Auto sector bailout

[capricorn]

The Agricultre and Forestry industries contributed $26.9 billion dollars to the GDP of Canada in 2007.

Now, the Automobile industry contributes only $14.1 billion dollars to the GDP of the country, yet there is huge pressure on the Government for a bailout or stimulus for the auto industry???

Yet we want to throw a massive amount of money on an auto sector???

Taking your point on step forward, I ask why is all the angst concentrated on the auto industry?

General Motors has 12,574 active workers in Canada, Chrysler LLC has 7,865 and Ford Motor Co. has 7,402.

http://www.ottawacitizen.com/plants+close+...7953/story.html

In Canada, Statistics Canada said the economy shed more than three times as many jobs in November as economists had expected. The unemployment rate rose to 6.3 per cent from 6.2 per cent, as 70,600 jobs were lost, 66,000 of them in Ontario. It was the worst month for job losses since 1982.

http://business.theglobeandmail.com/servle...al_gam_mostview

Ontario lost 66,000 jobs in November alone yet there are in total about 28,000 employed by the big three. So Ontario lost almost three times as many jobs in November as there are in the total workforce of the big three.

Where is the balance in evaluating and acting to stop this bleeding of jobs? It seems the focus is on saving the auto industry and the other sectors are being ignored. I just don't understand it.

[Moonbox]

I cry BS on that argument. There wouldn't be fuel rationing because ethanol was dropped. I don't trust ag economists on fuel issues. I simply don't.

The jobs come at a very high cost. The carbon is only reduced a little compared to other choices out there.

I don't agree with jdobbin often, but I'm totally with him on the ethanol fuel subsidy.

It's one of the many things that makes me sometimes question voting conservative lately.

It's less efficient fuel, does nothing for the environment, and simply increases the cost of gasoline due to its high refining and transportation costs. Ethanol fuel is the biggest and best example of backwards thinking the world has going for it right now.

[Oleg Bach]

Perhaps there are some crazy folks at the controls? Mental illness is not just the affliction of the poor. Who knows - maybe as the old guard is aging and dying out - they have figured out that they can't take it with them - so they might just be attempting a crash and burn - and take us with them..that is a possiblity. In the alternative..it may be a case of a system becoming so populated and complex that it has become unmanagable...Computer connections globally are a new curse that can spread the disease of fear and loss of confidence instantaneously...no one thought of that..or invisioned that our technology blew up in our faces. Then there are the environmentalist lunitics that want to rid the nation of auto-mobiles...some powerful men really like the natural world...and wish to save it - maybe it's time to run a high speed train down the Don Valley...maybe car use should be restricted to sunday driving like Henry Ford originally invisioned...It will all work out - the ride will be scarey...but don't panic.

[Moonbox]

Ontario lost 66,000 jobs in November alone yet there are in total about 28,000 employed by the big three. So Ontario lost almost three times as many jobs in November as there are in the total workforce of the big three.

Where is the balance in evaluating and acting to stop this bleeding of jobs? It seems the focus is on saving the auto industry and the other sectors are being ignored. I just don't understand it.

There is a ton of spill off from the Big 3. For every job lost at the Big 3, there's probably 2-3 jobs lost in parts manufacturing and service elsewhere in the country.

Make no mistake, there's plenty of jobs to be lost here. My problem with bailing out the Big Three is about the same problem I have with the ethanol industry. On their own, they're all completely failed business models. They're not sustainable and the cost of keeping them afloat is higher than the benefit they provide.

Sustaining the Big Three under their current model is only going to cost taxpayers more in the future. Either they and particularly their unions can negotiate to restructure, or we can replace and restructure them after the creditors go after them. There's a lot of infrastructure and machinery we're talking about here. It's unlikely that the creditors would scrap it for salvage. No, it's more likely some sort of new company would emerge from the debacle, without a militant union haunting it.

[capricorn]

There is a ton of spill off from the Big 3. For every job lost at the Big 3, there's probably 2-3 jobs lost in parts manufacturing and service elsewhere in the country.

I can appreciate that Moonbox. The domino effect so to speak. But what does that say about those parts companies ability of foresight, planning and adaptation? They must have seen this coming. Unless of course, the entities decided together and behind the scenes to go for the big (government) payoff.

Make no mistake, there's plenty of jobs to be lost here. My problem with bailing out the Big Three is about the same problem I have with the ethanol industry. On their own, they're all completely failed business models. They're not sustainable and the cost of keeping them afloat is higher than the benefit they provide.

