I see the Obama team is already denying this:
"President-Elect Barack Obama’s transition team is exploring a swift, prepackaged bankruptcy for automakers as a possible solution to the industry’s financial crisis, according to a person familiar with the matter.
Obama’s team has already contacted at least one bankruptcy- law firm to say that Daniel Tarullo, a professor at Georgetown University’s law school who heads Obama’s economic policy working group, would call to discuss the workings of a so-called prepack, according to this person.
Since the election, Team Obama has become "trial balloon central" (if they were genuinely serious about firing the leaker, Rahm Emanuel would hit the Chief Of Staff revolving door post-haste). They have been strategically using the media to test public opinion, but in this case I’d imagine they also did so with the intent to force the unions, bond holders and other stakeholders in the Big 3 into a more pliant negotiating position.
It was interesting to watch how quickly the chess pieces moved yesterday in the Senate. As soon as the Senators from Big 3 states called a press conference to announce their bipartisan plan to repurpose the Energy Bill money as a bridge loan, Reid and Pelosi stepped on their press conference and said they were calling a special lame duck session to deal with the problem. They usurped the cameras and demanded the delivery of a restructuring plan to Dodd and Frank’s committees on December 2 — something Obama had quietly called for in his 60 Minutes appearance only last Sunday.
If I was Waggoner, I’d be on a plane to China right now (probably coach). The Chinese have announced their desire to buy the Big 3. Why not? It would allow all their debts to be paid off so their suppliers and other creditors won’t go under in a domino effect, their stockholders won’t get shafted (which should make Wall Street happy), and they could easily make both interest payments to bondholders and the $35 billion payment to the VEBA fund that will take UAW pension and health care legacy costs off their books.
However, there are some long-term implications that could make this less than appealing for the US. As Ian Welsh has pointed out, there’s a reason the Chinese are so keen to buy a US automaker:
The moment when China becomes a consumer driven society is the moment when the US loses its leadership of the world, and when if it’s economy isn’t in good shape, it crashes out.
[]
Why? Because the US needs massive inflows of money from nations like China and Japan in order to finance both the government and private consumption. China and Japan, and other countries, for that matter, have amassed holdings of US securities, cash and so on, in the many trillions, as a result. They have been willing to buy assets that they know they will probably not see a full real return on because the US buys their exports, and in China’s case, is busily shipping American jobs to China, thus industrializing China.
The world needs the US because the US is the "consumer of last resort". It buys everyone else’s stuff, issues a pile of securities and dollars in exchange, and exports industrialization to China in exchange for deindustrialization and cheap consumer goods at home, which kept down inflation for a very long time.
[]
At the current time, China is not ready to have a consumer society. As Stirling points out, it’s about 2 economic cycles away from being able to switch to one. If it gets to buy up a US car company, it’s probably one cycle away. Since the US is in a really really deep hole and currently digging deeper at a ferocious rate (the five trillion spent on the financial crisis will add to the US’s outstanding debt) when this happens is a big deal. Two economic cycles gives America longer to get its house in order and fix things so that when China does take off, it doesn’t find itself unarmed with every major nation in the world able to annihilate its economy whenever they feel like and take only minor losses themselves.
I’m supportive of Obama’s idea that there needs to be a plan going forward for Big 3 viability before they get a bridge loan, but "viability" may not mean "profitability." If we’re serious about converting to a green economy, when gas prices are low people want to buy the gas guzzlers that Toyota and BMW and Mercedes are still making in Richard Shelby’s right-to-work state. You can’t demand that the Big 3 be profitable and make fuel efficient cars that people don’t want to buy, so you’ve either got to levy an unpopular gas tax or give people other incentives to make the cars attractive.
The fact is that the Big 3 and the UAW have already made a lot of the structural changes and compromises that they need to make going forward, and holding the threat of "organized bankruptcy" over their heads when a buyer is standing there waiting in the wings seems unrealistic.
If we’re playing chicken here, let’s let Richard Shelby and Jim Inhofe go back to their states and tell their constituents that Chevy is being sold to the Chinese (Inhofe visibly bristled at the very suggestion on CSPAN the other day).
That’ll go over well.
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ZED!
digg
Thanks Jane, cutting edge synthesis, at the speed of light, as per usual.
