The US auto industry: The fire or the flame?

While watching CNN a few moments ago, I saw a report saying the US auto industry is seeking a $25 billion bailout from the Feds as well. All this days after the announcements of Lehman Bros bankruptcy, Merrill Lynch's buyout, and the AIG bailout. My question is, bail them out with what? And what good will it do?

This is happening just as I said it would. The high energy prices are too much for the economy to bear, and it is breaking. People are having to drive much less because it is so much more expensive to drive. What they must drive (to their job, to town for food/supplies) is taking more of their expendable income from them, forcing them to cut back on non-essential purchases. As everyone has less to spend, businesses sell less. That takes away jobs, and places more people in dire circumstances.

As to the auto industry, people are now selling second vehicles or low-mileage vehicles in a panic to get more income or reduce their living costs. This is flooding the auto market drastically. I have seen this building over the past months: more and cheaper cars and trucks being placed out front of houses with 'for sale' signs and ridiculously low prices. My last trip, the streets looked like used car lots in many places.

As cars become easier to find, and the prices for used cars drop due to competition between not just dealers, but a swarm of private sellers now s well, the value of new cars drops as well. Yet, governmental regulations and auto industry costs have risen so much in the last decades that new cars cannot be made for their value to consumers today. The fuel mileage hasn't increased much in thirty years in the USA, either, and this makes new cars even less appealing to financially strapped purchasers.

In short, there is no longer much of a market for new cars.

So if we bail out the auto industry, it is just a quick temporary fix, one that will only work if the market resurges soon. I don't see that resurgence happening in the near future. Plus, there's the question of where will that $25 billion come from? Just how much debt can the US handle before the fiat dollar is totally worthless?

So we have a choice before us: bail out the US auto industry, and allow the value of the dollar to plummet farther. or let them fail and allow a huge portion of our population to become unemployed at a time when we have a serious lack of jobs paying a livable wage, If we go the former route, we risk a faster plummet into a general depression brought on by a complete economic failure (a given anyway). If we go the latter, we get the same result, as the number of people on the unemployment rolls will increase beyond the ability of the government to pay them all, and all those families will be indigent and unable to contribute to the economy.

And the Dow was just reported to be down 350 points today so far. The overseas indexes are dropping this week as well. As the US goes, there goes the globe.

I think the phrase "damned if we do, damned if we don't" sums this up pretty well.

TheRedneck

Good Evening TheRedneck. Good post.
The auto industry reminds me of the buggy whip manufacturers at the turn of the century. With the advent of the automobile industry, they were caught making a part that no-one no longer needed(except for a few Amish and harness racing drivers!)

Today, Detroit, for the most part, produces cars that still run on gasoline, something that becomes rarer and harder to find, as well as expensive.
What I would propose is something like this:

Have the government challenge the auto companies that want economic aid, to begin serious retooling for only alternative energy engines. Any aid would be contingent upon all such aid going only to the development and manufacturing of alternative energy automobiles. Furthermore, as a "carrot and stick" solution, penalize those companies that continue to produce only gasoline driven automobiles. That way, we do two things- we help Americans keep jobs, and we advance our independence from foreign oil.

i have worked for Chrysler LLC for 12+ years now. building the Dodge RAM and Dakota in warren michigan.Today i heard a rumor about us going on OT next week of 9hrs a day, 6 days a week. if not next week we are already set for that OT after the 29th of this month. someone is buying these trucks.

but i really wanted to add that recently i read an article about a Ford car overseas that gets 65 MPG, that they will not bring over to the US because they say it is desiel and desiel only makes up 3% of the market. so i aggree we neeed to get these alternate energies going and stop making the oil tycoons richer, while we get poorer(is that a word?)lol more poor?

Oh also read an artical that said nicola tesla invented an all electrical car in 1941 i believe was the year. i think both were here at ATS so if you need to search em up!

reply to post by ProfEmeritus
Good evening Prof!

I really just don't believe that gasoline is getting rarer, except possibly by design to keep the prices up. It's not unheard of: diamonds are pretty common, esp[ecially in certain parts of the globe, but since only one or two companies own the mines, they simply stash the diamonds and release enough to fill the demand at their preferred price. Now, if a gasoline shortage were to occur, it would drive the price sky-high, and those who own the wells know this. OPEC really makes no bones about the fact that they manipulate the global price of oil by adjusting the supply.

