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Author Topic: Do we bail out the auto industry?  (Read 13826 times)

StevenTing

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Do we bail out the auto industry?
« on: November 12, 2008, 11:47:18 am »
http://www.iht.com/articles/2008/11/12/america/12cong.php

Quote
Democratic Congressional leaders said Tuesday that they were ready to push emergency legislation to aid the imperiled auto industry when lawmakers return to Washington next week, setting the stage for one last showdown with President George W. Bush.

"Next week, during the lame-duck session of Congress, we are determined to pass legislation that will save the jobs of millions of workers whose livelihoods are on the line," the majority leader, Harry Reid of Nevada, said in a statement.

Complete article is found at the link above.

I have mixed feelings about this.  Personally, my father has some GM bonds and they are in the crapper.  Right now they were about 35% of Par last I looked.  So that means, if you bought a $1000 bond, you could sell them on the open market for $350.  Of course, my father has more than $1000 invested in GM Bonds.  The stock trades like the company is going to go bankrupt and it is a possibility.

But, how did GM and the others get in this mess?   I believe part of it is from the Unions and part of it is from Government Environmental regulations.  That, and possibly bad management. 

So, if a bailout happens, it benefits my father and those working for GM.  But, is this a worthwhile industry to bailout?  It would affect millions of people and would have a trickle down effect if the bailout did not happen.  There's all of the employees, the suppliers, the commodities, etc.

I think I would agree to a bailout if the automaker were able to heavily renegotiate with the Unions as well.  It's not completely the Unions fault, but a large part of it lies with them.  Even Toyota Motors is suffering and I don't think they have a union.

If you happen to work for an automaker, I'd like to know your thoughts.  If you happen to work for a dealership, how do you think this will affect you?
Utah

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    Re: Do we bail out the auto industry?
    « Reply #1 on: November 12, 2008, 11:59:00 am »
    I was thinking this through myself...
    And I have to say no.
    We let them fail

    After they crash and burn, they can restart and do so without the leash of the Unions.  The Unions are one of the biggest reasons the auto industry is in such bad shape even before the credit crisis which is keeping people from buying a new vehicle.   On top of that, we need massive deregulation.   

    I think the American auto industry needs a rebirth from its own ashes.     
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    Re: Do we bail out the auto industry?
    « Reply #2 on: November 12, 2008, 12:17:54 pm »
    I don't work in any part of the industry, but as a taxpayer and a capitalist, I say no.
    First off, I am a firm believer in laisse faire economics. If a business doesn't have a product that will sell well enough to keep its head above water, or they run their business in such a way that they go under, thats business. My personal opinion on unions is that they had their place many years ago, but now, after regulations on workplace standards and wages, they are little more than money grubbers. They're not fighting for safe work environments or living wages anymore, they're demanding higher pay and benefits and they don't seem to care if those demands will bankrupt the business.

    The same arguments go for any government bailouts or subsidies. When the gummint is concerned, stay out of it. I've noticed a trend that each time the government announces another bailout, the market tanks by a few hundred points for the day. Its not helping. Let the economy fix itself. When a company fails, there are always others that will step in and take up its share of the market and prosper. If GM, Ford, or Chrysler go under, it will mean the others will take over their business.

    I feel for the folks with pensions and stocks in the Big 3, but its not the government's job to insure their retirements. Cold, but true IMHO.
    TexasOutbreak

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    Re: Do we bail out the auto industry?
    « Reply #3 on: November 12, 2008, 12:40:21 pm »
    I'm thinking maybe we can have a car with a simpler control computer in it... leave out the sat nav and coms systems... leave out the trick active suspension controls that read your mind and tighten or loosen the spring rates as it goes... and just make a Simple vehicle again.  Cars and trucks are turning into Starships.   We don't need Starships...  We might want Starships... but why not build the rig as a simple unit and have the Starship features as upgrade options.  Remember those?  Option Packages? 
    Last rig I looked at - everything in it was STANDARD and really the only options were - and I kid you not, an engine upgrade, and upgrade in tire size, and bling wheels.  Everything else was "Standard".
    I remember a certain truck I had in VA.  It was a Ford pickup truck.  Simple... white... a Fleet truck.  It was the same as all the other trucks, but this one had to be ordered as a separate deal from their Fleet services.  It was very simple... the Radio was an AM/FM only and it had power nothing.  Bone Stock.   And it was cheap as all get out.  The regular truck was almost 10 grand more.  And it was a good truck!   Solid.  Powerful.  It could move.   Of course we threw in all our add on, gun rack, shotgun rack, emergency lighting, radios, push bar, etc...   I think the truck was only like 12 grand.   
    If all the vehicles they sold had these base platforms - they would sell more cars and trucks.  Sure, there is more profit in selling Starships, but still.
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    Re: Do we bail out the auto industry?
    « Reply #4 on: November 12, 2008, 12:51:05 pm »
    Sure, there is more profit in selling Starships, but still.

