Caught this on US car makers this morning:
General Motors and Chrysler, for example, owe their suppliers a total of roughly $10 billion for parts that have been delivered. G.M. has held off paying them for weeks, and Chrysler is paying in small increments. But the cash shortages at G.M. and Chrysler are getting more severe, according to their top executives and other officials.
Consider the ballooning effects this and what would surely be the wholesale failure of the dealership industry which would follow, and the idea of bailing out GM seems less frivolous. There are circumstances where our economy could absorb the job loss, and the revenue hole the Big 3 would leave behind at their failure. But those circumstances don’t exist right now.
Dick Cheney is telling the senate it’s Herbert Hoover Time.
UPDATE (1:40pm): Looks like GM will be temporarily closing 20 factories in the first quarter of 2009.
- Jason
What revenue hole would the Big Three (or their absence) leave in the economy? They’ve been losing money hand over fist for years. I’m not saying that there would be no repercussions, or even that they would be minimal – just that we need to look at what we’re really saying. They have been dragging on the economy for a long time, but we can’t afford to lose them? It seems to me that we need their assets (obviously not cash) freed for more profitable ventures.
Tough situation.
I am of a conservative bent, but pure capitalist ideologues have no answer for societal breakdown. There was an awesome editorial in the SL Tribune that explained this difference (sorry for not posting the link). That is, that if a “correction” is severe enough, it can cause society to break down. So, I disagree with the “market correcting this problem” mentality.
But I also hate nationalization of industries, and the rewarding of corporations who are horrendously inefficient and allow themselves to bow at the alter of efficiency crippling unions.
During the senate discussion it was brought up that GM and Toyota produce and sale essentially the same number of cars, GM loses 38 Billion, Toyota + 17 Billion. That is the real problem. Does the bailout solve that? Heck no. Thank goodness for the senate republicans pressuring the unions to get in line with the competitors who are kicking their butts. So, I definitely disagree with the hard core capitalists, but at the same time I recognize that rewarding corruption, and inefficiency is wrong in principle.
The immediate effects of inaction will be severe, but the gap left by GM will soon be filled by more efficient companies, so the net job loss would be less than the doomsday estimates.
So do you give a Hobo a $20 who is surrounded by empty bottles and begging in front of the liquor store? We will see.