Let GM and Chrysler go bankrupt, Americans say

Let GM and Chrysler go bankrupt, Americans say
http://tinyurl.com/djc427

Most of those surveyed say they would rather the automakers fall into
bankruptcy than get more bailout cash.
By Catherine Clifford, CNNMoney.com staff writer
Last Updated: April 9, 2009: 4:14 PM ET

NEW YORK (CNNMoney.com) -- Americans are fed up with the Detroit drama.

Three out of four Americans would rather see General Motors (GM, Fortune
500) and Chrysler face bankruptcy than watch the government pour yet
another round of bailout cash into the big U.S. automakers, according to
a CNN/Opinion Research poll released Thursday.

While 76% of survey respondents want to see the automakers face
bankruptcy, 22% are willing to prop them up with more bailout cash,
according to the poll, which surveyed 1,000 Americans from April 3-5.

While GM still hopes to avoid going bankrupt, preparations for a
bankruptcy filing have become "intense and earnest" at the Detroit
giant, according to a source familiar with the company's plans.

Americans are more divided on the Obama administration's increased
involvement in the way businesses and financial institutions are run.
According to the survey, which has margin of error of plus or minus 3%,
42% of Americans think the Obama administration has done what it should,
while 23% think the government ought to have even more oversight powers.
But 35% of respondents say the government has gone too far.

One of the reasons Americans are willing to let the Big Three head into
bankruptcy is that many don't see Detroit's woes significantly affecting
the national economy.

Of those surveyed, 44% said auto bankruptcies would only cause "minor
problems" for the U.S. economy. That's an increase from December's poll
results, when 28% of those questioned said the bankruptcy effects would
be minor. (For more on Detroit's ripple effects, see "Auto bankruptcy:
What it means")

But only 37% of those surveyed in April thought a Detroit bankruptcy
would cause "major problems" for the U.S. economy, down from 51% of
those polled in December. More than half of Americans think that a
Detroit bankruptcy would have no impact on their personal financial
situation.

If a major manufacturer does fall into bankruptcy, government guarantees
on their warranties could prove critical to maintaining consumer demand
for their inventory of cars. The CNN/Opinion Research pollsters divided
their respondent pool in half, asking one group about their willingness
to buy a car from a bankrupt auto company. Almost half of those asked -
47% - said they were "not likely at all" to do so, and only 12% said
they were "very likely" to buy from a bankrupt company.

But when researchers asked the other half of their survey pool about
buying a car from a bankrupt auto maker, they asked how likely the
respondent would be to buy if they knew the government would stand
behind the warranty on the car. Among those respondents, the "very
likely" to buy response rate doubled, to 24%, while the "not likely at
all" response declined to 27%.

President Barack Obama said late last month that the federal government
would stand behind the warranties on all purchases of GM and Chrysler
vehicles going forward. Analysts are waiting to see how much the moves
pump up sales.

 

Funny how the way that kind of thing is reported reveals the beliefs and
politics of the author or publisher (and/or the entity sponsoring/paying
for the poll).

Since the poll takers see fit to educate the respondents with the
particular information they want them to have (IOW biasing the results
to a conclusion they want the poll to favor), which again can reveal a
bias in whoever is doing - or paying for - the poll, I can't help but
wonder how the results would have changed if they informed them that (a)
bankruptcy does not mean that the company just closes it's doors and
sends everyone home - it gives them an opportunity to stream line and
restructure debt, and (b) it allows them to start with a clean slate on
what now are unsustainable union agreements so that they can start
paying and offering benefits more in line with other wage earners for
the work being performed.

 

If the USA brands of GM and Chrysler end up going away, the typical USA
new car buyer will not be inconvenienced in any way. Therefore, why
should their tax dollars be used to save something they see as "not
necessary to continue my life". When Zenith, Motorola, General
Electric, Magnavox, and others stopped manufacturing televisions, it
didn't stop consumers from buying televisions, they just bought Sonys
and such instead.

Same thing with cars. If they can't buy a new Chrysler, they'll buy a
Nissan, KIA, or Hyundai, for example. No inconvenience to the consumer
who simply buys another brand of transportation appliance.

Part of this negativity could be the result of prior dealership
experiences (of the poll respondents or some of their
friends/associates) in the past. If the local franchised dealer is the
local "face" of the manufacturer, if the consumer has a poor experience
there, it hurts the reputation of the manufacturer plus that of the
local dealer. Likewise, a good dealer and their employees who takes
very good care of their customers can reflect positively upon the
manufacturer.

Regards,

C-BODY

 

If you don't consider reduced selection and higher prices caused by a
reduction of makers, then sure I guess they won't be "inconvenienced".

But I for one value the selection and the price-pressure that comes from
having a healthy number of companies operating in the car sector or any
sector of consumer goods.

And I guess it's OK for Canada and the US gov'ts to not supply their
domestic auto companies with bridge loans when that's what other
countries are doing to keep their domestic companies from going out of
business?

These are not really "bailouts" as much as they are the gov't stepping
in and providing bridge financing because the banks are holding back on
all sorts of lending that they traditionally would otherwise do.

Many companies operate on loan. On debt. The auto makers are no
different, and many people finance that debt either directly or
indirectly through bonds. When interest rates go so low such that the
risk-reward for financing that debt turns negative, that's when all
companies will have problems continuing to operate, regardless how well
they're run.

The real problem right now is that interest rates are too low. The fed
bank rate needs to be 2 or 3%, not 0.15% as it is right now. Only when
the fed rate is higher, will more investers and banks take their money
off the sidelines and buy corporate bonds and finance the lines of
credit those companies need and traditionally have had, even in bad
economic times.

 

They should go bankrupt. That does NOT mean going out of business. GM
and Chrysler have huge market value. They're not going to do away with
the brand names. They should reorganize under bankruptcy and come back
strong without bankrupting the American consumer through bailouts.

 

Exactly. But that's what "they" don't want people to realize. They
want us to equate bankruptcy to closing the doors and sending everyone
home, which it isn't. Bankruptcy would also go a long way towards
getting the manufacturers out from under business-killing union
agreements. But the people in control are beholden to the unions to the
extent that, using your words, "bankrupting the American consumer
through bailouts" is preferred.

 

No, THIS one would buy a Ford.

 

"They" being the politicians who favor government intervention in
everything... :-/

 

Exactly.

 

No, THIS one would buy a Ford.[/QUOTE]

Yes Ford would be on my short list, as well as VW; well ahead of the
Asian brands.

 

Yep. Government got us into this mess and people think we need MORE
Government involvement?

 

Yes, but Americans didn't get jobs building the Sonys. It's about
producers, not consumers. What's good for producers and not consumers
should be the standard.

it also meant that the TV repair shops went out of business because
Sonys were tough to fix and parts and service documentation were
exppensive and intermittently available. The Japanese systematically
put the service men out of business so you'd buy a new TV instead.

The Japanese think long term and they put Japan first as a nation.

A good example is their steamrollering of the ham radio equipment
business. There never was any volume in it, but they came up with low
cost featureful equipment that made it "not worth it" for hams to
homebrew or small companies to manufacture ham equipment. That made a
lot more hams into "appliance operators" and cut off a major route
into the electronics business for a lot of people. Fewer people
learned electronics.

 

No unions means no political pressure against even more free market
interdependence and globalism, is that what you really want? American
industrial might was at its peak when the unions wielded enormous
power.

 

Can I have a Chevy engine, a Mopar transmission and a 9" Ford rear
end? That would be a good car.

 

You're saying free market interdependence is bad? I guess, first of
all, define what you mean by free market interdependence.