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Thread: What Will Happen to American Auto Companies

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    Default Re: What Will Happen to American Auto Companies

    1 - yes obviously the same principle of German gov't subsidized easy credit would apply to new leases and to the purchase of 2-3 year old lease return Volkswagens and Audis. As to the 'used vehicle' market, which must obtain financing via 3rd party lenders rather than the financial wings of an auto manufacturer ... high creditwortiness requirements, down payment equity requirements, etc. will take the greatest toll on this segment. It doesn't help if a 3 year old car that originally stickered for $20k+ is now selling for $10k if you don't have $2,500 in cash for the down payment and don't have a 720 credit score to get a loan approved.

    2 - new car affordability comes from both ends of the spectrum ... the income of the buyer, but also the production cost of the new car. And without after-tax profits, its doubtful that pay raises are going to be an issue at the vast majority of employers regardless of the union auto worker pay rates in effect.

    3 - this point actually revolves around 'domestic content' to some degree ... which VW has lacked. However, despite current economic conditions VW is going ahead with a huge new US auto assembly plant in an effort to bridge these 'domestic content' issues ... which stem from rental cars to taxi fleets to police cars.

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    Default Re: What Will Happen to American Auto Companies

    Quote Originally Posted by Melonie View Post
    ..."The guarantees would allow Volkswagen to offer customers cheap purchasing and leasing conditions, the magazine reported. Volkswagen’s move may prompt Daimler AG and Bayerische Motoren Werke AG to also apply for the funds, according to Der Spiegel. "(snip)
    That was supposed to be a result of bailing out the financial industry. Too bad it was just a Christmas present to them instead!

    Quote Originally Posted by minnow View Post
    ...2) Not so fast at casting stones at union jobs - If unions are further "cut down to size" as certain posters are so eager to occur, Mr. Regular Guy will be less likely to get the kind of raises required to put him in a good new car buying position, due to employer saying "you're just about making what big corp. folks are making, I can't afford to give you a (x)% raise."...
    I think it only the Detroit Three union workers which, with the limit on what price cars could be sold for, were greatly reducing their profits to where this recession and finance crunch depleted their cash reserves. The Detroit Three used to fairly easily cave in to their demand because of fears of striking; now a strike would actually help the mfgrs' cash positions. Not that such is likely now.
    Last edited by threlayer; 12-21-2008 at 11:04 AM.
    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.

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    Default Re: What Will Happen to American Auto Companies

    ^^^ in point of fact, the bailout of the US financial institutions ... and particularly the bailout of GM and Chrysler ... has primarily benefitted uber-rich bond investors, union workers, and politicians . It's more than a bit ironic that the only public bailout money that may DIRECTLY benefit US auto buyers / leasers in the form of more affordable cars is actually coming from GERMAN taxpayers !

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    Default Re: What Will Happen to American Auto Companies

    Quote Originally Posted by threlayer View Post
    Japan very effectively 'subsidizes' their own auto companies by excluding the importation of foreign autos. (And many other foreign products.) This has been factored already into their desicion to build assembly plants here. US has no fair trade with Japan because it is not bilateral so we should not feel obligated to continue it.

    The Japanese assembly plants are at best a poor subsititute for the lost auto production/sales we have suffered due to Japan's policies. Of course by that happening US automakers were forced into producing a much better product at a cheaper price. But now with Korea making very strong inroads into the market, things will continue getting worse for US and for Japan.
    From the news stories I read, even the Japanese automakers don't want US auto makers to collapse as they rely heavily on the same supplier network that would be devastated if this were to occur...

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    Default Re: What Will Happen to American Auto Companies

    ^^ And that's why they have pulled together.
    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 Melonie View Post
    ^^^ in point of fact, the bailout of the US financial institutions ... and particularly the bailout of GM and Chrysler ... has primarily benefitted uber-rich bond investors, union workers, and politicians . It's more than a bit ironic that the only public bailout money that may DIRECTLY benefit US auto buyers / leasers in the form of more affordable cars is actually coming from GERMAN taxpayers !
    Preventing American automobile manufacturers from going out of business will prevent a significant decline in the supply of vehicles and provide consumers with a wider selection.

    The intent of the bailout of the financial industry is to make credit available for things such as automobile purchases.

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    Default Re: What Will Happen to American Auto Companies

    Preventing American automobile manufacturers from going out of business will prevent a significant decline in the supply of vehicles and provide consumers with a wider selection.
    according to whom ? The flip side argument, of course, is that allowing GM and Chrysler to go bankrupt will remove a supply of vehicles that the American public in general already doesn't seem to want to buy ( variation - will remove a supply of vehicles i.e. SUV's which the American government doesn't want Americans to buy) ... and will allow other investors to 'resurrect' those segments of GM and Chrysler that would be profitable on their own ( thinking Chevy Volt, Jeep, Dodge trucks). Another flip side argument you are ignoring is the distinct possibility that the US divisions of Toyota, Honda, Volkswagen, BMW et al could begin offering other US assembled vehicles that are currently not imported.


