The National Money Hole

With the economy sliding deeper into a recession, panelists discuss whether it’s time for Americans to stop throwing their money into a massive pit out in the New Mexico desert.

Speaking of throwing money into a hole, is General Motors worth saving?

Update: More on the upcoming bail-out (which you know is almost inevitable… “free market” principles, be damned!) here:

The Harper government is coming under mounting pressure to provide financial support to the Canadian auto sector, because every other region that produces cars and trucks, including the United States, the European Union and Australia, is putting up billions of dollars to get the industry back on a sound footing.

Unfortunately for the Conservatives they’ll be damned one way or the other, no matter what they do. The joys of being the government at a time of severe recession…

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33 Comments

Filed under Economy, Humour

33 responses to “The National Money Hole

  1. No, it’s not worth saving. The auto industry’s troubles are structural, not cyclical. It was in decline long before this current economic crisis hit the world.

    Any tax dollars given to these companies will be wasted, as any assistance will be used up in a matter of months, and the companies will be back with their hands held out asking for more and more and more …

    Tax dollars should be invested in innovation and future industries as well as technologies. Don’t throw good money after bad. The auto industry’s time has come — deal with it.

    None of the jobs lost, and those to be lost in the near future, cannot be saved. They’re gone and lost forever.

    After being hammered about global warming and GHG, consumers have lost interest in buying gas guzzlers, Hummers and pick-up trucks — the moneymakers of the car industry. What is more, the industry has dug its own grave by offering ridiculously generous leasing and financing options for far too long, thus cannibalizing their own profits.

    The longer governments keep injecting bailout money into failing companies and industries, the longer this crisis will last, because all these bailouts can achieve is to delay the inevitable.

  2. Is GM worth saving?

    No.

    Not like the decision as to whether GM is worth saving is even a decision a government can or should make. GM will be saved when consumers buy their products. If not, GM should go out of business.

    Man, when I read that, its like when the Conservatives got elected, the Communists took over.

    Of course, if GM wasn’t in Flaherty’s riding, it might be a different story.

  3. Ti-Guy

    We really are through the looking glass when the satire, as absurd as it is, is not nearly as absurd as the reality.

  4. I’m inclined to agree, but the fallout is going to be devastating.

  5. I forgot funding for training and retraining. In our knowledge society and economy, lifelong learning should be a major concern for government. Tax dollars must not go to GM et al, but should go into providing affordable education at all levels (vocational, college, university). Those unemployed auto workers need to have easy and affordable access to training measures.

    Red, sure, the fallout will be devastating at first, but it’s better to rip the Band-Aid fast, instead of prolonging the pain and have these devastating effects go on for years, if not decades. Better to call it quits now and start a major rethink (such as opening up education to all).

  6. sharonapple88

    GM. Maybe.

    Car companies around the world are hurting.

    Toyota’s sales in Japan these last two years were among the worst for the company. They were also down 10% in September in the US. Their stock has also dropped. (Yes, they’ll avoid the red and collect a profit.)

    BMW AG and Daimler AG are going to take a $2 billion hit (still above the red as far as I know). Daimler’s considering suspending production for one month (Dec. 11-Jan12).

    If the loan helps the industry undergo a greenshit (copyright some company in Canada) as there is some talks down in Washington to connect loans to advancing new technologies, it might be a way to bridge old and new industries. (Yes, I feel extremely naive and idealistic as I type this out.)

  7. sharonapple88

    Those unemployed auto workers need to have easy and affordable access to training measures.

    The problem is that there might be a loss of 2.95 million jobs if the car industry collapses, and that’s a lot of people for an economy to absorb. Even if European and Japan ramp up production in North America, at best they’d only take up a fraction of these workers.

    Massive unemployment also tends to lead to massive protests (Luddites back in the 19th century, which lasted for years and which took the army to crush; the massive protests in the 1930’s), which makes sense since the people are generally desperate, feel ignored, and have quite a bit of time on their hands.

  8. is General Motors worth saving?