Why keep a business afloat that is unprofitable and doomed? With the US auto industry specifically, it seems there's a battle going on to win public support solely on the basis that a bailout is the right thing to do for the "country". UAW's response to the suggestion of wage parity with Toyota was that it would give a competitive edge to its competitors. I may be wrong but it looks to me the UAW is playing the patriotism card.

Sustaining the Big Three under their current model is only going to cost taxpayers more in the future.

If Canada and the US fall for it now, we'll be expected to present a life line ad infinitum. My feeling is that in the end, the taxpayer will come out short and will not even own any shares in the new nationalized auto industry.

[blueblood]

Considering that the dairy subsidy has nothing to do with food security, we can honestly say that it about income supports.

I cry BS on that argument. There wouldn't be fuel rationing because ethanol was dropped. I don't trust ag economists on fuel issues. I simply don't.

The jobs come at a very high cost. The carbon is only reduced a little compared to other choices out there.

That's what ag economist Don Bosquet was saying. He's never steered me wrong yet. The vast amount of fuel produced kept prices at the pump from really going out of control. The tradeoff was some Mexicans went without tortilla flour.

I'm not a fan of the dairy industry capping imports. i don't mind if they collaborate and cap their own production, but the capping of imports fries my bacon because it throws a wrench into every WTO negotiation.

It's less efficient fuel, does nothing for the environment, and simply increases the cost of gasoline due to its high refining and transportation costs. Ethanol fuel is the biggest and best example of backwards thinking the world has going for it right now.

Who cares if it's less efficient. More fuel gets exported to the states, more jobs are created, and it increases the value of our exports. Much better than the old fashioned fire hose spending before. It has kept gasoline prices in the US down due to the sheer volume being produced. The federal gov't wisely invests in the Tar Sands projects, is that backwards too?

[Oleg Bach]

At present those that were once in control financially are poor. Those that were under their auspice are also poor. The system has rendered all equal. The illusions of fiat currency has run it's course. The richest man in the world is now exactly at the same state as the poorest on the planet. The time for posturing is over. What should take place in order to ensure common survival of all, is mutual co-operation...put the ego aside for now. Those that thought they were better than their fellows now realize that in the end all are the same - the game is over.

My suggestion is do what has to be done - we all have children and we all love our human existance in this beautiful place. It's not that difficult...nor is it overly complex and daunting. Move forward in respect. Make sure that all survive--- I remember one lesson taught to me by my father. It consisted of one statement "There are others" - this is not a competition.

[Topaz]

$20-25/hr is enough. If not work someplace else.

Well, I know one factory that was US owned and they said the Canadian govts have to come up with a loan or we are pulling out of Canada. This company has factories in the US and in Mexico and is always threatening the union. So in 2003 the union took a pay cut for new employees, went from .35 drug plan to 5.00, no COLA and have been 10 hour days plus they have to work on Friday if the company requires it. They offered $25,000 for retirees and some took it and a lot of them later regretted it because some couldn't find other jobs and the final number after taxes was 18,000 if they didn't put into RRSP. Five years later this same company wanted to buy GMC division then the economic crisis hit and now that's gone. So when the contracts come up next year, the CAW is going to be there reminding the company, we helped bring you back . So the 20-25 hr is what most people have to make to be able to live and I feel for the young guys trying to make on 12.50.

[Oleg Bach]

Started to laugh...could not even finish the read. You get it...it's a common underworld shakedown..people who do not even work on the line are expecting a cut of the action...well it does not work that way..shake downs are old hat..better learn that YOU are part of society and must contribute not extort.

[HistoryBuff44]

G&M posting

I find this a frustrating topic, I realize the job loss potential here but at the same time as the article talks about 3.4 billion for 110,000 jobs. thats about what 33K per person.

Seems hard to ask people earning less than what those union people make to anti up for them when they refuse to take pay cuts.

Same goes for the companies, hopefully they use the money to actually try and build better vehicles than the japanese and Germans are making instead of using it to lobby the governments to lower emmission restrictions and such.

Still, its gotta be tough for an industry that takes years to design and build a vehicle to react to fuel prices that fluctuate like this. But the other auto makers dont seem to have this issue as much.

[Smallc]

3.4 billion for 110,000 jobs. thats about what 33K per person.