This is the inside dish I love. I read the breaking news stories, but was completely unable to put it in perspective.
Thanks, Jane.
And dugg.
Good Morning Jane.
Hey Pups don’t forget to Digg this Post from Jane!
Boy if they let the big three go under we will be in deep do do and the country will surely slip into a depression. I think this is just what Bush and company want as their final legacy to the Democrats! I just don’t understand why the rethuglians hate their country so much that they block anything that will save middle class jobs. But if their rich Banker/finance friends are in need they are right there with billions in money with no strings attached.
Time we put that party to rest and toss them on the trash heap of history. Let their survivors build another party with common sense values that work for America.
Hmm, why does “Parker Brothers (now a division of Hasbro)” come to mind?
OOOPPS Boo looks like we double Dugg! Your made it to the top so we will go with yours!
Unfortunately for us, Congress is a reactive not a deliberative body, and I don’t see a change in their processes during the 111th Congress, given the piss poor leadership on either side of the isle. Whether in special session of the 110th, or next year under the 111th, based on past actions,Congress will screw the pooch and eke out a deal that serves no good purpose except to increase our debt.
At what point does the Republicon hate of America turn into treason and if it be treason at what point does the nation begin building scaffolds to punish traitors?
For anyone who thinks this is the only area the Chinese are interested in buying, I’ve got two examples for you:
Maytag: the Chinese bid failed.
IBM’s PC division: The Chinese bid won. Lenova is basically IBM’s technology, sold to the Chinese.
Get it?
From a national security prospective alone, we need to stop this dead in its tracks before the Chinese manage to do this.
One thing that Ian lacks mentioning is that, because the Chinese political system is quite anti-democratic, that its ability to produce sophisticated technological products is impeded. That is why purchasing the computer manufacturing arm of IBM by Lenovo was so dangerous, they’re also buying the efficiencies that a democratic economic system brings.
Just to illustrate, in an anti-democratic society, the public at large lack incentive to strive for perfection; any imperfection is turned into denial – China (or the USSR before it) has no environmental issues or Iran has no homosexuality; it is why quality control is such a large issue for Chinese exports and why tainted baby formula or lead-laced products pop up from time to time (and will continue to pop up).
if these rumors were coming from a republican administration, democrats, even in congress, would be up in arms about it. only a D president has a chance to be permitted to do this.
What we are seeing with the Detroit bailout is stupid people making stupid decisions. Yeah, surprising I know. We are also seeing a lot of “Oh look over there at the bright, shiny object.”
We are currently talking about a bailout of an industry for a few tens of billions while Paulson spends hundreds of billions and Bernanke loans trillions for the immensely larger financial bailout.
We are talking about the auto industry’s lack of a plan for its bailout instead of asking the Congress where its plan is.
And we are not talking about the very large $400-600 billion stimulus package that we need now.
We are also not talking about how Obama who pushed the Congress into the $700 billion Paulson bailout now acts as if he can do nothing until January 20.
And we are not talking about how there is really very little different between Bush’s Paulson on the one side and Obama’s Rubin, Summers, and Geithner on the other.
Phoenix Woman says that the pre-pack BK is not a done deal in this comment.
Maybe our Chinese overlords could bring in some of their ancient health care technology into our crappy insurance system./s
i’d hate to lose our manufacturing sector to any foreign entity. If i recall correctly, the reason the South lost to the North was because the North had the manufacturing capability and the South had only cotton.
Let’s not field-gut ourselves.
Restructuring debts, nationalized health care, etc, let’s help out here.
Like Rachel Maddow said, how about some change we can see?
It’s interesting to see how China is being turned into the villain for what are our own problems, unless the argument is the Chinese, cunning yellow devils that they are, forced us to outsource jobs to them, buy products from them, and run up their balance of trade surpluses.
That is a good question and I certainly don’t have the answer to that. But the evidence is there. every time there is a bill that would help the lower rungs of society 95% of us, the rethuglians always want to add poison amendments to the bill, which usually mean billions for the well to do.
I still don’t understand why so many people vote against their own financial health. Just take Joe the plumber, he never would make more than $250k yet he was against Obama who promised to lower taxes on 95% and raise them on 5%, some people just can’t see the trees for the forest I guess!
