Ideology says, 'let the market kill off the failed US auto industry'

[Craig234]

Democrats said, make a sensible investment that helps our economy against a temporary fallout from the financial crisis caused by Wall Street:

Pelosi Statement on Chrysler’s Repayment of Outstanding Loans
May 24, 2011

Contact: Nadeam Elshami/Drew Hammill, 202-226-7616
Washington, D.C. – Democratic Leader Nancy Pelosi released the following statement today on Chrysler’s repayment of its outstanding loans to the U.S. Treasury, six years ahead of schedule:

“Six years ahead of schedule, Chrysler today paid back American taxpayers the financial assistance that helped the company to become more viable and energy-efficient. All Americans should be proud of Chrysler’s significant turnaround. Indeed, the swift actions taken by President Obama and the Democratic Congress not only made all three U.S. automakers more innovative and globally competitive, but saved more than 1 million American jobs.

“The auto industry is essential to a strong industrial, technological, and manufacturing base in our country. And when we make it in America, we spur innovation and strengthen our national security. That’s why Democrats stood by the American auto industry in difficult times and celebrate its return to profitability.

“Today’s news is a sign of the progress that can be made when we invest in our manufacturing base, in our workers, and in competitiveness for the future. Chrysler is now creating jobs and our country is better off because of it.”

I think we have a pretty clear choice here between the two sides - the one that follows ideology to a disastrous result, and the one that had a clue how to govern.

Still waiting for all the hyperbole about Washington designing cars badly to be found.

 

[ProfJohn]

When is paying back a loan not really paying back a loan?? hmmm

From NPR of all places:
http://www.npr.org/2011/05/25/136650503/chrysler-repays-billions-was-bailout-worth-it

CONAN: And Chrysler paid back more than seven-and-a-half billion dollars. Is that all the money they're owed?

MAYNARD: Well, they don't owe any other money. The way that the bailout was structured, the car companies got just direct money from the government, and then there was a portion of it that was a loan. General Motors has already paid back the portion that it was expected to pay back, and now Chrysler has paid back what it was expected to pay back, with interest.

CONAN: But there's other money it's apparently not expected to pay back.

MAYNARD: Well, there was a total of about $65 billion that was paid by the government to save parts of the American auto industry. I'm talking about the money that was paid to General Motors and Chrysler, what got them through the bankruptcy and out of the bankruptcy.

There were also payments for suppliers, for dealers, for some of the communities that were affected by the auto bailout, by the car plants closing down. So it was a pretty large price tag.

CONAN: And of that, how much is the government expecting ever to get back?

MAYNARD: Well, the government will tell you that they think they can get most of it back. There were estimates early on that they probably wouldn't get back 25 to $30 billion of it. But now people are saying that they might get, you know, might give up a little bit of it, but get most of it back.

CONAN: And the government still owns large parts of these two companies.

MAYNARD: Yes, it does. It owns, I think, about a quarter of General Motors, and it still owns about 8 percent of Chrysler. And one of the reasons why was because these companies offered stakes to the government in return for the way this financing was put together.

$65 billion and we still own 8% of the company...

 

[ProfJohn]

That is awesome!

The guys name is MAYNARD with a : after it

 

[ProfJohn]

From Heritage which of course is a right wing source.
http://blog.heritage.org/2011/05/25/chrysler-credit-the-bankruptcy-not-the-bailout/

“We received confirmation this morning…that Chrysler Group repaid, with interest, by wire transfer to the United States Treasury and by bank transfer to the Canadian government, every penny that had been loaned less than two years ago.”

That simple statement by Chrysler (and Fiat) CEO Sergio Marchionne that Chrysler had paid off its taxpayer loans sparked a victory dance among supporters of the automaker bailout that would have made Snoopy proud. President Obama issue a statement from Europe lauding the “tough decisions” he made to help the firm and made plans to visit a Chrysler plant in Ohio next week for a congratulatory photo op.

Taking a tougher approach, the Democratic National Committee launched an ad campaign attacking opponents of the bailout, saying that if the critics had succeeded, Detroit would have gone bankrupt.

