Do anyone noticed that the talking heads on TV are using the same spiel they used to defend the banks's buyout? They are all talking about the complete collapse of the American Manufacturing factor due to a possible bankruptcy of GM. Typical "We All Gonna DIE !!!" panicked crap they are peddling around.

As far as Mr Wagoner goes, the whole salary cap thing is laughable at best and insulting at worst. In GM, the problem is not overpaid executives but crappy cars.

Anyway, we all know that the State of Michigan is too blue and way too ethnic to fail. Obama will bail them out faster that the time a GM car run by itself between two repair jobs.

On balance, if you believe that markets are more efficient allocators of capital than Congress is, the population of the United States would, on the whole, be worse off.

I don't believe it's that simple, because a company (and its supply chain and all its creditors) in bankruptcy has very different rules than a company (et. al.) in a free market situation.

If they go bankrupt, the courts will be involved alongside the creditors.

So the choice isn't free market gm run by creditors or government bailed out gm. The choice is bankrupt gm run by the court looking after creditors and judges, or refloating gm.

Looked at that way, there is an argument that refloating gm is the way to go for free market afficionados.

I think the reason to let GM die is different than Manzi makes out. The reason is they probably are already dead, having committed suicide.

A company too big to fail that gets a bailout must be broken up. Why isn't break up part of our discussions from Paulson/Bernanke?

BREAK GM UP. Then refloat what has been created, and give similar deals to other car makers. Tesla? Give THEM the opportunity to borrow that money. The makers of the Aptera? Give THEM the opportunity to borrow that money. Terrafugia? Same opportunity.

Keeping companies too big to fail alive is dangerous to our economy. And more competition is what most of these companies and us consumers need.

(And call me unimpressed when NRO et. al., advocate the breaking of union contracts, and the raiding of pension funds. Let's examine how many years out of the last 50, that NRO has made a profit. A few years ago, I know they were asking for donations. Fact is, NRO (probably most magazines) operate at a loss and NRO is basically a private welfare scheme for a few nutcases with delusions they are self-made. I prefer drinking my beers with real America, assembly line workers, than faux America NRO writers who walk into sushi bars one day, then write a column about the latte loving, sushi eating liberals the next.)

The car companies with their greed and lack of innovation, and the U.A.W.

UAW? The UAW isn't in charge of making cars no one wants. The UAW isn't in charge of marketing cars, or predicting future trends, or hearing for 30 years about gas going up and just building bigger and bigger dogs, or hearing for 30 years about gas running out and taking their electric car OFF the market.

You've mistaken the UAW for management and the shareholders, both of whom ARE responsible for these decisions, and both of whom deserve the bath. Of course, management will sneak out with golden parachutes and the UAW is going to have contracts broken using the power and coercion of the State and their pension funds raided.

"National security"?

Nonsense. The same tasks will just move to other companies.

People have several mistaken ideas.

One of them is that a company doing business in the USA has a moral duty to the USA. The ad might say, "see the USA in your Chevrolet", but that hasn't kept GM and others from having their cars built elsewhere: Mexico, Canada, Korea, Japan.

Another mistaken idea is that Japanese and German cars don't break down. That's nonsense. Yes, there's an advantage you can see in repair records, but it's not as cut and dried as it's made out to be (and the fuel pump in my Sentra is $650 - is that "better"?). Your Nissan might be made in Smyrna, Tennessee. Your Honda, Marysville, Ohio. Your Chevrolet, Seoul, Korea. Your Dodge, Hamamatsu, Japan. Your BMW, Spartanburg, South Carolina. So who's building the lemon now?

There are no serious quality issues with Chevrolet, Dodge and Ford trucks or their big SUVs because performance overrides little niggles about cupholders - but you just can't sell those continuously. Hmm. More irony: the Duramax diesel in GM trucks is made by Isuzu.

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Now, think about the market for a minute. Cars are hit immediately by credit changes because they are almost never bought with cash - AND the bulk of sales tracked are "upgrades". People can keep their old car and still drive. This is different from every other commodity, because the health of a car company depends on new-car sales. Think, now, what would happen if they built cars which were actually durable (which is possible): they'd sell two for each family, plus replacements for total wrecks. That's nothing. The current size of the auto industry depends on public vanity.

I don't buy the idea that the UAW is completely independent of what happens in the car business. They can be said to have the job of ensuring the future of their members, and not recognizing the market factor above and doing something about it let those people down.

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Anecdote: I have a Nissan D21 "Hardbody" HD with 466,000 actual miles on it. It's not a luxury barge. It has spent hours at a time over 90 mph on an interstate I won't name, and it got 20 MPG while doing so, to my surprise. It's made about a hundred dragstrip passes in NHRA bracket racing (typical run: 17.80 @ 73 MPH) It's towed a full-size Chevy C20 van on a car trailer across Florida and a Bobcat loader across the county without any trouble - after all, that's Florida, it's flat. It has the original clutch in it. The drivetrain's never been apart.