Yes. I said yessterday or the day before when the post went up ranting against China & how they were gonna take over the world, that it was the first in what I expected to be a long line of posts of lefties creating [imaginary I forgot to add] US enemies whereever they could find them.
typical elite response to crisis. i expect more of it and i expect the elite in other countries will be using the same strategy with us as the target.
This is the way China ‘leapfrogs’ the problems in its economy and society – by just purchasing (or, if rumors are to be believed in terms of people’s laptops and hard drives disappearing when they go to conferences in China)or stealing technology. Because in the US, we forget that the technology that has been many times paid for by the American people(through grants from the National Science Foundation, etc.)as well as that technology that has been invented here(but because of employment contracts is owned by the companies, not the people who actually invent them)are actually ‘national assets’, people don’t flinch or take note when foreign entities buy up American companies…and then take the technology and absorb it. They may even move the technology to their own country and close the American company down completely.
But in the US, we feel it is OK for owners to gain the benefits of selling off assets to foreign countries, even if it is dangerous to the country. Big mistake. We should not be selling any of our technology to anyone – NOT ANYONE.
So I take it discouraging China (with a population 3-4 times ours) from making the same mistake we’ve made by becoming a consumerist society is a problem for you?
If we have a global warming crisis now, I can’t begin to imagine what it would be like if there were 4 times more drivers of American-type vehicles.
Hugh, I once read an article about Walmart and its effect on business in the US. The writer argued that Walmart’s pressure for bottom pricing forced companies from Levi’s the Huffy bikes to move manufacturing to China so that they could get the chance to sell in what is seen as the biggest retail market of the world: Walmart. If you can’t meet Walmart’s price(they tell YOU what they will buy it for – it’s your job to sell it to them for that), then you don’t get to sell in Walmart. Some companies have tried to do that(like Huffy) and are now out of business. Walmart helped a whole lot in this, as well as Target, Kohls, and every other discount retailer.
sure sounds like a long tern plan by them They do plan in 5 and 10 year chunks. We on the other hand can’t seem to plan for more than a few months at a time. Time our government went back to the planning table and truly look at what IS in the best interest of our country. A country with little or no manufacturing base is doomed to be at the mercy of those who have the capacity. Not only do we lose jobs but it drives down the average wages to the point where We are getting the “Shock Doctrine”, which it seems like we are in the middle of right now.
IMHO, China is a metaphor for our trade imbalance.
I don’t have a problem using it.
So you would prefer that the global warming solutions include keeping the Chinese poor?
Our leaders, both Democratic and Republicans have failed us in that regard under the mum of “free trade.” It is high time that mindset changes drastically.
One of the issues truly is that China has a planned economic and education policy – and the 918 million working age adults who need occupation to keep them busy. The US doesn’t have the same sort of economic or education policies, which is why we put out so few technical people and why our manufacturing base is in the crapper.
Well, if people want to play chess, every player has their move to make.
Yes, this is true. We know people who used to work for manufacturers of other products who tell the same story. And we have clients who do not sell their products to Walmart for that reason. Basically, in many situations, the only way to get your price to Walmart’s “acceptable” level is to have the product made overseas by people making 30cents/hour (or whatever).
But it’s a horrible endless cycle. That’s all that $10/hour hard working Americans can afford now, isn’t it?
India beat them to it. Health insurer, business see savings in medical tourism
WE could also start a petition for Reid and Pelosi to step down and a second petition in support of the bipartisan plan.
My one-liner is that the people who work for Wal-Mart can’t afford to shop there.
Are you assuming we have that much influence over China?
it is unfortunate that cspan didn’t provide live coverage of the second day auto hearings (barney frank’s house financial services committee) especially as there wasn’t any explanation i could see – there wasn’t much else going on.
might have been nice for more people to see jeffery sachs warn congress about what would happen if gm were busted up and parts were allowed to fail now. i made a few clips, although of poor quality as they are directly from the live committee webstream (maybe someone has some better ones?). here’s one:
http://www.youtube.com/watch?v=h2O3GZeSJ4U
sachs flat out warned congress:
certainly double digit unemployment in this country, 15-20% unemployment throughout the midwest
i never thought that would live to see us approaching a depression
we’re flirting with that right now
we’ll trigger things we don’t even know
i’m worried about the next year, 2 years, 3 years, 4 years.
i don’t want to have a depression in this country
i want us to take minimum responsibility to take 3.7% of what you voted to avoid a depression
it’s a not brainer in my view, this is not a hard one
get on to avoid a disaster
this is not an industry in collapse, we’re not saving the buggy whip industry
and i’m not even a fan of sachs (his role in the restructuring of other economies via shock therapy has marked him as a dangerous neoliberal in my book). but i don’t think he’s a complete idiot and i don’t think he likes seeing people suffer
!!!
i don’t think the solution is demonizing others for our own mistakes.