    The intent of the bailout of the financial industry is to make credit available for things such as automobile purchases
    again, according to whom ? The flip side argument of course is that, just like 'subprime' real estate, people who can't actually afford to own (i.e. pay for) new cars should not be given the credit to buy new cars. Unless you are advocating the introduction of a new 'entitlement' program which would, like HUD / Fannie / Freddie, use American taxpayer money to selectively subsidize new car loans for would-be low income / minority car buyers !

    If you take the time to do a little research, you'll find that a significant portion of new car purchases over the last 5 years were NOT funded with incomes, but were instead funded with 'liquidation' of other assets - specifically things like home equity withdrawls or exhaustion of savings. Thus the 'tin foil hat' crowd would again say that America does not have a liquidity problem, it has a solvency problem.

    And while the GM and Chrysler bailout addresses the potential future solvency problems of union auto workers, it does nothing to help the solvency problem of any other US workers i.e. the 'affordability' of a new car based on current US worker pay rates that are being increasingly arbitraged versus lower cost Asian workers. This is a 'problem' which does not HAVE a solution other than facing the facts that America's standard of living must endure a permanent decline to realign the ability of unskilled and semi-skilled American workers to afford a house / car / whatever with the 'global' value of their labor. Arguably, the GM and Chrysler bailout is an attempt to selectively subsidize one specific segment of American workers at the expense of all other American workers.

    ~
    Last edited by Melonie; 12-21-2008 at 11:42 PM.

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    Default Re: What Will Happen to American Auto Companies

    ^^ The price escalation of autos, foreign and domestic, has outstripped payrolls for several years. And yet Americans are, until recently, interested in upgrading their vehicles, so that's not surprising. Not surprising is why--wages, benefits and the depletion of dollar value. Because we control the markey ultimately, according to theory, we should habe been able to control it. Don't we? Maybe not.

    Question is why do we let them do that to us? Is it really marketing that makes 'us' want to buy more of what is promoted to us. Do we really believe that we "deserve it" no matter how realistic and impractical "IT" is? Are we that gullible?

    When we become that accepting and gullible, how much can those qualities be extended before we will buy most anything that strokes our inflated egos or fills our empty shelves? Examples: Do we really need off-road capabilities and/or 1500 lbs extra weight at the cost of 10-15 mpg over other choices? Will we sell out our neighbor's jobs so that we can buy a $10 made-in-USA baking pan for a made-in-China $6 one? Maybe we don't even have to think about it any more because the whole process seems so automated. Do we really need to have that much stuff, considering what that much consumption does to us? Apparently so.
    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

    When we become that accepting and gullible, how much can those qualities be extended before we will buy most anything that strokes our inflated egos or fills our empty shelves?
    well, this speaks directly to the 'moral hazard' which has been created by federal and state governments. Why NOT buy as large of a house as you can find a lender to write a mortgage for if A. the gov't is going to bail you out when you fall behind in your payments, B. if the gov't is going to allow you to keep any 'forgiven' loan balance as a tax free 'gift', C. if the gov't is going to prevent your eviction even if you are 6 months behind in your mortgage payments for the SECOND time after receiving a taxpayer funded bailout on your first default. Same applies to state bankruptcy laws that prevent auto loan lenders from repossessing a vehicle needed to drive from home to work. Same applies to anti-discrimination laws which actually provides bankruptcy filers with a BETTER chance of being approved for future credit 3 years after filing for bankruptcy.

    ~
    Last edited by Melonie; 12-22-2008 at 02:44 PM.

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    Default Re: What Will Happen to American Auto Companies

    Well, it appears to be what 'we' want. But it doesn't just apply to big ticket items. Funny thing is that laws are passed to help us out with our excess spending for 'stuff.' But nothing in a long time has helped us with our health expenses when they become overly expensive and life-threatening. For example health and pharmacy insurance just gets more expensive and contains less coverage. Funny priorities.
    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

    ^^^ well, arguably, the gov't is responsible in large part for those high (and rising) medical costs ... by passing laws forcing health care providers to provide services to those who cannot pay, while charging those who CAN pay double the actual cost to make up for it ... by passing laws forcing health insurance providers to cover all sorts of 'esoteric' maladies with very high costs that must then be recouped via higher premiums being charged to everyone covered ... by allowing very high awards for medical malpractice, resulting in malpractice insurance costs being passed on as a 10-15% price premium embedded in all health care services costs etc.

    In some similar myopic sense, the GM and Chrysler bailout decision by the gov't is also likely to result in HIGHER PRICES for future new cars, from both domestic and foreign owned automakers.

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    Default Re: What Will Happen to American Auto Companies

    Quote Originally Posted by Melonie View Post
    according to whom ? The flip side argument, of course, is that allowing GM and Chrysler to go bankrupt will remove a supply of vehicles that the American public in general already doesn't seem to want to buy ( variation - will remove a supply of vehicles i.e. SUV's which the American government doesn't want Americans to buy) ... and will allow other investors to 'resurrect' those segments of GM and Chrysler that would be profitable on their own ( thinking Chevy Volt, Jeep, Dodge trucks). Another flip side argument you are ignoring is the distinct possibility that the US divisions of Toyota, Honda, Volkswagen, BMW et al could begin offering other US assembled vehicles that are currently not imported.
    The American public does want to buy vehicles from American companies. GM sells more cars in the US than anyone else. The problem isn't that the American public don't want to buy cars from American companies. The problem is they can't because of the economy. Sales for ALL manufacturers have dropped significantly. Sales for Toyota and Honda have dropped by a third. If the American companies make it through this downturn, they will most likely become profitable again when the economy recovers.

