ensures that low wage earners end up better off (as they're the ones worst hit by the recession).

I was quite taken by that, Marc, when I saw it on the news.

I've often thought that reliance on interest rates alone to control the economy and inflation through the money supply (described by Ted Heath in the past as "like a one club golfer") as too simplistic and that control via a national sales tax would offer additional/alternative and more flexible control.

For example, if they wish to stimulate the economy then they will drop interest rates to increase the money supply. But that often triggers inflation. But if you reduce a national sales tax (VAT) then you not only stimulate through increasing the money supply but you reduce inflation at the same time (retail prices come down) - or at the very least compensate to some extent for the increase.

I've never seen that suggested so I guess there must be something wrong there but I can't see it.

Of course the government loses revenue but that is compensated by the increase in economic activity.

It all seems too good to be true some how or another :)

But I presume that's what Brown is doing.

I would also add that if the banks in the UK now behave as you say then they've improved a lot since I was there :)

[Marc Vaughan]

If you live in the US and you are paying a bunch of banking fees, you are not looking very hard.
All the accounts I have over here charge unless you have a certain amount in the account (and not just keeping it in credit, normally a reasonably substantial amount).

The best I have is a Wamu account where they charge and then refund it if I keep over a certain amount in the account - if you know a better bank then please let me know, but both Wachovia and Wamu (which are the closest banks to me geographically - I've heard bad things about Bank of America which is the other alternative near by so haven't checked them out yet).

[Marc Vaughan]

I would also add that if the banks in the UK now behave as you say then they've improved a lot since I was there :)
Heh - they've been pretty good all my adult life, however in recent years the 'charges' they made for overdrafts (which weren't as heavy as those made by the banks I've used in America) were made illegal (and indeed many people were able to reclaim those they'd paid from several years past).

[Marc Vaughan]

[QUOTE=Grammaticus;1893931I really don't think the UK has more banking options than the US.List of banks in the United Kingdom - Wikipedia, the free encyclopedia (http://en.wikipedia.org/wiki/Banks_of_the_United_Kingdom)[/QUOTE]

I wasn't meaning that there were more bank corporations (although considering the size of England I think there is quite a decent choice, what I was trying to argue is that by allowing foreign banks in it would increase choice and thus improve competition and service to customers.

If you look at the banks in England several are not 'native' banks (HSBC was I believe a Hong Kong based bank originally for instance. These banks helped push improved services to customers in order to gain them from the more traditional English banks.

There is of course a potential negative aspect to this side of things which can be seen from the collapse of the banks from Greenland which established entities in England.

[Mac Howard]

Heh - they've been pretty good all my adult life, however in recent years the 'charges' they made for overdrafts (which weren't as heavy as those made by the banks I've used in America) were made illegal (and indeed many people were able to reclaim those they'd paid from several years past).

12 years since I last had an account in the UK, Marc. Hell, is it really that long :eek:

[Edward64]

Woo hoo, up 3%. I did my part today! Hopefully we can extend last week gains.

Retailers keep fingers crossed as holiday shopping continues - Nov. 29, 2008 (http://money.cnn.com/2008/11/29/news/economy/holiday_shopping_sat/index.htm?cnn=yes)
Holiday shoppers are spending
Research firm says Black Friday sales up 3%, thanks to deep discounts, in cautious start to the season.

[cartman]

The official designation of the economy as being in a recession was made by the National Bureau of Economic Research. What is a bit surprising is that the start was pegged as Dec. 07, which means we've been in one for almost a full year.

[path12]

Woo hoo, up 3%. I did my part today! Hopefully we can extend last week gains.

Oops.

Strictly anecdotal -- one of the things I do is track retail sales for my vendors. While we have been beating their department averages (yay) those department averages are almost entirely 10-20% below last years same week, both in sell-through and average retail price.

Some unhappy/worried stores out there. And with a short retail season this year they've got reason to be.

[Grammaticus]

Same store sales for McDonalds are up 5.3% in the US and 8.2% worldwide.

Although it looks like October was not a good month overall. It looks like an estimated drop of 0.3% overall. This is based on a Reuters report that

"tracks monthly sales for 34 of the nation's largest retailers including Wal-Mart (WMT, Fortune 500), Gap (GPS, Fortune 500), Sears (SHLD, Fortune 500) and J.C. Penney - began tracking the results in 2000."

On the list Wal-Mart was actually up 2.4%.

http://money.cnn.com/2008/11/06/news/economy/Oct_retailsales/index.htm?postversion=2008110612

[Flasch186]

Q1 will see a shocking number of store closures and bankruptcy filings. Mom and pops are and should be very scared.

[sterlingice]

Q1 will see a shocking number of store closures and bankruptcy filings. Mom and pops are and should be very scared.

Yeah, I'm really worried about how many stores won't survive with 90 days of this Christmas, big and small

SI

[Mizzou B-ball fan]

Hoo, baby. Going to be a really rough day on Wall Street. Job loss report was FAR worse than expected.

[JonInMiddleGA]

Q1 will see a shocking number of store closures and bankruptcy filings.

Somewhat rhetorical question I guess but ... if we expect it, how shocking is it?

[Flasch186]

hmmm...

[Edward64]

Hoo, baby. Going to be a really rough day on Wall Street. Job loss report was FAR worse than expected.
Nice rebound ... what a crazy second half of 2008.

[Shkspr]

Somewhat rhetorical question I guess but ... if we expect it, how shocking is it?

I suspect the shocking part will not be the what, but rather the who.

[molson]

I suspect the shocking part will not be the what, but rather the who.

Who would be shocking? We have the big 3 automakers begging Washington for survival. Lehman Brothers had been around for 150 years.

The only one that would really shock me is Walmart, since they're basically recession-proof.

[Mizzou B-ball fan]

This struck a nerve with me. I was listening to the ABC News radio report at the top of the hour. The reporter mentioned that Obama and many others have said that GM's CEO should resign due to his lousy leadership. They then played a clip from an interview of a GM female union auto worker. She was asked if she thought the GM CEO should be fired. Her response:

Well, I think he should take a pay cut..........maybe not take a bonus. I don't think he should be fired. I think that everybody should be able to keep their job.

Proof-positive as to why these companies have become such a disaster. I'm hopeful that the restrictions are so tough that all three companies just don't even bother to take the money. I'm really surprised that the Democrat-led Congress is seriously pushing forward with any kind of loan/bailout given that public support for it has fallen to 25% or less in some polls.

[cougarfreak]

I think a better idea would be to let the oil companies bail out the auto industry. They have had those record profits for the last year, made their money off of the auto industry, and should have plenty of available cash.

[Fidatelo]

I think a better idea would be to let the oil companies bail out the auto industry. They have had those record profits for the last year, made their money off of the auto industry, and should have plenty of available cash.