    Apparently not. They were making money back when they sold the engine and four wheels with no frills. Now they're selling starships and they're hemorrhaging money. There may be more revenue in selling starships, but not profit.
    TexasOutbreak

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    Re: Do we bail out the auto industry?
    « Reply #5 on: November 12, 2008, 12:57:12 pm »
    No.

    I believe in a capitalist society, if they can't make money I don't see why we should give them money to keep not making money. I think they aren't making money for a number of reasons, a number of which the government could help with.

    Complying with enviromental regulations is an expensive pain. Reduce those.
    Importers of cars have a tax advantage over US manufacturers. Eliminate those.

    Most of the rest is up to GM, Ford and Chrysler. They need some ingenuity. I was just reading the other day about gps units in cars. For the most part, only high end cars have them stock, and it is an expensive option on the rest. Why? The GPS chip can seriously cost under $10, and LCD screens are dirt cheap. Car manufacturers should be able to get them in bulk for $30 easy. An extra $40 is trivial in the cost of a car.
    I think if car companies would smarten up a bit and think of those things I bet they could boost sales by quite a bit.

    I also think the executives of most big companies are paid too much, sapping money away from where it could be used better.

    This is why I think they need to learn their lesson. If they fail, they fail and hopefully someone with a better idea will take its place. The government doesn't need to keep them floating, preventing real ingenuity.
    If I saw a guy with a 60cu/ft safe filled to the brim with nothing but Jennings, Lorcins and Hi-Points, I'd look at the guy and say "Right on brother".
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    Re: Do we bail out the auto industry?
    « Reply #6 on: November 12, 2008, 01:19:50 pm »
    Look at the banking industry.  We starting giving bailout money - now everyone is putting their hand out for some... and they are not doign anything productive with it.
    Look at AIG - they've taken a second big off site trip for the execs blowing huge dollars.

    I think if anyone gets any government money - they need to be firing almost all of their executives.   If you can't run a company right - you don't get to run a company.
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    Thernlund

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    Re: Do we bail out the auto industry?
    « Reply #7 on: November 12, 2008, 01:24:35 pm »
    This will be the next bubble.  We saw the Internet bubble, then the housing bubble.  Next, when all the automakers burn, we'll see loads of new up-and-comers in the auto industry making "green" cars, better cars, more diverse cars.

    Trying to gauge the next "bubble"?  The auto industry is it I think.  

    As to the OP, no.  Let it burn.  I said the same thing about the $700B for Wallstreet.  Although, all those middle-class folks losing their jobs can't be good at all.  :(

    How about bailing out the people that become unemployed rather than keeping a dying company afloat?


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    Re: Do we bail out the auto industry?
    « Reply #8 on: November 12, 2008, 01:27:51 pm »
    One argument I've heard put forward is that the three U.S. automakers serve as a strategic asset--a large base of engineering and manufacturing capability onshore.  Would we have been able to build the ships, planes, tanks and other assets necessary to win WW2 without a strong manufacturing base?  I doubt it.  Have times changed, though?  Certainly.  

    I have mixed feelings about bailing out these firms.  As a proponent of the capitalistic system, I say we let them fail, but new firms need to rise from the ashes.  How do we deal with maintaining a manufacturing base if the new firms can't turn a profit either?  It's a tough question, but throwing my money (taxpayer money) at the existing firms to throw away the same way they've squandered their own resources isn't the answer.