But the pro-bailout jig is a bit misplaced. First, despite the congratulatory statements, Chrysler had hardly paid back its debt to the American taxpayer. Notice the careful wording in the Marchionne statement: Every penny that had been loaned “less than two years ago” has been repaid. That conveniently leaves out some $3.5 billion loaned to Chrysler more than two years ago. That includes $1.9 billion provided to Chrysler on May 1, 2009, as well as another $1.9 provided to Chrysler in late 2008.

Some of this will be recouped when the government sells its remaining 6.6 percent interest in the automaker (hopefully soon). But even the Treasury Department acknowledges that the income will not put taxpayers in the black.

And this doesn’t even count other subsidies provided to Chrysler, as well as other automakers, including a request for a new $3.5 billion loan from the Department of Energy to fund retooling of plants for more energy-efficient cars.

It’s also wrong to claim that the bailouts prevented Detroit from going bankrupt for the simple reason that Detroit (or at least General Motors and Chrysler) did go bankrupt. And it was those bankruptcies—more than an infusion of federal cash—that allowed the two firms to survive.

The two automakers certainly did not have bankruptcy in their plans when they first came to Washington asking for a bailout in late 2008. Labeling bankruptcy as unthinkable, they saw federal aid as a way of avoiding bankruptcy court. And the first dollops of federal cash were given to them (during the last days of the Bush Administration) with that in mind. But that approach only extended Detroit’s woes, allowing GM and Chrysler to put off the painful cuts, and creditors to evade the painful losses, that were necessary to get the automakers back on course.

President Obama should get credit for finally forcing the two into bankruptcy in early 2009. Unfortunately, however, it was accompanied by a massive inflow of taxpayer cash, government ownership of the two firms, and a manipulation of the bankruptcy process to advantage politically favored interests (notably the unions) at the expense of shareholders.

Going forward, the danger is that this intervention will become a precedent, legitimizing bailouts as a standard tool of economic policy. Such a result would be disastrous not just to taxpayers’ wallets but to the economy as a whole as firms (and investors) evade the consequences of their own decisions.

So far, the American people, to their credit, have refused to board any such bailout bandwagon. Rather than a model for the future, the public’s views toward the bailouts—outside of Michigan, at least—have been largely negative.

Bailout supporters, in doing their victory dance, are trying to change that public perception and clear the way for future bailouts. If they succeed in eroding the public’s justified skepticism of such interventions by Washington, the economy could be in for a bumpy ride.

 

[nageov3t]

just look at the way Ford, after receiving no help, crumbled and fell and had to lay off all its employees.

 

[LegendKiller]

just look at the way Ford, after receiving no help, crumbled and fell and had to lay off all its employees.

Ford was in a different position during the crisis.

That being said, most serious analysts agree that allowing GM to fail would have doomed the major parts suppliers which would have eventually seriously harmed Ford.

 

[Craig234]

just look at the way Ford, after receiving no help, crumbled and fell and had to lay off all its employees.

Straw man. What was good policy for the other makers was good policy.

But Ford benefited anyway. First, they got other assistance, Reuters:

FACTBOX-No bailout, but Ford sees gov't benefits


* Aug 5 (Reuters) - Ford Motor Co (F.N) has reaped a consumer, political and market bounce from not taking a U.S. government bailout to help restructure in 2009, unlike rivals General Motors Co [GM.UL] and Chrysler. The healthiest U.S. automaker,...


Aug 5 (Reuters) - Ford Motor Co (F.N) has reaped a consumer, political and market bounce from not taking a U.S. government bailout to help restructure in 2009, unlike rivals General Motors Co [GM.UL] and Chrysler.

The healthiest U.S. automaker, however, has received direct and indirect financial assistance through loans, capital, tax credits and other programs that have aided its strong turnaround.

The following are federal assistance programs that have or will help Ford and other automakers.

* The Export-Import Bank on Thursday announced a $250 million working capital loan guarantee for Ford. The loan facility will finance $3.1 billion of export sales for over 200,000 vehicles being sold to buyers in Canada and Mexico. These exports represent 15 percent of Ford's 2009 production. The loan, fees and interest will be paid off in one year.

