We would be better served using the money in a hostile takeover of Toyota.

No, that's not what I'm advocating, but it makes clear the futility of thinking that an infusion of government money and "oversight" is going to turn GM, Chrysler, and Ford into lean, mean, green machines.  The companies are structurally flawed and, without basic ground-up reorganization and restructuring, will really not be able to change course no matter how hard we try to force them.  We would be better off using that $25 billion to fund research and start-up initiatives (like Venture Vehicles or Aptera or any number of US firms competing for the Progressive Automotive XPrize).  A good portion of the $25 billion could also go towards retraining and education for the workers rather than to the corporate heads who have proven over the last two decades that they really don't know how to run an automobile business.

You want to retool the US auto industry?  Then let the dinosaurs die.

I am so tired of hearing about "retraining" the workers as a panacea for everything.  Economists, free traders, and neo cons tell us that with casual assurance all the time.

Unless you can actually specify what you would retrain them for that would let them earn decent, middle class wages, please don't make that suggestion.

You are not wrong about the need to retool the auto industry to produce more environmentally sound cars with a new generation of green technology.  Nor are others wrong about increased funding for rail.  I support all of that.

But the problem is that retraining workers is not a whole solution because there aren't enough well paying jobs in this country right now for which they can be retrained.

We encouraged people to be retrained for the high tech dot com industries and guess what?  Many of those jobs are now off shored. It's not realistic to think a fifty year old factory worker can be retrained to be a physician or computer systems designer.  The hard truth is that if the American auto industry folds - as opposed to being reformed - the workers will not be retrained for high paying jobs.  They will end up flipping burgers or working as Wal-Mart greeters, further driving down wages in the service industry because of the law of supply and demand (too big a supply of unskilled workers, too little demand for them).

Further, the erosion of our manufacturing base is not particularly good for national security either.  It's not healthy for any country to have an overdeveloped service sector and an underdeveloped manufacturing sector - that way lies a third world kind of future.

The answer is indeed bailing out the auto industry, but with lots of strings attached.  The industry must agree to retool to build cars with a new generation of green technology.  CEOs also have to stop taking insanely large salary and bonus packages - especially when their performance doesn't warrant it.  And we have to fix the credit industry, which was the whole point of the Wall Street bailout, because on top of the auto industry's other woes, it can't sell its cars because even those who still want to buy them can't qualify for credit right now.  That's even true of people with good credit ratings. Credit is very tight; everybody is afraid to loan money.

There's a lot that can be done to reform the auto industry.  However, letting it die is draconian and unwise.

"But the problem is that retraining workers is not a whole solution because there aren't enough well paying jobs in this country right now for which they can be retrained."

Um there are plenty of jobs available. Most of them require a college degree though which these people do not have.  You need a college degree to compete in the global economy.

"It's not healthy for any country to have an overdeveloped service sector and an underdeveloped manufacturing sector -that way lies a third world kind of future."

Do you know anything about economics???  Service jobs pay much higher wages than manufacturing jobs.  The reality is the complete opposite of what you posted.  Countries with a higher subset of manufacturing jobs are much worse off.  

"Um, there are plenty of jobs available."

...which is why unemployment figures are at a ten year high, I guess....

However, where are they highest.  States that have large numbers of people without college degrees.  

Original point still stands

I will ignore this type of nonsense in the future

Trust me, I know far more than you do on the subject.  I'm dealing in facts, not right wing talking points.  And believe it or not, lots of people don't have college degrees.  And the fact that well paying jobs with pensions and health benefits are disappearing is a problem.  It's what is leading to recession.

If we have to depend only on college educated people to buy luxury goods, the retail sector will contract, imports and the international manufacturing sector will contract, and the GDP will contract.  In addition, the real estate sector will continue to contract even faster.

In fact, it's doing so now.  The financial crisis brought on by the lending industry is only the tip of the iceberg.  It's all interrelated.

without some stability in the job market.  

In reference to service industry jobs, there is no comparison between the service industry and manufacturing in terms of wages.  Most manufacturing jobs in developed countries pay more than a subsistence wage.  There are only a handful of service industry jobs that pay anything close to a comparable wage -- almost all of these are in areas with strong unionization (e.g. the casino industry in Nevada).  