Not at all. Just trying to tease out Rayne’s thinking.
What do you expect from the Treasury/Central bank and Bush buddies. The big 3 are viewed as a bunch of motorheads from the boonies with grease under their fingernails unlike their banker/insurance friends.
Letting China gobble up the auto industry is similar to the Dubai ports deal. Why is there outcry here?
Which suggests, that the ‘powers that be’ realize that what is going on is NOT pecking order patti-cakery or simply children squabbling over nothing more important than mud pies.
What is going on is critically serious, perhaps even termially so, but let us not call it for what it is.
We shy away from honestly calling it what it is.
Such semantic evasion will NOT make ‘it’ go away nor better dispose those who are ‘winning’ this ’struggle’.
‘Shock and Awe’ are tactics of war, not of honest, just and responsible discourse or setteling of ‘difference’.
This is not a ‘fair’ fight, but brutal and deliberate effort to reduce the ‘people’ to the status of serfdom in a modern day version of feudalism.
this is the race to the bottom that the critics of corporate globalization have been warning us about. and not just in wages – in environmental regulations, labor rights, financial regulation even democracy itself.
Seems we need to make education a priority as the Dutch did for their 39 year project to build the storm gates for the Rhine river. they started with 905+ foreign workers and now it is 90%+ dutch workers as they invested in education for their people. the only way we can compete in the modern world is to educate our children and I feel it should include the first four years of collage.
We also need to make sure ANY trade deals be equal in both directions unlike all the trade deals currently on the books which provide no protections for US workers. Our companies cannot compete in the world markets when most other countries have universal health care, which our companies spend billions on.
And I hope this will also include travel, room and board for loved ones to accompany the loved one requiring surgery.
Last I checked, having a support system of loved ones has health benefits which are quite valuable dollar-wise.
BC is stupid. God help them the first time a patient dies overseas, away from family. Nice lawsuit.
That is NOT the issue – but I expected someone to bring up this point.
The issue is that we protect our own national interest and stop promoting the Chinese. The Chinese will do what they have to do as is their good right to expand their economy, etc.
It should be the policy of the United States, however, to promote policies that promote the United States first and foremost. They should not be able to steal our technology, pirate our intellectual and artistic property or employ cheap labor to the detriment of our own economy.
Futhermore, if China were a free and democratic society that would be one thing, but they are more of oligarchy than we are (which is hard to believe, I know) By assisting the Chinese government in prolonging their anti-democratic stranglehold on their country, it does the world society at large no favors either.
Oooh, R on panel about future of R party sez they must tamp down on talk radio because they’ll never win the Hispanic vote with talk radio ranting. Dya think?
Maybe not use public money to bailout automakers, but rather use the money to establish a single-payer health care plan available to all. It could be financed year to year by a health care tax on the auto giants, for one.
Employee benefits, btw, represent income not payed immediately. As soon as an employee agrees to accept the benefit rather than the present-value equivalent in salary payment, the company benefits by the deferral created. Had employees all along gotten salary increases instead of benefits, their salaries probably would have been quite a bit higher than they are, owing just to inflation.
