I had thought about the prospect of a taxpayer-backed bailout for the auto industry in the same light as the one for AIG and other large financials.  The bailout is actually the lesser of two evils, since these large manufacturers employ thousands of Americans who don't necessarily have any other skill base to rely upon (talk about legacy!); therefore, a larger number of the newly unemployed would not necessarily be able to find work again.  Go down one tier, and you have all the suppliers to the manufacturers, which would lose a large portion of their daily business should the Big 3 go under.  All their employees would then be subject to the unemployment rolls.  One more tier, and you're talking about thousands of corner stores, gas stations, Red Lobsters, IHOPs and grocery stores, out of business, just like that.  So.  On one hand we have widespread unemployment and business closures.  On the other hand we have a crushing tax bill, but at least we're still working and making things. 

For those who don't know me, this by no means is an endorsement for the bailout plan.  My 2 cents' worth...soon to be 2 cents' worthless.  :)

MGD,

I worked for UAL in 2001 when 911 changed everything and rode it out for another 2 years into their bankrupsy... I don't think I spoke out publicly against the company or the reasons behind their bankrupsy until I parted with them in 2003.....Never bite the hand that feeds you eh?  I just diddn't think it was ethical or wise to publicly criticize my employer in print. But the forum brushed on the subject.
http://www.aws.org/cgi-bin/mwf/topic_show.pl?pid=22938;hl=bankrupt

But I was against the Airline bailouts in 2001-2002  My coworkers thought I was crazy...  Ok maybe I am... One of the reasons that motivated me to leave the company was my disagreement with the Mgmt/Union pressure for a government bailout..... It is unethical in my opinion... 

At least Iacoca and Chrysler payed back their bailout.  (was against that one too)

GM is going to one shift at the LGR plant here in Lansing. This plant makes the Cadillac CTS & variants. One of their most profitable selling cars. Last I knew, the clear profit margin for a CTS was around $9000. The rest, as you pointed out, goes into "Legacy" benefits & overhead. There are aprox. 3 retirees to every one individual actually employed. This current situation will put over 800 locals out on the street. Sure, they will collect unenjoyment & SUB pay benefits, but it doesn't seem real likely they are going to get called back any time soon. Especially if the economy keeps going the way it is. Currently, there are aprox. 5200 total GM employees in town at three plants. 15 years ago, there were well over 11,000.

If the people don't get picked up by Area or Extended Area Hire, they might be better off looking for a job somewhere else. It's hard to say, but when GM had big layoffs here in the late '80's, some of those guys were laid off for over six years. The SUB pay ran out in a big hurry, insurance in 90 days as well. Some guys not even seeing SUB benefits for more than four to six months. After the unenjoyment ran out, that was it. A major slowdown or layoff here would devastate Lansing's economy. Like you also pointed out, MANY, MANY things are linked to the auto industry. If GM goes belly up, a lot of local & other businesses will fail subsequently. Not to mention, retirees losing their pensions. I personally see it coming. I just didn't think they could continue to pay heavy "Legacy" benefits forever, regardless of how much cash they have on hand or continue to make.

It's hard to say. Even though I don't work there any more, I know our local economy is heavily dependent on GM's success. Just look at Flint, MI if you want to see what happens when 80+% of a city's tax revenue & economic support structure disappears. I don't think things look good for GM either way. As far as a bailout, I really couldn't say one way or the other if it's going to fix anything long term. I do think a restructuring, much like the airlines is coming. After declaring bankruptcy, they can relieve themselves of any contractual responsibility to the UAW & offer workers their jobs back at half what they were making before, with a completely different benefits structure. I know a dude that was a mechanic for Northwest in Detroit & it essentially happened that way for them. Not a good situation. Too many GM employees are banking on that $30+ per hour paycheck & free health benefits until they retire. I wouldn't be counting on that a whole lot longer if I were them.

Michigan would tank for sure if the automotive industry went away completely here. Doubtful that is going to happen entirely, but it's not good either way.

FWIW S.W.

MDG,
  Thank you for your enlightening response. When it comes to "bailouts" I must admit, I have had my head in the sand, and I am in a learning mode right now.

jrw159

     The Big 3 all have excess capacity, that is plants working with reduced output or plants closed. This costs a lot more per car produced than it used to.

     The legacy costs were not a problem when sales volume was high, but it  is an even greater burden as there are early retirement /golden handshake employees who would be working - contributing to the whole rather than drawing from it if the sales volume had not declined. This too is an area where greater expenses must come from reduced income.

      My cousin's wife used to work for GM. One of Her friends who made several hundred K /year got an early out, He still gets His entire salary, He lost a company car, and is covered under His wife's insurance, as She still works for GM. Staff reductions like this one don't save the company much money.

      There is no easy way for a large company to become a smaller one, and with actions like the one I mentioned above, it is impossible.

I don't think it's been mentioned here but one issue that is not applicable to japanese auto makers is health care costs. In the US auto manufacturers to a large extent foot the bill for health benefits, in Japan and europe it's recognized by the government as an intrinsic right to all citizens.

now before we look at this as a freedoms issue or about trying to limit governt or about not wanting to increase taxes etc etc for health care. Lets breakdown the cost issue
America pays some of the highest % GDP of health care among any western nation
American health care outcome is not even close to top 10, simply put our health care is good and can be great but not nearly world class, for what we are paying
you must realize you already ARE footing the bill for people with no health care. And we are taking the most expensive route to do it
You also must realize that medical bills is the leading cause of bankruptcy for individuals.

Basically put those who don't have healthcare, avoid costly doctor visits until they are too sick to function and then seek MORE costly emergency room visits, there's no right of refusal, and many patients have no way of paying so the hospital DOES end up footing the bill and the price is split up and passed onto issurance agencies.  If we switched to a national system it reduces a lot of the inherent inefficiences of paying for people with no health care (something we already do) not to mention relieves employers of a burden that makes it difficult for some industries to compete in a global economy.

I think a lot of people get caught up on national health care for idealogical reasons, that are not inline with what is observed in the rest of the world. I believe in the power of the capitalism but monetizing and capitalizing every industry is the correct path. For example utilities and public works such as roads are systems that don't work well when privatized. Health care is one of those systems.

On the direct issue of the car companies you must realize it's a simple matter of delivering a quality product. Besides other things american auto makers have simply not been able to create a product that competes with the Japanese. and while the japanese companies aren't doing well during this recession they are posting a profit. I think we should really ask why we too can't create a sellable product at a reasonable price. The japanese cars are just as global as the us manufacturers and they have many plants here too but they structure their plants differently.

Finally as with MDG the detroit auto economy goes lock-step with the michigan economy. It's partially our own fault for being so heavily invested in one sector, but the slow demise of domestic auto has seen the michigan economy drop very low, unemployment soar and the tax base evaporate. I'm from Ann Arbor, MI and have many friends and family members working in detroit auto and it's not looking good for them. I'm set to graduate in only a few months and people ask if I'm going to move back to Michigan. But frankly the employement opprotunities are grim in the state right now..