I wonder which is better the government has already approved 25billion to save GM but GM wants more.<p>GM is a company that has been struggling for a decade vs. global competition because it refused to innovate. Pumping in 25-50 Billion might save 3 million jobs, but are there other options.<p>Would putting $100 Billion into auto company startups be better? The companies that come out of that would most likely get most of GMs assets on the cheap.<p>what do you think is better, give GM another chance or let bankruptcy create a fertile ground for a new kind of car company to come in and do better.<p>or maybe, there are a ton of problems like warranty enforcement and replacement parts that would be VERY disruptive. I just don't like the idea of us having Government owned companies.
Is it really that GM has failed to innovate? Let's look at the numbers:<p><pre><code> GM======================================Toyota
$1,525 in healthcare per vehicle $201 in healcare per vehicle
$73.73 avg cost of a labor hour $48 avg cost of a labor hour
34.3 hours to build a vehicle 27.9 hours to build a vehicle
Loses $2,331 per vehicle Makes $1,488 per vehicle
</code></pre>
So, let's just alter GM's healthcare and labor costs to Toyota's levels. Lowering labor costs would save GM $882.54 per vehicle. Add to that the difference in healthcare costs and GM would save $2206.54 per vehicle - nearly making them profitable right there! Yes, they're still not profitable, but it would be a huge difference.<p>The other things they need to do is use less labor hours to build a vehicle, increase plant utilization (which is only at 85% right now), and get idle workers off their payroll - yes GM is contractually obligated to pay people not to work.<p>GM should innovate. They do need to come up with better models. They do need more reliable cars. They do need to be more fuel efficient. However, none of those are really their big problem. GM is still selling nearly as many cars as Toyota. They don't have problems creating popular cars. That's a misconception with many people who happen to dislike GM cars (heck, I think they're complete crap).<p>The big question is, can GM reduce those labor and healthcare costs? If not, they will NEVER, EVER be profitable. You can't compete with a $2,200 handicap per vehicle. In fact, it's a testament to GM that they have been able to compete for so long with such a huge disadvantage. If those costs can be lowered, GM just needs a small loan (like $25bn) and a few years time. If those costs can't be lowered, we'll be talking about giving them another $50bn in a year and another $100bn in two years.<p>EDIT: Figures provided by NPR (<a href="http://www.npr.org/news/specials/gmvstoyota/" rel="nofollow">http://www.npr.org/news/specials/gmvstoyota/</a>)
let them die, imo. keeping them on life support will just be a drain on everyone. bailing them out will just allow them to continue to be a terrible company.<p>instead, use that money to fund grants and initiatives and prizes to incentivize new companies or GM itself, provided results are produced. that way, the industry will move forward. a bailout would almost definitely result in stagnation for many years. imo, ofc.<p>the bad companies will go away and other companies will take their place, providing new jobs.
One idea I heard on C-SPAN this morning was to chop them up and take the bailout money to instead build something like 12 hardcore engineering outfits to build cars of the future, then get startup people to pitch for an opportunity to run those outfits and/or commercialize them down the road.<p>I don't have any capacity for analyzing the pros and cons to this, but the idea of focusing on starting from innovation rather than trying to steer a big, unwieldy ship towards innovation sounds attractive.
it can't be a blank check, if they are going to bail them out that better come with a huge list of demands...forget golden parachutes, demand complete reorganization, huge cuts, new focus. i.e. I'd sell/cut Buick, Hummer, Saab and then go through the brands cutting models. GM makes 89 vehicles and many of them are pretty much copies of each other and compete with each other. Notice how honda only has 10 models, 1 for each class. This lets them make 1 good car for each space, instead of 4 half-assed ones.<p>Startup idea wouldn't really work, it costs way too much money to bring a car to market, and there aren't that many startups in the automotive space, Tesla is pretty much it.<p>Personally I'd want GM/Chrysler and Ford to go into a joint venture for a new brand to sell a full line of electric/hybrid vehicles. The space is too costly of an investment to take on by one company. This way they can spread the risk and work together on the same technology. And people looking for electric vehicles wouldn't be locked down into funky looking hatchbacks as their only choices.