    Another issue is the number of people employed by those companies, and their suppliers and dealers.  Bailing them out periodically may actually be cheaper to taxpayers than letting them fail.  By this I mean that with such a high concentration of the workers and suppliers in the Detroit area, if they all were to shut their doors the unemployment rate would skyrocket, with the associated costs to taxpayers (unemployment and welfare costs and social impacts of massive unemployment).

    Thoughts?
    Texas

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    Re: Do we bail out the auto industry?
    « Reply #9 on: November 12, 2008, 01:31:09 pm »
    That's a good point... but how much better could they be if they are bottom to top restructured?   
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    Re: Do we bail out the auto industry?
    « Reply #10 on: November 12, 2008, 01:54:27 pm »
    I say no, they need to fix their problems, build cars they will sell and curb the unions.  these workers are some of the highest paid and lowest producing in the world.
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    Re: Do we bail out the auto industry?
    « Reply #11 on: November 12, 2008, 02:17:04 pm »
    If they made cars that were more affordable, less complicated, lighter and more efficient... and made them cool enough people actually wanted them and could afford them, then they would be selling them.   Thats also one of the reasons they are in this mess now.  They are blaming the credit crisis, but that's only a part of the problem.  There are really so few new vehicles out there that people actually want bad enough to finance.
    I don' think I want ANYTHING out now bad enough that I would want to pick up a note for.    The CTS comes closes... if it were half the price I'd actually consider it.  The one I looked at was what, 36 Grand.  36!  They are up in the night on that.  No freaking way I'm going to spend that much money on that.  If it was 20 grand... Id consider it.  18 Grand, they might have me putting a note down for one.   
    But I don't think I could ever drop a note on a brand new car.  A car that has already been hit with the Off the Dealer Lot Depreciation - yes.  But I just can't take the 20% loss of value just for taking it off the lot.    No way.   
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    Re: Do we bail out the auto industry?
    « Reply #12 on: November 12, 2008, 02:57:59 pm »
    No.

    I believe in a capitalist society, if they can't make money I don't see why we should give them money to keep not making money. I think they aren't making money for a number of reasons, a number of which the government could help with.

    Complying with enviromental regulations is an expensive pain. Reduce those.
    Importers of cars have a tax advantage over US manufacturers. Eliminate those.

    Most of the rest is up to GM, Ford and Chrysler. They need some ingenuity. I was just reading the other day about gps units in cars. For the most part, only high end cars have them stock, and it is an expensive option on the rest. Why? The GPS chip can seriously cost under $10, and LCD screens are dirt cheap. Car manufacturers should be able to get them in bulk for $30 easy. An extra $40 is trivial in the cost of a car.
    I think if car companies would smarten up a bit and think of those things I bet they could boost sales by quite a bit.

    I also think the executives of most big companies are paid too much, sapping money away from where it could be used better.

    This is why I think they need to learn their lesson. If they fail, they fail and hopefully someone with a better idea will take its place. The government doesn't need to keep them floating, preventing real ingenuity.

    The navigation system is one area where they inflate the prices by a huge margin. The average installed nav system in a new car is a $3000 option, usually packaged with a sunroof or something. My Garmin Nuvi does all the same stuff, I can update it online and walk with it as well as drive, and it was about $300 (don't know the real number, it was a gift). 10% of the cost for double the utility. I'm sure there are other things that they blow up the price on for no good reason.
    TexasOutbreak

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    Re: Do we bail out the auto industry?
    « Reply #13 on: November 12, 2008, 03:33:58 pm »
    Heck no!

    The main reason they are going under is they built such junk for so many years, and lost so much of the market to Japanese cars, they can't stay in buisness. Too darn bad. Especially GM, they made a life ling enemy out of me in 1988 with a brand new Chevy that turned to crap in 7 months. Now I'm a very loyal Honda driver.

    The free enterprise system rewards good value products at a fair price. If you make junk, and can't compete with the guys who do make a good product, down you go.

