

How the US government bailed out the railroads…and made a profit - sethg
http://www.washingtonmonthly.com/features/2009/0903.longman.html

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dtap
_And while railroads had begun to lose their luster, they were still carrying
more tonnage than ever before in their history_

The railroads had business at their door but were unable to run an efficient
operation. By contrast, the auto industry has seen demand drop from 15M
cars/year to under 10.

Also, the railroads were tied down to losing operations by government
regulation. The auto industry doesn't have this problem yet, but mandatory
CAFE regulations could have a similar effect.

The government can help auto industries by lending them money as a debtor in
possession for a bankruptcy. If GM entered bankruptcy without government
backing, no one would lend them money to restructure further and they would be
forced to liquidate.

I am from Detroit and have seen how the UAW and the Big Three single-handedly
created the middle class. But having worked in the Rouge Plant for a summer, I
agree that people don't deserve to be middle-class for unskilled labor. The
only way to break this view may be a bankruptcy.

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josefresco
Even when demand was high, GM was unable to run a profitable business. Same
can be said for Chrysler and to a much lesser extent Ford.

The economy tanking was more or less the straw that broke GM's back
completely.

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jibiki
Counterpoint:

<http://news.ycombinator.com/item?id=373740>

I think there is a lot to be said for both sides. The one thing we don't want
is a situation where we keep giving money to management that is unable or
unwilling to become profitable. Nationalization and bankruptcy are both proven
options, but the sort of bailout currently in mode is not.

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weegee
great article, made some very good points about the efficiencies of railroads
vs. trucks.

