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Thread: What Will Happen to American Auto Companies

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    Default What Will Happen to American Auto Companies

    Still on the hill, the three auto companies are begging for help.

    Sales are drastically down. Their profitability has been low because of labor. Their quality has gone up and on average is equivalent to foreign makes. Their plants have beengetting more efficient on average. Their management has been sluggish to adapt to a rapidly changing market. The gasoline cost escalation caught them pretty badly. Public perception of their economy needs has apparently hit the hysteresis point and is not returning now that gasoline prices have fallen greatly. The availability of loans has caught them badly as well. They are a major factor in the country's economy, lots of spin-off industries. They make a strategic contribution to the armed forces. If all three go under, the stock market will greatly suffer, along with many people's retirement plans. Congress will look 'responsible' if they reject the requests that may not be paid back. Congress will look 'irresponsible' if their rejection takes our shabby economy even further into a lengthy recession.

    Lots of issues involved. And it's a big Republican business. Ripe for discussion here.
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    Default Re: What Will Happen to American Auto Companies

    Quote Originally Posted by threlayer View Post
    Lots of issues involved. And it's a big Republican business. Ripe for discussion here.

    The Union, that has the Dems in their pockets, walked out of talks before they went to Capital Hill the first time. The Repubs are mostly against this bailout. The Dems are for it.

    Ohhh and the money that would loaned, would be used to pay off bond holders. Betcha no mainstream media told you that (unless you watch Lou Dobbs, but he's not a mainstream CNNer).
    Quote Originally Posted by The Snark View Post
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    Default Re: What Will Happen to American Auto Companies

    I would like for Ford to get the line of credit they requested with very strict guidlines and strings attached. They seem like the most able to get through this mess.

    GM needs to accept a structured bankruptcy. They are done regardless of what happens with this bailout and they might as well get it over with now.

    Chrysler should be merged with one of the other two or go with the same bankruptcy deal as GM.
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    Quote Originally Posted by Katrine View Post
    Ya'll bitches need to calm down. Cerously.
    In other words: Boo-motherfucking-hoo

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    Default Re: What Will Happen to American Auto Companies

    Instead of giving them 34bill, how about buying them. Before the severe loss, they were only worth a combined 17bill, and going down.
    Quote Originally Posted by The Snark View Post
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    Featured Member Miss_Luscious's Avatar
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    Default Re: What Will Happen to American Auto Companies

    That's SOCIALISM!!!!!
    "A stupid man's report of what a clever man says is never accurate because he unconsciously translates what he hears into something he can understand." - Bertrand Russell

    "It's just a matter of people having low self esteem and being way too easily offended." -Random Guy on a Internet Forum

    Quote Originally Posted by Katrine View Post
    Ya'll bitches need to calm down. Cerously.
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    Default Re: What Will Happen to American Auto Companies

    Yes I suppose it is called socialism. ^

    What is it called when a company begs for a bailout and doesn't pay it back because corporate heads have spent all the $ recklessly- corporate theft.

    I personally think that to really help in this mess, if an acquisition does happen, and profits are eventually turned over to the government, then they should be used to pay off the national debt and to help balance the budget.

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    Default Re: What Will Happen to American Auto Companies

    And the 8 trillion dollar bail out of the financial sector gave us ownership in almost all the financial companies. Why stop there. Why stop fucking up when we are on a roll.

    Also, at least it will free up the Big 3 to provide a product people actually buy and employ people across th board. Unlike the finacial sector who is just sitting on the money or paying out millions in new bonuses,


    If you read some of my other posts, you would know I had a bit of sarcasm when I said it.
    Quote Originally Posted by The Snark View Post
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    Default Re: What Will Happen to American Auto Companies

    Quote Originally Posted by glambman View Post
    Instead of giving them 34bill, how about buying them. Before the severe loss, they were only worth a combined 17bill, and going down.
    That was Michael Moore's suggestion, too.


    Promote yourself and earn more money! This is a business that is owned by strippers for strippers. Let's make that money!


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    Default Re: What Will Happen to American Auto Companies

    If they default, then who does what to which?
    What are the conditions under which they will operate?
    And Who's guaranteeing that loan? { AIG? }
    Will union concessions, once sent to the members, hold up to a membership vote?