* Ford is eligible for share of $2.3 billion in clean energy manufacturing tax credits. Ford offers gasoline/electric hybrid vehicles and plans to roll out a plug-in electric car in 2012.

* Ford received approval for $5.9 billion in Energy Department loans to transform factories in five states to produce more fuel-efficient vehicles. Roughly $400 million of that money was spent on retooling the Chicago plant visited by President Barack Obama on Thursday. [ID:nN05133784]

* Ford received a $62 million grant from economic stimulus funds for a program aimed at accelerating manufacturing and deployment of next-generation battery technology for electric vehicles.

* Ford Motor Credit, the automaker's financing arm, benefited from the now-expired Federal Reserve Term Asset-Backed Securities Loan Facility, which helped unfreeze credit markets. The asset-backed market is an important way for automakers to raise funds and help consumers obtain loans.

* Ford also benefited from $5 billion bailout of the supply network, which is closely interconnected with all the Detroit car manufacturers. A supply network disruption would have hurt Ford.

* Ford buyers would qualify for a $7,500 federal tax credit for purchases of plug-in vehicles if the manufacturer brings an electric car to market.

Second, analysts suggest the destruction of the supporting industries for the manufacturers would have brought down Ford.

Comments by Rarry Reid:

Unlike its fellow Detroit-area automakers, Ford Motor Co. did not accept federal assistance in 2008. Instead, it preemptively leveraged it's assets, remaining afloat in exchange for debt.

But Senate Majority Leader Harry Reid (D-Nevada) on Tuesday defended the so-called "auto bailout" from critics -- specifically Senate Minority Leader Mitch McConnell (R-Ky.) -- on the grounds that without it, Chrysler, GM and Ford may not exist today.

"My friend says that we bailed out the auto industry," Reid said during a heated back-and-forth on job creation and retention. "Well, isn't it a good thing we did? Isn't it a good thing today in America we have an automobile manufacturing sector? If it had been up to them (Republicans), General Motors would be gone. If it were up to them, Ford Motor Company would probably be gone. Chrysler would definitely be gone.

"We decided they needed help. ...We're making money on what we did in investing in Detroit's automobile industry."

The statement proved fruitful fodder for a number of bloggers and GOP aides, who quickly accused Reid of ignorance and/or revisionist history. Doesn't he know "Ford didn't need a bailout because its management made better decisions than did those at GM and Chrysler"? Doesn't he realize that the government's own estimates of the rescue indicate it stands to lose billions in taxpayer funds?

While Reid's assertions are misleading at face value, they actually make some sense.

He specifically was speaking about jobs and more broadly about the entire auto sector. Had Chrysler and General Motors folded, many industry suppliers would have followed suit, leaving Ford with substantially less than a full deck. And even though automaker did not accept federal assistance, it told the Senate Banking Committee in 2008 that it was "critically important that loans are available to us and the domestic auto industry" should the downturn prove longer and deeper than anticipated.

And while recent estimates suggest the federal government could lose $12 billion of its $86 billion investment, some have suggested that may be a bargain compared to the economic impact of an industry collapse.

That said, while Reid may be right that the bailout saved some jobs and staved off an industry collapse, a watchdog group recently accused the Obama administration of rushing plans to close GM and Chrysler dealerships as part of their government-led bankruptcies, writing in a report that the decision resulted in "potentially adding tens of thousands of workers to the already lengthy unemployment rolls."

The White House said it strongly disagreed with the group's findings, arguing the companies may not have rebounded without necessary, painful sacrifices.

Also, Ford 'mortgaged nearly everything it had, going into debt instead of borrowing from the government', Wall Street Journal:

DETROIT -- As the lone Big Three auto maker passing on a federal bailout, Ford Motor Co. won't have to undergo an intrusive government review of its books and its business plans to become a viable company in order to qualify for --and keep -- the low-interest loans authorized by the Bush Administration Friday.

At the same time, the Dearborn, Mich. car company is likely to benefit from many of the concessions that General Motors Corp. and Chrysler LLC exact from the suppliers, unions, dealers and debt holders shared by all three companies.