 - retraining auto-workers to be skilled builders of solar power and wind power devices/parts/technology
- giving health care to every child in the country
- building more high speed rail between cities
- encouraging the American auto builders that are doing quite well to continue doing the right things (the "big three" are a failure, but others make cars here quite successfully)

Just let the dinosaur die already.  The time for them to wake up to embrace change was the first time they got bailed out in the 1970s...    management this change averse should simply be sent to live in a monarchy somewhere.

"Retrain auto-workers to be skilled builders of solar power and wind power devices/parts/technology?"

I'm all in favor of providing incentives to encourage more people to get into this growing market, and to encourage more entrepeneurs to invest in it, but you should probably avoid thinking about job creation as a zero sum game.  You don't create 25,000 jobs in energy by letting 25,000 jobs in manufacturing die.  It sounds good in the abstract, but consider: every one of those UAW workers has a home and, in all likelihood, a family somewhere in Michigan or Ohio or somewhere else in the rust belt.  Their kids are happily in a public school somewhere.  They're concerned about their mortgages like anyone else, but they have healthcare, reasonable wages, etc.

Here's what happens when someone loses a job: their mortgage quickly becomes out of control and they have to race to sell in down market.  Because a lot of other people in their housing markets will be losing their jobs at the same time, housing prices will be further supressed by a glut of supply and low demand; chances are their mortgage will slip underwater.

They'll also lose their benefits for both themselves and their families.  If the fiascos in the airline industry are any indicator, they'll probably also lose their pensions, so expect to see a lot of people dipping wiping out their savings as they try and regain their footing in a down economy with no personal income and that mortgage that just keeps piling up and also no healthcare.

The comes the part where you force them to move.  Because the funny thing is, they may live in Michigan now, but chances are they'll have to be installing solar panels or building wind turbines somewhere else, largely as a migrant work force, and since their jobs will be somewhere else, they'll have to pull their kids out of their current school systems and their friends and be transplanted somewhere else.

Life, as these individual people know it, will have changed forever.  Some of them won't be able to cope.  Some will develop drinking problems.  Some will commit suicide.

But it will be okay because we'll all get cheaper alternative energy.

...this is why you should try not to think about policy questions only as little abstract word problems.

This is an excellent comment that shows humanity, compassion and common sense.

It's not all about the CEOs and top executives who made the bad decisions to build SUVs.  It's about real, flesh and blood, humans just like us who happen to work in that industry.  Many of them don't have the options that those who post here do.  But like us, they have families to support.  This will cause untold pain to ordinary people.

There's no reason that the auto industry can't be retooled to produce cars for the 21st century with green technology. Not everything has to be produced in China, Mumbai, and other countries with no human rights and poor standards of living.

On the one hand I feel for all of the workers that are involved, and don't want them all thrown out of work.

But my frustration has been with management.  IMO they are bloated, their ideas are old and stale.  I have been frustrated for years that they encouraged the development of the SUV, and that is turning out to be the noose around their necks.

Right now they are asking for money, and if you hand it over without strings, they will blow it and then be back for more.   As best I can tell, their plan is to hope for the economy to turn around, but their product mix is all wrong.

Any help for them must come with lots of strings attached.  Never again do I want to hear about stonewalling related to the environment, safety or anything else coming from these idiots.

GM management may be using this as a ploy.  If they go into bankruptcy, they are going to be able to throw the pensioners under the bus.  They may complain about health care costs - that's a real cost, of course, but perhaps we can use this as a way to get serious now about some level of single-payer.

GM wants to get out of Union obligations.  This is a shock doctrine for automakers to gain serious change that they have been unable to make for over half a century.  However, they also made bad business decisions that the Unions needed to recognize.  Yet, did the UAW fight for fuel-efficiency legislation or work to protect themselves?

Labor costs are high for the domestic auto manufacturers versus their Japanese competitors.  Pension and health benefit obligations are a serious issue they need to tackle to be competitive.  That's why the government seriously needs to do something about getting healthcare costs under control in this country.  We pay more than twice per capita in healthcare costs than any other industrialized nation in the world.  And it is well over three times when you take Switzerland out of the mix.

What I am saying is this is an opportunity for GM to shed much of its responsibility to the UAW within a few months where key decisions are made.  If we take a business-as-usual approach to bailing out a giant corporation playing by their rules, nobody benefits.  They maintain their crappy business plan, and the union workers suffer.  

