Ludwig” The big three auto companies in the US appear to be in dire strife. If they go under, it really is going to put the whole national economy on very shaky ground and trigger a massive increase in unemployment.”

The thing which surprises me is the big 3 have survived this far. Apparently in Henry’s later years, Ford ran at a loss for every year between WWI and WWII, how is something which I do not fully understand.

For the past few years GM has been trading as a “junk” bond, again, the source of cash, not coming from earnings must be coming from either debt or asset sell offs. GM is further straddled with a debilitating employee welfare scheme which from my observation, reads like someone literally “sold the farm” but expected to still reap a cash crop.

If a business cannot finance its operations in the medium term, it does not deserve to survive, the same way a dinosaur which cannot find a reliable food source, goes extinct.

Business management is about competitive success, holding up the dinosaurs simply either denies or even burdens new business opportunities with a stone collar before they open for trade.

I would agree with wobbles “Let "the market" sort it out.”

The same happened in UK in the 1980’s when the dinosaurs and sheltered workshops of the socialist nationalized industries hogged skills, resources and tax payers subsidies to produce inferior services at exorbitant prices under monopoly circumstances which locked possible efficient operators out from competing.

Maggie T fixed those bastards.

The worst case is GM / Ford / Chrysler would go into Ch 11 and eventually be broken up, the profitable elements of these monoliths being salvaged and the unprofitable elements closed, their asset base being sold.

That is “How the market works”

Government bale-outs are where some politician uses tax payer funds to defer the hard decision and buys himself brownie points into the next election with niche sectors of the electorate.

I like Alan Moir’s cartoon on the OLO main page this morning: the US car industry portrayed as a great lumbering brontosaurus! http://www.onlineopinion.com.au/

I can’t agree that we should just let the proverbial dinosaur go extinct, which is what would happen if the market was left to sort it out. I reckon some very strong government intervention is warranted, in order to get the three big buggers to steer production towards greatly improved energy efficiency.

In fact the threat of their collapse, and indeed the weaknesses in the whole US (and global) financial system and economic structure, should be very good things for humanity….if they trigger reforms that are predicated on the achievement of …yep…a sustainable society.

I agree with Polycarp: executive salaries should be slashed. There might also be merit in reducing worker’s wages and extras, if it is a matter of doing so in order to secure the survival of the relevant companies...a la the survival of their jobs. Afterall, better that they all keep their jobs at a lower rate of pay than all or a large portion of them lose their jobs, yes?

“Government bale-outs are where some politician uses tax payer funds to defer the hard decision and buys himself brownie points into the next election with niche sectors of the electorate.”

I certainly hope that’s not the case Col. It appears that even under George Dubyashrub, and right at the end of the current government’s term (when their accountability is arguably nowhere near as good as it would be early in a term) the authorities are going to demand some pretty tough reforms before any money is committed to a bale-out.

Ludwig the problem with “government intervention” in any market

Imagine the Yangtze river, a fast moving river running over soft soils and rocks. It is prone to silting and thus to flooding.

Two options, dredge the river bed, painfully expensive but long term everything remains in balance.

Build up the banks of the river with levees, cheap and efficient and achieves the same results as expensive dredging.

Except, when there is a dramatic flood and the levees burst.

With the dredged river the burst is contained and effects only a narrow area along side the river.

With the “levee –built” river, the bank building and silting has gone on for so long the river ends up many feet above the level of the surrounding hinterland. When it bursts, the flood effects a far wider area than the narrow river valley and causes major devastation and losses.

Government, in supporting decaying and unviable industries is like the levee system of river containment, it is a cheap expedient until a major event occurs and when that happens there is wider scale devastation than would be experienced otherwise.

Better a dying industry is allowed to fail naturally, during times when the economic cycle is strong and investment is made in replacement opportunities, than waiting for a deluge and disaster to drag everything down with it, the dying industry and those opportunities which would have mitigated against wide scale devastation.

it is not a complicated reply
nothing need change

everyone gets their 4 wheel drive machines

but they run on joe fuel cells [leased]from govt] on a per mile carbon value[set at one third the price of gas]

it is made from a certain grade of stainless steel
it creates on site HHO gas [it implodes rather than explodes]

your petro combustion engines timming is advanced 25 degrees
[to reset the ignition cycle from explode to implode]

power on the UP-stroke
NOT the down stroke

a simple bolt on [at a cost of LESS than 100 mbucks]
give one to EVEry poor person

[the ritch let them pay tax on their polutions]

Col, I don’t want to see governments propping up decaying and unviable industries so that they can just continue on in the same old unviable manner. If these sorts of industries are to be baled out, they simply MUST be required to reprogram themselves so that they can not only be viable, but in a manner that is in line with the new world order of carbon emissions reductions and overall sustainability.

If they can’t do that, then yes, let them crash….despite the huge loss of jobs for innocent workers.

The big three have flirted with hybrid/electric vehicles, alternative energy sources and so on for many years. Now they need to be compelled to fully analyse the best options of those sorts and get stuck right into them, with great urgency.

If investment in replacement opportunities for these dinosaur companies is deemed to be the best course of action, then fine. But my feeling is that the established industries have a much better chance of converting to an environmentally friendly transport regime than something that has to start from scratch.

Ludwig, Col rouge,
Both of you seem to be taking a very narrow look at this problem.
The effect of their crash wouldn't just affect The USA
It would have an effect on all the big three's plants world wide.
Simply put Detroit guarantees finance or has constucted a debt tree on which all the satelites depend/are interwoven. If the HO goes so do all the branches.
In addition to this one needs to consider the impact of their combined debt failure on an already down financial market. Hence the front running idea is breaking up the behemoths to manageable sized debt concerns for others (the market) to absorb the debt as tax right offs. This way the financial system would totally collapse.
True it’s a poor solution but it beats a decade of depression.