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If GM Closes, wouldn't a foreign car company quickly move in and purchase the assets at a fire sale price and rehire most of the workers anyway? They have skilled workers, factories and an infrastructure.
Just like the restaurant on the corner that goes out of business due to poor food and management that is replaced by something better because there is still a demand and physical location ready to start up.
The Japanese auto makers are cutting production, why would they buy the factories? The Japanese are only going to build the cars here that they sell here and their current plants are now under utilized. It would make no sense to buy US factories, they would just sit empty.
If GM Closes, wouldn't a foreign car company quickly move in and purchase the assets at a fire sale price and rehire most of the workers anyway? They have skilled workers, factories and an infrastructure.
Just like the restaurant on the corner that goes out of business due to poor food and management that is replaced by something better because there is still a demand and physical location ready to start up.
Are you sure?
Honda cuts North American production again: Financial News - Yahoo! Finance (http://biz.yahoo.com/ap/081212/honda_production_cuts.html?.v=5 - broken link)
Toyota to cut more production in North America - Yahoo! News (http://news.yahoo.com/s/afp/20081210/bs_afp/japanuscanadaautocompanycutstoyota_081210050119 - broken link)
Yes they are cutting production because sales are down. But a certain number of cars are going to be sold every year regardless, and trade barriers make it difficult for to many of them to be produced overseas. If the Detroit Car Production Companies (GM, etc) were to close- then someone else would have to pick up the slack. The GM and Chrysler plants would be bought by Toyota or Honda and in the end the same number of cars would be produced in America regardless of who owns the companies.
The number of workers would be cut but they are already due to slower sales, technology and the fact that better cars do not require people to buy more often. In the final analyis the total number of people who work for the auto companies and their suppliers etc. should remain the same regardless of who owns them.
Again, their current factories are under utilized. They won't touch a new factory until their current ones are operating near full capacity.
Japanese businesses aren't the sort to buy things "just in case". If they start reaching capacity then they will start to think about new factories.
But it is true that at least some of the workers from GM, ford etc will theoretically get employed by other auto makers. But this really only applies to assembly line workers, which don't represent the majority. The Japanese autos won't be hiring GM, Ford engineers, research and development staff etc.
In the short term though, even the assembly line workers aren't going to get hired. There is currently a big oversupply of autos that will take a couple of years to cook off.
Allowing the US autos to fail will mean significant job loses both short and long term. Seems sorta stupid to let at least 1 million jobs get destroyed when you need to implement a huge fiscal stimulus to create jobs. I really don't think people realize....to what degree they are playing with fire. If the US autos fail that could tip the US into a major depression. The failure of these companies would shock a system that is already on the verge of collapse.
First, what is the level of technology at the plant and can it be retooled for their purposes.
Second, nobody wants the UAW involved in their plants. And they can not be kept out if those same plants are purchased. Maybe for a short while, but eventually they will be in and wages will be untenable again to maintain a business.
Third, location isn't necessarily everything in the auto business. While I agree that auto sales will go up for other manufactureres if any of the big 3 go down, I think the wealth will be spread around enough so as not to be a huge boon to any one particular company- although hiring at those plants will increase somewhat.
Well, if GM has such a huge amount of "asset", how did it find itself in such a deep hole? UAW played a major role, but greedy union is far from the whole story. Cold hard fact is technology wise, Big Three has been trailing Japanese auto companies for decades, why do you think back when gas was $4 a gallon, GM still could not crash out a hybrid to meet the demand? THEY DON'T HAVE THE TECHNOLOGY. Why do you think Toyota assembly line can assemble different type a car while GM assembly line can only assemble a single type of car? THEY USE OBSOLETE TECHNOLOGY. GM has nothing Toyota wants, Daimler practically had to pay to sell Chrysler. Their dealer network is more bloated than 400 pounds fat ass. Their technology is decade behind cutting edge. Their workers have certain attitude problems that don't seem to fit well with Japanese companies, their managers, well, they believe global warming is an sham and they turned their companies into SUV&Pick Up builder, why do Toyota want any of these? You tell me. Not to mention Toyota is always a companies stick to internal growth. If Toyota wants something, it develops internally, that's Toyota's way of doing things.
The Japanese auto makers are cutting production, why would they buy the factories? The Japanese are only going to build the cars here that they sell here and their current plants are now under utilized. It would make no sense to buy US factories, they would just sit empty.
Maybe, but remember that the "big 3" still sell millions of cars per year, and that demand needs to be met from somewhere. The transplants could get additional productivity from the manufacturing capacity it already owns, but probably not enough to meet the entire North American demand of Ford, Chrysler, and GM.
The other question is what happens to the global assets of companies like Ford and GM? They are making profits from those operations (hmmm...no UAW) and would probably sell or continue to operate them, even if their North American operations ceased or were severely curtailed.
Yes they are cutting production because sales are down. But a certain number of cars are going to be sold every year regardless, and trade barriers make it difficult for to many of them to be produced overseas. If the Detroit Car Production Companies (GM, etc) were to close- then someone else would have to pick up the slack. The GM and Chrysler plants would be bought by Toyota or Honda and in the end the same number of cars would be produced in America regardless of who owns the companies.
The number of workers would be cut but they are already due to slower sales, technology and the fact that better cars do not require people to buy more often. In the final analyis the total number of people who work for the auto companies and their suppliers etc. should remain the same regardless of who owns them.
All these points ignore the fact that if American automakers shut down, the economy would freeze up like pee in Antarctica - the number of vehicles sold would plummet.
All these points ignore the fact that if American automakers shut down, the economy would freeze up like pee in Antarctica - the number of vehicles sold would plummet.
Maybe, but that also assumes the false premise that bankruptcy means "shut down" and it doesn't. Companies routinely go into chapter 11 and reorganize their debt and their business and come out the other side stronger than they went in. That's the way it's supposed to work...not the spectacle we've been seeing lately.
The false premise that "people won't buy cars from a company in bankruptcy" is just that, especially if the government and 3rd parties guaranteed the warranty. People are fooling themselves if they think that the status quo is anything but an undeclared bankruptcy, with or without the government throwing a few billion in for good measure.
Until the fundamental problems are resolved, these companies will be on the brink.
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