"The clear winner in this game is Ford," Kimberly Rodriguez, a principal at Grant Thornton consulting firm and an adviser to Ford senior management, said in an interview Friday.

The Bush administration said it would provide a total of $17.4 billion in loans for GM and Chrysler. As part of the bailout, GM and Chrysler will have to open their books to the government and meet restructuring targets such as reducing their debt and hammering out deals with the United Auto Workers to cut labor costs.

Ford is still seeking a $9 billion line of credit from the government, though it adds it may not need to tap it. In addition, Ford wants $5 billion from the Energy Department program.

Most experts agree that Ford is in better shape than GM and Chrysler, in large part because it mortgaged almost all of its assets in 2006 to raise $24.5 billion.

"As we told Congress, Ford is in a different position. We do not face a near-term liquidity issue, and we are not seeking short-term financial assistance from the government," Ford Chief Executive Alan Mulally said in a statement Friday.

Still the company needed the Bush Administration to rescue GM and Chrysler because of fears that a failure of one or both of those companies could imperil their shared base of auto-part suppliers. "The U.S. auto industry is highly interdependent, and a failure of one of our competitors would have a ripple effect that could jeopardize millions of jobs and further damage the already weakened U.S. economy," Mr. Mulally said.

In the third quarter, Ford burned through $7.7 billion in cash, which left it with $18.9 billion. At the current rate Ford is using up cash, however, the company would have enough money to last only until April. Ford also has $10.7 billion in available credit lines, which could give it another four months of breathing room. But the auto maker has said that the company does not expect to continue to burn cash at the same rate in the fourth quarter.

To conserve cash, Ford is laying off salaried employees and cutting between $500 million and $1 billion in capital expenditures in both 2009 and 2010. Company officials have said the cutbacks would only slightly delay -- and not irreparably harm -- the auto maker's ability to bring new products to showrooms.

As part of their plan submitted to Congress earlier this month, Ford pledged to accelerate their efforts to bring new gas-electric hybrids and plug-in electric vehicles to market.

Still the overall decline in sales for cars and trucks continues to weigh Ford down greatly. The company this week confirmed it would extend its two-week holiday shutdown by an extra week at 10 plants in order to meet a goal of lower production.

Nothing in your posts in any way changes the fact the Democrats did the right thing.

 

[bfdd]

If you never let those who are going to fail actually fail, they'll never learn how to properly recover from it or work to prevent similar failures in the future. We're breeding stupidity by not allowing things to die. Sheltering people like we have from the harsh realities of life or making it so "hollywood" like we have has hurt us as a nation. We HAVE TO know how brutal and assholish life can be, that way we can ACTIVELY work against it. Turning a blind eye and allowing idiots to perpetually be idiots cannot be a good thing.

 

[glenn1]

Yeah, congratulations. For only a few score billion dollars, you "saved" the auto companies. And what a bargain too, it works out to the low, low low price of around $710,000 per hourly auto worker position at GM (54,900). Throw in the complete flouting of the rule of law in screwing the bondholders and you have the complete trifecta.

And what fine companies they are, those Fiat/Chryslers perennially dominating the Annual Worst New Cars lists, and GM too to ensure that suburban soccer moms will still have an "American" company to buy their giant SUVs from.

 

[chucky2]

I doubt the industries really would have failed. Someone would have had to sell a heck of a lot more vehicles, which means more volume from them. Those manufacturers would have needed inventory from likely those same suppliers that GM and ChryCo used. Not worth the $65B adventure and terrible message to send to Big Business. I love how the banks are 'too big to fail', but the unionized Big 2 of 3 need to be bailed out 'or else'. Talk about Dem's giving a mixed message...

Chuck

 

[rudder]

Kind of easy to pay back loans when the government expunges your debt. Not sure if this was the case with Chrysler... but it allowed GM to "pay back it loans."

 

[Pulsar]

I doubt the industries really would have failed. Someone would have had to sell a heck of a lot more vehicles, which means more volume from them. Those manufacturers would have needed inventory from likely those same suppliers that GM and ChryCo used. Not worth the $65B adventure and terrible message to send to Big Business. I love how the banks are 'too big to fail', but the unionized Big 2 of 3 need to be bailed out 'or else'. Talk about Dem's giving a mixed message...
Chuck

Hey, can we all just start pulling stuff out of our butts now?