Oh, yes. That is correct. And we may have already passed the ‘point of no return’ in terms of being able to stop it either, since we are so far into the hole – not only to the Chinese but also to the Japanese, the Brits, etc. that just finding the level of investment that it would require to establish industries again here in the US would be impossible. On the other hand, in the personas of certain companies, there is a measure of hope. One of Corning, Inc., which(just showing off my industrial history knowledge here) had one of the first R and D laboratories in the US – they came up with Pyrex in 1905 in Corning, NY. That base still exists – not only in Corning, NY, but in other places where Corning operates in the US. Corning invests a fairly large(for a US company – I’m sure Ian could tell us in more detail)percentage of its revenues into R and D(because coming up with new products is Corning’s lifeblood). On the other hand, you have a company like GE, which also had another very early and productive R and D lab in Schenectady – but GE decided quite a while ago that it was not in the business of ‘making stuff’. We need to understand in this country that a) making stuff is a good thing and something to be proud of and b)that we need to ‘arm’ ourselves with the technical knowledge and fight for our knowledge assets in frankly what will be an economic battle for survival. Do a good deed: Convince your kids that being engineers is a sexy thing.
As a former resident of the Netherlands, I think you are referring to the building of the dykes in Zeeland after the flood of 1953. Those dykes are truly one of the wonders of the world, so much so that they came up with a ingenious way of allowing one of the estuaries to stay salt-water based so that they did not kill off the existing wildlife.
It is why I find it laughable when conservatives were talking about getting rid of or moving New Orleans from its current location. About 50 percent of the Netherlands and a larger majority of its population is located below sea level. I am pretty sure that the powers that be in NOLA brought in the Dutch to consult on this matter as they are leaders in the field.
Looking at the Chinese in a cold and dispassionate way, we must understand that no matter who rules China, they are facing hundreds of millions of people who a) need to be kept busy and b) who need to be kept fed/housed, etc. The Chinese have thousands of years of history and cultural memory behind them and they know intimately what happens in their country when people are not kept reasonably content(that is, when things go out of control). However, that does not mean that we should throw our technology and manufacturing capacity out the window to keep their workers occupied while we go in the tank.
Bravo Toby!!!
(Standing, cheering and clapping, vigorously)
Seriously, Toby, when might you consider standing for public office, that others might benefit from your wisdom, courage and insight?
You would do the Empire state proud.
DWB
Both.
lol…. doubtful it will be soon before anything will makes me laugh as hard as this did.
don’t have kids and i’m probably incapable of thinking (let alone convincing anyone) that engineering is sexy. but i will say that my first couple of years out of college (chem e) working as a process engineer on a hard core ic manufacturing line (24/7 with only 2 days down per year for physical inventory). was great training for all manner of things.
Heh — Standing is one thing…running is something else…
Thank you firedoglakers for standing up to the right wing talking points as though these CEO’s are the only “icky” ones. Funny they’re also the ones who have a fully unionized workforce, eh?
We can’t let the economy go into freefall. I think of the battered wives, the child abuse, the suicides.
Please, join me in demanding that no more manufacturing industries go out of business in this country.
The lives of millions of Americans are at stake in this one. Call your members of Congress:
(877) 331-1223.
The Dutch Simulate their Demise
This is what I was speaking of. the Dutch took IIRC thirty years to get to this point!
And this link and this article.
They all show how a country can work for it’s own welfare and at the same time invest in their people!
All these things are two edged swords. OTOH we don’t want them to exploit our technological superiority but we are willing to exploit their cheap labor, lack of protection of worker’s rights, and non-existent pollution controls. And we get all bent out of joint when they send us lead painted toys for our children to suck on.
The truth is our government facilitated the shipping of jobs to China. And yes, Walmart too had a lot to do with that too. But a lot of manufacturers wanted to go driven by the search for ever cheaper costs. This reminds me of the criticism I made of Pantera’s financial analyst Glantz yesterday. It would have been OK if some or a few manufacturers did this. Our economy could have absorbed and redirected any job losses but there were no limits on the process and what we have seen is a hollowing out of the US industrial base, and middle class. I just don’t get why we are blaming China for what were the decisions of our government and our corporations.
nahant – when I used to do economic development for a elec/gas utility, I used to talk about ‘the wanna factor’ – after all the number crunching, maps, etc. etc, many times the company’s choice came down to ‘where do we ‘wanna’ be?’ For the US to do what needs to be done, there has to be a huge amount of ‘wanna’ – either we ‘wanna’ do it — or we don’t.
Buick is the most popular luxury car brand in China.
Why is that?
Thank you. My 36 did not convey the level of diplomacy/respect I intended. Sorry.
Indeed, yet, are we not the people we have been waiting for?
