Why Detroit Is Not Too Big to Fail

Why Detroit Is Not Too Big to Fail

www.time.com

The surprise was that policymakers and bankers had the guts to allow Daewoo to collapse. Daewoo was an icon of Korea's astounding economic miracle

In a pathetic attempt to avoid losses, Japanese banks kept pumping fresh funds into debt-ridden, unprofitable firms to keep them afloat. These companies came to be known as zombie firms — they appeared to be living but were actually dead, too burdened by debt to do much more than live off further handouts.

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This is the best rational as to why the Big Three shouldn't get the Bail Out that has just been confirmed . Indeed there is no reason not to think that the Bail Outs as a whole not just the automotive hand out are both going to make economic conditions worse as well as being a waste of tax payer dollars .

Indeed the list of Zombies that is being created is going to be on the bloated list . The sooner the likes of the Big Three fail the sooner a global economic can recover . At this rate the global economy is going to have its own lost decade .

www.time.com
(visit the link for the full news article)

reply to post by xpert11


In any normal sane market I would tend to agree with you. But the auto industry is not just the big two who got a cash bailout but all the suppliers and their employees and shippers and dealers that equals a lot more than a few thousand employess with the big Two who got bailout cash.

I'm not much on Fords but I must say this they must be doing something right. Kudos for them.



Also we did have an example of a bailout working it was chrysler but between the turnaround in the 80's and this latest debuckle so much for that example.

good post thanks

I can promise one thing-
Detroit would fail, but it'll drag the rest of the country with it.

1). We are largely a consuming country, and these two businesses are two of the largest manufacturers in these times.
2). Chrysler and GM wanted loans, not handout or bailout, but loan.
3). Ford already took out loan for recessionary fund in 2006.
4). Banks were handed $ to supposedly save economic meltdown, but auto co. are entangled with job market, and if they went down, it would send a tidal wave through country, as most all jobs are indirectly affected by big three. From sales to transporting goods, I can imagine one million plus out of work to jumping overnight to thirty million.
5). All workers for both companies will be laid off for better than a month at the start of the new year (my father works for GM and it's no secret).
6). Most are hoping immedaite changes will be made shortly upon Obama taking office; big Positive changes are needed, and we all hope they're coming.
7). Though I have no confidence in our govt., no one wanted to give this loan, actually despised doing it, but had to regardless. Just imagine the snowball which would've occurred otherwise.

Ford Motor Co. to seek $18 billion in financing

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NEW YORK (MarketWatch) - Ford Motor Co. (F:Ford Motor Company
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4:02pm 12/19/2008

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F 2.95, +0.11, +3.9%) said Monday it would borrow about $18 billion by the end of 2006 to address its short-term and medium-term needs, fund its restructuring at $18 billion.

JPM 30.32, +0.11, +0.4%) would arrange for a new five-year, $8 billion revolving credit facility; a senior secured term loan of about $7 billion; and $3 billion in transactions that could include unsecured notes that would be convertible into Ford common stock. Ford said it expects to have $38 billion in liquidity at year end 2006.

What would have happened to U.S. if these companies were allowed go down, on a large scale? Think massive.

Time Magazine says we should allow the automakers to fail; The Economist says bail them out. Different economists have diametrically opposed ideas as to what will work.

IMO if it was just the big three that were in trouble, I'd agree--let them fall. But they're just a part of a whole economy that has gone down the tubes. We're in huge recession, worse than any since the Great Depression of the 1930's--some are even calling it a depression.

In the 1930's Roosevelt's "New Deal" pumped huge amounts of money into the economy, and though it took a few years, it worked. Bush, Paulson, and Obama are all advocating taking that route this time.

If the banks, insurance companies, etc.--the "fat cats" on Wall Street--are deserving of a bailout so are those industries which are the backbone of Main Street.

reply to post by orderedchaos


Good post I feel that I need to reply to some of your points .

The US economy has failed to adapt to globalization due to the fact that to few people have clued on that in today world it is no longer possible to sustain an economy on domestic consumption if it ever was . The fact that it is a loan mean very little in the context of things if you think things thou .

What happens if the Big Three need to lay off workers in order to become profitable ?
The bail out is being given on the basis that to many jobs would be lost if the company's in question went under . Change and responsible management can only come from a complete fresh start if there is to be one .


A lot of jobs are tied to the housing market as well but the government shouldn't bail out construction firms or property developers. Well if unemployment soared then it might force sound policy's from the US governments . The best thing the US government could do if there is a relaunch of the US auto sector is to press for access to markets in places like India and China .

What a fantastic system we have for the Rich, Privatize the wealth so the greedy elite can eat caviar and then when things go bad Socialize the debt and let the middle class pay it off.

[edit on 19-12-2008 by mazzroth]