    Employees/union, stockholders, bondholders, pensioners, holders of payable accounts, others (dealers, suppliers, transport companies, etc.) all are directly hurt when a company goes bankrupt. There's very little equity left for stockholders in comparison to say 10 years ago.

    A whole bunch of questions.
    Last edited by threlayer; 12-05-2008 at 06:31 PM.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: What Will Happen to American Auto Companies

    I was being facetious. I just wanted to feel like a Republican for a minute.
    "A stupid man's report of what a clever man says is never accurate because he unconsciously translates what he hears into something he can understand." - Bertrand Russell

    "It's just a matter of people having low self esteem and being way too easily offended." -Random Guy on a Internet Forum

    Quote Originally Posted by Katrine View Post
    Ya'll bitches need to calm down. Cerously.
    In other words: Boo-motherfucking-hoo

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    Default Re: What Will Happen to American Auto Companies

    Why not pass a highly accelerated taxing system top executives in companies receiving taxpayer loan assistance, whereby they would be personally taxed wherever they worked until their company's loans were paid off. This would include top management salaries, bonuses, perks, life insurance not made payable to other than the company, etc. After all these executives requested the loans. The symbolic dollar a year thing would not really be needed. The accelerated rate would start at say a million.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: What Will Happen to American Auto Companies

    Quote Originally Posted by Paris View Post
    That was Michael Moore's suggestion, too.
    Oh, that ought to reassure the Republicans/Libertarians here.

    Quote Originally Posted by Miss_Luscious View Post
    I was being facetious. I just wanted to feel like a Republican for a minute.
    Careful there, someone's liable to give Ann Coulter your SW screen name.
    Last edited by threlayer; 12-05-2008 at 06:33 PM.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: What Will Happen to American Auto Companies

    Quote Originally Posted by Miss_Luscious View Post
    I was being facetious. I just wanted to feel like a Democrat for a minute.
    Fixed it for you.
    Quote Originally Posted by The Snark View Post
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    Default Re: What Will Happen to American Auto Companies

    A lot of folks say so what. Toyota, Honda, BMW etc are building cars here. And they employ American workers. All of which is true. However, what you may not know is that when these folks build a plant in the US they specify tooling (which is billions of dollars) either manufactured in their mother country or built using components manufactured in said mother country. Which kicks to the curb any opportunity for selling US brand products in the plants. This has a huge long term ripple effect.

    While I am certainly happy to see $18/hr jobs here are opposed to somewhere else their hands are not that clean. But they are good at PR. In fact, its likely they hire US PR firms

    FBR
    Once again I have embraced my addiction and have put off the moral dilemma to another day.

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    Default Re: What Will Happen to American Auto Companies

    ^^^ yup, a few details about the 'Detroit Three' versus US auto plants under 'foreign' ownership are worth mentioning ...

    there are 115000 US auto workers at BMW in South Carolina, Hyundai in Texas, Honda in Ohio, Subaru in Indiana, and a host of other locations. They now comprise about 50% of ACTIVE US auto workers, although the Detroit Three still list a large number of INACTIVE auto workers as employees (see Jobs Bank).

    On the average, the salary plus benefit costs of these 115000 workers is on the order of $43 an hour, versus $70 an hour for 'Detroit Three' workers.

    Part of the difference is due to the $10+ dollar per hour higher pay rate for unionized 'Detroit Three' workers versus non-union workers at the foreign owned US assembly plants. Another part of the difference is the huge number of retired former 'Detroit Three' employees who are collecting extremely generous health and retirement benefits.

    Because of these structural cost differences, Dr. Zandi's assessment at the congressional hearings is absolutely correct. Without the abilitty to abrogate union pay rates and union benefit costs, the 'Detroit Three' will never survive financially versus direct foreign competors or versus 'foreign owned' US competitors. Thus the $38 billion in 'bailout' funding will simply be the equivalent of a 'social welfare' payment to union auto workers for the next year or so. Once that money has been spent, a second round of bailout requests will commence.

    ---------------------------------------------------------------------------------------------------------------

    Ohhh and the money that would loaned, would be used to pay off bond holders. Betcha no mainstream media told you that
    Yup ... just like the bailouts of the financial companies ! The uber-rich bondholders wind up having their losses made good by the US taxpayer, while the 'joe sixpack' stockholders get stiffed. This is an absolutely huge point (i.e. that the uber-rich are the primary beneficiaries of all of this bailout money), coverage of which certainly appears to be actively supressed by mainstream media.