    Let 'em crash! It will be a good leason to those who come later, like maybe when they emerge from the ashes, and get rid of the unions and make a decent car, and not pay top execs upteen millions of dollars a year.

    ridata

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    Re: Do we bail out the auto industry?
    « Reply #14 on: November 12, 2008, 04:00:04 pm »
    Hey George, I found a car for you. Right in your price range.  ;D http://tinyurl.com/cadillacebay

    I propose the government does a sot of bail out. They appoint me as CEO of the big three. The companies pay me a measly $500,000/year(isn't that just about what the union workers get?). I will completely restructure the companies, fire half the executives and union workers, no matter their contract. After all, I'm appointed by the government to do this.

    Under my leadership these companies will take a step 20 years back, and that's a good thing. The plastic is replaced with metal, the quality overall goes up and the price comes down with all this money shaved off labor and top exec's salary. We will take advantage of this oil price low selling cars that can actually accelerate, and can move things. The Hummer H3 and H2 lines will be eliminated and the H1 lines resumed(only because I love it). Most ugly cars will be gone.  :neener

    And then profitability will return, and I get a 25% stake in the company.
    Boy, the government needs some lessons in bailouts. ;)
    If I saw a guy with a 60cu/ft safe filled to the brim with nothing but Jennings, Lorcins and Hi-Points, I'd look at the guy and say "Right on brother".
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    Re: Do we bail out the auto industry?
    « Reply #15 on: November 12, 2008, 04:16:59 pm »
    We should not have bailed out the banking industry.

    We should not bail out AIG again...and again...and again...

    We should not be rescuing homeowners who are stupidly upside down on their mortgages.

    We should not bail out the Auto companies.

    Capitalism without risk of collapse and failure is called SOCIALISM.  You cannot socialize the risk while you capitalize the profits - which exactly what this Democrat Congress aided and abetted by the worse natures of the Bush Administration is doing - and excatly what the next Administration demands we need to do even more. 

    If you wanted to spend your money buying GM bonds and they go t___ up - too bad.  If you wanted to spend that money buying over priced houses hoping to flip them - too bad.  If you wanted to stick the money in your mattress while stocks soar 100% - too bad.

    I am well and truly sick of this belief that government exists to save people from their bad decisions.  We provide Defense - but we only promote Happiness.

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    Re: Do we bail out the auto industry?
    « Reply #16 on: November 12, 2008, 04:17:25 pm »
    I am with the NO and Heck NO crowd.

    Three things that I believe are hurting US automakers: health insurance, unions, and management.

    In a past career I worked closely with some of the automakers.  There were many things that needed to be improved with the American automakers.  The Japanese run a much tighter ship and build better products.  Sad but true.  The industry definitely needs change.

    There are many good autoworkers out there busting their butt on a daily basis but unfortunately the union protects the lazy ones.

    We own one vehicle that is made in USA and it is a Toyota.
    1-Dodge truck -Made in Mexico
    1-VW Jetta -Made in Mexico
    1-Toyota Sienna -Kentucky, USA


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    Re: Do we bail out the auto industry?
    « Reply #17 on: November 12, 2008, 05:25:29 pm »
    Quote
    Hey George, I found a car for you. Right in your price range.  Grin http://tinyurl.com/cadillacebay

    Dude, don't show me that after I just got a truck...
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    Re: Do we bail out the auto industry?
    « Reply #18 on: November 12, 2008, 05:36:49 pm »
    Dude, don't show me that after I just got a truck...

    Just keep reminding yourself about the things you want to haul (dogs, dead animals, etc.) and where you want to haul them (places with bad roads or no roads).

    Don't remind yourself too much though, or you'll develop an itch for a bushplane.
    Arizona

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    Re: Do we bail out the auto industry?
    « Reply #19 on: November 13, 2008, 08:18:33 pm »
    If we had universal health care like they do in Germany that would take a huge load off of GM, Ford, and Chrysler. It might make them competitive again.

    Yes, yes, I know. Universal health care is socialism which is really communism which is really Stalinism. So when I advocate universal health care, I am really advocating marching people off to the Gulags and closing the churches. Strange that this does not happen in Germany. Their places of worship are all open and they don't have any Gulags.

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    Re: Do we bail out the auto industry?
    « Reply #20 on: November 13, 2008, 08:35:18 pm »
    If we had universal health care like they do in Germany that would take a huge load off of GM, Ford, and Chrysler. It might make them competitive again.

