
What’s Another $14 Billion Anyway? - IsaacSchlueter
http://mattmaroon.com/?p=626
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ojbyrne
I think the amount of oversight, controversy, and political grandstanding over
giving $14 billion to companies that actually make things is just insane
giving the $700+ billion given, without any strings attached, to companies
that move numbers around on spreadsheets.

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mattmaroon
I don't think that's logical. I mean, I agree that there should maybe have
been far more strings attached to the $700 billion, but that doesn't mean
there should have been less oversight of this one. (There's actually pitifully
little.)

~~~
snprbob86
But who oversees the overseers? The American people have proven they can't
pick a smart loan, much less manage $700B.

I'm opposed to both of the bailouts, with or without oversight.

~~~
mattmaroon
The Fed should oversee the loans, and Congress them, just as with anything
else. I don't consider myself informed enough to have a strong opinion about
the $700 billion one. I don't have any moral objections.

~~~
palish
_I don't have any moral objections [to the $700b bailout]._

So you're fine with the government taking your money (i.e. your property) and
giving it to someone outside of the government for no reason other than
"they're a big company"?

I'm totally open-minded on this issue, so I'd love to hear a well-reasoned
argument as to why it made sense for the government to have done that. As it
stands, I feel that it is quite immortal to redistribute property unjustly.

 _I don't consider myself informed enough to have a strong opinion about the
$700 billion one._

They're playing poker with your chips. Isn't it worthwhile to understand their
tactics (or lack of tactics)?

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mattmaroon
Well, the idea of the $700b worth of loans (which is not the same as $700b of
giveaway, much of it will be recouped) is to prevent a depression, which would
cost far more than the loans. We're in a situation where either way, the
taxpayers lose. If those $700b of loans prevent us from losing $7 trillion,
then it's worth it. They're not giving out the loans just because the
companies asking for them are large. They're doing it to jumpstart the lending
the entire economy depends on.

Is that a good idea? I really can't say for sure. The theory sounds good, but
for all I know its misguided.

It's not worthwhile for me to try to determine that for myself. I don't have
years to devote to the study of economics, which would be necessary for me to
have an informed opinion on whether or not the loans will prevent far more
than they cost. We can't all be economists, and anyone who isn't can't have an
informed opinion. And even if I did have that kind of time, by the time I got
that far it would be too late. And even then, the most informed opinions are
still far from infallible. They're significantly more likely to be correct
than the one I have now for sure, and they're the best we can do, but I'm not
sure how much my one extra vote would matter.

That's the thing with government and capitalism, it's all about division of
labor. I can't be informed about everything. I just try to vote for people who
will get advice from people who are, which is why I base my votes more on a
candidate's intelligence and epistemology than their stances and specialized
issues such as economics..

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mhb
<http://buffalobeast.com/133/bigthree.jpg>

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abstractbill
_They’re losing because every car costs $2,000 more to build due to higher
wages and health care. That’s it. End of story._

I'd never buy an American car, and it has _nothing_ to do with the price.
They're ugly, and crap. End of story.

~~~
mattmaroon
That has everything to do with the price. They're ugly and crap because of the
extra cost.

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wensing
I don't understand. You're saying that GM could build cars of similar quality
to Toyota or Honda if they were only able to charge $2,000 more?

I defy any one of the big three to release a minivan comparable to the Toyota
Sienna for anywhere near the same price (+$2k is fine).

And why does inexpensive have to mean low quality? From what little I know,
the Japanese manufacturing mindset (read: The Toyota Way) is that high quality
equals lower cost over the long haul.

~~~
mattmaroon
I'm saying that if Toyota had to pay $2k extra to manufacture every one of
their cars, they would either cost $2k more (thus significantly reducing their
market share and volume, and therefore reducing profits, increasing relative
proportion of fixed expenses, etc.) or would be significantly inferior to what
they are now due to having cheaper suspensions, doorknobs, etc.

You're talking 10-20% of the manufacturing cost of the car in an industry that
has spent 100 years reducing costs in every conceivable way. There isn't that
sort of slack laying around. The only way to recoup that cost is to use
significantly inferior parts.

My next blog post will address that a bit. It's already written, just hasn't
published yet.

~~~
mattmcknight
Agreed- they should cancel the union contracts and fire all the managers that
signed them now. GM has 96000 workers paying the inflated health care costs of
over 1M people. That just doesn't provide any competitive possibilities.

Still, it's far deeper than wages and costs.

What about the costs to the company for the warranty repairs? The big 3 were
offering some very long term warranties for a while. If the sort of quality
you are talking about is durability, that could end up increasing costs.

The big 3 approach to reducing costs has been inferior to the Toyota approach.
The restrictive UAW work rules limit the flexibility of the work force and
devalue overall productivity. They should compare the throughput and excess
inventory of the manufacturers. You will see that GM makes too much too
slowly, and thus can't respond to demand in a pull based manner as well as
Toyota.

The money should go to startup car companies. BYD is valued at 2.5B and they
have a huge cell phone battery business. For 15B we could easily start 10 car
companies. Invest in the real future.

~~~
mattmaroon
Oh I would never suggest that the wages are the only Union-induced problems.
There's a whole laundry list of them. It's just the easiest one to tackle.

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jamiequint
"They’re losing because every car costs $2,000 more to build due to higher
wages and health care. That’s it. End of story."

If this is really the case than the US government should have agreed to some
sort of specific bailout for the health care and benefits wages which are
really dragging these companies down. If Toyota can work with US labor (well
kind of, see source below) than there is no reason that the big three should
not be able to.

Interesting side story. Toyota is worried because "Labor costs as a percentage
of sales are growing faster than Toyota's profit margin" and there is now talk
of unionizing to sustain labor wages. One of their own senior employees is
quoted as saying, "I'm more than willing to work with that company to keep my
job. But when they just take it because they want more, I don't agree with it
at all." (<http://www.freep.com/apps/pbcs.dll/article?AID=2008112120001>)

If Toyota gets caught up in this UAW mess too, I'm not sure how any company
will produce in the US. Is there any foreseeable way jobs can stay here if the
unions won't let the companies operate profitably?

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chaostheory
whatever the auto makers do it's nothing compared to the f-ups of the bankers.
even their loan is miniscule compared to the 2 trillion dollar loan we've
already given the banking industry; not to mention the 5 trillion in free
money and the complete lack of oversight and transparency for the bankers.

More attention should be re-diverted back to the banks...

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iamdave
Okay.

What does Matt Maroon do for a living?

~~~
rokhayakebe
Writing articles that seem to be well thought through. Although I, sometimes,
find myself opposing his views, I have to say that they are always
interesting. "If two people think the same , one of them is not needed". So we
do need writers who bring a different point of view. I think that is what he
does with his writings.

~~~
mattmaroon
Sometimes I think I should do that for a living. But then I worry that that
may take the fun out of it.

~~~
fallentimes
At least the other things you do for a living are pretty fun.

~~~
mattmaroon
Yeah, they've been a lot of fun lately. And even when they weren't, it was my
fault for doing them wrong, so I can't complain there.