I don't like the word "bailout", but I think letting them die at the moment is too risky.<p>I would consider a government-backed loan or temporary equity stake on the conditions that:
- Executives are replaced
- The UAW agrees to major contract restructuring or is disbanded altogether (see below before you crucify me)
- The companies set efficiency goals for production and sales processes (stop putting out designs earlier and changing them every year)<p>I also think the government could do things on the demand-side to help. Such as offering tax credits for buying a new, American car<p>On the UAW issue, please be aware that I'm not "anti labor". Non-union workers at US-based plants (for Toyota, Hyundai, etc.) have comparable salaries, good benefits (including pensions), and negotiating power.<p>Some good info on all of this at NPR:
<a href="http://www.npr.org/templates/story/story.php?storyId=96945326" rel="nofollow">http://www.npr.org/templates/story/story.php?storyId=9694532...</a>
There is a middle ground between bailout and a liquidation - a bankruptcy reorganization. It would probably wipe out the shareholders and the debt holders, and some jobs and factories, but a lot of GM and its brands and factories would live on.
Some (self described) smart people believe that "it'll all just work" if we put the just-right smart person in charge of such a bailout to decide what the just-right thing to do is. We instead need to put 200 million smart people in charge of deciding what to do - and they can each decide with their own hard-earned money. Give your money to government - or just the same, give government the power to take your money - and all you get is a handful of not-really-that-smart people deciding what is best for you.
One of GM's largest problems is the unions. Going through bankruptcy would provide them with a much needed chance to re-negotiate the labor contracts. I vote for bankruptcy all the way.
Where financial organisations were concerned, letting them go bust was not an option because of the impact on the rest of the world... The Lehman bankruptcy fucked everyone up big time, and should have been avoided.<p>However, when it comes to "normal" companies like GM, I say let'em go bust.<p>Obama sees them as a key part of gearing up the US to becoming a leader in green cars, but tbh, I think the $50bn would be better spent buying Toyota or something...
yeah when I heard anyone under 10 years will get a $100k "your fired" fee, and over 10 years gets $140k ... I just shake my head and realize the damage the UAW has done.<p><i></i>These are mostly un-skilled labor, who have "thugged" there way into skilled labor pay
As a founder of an auto(motive) startup, let me tell you that the things we'd do with x billion at this stage are not good. Some investment would be helpful (and we're looking for it), but a government administered venture fund of those proportions would probably be a disaster; a distraction for the ages. Our contention is that the market has not yet fund the successor technology to gasoline yet, and giving existing solutions massive wads of cash will only reduce the speed that it will.
As a confirmed liberal Democrat I am all for helping the workers. But as the owner of a 1999 Ford Windstar I have a very low opinion of the US automobile industry. It's not the workers' fault--they're not the ones who (mis)designed the cars--but I don't want to give the management any more rope. So I'd rather see the government spend $250 billion on job-training programs for laid-off auto workers, etc., than $25 billion to prop up GM as a corporation.
Three points:<p>1) It's not either/or. GM can declare bankruptcy, renegotiate their debts and expenses, ditch ideas that are not working, and come back as a smaller, kick-butt company.<p>2) If you go here then it's just a big political hand-out for whoever has the most contacts. It's not a financial bailout anymore. Be honest about it, and expect a lot more applicants.<p>3) So you spend our money to bail out some business or sector. What is the evidence that the underlying problem has been fixed? I know Congress can attach a lot of feel-good riders onto the deal, like more green energy and better employee benefits, but what assurance is that? Are we fixing the problem, or just putting a band-aid on a gaping wound? 'Cause I got a funny feeling that if you write them a check this year, they're going to be back in a year or two.<p>They're an important company, and I hate to see them go. But I hate even more the idea that some companies are "too big to fail". Times change. If GM is able to change with them, then that's great. If not, then that sucks. But we don't have buggy-whip manufacturers anymore -- those days are gone. And perhaps the days of super-big American manufacturing companies are going away too. Maybe not. I don't know. But I know you can't force it to work if it's not going to.
