Just what I was thinking of saying. Nice post.

It's not just a matter of losing jobs, it is a matter of losing unionized jobs. Even if the companies manage to restructure under chapter 11, the bankruptcy protection will give the courts latitude to throw out portions of the existing union contracts.

The fight over the bailout isn't about the auto companies, it's about unions. For Republicans, this is a way to further reduce the size and power of the unionized workforce in the US.

Andrew: But for Matt Y, it's different; he's not anti-union, he's anti-car. It's been kind of dismaying watching his good sense go out the window when it comes to something he personally doesn't care for.

There's an existing mechanism for firms to get a time-out and regroup. It's called Chapter 11 Bankruptcy. I've seem an agrument that the auto companies would not really be able to oeprate because of the turmoil in the short-term financing markets, but this does not persuade me. First, things seem to be stabilizing in the commercial paper markets 9rates are down, issue of CP are up). Second, even a minimal government guarantee would be likely to be effective here. So I can see no reason to throw money at these firms. (And, by the way, I wonder about the 3 million jobs...if there really are 3 million jobs in motor verhicles and parts, paying an average of $40,000 per year, then, as near as I can tell, the labor costs of building a car in the US must average about $20,000. That seems implausible, but, even if it were true, it'd mean that US domestic auto manufacturing will die anyway.)

That's an interesting take on it, Ezra. It seems to me the really hard question is can we bailout the auto industry in some manner that avoids the situation where we just postpone its collapse for a few more years.

will this money be going toward creating new, competitive energy~efficient cars....or is this money going to be given with little accountability, just with the hope of stabilizing the symptoms of a very ill patient....at the end of the day, will this money simply disappear....and then we will hear that the executives retained huge bonuses and trips to spas...and the money will not have been enough to create the beginning of radical restructuring and new, competitive vehicles?
with real accountability, couldnt this be part of an energy initiative, or is this just money to stem the tide?
i try and read about the bailouts, but they are very hard to understand.
if the taxpayers are going to be paying for this bailout, it would be wonderful if could yield results.
how much oversight and planning is there regarding what occurs with the bailout money?
or is oversight just an afterthought, again?

Is the alternative between doing something and doing nothing, or is it between different coruses of action?

What I find most repuslive about the suggestion of a bailout is the clueless "let's throw some money at the problem and pray" attitude. There is no concept for a solution, there is little indication even of an understanding of the problem. By clamoring for mindless, wasteful bailouts, the Democrats risk losing it even before they start taking over the administration. The right wing already prepares to blame the economic crisis on Obama. Right wingers are already convinced that bailouts are the essence of liberal politics. That the financial bailout was in fact inititated by the Republican administration will be forgotten faster than you can watch. Wait for Obama to be sworn in and 40% of the country will blame him for everything from day one. And then, when Democrats fail to turn the economy around immeduately, that number will grow day by day. Ill-conceived, oportunistic political decisions in the coming weeks have the potential to wreck the next administration before it even starts. That's the greater risk at the moment.

I feel that not bailing them out would be incredibly shortsided and stupid. They hit a perfect storm of high gas prices this summer and the credit crisis with a lack of consumer demand. Everyone talks about Toyota, the geniuses there spent 1 Billion dollars on their Tundra Factory which sales are down 65%. They are getting slammed too, they just have better cash reserves. You better believe they are hoping GM fails so we will be sending even more money to Japan for the forseeable future. In my informal polling The Obama Bumper stickers were on about 80% foreign cars. At least Edwards backed up his talk by driving Fords and don't give me the quality crap. JD Powers shows minimal difference

In my informal polling The Obama Bumper stickers were on about 80% foreign cars. At least Edwards backed up his talk by driving Fords and don't give me the quality crap. JD Powers shows minimal difference

jenga, I think that Obama drives a Ford Escape.

By the way, I have an Obama sticker and drive a 1995 Toyota Tercel. I still drive it because it gets about 35-40 miles per gallon and is still running at 170,000 miles. If Ford or GM will produce small cars that are reliable and get good gas milage, I'll buy one (for example, I'm considering a used Cobalt right now).