I do also believe that gasoline is a very inefficient power source and should be phased out as soon as practical. The problem with your carrot and stick approach is that it in itself goes against everything the US stands for: non-interference of the central government with the economy, other than to regulate monopolies and establish fair trade between the states. Now that said, I also realize that the central government typically does operate in that fashion, whether it is proper or not, so I guess I can see your point.

I would like to see some of these grants given to individuals in order to produce better, cleaner, less expensive (and freer) energy sources. Of course, that is a pipe dream, given that these huge tax breaks and bailouts are geared toward the top corporations to allow them to fund political ambitions. But, hey, a redneck can dream, can't he?

TheRedneck

reply to post by keeff

someone is buying these trucks.

Could you sneak out a nice Ram Quad-Cab, 3500 (dooley) with a Cummins Diesel? Dark reddish brown would be nice. Oh, yes, and a full 8' bed would be great too (although I don't need the bed itself, will make my own dump flatbed with sideboards for it).

I am wondering if those trucks are being used as downgrades for light industrial delivery? Or perhaps construction vehicles. Either way, it's nice to know you'll still be making my dream truck for that day when I actually have money to buy with.

TheRedneck

But, hey, a redneck can dream, can't he?

Absolutely, points well taken. My suggestion was not so much a mandate for government intervention, as much as it was a suggestion that we encourage a national goal towards energy independence, and as part of that, an incentive towards that goal. I look at what we did in less than a decade, when Kennedy set a goal to put a man on the moon by the end of the decade, and in that short time, we did. I believe we CAN achieve energy independence. After all, until a few decades ago, we WERE energy independent. We can get back there, as well as improve the environment, and secure renewable energy for our children and grandchildren.
As always, your comments are very insightful.

reply to post by ProfEmeritus
Well, since I disagreed with you on one post, I guess I need to agree with you on one. That way, when the Fairness Doctrine is passed into law, maybe I won't be the first guy arrested.

What we did prior to 1969 was totally awesome! But what was more awesome is that we did it with tiny (power-wise anyway, they weighed about the same as a typical bus if I'm not mistaken?) computers which were not even capable of what this worn-out laptop can do today. 40 years later, we have ended the manned space missions because we can't guarantee safety. In 1967, you could buy a Volkswagen Beetle that got in excess of 30 MPG (I know because I used to won a 67 Beetle). Today, 40 years later, I see advertisement for 'high-mileage' cars that get 30 MPG. Heck, I remember test-driving a car in the late 70s that was advertised to get 50 MPG! (I got 48 MPG on the test drive, mostly in the city. Came in second. )

In short, what has all this technology gotten us? From where I stand, we have made major advancements in new ways to distribute porn, chat, make movies, and control prices/wages. Somehow I think technology should have more profound impact than this... Oh, yes, and I almost forgot... we are much better at destroying economies than before. Want proof? Stick around, my friend...

TheRedneck


[edit on 17-9-2008 by TheRedneck]

What we did prior to 1969 was totally awesome!

I think H. Ross Perot said it best, regarding NAFTA- namely the giant sucking sound of American jobs going south to Mexico. As he said, unless a country MANUFACTURES things, it looses control of the market.
In the last few decades, we stopped manufacturing things, and have been too concerned with financial manipulation as a national product. Of course, now we are in deep trouble, since that "product" is going down the tubes.
America used to pride itself in its Engineering, Workmanship and Innovation. Today corporations are only interested in producing products at the lowest cost.
Our society has become a "Throw-Away" society.
Ask yourself- What happens when your color TV breaks?
If you are like most people, if it isn't under warranty, you probably toss it away(legally, of course) and go to Walmart and buy another Korean or Chinese TV.
Your blender breaks, your toaster, your oven, your refrirgator-not under warranty- toss it and go buy a new one. Each time you do that, you also add to the US trade deficit, as those products probably all come from Asia.
Are the Chinese interested in making better TV's? Of course not, since you'll buy them at Walmart anyway, and in fact, the worse they are, the more you sell.
So, in a nutshell, we don't make the products anymore. The products are substandard, and we continue to feed this frenzy of insanity.

The energy "crisis" is an opportunity for us to reverse this process, by using good old fashion engineering and American know-how to produce clean, renewable energy that allows us to take back our economy.
Time is growing short, as more and more of America is owned by countries like China.
Wake up, America, it's five minutes to midnight.

reply to post by ProfEmeritus

Ask yourself- What happens when your color TV breaks?
If you are like most people, if it isn't under warranty, you probably toss it away(legally, of course) and go to Walmart and buy another Korean or Chinese TV.