I think that might set back the green initiative just a wee bit :)

[sterlingice]

I love that we're all up in arms about a $15B bailout, even moreso than an even stupider $700B bailout

SI

[Mizzou B-ball fan]

I love that we're all up in arms about a $15B bailout, even moreso than an even stupider $700B bailout

SI

Don't lump me into that crowd. I was a vocal critic of the original bailout as well in this very thread, though I was in the minority at the time.

[Logan]

I love that we're all up in arms about a $15B bailout, even moreso than an even stupider $700B bailout

SI

I think the $700B bailout has a 10% chance of success, and my calculations put the potential success of the auto bailout at -17.9%.

[flere-imsaho]

I think the $700B bailout has a 10% chance of success, and my calculations put the potential success of the auto bailout at -17.9%.

That sound you just heard was QuikSand strangling himself.

[SportsDino]

Here it comes, the lines of "well we gave out 700 billion, whats 15 more?" (or reapportioning the 700 billion already sent to random whims, which of course it was designed for i guess anyway).

I opposed all sorts of bailouts, and to be honest the snivelling beggars these millionaires are becoming to try and win a government handout is just ticking me off. Well, the fact the act might work is ticking me off.

If 3 million jobs really hang in the balance over 15 or 30 billion in short term cash, then the government should say "okay here is your bridge loan, 10% APR". The reason that none of these companies will accept such a thing is because the real truth is they want a handout. Securing massive government dollars at say 4% is almost free money considering large chunks of their private funding comes in over that rate. Heck, I had 15% credit cards too, if the U.S. would pay down my principle and give me a new rate of 4% on it, I'd be throwing salt in my eyes to drudge up enough tears for my sob story.

Sure, give em a loan, charge a real interest rate, and charge it during the grace period. Make some money off of them. The request will either disappear over night as the free handout feel goes away, or they'll bite the bullet and take it since private debt experts would charge them more.

[Mizzou B-ball fan]

Looks like common sense may prevail. Even the paired down $14B deal appears to be going down to defeat. Not only do the Republicans oppose it, but some Democrats are voicing concerns over judicial pay raises that Harry Reid stuffed into the bill at the last moment.

Alright GM and Chrysler, Congress and the American public have called your bluff. We expect those banruptcy notices and the inevitable doom soon to follow as you've predicted.

[flere-imsaho]

but some Democrats are voicing concerns over judicial pay raises that Harry Reid stuffed into the bill at the last moment.

WTF?! Why can no legislation go through Congress without getting a lot of irrelevant BS attached to it?

That was a rhetorical question.

[CamEdwards]

WTF?! Why can no legislation go through Congress without getting a lot of irrelevant BS attached to it?

That was a rhetorical question.

Absolutely (and let's all pause to note the day that Flere and I agreed on something). If this is a crisis, then treat it like one. If it's not a crisis, then don't act like it is.

[Marc Vaughan]

Absolutely (and let's all pause to note the day that Flere and I agreed on something). If this is a crisis, then treat it like one. If it's not a crisis, then don't act like it is.

The trouble with all such 'crisises' is that until they've happened its impossible to tell 100% accurately what the fallout would be.

This was the case with the financial bail out - the money hats blinked first and the financial institutions got the money they 'HAD' to have .... did it save the economy, no one really knows and I'm sure university dissertations will be written upon that subject for decades to come.

The problem for the auto industry is a 'once bitten, twice shy' approach things things imho - the financial industry got in first with doom and gloom stories then failed to do what it was meant to (ie. unfreeze the credit system) and indeed no one really seems to know what was done with a lot of the money or the strategy which was utilised to determine its distribution ...

This will all lend itself towards the auto-industry having a harder time getting its bail out ... regardless of whether its justified or not.

[Flasch186]

I stand by my statement that Paulson's statement about NOT buying up the bad assets which had been one of the main facets of the whole tarp plan completely undermined the intended effect of the entire plan. Paulson basically torpedoed it and like I stated before, things are looking really really bad for next year. Complete and utter bunk, what he did to the program and I believe that had he not done that it might've worked.

[Marc Vaughan]

I stand by my statement that Paulson's statement about NOT buying up the bad assets which had been one of the main facets of the whole tarp plan completely undermined the intended effect of the entire plan. Paulson basically torpedoed it and like I stated before, things are looking really really bad for next year. Complete and utter bunk, what he did to the program and I believe that had he not done that it might've worked.

I don't know enough about the setup to indicate if the change was right or wrong from a pure economic stand point - BUT the change from a confidence perspective was hugely damaging ... it gave the indication that everything was being done on a wing and a prayer rather than having been planned out in advance.

[sabotai]

WTF?! Why can no legislation go through Congress without getting a lot of irrelevant BS attached to it?

That was a rhetorical question.

Not surprising, it's not as simple as MBBF would have you believe. I mean, yeah, it's a good demonstration of how the political process is inefficient and a bit silly, but it's not like Reid was trying to sneak some kind of big pay raise in under the radar for his judicial buddies.

The Associated Press: Democrats to scuttle pay raise for judges (http://www.google.com/hostednews/ap/article/ALeqM5imqmrwprv1s0_qF273vW6rq30jKgD950P0JO1)

"Members of Congress, however, who presently make $169,300 a year, will automatically receive a raise of almost $5,000 on Jan. 1.

Members of Congress and district judges now make the same salaries, a long-standing practice. Under ethics legislation enacted almost two decades ago, members of Congress get a cost-of-living raise automatically, but they have to vote to give judges an identical raise.

The Senate passed the judicial pay measure as a separate bill in November, but the House never acted on that stand-alone bill. House Speaker Nancy Pelosi, D-Calif., supports the pay raise, but was wary of forcing rank-and-file House members to vote during a recession to increase the pay for people making far more than most workers.

Instead, she agreed to a request by Senate Majority Leader Harry Reid, D-Nev., to attach the pay raise for judges to the bailout bill, which the House passed Wednesday night."

EDIT: And the original pay increase bill was passed in the Senate by Unanimous Consent, so it's not like anyone voted against it or objected to it a month ago. Smells more like a PR stunt by those objecting to it than anything else.

[sterlingice]

Sounds a lot more like a procedural vote than anything. But let's make it partisan while we can!

SI

[Bigsmooth]

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[Balldog]

Might as well kiss my job goodbye. :(

[Mizzou B-ball fan]

Not surprising, it's not as simple as MBBF would have you believe. I mean, yeah, it's a good demonstration of how the political process is inefficient and a bit silly, but it's not like Reid was trying to sneak some kind of big pay raise in under the radar for his judicial buddies.

It actually is that simple. A judicial raise has nothing to do with an auto industry bailout. If they wanted to do that, write up another bill to just do that. It's very simple.

[Marc Vaughan]

It actually is that simple. A judicial raise has nothing to do with an auto industry bailout. If they wanted to do that, write up another bill to just do that. It's very simple

is it only me who see's a sub-3% pay raise for a very skilled position not being something to get excited and up in arms about?