And my old high-school sweetheart's business in Nebraska has a Chevy pickup with 544,000 on it. It runs the length of Nebraska regularly.

A lot of the durablity issues claimed are because of widely different opinions on maintenance. Common items, like seats, window motors, exhaust pipes, etc. are made by the same company to install in different cars. Look up the name, "Hollander". Meanwhile, not even a Toyota will run forever with dirty oil.

P.S. Who killed Detroit? The car companies with their greed and lack of innovation, and the U.A.W., along with health care tied to employment.

I respectfully disagree. Detroit got killed by those who thought that you can substitute influence peddling to productive innovation. The car industry was too busy making friend with unions, lobbying the government for import fees against Non-US cars and repeating the whole "Buy American" spiel while they should had produced better cars instead.

Oh well, at the speed things goes, not only a "Rescue Plan" will be put in place for the "Big Three" but the John Deere company will tries to make us believe that they are building cars just to take their share too!

No one is standing against this lunacy, in the Congress. WTF?

Why should they, Jeff? The last election results have taught them that there are no penalties for taking incorrect positions, only for improperly spinning them.

The last election results have taught them that there are no penalties for taking incorrect positions, only for improperly spinning them.

That's funny, even for you Brian.

McCain was actually doing pretty darn well(*) until the financial meltdown hit, and then his series of false steps is pretty much what sealed the deal against him.

(*) doing pretty darn well for any Republican following the worst president ever.

Actually, Jerry no.

McCain was NEVER doing "pretty darn well". In fact, from all appearances he was TRYING to lose the election. It was only the fact that Obama was so clearly transparent that was keeping McCain where he was. McCain didn't want to be president, he wanted revenge on the Republican party for denying him the run in 2000.

The only reason Obama won by the margin he did is because people like you believe the media spin that Bush was the "worst president ever", and that he was somehow responsible for the collapse of the house of cards that was FMLA.

Here in Connecticut I meet someone just about every day who thinks that Bush is responsible for the collapse of FMLA, and not their own Senator Dodd.

GM needs $1500 per car from somewhere to fund their uncompetitive pension and healthcare obligations. They aren't a car company, they are an insurance plan. This is unsustainable.

The only question is whether or not those of us who never enjoyed the benefits of the UAW pension and retirement plan will continue to pay for it, or not.

Who pays, who benefits?

We are living in crybaby times. There needs to be a course in school that starts in kindergarten and is repeated every year through Grad school. The course should be called "You pays your money (and you takes your chances)."
People need to learn that the only guarantees are death and taxes. The average person has no understanding of economics. The housing meltdown would have been lessoned if supply and demand was understood. When the price of a house gets more expensive than the average family can afford, prices have to come down.

This graph explains why even $1.00 given to the Big 3 is a complete waste of money:

http://mjperry.blogspot.com/2008/11/50b-bailout-would-only-be-down-payment.html

Breaking News:

The EU & the WTO regard the bailout as a huge subsidy to the American auto industry and a clear violation of international trade rules, and they are now threatening serious lawsuits & retaliation:

http://www.thetruthaboutcars.com/eu-youll-be-hearing-from-our-lawyers/

In the meantime, the politician screaming the loudest for the bailout is Michigan Governor Jennifer Granholm. Obama named her to his Transition Team last week as an economic adviser, so that she can tell him how to do to the economies of the other 49 states what she & the Big 3 have done to Michigan's.

And the leading candidate for Commerce Secretary in the Obama administration is Chicago businesswoman Penny Pritzker. She was Chairman of the Board at Superior Bank, which collapsed in 2001 after making one subprime loan too many, in a perfect foreshadowing of today's mortgage catastrophe.

The next 4 years are going to be very entertaining.

If by "entertaining" you mean "struggling not to slit my wrists", I agree.

The unions drove too hard a bargain against the Detroit auto companies, and now the companies can't pay. So, we're supposed to pay.

I have an idea. I'll write a contract where Fred promises to pay me in the future for my work today. When Fred defaults, I'll go to the government and ask them to pay. It is only fair. (smile)

Along with this is the argument is that we need bailout and stimulus to avoid a further collapse and more recession. Supposedly, even if the government spends a lot money for nothing, it is still money, and we are all better off. Wrong.

Jobs change when people change what they want to buy or can afford. Bailouts and Stimulus are like throwing a party after losing your job. It interferes with looking for the next job, and it uses up savings. Worse, it is more of the borrow and spend policy that helped cause our problems.

See also Stimulus Does Not Cure a Recession

I have a friend who lives in Western Pennsylvania which has been heavily unionized for some time, so the mentality is ingrained.

He says when the factories lay people off, they get unemployment and a job that pays under the table (school bus driver, bartender, etc.) and "wait for their job to come back." As if it went on a little vacation or an impromptu road trip. They don't look for another job or train for a new career. They "wait for their job to come back."

