Where has the money gone?

[Aditya Chitral]

Chrysler has announced to close nearly 800 dealerships followed by GM's announcement to close around 1100 dealerships.

Bankruptcy is inevitable. Where has all the money that they received in bailout gone?

Anyone accountable?

 

[bigbadwolf]

Acountability? *Snort of derision* -- this is the US of A. As for bailout money, that was but to buy time -- which most everyone knows. The structural problems of the US car industry -- poor engineering and (relatively) poor quality in a saturated global and national market -- have existed for years, and the Big Three have been too ossified to be able to do much about it. In the '90s they staved off disaster by selling SUVs, but that could only last for some time.

I've forgotten the title of a book I read about 20 years ago, which compared Nissan with Ford. At Nissan they were focused on engineering and quality. At Ford, where they had MBA-types running the show, it was all about accounting, finance, and neat presentations at meetings.

There was a time when GM alone employed close to 1m people and the health of GM was seen as so critical to the health of the US economy in general that the president of GM had open access to the president of the USA. US manufacturing became complacent. Hungry European and Japanese manufacturers made inroads into the North American market (let alone in global markets). I recall the jingle of a Nissan ad in the US in the late '70s: 'We are driven." That they were; they were obsessed with the minutae that go to constituting overall quality.

Anyway, this spells the death knell for the US auto industry and along with it quite a bit of manufacturing (even though the parts sourcing of the Big Three has been global for the last few decades).

 

[Aditya Chitral]

Acountability? *Snort of derision* -- this is the US of A. As for bailout money, that was but to buy time -- which most everyone knows.

How important was it to buy this time? Was paying billions of dollars of taxpayers money to buy few months of time worth it? What would have happened if we would have let GM and chrysler fail then and use that money elsewhere?

Give the money to people who lost jobs instead of giving them to CEOs who already had millions of dollars as bonuses.

 

[bigbadwolf]

How important was it to buy this time? Was paying billions of dollars of taxpayers money to buy few months of time worth it? What would have happened if we would have let GM and chrysler fail then and use that money elsewhere?

Give the money to people who lost jobs instead of giving them to CEOs who already had millions of dollars as bonuses.

These are "political decisions" (i.e., made behind closed doors, between people with influence to sell, and those with the means to buy). Rational criteria "ain't got nothin' to do with it" in the greatest of all democracies. I suppose some half-hearted rationale was given about giving the automakers time to adjust but I recall the same questions being raised in Congress at the time: What happens when the companies have spent the money?

I don't think the CEOs have used the money for themselves; it's just that the "burn rate" for GM and Chrysler is so great that going through billions is no problem.

The loss of the automotive industry is a body blow to the country.

 

[daleholborow]

I don't think its a body blow to the country. It might be a body blow to the guys working in the car industry.

Car industries, in most countries in the world, are a net negative... a black hole. No matter how many people are employed by the car (or indeed, any) industry, if at the end of the day its not a profitable industry, it just means that everyone else across the country is paying for those guys to have a job. I accept the social benefits in providing things like health care and unemployment benefits when people need them... I don't accept the idea that some industry is "vital to the nation" if at the end of the day, we're all worse off for its continued, hand-held, taxpayer-funded existance.

If I recall correctly, this is the first year that Toyota have made a loss since 1950 or so. I think Nissan also recently announced a loss, their first in several decades (again, not certain of the figures). Compare that with Ford and GM, who basically haven't made a PROFIT for decades... the head of the Automotive Union telling everyone that the financial crisis is the cause of their dramas is so deluded its laughable.

 

[bigbadwolf]

That is the problem of our society. We give money to the wrong people.
CEOs should get fired instead of getting a bonus for some bullshit they did. They have so much responsibility and they are most of the times acting negligently because it's not their money they are playing with.

It's not"we"; it's crooks acting in our name giving it other crooks in a pay-to-play "democracy." The USA is a banana republic writ large.

 

[bigbadwolf]

Here is a good essay explaining the auto industry in detail by a former GM assembly-line worker. The bias is left-wing (which reflects my own leanings) but there's a lot of factual meat in the article:

General Motors, alone, lost $30.9 billion in 2008. Its fourth quarter loss was $9.6 billion, a decline of 39 percent in revenue. It sustained losses in North America and the rest of the world. This burned a huge hole in its cash reserves. The corporation ended 2008 with about $14 billion in cash, which is close to the minimum amount of cash GM claims it needs to fund its operations. (That figure includes the $4 billion it borrowed from the U.S. Federal government.) Figures are similar for Chrysler and Ford.

As I've written before, the money that GM and Chrysler have received from the government could only last for a limited amount of time as the "burn rate" has been so fast.