Being a judge is a job with a huge amount of responsibility and pressure, not to mention the challenge of staying on top of a constantly evolving legal system - I think they'd deserve every penny of that raise myself.

[Mizzou B-ball fan]

is it only me who see's a sub-3% pay raise for a very skilled position not being something to get excited and up in arms about?

Where have we heard this before?

"The last bailout was $700B. What's 15-25B more?"

It all adds up. 3% here, 2% there. Earmarks that have nothing to do with the bill don't belong in that bill.

I never said that a judge doesn't deserve a salary increase. I just object to it being passed in an auto bailout bill.

[JonInMiddleGA]

Random little aside from the car makers impact.

Estimates are that automotive advertising makes up 12-15% of all radio advertising and as much as 25% of all TV advertising.

First half of the year was down 10%, to just over $5 billion. About half of that comes from the Big Three, who were down anywhere from 6% (GM) to 22% (Ford & Chrysler). By the end of Q3, the Big Three were down nearly 19% between them, spending only $4.1 billion so far this year.

Even at those levels incidentally, automotive is still the largest advertising category in the country, roughly double the pharmaceutical industry. For those who are curious, here's a story (http://www.medialifemagazine.com/artman2/publish/Media_economy_57/Advertisers_trim_spending_1_7_percent.asp) on the top categories for advertising. It also includes a table on various media types & their up or down for the YTD.

Also, here's a short Q&A piece (http://www.medialifemagazine.com/artman2/publish/Media_economy_57/A_backgrounder_on_auto_ad_spending.asp) on auto advertising & the impact for anyone who finds this remotely interesting.

[JPhillips]

It actually is that simple. A judicial raise has nothing to do with an auto industry bailout. If they wanted to do that, write up another bill to just do that. It's very simple.

It's actually much more efficient to attach something with huge bipartisan support to an existing bill. Starting a bill from scratch can be a long, tedious proposition. This isn't a case of trying to sneak an unpopular measure through in a very popular bill, so I really don't understand the fuss.

[sterlingice]

Random little aside from the car makers impact.

Estimates are that automotive advertising makes up 12-15% of all radio advertising and as much as 25% of all TV advertising.

First half of the year was down 10%, to just over $5 billion. About half of that comes from the Big Three, who were down anywhere from 6% (GM) to 22% (Ford & Chrysler). By the end of Q3, the Big Three were down nearly 19% between them, spending only $4.1 billion so far this year.

Even at those levels incidentally, automotive is still the largest advertising category in the country, roughly double the pharmaceutical industry. For those who are curious, here's a story (http://www.medialifemagazine.com/artman2/publish/Media_economy_57/Advertisers_trim_spending_1_7_percent.asp) on the top categories for advertising. It also includes a table on various media types & their up or down for the YTD.

Also, here's a short Q&A piece (http://www.medialifemagazine.com/artman2/publish/Media_economy_57/A_backgrounder_on_auto_ad_spending.asp) on auto advertising & the impact for anyone who finds this remotely interesting.

I'm not sure whether this is good or bad. On the one hand, you could say that it's good these companies are cutting back. On the down side, tho, it takes advertising money to make money. Cutting back on advertising money is like cutting back on R&D money- you may not see it initially but it can hurt you significantly in the long run.

SI

[Mizzou B-ball fan]

I'm not sure whether this is good or bad. On the one hand, you could say that it's good these companies are cutting back. On the down side, tho, it takes advertising money to make money. Cutting back on advertising money is like cutting back on R&D money- you may not see it initially but it can hurt you significantly in the long run.

SI

Increase car quality along with reduced labor contracts (and car prices) would have a much larger impact on the economy (in a positive way).

[Mizzou B-ball fan]

It's actually much more efficient to attach something with huge bipartisan support to an existing bill. Starting a bill from scratch can be a long, tedious proposition. This isn't a case of trying to sneak an unpopular measure through in a very popular bill, so I really don't understand the fuss.

You'll have to ask the Democrats who made the fuss. Even if they weren't actually opposed to the pay raises, it probably provided a convinent reason for them to oppose the bill without directly pissing off the UAW. That would be just as good of an argument for leaving it out of a bill. There are PLENTY of bills that pay raise could be tacked onto. This is the absolute last one that they should have used for that purpose given the high level of scrutiny.

[Marc Vaughan]

It all adds up. 3% here, 2% there. Earmarks that have nothing to do with the bill don't belong in that bill.
I never said that a judge doesn't deserve a salary increase. I just object to it being passed in an auto bailout bill.

Don't get me wrong - I think its bizarre it gets tagged onto the auto-bill, but I think a pay-rise each year if you perform well at your duties is something people should expect myself ... otherwise each year people become worse off, inflation being a constant in life pretty much.

[Honolulu_Blue]

Looks like common sense may prevail. Even the paired down $14B deal appears to be going down to defeat....

Alright GM and Chrysler, Congress and the American public have called your bluff. We expect those banruptcy notices and the inevitable doom soon to follow as you've predicted.

If you think this vote had anything to do with anything other than pure politics, then I've got some awesome automotive stocks to sell you. This had nothing to do with "common sense" and everything to do with politics.

A very disappointing result. Hopefully, they will find the money somewhere. Bankruptcy for anyone of the Big Three would be devastating, especialy to this region that's already been reeling for many years. The negative implications of this will reach much further than Michigan or even the industrial Midwest.

Essentially abandoning your country's manufacturing foundation is not a wise move for any number of economic or political reasons.

[Marc Vaughan]

A very disappointing result. Hopefully, they will find the money somewhere. Bankruptcy for anyone of the Big Three would be devastating, especialy to this region that's already been reeling for many years. The negative implications of this will reach much further than Michigan or even the industrial Midwest.
From what I understand of American bankruptcy law though - isn't it vey possible to structure bankruptcy in such a way that it protects the company and allows them to continue to function and restructure (and eventually come out from that state).

I'm pretty sure I've heard of several companies which have been through this ..

Essentially abandoning your country's manufacturing foundation is not a wise move for any number of economic or political reasons.
I think if a company isn't economically viable for whatever reason then its impossible to practically 'prop it up' continually - it drains funds from the healthy part of the economy and gives the unhealthy aspects no incentive to improve.

A bailout makes no sense imho - either nationalise the industry (which is effectively like bankrupting them done right, ie. get it healthy and put it back into the private sector) or let them go through bankruptcy and recover or fail in due course.

I agree that them failing would be bad for the areas they're located within - BUT imho that means the goverment should anticipate the possibility and put economic incentives in place in those regions to encourage other industries to locate there not bail out companies which are already unhealthy.

[ISiddiqui]

I think if a company isn't economically viable for whatever reason then its impossible to practically 'prop it up' continually - it drains funds from the healthy part of the economy and gives the unhealthy aspects no incentive to improve.

