Good article. Your linked article raises some grave consequences for letting GM go under:

So beyond losing developed and ready for market electric-car technology permanently to the Chinese - tech the US has already spent hundreds of millions of dollars and decades perfecting - we would give the Chinese a huge dealer network and the most recognized brand name in the auto industry. The Chinese would then gradually move Chevy and Buick production to China, undercutting every other automaker's costs, including nonunion Japanese plants here in the US.

This is a once-in-a-lifetime deal for the Chinese and a disaster for America if GM is allowed to go under.

This should have been done years ago. The city of Detroit in general is at its lowest morale point ever. If the government focused all this bailout effort on the working man instead of stockbrokers, it might be a small pat on the back for Bush before he gets the hell out of office.

detroit is fucked. no doubt about it.

Greetings from Detroit; it took me a while to respond to this as I first had to raise an old timey fire brigade to douse some house fires while twiddling handlebar mustaches.

As a lifetime resident of the area (the great J.J. Walker once noted when he heckled me from the stage of Improv Vegas that "You're white. You're not from Detroit. You just drive through it to get to the airport), I'm fully aware of just how deep the Auto Industry's roots are under all of our feet - not just in Michigan, but the country.

That said, there are three things that should be looked at as a bottom line to this "bailout," that, whether you're liberal, conservative or mormon, are irrefutably a good idea.

1. The cost to current social services, unemployment etc. for three million autoworkers (the number is actually much higher, when you count the suppliers that would instantly go under) for the first year would cost the taxpayers more than triple than the $25B bailout. Just do the division; $25B / 3M = $8,300 per worker. That won't even cover the first quarter of unemployment benefits. If they're denied benefits and end up on the street, well, have you seen Beyond the Thunderdome? Well, that's what Detroit looks like now, imagine it with 3M more homeless.

2. Auto workers buy American cars. When you watch a car commercial in Michigan you hear the same phrase at the end, "$$$ for A, Z, D customers." That may sound foreign to most of you, but those are employee pricing plans from the big 3. Henry Ford's original motivation for developing mass production was so that the people who build the product, can afford to buy it. That's held true, and over the years the big three has owed much of their sales to auto workers buying a new Chevy every year, and one for their daughter on her 16th birthday. These people love American cars, and they buy a lot of them. As the automakers moved jobs out of the country, they didn't take into account that they were also losing sales.

3. This whole idea that cash and economics obey the laws of gravity is ridiculous. Republicans are still preaching the trickle down theory? Really? Listen, I'm a rich guy , from a wealthy family, and I love tax cuts for the middle class. Rich Guys need to realize that it's the poor people who buy all your shit. Even if the tax rate on the wealthy had to be raised to 49%, it would still make sense to give the money to the bottom - because they would buy from the rich at 51%. Obviously, that's an extreme, so what's the problem with being taxed at 33% so that the poor can give it back to me at 67%? Sounds awesome to me.

Now if you'll excuse me, I have a riot to participate in.

^^^ all very good points.

CNN puts the cost of a 50% reduction by the big 3 like this:

So, spending $25 billion to bail GM pays for itself more than twice over the first year, since you not only save the $50 billion in revenue to government but you also avoid billions in government expenses like unemployment and charity healthcare for now-uninsured unemployed.

The bailout is needed because those huge givebacks in UAW contracts take full effect in 2010, vastly increasing US automaker's competitiveness. Total auto sales are now the worst in 25 years but are expected to substantially recover in 2010.

I say begrudgingly to help, I think their lack of sales as more to do with the economy as a whole than people not wanting the huge gas gusseling behemoths.

What's 25 Billion dollars in the scheme of things ? The Fed will just fire up the presses and create it out of thin air anyway.

I think any potential sale of parent GM to it's Chinese partner would HAVE to be blocked in much the same way as the ill-fated Dubai port debacle. It's national security for the new millenium.

Not gonna happen under a GOP administration. The Republicans love sending good jobs overseas almost as much as they love breaking unions.

Well let's hope the big three can holdout until January. But I fear we may be postponing the inevitable.I do have a problem with Cerebus though,there is going to have to be a sacrificial lamb here to appease the gods and it might as well be the privately owned one. I mean Nardelli ? Really? (And while they are at it slap a extra tariff on all Daimler products sold here ,since they thoroughly trashed Chrysler)

Regardless of whether you are PRO or CON on the auto bailout idea, I think it is inevitable that there will be a large layoffs for these companies. It seems to me like the current and coming year sales of vehicles will continue to drop off such that the decreased demand will cause a equivalent reduction in workforce. The bailout might help the solvency of the automakers but it is going to do little to stem the decline in demand.

+wf+

mk700c and the great Mr. Stiles have it nailed, as do you, FTR. What irks me is the same thing that has irked me for twenty eight years now; good data and a strong case get derailed by a tightass with an extra dollar to squeeze out of the dying middle class and the whole thing goes to shit. The more you have the more you have to gain fr4om society as a whole being stable and well occupied, so its a mystery how so many well to do people still take the Marie Antoinette attitude. Eventually that ends poorly for all, but particularly poor Marie.

25 billion dollars is a pittance compared to the real costs of the obvious alternatives. Still, an aid package needs to be carefully drafted and managed. I nominate mk700c as Omnibudsman to the US auto industry.

Good article. Myths about the Detroit 3 from yesterdays Free Press.

I do have a bit of an issue with this statement:

I could see that statement possibly applying to Rick Wagoner (GM) who has had his position for a decade or so (I'm sure someone will correct me). GM's domestic and international market share has declined during Wagoner's tenure. Allan Mullally (Ford) became CEO in 2006. He's sold divisions that did not fit Ford future plans (most of the former premier auto group) and put money into new model development (especially small cars). He's also cutting costs by adapting european models for the US market (and moving production here) instead of designing separate models. Bob Nardelli (Chrysler) has been in position for a little more than a year and is playing a much more difficult hand. It's difficult to see how you could blame Mullally or Nardelli for the current situation and I think you can make make a case that Mullally has made good decisions in his relatively short tenure. CEO transitions can be difficult under good circumstances. I'm not sure that the 'off with their heads' approach is the best strategy here.

As to the 'their big and slow an losing money' strawman - everyone (even Toyota) will lose money on their North American operations this year. (I read this in the Free Press or the Detroit News or the Ann Arbor News yesterday, but can't find the link now). It's an inevitable consequence of a market contracting as rapidly as the market for cars and trucks has in 2008.

Per Wesley Clark, it's not just an economic, but a National Security issue.

Ford CEO Alan Mulally on CNN today..

here

I would like to hear one of the CEO of these companies say that because of their lack of fore sight they are partly to blame for the companies demise and that its not just the economy.

edit.