    I doubt the Chevy Volt will be profitable anytime soon, if ever. It costs more than twice as much to build as an equivalent car with only an internal combustion engine.


    Quote Originally Posted by Melonie View Post

    again, according to whom ? The flip side argument of course is that, just like 'subprime' real estate, people who can't actually afford to own (i.e. pay for) new cars should not be given the credit to buy new cars. Unless you are advocating the introduction of a new 'entitlement' program which would, like HUD / Fannie / Freddie, use American taxpayer money to selectively subsidize new car loans for would-be low income / minority car buyers !

    If you take the time to do a little research, you'll find that a significant portion of new car purchases over the last 5 years were NOT funded with incomes, but were instead funded with 'liquidation' of other assets - specifically things like home equity withdrawls or exhaustion of savings. Thus the 'tin foil hat' crowd would again say that America does not have a liquidity problem, it has a solvency problem.
    Do you have any references for that? I would bet that most people finance their cars through banks or dealers. Many people lease cars.

    The current problem is that even people with good credit are having trouble getting loans for automobiles because of the financial crisis.


    Quote Originally Posted by Melonie View Post
    And while the GM and Chrysler bailout addresses the potential future solvency problems of union auto workers, it does nothing to help the solvency problem of any other US workers i.e. the 'affordability' of a new car based on current US worker pay rates that are being increasingly arbitraged versus lower cost Asian workers. This is a 'problem' which does not HAVE a solution other than facing the facts that America's standard of living must endure a permanent decline to realign the ability of unskilled and semi-skilled American workers to afford a house / car / whatever with the 'global' value of their labor. Arguably, the GM and Chrysler bailout is an attempt to selectively subsidize one specific segment of American workers at the expense of all other American workers.

    ~
    No, you're greatly exaggerating the situation for most Americans. Most American families can afford new automobiles. They’re not that expensive. A Chevy Cobalt or Toyota Corolla can be bought for less than $15,000. Not as many American may be able to afford to purchase big trucks and SUV’s as before, but that would be a good thing.

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    Default Re: What Will Happen to American Auto Companies

    I doubt the Chevy Volt will be profitable anytime soon, if ever. It costs more than twice as much to build as an equivalent car with only an internal combustion engine.
    Don't worry. As 'part owners', Obama and washington democrats will undoubtedly pass a new federal tax credit for electric vehicles ... allowing ALL taxpayers to pick up a large percentage of the Chevy Volt's purchase price.


    I would bet that most people finance their cars through banks or dealers. Many people lease cars.

    The current problem is that even people with good credit are having trouble getting loans for automobiles because of the financial crisis.
    This previously made point still seems to be unmade. The financial crisis only removed the ability of BAD CREDIT RISK borrowers to obtain new car loans at affordable interest rates. Translation, a significant portion of would-be new car buyers are actually BAD CREDIT RISKS given their overall levels of after-tax income versus their overall levels of pre-existing debt / equity. Translation, a significant portion of new car buyers over the past several years were only able to 'afford' a new car via the approval of risky cash out home mortgage re-fi's, risky home equity loans, via 100% financing of the new car with zero equity etc. With some prudent creditworthiness / lending standards being reintroduced by most lenders, today those new car buyers CAN'T AFFORD a new car pure and simple.


    A Chevy Cobalt or Toyota Corolla can be bought for less than $15,000.
    Ah yes but from a lender's standpoint, how many people who actually have $3000 in cash available for a down payment plus actually have the actual ability to afford an additional $12,000 in new debt want to buy a Cobalt or Corolla ? True that this option may be 'forced' on some new car buyers eventually !

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    Default Re: What Will Happen to American Auto Companies

    Quote Originally Posted by Melonie View Post
    ...As 'part owners', Obama and washington democrats will undoubtedly pass a new federal tax credit for electric vehicles....
    You have to understand the factors of product development cycles before you judge incentive programs too harshly. This is an issue of 'economy of scale' increasing sales in any way will help:
    • distribute the development costs among a larger number of buyers,
    • reduce the per unit cost of items they have to buy instead of build,
    • make the Volt a more acceptable, less risky big ticket item,
    • help establish a better infrastructure network,
    • lead to more improvements from competition, etc.,
    • allow pollution controls to be better managed at central sites rather on distributed on all vehicles.
    This is just another investment program initiated with government assistance with nation-wide, longer-term benefits. Others have been:
    • the Internet, without which we wouldn't even be here and which has led to a huge number of new technologies that stand on their own,
    • the space program with its huge technology spin-offs like the digital age,
    • the national highway system which has led to many economic trade benefits,
    • nuclear power which is a big though unpopular answer to many national problems,
    • passenger airlines.
    Yes, there are bad examples too.
    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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