I've explained this a hundred times, but I'll do it again. First - Ford was saved from bankruptcy because they mortgaged everything, BEFORE the crash happened. They literally took the blue oval to the bank and took out a loan against it and every Ford facility on the planet. Had that gamble failed, you'd be looking at a bank-owned Auto company, if they hadn't been sold off in pieces.

Next. The suppliers. MANY of the suppliers were in serious financial straights. I'm talking tier 2 and tier 3 suppliers. This is the reason that the Japanese automakers accompanied the big 3 to Washington to lobby for support. The Japanese AND the Big 3 were smart enough to know that margins were so thin (Delphi was in bankruptcy, and many others were declaring) that if just one of the big 3 defaulted on their payments to the suppliers you'd see a cascade effect. It would have hurt the Japanese. It would have wiped out Ford, Chrysler, and GM.

At the time, the big 3's profit-per-vehicle was less than $100 on many models, and they were losing money on small cars. In large part this was due to the uncompetitive labor structure, and the benefits (blame it on anyone you like). The bankruptcy allowed GM and Chrysler to renegotiate, and later Ford followed suit without needed the bankruptcy to do so. Of course Ford has always had a far better Union relationship than the other two: that didn't hurt.

In the end, the auto industry was a house of cards. It still is, in some ways. Japanese automakers have announced they no longer plan to expand more here in the states, and in fact have moved some production back overseas. Suppliers are still in sorry shape for the most point. GM and Chrysler look OK, but then again they were forgiven all their debt and no longer owe 25 billion+ and have to make interest payments on it.

On the other hand, Ford still has some debt, but it actually competing with the others, refusing to put incentives in place because of a strong line-up, and paying off their debt at the same time. While they don't have the healthiest balance sheet of the 3, they are by far the most competitive.

So when some ignorant folks come in here and blather crap like "oh, it would have been fine", I wonder if they know the half of how bad it really would have been. Statistics indicated that for every 1 job in the domestic auto industry, 7 other jobs are created or supported. While I know none of this appeals much to our coastal folks who turned away a long time ago, I wonder if they realize how integrated the Microsofts, the Googles, the tech companies and the IT companies are in the big 3, and how huge the resulting losses would be if that business all went to the Japanese, Chinese, or Koreans.

 

[Craig234]

I doubt the industries really would have failed. Someone would have had to sell a heck of a lot more vehicles, which means more volume from them. Those manufacturers would have needed inventory from likely those same suppliers that GM and ChryCo used. Not worth the $65B adventure and terrible message to send to Big Business. I love how the banks are 'too big to fail', but the unionized Big 2 of 3 need to be bailed out 'or else'. Talk about Dem's giving a mixed message...

Chuck

There's a huge difference between Wall Street companies looking for bailouts after over-leveraging and creating a disastrous risky system, and automakers who had a crisis getting capital to operate as a result of Wall Street's crashing the system. Moral Hazard applies to the former, not the latter.

But thanks for your expertise correcting all the experts on the industry.

 

[Craig234]

Hey, can we all just start pulling stuff out of our butts now?

I've explained this a hundred times, but I'll do it again. First - Ford was saved from bankruptcy because they mortgaged everything, BEFORE the crash happened. They literally took the blue oval to the bank and took out a loan against it and every Ford facility on the planet. Had that gamble failed, you'd be looking at a bank-owned Auto company, if they hadn't been sold off in pieces.

Next. The suppliers. MANY of the suppliers were in serious financial straights. I'm talking tier 2 and tier 3 suppliers. This is the reason that the Japanese automakers accompanied the big 3 to Washington to lobby for support. The Japanese AND the Big 3 were smart enough to know that margins were so thin (Delphi was in bankruptcy, and many others were declaring) that if just one of the big 3 defaulted on their payments to the suppliers you'd see a cascade effect. It would have hurt the Japanese. It would have wiped out Ford, Chrysler, and GM.