If the government could bend the rules and allow them to renegotiate labour contracts and healthcare without declaring bankruptcy, that should be option #1.<p>If these companies are still straddled with the nightmare of these obligations, no amount of government money will save them in the long run.<p>Government run "innovation initiatives" are fraught with the same problems as a government owned company (moral hazard, non-market competitive landscape, distorted incentives) and should be considered equally inefficient. Nothing can match the innovation that could be achieved by allowing these companies to be broken apart (a process that began 30 years ago when Toyota started achieving success using standard, outsourced, intermediate goods). Breaking these companies up would create a competitive framework for smaller players to enter. Think about what could happen if you could start a car company without having to hire a single assembly-line worker? It would be like giving the car business a set of APIs.
No one will let GM die, especially not a Democrats controlled congress and a Democrat as president. They owe the unions for the votes and no one is brave enough to tell GM -- whom people have worked for multiple generations and who in turn have been taken care of by the company -- to go die. We'll just going to hand them money.
If GM goes bankrupt, there will be massive unemployment and closed factories. This sucks. On the other hand, this is a good environment in which to be a manufacturing company with cash on hand. If GM can't turn a profit, they need to make room for someone who can.
Whatever is done, you cannot reward the current management. They need to suffer the consequences of their failure. (More so the case for Chrysler and their ownership by Cerberus). As I heard someone state this morning, why believe that the management team that created the problem will be able to solve the problem.<p>IMO, GM needs a major overhaul from their pre-1980 ways. Besides labor unions that were mentioned, they also have an overextended dealer network. Their desire to focus on so many brands with just re-badged cars (they even neutered Saab with this approach) needs to be changed. The Toyota/Lexus, Honda/Acura, and Nissan/Infiniti models show a much better approach.
Short answer is "yes, let GM fail". For more details, I appreciate Daniel Ikenson's insights on this:<p><a href="http://www.cato.org/dailypodcast/podcast-archive.php?podcast_id=778" rel="nofollow">http://www.cato.org/dailypodcast/podcast-archive.php?podcast...</a>
Well if the gov't wants to act as a private equity firm, so be it. Buy them and then chop them up and sell to other companies. Their parts are worth more than the whole.<p>Also, if you want any sort of green-innovation in the car industry, they have to go.
1.)Slice up the company into smaller companies, based on make (Pontiac, Saturn, Saab, Hummer[!]), and let those fight on.<p>2.) Any government funds come with strings attached. Things like developing fuel/energy efficient vehicles(say, didn't we already pour 25 billion into the big 2.5 just this year for that?). Or gut middle and upper management.<p>3.) Trim the 1inch thick agreements between the unions and the big 2.5.
As far as I see it... In Michigan the auto companies underpin so many other industries and fields that if the big three fail we'll be looking at the current foreclosure epidemic as a vacuum cleaner relative to the black hole that will ensue. I very much doubt that anyone in the position to decide will let the auto companies fail.<p>In Silicon Valley it's, "Start a startup!"<p>In Michigan it's, "Join the union or!"
Let them die, but don't let them die now, because now things are bad enough as it is.<p>Think of it as a bail out of everybody else.<p>We're going to spend 3,4, maybe 5% of annual GDP to get through this mess. Might as well use some of that to kick the GM can down the road a bit.
The best idea I've heard (can't find source right now) is for the gov't to BUY $100B worth of cars over the next 4 years, replacing their own fleet.<p>A big chunk of that (the $25B floated) could be handed over now in order to design a fuel efficient, safe car with appropriate eco-awareness (hybrid, flex fuel, all electric). This is similar to how military contracts are structured.<p>The bidding could be thrown open to any company that uses American labor to get the job done: it has to be built here. But Honda/Toyota/etc. are welcome to take part.<p>If GM can't build the "car of tomorrow" with $25B in startup, they <i>should</i> fail.
gm, in its present form should not be bailed out.<p>institute new federal efficiency standards on all cars sold in america. this will level the playing field while the american auto industry retools itself.<p>pump tens of billions of dollars into research and development to create the next wave of vehicles that meet these new standards.