The day MUST come when the wisdom and capacity which are daily evidenced here, are translated into the pleasure we all would have of seeing the names of some of us following such titles as Senator or Congressperson.
In fact, how shall we measure true progress until this is so?
I do not mean to put you on the ’spot, any more than I mean to put Christy on the spot when I suggest that.
Be advised, Toby, that, were you to ‘run’, you would ’succeed’ and could count upon each of the rest of us to support you, with money, with effort, and with our best hopes and dreams.
No problem.
For the past twenty-plus years, foreign exchange students have dominated the engineering enrollments across groves of academe in American. Higher education in this country has been one of its major assets for a long time. Unfortnately, the talent has been exported along with the the manufacturing capacity.
Universities and colleges have turned their attention more and more to commerical enterprises and creating hybrid institutions, putting themselves in beds with corporations and becoming stakeholders in the corporations’ survival. As a result their survival continues to be assured. At the same time, their fees and tuitions only creep up. The campuses have tended to take on country club atmosphere, providing comforts and other attractions for students who otherwise would drop out. It’s really disgusting.
Even so, at the present time, state-funded institutions are running out of money. They’re facing stringencies that threaten the future of faculty, tenured and otherwise, staff, and academic departments, let alone all the accouterments to make life less academic and more just plain fun for the yuts that go there.
I saw evidence of this just yesterday in an email from the president of a major state-funded university that warns that bad times are coming. Fasten your seatbelt, and so on.
Yes, well as I have often said, universities only raise tuition in two circumstances: times are bad and they need to or times are good and they can.
I think we’re both saying the same thing.
I would like to point out that I have to say that that article is pretty poorly translated, and it is a difficult read.
What I was talking about was the initial portion of the Delta project, which was to shut off the estuaries in the southwest, that was completed in the late 80s.
It appears from your second link that an additional phase was to build a lock on the Rhine river near Rotterdam proper to prevent a storm surge up the river and to prevent one of the largest harbors in Western Europe from being decimated.
:P
And that’s my point, the policy of the United States should not be to promote these policies. By imposing tariffs on said goods, we regain some of the costs to our overall economy while allowing us to compete on a more level playing field. That takes a little bravery and leadership on the part of the United States and its leaders who unfortunately who have been bought and paid for by the Wal Marts of the world. Right now, only a select few are benefiting from the export of jobs and technology oversees which has a direct cause to the financial crisis we see today.
Stupid thing – this was in response to #50!
It’s not an either-or proposition, not a zero-sum game. Sick Chinese suffering from lung cancer don’t exactly eat a lot, I’ll point out.
If they want to leapfrog, they’ve got more than 4x the engineers we have. They can do it.
What they don’t have is strong background in commercialization.
Frankly, I don’t know that this is about leapfrogging or acquiring contemporary market skills they don’t have. There’s a very good chance that this is a way to prop up their existing investments in American debt.
In other words, they are buying up the toxic assets to stop the free-fall of their value, rather like the plan that idiot Paulson was supposed to do. Instead of holding a lot of worthless American debt underpinned by failing assets, they’d own a mess of manufacturing capacity and the free-fall would stop.
And they’d be able to turn around some of that capital into their own country’s progress.
The Chevrolet Corvette, the iconic American sports car, has a color called “Victory Red”. If GM sells out to China, that color name would take on a whole ‘nother meaning.
Just give ‘em Buick. That brand is selling well in China, at least. If I’m buying an Asian car, it’s going to be either a Nissan 370Z or a Hyundai Genesis Coupe…
“Trial-balloon central”
I’m glad somebody said it. I don’t think it’s a good thing or a bad thing, but it’s certainly more important than the hysteria around Obama’s appointments (geez, has there ever been so much attention paid to an elect’s appts?).
In fact, having said that, I think it’s smart. They get to see how choices play in public opinion, and that may even give them room to throw political bones without having to pay the political consequence. Seems smart to me.
In fact, I suspect the HRC appt was in that mold, except they found it to be workable…
Smart politics so far. Some of the more conservative appointments so far are a little disturbing, but… if he thinks it’s easier to manage an experienced old hand than a newbie on top of an existing bureaucracy, I’ll give him the benefit of the doubt for now. Particularly because the policy side, where that’s been leaked, looks better than I’d hoped for (health care and net neutrality come to mind).