spoon059 wrote:
That is over simplified. You, amongst others here, seem to think that if GM went belly up, its customer base would never buy another vehicle again, hence the domino theory of out of work suppliers and lack of tax collection.
The reality is that GM buyers would have to simply buy a vehicle from one of the numerous other manufacturers, who would collectively absorb GM's share of the market. Those manufacturers would have to increase their purchase of parts, likely providing work and sales to suppliers or else increasing demand of suppliers enough to cause out of work suppliers to be able to find new employment. The workers would pay taxes, the increased sales from other manufacturers would pay the tax burden, etc.
The end result would be knowledge that proper management of your business is the proper way to ensure you stay in business. It would also be a warning to financially insolvent businesses that poor practices will not be supported.
Spoon, you are correct that some of the customer base would have still needed to buy cars, (a fair amount of the customer base would have been out of jobs!) and that would have kept the other OEM's going. For those people not in the auto industry, here is some perspective that people may not know or understand.
Prior to the crash in 2008, there was a large part of the auto supply base that was distressed. Several companies were going out of business. Who had to take the slack? Other suppliers, a good thing right? In 2007 in less than 3 weeks my company took over an entire supplier that went bankrupt. Basically the OEM told my company we were taking everything. My company moved everything into their existing facilities and got everything up and running. This didn't come without a cost. To take on that business, we charged the OEM more than the bankrupt supplier was charging them for the parts. We certainly weren't going to take on business that was loosing money!
If GM and Chrysler were allowed to fall, a lot of suppliers would have gone bankrupt. As we know, a fair amount of suppliers don't just supply one OEM. So who was going to take over the business for the OEM's that survived? Stable suppliers, but they certainly weren't going to take it on at a loss either. Part prices for Ford, Toyota, Honda and anyone else were going to go up...thus car prices would have had to increase too. A good thing for an economy tanking? Moving production could have also impacted the other OEM's by delaying parts and causing them to idle plant while the new supplier took over.
goducks10 wrote:
And didn't Ford borrow money to re-tool their small car division to be more competitive, while GM and FCA (Chrysler) needed the money just to keep the doors open?
Yes, they took approximately $5.9 BILLION in low interest loans.
Ford DOE Loans Lets not also forget that if they hadn't mortgaged everything prior to 2008 they probably would have been the first to need a bailout.
