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Big-Three Bailout and National Security

November 18, 2008 - by Donny Shaw

It looks like the votes won’t be there this week for Congress to pass a $25 billion bailout for the Big Three Automakers. But check out this video GM has released explaing what they think would happen if Congress let the companies go under:

Personally, I’m mainly struck by the Klaus Schulze-esque soundtrack. The AP however, looks at the information presented in the video and challenges one of the most compelling parts:

>Desperate for a $25 billion government rescue package, U.S. automakers and their allies in Washington are warning that U.S. national security would be harmed if Detroit goes under and takes its vast chain of parts suppliers along with it. Truth is, that argument is a tough sell.
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>General Motors, Ford and Chrysler long ago exited the defense business. Many of their suppliers make the axles, transmissions and engines used on military vehicles, but defense experts see little risk to the armed forces beyond paying higher prices.
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>"It’s a stretch, quite frankly," said retired Army Lt. Gen. John Caldwell, chairman of the National Defense Industrial Association’s combat vehicles division. “I think they’re grasping at straws.”
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>[…]
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>When the Pentagon needed MRAPs in a hurry, it turned to traditional defense companies like Force Protection in South Carolina, BAE Systems of Sealy, Texas, and General Dynamics Land Systems in Canada. Similarly, the Army and Marine Corps are buying a vehicle to replace the venerable Humvee and awarded contracts to manufacturers with heavy experience building military trucks.
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>"The defense sector has become so specialized that much of it is completely separate from the commercial sector," Wood said.
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>Detroit’s Big Three was uninterested in a partnership to build the mine-resistant vehicles, which can weigh 20 tons or more and have a unique V-shaped hull to deflect blasts, said Damon Walsh, Force Protection’s executive vice president.
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>"It just wasn’t sufficient volume for them," Walsh said.

And here’s a link to retired General Weley Clark’s New York Times op-ed from Monday arguing for the bailout, and saying that what’s good for GM is good for the Army.

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Comments

  • Anonymous 11/19/2008 12:09am

    The other serious flaw in their argument is that it’s extremely unlikely that all three of these companies would completely collapse. Demand for automobiles has dwindled, but it hasn’t evaporated altogether. There’s plenty of demand to continue to support an efficient, innovative domestic auto industry.

    I’d much rather see that Congress provide seed money to some of the best and brightest from the big 3 (the ones who, perhaps, haven’t been able to pursue their own direction) and let them startup new, smaller companies that can design and deliver more innovative products and disrupt the market enough to keep it alive.

  • Anonymous 11/19/2008 9:08am
    Link Reply
    + -1

    Anything runs without gas?

    Aircars.

  • Anonymous 11/20/2008 1:40pm

    Sounds like a good idea to provide seed money to only the best, however if one of the big 3 goes under, all of them will, due to the fact that the majority of suppliers that provdie parts to one provide parts to the others, and the majority of the suppliers would go under. The majority of the suppliers would go under due to the fact that they could not withstand the lose of payment from the bankrupt car company, and thus taking down the other 2 of the big three.

  • zane 11/20/2008 4:44pm

    Even if they did all entirely collapse, it’s extremely that all that manufacturing capacity would completely evaporate. They’d declare bankruptcy and re-organize their operations while protected from their creditors. Current shareholders would lose their shirts (most of them already have) and current creditors would take ownership. They’d slough their pension obligations to the federal government (just like the airlines do every time they go bankrupt), and re-open for business. Or they’d sell themselves off to other manufacturers, like Toyota, who would probably be happy to take over all that capacity at bargain basement prices, and retain a lot of the employees and plants right where they are.

    If they were really concerned about how horrible their bankruptcies would be for the nation, they would have made better long range business decisions instead of turning the quick and vulnerable buck making enormous, inefficient vehicles. This video is pure propaganda.

    Cars can be fun to drive, safe, and highly fuel efficient if they’re light weight, aerodynamic, and made out of composite materials instead of steel. Read “Winning the Oil End Game” by Amory Lovins for more information. It’s all online: http://www.oilendgame.com or check out this short interview: http://www.youtube.com/watch?v=8D-uhKHy7mk or search around for “hypercars”. If the Big Three aren’t willing to innovate on that scale, screw em.

  • Anonymous 11/30/2008 10:52am

    So the economy has got to the stage where even the big 3, the stable bastions of American industry, need to be rescued. Isn’t it clear by now that we’ve made a pretty big mistake somewhere down the line? In 1978 the American auto industry had the chance to reinvent itself with a Hydrogen cell that used hydrogen created from water using solar power, and ran essentially normal cars (Jack Nicholson had a hydrogen powered Chevy I think) for the equivalent of 35 cents a gallon. This was 1978! Thirty years later, where are we? What have we done with this idea? Where is this hydrogen cell? Probably in a file in the offices of Shell, where nobody else can use it to compete with big oil.
    So let’s do the right thing this Christmas – let’s save those jobs at Ford, GM and Chevy. But let the bailout money come from those oil companies, not from the pockets of taxpayers.

  • Anonymous 12/03/2008 1:17pm

    Let them fail. Let the free market run it’s course. Somebody with bigger and better ideas will pick up the pieces. That is how the free market stays healthy.

  • Anonymous 12/04/2008 8:36am

    I agree with letting them fail, and reorganize. These three companies have been seriously mismanaged for many years, and it disturbs me to think that a government bailout is even being considered. All the CEO’s of these companies should be fired and replaced if any bailout were approved. They have failed in critical areas of R&D, and in basically promoting the American Auto industry in a viable manner, and they in turn have been compensated with millions of dollars per year. It just doesn’t make sense…Leaders of our nation need to keep a sharp eye on these critical industries in an effort to prevent these catastrophic failures that affect the entire economy. PKPODV

  • gmjason 12/04/2008 1:47pm

    I am a middle manager at General Motors and have to say there has to be a clear understanding on how important our industry is to everyone. I will agree there have been mistakes made in the past, but realize we have been in business for 100 years. Helping the country through 2 World Wars, 9/11, Katrina, etc. When we need help is my country going to turn their backs on us? GM and Ford both gave 10 million for 9-11 relief efforts, Honda and Toyota gave nothing. GM employees also give money and lots of time to great charaties such as: Habitat for Humanity, United Way, Toys for tots, etc. Let’s get on board America and give the LOANS to good American companies.

  • Anonymous 12/07/2008 4:20am

    A loan to the big 3 is only a temporary fix. What good is it going to do if they get the money they want but they still won’t be selling cars? What congress should do is offer discount certificates to the consumers for up to 75% off on any new vehicle. This way, the big 3 gets the money they need to re-group and get rolling again. They won’t have to worry about paying back the money because the tax payers will benefit by purchasing new vehicles and the employees will keep their jobs because the cars are moving again. Either something like that or just give the big 3 the money, let them lay off thousands of employees, and listen to them beg again in 6-10 months for more money. Money of course that they will never pay back.

  • Anonymous 12/07/2008 6:17am

    5. Should USA tax payers fund companies not committed to maintain their business (operations) in USA? Should other countries (NAFTA, BRICK and others) which have benefited from the investments made by BIG THREE, contribute an equal (proportional) share to keep BIG THREE afloat (on life support)?

  • Anonymous 12/08/2008 7:54am

    75% off, what do you think this is Wallmart? we’re not talking $20 dollar items here. I don’t agree with the bailout either but that’s not the way to do it…….The 3 companies need to restructure, when I say this I mean from top to bottom, they get $25 per hour to sweep the F!@#ing floor are you kidding or $75 per hour to put a bolt on a steering wheel? This is by no means the employees fault I’m saying…..

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