But it really doesn't help when the head of GM says that global warming is a crock.

Unfortunately, contra jenga, GM's competitors do not just have better cash reserves, they have a more diverse product lineup, that helps them weather changes in market conditions.

And that's really GM's biggest problem. Not that it sold lots of SUVs, but that it bet the whole egg basket on them in the US market.

If look at the Opel lineup in Europe, GM clearly has the designs and engineering resources to have a more diverse product line. But... will they make the effort under the proposed bailout scheme? That's the big concern.

Ezra: as I understand it, what you are arguing for is that we should prevent the US automakers from going bankrupt during a recession, in order to arrange that they go bankrupt at a more convenient time. I'm all for it if we can really tune their performance so carefully. What I worry about is that, on the one hand, we decide that they can never be allowed to go under during an economic contraction; and on the other hand, they can manage to limp along during the economic expansions. Somehow this doesn't seem like an appropriate government role to me, but maybe I am wrong.

1) Toyota is foreign owned, but they make and employ a ton of Americans.
http://www.cars.com/go/advice/Story.jsp?section=top&subject=ami&story=amMade0707

2) If GM gets a bailout, why not toss some of that money Tesla Motors (or other startups)? They already make fully electric cars that GM is supposed to go towards.

Consumer Report's car reliability ratings, which are based on extensive data, place the Big Three consistently at the bottom of the heap. Surpsisingly to some, German brands get mediocre ratings at best. My own very limited experience suggests that if you have to own a car, Honda is the most rational choice for most people (if money matters at all). Why would anybody take an unnecessary risk?

Besides that, what people tend to overlook is that the US car market is already oversaturated. Face it, Americans already have more cars than they need and much fewer cars will be needed to keep up with demographics and replacement than were sold in the past years, when cheap credit and lopsided consumer values incited many consumers to spend much more on car purchases than necessary. These conditions won't come back, no more than inflated house prices will come back any time soon. People who contend that the auto makers would be in ok shape if not for that unfortunate coincidence, that credit crisis coming like a bolt out of the blue, are deluding themselves. It was the bubble that allowed car sales to expand beyond reason, and that is over.

Any attempt at "helping" the car industry in a way that tries to petrify an obsolete economic model is doomed.

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Hell, 109K is right in my price range
although 244 miles per charge does sound a hell of alot better than gm's volt that gets 40? miles per charge

It is entirely unclear to me how this leads to the sector's liquidation.

There is no question the loss of GM will cost a lot of jobs, but let us please not pretend that the other US automakers will somehow suffer for this.

GM's competitors will be more than happy to take up some of the demand slack from customers who can no longer buy GM cars, will be more than happy to negotiate some great deals with suppliers who will be desperate to find an automaker to supply, etc.

I am not saying that there won't be spillover effects, but this is not banking. The whole sector is not going to go bankrupt.

As the auto industry bailout debate begins in Washington this week, get ready for some incredibly dire warnings from its supporters about the awful things that would transpire without a bailout.

http://www.greenfaucet.com/economy/let-the-gm-red-herrings-fly/38019

Years ago, GM came out with an electric car which was hugely popular all over California - then all of them, less than 2 years were recalled (all were leased) and sent to the crusher.

See "who killed the electric car", a movie preview on YOUTUBE.

If this wonderful, affordable car could be produced then - why not now?

Bailout - sure, but if you get the dough, then you will make what we tell you to make. NOW, you will operate in the PUBLIC INTEREST!

THe political divisions of the bailout have become very clear in the last few days. Those screaming the loudest about letting GM go down the tubes have been the GOP, particulary those from southern states that now host foreign auto makers, like Mercedes in Alabama.

The Big Three has been terribly managed, but that really isn't the point of those in power who are screaming about letting the Big Three go extinct. There are many who love to see the last remants of the private welfare state that was codified in the treaty of Detroit get taken down.