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A pair of Michigan consulting firms say an automaker bankruptcy would be four times more expensive to taxpayers than a government bailout that allows the companies to restructure.
If two of the Big Three declare bankruptcy and are forced to liquidate, federal and state taxpayers would lose $66 billion in the first two years alone, according to a study by Anderson Economic Group of East Lansing, Mich., and BBK, a business advisory firm in Southfield, Mich. That scenario -- which envisions the loss of 1.8 million jobs -- includes costs of $20 billion in lost federal income taxes, $21 billion in payroll taxes, $6 billion in state income and property taxes, and $5 billion in unemployment benefits.
A $30 billion loan in which half is repaid and the government gets a stake in the companies would cost $16 billion, with far less in lost revenue and higher spending to support unemployed workers, the firms predicted.
Warily eyeing the auto industry's problems is the Pension Benefit Guaranty Corp., the federal corporation that insures the defined-benefit pensions of 44 million American workers, including autoworkers.

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Fanny May and Freddie Mac and the Oil industry is the reason for our present circumstances. Why should be punish ourselves for the sorry politicians and greedy CEOs who could care less about the average hard working person. Their greed and miss management are the culprit not you or me or the big three. Our senators need to wake up and support the people not themselves.
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quote:
Originally posted by glslocksmith:
Their greed and miss management are the culprit not you or me or the big three. Our senators need to wake up and support the people not themselves.


How about the greed and mismanagement of the Big Three? Does that play into this scenario at all?

These companies have teetered on the brink of bankruptcy for years. All it took was one little shove. If they were strong and solvent, they could be more agile in this situation. They've ignored their internal and infrastructure problems, and now have a scapegoat and are using fear tactics to extort money from the taxpayers.
The results of bankruptcy varies depending on which chapter you file. They may or may not liquidate. They could choose to simply reorganize and not liquidate. Either way, I don't think it will be the end of the world. If we hand the auto industry money then which industry is next? Industries have gone bankrupt numerous times without any help for the people. Now we are contemplating the bailout of Chrysler a second time. If they reorganize then a bankruptcy judge will supervise their business and maybe straighten out their executives. If they liquidate other car companies will still exist.

Did somebody bail out Martin Industries in Florence? No Did somebody bail out Pillowtex who had bought Fieldcrest Cannon? No Did somebody bail out Cities Services? No Did somebody bail out Diamond Shamrock? No Did somebody bail out Union Carbide? No Most of these companies either got bought or were replaced. I don't see how we can justify giving the auto industry a bailout when (a) most of the money will go to the investors and not the employees (b) the car companies have made no promise to bring back jobs from overseas (c) most economists believe it will be only months before they are back begging for more.
To put this into perspective. At the height of the depression, 1934, unemployment topped about 22%. Now unemployment is about 7% and climbing, it will be over 8% not long after the first of the year.

In America, it is estimated that 1 out of every 10 jobs is tied to the automobile industry. If all of the big 3 go down, that adds about 10% to the unemployment. Now how much would the fallout be toward businesses and restaurants and all those who would lose their retirements, who are already retired. your looking at that 22% unemployment soon next your if we do nothing.

If we can spend 700 billion to bailout wallstreet, this is peanuts to save our nation a terrible depression.
As I have said before the ONLY way I would give up any money is having an agreement on jobs coming back home. This bailout won't save jobs nor will the money go to the workers. The money is to save the investors (Wall Street) and the executives. $20 billion won't save the companies. They don't have enough time to turn the business around. What will they do? Give cars away? After giving them $20 billion you have to have customers to buy the cars. So far only the only people getting the bail out money is the people who made bad decisions.

I think you will soon find out either way. It looks like they are going to a "controlled bankruptcy" according to the news. It is some kind of brokered agreement with the government.
I do believe history can teach us very much, however, we live in different times, and circumstances from that of the great depression. We don't know what the outcome will be because we are not omniscience, neither is the past a sure gauge of the present. The cost of failure is greater than the cost of help. Whether you or I like it or not what is best is what should be done and because we are not omniscience and because the past is not an absolute gauge for the present then helping the auto industry is the best opinion.

What is different from companies that fail in good times? Companies that fail in good times and not because of Fanny May and Freddie Mac and the oil cartel are normal attrition. Companies that fail because of sorry CEO's and Political Idiots filled with greed and self-serving and the oil cartel who high jacked our economy is all together another thing. If helping the big three works then all the companies that benefit from their success will survive, everyone wins. The cost of their failure is 4 times greater than their continued existence.

I own my own business. The drastic down turn in business this year is not my fault or yours, it is the fault of the long list of self serving Fanny May and Freddie Mac crooks and the Oil industry. Neither I nor you (plural) had any control over this. We are victims of greed, intentional white color crime and miss management.
quote:
Originally posted by NYTrooper:
If the auto industry was doing fine...only those with pristine credit history could get a loan to buy a car right now. If they keep producing what will they do with them?


You meake an excellent point. Consider this. In a recession, there are people who still make money an d relatively do well. So i would say that auto sales will still exist, only at a slower pace. in a depression, there would be far fewer people able to buy some will still be able. 1934 was the worse year for the depression, and still there were 1934 Fords as well as other brands.

i think that the purpose of this bailout/loan, is to allow the car companies to retool to provide efficient cars and my hope is the first generation hydrogen powered cars. The technology now exists to build a practical hydrogen cars. It is just piecemeal, n\this will help the auto industry to put it together and develop the next technological breakthru, and this will indeed bring a revival of our economy.

You get out of this one of two ways. Have a major war in which the country is socialized to win and thus recocer the economy, or you have the leap in technology that reinvigorates manufacuring and consumption.
I guess in a perfect world, the loan would come with conditions that would be bulletproof. After hearing the President speak this morning, I'm not sure about those conditions. I mean, $13B now and $13B next month, assuming they meet "conditions"? What sort of conditions could a leviathan like the Big Three meet in a month?

I would almost have wanted the government to invest in the companies, rather than loaning to them, but that's fraught with danger as well. Having an idiot (such as a government overseer) as a major player on a corporate board is a quick way to a spiral path down the porcelain bowl. But I believe the loans (or investment) should be tied with the overall long-term health of the AMERICAN economy, rather than the long term health of the Big Three. A major invester could drive the companies toward restructuring to smaller, more agile enterprises; toward more independence from imported oil; and toward higher rates of customer satisfaction.

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