There's only so many suppliers who make roof shingles. Multiply that by every subassembly, cabinet, sink, light fixture, etc. Homebuilders are assemblers too. Where was the call to fork over a hundred billion taxpayer dollars to them, return on investment be damned?
Oh, they got their handout as well. It's just more dilute because there are a bazillion times more builders than car companies, which is the crux of my argument actually.
Foreclosure Prevention Act of 2008 was a $29 billion dollar tax gift to the builders.
First Time Buyer's credit pumped a ton of capital into the market.
Nobody remembers these and others...
In summary: One rifle shot could have taken down the auto industy, they are so closely intertwined. It would take a couple of frag grenades to take down the housing industry.
IMO, the arguments for bailouts of the respective industries are not comparable on any level, CG because of the dilution (sheer numbers) of homebuilders.
Would there be a shortage of new cars if GM did not exist?
Its plausible I suppose but I really don't now how possible.
Foreclosure prevention was a gift to the banks, not the builders. I suppose you could consider first time buyers somewhat builder related, but I think that had more to do with trying to move existing homes off the market than trying to create demand for new homes.
That logic only works if you choose to believe that GM is the entire auto indsutry. I respectfully disagree that it is.
I don't think so. Had GM been allowed to go through a normal bankruptcy someone would have purchased the Chevy, GMC, Buick and Caddy brands and continued production of those lines.
My point exactly.
Lets say 12 million cars total will be purchased in the US this year (about right).
If GM didn't make "their share" of them, someone else would.
I think this is the strongest point of your argument. What's unknown is the effects of the process on the halo of suppliers.
I don't think GM is the entire auto industry. But disturbances in small ponds cause more havoc than in a large lake.
Well, maybe but the argument put forth was that GM would take suppliers with them and thereby reducing the supply of parts available to anyone.
In any event, my argument for the bailout tobegin with had more to do with the fact that we were going to spend that money in one way shape or form because if GM went down then we were going to spend it in social services.
Those suppliers would have then bid on Ford, Toyota, Hyundai, etc. sub-assemblies instead of GM's. Other manufacturers would have taken that market share and required the same amount of employees to produce those cars and sub-assemblies. Some suppliers might have gone out of business but others would grow or be created to meet the sales demand.
I would not say that GM was "essentially owned by the UAW".
It isn't really fair. It wasn't meant to be.
It was meant to avoid a massive liquidation, and it did that, did it not?
Whats not fair?
The United Auto Workers will be the single biggest shareholder in GM and Chrysler after the government liquidates it's share at a loss. What part of this don't you understand?
Going back to your other two opinions,
What "should" have happened to GM is central to the debate here. While I agree there is nothing sacred about GM, I think the economic damage would have been MUCH greater, had that happened.
The break up would have taken place during the worst financial asset meltdown in living memory. It is arguable whether ANYBODY would have had the financial werewithal to taken on any of the brands, even at the steeply discounted prices that they would have gone for. Several analyses I read doubted that even a small fraction of GM in North America would have survived.
Should we have allowed the massive economic damage, just to satisfy your apparent dislike of unions?
You asked me if this is fair. I said no.be allowed to go out and compete head to head with Ford, which DIDN'T take tax dollars and DIDN'T get the same tax breaks? Not only that but FORD pays TAXES that politicians take and use to subsidize it's compe or...
How ing fair is THAT?
The UAW is not as of now the "essential owner".
As GM issues more stock that ownership stake will be diluted, and I don't know if the UAW will retain the shares, given that the shares were created in lieu of a liability owed. I would think that the UAW would likely slowly sell off its stake to meet the financial needs of the union as they arise, since that was the underlying nature of the liability discharged, to my understanding.
Joe, Fred, and Pete sell apples at the farmers market. Together they sell 100 apples a day.
Pete starts smoking crack and gambling and loses his fruit stand in a craps game to Jose.
Now Joe, Fred, and Jose sell apples at the farmers market. Together they sell 100 apples a day.
Where is the economic loss?
I generally agree that government shouldn't bail-out any industry, particularly if their troubles are their own doing.
However: jobs you listed are service jobs, they differ from manufacturing jobs. If a restaurant goes out of business, the people will still need to eat, and another restaurant will open. An American may have lost a job, but another one will get it. If GM went out of business that vacuum would be (mostly) filled by foreign companies and their suppliers.
Depends how the bankruptcy would have been handled. I don't see why there couldn't have been some kind of arrangement where GM continued to build some number of cars while bankruptcy proceedings went on. The bondholders would have been for that since liquidation of a GM that was still building cars would fetch more $$$ than liquidation of a GM that wasn't building cars. The union would be ing up a storm since operations under that condition would certainly involve throwing out the union contracts with a BK judge determining compensation, but given the alternative of no one having a job at all, I think they'd begrudgingly have gone along with it. The stockholders were going to get wiped out under any scenario so their input didn't matter.
Under that scenario, GM continues to build cars while the company is being liquidated. Secured creditors get first dibs on the proceeds in accordance with bankruptcy law, secondary creditors come next. Taxpayers aren't on the hook. The corporate en y known as GM dies, but the production continues and the only significant ripple in the pond is the falling consumer demand which no one can do anything about anyways.
The fault in that arguement is that the jobs that were "saved" are far more expensive than putting people on unemployment. $100 Billion worth of unemployment benefits is enough to put 2 million people on unemployment for 2 years. And I find it hard to believe that 2 million people in America were going to end up unemployed if a company that only employeed 200,000 worldwide went under.
Unemployment benefits are not the only cost associated with mass unemployment. The estimates on unemployment were for 1 million, however.
Perhaps in a healthy credit market. That didn't exist then, and still doesn't.
GM had approximately 20% of the US market share. If they had gone completely out of business other manufacturers would have filled that 20% gap and hired additional employees/suppliers in order to do so. There should not have been a significant net job loss.
So you are claiming that GM's 20% of market share would not have been replaced and we would have a car shortage now?
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