It seems that the needs of the future for transportation may require nimble, innovative entrepreneurial firms that are lean and hungry, not just making gestures of shedding private jets. Is it time to let Detroit out of the responsibility of keeping our economy going?
Many critics of the auto industry argue that bankruptcy is the best choice for the Big Three. A bankruptcy judge has broad powers to let the automakers shed their debts and other obligations, as well as get out of labor contracts that they can no longer afford.
Other industries, including steel and airlines, have used bankruptcies to emerge financially healthy.
But the automakers say that consumers’ concerns about warranties and the resale value of vehicles would stop them from buying from a bankrupt automaker. The resulting drop in sales would make already bleak conditions worse.
There are also questions about whether the automakers could get the financing they need to operate under bankruptcy court. Many lenders that have loaned to bankrupt companies in the past have exited the field in the wake of the credit crunch. And experts question whether the crucial source of funds needed to emerge from bankruptcy would be available to the automakers.
“The size of the companies, the state of the capital markets [and] the uncertainty about how bankruptcy would play out…means the ability to get [financing] is a big question mark,” said S&P’s Schulz.
Giggle Bear: The ‘domino effect’ was last disproven in regard to the Vietnam War. For example, if auto workers become unemployed, they will have unemployment insurance which can be extended while retraining and other efforts to get them employed take place.
The only people who will be left out in the cold are the bigwigs at the auto companies. They won’t be able to add millions to their trust funds and other personal accounts.
Fear, uncertainty and doubt are great sales tools, but I ain’t buyin’.
Eugene
Floyd
That’s an intelligent question, but I’m going to give you a dumb answer (sorry):
They’re not like dinosaurs because dead dinosaurs give us petroleum – the automakers just suck it up.
Alvin
have you ever heard of the Domino Effect? i dont think you have. if people who work for big 3 lose their jobs it will cause a major domino effect thru the country….people who supply the big 3 will lose their jobs, people who work in schools like teachers will lose thier jobs, even people who work at mcdonalds and burger king will lose thier jobs! Why? because the people who work for the auto industry will not have any money to spend! the auto industry has a lot of people working for them…so do your country a big favor and BUY AMERICAN…if the auto industry goes down, kiss YOUR job good bye.
Kathryn
No, the dinosaurs were efficient for billions of years.
Holly
No. The Big 3 have changed much in the last 30 years and are evolving daily.
How can our congress drag their feet on making a small loan to try and save our countries industrial base, billions of dollars in wages, taxes, benefits, pensions, etc.
Every day they wait is costing our economy millions and billions of dollars and driving our standard of living down even further.
You are mistaken about your premise. The big three are viable, were profitable until the gas fiasco, and can be profitable again if the loan moneys are freed up to allow people to purchase vehicles.
They were making the suvs, because that is what the American buying public wanted and were buying and they were very proifitable.
Foreign automakers I believe get tax breaks each and every year from states and gov for having their factories here, sending the profits back home and their products aren’t selling well right now either. They too were heavily investing in suvs because they were profitable. I would bet their countries are helping them out with cash if they need it right now, why in the world wouldn’t the American gov do the same for our own hardworking American autoworkers?
Don’t believe all the BS about the $70. per hour wages, that is a total of wages, benefits, overhead, costs, etc. inflated for effect during negotiations. The new hires coming into say GM get around$15.00 per hour and basically no benefits. The jobs bank or sub pay was a negotiated item that GM and all the automakers, even the import companies agreed to, to try and retain highly trained employees whenever downturns occur.
The Big 3 are asking for a loan to help people buy what they already want to buy, but the banks that the congress already gave 700 billion to aren’t using the money for what it was intended?
GM in particular has lots of the highest rated vehicles in quality and mpg, higher than the imports, it is just the American public has been brainwashed and don’t want to hear it. Jealousy, I just don’t know?
Benjamin
These companies have dinosaurs in the front office but the companies themselves are OK. They are modern, automated and efficient. The labor is unionized and the workers better off than in most industries. Despite higher labor costs they have been competitive. This crisis is a great opening to force the dinosaurs in the front office to do what they have so long resisted: start building more fuel efficient and reliable cars. The gov should help but the help should be in the form of rebates for people who buy the cars…. say $5,000. The car company would be reimbursed by the gov. Cars will sell and the lowly American citizen will benefit for once.