

Ask YC:a better way to save American Auto - jdavid

I am wondering if there is a better way to save the American auto industry, what if their bailout was based on them meeting some fuel efficiency measurement, say 50mpg, or maybe even 100mpg?  The bailout might be amortized over a period of time based on performance expectations.  Maybe there is even a bonus for companies that have the highest fuel efficiency in their class?<p>Just a bunch of Wednesday night thoughts.
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callmeed
Standards for the bailout are a nice idea, but hitting those measurements
doesn't mean people will buy the vehicles.

Perhaps it would be better to give tax credits to consumers who buy American-
made vehicles.

I maybe way off because I haven't done enough research, but I've always
thought that the unions have indirectly caused much of Detroit's woes by not
adapting with the expanding global marketplace. The Asian companies make their
cars faster and cheaper than the US–even in their US-based factories. To me,
that's clearly an efficiency/productivity issue.

I read that in '06 GM lost $1,400 per vehicle and Ford lost $5,000 per
vehicle. Also, benefits being paid to retired US auto workers add $1,500 to
the cost of every vechicle. I'm all for retirement benefits, but c'mon ...
these US companies are basically paying for the salaries of all their
workers–plus the salaries of all their _former_ workers.

When you're selling cars and your profit margin is -10%, a bailout is not the
right fix, IMO.

Full disclosure: I drive a '97 Bronco :)

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curiousgeorge
I'm tired of the blame the unions meme. Honestly. If the cost of labor is too
high invest in robots. The Japanese do it. Or stop building things at a loss,
call it quits and go home.

I know everyone loves Ron Paul on the Internets, but one cannot seriously
argue in favor of market solutions to problems and somehow believe labor
agreements reflected anything but a supply/demand equilibrium price between
capital and labor when made. Collective bargaining secured lower labor costs
up front in return for imposing obligations on companies to invest a certain
amount of funds to cover worker benefits in the future.

And yes... many companies have gutted their pension funds, or entered
bankruptcy to foist their obligations onto the government. And others have
deliberately underfunded plans to increase short-term profits and management
payouts..

The anti-union bias in these comments is a right-wing talking point, and not a
very good one unless people really believe that debt obligations on capital
are somehow more sancrosanct than similar obligations made to labor. And
frankly, when the senior management at General Motors starts spouting right-
wing talking points I consider that prima facie evidence that the company is
managed by a bunch of idiots:

<http://www.reuters.com/article/latestCrisis/idUSN22372976>

There is a cost to having major sectors of your economy run by a bunch of
idiots. This is it. If there's a lesson relevant to this forum, it's to ask
for your cash up front, and start your own business so your pension isn't in
the hand of someone with short-term managerial incentives and the ability to
screw you.

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callmeed
Honestly, I wasn't aware that there was a right-wing, "blame the unions" meme.

Large corporations down to individuals file bankruptcy to shield themselves
from debt obligations all the time ... so, if anything, labor is more
sacrosanct.

There's a reason car companies who want to sell to the US put their plants in
Canada, Mexico, and Alabama (in the case of Hyundai) ... and it's not the
weather.

Again, I don't claim to be an expert on this, but you haven't done much to
convince me that poor management is entirely to blame.

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nazgulnarsil
the most efficient thing to do is allow the free market to determine which
companies live and die. auto companies make money by giving people what they
want. those that don't give people what they want should not be propped up
with taxpayer money.

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run4yourlives
All fine and well until you start dealing with the collapse of an industry
that employs/supports literally _millions_ of people.

Millions of people out of work with no money becomes your problem, and mine.
This is the only reason that the big three are getting any money at all.

It stinks, but it's certainly better than the chaos that would ensue if GM
didn't exist tomorrow.

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corentin
And don't you think that the millions of dollars of taxpayer money given by
the government to a failed industry destroy jobs as well?

Look, if I take 10 dollars from you and give them to the shit sandwich maker,
whose business is failing, that's 10 dollars you can't give to his competitor,
a gourmet bread maker that could be thriving if only the government didn't
redirect his potential income to his failed competitor. Moreover, this gourmet
bread maker could actually be the same person as the shit sandwich maker,
provided you stop supporting his failed business and force him to create
something people really want.

If you want to have social policies, at least try to have sensible ones:
protect individuals themselves (not their jobs).

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run4yourlives
I'm not a huge fan of propping up businesses, but your analogy is flawed on so
many levels.

First, you're assuming that the market for shit bread is the same as the
market for gourmet bread. That's ludicrous. All you've done is drive up the
price of bread for everyone.

The other issue is the fact that the gourmet bread maker may actually only be
in existence _because_ shit bread is the commodity. People who buy luxury
brands do so specifically because they are _not_ the most popular option.

So know you've popularized the luxury item, but it's even more expensive than
the shit bread that it replaced.

As I said, the auto industry is certainly not the easiest to defend. To be
honest, I think this is a perfect chance for the government to force them to
think in ways that actually improve their business models. Of course, that's
hard work and nobody wants to do that.

Allowing the invisible hand to sort things out has the slight problem of
absolutely crushing economies in the bad times as much as it let's them thrive
in the good times.

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giardini
Shouldn't we ask first if it is necessary and wise to "save" the American auto
industry? Isn't the decline of the American auto industry the creative
destruction of economics at work?

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hapless
The american auto industry doesn't need saving. Honda, Toyota, Ford are all
likely to survive.

The world will go on after GM and Chrysler fold.

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alaskamiller
How to save the American auto? Kill the unions. Done.

