[quote=svelte][quote=flu]
Well, that’s sort of what happens when one government starts bailing out private industry. Then pretty soon, you have other governmenets following suit, and we’re back to square one on protectionism and trade war.[/quote]
You seem to be saying Toyota/Mitsu/Nissan didn’t really need the loans, they are just doing it to protect Japanese interests.
I said if the U.S. gov didn’t decide to supplant GM/Ford/Chrysler with a sub-market termed loan that they probably wouldn’t be able to get with their existing failed business model and cost structure through convential means, I doubt the other auto makers would have approached their own governments for similar sub-market subsidized loans (maybe through conventional means, under more strict terms, under duress that requires the automakers to seriously cut cost and production).
There is no question almost every automaker “needs” a loan. But needing a loan and getting a loan are completely different things.
Of course, other automakers are approaching their own governments for bailout loans now. One of the biggest stinks every other automaker was raising was the first round of loans extended to GM/Ford/Chrysler was providing these three an unfair advantage that they probably wouldn’t be able to obtain through traditional means. (It would be completely ridiculous for the Fed to give loans to Toyota,Honda,Hyundai for obvious reasons). And since everyone is in the “government save me too” mood, why not?
Unfortunately, providing these sub-market loans, imho, allows delays these companies for making tough choices very early on. Because they can prolong the painful thing by just “hanging until the market turns around…Lets just keep producing cars even though the ports are filled with the previous year’s models”. Versus, “oh crap, the markets are oversupplied with cars, let’s just cancel the entire 2009 production and furlong the factory workers year until the inventory gets reduced. meanwhile we’ll spend the unused manufacturing dollars on the next gen cars”.
Anyway, the issue with loaning the big three any more money isn’t the loan itself. It’s a loan without plans to drastically change their product offerings AND labor costs. The big there were ALREADY ailing before this recession took a hit. And the plans the big GM/Chrysler posted doesn’t appear to be *that* much of a drastic change to make a difference (a few same uninspiring new car design, cutting labor cuts a little here and there, still paying retiree a lot of benefits,etc).
It sure doesn’t seem so. So leading more money down the same execution path is doomed to fail.
The interesting part is that if GM/Chrysler does file for BK and restructures, and significantly redos labor contracts and product offerings, it probably will survive just fine. However, Ford would then be at a disadvantage (still honoring existing contracts). I’m all for hoping GM/Chrysler/Ford builds more desirable/inspiring cars. But it won’t under the existing structures.
I think what you are soon about to see is the spiral downward in the auto industry across the board. It’s going to be a race to the botton.
Auto manufacturers are going to prolong the pain by not making the tough choices to drastically cut production by taking on these government subsidies. We’re going to have an even bigger glut of inventory, prices of autos are going to get hammered, making the auto industry take on even greater losses.
That’s why I don’t think there is any hurry in buying a car of the next couple of years. All this inventory is just going to pile up.
