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Car Trouble: Big Three Go Begging, But Is a Govt. Bailout the Answer?

Posted Nov 07, 2008 12:14pm EST by Aaron Task in Investing, Recession, Autos

More dire news from U.S. automakers: GM posted a worse-than-expected $2.5 billion Q3 loss and indicated that it's "estimated liquidity will fall significantly short" of 2009 operating costs. Meanwhile, Ford announced that it lost "only" $129 million in Q4 but had also burned through $7.7 billion in cash. Little wonder that the CEOs of the Big Three carmakers went to Washington yesterday with hats in hand.

In the accompanying video, Henry and I argue that a short-term government bailout à la the banking industry won't fix what's wrong in Detroit. But what will? While our suggestions may not go as far as The Wall Street Journal's, it's clear that a federal-cash quick fix won't address the pension shortfalls, union stranglehold, or fuel efficiency double-standard that have been choking U.S. auto manufacturers for years.

371 Comments

madmilker
madmilker - Friday November 07, 2008 12:20PM EST

made in America is the answer only if the American consumer buys made in America.......

__A_YAHOO_USER__
__A_YAHOO_USER__ - Friday November 07, 2008 12:26PM EST

Make a good car.......That is my answer......even if there is a bail-out it will remain losing money not unless the built a better good quality car that most people like if not it is a waste of money.......Soory

IggyJ
IggyJ - Friday November 07, 2008 12:27PM EST

GM needs the money now - remember no other industry is able to sustain other companies like the automobile companies. The norms is for every automobile worker it translates to 5 other jobs it helps. Lets start making this decision now.

Softshoe
Softshoe - Friday November 07, 2008 12:31PM EST

Aaron, there is no way in the world that every entity can be saved from their own stupidity,and outside,unseen,circumstances. The answer????. Let the chips fall where they will. The strong survive,the weak fall by the wayside. Isn't that true capitalism??? That's the way I was taught,growing up in the 20's,30's and 40's. When things get tough, the tough get going.(again). JIM

Chris P
Chris P - Friday November 07, 2008 12:31PM EST

THE COUNTRY WILL GO INTO A DEPRESSION IF AUTO MAKERS ARE NOT HELPED. PEOPLE WHO DON'T AGREE WITH THIS ARE IN DENIAL. THERE ARE SO MANY PEOPLE AND COMPANIES THAT ARE INTER-RELATED TO THE AUTO INDUSTRY THAT THEIR FAILURE WILL BE THE FINAL NAIL IN THE COFFIN OF THIS ECONOMY.

Slawek
Slawek - Friday November 07, 2008 12:33PM EST

Get a new management team. When will they realize that what they are doing is not working and never will? oh yeah... start producing quality products.

Yahoo! Finance User
Yahoo! Finance User - Friday November 07, 2008 12:33PM EST

Then built their business model on selling Bigger & Bigger Trucks. Yet Ford knew that bigger & bigger trucks weren't the answer because Ford has Cars for South American & European Fords which look absolutely nothing like what is in the US market. If they want Govt help they must surrender to government stipulations.No big CEO/Exec payouts. Surrender Real estate like the renaissance tower and put it up as collateral for your loans and give a definite 5 year turnaround on the money with assets that can't be used in a BK filing. Then & only then should we do business with them. This was a disaster of their own making ! If this is the way they chose to do business we need to hold some one accountable and if they won't act responsibly then we must force them to certain terms and conditions before they get 1 red cent.

Yahoo! Finance User
Yahoo! Finance User - Friday November 07, 2008 12:33PM EST

The American consumer has voted and they say NO to GM, Ford, Chrysler! They voted YES to Toyota! Why support makers of poor product that noboby wants to buy???

robert m
robert m - Friday November 07, 2008 12:34PM EST

there is a price to pay for all because people would rather buy non american non union goods going back 25 years in its starting point.......the chickens have come back to roost......and you throw in all the greed of the ceo's and crooks in government taking payoffs to send our jobs out of the usa......

