So let's work through this logically:
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Originally Posted by AGDee
The auto companies were holding their own until the following things happened all at once:
1) Gas prices skyrocketed to over $4.00 causing people to stop buying the SUVs.
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This is a simple supply failure - their inability to be flexible with their own supply line is actually a business decision, and a poor one at that. Japanese manufacturers have had to deal with this same issue, and had had no trouble re-tooling factory lines or accounting for sudden shifts in demand.
Additionally, gas prices have been on the rise for a long time, and are now below $1.50/gal - so what now? Is 6 months really that big of a deal? If so, again, that appears to be an endemic failure on their part.
Quote:
Originally Posted by AGDee
2) The credit market froze. People who want to buy cars are having a hard time doing so because they can't get credit.
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Seeing as the auto manufacturers themselves made the decisions that led to the current financing system (and its inbred nature with dealerships etc.) it's hard to be sympathetic, especially when this has affected dozens of other markets as well.
Quote:
Originally Posted by AGDee
3) The stock market crashed. No business can survive their stock going from $24 a share in January to $3 in November.
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This is an effect, not a cause - profitable companies still retained value. Companies built on archaic supply chain and manufacturing, with an upside-down pyramid structure, were appropriately priced by the market.
Quote:
Originally Posted by AGDee
4) They cannot borrow money because of the credit crisis. The money they can borrow is at double digits %. Yet, the Federal Reserve rates have dropped to almost nothing for banks to borrow money from each other.
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Again, effect, not a cause - this is akin to saying "I hit the ball directly at the center fielder, and he didn't drop it!"
I completely understand that this represents a damaging blow for Detroit and much of MI, and that the "everyday worker" is the one who will ultimately pay for the poor decisions of management - but it seems a bit far-fetched to pretend that this is simply a byproduct of circumstance. In reality, the auto manufacturers screwed up. It's really that simple - sure, Americans were buying SUVs, but Americans were also buying Priuses at record levels, too. The "Big 3" used internal strategy and marketing that was fundamentally flawed, allowing the confluence of circumstances to bring them down.
Now, should this earn a bailout? In the grand scheme of things, $25 billion isn't a ridiculous sum (irony alert) . . . but I, for one, would be loathe to have tax dollars go to allowing the same terrible management to run a private business using public money. It's similar to the airlines - two of the worst-managed industries since the Industrial Revolution, who are lucky to even exist today - and perhaps bankruptcy or nationalization would actually help. I simply would hate to abide the status quo using public money.
The UAW is complicit in this, by the way - while you can't fault a union for doing the best it can for its members, its rigidity really shows what an anachronism most unions have become in the modern economy. The $70/hr figure is ludicrous, considering the general skill level of the workers involved.
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