Late last week, Republicans in the Senate for the so-called “big three” of the automotive industry, but President Bush and the Democrats continue to try to find some sort of deal that will permit the passage of the legislation. Regardless of where you stood on the bailout (I personally was strongly opposed to it), there are nonetheless a number of important questions that remain to be addressed.
What is the answer for dealing with these automakers’ woes and lack of competitiveness? Is it bankruptcy? A bailout? Or something totally different?
Moreover, as the economic situation of these companies continues to worsen, they are in all likelihood going to lay off a lot of employees. What should be done about the plight of all of these jobless people? Should someone “bail them out?”
The big question here is: what should be the GOP’s answer to this situation?
We’re looking for your thoughts the above questions and any other thoughts on the auto bailout that you’d like to share. Please share your thoughts in the comments section!
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I was against the bailout too. Was also against the financial bailout. Bernanke stated in a letter to Chris Dodd that he did not believe automakers had “adequate collateral to secure a loan from the Fed”. That tells me it would be a risky loan. When situations get this desperate bankruptcy seems to be the only solution. Bankruptcy courts are much more capable of managing situations like this. That’s what they do.
Why are the automakers dead set against it? Didn’t Delta file bankruptcy? Aren’t they flying today? I suggest automakers & UAW believe they will have to take much stronger medicine under bankruptcy & they don’t want to do it. Esp. UAW. But strong medicine is what is required. The gov’t could have a role, I’m not up to speed on how it all works so I’ll defer to Mitt Romney.
The UAW has shown it will not work with Congress: “Gettelfinger said today it was a mistake for his union to conduct a detailed negotiation with Congress on the matter”. . That should close the matter.
The GOP should stress that gov’t has no business in the car business & let the experts handle it. Also, they could consider tapping the $25 billion in loans (already set aside at Energy Dept.) as a safety net for employees – extend or increase unemployment benefits, subsidize their health ins. if needed, etc. My 2 cents.
Even though it was the government that got them in this mess, it’s not a government solution we need. Especially if they want to impose MORE regulations. If you want to save businesses from recession or bancruptcy(not just the auto industry), demand that the business tax be eliminated. Isn’t the business tax around %30? Think of how much money they would save the companies, and consumers in our market. Not to mention you’d be having money go where it should; to the most successful businesses.
I also heard that the auto industry is knee-deep in debt. So if they were to declare bancruptcy, all there assetts would be liquidated, and turned over to pay back the banks. That’s just what I heard. Don’t know if it’s %100 true.
I think unemployment will happen whether the Bailout occurs of not. If people aren’t buying, there isn’t sufficient revenue stream.
Hence banckrupcy is the best and most expedient means to reorg in order to produce both the product and price American’s seek.
Lisa
Allow chapter 11 realignment. Let the mechanisms already in place work. The Heritage Foundation has some great ideas on this issue.
Until I see one executive or CEO driving a sub compact company car or flying coach I have absolutely no empathy or nor reason to feel that this is a “government” problem. Albeit, the government is seemingly oozing corruption as of late, corporate greed ALONE got them, and us, into this mess!!!!!!!!!!!
I am very much opposed to an auto bailout – especially since the UAW would not agree to giving up some of their salaries and benefits – greed, greed, greed. If the automakers had made a decent product and run their company efficiently, they would probably be making the same money as Toyota, Honda, etc.
Saying this, however, a good friend of mine is an office worker in Detroit. I do feel for her and her co-office workers. She is 50+ and probably cannot find another job. However, it is up to free enterprise (the companies) to run a company that makes a profit!
Yes for the auto bailout. If the greedy wall street got a bailout then the only viable industry in America should be helped.
Unlike wall street, the auto industry will use the bailout. Guaranteed, we will have increased taxes, so it doesn’t matter what the cause is. A democrat is in office.
It doesn’t matter any more, just put the bailout once. If they, or anyone else asks for another one, ignore it and let them go under. The free market will determine which new private company comes in and takes over the industry.
I am glad the real conservitives stood up for what they belived in. If the bailout has passed is would indicate the nation is continuing to follow a socialist path. The bailout is unconstional because it would Honda and Toyato workers to subdize the big 3 in the United States, which would give Ford, GM and Chyler a unfare advatage which violate the 14th admement, the equal protection clause of the Constiution
The big 3 need to file just like everybody else.
The American auto industry has moved away from a capitalist and entrepreneurish system to one based on the demands of consumption. The UAW kept making demands for wages that had nothing to do with the ability to produce a product that the consumer would buy. The management is also not invested in the product but in the value of the stock. Stock value is what has determined their pay, bonuses, and options. The focus has not been on what product will sell at what price but on how much can we suck out of the industry.