Bingo. Rewarding inefficiency is worse for the economy.

[Honolulu_Blue]

From what I understand of American bankruptcy law though - isn't it vey possible to structure bankruptcy in such a way that it protects the company and allows them to continue to function and restructure (and eventually come out from that state).

I'm pretty sure I've heard of several companies which have been through this ..

Yes. Bankruptcy doesn't mean a company turns out the lights, locks the doors and stops doing business. Many companies have gone bankrupt, continued to survive, and ended up being profitable again.

I don't think this is the case for the automakers and the reason is simple: People will not buy a car for a bankrupt company. One of the biggst considerations in buying a car is the services and support during future years. How can you ask someone to spend $15,000 to $60,000 on a new car if there is great uncertainty about future service and support? Such a blow would drive even more people away from U.S. automakers and would, essentialy, mean the end for them.

[Honolulu_Blue]

Bingo. Rewarding inefficiency is worse for the economy.

what worse for economy: rewarding inefficiency or the loss of 2 million jobs?

[JonInMiddleGA]

I think if a company isn't economically viable for whatever reason then its impossible to practically 'prop it up' continually - it drains funds from the healthy part of the economy and gives the unhealthy aspects no incentive to improve.

Ding ding ding.

A bailout makes no sense imho - either nationalise the industry (which is effectively like bankrupting them done right, ie. get it healthy and put it back into the private sector) or let them go through bankruptcy and recover or fail in due course.

Now there we'll disagree, as I strongly oppose nationalization. In the absence of significant changes (such as getting labor cost under control, which won't happen on the government's watch) the industry won't be viable regardless of whose name is on the door. And we've got enough sinkholes on the taxpayers tab already.

[lighthousekeeper]

what worse for economy: rewarding inefficiency or the loss of 2 million jobs?

in the long run i would guess rewarding inefficiency.

[ice4277]

Random little aside from the car makers impact.

Estimates are that automotive advertising makes up 12-15% of all radio advertising and as much as 25% of all TV advertising.

First half of the year was down 10%, to just over $5 billion. About half of that comes from the Big Three, who were down anywhere from 6% (GM) to 22% (Ford & Chrysler). By the end of Q3, the Big Three were down nearly 19% between them, spending only $4.1 billion so far this year.

Even at those levels incidentally, automotive is still the largest advertising category in the country, roughly double the pharmaceutical industry. For those who are curious, here's a story (http://www.medialifemagazine.com/artman2/publish/Media_economy_57/Advertisers_trim_spending_1_7_percent.asp) on the top categories for advertising. It also includes a table on various media types & their up or down for the YTD.

Also, here's a short Q&A piece (http://www.medialifemagazine.com/artman2/publish/Media_economy_57/A_backgrounder_on_auto_ad_spending.asp) on auto advertising & the impact for anyone who finds this remotely interesting.

I work for the company that handles media for GM. We've had about 100 (out of a staff of about 350) laid off from the Detroit office in the last couple months. There likely will be more where that came from in 2009. Scary time for anybody working in advertising in Detroit.

[Marc Vaughan]

Now there we'll disagree, as I strongly oppose nationalization. In the absence of significant changes (such as getting labor cost under control, which won't happen on the government's watch) the industry won't be viable regardless of whose name is on the door. And we've got enough sinkholes on the taxpayers tab already.

Part of our differences in opinion on this undoubtably come from our upbringings - mine has seen successful nationalisation in the UK (British Steel, Rolls Royce amongst others) actually make money for the goverment and equally importantly save jobs, whereas I know nationalisation is almost a dirty world in America.

(ignoring economic arguments towards certain industries being nationalised which aren't applicable in this case)

I see it simply as an alternative to them going through the bankruptcy process and restructuring that way - it should ONLY be done if the goverment has the confidence and ability to be ruthless enough* to turn it into a profitable industry.

It can be done obviously, there are car manufacturers which are profitable today - its just that the three in trouble aren't.

*Amongst other things that means breaking the unions involved and ensuring that the companies are truly competitive.

[ISiddiqui]

in the long run i would guess rewarding inefficiency.

What he said.

We want short term gain for long term pain?

[Marc Vaughan]

Yes. Bankruptcy doesn't mean a company turns out the lights, locks the doors and stops doing business. Many companies have gone bankrupt, continued to survive, and ended up being profitable again.

I don't think this is the case for the automakers and the reason is simple: People will not buy a car for a bankrupt company. One of the biggst considerations in buying a car is the services and support during future years. How can you ask someone to spend $15,000 to $60,000 on a new car if there is great uncertainty about future service and support? Such a blow would drive even more people away from U.S. automakers and would, essentialy, mean the end for them.

I think thats a fallacy to be honest - how many people here have negative connotations about the following companies:

Rolls Royce (Bankrupt 1971)
Jaguar (its owner MG Rover went bankrupt in April 2005)
..

The list is fairly huge, they're all UK companies which went down but which have been revived and continue to function and be percieved by customers as worth purchasing.

People WILL still buy from a bankrupt company if they believe they can get support and parts, there are enough in circulation that wouldn't be a problem and heck even if the plants involved closed down today there is enough of an on-going market that third-party companies would produce them for a fair while imho.

[Marc Vaughan]

We want short term gain for long term pain?

Its indeed what the media are pressing for and that short term attitude which has gotten the worlds economies into this state - its about time countries (and companies) took fiscal responsibility properly imho and planned for the countries future not just their 'next election' or their next bonus check ....

I believe the media is a large part of the problem, they rally public opinion towards the most ludicrous things by putting forward very shallow surface arguements and agressively attacking anyone who disagrees with them.

[JonInMiddleGA]

I work for the company that handles media for GM. We've had about 100 (out of a staff of about 350) laid off from the Detroit office in the last couple months. There likely will be more where that came from in 2009. Scary time for anybody working in advertising in Detroit.

Bad times right now for anybody working in advertising, on either side of the equation, just about everywhere.

Anecdotally, we talked to a broadcast station in Detroit last week that admitted to being at 4% sold for January (came up because we're currently working on a per inquiry program for a client). I know Q1 is always slow but that's the lowest number I've ever heard I think. I'm also hearing a lot of 12% or 15% comments too, that's bad enough but that single digit thing kind of blew my mind.

[Coffee Warlord]

Bad times right now for anybody working in advertising, on either side of the equation, just about everywhere.

Ayup. We're down now to a whopping 8 employees. Agencies ain't doing so hot.

[miked]

Yes. Bankruptcy doesn't mean a company turns out the lights, locks the doors and stops doing business. Many companies have gone bankrupt, continued to survive, and ended up being profitable again.