Some have been waiting for years. Yet, they continue to wait.

This is what unions and nanny-state economics do to people.

Martin: Interesting bit of reading. But the Big 3 export so far cars that sanctions in that area hardly matter. The danger zone comes if the WTO decides that they can apply cross-industry sanctions to punish Washington. If that happens, expect the collapse of the WTO and an all-out trade war to follow.

Boy, I'm betting my dad is spinning in his grave right now. He spent nearly 40 years working for GM and I can tell you from personal experience that we didn't call it Generous Motors for nothing. And yes, the UAW had a big hand in that.

If GM goes under it's their own fault.

UAW? The UAW isn't in charge of making cars no one wants. The UAW isn't in charge of marketing cars, or predicting future trends, or hearing for 30 years about gas going up and just building bigger and bigger dogs, or hearing for 30 years about gas running out and taking their electric car OFF the market.

I posted this on a previous AG thread on this subject, but was late to the game:

"First, you need to review the Wagner Act. Passed in the mid-30s, its consequence was to force upon the auto industry a labor cartel that was legally able to collude in ways that would have put the auto company executives in jail had they tried the same thing.

Additional federal and state laws make it very difficult for the automakers to shut off losing brands and consolidate dealer networks.

The result? US automakers are laboring under roughly $1500 per vehicle in additional costs, compared to their rivals, that they cannot control. That is enough to essentially wipe out any profit on small cars -- which is your answer as to why US automakers have focused on larger vehicles.

Then, as if that wasn't enough, the government then cooks up the CRA, which metastasizes into a seized credit market.

Other than houses, cars are the one purchase where most people require a loan.

So, the CRA originated debacle has hit the automakers particularly hard.

If I became Head Dude What's In Charge tomorrow, and wanted to destroy completely destroy an industry, I wouldn't be able to think of anything better than what our government has inflicted upon the automakers."

A friend of mine worked at Ford as a network engineer. For a couple months, he nearly disappeared at work. When he resurfaced, I asked what the heck he had been up to.

"We are consolidating a couple engineering operations in one building, and I have been figuring out how to run the T-5 networking cable."

Me, with WTF look on my face.

"Huh? You can buy wireless routers for less than the cost of cable, never mind running the darn stuff in an existing building."

Him, with a YDF on his face.

"How many union jobs are there in wireless routers?"

A lefty I love to hate, Robert Scheer, appeared on his this radio program today (link for 11/14) and asked the same question in Amy's post. And it's a very good questions. Wall Street has been no more competent than Detroit, and arguably more odious... So why is it that people both left and right are so eager to bail out the bankers but not the factory workers?

"(*) doing pretty darn well for any Republican following the worst president ever."

Ah, this tired bit of drivel again. Beyond all doubt, the worst President in history our 17th President, Andrew Johnson, who served from 1864 - 1868, and was so crazed as to have actually considered mounting a coup against Congress (deterred in part at least after being informed that the Army would "disperse" any usurper Congress set up by him and sustain the legitimately elected one). And then of course we have his viscious racism and fierce struggle to prevent implementation of civil rights for blacks in the post war South.

Second worst President is more debatable, but my candidate for that dubious honor is Jimmy Carter. Anybody remember the misery index? 18 or 20 percent home loans? Double digit inflation? Double digit unemployment? The national malaise? Four long years of humilation at home and abroad? Current politically motivated hyperbole notwithstanding, Carter's economy really was the worst since the Great Depression - current conditions not excepted.

Should GM be bailed out by the U.S. taxpayer? Most of us have voted with our wallets and bought Japanese, Korean and even European cars for for the past 3 decades.
The majority market share that the U.S. auto industry enjoyed mid 20th century was lost to a combination of an ever more sophisticated buyer, an increase in quality and content in the competition, a complacency within the domestic industry, and a strangling by unions.
I for one won't shed a tear over a "few" less union jobs, or a couple less choices when I go looking for a new car.

You can not kill a nissan hardbody. Best truck ever made, shame it's gone. Ford, interestingly enough, is now ranking with toyata and honda on reliability. If a company can't compete, it needs to die. Whether it makes houses or cars or loans. Better now than 30 years from now, better 30 years ago than now.

I've never really done the car maintainance thing, past oil changes, until a repair crept up. With current van, I am trying to do the things that are recommended. We'll see if it makes a difference. I got 160K+ off my camaro that was treated like crap (and needed quite a few repairs along the way)

I don't know about anyone else, but we are scrambling to pay off what little unsecured debt we have. Once we are down to mortgage only, I'll feel a lot better about teh next 4 years or so. We're almost there.

I heard, in random conversation the other day, that Obama wants to renegotiate mortgages so that the payment is 34% of your take-home pay. Is that true? I need to go google.

From what I read, that's not Obama. But it's 38%, and there's some qualifications.

Info here.

In short, don't stop paying your mortgage in the hopes of getting a writedown. It's going to be like washing your car to make it rain.