The reason our health care costs are so high is directly atrtributable to our health insurance industry and the high administrative costs it generates.  You are absolutely right that ours is the most expensive health care system - and the average person isn't getting the bang for their buck either.

It also keeps our industries at a competitive disadvantage in the world marketplace.  Health care reform would go a long way to helping our businesses compete more effectively in the world marketplace, while helping the average working person to have better health care coverage.

It works for Taiwan.  We could use the Bismark model that Germany, France and Japan use.  Or we could use, arguably, the best in the world the UK's model.  Anything is better than what we have now.

I don't think the British (or Canadian) model is do-able, and frankly I think there are better alternatives. I actually do think the French model is the best, and the most easily translatable -- hopefully our Franco-phobia has subsided enough to allow it to be a viable option. So combination of what the Swiss, French, Swedes, Japanese, and Taiwanese do is feasible and would be very popular here.  

(I believe at FDL in a diary by Ian Welsh) that, if you factor out the costs per auto that the Big 3 have to spend on current health care and legacy health care costs to their employees and retirees, both Chrysler and GM would still be profitable (Ford almost, but not quite).

It's absolutely true that American automakers cannot compete fairly with Japanese and European companies that aren't paying for health care for their employees. Until we solve that problem, American manufacturing businesses will continue to suffer and decline.  

What we have here is a simple case of the arrogance of power believing its own propaganda and flunking in the market test, IMHO. Even back in the days, I remember Engine Charlie Wilson of GM, called up to be Sec Def (for  Ike?) when he accounced that "what is good for General Motors is good for America." It was about that time that Japanese automakers began sending funny little cars to California and Volkswagon did the same on the East Coast---- and Detroit laughed, certain that such animated cartoon cars would never succeed in America (instead, Detroit produced the Edsel, elaborable fins on Cadillac fenders, and monster truck forerunners to SUVs).

This argument about the management of the auto industry's companies has been going on for at least 70 years... but I can never forget that after Pearl Harbor it was Detroit that instantly re-tooled and cranked out thousands and thousands of tanks, landing craft, jeeps, convoy trucks, adn so on, and helped produce airplanes in such quantities that Hitler told his Intelligence chief to stop giving him the numbers, they weren't believable. We need Detroit for our vaunted military machine, even in the days of electronic warfare, and I'm surprised terrorist expert GW Bush hasn't mentioned that while he disses bailouts.

Can we afford, for national security reasons as well as for economic reasons, to let Detroit go under? I suspect we cannot, but if the American taxpayer turns itself into yet another cavalry charge coming over the hill, we need to have a helluva lot of gurantees, preconditions, and audited supervision of the deal, and it cannot be a plain bailout.

Just noticed an op ed in the New York Times by retired Gen. Wes Clark on the same topic of the auto industry, riffing off Engine Charlie's comment, and pointing out the need for a strong Detroit if we want a strong Army: http://www.nytimes.com/2008/11...

After Pearl Harbor, it was Detroit that started rolling out tanks, jeeps, etc., because that's who made tanks, jeeps, etc.

Today, GM, Ford, and Chrysler provide far less of the military machinery than 60+ years ago.  I would venture to say that in the firesale that would take place were GM to go belly up, General Dynamic, Northrop, etc., would be buying up the military product lines.  I don't see the Humvee disappearing because GM's commercial lines go under.

op ed article by Clark: Detroit really is still supplying some of modern vehicular products on demand for the military. I, too, had assumed that much of our Big Iron was now outsourced, but apparently not yet. Give Bushie a few more years, and it probably would be true, since he has gone out of his way to weaken the United States in every way possible (or so it seems to me).

The Abrams battle tank is made by General Dynamics (because Chrysler sold that part of its business).

The Bradley Fighting Vehicle is made by BAE Systems.

The AAV7A1 Amphibious Assault Vehicle is made by FMC (a division of BAE).

The only major vehicle platform still built by one of the big 3 automakers is the Humvee built by GM.  Any doubts that BAE or General Dynamics wouldn't jump at the opportunity to buy that line of business at a GM fire sale?

I understand Clark's argument, but it just doesn't pass the fact test.  The big 3 aren't supplying the armed forces any more.  They got out of that business (just one of the really "smart" decisions they've made over the years).