I don't think this is the case for the automakers and the reason is simple: People will not buy a car for a bankrupt company. One of the biggst considerations in buying a car is the services and support during future years. How can you ask someone to spend $15,000 to $60,000 on a new car if there is great uncertainty about future service and support? Such a blow would drive even more people away from U.S. automakers and would, essentialy, mean the end for them.

Silliness! People flew bankrupt airlines. How can you ask people to fly in tin cans 30,000 feet above the air if you aren't sure whether or not they can afford upkeep and gas.

Bankruptcy will actually force them to restructure and lay out a new plan, and give them plenty of protections that bailout will not. It will not force them to close down shop, fire every one of their employees, or anything else the sky-is-falling people say.

[Mizzou B-ball fan]

I work for the company that handles media for GM. We've had about 100 (out of a staff of about 350) laid off from the Detroit office in the last couple months. There likely will be more where that came from in 2009. Scary time for anybody working in advertising in Detroit.

Interestingly enough, Ford has actually increased their production at the manufacturing plant here in the KC area. They make Ford F-150's there and they're selling so well that they've got to produce more. So I guess it depends on what part of these auto companies you are in. I'm guessing that's also part of the reason that Ford likes their outlook a bit better than the other two companies.

[Mizzou B-ball fan]

UAW is already playing the blame game. It's evidently the GOP's fault. I get the feeling that the UAW may know the cush gig might be done........

United Auto Workers Lash Out at GOP Senators Over Bailout Collapse - FOXNews.com Transition Tracker (http://www.foxnews.com/politics/2008/12/12/auto-workers-union-lashes-gop-senators-bailout-collapse/)

[JPhillips]

UAW is already playing the blame game. It's evidently the GOP's fault. I get the feeling that the UAW may know the cush gig might be done........

United Auto Workers Lash Out at GOP Senators Over Bailout Collapse - FOXNews.com Transition Tracker (http://www.foxnews.com/politics/2008/12/12/auto-workers-union-lashes-gop-senators-bailout-collapse/)

Sen. DeMint blamed the failure on the UAW last night.

[Honolulu_Blue]

Silliness! People flew bankrupt airlines. How can you ask people to fly in tin cans 30,000 feet above the air if you aren't sure whether or not they can afford upkeep and gas.

Bankruptcy will actually force them to restructure and lay out a new plan, and give them plenty of protections that bailout will not. It will not force them to close down shop, fire every one of their employees, or anything else the sky-is-falling people say.

Apples to oranges comparison.

[Honolulu_Blue]

in the long run i would guess rewarding inefficiency.

What he said.

We want short term gain for long term pain?

At his moment? Yes. You can't just look at this in a vacuum. The economy sucks right now. Big time. Job loses and unemployment are reaching record highs. I don't think the economy can sustain such a massive blow at this moment. It's too fragile. We need to keep these companies afloat for now, keeping their employees in jobs. We can reasses the situation once our economy is stronger.

At that point, then, perhaps bankruptcy will be the best option for everyone. That point is not now.

[Honolulu_Blue]

UAW is already playing the blame game. It's evidently the GOP's fault.

Largely it is. This is mainly politics, not principles.

[miked]

Apples to oranges comparison.

Well, of course, you're in Michigan and my wife works for an airline. An automaker going bankrupt is apparently the worst thing for the country. Plenty of companies have emerged from bankruptcy without their "brand" or whatever being destroyed. If the price is right and the reviews are good, people will buy.

And it's not really that apples to oranges. There were airlines stranding people, canceling paid-for reservations, etc. So it definitely was a thought in some people's minds that buying a ticket on a potentially bankrupt carrier was a big risk. But the big ones with good plans (Delta, United, USAir, etc) all weathered the storm (for now).

[Honolulu_Blue]

And it's not really that apples to oranges.

It is and here's why. When airlines like United, Delta, and Northwest declared bankruptcy, most fliers stuck with them. That's because it was clear those airlines would stay in business at least long enough to honor their tickets. But it wouldn't work that way for an automaker. Most people who buy airline tickets plan to use them within weeks. But consumers spend way more on a car than an airline ticket, and commit to the product for years. It's kind of important that the company selling the product be around to make good on a 60,000-mile warranty, service the car, and supply parts.

Edit:

Simply declaring bankruptcy would be a disaster for an automaker, even if the company seemed likely to ultimately survive. In a survey conducted by CNN 80 percent of people close to buying a new car said they would abandon an automaker if it were to file for bankruptcy. Not surprisingly, the numbers were higher for the Detroit 3, and lower for most foreign makes. An automaker could forestall the doom somewhat by offering fire sale prices—but selling cars at a loss would only perpetuate underlying profitability problems.

Another difference is that for airlines and other big companies that have successfully emerged from bankruptcy, Chapter 11 allowed them to cut costs and other expenses they were unable to address under normal operations. The airlines, for instance, were able to slash pensions and renegotiate rich labor contracts that were signed when the airlines were flush, but which they could no longer afford. That improved cash flow and helped them get back on their feet.

The automakers, by contrast, don't have a major problem funding their pensions. And they've already negotiated deep wage and job cuts with their unions, and cut billions in costs. They're not being crushed by wage and benefit costs. It's about revenue and products now. It's a business model issue."

Bankruptcy might allow Chrysler or GM to offload some debt—but it wouldn't do anything to increase revenue, speed the arrival of must-have new products like slick compact cars and family-oriented crossovers, or fund technology breakthroughs like GM hopes the Chevy Volt plug-in hybrid will be.

To sum, in today's marketplace, bankruptcy for General Motors (or any major automaker) is a death knell.

[SportsDino]

You don't do nothing with the auto companies, you restore the core parts of it (attack the assets and jobs). But all the rich folk surrounding them, time for them to perish. They have been skimming for the short term for years leaving the company in a giant financial mess (anyone bringing up the benefits holding them down thing, maybe if they set aside resources all along and intelligently planned their retirement load, they would not be having a problem... it takes 30 years of ignorance to have a pension problem, even though the symptoms occur over night).

If you ask me, give out loans at high interest, demand reforms in corporate governance, have some shareholders actually stand up for the company health for once (fat chance of that happening from the damn sheep), and reign in incentives for being a looter of your own company. End result, most of the company management will probably stay intact, but maybe some of the worst losers can be shaken out. The loans will generate money for the government (not a lousy freeby rate either although with hyper inflation it might not matter). But more importantly, keep jobs alive... maybe with interesting tax incentives like, I dunno, prorated credits for each employee up to 100K (scaled so higher paying jobs are worth more per dollar than min wage)... instead of dividend or capital gains cuts which actually increase the incentive for corporate looting in this environment (i could write a novel on corporate looting, and its helped guide my short selling policy fairly profitably).

[JonInMiddleGA]

Largely it is.

LOL.

No political party made this mess, except on the periphery. The bulk of the blame lies on incompetent management and overpaid workers that the aforementioned management lacked the balls to stand up to properly. Combine that with getting their asses kicked in quality for decades & you end up with the mess we see today.

