How the see us: Do U.S. carmakers deserve a break?- Response

I decided to continue on the topic of the auto industry with this article I found in "The Week" which is coincidentally the same magazine I drew my previous entry from. I found it extremely interesting to see just what the rest of the world thought of a situation that many Americans believe only affects the US population. This article brought to light though, just how far reaching the US auto industry is. I thought it to be almost amusing the Europe can't agree on the best fate for the auto industry any better than we ourselves can. Bailouts and bankruptcy both offer different potentials and potholes for the future of the industry in America. I had no idea that Britain has gone through the same crisis with their industry as we are now. One must ask though that if the auto industry essentially began in America, why did Britain's fall apart faster than ours? It certainly does bring new light to the phrase "history repeats itself". I personally do not feel that the auto industry entering Chapter 11 would cause such a disturbance nationally or even internationally. In a time when funds are not even available for many people to even purchase a car, it seems to me that this is the best time for these companies to take some downtime and reorganize. Better now than when the economy is strong and such a disturbance could potentially cause an even more significant ripple effect.

How the see us: Do U.S. carmakers deserve a break?

"Pity the poor Americans" says Jeremy Warner in Britains's Independent.
The American auto industry is now in the same position that British auto makers were 30 years ago.
The Big Three auto makers "pay themselves too much, they've failed to modernize, and they no longer produce the sort of cars that anyone wants to buy".
The US intends to do the same things that the British did when their auto companies were risked- handing out cash.
Howe this will not be enough as can be seen from the outcome of the efforts made by the British.
It is thought that by March, the auto makers will be back asking for even more money.
"Huge amounts of tax payers money were spent propping up this dying industry" in Britain and "very little was there to show for it in the end".
Jeremy Warner believes that instead of subjecting the American auto industry to a "slow death by a thousand cuts" which is what is believed to have been the what the British car makers endured, Warner claims that bankruptcy would do the auto makers better.
This is the only "long term solution".

However, there are indeed other opinions being spouted across the pond.
Quentin Willson in Britain's Sunday Mirror thinks that the US auto makers have done themselves in with "lousy management, kowtowing to unions, too many big-drinking trucks and SUV's, and an arrogant contempt for small acrs and green technology"- bold statements to be made by a journalist who reports for a country who is not directly tied to the US auto industries implosion. Or is he???
Willson thinks that allowing the US auto makers to enter into bankruptcy would have a "seismic effect on the US economy" but also "hurt Europe".
Chapter 11 would indeed allow the auto industry to reorganize and get back on track with out sucking billions of dollars out of the US government's pockets. It is thought that this might have effects more widespread though.
The auto manufacturers' suppliers would fail due to the lack of business from the US, and thus, the European auto market would also falter, due to their reliance on the very same suppliers.

Bush's vow to rescue Detroit- Response

This article was somewhat outdated however, the publication date of the article I was taking information from was within the two week time period. I had yet to really focus on the potential auto bail out in my research and thought that it would be critical to my research to do so now and to be able to follow it as it progressed. These bailout will be extremely critical in how this financial crisis proceeds. With the deficit closing in on $1 trillion dollars, it seems as though now is no time to be bailing more companies out. However, this article offered some very interesting points as to how this bailout might help the recovery of the auto industry, and the US economy. I found it to be a very interesting idea that this bailout would provide the Obama administration with much more leverage over the auto industry than before. However, I find this to be a horrifying concept. There is no reason that the US government should have any more control over the auto industry than it should have over the computer industry, or the boat industry, or any industry for that matter. The US government has no place in corporate America other than to enforce laws and Constitutional rights. The failure of an industry is a sign that it needs to be reformed and the placing of such companies under more jurisdiction from the US government will in no way help the reformation of such companies. As stated in the notes, "Chapter 11 would provide an opportunity for these companies to reorganize themselves". This is exactly what chapter 11 was designed to do and it has worked out so far. That is, until the apparent relization that certain industries were too closely tied to the US economy came about. It seems to me that any industry that is that closely tied to the US economy needs to be reorganized as it is.

Bush's vow to rescue Detroit

The Senate rejected a $14 billion dollar bailout plan for the auto industry.
The Bush administration, auto executives, and union leaders scrambled to put together a bail out plan.
With little time left, auto makers hurried to look for cash, even looking into the $700 billion financial bailout plan, which would not requite congressional approval.
Opposition from Republicans in the Senate led to the failure of the original Congressional bailout plan.
General Motors and Chrysler have been cutting jobs and slashing spending but still claimed that a direct infusion of cash was necessary.
Chrysler staked claim to $4 billion while GM asked for $10 billion, claiming that this money would be essential to keep them running through march.
Ford did not claim to require bailout help.
President Bush claimed to be committed to constructing a bailout package for the auto industry.
"By refusing to write a blank check to Detroit, Senate Republicans have started to reclaim some credibility on fiscal policy and the role of government." stated the Wall Street Journal.
The common belief is that no amount of bailout monies will save the auto industry without massive restructuring.
This would include a reduction of union wages and benefits.
There is another side to the bailout however, one that is embedded in the future administrations of the US government.
Such a bail out would provide the Obama administration and Congress "huge leverage over the cars Detroit builds"- this is a power that many organizations have craved for decades.
The Big Three auto makers only pay around $10 more an hour in wages and benefits than Toyota and other foreign car makers in the US.
Detroit's labor costs are much higher however due to the fact that they have been in existence for longer and thus have hundreds of thousands of retired workers receiving pensions and benefits.
Some see the potential bankruptcy of the auto makers as the way out. Stock holders will loose massive amounts of money however, placing the companies under Chapter 11 will free them from past obligations and thus allow them to produce better products, not focus their out put on profit needed to meet past obligations.\