    It doesn’t matter. What matters is that Michigan cannot afford to lose that many jobs. Their tax base would collapse and US states are not allowed to run deficits. That means there will be a bailout and Canada will be forced to follow with its own bailout. That’s the reality and arguing if it should be done or not is pointless.

  9. Robert — It may very well work out that way (“too big to fail” and all that), although there seems to be a lot resistance to a bailout coming from the Republicans. Public opinion seems to be running pretty strongly against it as well… at least that’s my impression.

  10. counter-coulter

    The problem is that there might be a loss of 2.95 million jobs if the car industry collapses, and that’s a lot of people for an economy to absorb.

    We’re not talking about 2.95 million jobs, GM employs about 250K people. Even if they were to go through a bankruptcy/restructure thing, not all of those jobs would be lost. The upside for a GM bankruptcy is that it gives them a nice opportunity to do some union busting on one of the last remaining large labor unions.

  11. C-C: I think that figure represents all of the “Big Three” plus downstream suppliers and others economically connected to the automakers.

  12. Public opinion seems to be running pretty strongly against it as well… at least that’s my impression.

    It undoubtedly is, at least in the US where Sir Spend-a-lot has pushed the debt past ten trillion. The trick for Obama will be to sell it as something else. For example, one of the reasons the Big 3 are having difficulty is because of healthcare expenditures. Obama could take that off their hands as part of his plan to expand healthcare coverage in the US.

  13. it gives them a nice opportunity to do some union busting

    The real reason conservatives want GM to fail rears its head.

  14. counter-coulter

    RT: Well I know that that sort of hyperbole makes for great press and tries to scare the Feds wallet open, but I don’t think anyone has touted anything close to those numbers as any real sort of possibility.

    As for me, I think that a lot of the GM issue is just that, hyperbole. We’ve heard the same thing before from Chrysler back in the late 70’s , the S&L folks in the late 80’s and more recently the Credit lenders: “bail us out lest ye incur a depression”. But when it’s all said and done we end up right back to where we started, corporations that don’t change their ways and are guaranteed corporate welfare for their mismanagement and we US taxpayers with an ever increasing debt.

    Like I said before, in this case (GM) gets a great new excuse to try to demolish their long time nemesis — the Auto Workers Union.

  15. counter-coulter

    The real reason conservatives want GM to fail rears its head.

    Hell, bail or fail they’ll still be pushing for killing the union (short of some sort of provision within the bailout package — which I couldn’t see happening) for no more reason than as a “cost saving measure”.

  16. sharonapple88

    C-C: I think that figure represents all of the “Big Three” plus downstream suppliers and others economically connected to the automakers.

    Got the number from TEXT

    (The number might be exaggerated, they probably included jobs in car-industry towns like Oshawa, but the article notes that 740,000 employed by car dealerships, which are independent dealers and therefore not directly employed by the big three… add to this car parts plants, like Magna, which itself employs 83,000… anyway, it’ll probably higher than 250,000. Still, even with 250,000, if it’s localized in a few states, would hurt quite a bit. )

  17. sharonapple88

    Got the number from TEXT

    TEXT=this article from Detroit News.

  18. sharonapple88

    We’ve heard the same thing before from Chrysler back in the late 70’s , the S&L folks in the late 80’s and more recently the Credit lenders: “bail us out lest ye incur a depression”. But when it’s all said and done we end up right back to where we started, corporations that don’t change their ways and are guaranteed corporate welfare for their mismanagement and we US taxpayers with an ever increasing debt.

    Chrysler paid back the loan. The government actually got $660 million from it.

    The S&L collapse… was a farce.

    Interesting chart here on bailouts and their aftermaths. If there’s a pattern — bailing out banks and finacial companies tends not to go well; bailouts to other industries tends to end a bit better.

    Look, no one’s going to cheer giving industries money, and more should be attached to these loans, conditions and regulations (especially when it comes to financial company), but if a bailout can prevent instability, the real threat to economy, it should be done… but cautiously.