Excuse the typo: "elaborable" was meant to be "elaborate and adorable" (snark comment) but I ran the two together, thus inventing a single new word with the meaning of two old words. Heh.

As a Flint, MI native I've seen the demise of Michigan and the auto industry first hand. I have seen many an individual laid off and their families lose everthing in the process. It isn't just the auto maker that loses, but all the people in the state and in the country whose lives rely on the auto industry for their income. Many a good union worker lost everything in the 70's when OPEC reduced production of oil, but it wasn't the worker's fault. They were merely producing the product that management designed.

For many years the auto industry was run by individuals who loved the automobile and wanted to make a great product. Soon, the industry was taken over by bean-counters who's only mission was to line their pockets and increase their wealth and the wealth of their stockholders. Roger Smith and his ilk replaced the Louis Chevrolet's, Ford's, Durants and others that started the industry. They stopped making good looking cars and started making tanks that produced the most revenue. Add to that America's tax code encouraged American Corporations to invest overseas, in lieu of retooling their plants in this country. The American auto worker was and is a pawn in global politics and corporate greed.

Almost every automaker in the world makes SUV's. Land Rover was making this product long before GM, I believe, and we all know the gas mileage numbers for the Land Rover line. In the 80's we bailed out Chrysler and the bailout worked. Thanks to the hard work of then Denocratic Congressman(and later Governor) Jim Blanchard and others, the corporation was saved and they paid back the money to the taxpayers early.

I agree we should have strings to the money we lend, but I believe we need to save America's working class. We are presently paying off George Bush's cronies on wall street to the tune of close to a half a trillion dollars. Yet we haven't asked them to revise their business model, nor required massive oversight to a class of crooks like this country has never seen.

The Chrysler bailout was $1.2 Billion in loan guarantees.  Chrysler never got a check from the government.  Chrysler was supposed to pay the government the difference between the interest rate secured with the government's backing versus the rate Chrysler would have gotten had it attempted to finance on its own.  Chrysler never paid anywhere near that.  It is also a myth that Chrysler turned things around.  Basically, Chrysler restructured its debt the way it would have had it declared bankruptcy (paying back some of its creditors $0.30 on the dollar) and used some interesting accounting to make the comeback look all the better (deferring pension payments, cutting R&D, decreasing capital investments).  

But let's just say that Chrysler was handed a check for $1.2 billion back in 1979.  Even adjusted for inflation, the numbers we're talking about to today are an order of magnitude larger than what it took to keep Chrysler.

I'm all for finding ways to protect the workers as much as we can, but I'm not sure infusing untold sums into the decrepit, ailing, flawed, mismanaged Big 3 is the right way to go.  When Chrysler approached the Carter administration, Chrysler already had a plan in place to move forward.  I haven't seen anything from GM that except an empty hand looking for some assistance.

I was listening to a report by Naomi Klein (sp?)(author of The Shock Doctrine) on the Wall Street bailout, and its not a pretty story. No oversight, monies going to shareholders and executives, and little or no valuations of assets to determine cost of asset purchases. It sounds like the ultimate pork palace debauchery and the Bush Administration's final gift to Wallstreet. The Wallstreet bail-out in effect rewards past poor management decisions, reckless lending practices, with tax payers footing the bill. This is the BUSH way of "fixing" a problem. Hopefully the Obama administration will take a different approach by demanding accountability, its the taxpayers money afterall.

I believe that we can support the automakers but not a la Bush. Need a different approach that includes incentives, tax credits and accountability..but most of all Detroit needs a "up from the bootstraps" renaissance in product line and quality. We are 8 years into the new millennium, and "business as usual" for the U.S. automakers needs to change if they want to survive. Shout-out to friends in Flint.

   

...and was able to get a very good deal on it which I believe is in large part due to the financial difficulties that the company in having. They desperately need business and it creates good deals for folks like me who live on an organizer's salary.

That's a community organizer, I assume? You know, that useless socialistic trade Obama played around with after Harvard Law School? Making trouble?

thats a service job not a manufacuting job I assume

Looks like AIAW thinks you are hurting the economy

(snark alert)

because I really do believe in live and let live and the marketplace of ideas.

But realist, do you actually not realize that flipping burgers, working in Wal-Mart, and other low paying retail jobs is what I was talking about?  That's considered the low end service industry. WE're not talking about investment counselors, financial analysts, and other professionals in a different part of the service industry.

