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Ask YC:a better way to save American Auto

3 points by jdavid 18y ago

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? Just a bunch of Wednesday night thoughts.

nazgulnarsil 18y ago
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.
- run4yourlives 18y ago
  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.
  - kqr2 18y ago
    The car companies probably wouldn't close overnight. Like the airlines, they would go to bankruptcy court. This would most likely wipe out existing share owners, however, contracts could be renegotiated to try and resurrect it and raise new capital. A healthier company, such as Toyota could also step in and buy some of the assets.
    - run4yourlives 18y ago
      >This would most likely wipe out existing share owners Which is probably about 80% of all investors in the market, btw. It would also render insolvent all their existing pensioners retirement funds, as well as every loan that GMAC finances... Not something anyone would be thrilled to deal with.
  - corentin 18y ago
    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).
    - run4yourlives 18y ago
      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.
  - nazgulnarsil 18y ago
    those people's skills are currently mis-allocated to a company that doesn't give people what they want. the mistake socialists make is to treat the world as a zero sum game like the mercantilists did. As if those people couldn't be doing something that people want. Until everyone has everything they want there shouldn't be anyone wasting time doing something that people don't want.
  - callmeed 18y ago
    Millions might be a stretch ... the UAW has 640K active members according to their site. I'm sure there are tertiary jobs that would also be affected, but how many really? Auto parts and auto sales?
callmeed 18y ago
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 :)
- curiousgeorge 18y ago
  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 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.
alaskamiller 18y ago
How to save the American auto? Kill the unions. Done.
giardini 18y ago
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?
hapless 18y ago
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.

3 points by jdavid 18y ago

nazgulnarsil 18y ago

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.

run4yourlives 18y ago
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.
- kqr2 18y ago
  The car companies probably wouldn't close overnight. Like the airlines, they would go to bankruptcy court. This would most likely wipe out existing share owners, however, contracts could be renegotiated to try and resurrect it and raise new capital. A healthier company, such as Toyota could also step in and buy some of the assets.
  - run4yourlives 18y ago
    >This would most likely wipe out existing share owners Which is probably about 80% of all investors in the market, btw. It would also render insolvent all their existing pensioners retirement funds, as well as every loan that GMAC finances... Not something anyone would be thrilled to deal with.
- corentin 18y ago
  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).
  - run4yourlives 18y ago
    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.
- nazgulnarsil 18y ago
  those people's skills are currently mis-allocated to a company that doesn't give people what they want. the mistake socialists make is to treat the world as a zero sum game like the mercantilists did. As if those people couldn't be doing something that people want. Until everyone has everything they want there shouldn't be anyone wasting time doing something that people don't want.
- callmeed 18y ago
  Millions might be a stretch ... the UAW has 640K active members according to their site. I'm sure there are tertiary jobs that would also be affected, but how many really? Auto parts and auto sales?

callmeed 18y ago

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 :)

curiousgeorge 18y ago
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 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.

alaskamiller 18y ago

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

giardini 18y ago

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?

hapless 18y ago

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.