Yahoo! Finance User
Yahoo! Finance User - Friday November 07, 2008 12:34PM EST

Let them fail...I've bought my last American car EVER. I'm tired of tax money being used to bail out failed business models.

Yahoo! Finance User
Yahoo! Finance User - Friday November 07, 2008 12:35PM EST

Then built their business model on selling Bigger & Bigger Trucks. Yet Ford knew that bigger & bigger trucks weren't the answer because Ford has Cars for South American & European Fords which look absolutely nothing like what is in the US market. If they want Govt help they must surrender to government stipulations.No big CEO/Exec payouts. Surrender Real estate like the renaissance tower and put it up as collateral for your loans and give a definite 5 year turnaround on the money with assets that can't be used in a BK filing. Then & only then should we do business with them. This was a disaster of their own making ! If this is the way they chose to do business we need to hold some one accountable and if they won't act responsibly then we must force them to certain terms and conditions before they get 1 red cent.

Yahoo! Finance User
Yahoo! Finance User - Friday November 07, 2008 12:37PM EST

The leaders of American car companies have no vision, that is why they are always behind the 8-ball. Why is it the foreign car makers are building superior green cars and Detroit is still cranking out ancient gas guzzlers? If they can't figure out the market they should be out of business. Let Toyota build more car plants in the US, in the south where workers are happy to get $15/hour for a good days work. Detroit has been spoiled by unions, thinking that someone that slaps together a car is worth $50/hour (inc. benefits). Come on, a chimp can build a car, it ain't rocket science!!

Peter
Peter - Friday November 07, 2008 12:38PM EST

The job rate has reached all time hi in years. That's positive news if you ask me. No wonder the market is up

Yahoo! Finance User
Yahoo! Finance User - Friday November 07, 2008 12:38PM EST

No bailout. There shouldn't have been a single one. Then maybe we could already be in a depression. Which is where we're headed anyway.

Yahoo! Finance User
Yahoo! Finance User - Friday November 07, 2008 12:38PM EST

Bottom line, you can't continue support a bad business model by throwing money at it. History shows us that over and over again. The warning has been coming for 30 YEARS. I support giving tax incentives that HAVE to be used to improve automotive innovation and build new efficient vehicles but not to just add to the bottom line. How many times do you fix an old crumbling building? Tear it down and put a better one in it's place and what do you think the imports have been doing in our own country. Too bad all the profit leaves the US after the sale.

tomcat
tomcat - Friday November 07, 2008 12:38PM EST

The same thing needs to happen to GM ,Ford,like the airline industry. We should NOT bail them out. They should file for bankruptcy and emerge as a smaller more efficient company. The airlines did it and it works. There is too much capacity, too many divisions, too many cars lines and too many greedy unions. The cannot operate with the current cost structure and be competitive they must realize this or there will not be any domestic car producers in 10 years.

jamesg
jamesg - Friday November 07, 2008 12:39PM EST

American Autos were always pretty much behind the curve in terms of making better quality and more effiecient vehicles. They get what they deserve. Buy German!

Yahoo! Finance User
Yahoo! Finance User - Friday November 07, 2008 12:39PM EST

Yeah, iggymac is right, every GM worker gives jobs to 5 other workers, unfortunately the other 5 workers are repair shops trying to fix the POS that Detroit built!! Sad, is this the best America can do??

Yahoo! Finance User
Yahoo! Finance User - Friday November 07, 2008 12:40PM EST

Yeah, iggymac is right, every GM worker gives jobs to 5 other workers, unfortunately the other 5 workers are repair shops trying to fix the POS that Detroit built!! Sad, is this the best America can do??

Softshoe
Softshoe - Friday November 07, 2008 12:40PM EST

Aaron: Are you old enough to remember General Motors Corp's, Mantra and Slogan".--What's good for General Motors,is good for the Country"???? What are they saying now???? Jim

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