Please study economics before you start thinking your snark is clever.  You only embarrass yourself.

From the sound a few comments and the poll, it sounds like the answer is mostly no.  We are not just talking about letting GM, Ford and Chrysler go out of business.  We are also talking about the numerous parts suppliers and dealers connected to those companies also going out of business.  We are talking about losing a substantial portion of the manufacturing base that still remains in America.  Do you really want to throw 2+ million people out of work?  And can you imagine what a devastating impact that will have on the economy?  You can't expect that not to have a cascading impact.  You can't expect that not to affect your or your friends' or your family's livelihood.

Bankruptcy would mean liquidation for these companies.  Normally, you would see in Chapter 11 financing to get the company through restructuring, but not in this debt market.  So, they would go to straight to liquidation.  Equally, it is hard to see even if they somehow managed to find creditors willing to finance restructuring how they would find revenue.  What person is going to buy a car from a bankrupt manufacturer?  It is one thing to pay $200 to fly coach on a bankrupt airline; that is a relatively small dollar amount for a short duration service.  It's quite another to shell out several grand for a long term commitment to a company that is in bankruptcy.  Not a lot people are going to be willing to take that risk.

And from a perception issue, after bailing out the banks, it is going to look awfully bad if politicians allow the auto makers to fail.  The automakers did not cause the current crisis we are in.  They are victims of it.  Like many main street businesses are.  If all we do is help out the people who were complicit in causing this crisis, what message does that send?

I have to say that the "let them fail" or "or let them go bankrupt" sounds an awfully lot like: "Let them eat cake."

To the points of this diary...  If we want to put condition on this loan, that's a fine idea.  Though like the drug wars, I think a more effective solution would be one that dealt with demand (i.e. a gas tax or a carbon tax or a combination) versus supply (i.e. CAFE) if what you are after is green.  But politics is all about the art of the possible; and dealing with demand is not a popular idea with the public.  I think saying they can only use the money to completely retool their industry is bit too onerous.  But something in the middle would probably work for both parties.  As far as saying the workers who do get laid off should be put to work on the power grid or something else green related: one, I am not sure their skills are transferable (you need to be lineman for the grid, right?); and two, that is starting to sound too much like a command economy for my taste (and I obviously have a high threshold =) ).  If we are talking about generally retraining the workforce to handle all of the jobs we are going to create in remaking how we get and use energy, I think that is the topic of another bill and not a loan to the auto industry in particular.

I was waiting for you and AIAW to show up when I opened this diary this morning.  Karen in particular because there are times when you need someone represented by part of the AFL-CIO to speak up and say "how about we not screw the working man?" and you because we frequently need people to remind us that easy answers aren't commonsense answers--they'll sound tempting in the abstract, but the problem is much more complicated when you're dealing with real people and real problems.

Would I bail out the big three?  Yeah.  I'd probably tie a fair number of conditions into it, chief among them that the corporations would eventually have incentive to pay the government back and buy us out of their business (I don't like the idea of the American people becoming a controlling shareholder in any company long-term, and I don't like the idea of taxpayer dollars being used without regulatory bodies and oversight, so encouraging private interests to quickly buy us out is highly preferable to me).  For the rest, I think we should bring the chiefs at the UAW together with the suits from the businesses in question, sit them down with some of our elected leaders and discuss precisely what everyone is willing to do to solve this problem.  Because we shouldn't look at this as a bailout or an opportunity to impose our will on Detroit; we should look at it as a short-to-medium term investment in our own economy.  We're not just making laws here--we're also making a deal.  So let's cut out the unilateral bullshit, let's stop the back and forth on Meet the Press, let's stop negotiating through lobbyists and get the interested parties to talk to one another.  Maybe there's actually room enough to make a decent deal.

Give them aid only if they fire their CEO, CFO, and entire Boards of Directors.  This is not a time to dance with the one that "brung ya".  They got it wrong, off with their 'eads.  No Bye Bye bonus, no Golden Parachute.  Their employment agreements must have a "no severance pay due if fired for bad behavior" clause...destroying the economy is very bad behavior.  Not up there with gay marriage, or war opposition, but bad none the less.

This should also be the case for any and all of the financial industry companies seeking bailout.  Otherwise, we are handing over billions of dollars to the same gangsters that robbed us to begin with.