You're thinking of direct jobs. According to the Ontario government, there are 400 000 jobs at stake.

[Hydraboss]

Uhmm...who cares?

Why should all of Canada pay (forever) for a bunch of auto workers from Ontario? Where the hell was the concern in the 80's for Albertan oil workers????? Oh, that's right...there wasn't any.

If there are 400,000 people in Ontario that will be out of work, best call Kwebek and ask for help.

$150,000 a year to install Screw #112-756 in Dash Panel #443-34. Wow, do I ever feel sorry for those guys! Must be terrible to only have a few hundred thousand in the bank and investments and have your job threatened. (After all, aren't all auto workers rich? Isn't that what was said about Alberta oil workers?)

Let them starve.

[Moonbox]

I can appreciate that Moonbox. The domino effect so to speak. But what does that say about those parts companies ability of foresight, planning and adaptation?

It depends on the company. Some companies have diversified while others will be in for a beating.

Why keep a business afloat that is unprofitable and doomed?

We shouldn't. Unless the unions are willing to make gigantic sacrifices to earn an actual FAIR wage for their skills and training (similar to Toyota/Nissan/Honda wages), throwing money at the Big Three is an exercise in idiocy.

If Canada and the US fall for it now, we'll be expected to present a life line ad infinitum. My feeling is that in the end, the taxpayer will come out short and will not even own any shares in the new nationalized auto industry.

I completely agree with you. I'm cool with a bailout if it's going to create a totally new dynamic for Big Three automakers but unless that's going to happen they can stick it up the arse. Given that our Fed government has approved a bailout I can only hope that the US plays tought with the UAW...hopefully that will make sure we aren't going to be paying for it in the future.

[TCCK]

How about both Canadian and US Govt. get smart, forcefully remove the union in the Auto sector, abolish the guaranteed pension after 25years work and do a minor wage cut.(They will have more money as they are not paying into the union.)

I have a buddy that started to work at GM when he was 19 years old fresh out of high school no training. 7 years ago when he turned 44 he took early retirement and has a 60% of his best 5 years of pay checks so earns like 55K /yr on pension. Then took 2 years off and then applied at Ford, because of his years of experience and all the management couses GM paid for through union pushing, he got a cushy management job. He was just about 47 when hired, he can work until 65 and get a 41% pension when he retires from there. He will make more in a year retired than most people living in Canada that have a Bachelor or Masters degree and 10-15 years on the job IN HIS RETIREMENT DOING NOTHING!!!!

Now that is wrong.

I say make the pensions not kick in until any worker has quit work and hit the ripe age of at LEAST 60yrs old. I don't give a crap if you retire at 45-50 yrs old. The union forces the auto companies to shove millions into the pension fund that the union manages (or let us be clear MIS-MANAGES) and then the pension costs are pushed on to the car consumers and the North American companies have to cut corners to compete in the auto market because the Asian, Japanese and European auto manufacturers would never put up with that type of crap.

SAVE THE USA and Canada, abolish union control of companies. Let workers freely choose if they want to work non-union without fear of heavy handed reprisial from some union thug. Or turn the unions into what they used to be just a lobby force to make sure businesses treat employees fairly but do not give them full control to abuse the companies economic situation.

And YES I would shut my company down overnight if the union tried to get in. I've done it before and I would do it again!!! But I pay my employees well and they tell the union people that come knocking to recruit to shove it where the sun doesn't shine because they know they would lose out not gain.

[Michael Hardner]

How about both Canadian and US Govt. get smart, forcefully remove the union in the Auto sector, abolish the guaranteed pension after 25years work and do a minor wage cut.(They will have more money as they are not paying into the union.)

I have a buddy that started to work at GM when he was 19 years old fresh out of high school no training. 7 years ago when he turned 44 he took early retirement and has a 60% of his best 5 years of pay checks so earns like 55K /yr on pension. Then took 2 years off and then applied at Ford, because of his years of experience and all the management couses GM paid for through union pushing, he got a cushy management job. He was just about 47 when hired, he can work until 65 and get a 41% pension when he retires from there. He will make more in a year retired than most people living in Canada that have a Bachelor or Masters degree and 10-15 years on the job IN HIS RETIREMENT DOING NOTHING!!!!

Now that is wrong.

If it's wrong, then let the companies die and have something else take their place. I don't think the government should be taking sides to preserve this unhealthy relationship. If the Japanese auto companies are getting on better with their workers, then they should survive. Capitalism is about having the best businesses win, isn't it ?

