GM and Chysler Bankruptcies

[Kevin]

The automakers that remain will benefit from the lack of competition. But, what I'm talking about is the closing of plants, and reducing the capacity to produce a product.

Yep supply drops, and assuming demand stays the same, price goes up. Of course right now, demand has dropped too and I admit that supply is going to drop more than demand. I'll grant that the short term in the car market I'm talking about is still 5 years or so, not one year. But I also feel that someone will use some of that idle capacity that is still viable that gets shed when these people go belly up.

But this issue is not really new. Part (and I can not say how big a part) of the reason the Big 3 failed is because they didn't produce what the market wanted. Yep their big gas guzzlers still sold well, but they never made a good mid size or small size that people wanted. People were still buying those cars, they were just getting them where they have been for decades, imports. If the Big 3 had ever responded correctly to that issue the problems they are facing now would be smaller. I'm also aware that Honda and Toyota and other non US manufacturers are cutting back production because they are facing issues.

The other thing to consider is where demand is going to grow. I still contend that the demand is going to grow in the smaller car sizes that the failing companies had more issues in.

So to go back to your food issue. There were 100 acres, and there were 10 acres already sitting unused, because you still didn't acknowledge that there was unused capacity already out there. 50 acres were being used to produce corn, 30 for wheat, 10 for soy beans, and 10 for mushrooms.

We just lost all the mushroom acres, all the soy bean acres, 20 of the wheat acres, and 40 acres of corn.

So we are still making 10 corn and 10 wheat and can easily add 10 more of either. Damand for mushrooms has dropped significantly. There are people that wanted to import soy beans but were selling them for just a bit higher than what was being made here so they couldn't. The government is going to take over 30 acres and produce corn and wheat on it (GM is still going to make cars.

So I still say that we can easily still fill 60-80 of the production under the current plan and that we really only need what can be produced on 90 acres. In a few years we'll be using all 100 acres that we need to fill the demand again.

Lower quality vehicles will get purchased now too. Used cars that had a year or three of road life in them that got scraped before will be back on the roads, because yes cars that pass all the standards to be drivable get scraped.

And yes prices will go up in all the car markets.

This is an Obama *and* was a Bush problem. Paulson is out, but Geithner was his right hand guy. The Fed now is still the Bush fed, so where is the big *change*?

You of all people didn't really believe there would be? Obama campaigned on Hope and Change, not Change and Hope. He put the real promise first. :) I never said he was a great candidate. I've never had a great candidate to vote for in my voting lifetime though. :)

And this problem actually goes back farther than that. Didn't Reagan push a lot of regulation out on carmarkers too?

Also as I mentioned earlier, it's not like Japan doesn't have similar standards and they still seem to be able to produce vehicles that meet all our requirements.

It looks like in 2008, the big 3 made up 48.4% of the US sales. So we have to keep in mind that everything we are talking about is less than half of the total vehicles sold in the US. Yes, it will have an impact. But some of the trends and issues in the market are related to the GLOBAL recession. If that changes it will have impacts as well. Back in May of 08 Chrysler was only the 5th biggest manufacture in the US market.

Take a look at http://online.wsj.com/mdc/public/page/2_...sales.html. It's bleak, most everyone, included the Japanese companies are falling in sales by huge numbers. As I said demand is plummeting right now. But oddly look as what is going on, especially in the light truck market with the smaller companies. It's the only green numbers you see on the bottom chart.

As mentioned the US market has been doing what the European Market has been like for awhile. Volkswagon was the big winner of market share in 07 at 10%. The US market was already really a 6 company market. The Big 3 couldn't stay big even without the recession. Some of what we see was going to happen no matter what, and as I've said since there are other sources that have been entering the market for years, they are going to expand to exploit it more quickly than I think you believe.

Back in June of 08 it was looking like Toyota was going to take the world crown from GM (http://www.usnews.com/blogs/flowchart/20...champ.html).

There are also several Chinese manufacturers that have been looking to get into the US market. Do you not think they will try to step that up if all the Chrysler plants close.

You're thinking still seems to be rooted in a local market, not a global market.

Of course the thousands and thousands of people out of jobs (unless one of those Chinese plants does what Toyota and Honda have done and make plants in Kentucky, Ohio, Missouri, etc) they won't have incomes to buy cars with. Of course I covered that a bit in my falling demand.

Not so good for the 80% of people who do not live on a transit corridor.

Hah! I live in a town of 16,000 - 20,000, we do have a 24 hour cab company and if you plan really well you can get a greyhound bus to pick you up in the parking lot behind McDonalds. I don't live on a transit corridor. :)

I also realize that if circumstances hadn't forced me to, I wouldn't have willing gone without a car that long, but I couldn't do much about it. However it taught me some good lessons, and while I'm in process of fixing up an 88 Honda Civic to have as an option, I'll still get around on my bike and feet mostly. I'll still use my cooler attached to a two wheeler to assist me in shopping and getting clothes to the laundry mat.

I also realize that this can't work for everyone, but I would bet that over 40% of the population could get away with it, they just don't think they can. Honestly I hope they don't have to either. It can be a real pain in the ass and really limit options. But a car is not a requirement to survive in the United States.



On a final note I'm still not sure what you want. You don't want them to collapse, you don't want them propped up. What do you want to happen to a company that hasn't responded to the pressures that have been hitting them for decades. Do you think that if the Feds hadn't bailed them out they would have survived? We are going to have an aftermath. My personal opinion is that we would have been better of to get the natural aftermath of the failures than this crap we are going to have with the Fed in the middle, but I also feel that while it will hurt, that we'll be fine.