At the time, the big 3's profit-per-vehicle was less than $100 on many models, and they were losing money on small cars. In large part this was due to the uncompetitive labor structure, and the benefits (blame it on anyone you like). The bankruptcy allowed GM and Chrysler to renegotiate, and later Ford followed suit without needed the bankruptcy to do so. Of course Ford has always had a far better Union relationship than the other two: that didn't hurt.

In the end, the auto industry was a house of cards. It still is, in some ways. Japanese automakers have announced they no longer plan to expand more here in the states, and in fact have moved some production back overseas. Suppliers are still in sorry shape for the most point. GM and Chrysler look OK, but then again they were forgiven all their debt and no longer owe 25 billion+ and have to make interest payments on it.

On the other hand, Ford still has some debt, but it actually competing with the others, refusing to put incentives in place because of a strong line-up, and paying off their debt at the same time. While they don't have the healthiest balance sheet of the 3, they are by far the most competitive.

So when some ignorant folks come in here and blather crap like "oh, it would have been fine", I wonder if they know the half of how bad it really would have been. Statistics indicated that for every 1 job in the domestic auto industry, 7 other jobs are created or supported. While I know none of this appeals much to our costal folks who turned away a long time ago, I wonder if they realize how integrated the Microsofts, the Googles, the tech companies and the IT companies are in the big 3, and how huge the resulting losses would be if that business all went to the Japanese, Chinese, or Koreans.

Good post, until the last part - 'coastal folks' who are more Democratic, supporting the policy good for the economy, aren't your problem here. It's the red state ideologues.

 

[LegendKiller]

Hey, can we all just start pulling stuff out of our butts now?

In the end, the auto industry was a house of cards. It still is, in some ways. Japanese automakers have announced they no longer plan to expand more here in the states, and in fact have moved some production back overseas.

Trying to find evidence of them moving out of the US.

 

[glenn1]

There's a huge difference between Wall Street companies looking for bailouts after over-leveraging and creating a disastrous risky system, and automakers who had a crisis getting capital to operate as a result of Wall Street's crashing the system. Moral Hazard applies to the former, not the latter.

But thanks for your expertise correcting all the experts on the industry.

You could just as easily say that Wall Street mostly needed regulatory forebearance from the Mark To Market Rules that meant when the market froze up the banks' assets were essentially taken to be worth zero since there were no bids.

Plus, some Wall Street firms were allowed to fail (does Lehman Brothers ring a bell?), unlike the auto companies. Chrysler was and is just as shitty a company as any of the banks which were allowed to go under, and would be just as unlamented in its demise as any company since Enron.

 

[Matt1970]

just look at the way Ford, after receiving no help, crumbled and fell and had to lay off all its employees.

The only reason Ford wasn't taking bailout money was just a couple years earlier they borrowed $24 Billion for restructuring.

 

[Darwin333]

Good post, until the last part - 'coastal folks' who are more Democratic, supporting the policy good for the economy, aren't your problem here. It's the red state ideologues.

So do you also support the blatant disregard for black letter law? Do you support the Republicans being able to blatantly disregard black letter law as well (regardless if they could, do, or have)?

 

[Craig234]

So do you also support the blatant disregard for black letter law? Do you support the Republicans being able to blatantly disregard black letter law as well (regardless if they could, do, or have)?

I don't know what violations you are referring to. Better to provide the info than beg the question.

 

[rudder]

Trying to find evidence of them moving out of the US.

Here you go:

http://www.tennessean.com/article/2...san-may-add-jobs-Smyrna-U-S-sales-keep-rising

oh wait the article mentions Nissan moving production of the Rogue from Japan to Tennessee.

 

[Zebo]

I don't know why all these car companies have not moved to china yet? Anyone know?

 

[PokerGuy]

LOL @ usual Cragfail. Craig, you should really trademark CraigFail, you've raised the bar of failure so high that only a very select few can consistently fail as much as you do.

For the tiny sum of just south of a 100 Billion or so we managed to temporarily save GM so they could produce cars like the volt that nobody wants. We can then subsidize those vehicles with $8000 in taxpayer money and force fuel standards on the industry to force consumers to buy stuff they don't want. Sounds like another winner of a plan by the dims.