[Jerry J. Fortin]

It looks like the Canadian tax paying citizen is going to support corporate interests. Great, all I wanted for Christmas was a tax reduction, or at least a tax deduction. Here we go, the citizens of Canada are going to spend billions of dollars on Ontario and Quebec to support their industries. So the rest of Canadian citizens can look forward to paying for this corporate welfare for years to come with no realized benefit to their provinces whatsoever.

Now can somebody tell me what the net benefit is to being a citizen of confederation in any province other than Ontario and Quebec ?

[Smallc]

Now can somebody tell me what the net benefit is to being a citizen of confederation in any province other than Ontario and Quebec ?

Every province gets a great deal of money from Ottawa, and having a strong Ontario is a good thing. You also forget that car dealerships are in danger here as well as suppliers that exist across the country. The ripple affect of the big 3 going under would be catastrophic. It may even drag other car companies down with it. Confidence in the market would be gone. GM and Ford can't be allowed to fail (though I think Chrysler probably could). Ford isn't in danger of failing yet and won't be for a while, but GM is on the brink and so is Chrysler. If the other two fail it will kill Ford and most of the domestic operations of all brands for a long time. It is estimated that in the US there are somewhere between 3 - 4M jobs at stake and in Canada I've heard a low estimate of 400 000. When you take everything into consideration, its probably closer to 1M. We don't want these companies to fail. It will destroy the North American economy.

Edited December 13, 2008 by Smallc

[Jerry J. Fortin]

So we institute corporate welfare?

How did the last little investment in the auto industry workout again? I seem to recall that the province of Ontario handed out millions of tax dollars and then the plant closed. What are the chances of the same thing happening again?

This benefits Ontario and Quebec, it does not benefit the rest of the nation. The rest of the nation is going to have to pay taxes for which no service or benefit will be realized. This isn't a small thing folks, if you think that this 3.2 billion is an end to it then you are sadly mistaken. The total cost of this bailout is somewhere over 100 billion dollars.

Our Prime Minister has taken the position that our nation will cover 20% of the cost of the bailout. His intent is to keep the 20% of production in Canada. Good luck on that. Citizens can reasonably expect a 20 billion dollar debt, but don't bet on keeping the jobs.

[ToadBrother]

Every province gets a great deal of money from Ottawa, and having a strong Ontario is a good thing. You also forget that car dealerships are in danger here as well as suppliers that exist across the country. The ripple affect of the big 3 going under would be catastrophic. It may even drag other car companies down with it. Confidence in the market would be gone. GM and Ford can't be allowed to fail (though I think Chrysler probably could). Ford isn't in danger of failing yet and won't be for a while, but GM is on the brink and so is Chrysler. If the other two fail it will kill Ford and most of the domestic operations of all brands for a long time. It is estimated that in the US there are somewhere between 3 - 4M jobs at stake and in Canada I've heard a low estimate of 400 000. When you take everything into consideration, its probably closer to 1M. We don't want these companies to fail. It will destroy the North American economy.

And yet there seems no guarantee that throwing money at them will save their bacon. I say "If we're going to nationalize, let's just nationalize". In other words, oust management and union leadership, seize control of the companies and retool them. Maybe North America can't afford to live without them, but this is a sufficiently onerous demand on the taxpayer, and a sufficiently nationalizing-like strategy that there seems to be a strong case for turfing the turkeys who got them into this mess.

[Smallc]

there seems to be a strong case for turfing the turkeys who got them into this mess.

I can almost assure you that Rick Wagoner will gone gone from GM. There is no reason to fire Nardelli from Chrysler as he just started, and no reason to fire Mulally from Ford as he only started at ford in 2006, and everything at the company has improved since that time. Each of them is in a different position in terms of their management team, and each of them are in this position for different reasons.

GM is here because they thought that selling cars at any price, profit or not was the best way to go. Chrysler is here because they were screwed by Daimler, who gutted them, deprived them of product, and destroyed any quality they had. Ford is here because a former CEO spent too much money on luxury brands that never should have been bought. Those brands took away from the others in that resources had to be shared (which was too much of a split, even considering that ford had the worlds largest R&D budget at the time, I think they are still second or third in that regard).