And a bail out will not do one damned thing to fix any of the causes.

[Marc Vaughan]

Simply declaring bankruptcy would be a disaster for an automaker, even if the company seemed likely to ultimately survive. In a survey conducted by CNN 80 percent of people close to buying a new car said they would abandon an automaker if it were to file for bankruptcy.

If this is true then why historically has this never been the case - many European auto makers have gone bankrupt in the past, but of those who chose a course allowing restructuring they have generally performed very well (see previous comments about Rolls Royce, Jaguar etc.).

(in other news 81.2% of surveys found that their results might not be accurate ... ;) )

[JonInMiddleGA]

If this is true then why historically has this never been the case - many European auto makers have gone bankrupt in the past ...

You already referenced earlier that there are different psychologies for U.S. residents/consumers (re:nationalization as an example).

[Honolulu_Blue]

LOL.

No political party made this mess, except on the periphery. The bulk of the blame lies on incompetent management and overpaid workers that the aforementioned management lacked the balls to stand up to properly. Combine that with getting their asses kicked in quality for decades & you end up with the mess we see today.

And a bail out will not do one damned thing to fix any of the causes.

Huh?

The vote against the bailout is largely political, not the mess the Big Three are in. I will make no apologies for the leadership of the Big Three. They have been horribly mismanaged and the UAW has has made it nearly impossible for them to compete on costs. A lot of their decisions have been Detroit Lionesque.

That said, the Big Three are in this dire situation in part because
Congress' failure to anticipate and head-off the collapse of the financial industry has frozen credit markets.


And a bail out will not do one damned thing to fix any of the causes.

I disagree. You're buying into a lot of false myths about the status of Big Three today. They've been slow as hell to react, but they are slowly turning their massive boats around. It will take some time, but they're getting there.

If the companies fail, they will take with them 4 million jobs throughout the economy, and 4 percent of the nation's Gross Domestic Product will disappear. Lost revenue to the federal government will be roughly $50 billion a year. No amount of government manipulation will be able to keep the economy afloat.

[Marc Vaughan]

You already referenced earlier that there are different psychologies for U.S. residents/consumers (re:nationalization as an example).

I agree there are different psychologies - but in this case I haven't seen any historic examples which contradict my proviso and show this is one of the cases where different psychologies would have an effect.

I'd have believed that the airline comparison would be the most accurate available, I agree yes air tickets are used within a short space of time but the fact that (1) Its a potential risk to life and limb if they're cutting corners, (2) for most people its a big one off expense especially if its a family affair (I've often spent more on a holiday flight for my family than the cost of the family car*) - would give credence to the comparison.

*Yeah I hate buying new cars (my all time favourite car cost £500 and lasted for nearly 3 years with no repair bills, perfect :D), waste of money because of the depreciation imho ... that being said my current Chysler is my first ever new car and it rocks ...

[JonInMiddleGA]

Huh? The vote against the bailout is largely political, not the mess the Big Three are in.

Whoa, stop there. I'll apologize for misinterpreting what blame you were referring to earlier.

My disagreement with you the politics vs philosophy aspect of the vote last night is FAR more mild than my disagreement over what I thought you were saying, so much so that it's doubtful I would have even commented on it at all if I had read you right to begin with.

[Honolulu_Blue]

I'd have believed that the airline comparison would be the most accurate available, I agree yes air tickets are used within a short space of time but the fact that (1) Its a potential risk to life and limb if they're cutting corners, (2) for most people its a big one off expense especially if its a family affair (I've often spent more on a holiday flight for my family than the cost of the family car*) - would give credence to the comparison.

In addition to the economic reasons stated above, I think you additional reasons don't work either:

(1) There is a lot greater potential risk to life and limb if an automaker is "cutting corners" than if an airline is. That seems quite obvious, no?

(2) While I can't state this with any certainty, I would imagine the majority of airline's revenue comes from business travel, so the "family affair" expense doesn't work.

[Honolulu_Blue]

Whoa, stop there. I'll apologize for misinterpreting what blame you were referring to earlier.

My disagreement with you the politics vs philosophy aspect of the vote last night is FAR more mild than my disagreement over what I thought you were saying, so much so that it's doubtful I would have even commented on it at all if I had read you right to begin with.

Gotcha.

[JonInMiddleGA]

I agree there are different psychologies - but in this case I haven't seen any historic examples which contradict my proviso and show this is one of the cases where different psychologies would have an effect.

Not sure there's a relevant historic example to point to, it's an unusual situation. But common sense says the U.S. consumer doesn't particularly trust these companies when they aren't going belly up -- which immediately sets them apart from RR & Jaguar -- why on earth would anyone think they'd be trusted during a bankruptcy?

[Marc Vaughan]

In addition to the economic reasons stated above, I think you additional reasons don't work either:

(1) There is a lot greater potential risk to life and limb if an automaker is "cutting corners" than if an airline is. That seems quite obvious, no?
This while true isn't something the consumer would think about in the same way generally imho ... the thing which would be thought of from a consumers perspective is simple one off danger management.

* If a car fails you're on the ground and chances are you'll be able to control things and avoid death.
* If a plane fails, well good luck (modern day aircraft don't 'glide' so there's none of this coasting down and landing malarky - you've either got engines or you don't).

Its for this short term reasoning that people makes people quite good about avoiding instant disasters they're visible and easy to see the consequences of - however long term problems (obesity for example) isn't something a lot of people can avoid easily because they 'sneak up' on you.

This is why I think PR'd right bankruptcy would work for the big car manufacturers, promote their restructuring as a positive - go on about how much more efficient they're being and how 'American' the companies are ... people would buy into it imho.

(its also one of the reasons unfortunately why the economies in this mess in the first place - too many people dealing with the immediate problem/risk without thinking about long term consequences)

(2) While I can't state this with any certainty, I would imagine the majority of airline's revenue comes from business travel, so the "family affair" expense doesn't work.
Thats a reasonable proviso (not sure the exact percentages myself but it would likely be high) and something I hadn't considered.

[Aylmar]

If this is true then why historically has this never been the case - many European auto makers have gone bankrupt in the past, but of those who chose a course allowing restructuring they have generally performed very well (see previous comments about Rolls Royce, Jaguar etc.).)

Are we talking about the same Jaguar that was owned by Ford from 1989 until early this year? I notice you said it's owner went bankrupt in 2005, but that was MG Rover, who formed up from the parts of the Land Rover business that BMW didn't sell to Ford in 2000. The only connection they really have to Jaguar is that Ford sold the 'Rover' marque along with Jaguar and Land Rover to Tata Motors of India earlier this year.

[Balldog]

People WILL still buy from a bankrupt company if they believe they can get support and parts, there are enough in circulation that wouldn't be a problem and heck even if the plants involved closed down today there is enough of an on-going market that third-party companies would produce them for a fair while imho.

