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Study: Autos bankruptcy would be 'catastrophic' to U.S.

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Bozita Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 10:27 AM
Original message
Study: Autos bankruptcy would be 'catastrophic' to U.S.
Source: Detroit News

Monday, December 8, 2008
Study: Autos bankruptcy would be 'catastrophic' to U.S.
Alisa Priddle / The Detroit News


A bankruptcy filing by two of the Detroit Big Three would cost up to four times the $30 billion bridge loan the automakers seek from Congress over two years, according to a report released this morning by Anderson Economic Group and BBK.

The catastrophic impact would include a "complete shutdown of nearly all auto production in the U.S. for some time," according to Kriss Andrews, Managing Director and Automotive Practice Lead for BBK.

The study found the job loss, as well as the sharp decline in income from employment and tax revenue due to bankruptcy would be "unequivocally much higher than the losses from company restructuring with the help of federal bridge loans," the study concluded.

If General Motors Corp. and Chrysler LLC were to go bankrupt, as they have claimed is likely without an emergency loan, the study estimated more than 1.8 million jobs would be lost and the cost in federal and state tax revenue lost would be nearly $70 billion over two years.

Read more: http://www.detnews.com/apps/pbcs.dll/article?AID=/20081...
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navarth Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 11:01 AM
Response to Original message
1. yep.
I just hope we can make this the very medicine we need to get things shaken up to the point where those that need to will pull their heads out of their asses.

I'm a Detroiter and I've been bitching about the way things were done by the Big 3 for a loooooong time. How many people on DU would say they could see this coming for a long time?

I really do believe that a whole lot of people in the auto industry could see it coming too, and have tried to do something about it. My wife's neice is married to a guy who's on the inside of this issue, he works for a place that does the testing of cars for safety, reliability, quality, etc.

Over Thanksgiving dinner I picked his brain about it. Here are a couple of items I gleaned from it:

#1 There's not as great a difference in quality between the Japanese and American cars anymore. Fords come out very well, GM is doing well too.

#2 I asked him: why the hell don't these clowns make the cars we need RIGHT NOW? Or perhaps I should say, why haven't they been building them for a while now?

His answer was something like...'GM is HUGE like the government, it takes a LOT to turn the Titanic'. Something on that order.

....I just hope we can rescue the Titanic and fix the holes. AND we should definitely have strings attatched.
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Art_from_Ark Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 09:02 PM
Response to Reply #1
8. I've seen this coming for a long time
Dating back to the time when Detroit didn't learn from the first set of oil shocks in the '70s and farmed out all its small car production while focusing its own production on gas guzzlers.
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proud progressive Donating Member (358 posts) Send PM | Profile | Ignore Mon Dec-08-08 11:26 AM
Response to Original message
2. OK. a study conducted by whom? and then what?
do we give them a bridge loan so the suppliers can continue making the crap that goes into the cars that nobody wants? so that 'unsold' inventories can get even higher? so that the ceo's and their henchmen can keep getting their exorbitant salaries?
how about instead we let them go under; fund an account that will pay all blue-collars and 'lower' level white-collars a paycheck until they either find other work or we retrain them for other work;
take over all retiree accounts; provide health care until obama's plan gets passed; and, say fuck you to all the ceo's and their friends.
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Bozita Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 12:44 PM
Response to Reply #2
4. Here ...
Anderson Economic Group: Automaker Bankruptcy Would Cost Taxpayers Four Times More Than Amount of Federal Bridge Loans

SOUTHFIELD, Mich.--The effects of an automaker bankruptcy would inflict much higher costs to United States taxpayers, up to four times the amount of the proposed federal bridge loans if at least two companies failed, according to a joint analysis released today by Anderson Economic Group (AEG) and BBK, an international business advisory firm with extensive experience in the automotive industry. The analysis is the first comprehensive study of the likely costs of a bankruptcy declared by the Detroit automakers contrasted with the taxpayer costs of the requested federal bridge loans. The results were released during a press conference at BBK headquarters in Southfield, Michigan, and show that the nations economy would be far better served by providing bridge loans to the automakers.

We hope this research report provides policymakers and taxpayers with an objective, independent assessment of what an automaker bankruptcy would look like, said Patrick L. Anderson, Principal and CEO, Anderson Economic Group. The findings indicate a bridge-loan scenario would be the more financially sound choice of the scenarios currently under debate in Washington, with lower relative economic costs than not providing any type of financial support.

The study estimated direct taxpayer costs of multiple scenarios for a bridge loan, and a bankruptcy, over a two-year period. It revealed that the losses of employment, income, and tax revenue in a bankruptcy scenario are unequivocally much higher than the losses from company restructuring with the help of federal bridge loans. Under a bankruptcy scenario, which contemplates two of the three Detroit-based automakers failing, there would be more than 1.8 million one-year jobs lost, and nearly $70 billion dollars less in federal and state tax revenue over a two year time period.

The report shows the immediate impact of the collapse of even two automotive manufacturers that would only further exacerbate our current economic crisis and likely would precipitate a complete shutdown of nearly all auto production in the U.S. for some time, according to Kriss Andrews, Managing Director and Automotive Practice Lead, BBK. The other direct economic costs of a bankruptcy would be similarly distressing from additional debtor-in-possession financing of an already bankrupt automaker by the Federal government, to the disruption of the credit and related markets.

Additional conclusions of the report included:

more...

http://www.theautochannel.com/news/2008/12/08/288729.ht...
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Festivito Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 01:06 PM
Response to Reply #2
5. Wait a second. You don't even have to click to get that answer.
It's part of the excerpt.

What? Nobody wants their cars. Nobody's buying cars because they don't have a secure job, their pay has been effectively lowered -- although it looks like the same number is was a few years ago -- they know it's not going up, prices are, and they now know the recession is here and it will get worse.

What they don't want is to buy a car on credit for years when they don't know if they be able to pay the loan for a matter of weeks. It's not for a lack of car choices.

These are not typical CEO's that learn the literal law and then exploit the loopholes, these guys actually build something with knowledge they've gained from years in the car industry. And, they know the loopholes.

Hey, it's fun to shoot guns, but don't use your own foot for target practice.
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OhioChick Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 12:40 PM
Response to Original message
3. K&R
:kick:
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Azlady Donating Member (889 posts) Send PM | Profile | Ignore Mon Dec-08-08 06:14 PM
Response to Original message
6. Kick & recommend
I know if my car, a Ford gave up on me right now.... I'd have no vehicle as I can not afford one. I realize all 3 need to be making alternative vehicles, but also the condition of our economy is pounding not only the auto industry, but many.
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bemildred Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 06:43 PM
Response to Original message
7. Does this mean we are badly governed, that our leaders suck?
That we have come to this, without even a smidgen of action to fend it off beforehand? That nobody in power saw it coming, or cared enough to see it coming, until it was already a "catastrophe"?
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Xenotime Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 09:07 PM
Response to Reply #7
9. Hope and Change will show up just in time.
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