"ATP*" wrote in message
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"Ed Huntress" wrote in message
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"ATP*" wrote in message
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"oldjag" wrote in message
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Well, I guess most folks don't really care to much if the US auto
companies fold, judging by the internet postings. If one or more does
fold, who has the capital in the US right now buy up any of the
assets? The cost of admission for new vehicle design is very high.

They need to go bankrupt and reorganize. There will still be a US auto
industry and it will be more competitive than ever without the UAW
millstone around its neck.

Most of the industry experts I've heard over the past few days say there
will be no receivership and no reorganization. People don't buy cars from
bankrupt manufacturers. (Studebaker is an example; once it became known
they were thinking about getting out of the car business, they were.)
They'll go straight to liquidation, possibly with a few months of
receivership in order to handle the selloffs. The brands have very little
goodwill equity so most of the remaining value will be real estate and
hardware.

The Chinese are already sniffing around, looking for possible bargains.

--
Ed Huntress
I think the brands are still valuable. Chevrolet, Cadillac, Ford, even
Chrysler will always retain a certain percentage of the market. If the
newly reorganized company is solvent and honors existing warranties,
people will still buy from it. Whether the trademarks and desirable
production facilities can remain intact and be transferred in a
liquidation is of course, questionable. The other question is, even
assuming the US automakers are not long term viable, can we afford to let
them fail right now?

My feeling is that we can't. But I'm going on all second-hand information
and analysis. Overall, my fear is that the layoffs or firings would be
enough to push us over the brink into a deflationary spiral, which most
experts agree would require years of recovery -- or an extremely expensive,
revolutionary government program that we'd be paying off for decades.

Either way, it isn't pretty. Deflationary spirals tend to last for close to
ten years. And growing the economy with a multi-trillion-dollar national
debt hanging over us would succeed only if the economy is generally healthy
so that the debt service doesn't drive us down in another spiral.

From an economics point of view, I think a bailout is less expensive and a
lot less risky.

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Ed Huntress