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    Default Re: What Will Happen to American Auto Companies

    Quote Originally Posted by glambman View Post
    And the 8 trillion dollar bail out of the financial sector gave us ownership in almost all the financial companies. Why stop there. Why stop fucking up when we are on a roll.

    Also, at least it will free up the Big 3 to provide a product people actually buy and employ people across th board. Unlike the finacial sector who is just sitting on the money or paying out millions in new bonuses,


    If you read some of my other posts, you would know I had a bit of sarcasm when I said it.
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

    I'm not sure exactly how sarcastic you're being here, but there's a degree of truth in the above. If I as a taxpayer am going to be soaked, I'd rather be soaked with something that is more tangible, and easily measured, like manufactured goods. So , we have "ownership" in the financial institutions?? Hmmm, does that mean that I am going to get a quarterly dividend check from those folks? Are they going to offer me a no-fee, high interest paying checking account, in recognition of my part ownership status? Is every taxpaying SW member going to be offered ultra low interest debt consolidation loans, NOT!?!?!?!

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    Default Re: What Will Happen to American Auto Companies

    ^^^ while I agree with your basic sentiments, there is a fundamental difference between the financial industry and manufacturing industries. The financial industry is the 'lubricant' which all other business activity requires in order to function. Imagine the impact if every American was expected to pay cash for a house / car / appliances / furniture / you name it ! THIS is the arguably justifiable reason that the US financial industry had to be rescued.

    But bailing out US manufacturing industries, and specifically bailing out CERTAIN US manufacturing industries while allowing other competing US manufacturing industries to 'fight their own battles' in the same marketplace is an entirely different story. This boils down to the US government choosing winners and losers. And as is obvious from the auto bailout hearings, the gov'ts choice to bail out one manufacturer (i.e. Ford / GM / Chrysler) versus a competing manufacturer (i.e. US BMW, US Subaru, US Hyundai, US Toyota) is going to be politically motivated not economically motivated.

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    Default Re: What Will Happen to American Auto Companies

    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

    No one sector, or industry has a monopoly on being a "lubricant". Yes, financial services applies some grease, but only if their palms are also being greased. Charging 6.5% for mortgage, more for car loan, much more for credit card, while paying a lousy 1/2% on interest checking?? Doubling money every 11 yrs. on mortgage loan (quicker on auto or CC rate) vs every 144 yrs. on interest checking acct?? Is that a way to grease an "owners" palm?

    As for "politically motivated", if govt. money is involved, right there its politically motivated. As FBR points out, there's more to manufacturing than just making widgets. How much US parts/components/ plant tooling do Honda, Toyota, BMW, Hyundai, etal utilize compared with GM/Ford/Chrysler?? How many additional US support role workers does that add up to? More to the point, how many more voting US taxpayers does that add up to?

    I'd like to have a solid cadre of employed middle class US citizens available to buy my home keeping its value up as much as I'd like a mortgage company to be in business to make a loan. Consumers do play a role in greasing the wheels of commerce.

    As for picking winners & losers: Do Japan & other countries afford US Big 3 the same access to their home marketplace as they afford to their home manufacturers? Just how "level" is the playing field?

    Lastly, realize that this whole thing is "political". One key reason US auto manufacturers costs are so much higher than foreign US based manufacturers is that they have an overwhelmingly greater number of retirees, having been in operation so much longer. (I'm guessing Honda has oldest US based plant, its been in operation barely more than 20 yrs). Active employee headcount may be nearly equal to US big 3, but throw in legions of retirees, plus employees at parts & support manufacturers, etc industries. Now, how many more registered US voter taxpayers does that add up to????

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    Default Re: What Will Happen to American Auto Companies

    Quote Originally Posted by Melonie View Post
    ^^^ while I agree with your basic sentiments, there is a fundamental difference between the financial industry and manufacturing industries. The financial industry is the 'lubricant' which all other business activity requires in order to function.

    8 trill in guarantees and look, we have to have another homeowner helper plan. All that money, and the banks are just sitting on it. Well, except for the millions in bonuses they are using it for. Not every bank was hit by the mortgage crisis, not every mortgage lender. Why bail out people who caused their own problem?