Huh? The service parts are made by the same companies the production parts, same tools, same everything. I'm not sure how third-parties are going to make these parts, you can't just crap parts out.

[sterlingice]

* If a car fails you're on the ground and chances are you'll be able to control things and avoid death.
* If a plane fails, well good luck (modern day aircraft don't 'glide' so there's none of this coasting down and landing malarky - you've either got engines or you don't).

I'll just sit back and listen to the rest of the conversation but I have to go against this.

If your brakes fail on a car, how are you going to be able to control things? It's the concept that I can blame someone else if there's a plane problem but I have "control" when something goes wrong in my car. It's the illusion of control, but it's not actual control. This is the type of reasoning that fear of flying people have that is based in no logic.

SI

[Marc Vaughan]

I'll just sit back and listen to the rest of the conversation but I have to go against this.

If your brakes fail on a car, how are you going to be able to control things? It's the concept that I can blame someone else if there's a plane problem but I have "control" when something goes wrong in my car. It's the illusion of control, but it's not actual control. This is the type of reasoning that fear of flying people have that is based in no logic.

SI

I agree entirely - but its the perception of the difference that makes common feeling in many people of being slightly uneasy (or worse) when flying compared to a minute amount of people who are scared at the concept of being a passenger in a car.

(statistically speaking flying is the safest form of transport - BUT logic doesn't come into many peoples decision making when fear is involved ;) )

PS - With loss of brakes on a car you dump the car through lower gears to cause loss of deceleration and braking until it can be stopped, not pretty and can mess up your clutch pretty badly - but it works, I know because I've had to do it on a motorbike when the brakes failed coming up to a roundabout when I was younger.

[Marc Vaughan]

Are we talking about the same Jaguar that was owned by Ford from 1989 until early this year? I notice you said it's owner went bankrupt in 2005, but that was MG Rover, who formed up from the parts of the Land Rover business that BMW didn't sell to Ford in 2000. The only connection they really have to Jaguar is that Ford sold the 'Rover' marque along with Jaguar and Land Rover to Tata Motors of India earlier this year.

I'll give you the 2005 bankruptcy as I know little about it apart from the date it occured (I'd kinda hoped it was somehow structured to its base but apparently not) - but I will raise you an earlier one by the companies history where it was nationalised and then re-privatised (only to be ****ed up as a private company once again):

Jaguar merged with the British Motor Corporation (BMC), the Austin-Morris combine, to form British Motor Holdings (BMH) in 1966. After merging with Leyland, which had already taken over Rover and Standard Triumph, the resultant company then became the British Leyland Motor Corporation (BLMC) in 1968. Financial difficulties and the publication of the Ryder Report led to effective nationalisation in 1975 and the company became British Leyland Ltd (later simply BL plc).

In the 1970s the Jaguar and Daimler marques formed part of BL's specialist car division or Jaguar Rover Triumph Ltd until a restructure in the early 1980s saw most of the BL volume car manufacturing side becoming the Austin Rover Group within which Jaguar was not included.

Privatisation
In 1984, Jaguar was floated off as a separate company on the stock market — one of the Thatcher government's many privatisations.
(taken from: Jaguar Cars - Wikipedia, the free encyclopedia (http://en.wikipedia.org/wiki/Jaguar_Cars))

[Marc Vaughan]

Huh? The service parts are made by the same companies the production parts, same tools, same everything. I'm not sure how third-parties are going to make these parts, you can't just crap parts out.

If the companies involved truly went bankrupt do you not think private investors wouldn't see the potential for making 'generic' parts for the cars involved?

When English car companies went bankrupt this was exactly what occurred - either companies setting up their own factories to produce the parts or buying up the production plants at the now bankrupt companies (thus limiting job losses somewhat often by re-employing people who used to work in those areas).

.... but to reiterate I don't think that a bankruptcy situation would be more than a chance for the companies involved to restructure.

One final aside - don't worry about being 'harsh' when telling me if you think I'm wrong on any of this - I'm speaking my thoughts out loud and coming from a very different perspective to most people looking in on this situation (ie. my English upbringing), I'm using these sort of discussions to learn about how things stand in America as much as anything and very rarely take offence when people show me I'm wrong, somethings I think might be transferable from the UK to here may simply not be practical for various reasons and sometimes I may just be being flatout incorrect or stupid :D

[JonInMiddleGA]

companies setting up their own factories to produce the parts or buying up the production plants at the now bankrupt companies

With what capital? Or more accurately, with whose capital? Ain't exactly easy to come up with money to set up factories or buy up existing production facilities at the moment.

[Balldog]

If the companies involved truly went bankrupt do you not think private investors wouldn't see the potential for making 'generic' parts for the cars involved?

The problem is, other than nuts and bolts there isn't any generic parts on any cars. Its not as simple as everyone thinks it is to make a car. Every car has thousands of dedicated parts and very few common parts. It is an opportunity for a cost savings but its an opportunity that isn't realized by any auto maker, even Toyota, Honda, etc.

When English car companies went bankrupt this was exactly what occurred - either companies setting up their own factories to produce the parts or buying up the production plants at the now bankrupt companies (thus limiting job losses somewhat often by re-employing people who used to work in those areas).

Are you sure about this? You can easily spend $100k (sometimes millions) to build a tool, I don't see many companies spending $100k to build a tool to manufacture a couple thousand parts. Maybe it happened then, but I don't see it happening now given this economy.

Setting up a factory isn't exactly a drop in the bucket either.

I'm really hoping for some kind of resolution, millions of people stand to lose their jobs.

Don't forget every other country is spending money to save their automotive companies. The trickle down effect is going to effect far more people than expected.

[GrantDawg]

If this is true then why historically has this never been the case - many European auto makers have gone bankrupt in the past, but of those who chose a course allowing restructuring they have generally performed very well (see previous comments about Rolls Royce, Jaguar etc.).

(in other news 81.2% of surveys found that their results might not be accurate ... ;) )

Again, I think most people have covered this, but there are several very major reasons this would be quite different than your examples:

1) One of the major reason people/companies buy new cars versus used cars are the warranties. If the company you buy the car goes under, warranties go bye-bye. So, would I buy an American car with the possibility of no warranty, or a foreign maker with one? Tough choice.

2) The places companies under bankruptcy borrow money to continue doing business are broke. There is no way that the borrowing budget the size GM would need to function under bankruptcy could be met. That is different than in Europe where the government nationalizes and the banks have greater guarantees.

3) The companies that are under bankruptcy would have to drop prices drastically to coax any buyers to purchase their products. That will continue to exacerbate the underlying problem.

[Balldog]

Don't forget as late as Summer of 08 these guys were starting to make money until the economy just fell apart.

Shoot, I'm having a hard time spending $25 on my wife for Christmas let alone buying a car.