    Yes, yes, I know. Universal health care is socialism which is really communism which is really Stalinism. So when I advocate universal health care, I am really advocating marching people off to the Gulags and closing the churches. Strange that this does not happen in Germany. Their places of worship are all open and they don't have any Gulags.

    Give an inch, and they don't take a mile.  They take another inch.  "What does that mean??", he says.

    It means I hear you be be advocating just a tiny little bit of socialism, and saying that if we just keep it limited to this we can make it work.  And what happens when it does work and everything is wonderful?  The powers that implemented this wonderful system will begin looking to apply this model in other areas.  They'll say, "Look!  It works.  And we can make it work with X too!"  Then we'll say, "Ok.  Just this little bit, and we'll keep it limited to this."

    People have short memories.  Case in point: Barack Obama got elected.

    I for one would rather not give them that inch, no matter how insignificant it is.  One day it could be the inch that everyone will say ended it all.


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    Re: Do we bail out the auto industry?
    « Reply #21 on: November 13, 2008, 08:45:52 pm »
    Yes, we should bail out the auto industry.  The oil industry needs our help too.  I'm also very concerned about the lumber companies.  They have fallen upon hard times.  Aren't mineral prices down also?  I bet the diggers could use a check.

    Wait!  I have an idea.  How about if the government just BUYS all these sectors and runs them from Washington?  Wouldn't that make sense? 

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    Re: Do we bail out the auto industry?
    « Reply #22 on: November 13, 2008, 10:27:48 pm »
    Bail out the auto industry?

    Let me put it this way. When you have a company that is contractually obligated to pay $75 an hour to the guy who SWEEPS THE FLOOR... you deserve to FAIL.

    Let me rephrase.

    FAIL! Damn it! Go to hell, go to hell and die!

    I'm sick and tired of this crap.

    The argument for strategic industry is one thing, but it is fundamentally flawed. The days of Detroit flipping over and turning out Sherman tanks are gone. If the auto industry tried to tool up for wartime production our new tank would be the M2 NADER, which blows for combat but gets 32 miles on the highway, and three Iranians and an angry goat driving a '75 Toyota pickup truck (that's still running) could burn a fleet of them.

    Screw it. The unions raped the auto industry. It is time for a reboot.

    In a true capitalistic society, these companies would croak, then somebody else would come along, learn from their mistakes, and buy their assets. Then you would have a new and improved industry. That method has only worked since the invention of freedom and money, but hey, let's try this new way, 'cause this Marx guy seems pretty cool!

    Bailing out banks is stupid. Bailing out AIG is stupid. Bailing out Detroit is stupid. I'm sick of stupid. George Bush, you suck more every day. Nancy Pelosi, it is impossible for you to suck anymore, as you are the baseline of all suck.

    StevenTing

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    Re: Do we bail out the auto industry?
    « Reply #23 on: November 13, 2008, 11:05:30 pm »
    If the Auto industry fails, then their assets have to be sold.  It's not like you can move a plant somewhere else.  A new company will operate the existing plants.

    The problem is, where is the labor?  The labor still lies with the unions.  Whoever takes over the assets will still have to deal with the unions.

    So if the Auto industry fails, who else fails with them?  How about the suppliers?  How about the banks?   How about the insurance companies?  All of these are tied to the Auto industry in some way.  I think if the auto industry fails, all of our rates go up for everything.
    Utah

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    Re: Do we bail out the auto industry?
    « Reply #24 on: November 13, 2008, 11:44:08 pm »
    Quote from: StevenTing
    Whoever takes over the assets will still have to deal with the unions.

    Why?
    I'll admit, I know very little about unions. But why can't the industry fire all the union workers, and then offer to hire them again at reasonable rates? As we venture into recession, the unemployment rate is going up. People want to keep their jobs. Why can't the industry just hire anyone who is willing to work for x amount of years at a wage that the industry decides on? If everyone goes on strike and won't come back to work, then hire the unemployed from across the US.
    If I saw a guy with a 60cu/ft safe filled to the brim with nothing but Jennings, Lorcins and Hi-Points, I'd look at the guy and say "Right on brother".
    -Thernlund

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