    You know, I am against govt bail outs, IMO the Big 3 would be better served in bankruptcy, but I also beleiev in a level playing field, if other countries are propping up their auto sector, then sorry, we can't let ours go.

    It is not favorites to support the Big 3 in the US, while not funding foreign plants here. The Big 3 are US companies, the others are not. (Don't go technical....subsidiaries, etc..)
    Quote Originally Posted by The Snark View Post
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    Default Re: What Will Happen to American Auto Companies

    You know, I am against govt bail outs, IMO the Big 3 would be better served in bankruptcy, but I also beleiev in a level playing field, if other countries are propping up their auto sector, then sorry, we can't let ours go.
    Let's run with this premise. Point #1 - Right now, your alleged 'non-level' playing field results in lively price and quality competition between autos offered in the US market. For purposes of discussion, this now means that Joe Sixpack can pick up a halfway decent new car for $US 15k.

    Point #2 - In order for the 'Detroit Three' to be profitable, a $US 15k selling price ain't gonna cover their current labor and legacy costs. In order to do this, and create a 'break even' situation, that selling price needs to be US $18k. Free market economics are not going to allow this level of pricing, since lower foreign labor costs and lower foreign corporate taxes / environmental compliance costs / worker safety compliance costs allow foreign owned 'assemblers' like Honda or Hyundai to do their 'dirtywork' manufacturing offshore while assembling the foreign components in US plants.

    So the question really boils down to a bailout of the 'Detroit Three' being called out for what it really is ... a $3 k per car gov't subsidy being financed by ALL US taxpayers. Another option of course would be to impose a tariff on the imported components being shipped in by 'foreign owned' car companies in order to compensate for their lack of union labor costs, their less expensive foreign environmental compliance and worker safety compliance costs, and of course lack of legacy benefit costs. But the politicians will never choose the latter !!! The reason is this ...

    If the 'playing field' were leveled, then the price of our example car would increase from $15k to $18k regardless of whether that car was produced by the 'Detroit Three' or by foreign owned assemblers. But this would require that EVERY American, regardless of income or status, would have to pay $3k more for that new car. But via the bailout method, lower income US (non) taxpayers still get to have a $15k sale price. It will only be the actual middle class taxpayers who will wind up funding the 'Detroit Three' bailout subsidies (to the tune of $5-6k per car since they comprise 40 odd percent of US tax filers but 97% of actual taxes paid).

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    Default Re: What Will Happen to American Auto Companies

    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

    "Joe Sixpack" is more likely to buy a used (er-, pre-owned) car than a new one. JS's late model used car may very well be coming off a lease. Part of the reason of "bailout" is to facilitate retooling to manufacture economical fuel sippers that people really want(need??).

    As a traveller, I see a lot of vehicles at car rental companies that few would really want to buy on their own coin. The supposed "advantage" of higher sticker price vehicles is eroded by the much higher discounts being offered out there, as well as the lower negotiated fleet lease rates needed to "unload" some poor sellers. Probably all involved parties in car rental transactions are taking a hit (consumers paying higher rates, rental companies giving renters a pickup truck, minivan, or Ford Mustang V6 convertible when renters originally reserved Focus, or Corolla is not available, and aforementioned lower sticker/lease prices). Been there, done that.

    Vehicle production allocation distortions can occur when customer is only renting, rather than buying the vehicle(s) in question. One factor to look at would be to see if more rental customers are getting the car that they want, or being foisted with a gas guzzling "leftover".

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    Default Re: What Will Happen to American Auto Companies

    a would appear that the Detroit Three bailout plan will be up for a congressional vote next week.



    At this point we will find out whether the republican senators from states with 'foreign owned' auto plants will filibuster GM into bankruptcy ... which IMHO is the best thing that could possibly happen under present circumstances.


    Part of the reason of "bailout" is to facilitate retooling to manufacture economical fuel sippers that people really want(need??)
    Actually, many many Americans prefer the safety, comfort and load carrying capacity of big cars / trucks / SUV's. It has only been their inability to afford putting gas in these vehicles at $4 per gallon that caused sales to drop drastically. The equation is actually very different with gas below $2 per gallon.