Ah, but this attitude goes back beyond even NAFTA, Prof. I used to fix my own appliances whenever possible (and for a very short time fixed electronics for others). The newer appliances are nothing like the older ones. At some point in time, the concept of repairable products was thrown out of the window in favor of a bottom line.

In my old Realistic 200W receiver, repair was easy. Boards could be removed and contained test points. The layout was of such high quality that one had access to practically every component for removal and/or replacement. Now, if I take my children's stereos apart, I would bet good money that not only are the circuit boards melted into the case with plastic pins, making their removal almost impossible, but the boards themselves are so cluttered and poorly laid out that testing them would be a major undertaking. The difference in cost to manufacture the two different 'styles' is minimal. The real difference lies in the forethought that goes in before the manufacturing process. At one time, an engineer took pride in his work, and was willing to hold it up to public scrutiny. Today, far too many engineers take the easy way out and throw something together in cookbook fashion, with no forethought as to what happens if there is a problem.

And I really can't place all the blame on them. Their employers aren't concerned with quality either. The idea of spending 1/2 cent on a larger wattage resistor because it could overheat with regular usage is considered blasphemy. In the first place, they can pocket that 1/2 cent (times many thousands or millions of units produced), and in the second place they can sell more units if the old one does break. It's a win-win solution for the companies that produce the products, and a lose-lose situation for the workers who designed it and the people who buy it.

We have all fell into this trap of judging things on the basis of profit. And we have all fell into the further trap of judging life itself based on profit. I shake my head every time I hear of someone sued for wrongful death. They get a judgment for... money! Now I don't know how well those dollars fill the void in their lives, but green paper could never replace a loved one of mine. Ummm, yeah, I'm getting off topic here, sorry.

Cars as well have become basically throw-away. I can easily remember a time when all one needed was a good toolbox and some basic knowledge to do routine maintenance or even minor repairs. Today, we have cars so sophisticated that it is nigh-impossible to change a spark plug without either buying a special tool from the factory or literally lifting the engine out of the car. This is terrible news for those who buy the cars, but it profits the companies who make them, because the customers have to pay extra for service.

Now we are at the point where auto manufacturers have slit their own throats. Foreign countries have taken more pride in their education and expertise of their professionals than we have, and their products are now superior. Perhaps that is changing, but decades of poor quality products have left a bad taste in the mouths of consumers, who are now looking toward foreign companies for their cars. It will take yeas, perhaps decades, for the concept of 'made in America' to mean something again.

NAFTA was simply the icing on the cake. It exposed our own weaknesses by allowing superior products made with superior pride to enter the market with no discrimination. And it ignored the regulations we place on our manufacturers, regulations which foreign countries do not recognize. There is no minimum wage law in China. No one is concerned about the safety of their workers as OSHA is over here. Taxes are reversed; while we take and take from our infrastructure, they give and give to theirs. Now we have inferior products made with inferior pride being imported as well, actually, in preference to those which are well-made. And so we have become this throw-away society, always looking for the bauble and the bling from the latest gadget. What will we do when there is no more money to buy things with?

In the end, at the risk of sounding 'un-American', we have done this to ourselves. We have coasted, living off the legacy that was left us by our forefathers, and squandered that inheritance on selfish, lazy pursuits. Now, to quote the Rev. Wright out of context, "the chickens are coming home to roost".

I still love my country, don't misunderstand me on that. America is my home, and my pride. I simply wish we had more to be proud of, as we did in days gone by.

TheRedneck

Ah, but this attitude goes back beyond even NAFTA

Absolutely. I guess I wasn't too clear in my post. My mention of NAFTA was to introduce the problem with letting our manufacturing jobs leave our country. That certainly happened before NAFTA. I wanted to get Peror's comment into the discussion, because he said it when NAFTA was being debated.

Anyway, I think we're saying the same thing. Although like you, I'm not thrilled about the government getting involved and "lending a hand" to the promise of renewable, clean energy, we have to remember that the countries that have eaten our lunch recently all have governments that heavily subsidize their companies (e.g China and Japan).
It seems that all our government can subsidize is the greedy bankers and private lenders that have gotten us into this mess.

I am afraid that neither party is REALLY interested in alternative domestic energy, because other than TALK, they have done virtually nothing about it.
Both candidates give lip service to alternative energy, but neither has put forth a WORKABLE, REALISTIC, Time-Critical plan to get us to the point of self-reliance again. I hear things like 20% alternative energy by 2050.... At that rate, we'll all be using candles by 2050.
I hate to use a well-worn phrase that "Old timers" like me used to use often, but here goes..

If we could get to the moon........