[Raiders Army]

Here's an ignorant question: would warranties really go away if the companies declared bankrupcy or is this just mass hysteria generated by GM, Ford, and Chrysler?

I mean, if the company is still in business after they declare they're bankrupt they still have to honor the warranties, no?

[Raiders Army]

Also, these four million jobs aren't going to disappear overnight are they? Television ads won't simply disappear one day, right? If the companies truly go out of business, then it's not like those people wouldn't have time to look for other jobs.

[Balldog]

Also, these four million jobs aren't going to disappear overnight are they? Television ads won't simply disappear one day, right? If the companies truly go out of business, then it's not like those people wouldn't have time to look for other jobs.

I'm sure we will start laying people off as early as next week, at least until the middle of February. We already had one wave the week of Thanksgiving, 10% were cut.

The problem is there are no other jobs out there, generally companies aren't hiring.

I'm sure the next question is move and find a job somewhere else, but look at the housing market!

[Anthony]

I think thats a fallacy to be honest - how many people here have negative connotations about the following companies:

Rolls Royce (Bankrupt 1971)
Jaguar (its owner MG Rover went bankrupt in April 2005)
..

The list is fairly huge, they're all UK companies which went down but which have been revived and continue to function and be percieved by customers as worth purchasing.

People WILL still buy from a bankrupt company if they believe they can get support and parts, there are enough in circulation that wouldn't be a problem and heck even if the plants involved closed down today there is enough of an on-going market that third-party companies would produce them for a fair while imho.

i truly beleive people will buy any car that is a fucking bargain. bankrupt or not. obviously you couldn't continue to sell cars from a bankrupt company at competitive prices - they'd be at a deep discount. shit, i'd buy a Big 3 truck right now if the price was right, bankrupt or not. services and warranty probably count for 30% in the decision making process, the rest is all price. if nothing else service/warranty isn't a factor for me - it's all price. i want the best car i can get for as little as possible. if i'm buying new then it isn't likely i'd need the warranty for at least the 1st 3 years. i bought a Hyundai Elantra in '02 and i have yet to have a reason to use the warranty. charge something cheap enough and you'll have a market for it. besides, the car makers themselves don't make the parts. its the 3rd parties, right? at least that's the line we've been given by the Big 3. "it's not just our companies that will suffer, it's all the mom and pop companies that make parts for us that will go out of business".

listen - we're humans. we manage. if a Big 3 company goes out of business, yeah, there might be some fallout from other companies that support the auto industry. but if there's enough of a demand for a product someone eventually starts a business or expands their current business and they make that product. you really think as soon as a Big 3 company goes under the same day a mom and pop parts supplier shuts off the lights? most (smartly) run companies have reserves they can tap, i'm sure it'd be a while before these smaller supportive companies start to have to tighten the belt. and who's to say they don't already lay people off during the normal course of business. people get laid off all the time, they get fired. why is now any different. at the worst they can always sell their business to some other parts company and the auto parts market consolidates. its not like this entire parts industry is going to get wiped out overnight. and if a Big 3 company goes under then these parts suppliers can try to find business with the other numerous car companies. or they get bought out. this really isn't armagedon. are we gonna bail out all the Seattle stores that suffered when the Sonics left for Oklahoma City? no one was concerned about all those stores that were dependent on having the Sonics in the vicinity. it happens. you build your store/company based soley on one attraction or one specific market you run the risk of your business being impacted by the loss of that one attraction/market.

it's called capitalism - you risk money to make money.

[GrantDawg]

Here's an ignorant question: would warranties really go away if the companies declared bankrupcy or is this just mass hysteria generated by GM, Ford, and Chrysler?

I mean, if the company is still in business after they declare they're bankrupt they still have to honor the warranties, no?


No, warranties go away when the companies shutter. It has nothing to do with mass hysteria, just common sense. Clark Howard has been warning people about this with Chrysler for the past year. They were close to closing their doors before all this happened.

[Raiders Army]

I'm sure we will start laying people off as early as next week, at least until the middle of February. We already had one wave the week of Thanksgiving, 10% were cut.

The problem is there are no other jobs out there, generally companies aren't hiring.

I'm sure the next question is move and find a job somewhere else, but look at the housing market!
Thanks. It is tough right now. I'm sure the easy answer is to move and find a job, but that's easier said than done sometimes. That being said, unless they go out of business entirely, all four million jobs aren't going to be lost either.
No, warranties go away when the companies shutter. It has nothing to do with mass hysteria, just common sense. Clark Howard has been warning people about this with Chrysler for the past year. They were close to closing their doors before all this happened.
I know the warranties would go away if the company were to close, but aren't we making a huge leap to say that bankruptcy will definitely lead to companies closing?

[Anthony]

That being said, unless they go out of business entirely, all four million jobs aren't going to be lost either.


and like i said, they aren't all going to be lost *at the same time*. it'd be staggered depending on the reserves the company has on hand. some may be able to last about a year, which hopefully would be enough time for a solution to be discovered. i don't quite think its a "here today, gone tomorrow" scenario we're being lead to believe it is.

[Raiders Army]

The other thing is, why don't GM, Ford, and Chrysler (can't call them the Big 3...if they were, then they wouldn't be in this mess) offer greatly discounted cars without warranties? There are ways around the warranty mess and I agree with HA that people will still buy cars with good deals.

I think you can also buy a warranty through a third party, so why not do that if you can negotiate the price down to cover the cost of it?

[JPhillips]

I think for a number of states lemon laws would get in the way of eliminating warranties, but I'm not sure.

[GrantDawg]

I know the warranties would go away if the company were to close, but aren't we making a huge leap to say that bankruptcy will definitely lead to companies closing?


Huge leap? Not really. Not with experts saying they will not come out of bankruptcy. Instead of looking at this with your own personal view, you need to think about this as the average consumer. A new car is a major investment to the average person. Are they really going to gamble a good percentage of their income on buying a car from a company that might not exist next year?

Also, their seems to a fallacy thinking here that price is the chief motivating factor in car purchases. If that were the case, then the US brands would have been killing the foreign makers since every like American vehicle has been selling for thousands less than the foreign counterparts for years. It might be the only factor that has kept them alive, but it has not been a great strategy to stay alive in the future.

People buy new cars based on a number of factors. Price is far from the only concern. Warranty, dependability, ease of service, and resell value are very important. All of those are going to take major hits for a company in bankruptcy, and the American makers were already behind in all of those factors, save warranty and ease of service. But with warranties not being with anything if the companies gone (and no, lemon laws won't help if the company is out of business), and New car dealers going under rapidily (I read a trade paper yesterday that predicted new car dealerships for the big three will shrink next year regardless of bail-out to the tune of 30% or more), the ease of service goes out the window as well.

If you think a bankrupt car maker is not going to drop 50-70% in sales numbers, then you are kidding yourself.