    As to Americans 'needing' small fuel sipping cars, that is arguably a political policy decision. Forcing Detroit to build cars that they are not 'good at' via a taxpayer bailout does not improve the affordability of such cars (compared to foreign owned competitors who are far more experienced building such cars), arguably does not directly increase the desire of many many Americans to own such cars, and hurts the ability of Americans who actually pay income taxes to afford making payments on both fuel sipping cars as well as big cars / trucks / SUV's.

    If the political policy of fuel sipping cars is what American politicians and voters really want, then the smart thing to do would be to simply let the Detroit Three go bankrupt. As a result, the major source of big car / truck / SUV product would immediately dry up ... thus forcing Americans to buy smaller vehicles ... and WITHOUT increasing taxes on a huge number of Americans in order to continue providing paychecks for union auto workers who receive much higher hourly pay and much better benefits than they do !!!
    Last edited by Melonie; 12-06-2008 at 12:09 PM.

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    Default Re: What Will Happen to American Auto Companies

    Quote Originally Posted by Melonie View Post
    Let's run with this premise. Point #1 - Right now, your alleged 'non-level' playing
    The non-level playing I am referring to is the bail out of foreign auto companies by those governments. That's it.

    Once we move beyond the bail out, yes, tax at the same level we are taxed at. There are enough manufacturers to take up the slack if we 'lose' one countries cars.

    Quote Originally Posted by Melonie View Post
    Point #2 - In order for the 'Detroit Three' to be profitable,
    Legacy costs only run 1,500 per car. Why not just assume their debt. IIRC GM has 57bill, the interest payment alone would make them profitable.
    Quote Originally Posted by The Snark View Post
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    Default Re: What Will Happen to American Auto Companies

    I wish they would just let them fail, some one will buy them. They'll just buy them for pennies on the dollar. They've already failed and frankly it is ridiculous to loan them money, we might as well dump it down the drain. They'll never pay it back, the unions will never let them make the kind of cuts they really need.

    Frankly I don't give a damn if there are no more "American cars". If toyota makes Ford, I really won't care, it's capitalism.

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    Default Re: What Will Happen to American Auto Companies

    Quote Originally Posted by Melonie View Post
    Let's run with this premise. Point #1 - Right now, your alleged 'non-level' playing field results in lively price and quality competition between autos offered in the US market. For purposes of discussion, this now means that Joe Sixpack can pick up a halfway decent new car for $US 15k.

    Point #2 - In order for the 'Detroit Three' to be profitable, a $US 15k selling price ain't gonna cover their current labor and legacy costs. In order to do this, and create a 'break even' situation, that selling price needs to be US $18k. Free market economics are not going to allow this level of pricing, since lower foreign labor costs and lower foreign corporate taxes / environmental compliance costs / worker safety compliance costs allow foreign owned 'assemblers' like Honda or Hyundai to do their 'dirtywork' manufacturing offshore while assembling the foreign components in US plants.

    So the question really boils down to a bailout of the 'Detroit Three' being called out for what it really is ... a $3 k per car gov't subsidy being financed by ALL US taxpayers. Another option of course would be to impose a tariff on the imported components being shipped in by 'foreign owned' car companies in order to compensate for their lack of union labor costs, their less expensive foreign environmental compliance and worker safety compliance costs, and of course lack of legacy benefit costs. But the politicians will never choose the latter !!! The reason is this ...

    If the 'playing field' were leveled, then the price of our example car would increase from $15k to $18k regardless of whether that car was produced by the 'Detroit Three' or by foreign owned assemblers. But this would require that EVERY American, regardless of income or status, would have to pay $3k more for that new car. But via the bailout method, lower income US (non) taxpayers still get to have a $15k sale price. It will only be the actual middle class taxpayers who will wind up funding the 'Detroit Three' bailout subsidies (to the tune of $5-6k per car since they comprise 40 odd percent of US tax filers but 97% of actual taxes paid).



    I forgot to add one point, whenever a foreign auto company brings a plant here, they select a number oflocations and start a bidding war as to who will give the best benefits. Training funds, tax breaks, etc.. So, actually, we are already subsidizing the companies who provides a 'cheaper' car.
    Quote Originally Posted by The Snark View Post
    But then I suppose the sort of people who write this kind of crap generally don't allow their opinions to be tainted by things like "facts" and "reality".
    Distortion becomes somehow pure in its wildness
    The note that began all can also destroy

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