Car industry bail out

[maarten]

I'm going to blab for a minute outside of my competent reach. OK, what else is new? :) I'm just writing this to explore the issue for my own purposes

Comments

[andrel]

I don't see how GM is the same as a bank. GM can reorganize under chapter 11, thus their "failing" doesn't bring the whole system down, heck it doesn't even bring GM down -- in BK they'd keep on making the same lousy cars that nobody wants to buy today.

The only reason that banks can be too big to fail is that banks don't have the option of reorganizing. They either stay in business or they get liquidated in chapter 7.

[maarten]

Hmm, didn't know about the ch 11 v. ch 7 distinction.

Unclear to me is whether ch 11 wouldn't be catastrophic. How much of GM do you have to eliminate before you're left with something that's likely to be profitable?

[andrel]

Chapter 11 is the usual way the government steps in to rescue a failing business. It may be that some other way of restructuring the company makes more sense, and we should make a special case for GM, but I'd want to hear good reasons why. Especially if the alternative involves bailing out GM's investors, as seems likely.

Personally, I'd rather see any government bailouts and subsidies go to mass transit and bike trails than to the auto industry.

[maarten]

Another option I failed to mention is that the gov't could accelerate replacement of gov't vehicle fleets, taking large amounts of inventory off the Big Three's hands to avoid flooding the market with discounted inventory.

car bail out

[anonymous]

well i don't think we should bail out gm or any car industry , they make 7 times over the minimum wage, they go on strike and hurt everyone, they get more money and we pay higher prices for cars, i am a machinist and there work is not that hard, they need to take a pay cut to help the company out, not rob america so they can live better as we suffer,

[aram_fingal]

I find it ironic that the "Free Market Economy" where we let businesses do whatever they want with no supervision is how we got in this mess, and yet they are asking for all this money from government which is completely the opposite of what a "Free Market Economy" should do

[eldan]

I'd argue that it has to depend on the industry. What makes banking & finance special is that they could bring any other sector of the economy crashing down with them, so they're presumably worth rescuing for everyone else's sake. Outside of that arena, there are few industries (health care perhaps?) with such far-reaching implications, so individual industries should be allowed to wither, and what should get some kind of government help are the regions that are already suffering from the industry's demise. In the long run, it's clearly better to get some other industry into a place than prop up one that can't survive without government help.