Gm and Chrysler need monumental change, but they don't have the money to do it. They need money now to survive. Ford has already went through much of the change and its continuing, but it is expensive, and they may need the secured lines of credit their asking for in about a year if the market stays under 14M units. No one can survive if this much smaller market is continued. I fear that if we let one auto company collapse, it will jsut be the beginning. Nissan - Renault, Honda, and even Toyota aren't immune to any of this.

[Smallc]

So we institute corporate welfare?

How did the last little investment in the auto industry workout again? I seem to recall that the province of Ontario handed out millions of tax dollars and then the plant closed. What are the chances of the same thing happening again?

This benefits Ontario and Quebec, it does not benefit the rest of the nation.

First, this isn't corporate welfare, these are loans, and the companies will pay them back if they survive, just as they have done in the past. We have no idea what this will cost, but I don't think we can risk the disappearance of up to 5M jobs from North America. I'm not sure what would happen with those kinds of job losses.

The last investment in the industry that you referred to came From Ottawa and went to Ford. The plant is being retooled as we speak to prepare for assembly of a new fuel efficient engine line.

There are out industry related jobs in many provinces, even if you don't recognize it. There are dealers, suppliers, and many other industries across the country that are dependent on the auto industry.

Edited December 13, 2008 by Smallc

[Huston]

I'm not sure what would happen with those kinds of job losses.

A retooling of the economy that will actually work.. but of course they won't work, because it is regulated against the small business. It is small business that creates real jobs, that way massive job loses would not occur in the first place. Why should we keep this flawed system together. What did people do with all their money? Oh that's right, they want people to keep spending, because they think that is what creates jobs. To keep these jobs, they must keep producing. I am sorry but the current sysent system is wasteful, it doesn't matter if they are fuel efficient cars, they will still be evironmentally, economically and socially unsustainable, all because they need people working their entire lives because they are wastefully consuming, supporting these unsustainable nationalized corporations.

[Oleg Bach]

It's really not a case of paying back the "loans". The public will never really know if their money is ever payed back. What this situation hindges on is jobs. IF - we send them the money and layoffs contiune to occur. Then logic dictates that someone absorbed the money and the present status quo continues are per usual. This is not good enough. Three billion dollars should be used to ensure continued full operation of the car plants - and suppliers. It should be full steam ahead - and there should be a concerted effort to enforce domestic sales of domestic product.

IF we give them OUR money as common Canadian shareholders in the Company and the people at the top simply take the money and dump the labour force causing more strain on the economy and social resources - then what we have is grand fraud on a level never seen before in this or any other nation - Before the money is handed over - there had better be a personal insurance from the executives that they will be personally held liable - and sued personally with no corporate glob to hide behind. It does not make sense to hand over 3 billion odd bucks and have them walk away with the public holding an empty bag - and this could happen.

[bush_cheney2004]

..... It should be full steam ahead - and there should be a concerted effort to enforce domestic sales of domestic product.

You can't force the market to buy cars...Norte American sales are down from a peak of 16.5 million units to about ten million. Who's going to buy the excess inventory if you maintain even current production levels?

...It does not make sense to hand over 3 billion odd bucks and have them walk away with the public holding an empty bag - and this could happen.

Nope....but it sure makes sense to take it.

[Huston]

First, this isn't corporate welfare, these are loans, and the companies will pay them back if they survive, just as they have done in the past.

Going back to another reason people need jobs, is that their money is worhtless. And a loan needs to be guaranteed. Money need to become available, and so the government has to borrow the money, like they do with student loans, or print more money. What if the auto industry cannot pay off the loans? Or goes back to the exact same problem. It doesn't matter what the auto-industry does, their problems are financial, not evirnmental. People are not buying them because they cannot afford them, and even more today than ever. What market are they going to make this money from? it is like in highschool, they encourgae you to go to university, of course, the student is never educated on the matter and they spend their money on worthless liberal art degrees.. or well their debt. They then go into the market and.. oh there is not market for this. Should we then make a fake market for this? Well.. yes, that is point of schooling. It create oppotunities to give these people, who have no practical knowledge, to work for large corporations that are wastefull with money, because it is the corportion who are employeed by the government, who wastefully spends money, which in turn increases inflation, thus effecting the poor, or those who have no work.

Ah, capitalism has been dead for quite sometime. It has been hijacked by the state for a corpocracy. A feudal state where people are dependant, utterly, on the corporate lords. And of course, there is no opportunity for self-reliance because regulations are for the corporations and against those who bring affordable, efficient, and new products to the market.