 

[Thump553]

I have to admit to being pleasantly surprised. I figured any money given to Chrysler might have well as been burnt. Here's to hoping we don't have to bail them out yet again in another couple of decades.

I remain astonished that Fiat could turn around what Mercedes Benz could not (admittedly the situation was pretty different, but still).

 

[Scotteq]

I don't know why all these car companies have not moved to china yet? Anyone know?

Much (if not most) of the parts production has already moved out of the country under Delphi and the Robert Bosch Corp. That started early, though, so we have a lot of Mexico along with China.

More to the point for Automobiles, though - They're expensive to ship, and once the volumes are sufficient it's cheaper to open an assembly plant in the target nation than it is to build them elsewhere then export & ship. Parts can be crated and manhandled in bulk. Assembled vehicles can not.

Not to mention incentives/tax breaks for jobs in the target nation.

 

[CADsortaGUY]

Hey, can we all just start pulling stuff out of our butts now?

I've explained this a hundred times, but I'll do it again. First - Ford was saved from bankruptcy because they mortgaged everything, BEFORE the crash happened. They literally took the blue oval to the bank and took out a loan against it and every Ford facility on the planet. Had that gamble failed, you'd be looking at a bank-owned Auto company, if they hadn't been sold off in pieces.

Next. The suppliers. MANY of the suppliers were in serious financial straights. I'm talking tier 2 and tier 3 suppliers. This is the reason that the Japanese automakers accompanied the big 3 to Washington to lobby for support. The Japanese AND the Big 3 were smart enough to know that margins were so thin (Delphi was in bankruptcy, and many others were declaring) that if just one of the big 3 defaulted on their payments to the suppliers you'd see a cascade effect. It would have hurt the Japanese. It would have wiped out Ford, Chrysler, and GM.

At the time, the big 3's profit-per-vehicle was less than $100 on many models, and they were losing money on small cars. In large part this was due to the uncompetitive labor structure, and the benefits (blame it on anyone you like). The bankruptcy allowed GM and Chrysler to renegotiate, and later Ford followed suit without needed the bankruptcy to do so. Of course Ford has always had a far better Union relationship than the other two: that didn't hurt.

In the end, the auto industry was a house of cards. It still is, in some ways. Japanese automakers have announced they no longer plan to expand more here in the states, and in fact have moved some production back overseas. Suppliers are still in sorry shape for the most point. GM and Chrysler look OK, but then again they were forgiven all their debt and no longer owe 25 billion+ and have to make interest payments on it.

On the other hand, Ford still has some debt, but it actually competing with the others, refusing to put incentives in place because of a strong line-up, and paying off their debt at the same time. While they don't have the healthiest balance sheet of the 3, they are by far the most competitive.

So when some ignorant folks come in here and blather crap like "oh, it would have been fine", I wonder if they know the half of how bad it really would have been. Statistics indicated that for every 1 job in the domestic auto industry, 7 other jobs are created or supported. While I know none of this appeals much to our coastal folks who turned away a long time ago, I wonder if they realize how integrated the Microsofts, the Googles, the tech companies and the IT companies are in the big 3, and how huge the resulting losses would be if that business all went to the Japanese, Chinese, or Koreans.

1. Ford did the RIGHT thing and leveraged itself.
2. Suppliers can be reformed. Maybe this is another reason the auto industry is failing? Maybe this old model of doing business sucks or maybe they are just heavy on labor or maybe who knows. However, none of this makes a damn bit of difference when it comes to the bailout. IF the bailout was for emotional reasons - ok, but if it was principled then it wouldn't have happened. It's not the tax payer's fault these companies are so heavily reliant on one or two customers.
3. Failure would have allowed renegotiation with the blood suckers.
4. wow, go figure - more scare tactics. blah blah blah you don't know how bad it would have been...blah blah blah... Grow up and look here at the real world. Businesses fail, business models fail, it happens and it should have been allowed to take it's natural course here as well instead of having the gov't own the two companies(and give billions to the unions).


Anyone who cheers the fact that our Federal Gov't owns 2 car companies is a fool.