When are we going to start prosecuting some of these guys?

it's easy.

Provide a bridge loan to the industry for $25 billion -- a loan which may be repaid in a few years as was the case with the Chrysler bailout in the early 1980s.

Or let the industry collapse, and pay at least $100 billion in social service costs right off the bat for anywhere from 500,000 to 2.5 million workers who lose jobs as a result of the industry's collapse.

These numbers don't factor in the lost tax revenue from unemployed workers at a time of sky-rocketing deficits, or the impact that these lost jobs have on already depressed housing markets.  It also doesn't answer the question of what kind of work these unemployed workers will eventually find down the line.

During an economic down-turn, it's said that you could rationally justify paying people to burying pots of money -- an activity which at least keeps money flowing through the economy.

In this case, the Big Three, are engaged in a productive activity with a pretty decent long-term horizon.  (e.g. GM is already the #3 player in China, a major player in the European auto market, and they have some good products in the pipeline.  The Chevy Cruze -- a 45 mpg gas vehicle -- which rolls out in Europe in 2009 looks like a good product).

It makes sense to tie strings to the bailout -- getting additional concessions from the UAW, limiting executive compensation, jettisoning global warming denier Bob Lutz, and also ensuring that the the Big Three have a viable business model going forward.

One thing that is killing our domestic industry right now are health care costs -- an issue that most foreign suppliers don't need to worry about.  Yet another reason to look towards a national health care system.  We are at a competitive disadvantage, because of the patch-work private insurance system.

Personally, I'd rather extend a $25 billion loan, than to provide $100 to $200 billion in social service costs for workers who are unlikely to find new employment in the near future (e.g. the next 24 to 36 months).

The purpose of my blog post was to create this dialogue.  I know people are anxious to voice their opinion.  I agree that doing nothing really isn't an option.  However, I am unwilling to accept our government bailing these folks out, without taking advantage of a historic opportunity to change the trajectory of the American auto industry.  Our government has an unprecedented opportunity to move America in a green direction and drastically reduce oil dependence.  One of the biggest opponents to fuel efficiency - the U.S. Auto industry, is on its knees begging for help.  They are not in a position to attach strings.  We have to take advantage of this.  This will be a great opportunity for Obama to lead, however the lame duck session mustn't screw this up by being soft and thinking small rather than big!

GM has already started pivoting in a "greener" direction, because it makes more sense.

Sure, also use the opportunity to put in more stringent fuel efficiency standards.  But get a deal in place that can protect the jobs at least through the next 24-36 months.  (e.g. so that there will at least be the prospect of new employment that the employees can transition into).

If a deal is structure right, I think there's a better chance that GM will emerge out of the recession as a company that is still viable, and better positioned going forward.

I don't know how much they can change.  I did a team project in grad school on hydrogen cars which was overseen by a GM lobbyist, who shall go nameless.  I could tell the way they were approaching this that they were always about what is in it for them, and not their workers or America.  Later on I was told by a reliable source that this same lobbyist fell asleep in a meeting with a Congressman, and woke up to bitch and moan about GM's needs, after failing to listen to everyone else.  Maybe this mindset has changed, but I doubt it. There needs to be serious sticks to go along with any carrots.

there need to be carrots and sticks tied into a deal.  GM is looking out for GM -- not for the entire automotive industry or the U.S. economy.  The same is true of every business enterprise.  

When people like Sen. Shelby of Alabama talk about opposing loans for the Big Three, it's also important to keep his motivations in mind.  He is reflecting self-interest as it relates to the auto industry in Alabama.  

Shelby would love to see competitors disappear up north, so that the companies based in Alabama have greater leverage over U.S. consumers and the U.S. automotive market.  In that scenario there's less competition, which might benefit the interests of Alabama and Alabama's economy, while hurting everyone else.  

Certainly as it relates to the electric car, the companies that he's representing would love to see GM fail given that GM has a bit of a head-start in that area.

Self-interest is at the basis of our economic system, and people can create problems when they get too greedy.  The key is striking the right balance.

That said, it does make sense to LOAN the big 3 money.  Sure, part of their woes are the fault of management.  But not all.

They had no control over the skyrocketing price of fuel.  I don't think a reasonable person would know fuel prices would rise 400% over 8 years.  And I don't think a reasonable person would know fuel prices would drop in half this year.  Of course they need more fuel efficient vehicles, but the sudden drop in demand for their current inventory was a result of rising fuel costs.

