US Auto Bailout accounting

[kevm14]

http://www.marketplace.org/2014/12/30/b ... to-bailout

This is the primary area of discussion I think:

President Obama has hailed the official end of the auto bailout as a roaring success, claiming that taxpayers recouped the $60 billion loaned out under his administration. The Treasury’s final reckoning, however, shows the bailout cost taxpayers about $9 billion, out of a total investment of around $80 billion between presidents George W. Bush and Obama.

But some say simply looking at money spent vs. money returned is not accurate.

“The cost of doing nothing was not free, and that’s not taken into account in the government’s $9 billion number,” says Kristin Dziczek, a director at the Center for Automotive Research in Ann Arbor, Michigan. Had the government let GM and Chrysler go belly up, she says, taxpayers would be out much more than $9 billion in the form of unemployment payments and decreased tax revenue.

By pure accounting, the gov't is out $9B. But the argument in the second paragraph has a point, too, if you buy it.

[bill25]

There is also the idea that parts suppliers would also have been destroyed, and they also supply Ford. I read about this a while ago. Basically if Ford was the sole survivor, a lot of parts companies would have likely also gone away, hurting Ford. If you don't believe that, it is generally accepted that competition drives down cost, and if Ford was the only American company, you could imagine a world where imports raised prices, and it would look like Ford was a discount car company if they remained at their current prices. I don't know why but there is something symbolic of the downfall of the big 3 (arguably 2 now). To me, cars have always represented freedom. From when you first got your license, you can get in a car and go anywhere. It would be a strange world where America didn't build any.

[bill25]

This kind of mentions it:
http://www.cbsnews.com/news/what-happen ... -bankrupt/

[kevm14]

A bankrupt company still leaves behind engineers, skilled laborers, managers, marketers, accountants, and those suppliers you mention. Something (or things) could have risen from the ashes. Exactly what that would have been and how successful it would have been is a whole different conversation.

The auto industry is a tough place to startup. I mean Tesla has a lot of mindshare but they aren't making any money and a non-tech funded auto company would have already collapsed.

[bill25]

I found it!

This is the article:
http://money.cnn.com/2012/09/06/autos/a ... index.html

It even has the quote from Bob Lutz that was awesome in response to "why don't they just borrow the money from the banks?":

Mitt Romney claims that if GM and Chrysler Group had gone through a privately-financed bankruptcy process, they would have emerged even stronger than they are today.

But many auto industry experts, including the Obama administration's former car czar, Steven Rattner, a Democrat, and former GM Vice Chairman Bob Lutz, a Republican, say there was no private-sector financing available in 2009 and the bailout was the only way to keep the companies alive.

"He thinks we didn't try to borrow money from the banks?" Lutz told the Detroit Free Press in February. "The banks were even more broke than we were. Who had the money?"

And calm down Republicans, this wasn't CNN being crazy, bashing Romney, the quote is from Bob, who is a Republican, and the person running the company at the time.

[bill25]

Something (or things) could have risen from the ashes. Exactly what that would have been and how successful it would have been is a whole different conversation.

The auto industry is a tough place to startup. I mean Tesla has a lot of mindshare but they aren't making any money and a non-tech funded auto company would have already collapsed.

I pretty much agree with all of that. I think striking GM and starting totally from scratch would be throwing away what like 100 years of process, and car building experience? I really think the right thing happened. Tesla is threading water by being green, and getting gov funding, and having the "interesting/hipster" shine like Apple. Until they can build and sell on the large scale, they still have a lot to prove.

It does kind of suck that money was poured into Chrysler for a Foreign Company to reap some of the benefits, but, I guess it is better than keeping it here and doing it all over again for them since they will never understand how to build cars. Maybe they can buy the GM/Ford 10 Speed and finally have a transmission that lasts more than 3 years.

I really want to believe GM has changed for the better. As far as real commuter, everyday cars, the Cruze, Malibu, and the Impala are all really good, and all actually look really good now. They have figured out that style matters again which is good. GM clearly makes the best performance vehicles, which is obviously fact and not opinion so that doesn't need anymore discussion, and they still are the best at Full sized trucks and SUVs. They are on their way to being the best midsized truck builder with the Colorado. Sorry Taco.

[kevm14]

Maybe they can buy the GM/Ford 10 Speed and finally have a transmission that lasts more than 3 years.

They buy ZF for cars and now have Aisin in the HD Rams.

[Bob]

The auto industry is a tough place to startup. I mean Tesla has a lot of mindshare but they aren't making any money and a non-tech funded auto company would have already collapsed.

Let's also keep in mind that Tesla is the first domestic startup automaker to sell more then 100k cars in generations. They are an anomaly, not the norm. The barriers to entry to become a high volume automaker are incredibly high.

The auto bailout seems incredibly civilized compared to today's environment of the president elect tweeting threats of tariffs against any automaker who wants to build cars in Mexico. Let's be real here - it doesn't always make sense to make every model in the USA, particularly small cars where margins are much slimmer. These companies made large capital investments operating under the assumption of some sort of stability in trade agreements. When the government starts to meddle, particularly in an irrational, backroom deal sort of manner, no good will come of it. Based on their recent performance, GM has earned back the right to make their own decisions and not have decisions made for them by the government.

[kevm14]

The auto bailout seems incredibly civilized compared to today's environment of the president elect tweeting threats of tariffs against any automaker who wants to build cars in Mexico. Let's be real here - it doesn't always make sense to make every model in the USA, particularly small cars where margins are much slimmer. These companies made large capital investments operating under the assumption of some sort of stability in trade agreements. When the government starts to meddle, particularly in an irrational, backroom deal sort of manner, no good will come of it. Based on their recent performance, GM has earned back the right to make their own decisions and not have decisions made for them by the government.

My bet is you will see far more rational policy than seemingly random tweets with incorrect facts. This is not the peak of his policy making.

The individual choices he has made so far are not really the point - the conversation about it all is the point. And while it is a global economy, it is not an equitable global economy. And unless we can convince all countries that we trade with to approach capitalism and trade in the exact same way that we do, it won't be equitable and we probably shouldn't treat it like it is. It's all about the GDP. I think (I hope) we are going to see things shift in the positive direction. Many folks who understand business and the economy far better than I seem to be optimistic (if cautiously), which makes me less nervous.

[kevm14]

Found this comment and it was relevant for this thread:

If gm and Chrysler went under, ford would probably follow. All 3 of our car makers share suppliers and ford wouldn't be enough to sustain them. Ford didn't take the bailout money but they lobbied congress for their direct competitors. This is how vital this was. Even Toyota lobbied for it.

I mean, if it would have been an ideal capitalistic circumstance for Ford to be the sole US automaker, surely they'd have lobbied against the bailout, no? Maybe I need to do my own research to make sure this isn't fake news...

Toyota I could actually understand - there'd be some blow back from pissed off Americans in the rust belt. Which is why it was financially motivated. As with Ford. It's not like Toyota doesn't also share some US suppliers, either.