Tuesday, December 16, 2008

Rooting for the Competition

Not only does God favor a loan for the Big Three, but the Japanese automakers are praying that none of the American companies folds.

Yuri Kageyama of The Associated Press reports:

"But now as GM and the entire U.S. auto industry teeter on the brink of collapse, Toyota and other Japanese carmakers are hardly rejoicing. They say the bankruptcy of any of Detroit's Big Three would spell serious trouble for them as well.

"Should that happen, 'the damage to our business is certain to be tremendous,' Toyota Motor Corp. spokesman Hideaki Homma told The Associated Press on Monday. 'The conditions for the U.S. auto market are extremely tough right now, and any additional negative is sure to make things worse.'

"One major problem is that Japanese carmakers in the U.S. share many of the same parts suppliers. If a Detroit automaker were to collapse, suppliers would likely follow, setting off a chain reaction that could would wreak havoc for Japanese production in the U.S., a vital market."

Republican Senators from the South, are you listening? Probably not.

Thanks to Jim Holbel for finding this one.


  1. How many people in this debate are mistakenly (or disingenuously) using "bankruptcy" as a synonym for "go completely out of business and lay everyone off"?

  2. Rand, would you contract with a homebuilder in bankruptcy to construct a new house for you? Would you invest in a mutual fund with Fidelity if it were in bankruptcy? Would you sign up for a membership at a gym in bankruptcy?

    I understand your point, but I think it's a reasonable to assume that bankruptcy could kill existing sales, which are already plummeting. Maybe not, but why chance it? Why not simply force restructuring as a condition of a the loan to the Big Three?

  3. The companies are already functionally bankrupt. People who buy cars from them are already taking that risk.

    Here's what I wouldn't do. I wouldn't buy a product from a company that is picking my pocket by going to Congress for a bailout, rather than do a Chapter 11, like everyone else has to, which is what will be necessary to get out of the dealer agreements and archaic and inefficient union work rules and contracts that have been dragging them under for years. I'll buy from some other company, no matter what its nationality, and regardless of how much loyalty I might have because my family works (and I have worked) there.

  4. Yes, I'm sure we've all heard some shoddy UAW stories... where they don't work as efficiently as they should. I know I have. So why doesn't GM break the union then? Now's the time, if any...

  5. I don't see breaking up the unions as the answer. The union aspired to be exactly as strong and corrupt as the auto administration was - no surprise. They have pretty much come to their senses, around the same time the CEOs did. Nationalizing health care could be the answer. So could, perhaps, letting just a third of the Big Three go.


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