Capitalism is based on investment and risk. The investment has been minimal and the risks have not been accounted for. Constantly borrowing to pay wages and benefits without concern for the profitability of the operation is what put the industry in the situation they are in.
To prevent a total collapse of the industry (including suppliers) a rework of operations is necessary, without that no matter how much money is sunk into it, it will collapse completely. Salaries and benefits of management must be based on performance and not stock value or how long they can manage to borrow money to keep afloat. Wages need to be based on the profitability of the product produced. The product lines need to be evaluated as to salability and reduced to those that are profitable.
Once the SOP of the industry is changed then and only then should the government step in with loans to allow the industry to achieve profitability and stabilize the economy.
It is interesting that in the last 30 years Ford Motor Company has been moving production to other countries while Toyota has built 12 new plants in this country. This has produced a $4 billion profit for Toyota in the last reporting period while Ford has lost $9 billion.
Let’s use whatever money was left from the Wall Street Bailout to bailout General Motors, Ford and Chrysler.
Now, coming from Michigan, where I used to live and having family and friends who have worked in some way in the auto industry, this would be a great help to employees in Detroit and Lansing and other US cities. Without that bailout, those cities would be ghost towns.
And Michigan needs to recall Jennifer Granholm. That bitch has caused Michigan’s economy to go down the toilet.
I supported the bailout of the financial industry, but did not support additional money for the auto industry.. However, if Bush would take away money from the financial TO the auto industry, that would be fine.
YES to LOANS to the Detroit Three. The $15M loan to this industry will have a larger short-term impact than the $350M+ that’s been thrown at the financial industry. It will prevent the immediate loss of hundreds of thousands of jobs and allow for a more orderly restructuring of the industry. Who would buy a car from a company in Chapter 11? Yes, the automakers have made mistakes, but Shelby, Corker, and McConnell are uninformed and talk about our domestic industry as if it were the 1980s or 1990s. They are simply ignorant of the facts and the significant changes that have taken place in the last 5 years, albeit a little late. They would not be in this current situation if it weren’t for the credit crunch. Let’s give them some time to make the corrections, save a ton of jobs in the meantime, and it will benefit the entire country.
I think Mike is dead on – my expanded thoughts are here
Subsidizing failure does what? Produces more failure. If these companies cannot situate their finances during a positive bubble then they must be allowed to fail during the bust. Honda, Nissan, Mitsu, Toyota, all of these companies seemed to do well during the bubble, and just fine after the bust, even though the market has tanked. The capital used by the Big 3 during the boom that was poorly allocated must be reallocated during the downturn, that is why its referred to as a correction. Governments can do nothing during a correctional period except prop up the tanking market, yet economic law is ultimately inevitable and will eventually correct itself, although re-igniting the bubble through Keynesianism will eventually lead to a harder burst in the future. You either let the correction occur in light of all the malinvestment taken place during the boom, or lengthen the agony and have a worse correction later down the road. Take your pick.
I almost have to agree with Bill Kristol and Pat Buchanan in saying that some sort of deal needs to be done before the year is out for political reasons. If it is not done and at least one of the Big 3 go under the Republican Party will gt blamed even though it is the Democrats who control both houses of Congress. I personally favor something like the Corker Bill which calls for shared pain. However, it looks like the UAW and the Democrats are trying to squeaze the taxpayers and not solve the problem. If some bill that reforms the auto industry even a little bit passes then this mess becomes the Democrats problem when the GM and Chrysler have to declare bankruptcy. The politics in DC are such that real reform will not come until the Big 3 fail and as long as Bush is in the White House, the Republican Party will get the lion share of the blame for letting that happen. If the Republican Party gets blamed, this will hurt Republicans further in Michigan, Indiana, Ohio, Pennsylvania, Kentucky, and Virginia.
What we are talking about is not a bailout for the Big 3 but a bailout for the UAW. Unions take when they can and then they refuse to help out when the going gets hard. Until the UAW takes cuts no amount of money will save the Big 3. Bankruptcy will be best because the judge can force changes to the labor contracts. We need to make it clear to the UAW that they can be stubborn and “protect” their members for a couple of weeks or even months or they can bite the bullet and protect a majority of the jobs for years to come. That being said Bush should do some sort of stop gap measure to make sure that nothing bad happens to the Big 3 until Obama is in office, to lessen the political implications for the party.