Japanese and Korean companies have also been able to exploit labor because they locate in anti-union states.  It's easy to compete when you can exploit people.  We should have demanded that their employees be represented by unions.  

When we have fair trade, labor rights, and energy independence and these companies fail - I say let them fall.  But currently it's an unfriendly environment for American manufacturers and especially those who show respect to American workers.

Finally, I believe that American companies should be keystone to our fuel efficient vehicle initiatives.

If those arguments don't cut it for you, this last argument should.  If we allow the Big 3 to fail it will ultimately cost tax payers much more than $25 billion when you consider the economic consequences.  

I believe that lower fuel prices (if it lasts) will increase demand for current inventory.  The big 3 will survive (and become profitable again) if they can make it another 12 months.

One way to put the floor under foreclosures is to keep people employed -- especially those who are making living wages.  

Initially a collapse of the Big Three would have a severe hit in Michigan and Ohio -- where the foreclosure rates are already amongst the highest.  However, the the ripple effects would be felt throughout the economy.

I agree with you about the need for a loan, not a handout.  The terms that I've heard are along these lines -- it would be a $25 billion loan.  I would be surprised if it didn't end up being more than that based on the cash burn at the companies.  Odds are that it will probably take more than 12 months for the autos to start turning a profit.  I'd guess that they'll start moving again once the economy pulls out of recession.  

And it will do it again.

http://www.theoildrum.com

basically supplies are getting tight with little spare capacity.  In the years to come, supplies will start to fall as the old oilfields are being slowly exhausted.

But I don't think anyone predicted the speed.  That volatility was fueled (pardon the pun) by economic growth in China and elsewhere.  Our demand didn't change very much, but global demand did.

We know that long term oil will rise and we need energy independence.  

Stay tuned by the Ford Fusion (hybrid) next year.

We know that long term oil will rise and we need energy independence.

But yet, Detroit has done little to acknowledge that trend, instead insisting on bigger trucks and SUVs because that's where short-term profits were.  It is telling that at the same time GM was crushing EV-1s, they were ramping up and hyping the Hummer line.  What was Toyota doing?  Building the Prius.  What was Honda doing?  Building the Insight.  GMs hybrid and electric program is still not in production (the hybrid Saturn, for example, is a joke).  Ford and Chrysler are equally delinquent.  While Toyota is on the 3rd generation of the Prius, we haven't even seen the first generation from Detroit.

Other companies saw the writing on the wall regarding the need for better efficiency and greener cars.  Detroit only saw the green of short-term profits.  I don't know how you change that mindset overnight even with an huge infusion of cash either through a direct bailout or guaranteed loans.  How much effort will GMs lobbyists expend trying to weasel out of any terms or conditions versus the effort spent actually complying?

There is a reason so many into business ethics classes use case studies from the automotive industry.  There are a plethora of them out there.  Why are we to assume that GM would act any more honorably simply because the government bailed them out and attached terms and conditions to the bailout?  What happens when GM turns around and says "You know, we really don't want to meet those environmental standards you set"?  Are we going to pull the plug on them at that point?  If we've already invested $25 billion or more, I doubt it.

But we simply can't allow what I consider a source of national pride - equal to that of our space program (also deteriorating) to collapse.

The record of Big 3 management is really bad.  I think that part of the terms should include replacing some of them and appointing a manufacturing czar - responsible for rebuilding our manufacturing base.  We should have NEVER allowed free trade to destroy our manufacturing base.

A problem and key player in this everyone seems to ignore is unfair trade.  

Also, being in business I develop products or solutions that fits into a niche.  The Japanese and Koreans already filled the niche for small cars.  I'm sure that GM saw goliath vehicles as a niche - after all they were selling like hotcakes for awhile.  Business and our national interests don't always cross paths so it is up to our national leadership to step in when this occurs.

It isn't GMs job to set energy policy - they will always act in what they percieve is in the interest of shareholders.  We have got to come to grips with the fact that business cares about just one thing: making money.  Capitalism is based on greed.  They miscalculated and their risk failed, but they never for a moment (and never will) build efficient vehicles because they think it is the right thing to do.  They will only do this if the government forces them to, or if there is a market demand.