  19. sharonapple88

    Mentioned the Luddites early, but it’s funny… the mechanized looms were destroyed by rioters because they threatened the income of crafts people. Now factories provide a fairly good income for large groups of people… funny how these things go.

    Concluding with an interesting article on the decline of Detroit.

  20. Bill D. Cat

    I doubt the link would get through any spam filter , but according to a borque piece this morning , GM is the worlds largest purchaser of ….. cough …. lifestyle enhancing drugs , 17 million in wood a year . They really should rethink a few things .

  21. sharonapple88

    The information was released by GM in their attempt to negotiate down health care coverage.

    (jerks. Toyota covers their workers.)

  22. Bill D. Cat

    jerks. Toyota covers their workers

    Ain’t gonna ask in what .

  23. Apparently – 1 in 10 jobs relate directly and indirectly to the auto sector in the US. That’s a hell of a lot of people out of work.

    I saw Ted Turner on Lou Dobbs the other night – he said the auto industry is not worth a bail out and said they made their own bed – because they answered to big oil, had poor management and wages and health coverage was way too high.

    I wonder – if we were to bail them out….and say it was successful and once production improved – would the unions start making demands? Would they compromise for a few years, take lower salary, benefits, etc.?

  24. Bill D. Cat

    To paraphrase The big three are health care providers who manufacture automobiles on the side .
    From the radio , on the drive to work the other day .

  25. lee

    sharonapple88 makes reference to the decline of Detroit. For those interested, I submit my daughter’s recent photo essay of Detroit (Carrie is a photography major at Columbia College). She was born in the Detroit suburbs, but her mother and I were born and raised in the city. We have remained here in the area all our lives. It breaks our hearts to have witnessed what has happened to our once great town.

    http://tinyurl.com/5j9sly

  26. Most definitely the UAW and CAW are being singled out as major villains in this piece by right-wingers on both sides of the border. Perhaps they are to a large extent. I know from talking to various people that worked at Ford and GM when I lived in Windsor, there were some pretty hilarious (or pathetic, depending on your POV) tales of institutionalized inefficiency and incompetence related to union rules.

  27. Lee — Great photos! (What does she charge for these? I may have use for one or two them in my work — that one of Ambassador Bridge, for example).

    Actually, she could have been even more bleak in documenting Detroit. All you have to do is go to the old Grand Central Station (truly sad) or around the River Rouge area which, quite literally, looks like Hell.

  28. lee

    RT – Thanks. I’ll tell her you liked them. I don’t really think she was going for “bleak”, though. What strikes me HARD each time I look at this series is the lack of people in most of the pictures.

    I’m sure she’d be flattered if you wanted to use any of them, with attribution I’m sure, but I don’t know the particulars of the various licensing schemes available on Flickr or which ones she placed these under. You could ask her directly on Flickr by commenting on any pic you’d like to use. You’d have to break out of the slideshow first, though.

    Sorry, I did not intend to hijack this thread.

  29. No problem. I’ll do that.

    I used to go over to Detroit now and again (actually avoided it deliberately because it was depressing) and yes, you’re right… it’s suffered a noticeable depopulation over the years. There are whole areas of the city that are practically vacant, boarded up houses and shops, abandoned factories, etc. all falling into disrepair. It’s very weird and kind of scary. Oh, and the roads are horrific. That highway out to the airport… I forget which one… it runs out by Taylor, MI is a lethal hazard what with all of the potholes and the high number of clapped-out cars driving like mad…

    Of course, if you head out to the suburbs and small towns surrounding Detroit, it’s quite a different story. There are some really idyllic little places out there.

  30. As others have noted, GMs activity has a rather large multiplier effect on the North American economy.

    Chrysler was saved in 1979-80. Why not GM now?

  31. sharonapple88

    RT – Thanks. I’ll tell her you liked them. I don’t really think she was going for “bleak”, though. What strikes me HARD each time I look at this series is the lack of people in most of the pictures.

    I noticed how devoid of people the city is in those pictures. Found this one rather eerie.

  32. guys, advise you to watch great movie about crisises, governments, etc.. name is — Zeitgeist: Addendum

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