The physical plant and the skilled labor force will not evaporate into thin air if the domestics leave US shores. The foreign automakers will by up the viable components of GM, Ford and Chrysler. You can see this on Horizon. Nissan will not produce full sized trucks in the US anymore. They plan on selling re-badged Dodge Ram pickups. It is only a short step to buy up Dodge Truck and Jeep divisions and take over that market segment.

I believe VW has bought a domestic plant in Tennessee although I can’t remember which company. The domestic auto companies are going to sell off parts to foreigners soon bailout or not.

Your fears are way overblown.

The idea that Toyondissandai can take up the slack should domestic mfgs fold is based on utter ignorance of the automotive industry and its supply chain. To begin with, the transplants don’t have the capacity in their US operations to meet the current market level of roughly 10.5 million units per year, let alone a more normal market of 16+ million units. They can’t meet that capacity even including their offshore facilities because those facilities are currently set up to produce vehicles for other markets. Changing over their own plants, though they are flexible facilities will take time and money and even Toyota’s credit rating has been slashed. Buying plants from dead American companies and switching them over will take even more time and money. 40% of Americans won’t even consider an American car and you think that slapping a Toyota badge on a Malibu will change their minds (actually, the Malibu is probably a better car than the Camry)?

You mentioned the high US content of the Camry. That means that Toyota is buying components from the same supply chain as the domestic mfgs. If the domestics fold, so will most of their suppliers, making tremendous difficulties for Toyondissandai’s normal North American operations, let alone expanding those operations to meet market demands if the Detroit 3 go belly up. Automotive components take time to develop. Toyota, if it’s been buying parts from, let’s say, Delphi or AC Delco, can’t just pick up the phone to Denso and say “we need 250,000 alternators next month”. Car parts aren’t 2X4s. You can’t just go to Lowe’s or Home Depot like you can if the corner lumber yard goes out of business. Besides, Denso’s going to be scrambling to find cash to operate, having lost not only the business they have with the domestics, but will also take a direct hit on their accounts receivables as they take their place deep in the line of other creditors. I worked for DuPont for a long time and it’s about as diversified as a big company can get in terms of the various markets and industries it sells to, but people in Wilmington will lose their jobs because GM is still DuPont’s single biggest customer either directly or through tier 2 suppliers.

I’m not a supporter of government subsidies of business. I’m a reluctant supporter of bailing out Detroit at best and recognize the need for structured reorganizations for GM & Chrysler at least. Ford has done most of the heavy lifting and corporate culture changes it needs to do, now they just have to ride out the current credit mess and recession, well, if they have enough cash to do so. If GM files, though, Ford will have to go Ch 11 too as a matter of staying competitive. The best case scenario if all three survive bankruptcy will mean a loss of maybe 500,000 jobs. If they fold completely, the job loses will be in the millions.

You can fool yourself into thinking that there won’t be a massive impact on businesses seemingly far removed from the auto industry, but it doesn’t change reality. You can think that Toyondissandai will take up the slack, but they’ll be too busy dealing with their own survival because of impact to their supply chains.

So few people are involved in actually making things in this country anymore that they have no clue at all what’s involved in designing and building cars.

This is what the LA Times has to say about the impact of a collapse of the Detroit mfgs on the economy of southern California:
http://www.latimes.com/business/la-fi-dealers1-2008dec01,0,6804146.story

Here’s what the Mercury News says about Silicon Valley
http://www.mercurynews.com/ci_11082323?source=most_emailed

Neither one of those papers are cheerleaders for the domestic auto industry.

jerryofva, if I may ask, what do you do for a living? Have you ever made and sold a real product? Public or private sector? Finance or the real economy.

As for the banking crisis, I’ve been saying all along that everyone who took advantage of cheap credit for the past 15-20 years shares some of the blame. At the same time, had Fannie & Freddie and wall street not sold derivatives, mortgage based securities, credit default swaps, and tried to securitize risk while acting as though the statistically small risk of default would never actually happen, well, those subprime loans and refis to take out equity would never have posed a systemic risk.

Cars will continue to be made in the United States and those supply chains will remain intact. The difference will be the nameplates. The Toyota Camry has the highest domestic content of any car “built” here. If the domestic industry folds then the slack will be taken up by others who find it cheaper to buy their parts here then ship them from elsewhere. Must of the automotive world buys the chips here anyway.

Nobody looted your life savings. You, me and everbody else made bad investment decisions. For every bank that made a subprime loan to a risky borrower there was borrower gambling that he could either turn the house over for profit before the rate went up or would be able to refinance at a fixed rate several years hence when the equity in his house grew.

We agree about teachers unions. There are huge differences, though, between private sector unions and public employee unions. To begin with, private sector unions are paid, ultimately, with voluntary purchases of their employers’ products. Public employee unions are paid with taxes coerced at the threat of going to jail. Privates sector unions have a vested interest in their employer turning a profit and will be out of a job if the contract makes their employer non-profitable. Public sector unions have no interest in cost containment or sustainability, their employers run deficits as a standard operating procedure. If you’re upset over unions telling employers to bend over and take it, what about public employees like policemen, firefighters and teachers who don’t just threaten to strike, they deprive us of vital services if they aren’t pleased with their guaranteed pensions and high wages. If a private sector union gave money to a company executive or manager, that would clearly be a corrupt conflict of interest. Yet public employee unions like SEIU and the NEA & AFT routinely give millions of dollars in campaign contributions to the politicians who negotiate and vote on their salaries.

For all the sins of private sector unions, they pale in comparison to how public employee unions are jobbing us all.

Navy submariners deserve every penny they are paid. I have a brother in law who is a Commander in the sub service and I’m well aware of the hardships the sub service deals with to protect us. My daughter has enlisted in the Navy and will most likely go to nuke school. They don’t put women on subs, so she’ll likely work on a carrier. If she puts in her 20 years and retires with a commission, she’ll have earned that. I stand in awe of our fighting men and women and have no problem with their compensation. Unlike most people on the public payroll they actually work hard and serve the public, deserve every penny they get and then some.

That $70/hr figure for UAW workers, though, is a red herring. It’s not wages and benefits but rather the total cost of the labor contract divided by the number of active employees. It includes the actual cost of retiree benefits, not just how much the company is putting aside for active employee pensions. It includes the cost of all pensions and health plans for current retirees. GM pays more pensions than anyone else in the US except for the government. That says something about their total labor costs, but it says more about our bloated and entitled public payroll. So the idea that UAW workers are making $150,000 a year in total compensation is a distortion at best and close to a lie. You’re upset about 150,000 autoworkers who make good money and benefits, and I’ll readily admit that before the current concessions the UAW contract was not sustainable. Compare those 150,000 autoworkers to the over 130,000 federal employees (civilian) who make $200,000 or more in actual wages and benefits. Federal employees get benefits that would make the UAW green with envy.
Does anyone think that government workers are more conscientious than union autoworkers?

Unions aren’t saints and have a role in Detroit’s crisis, but let’s not ignore the 800 pound gorilla on the public wage roll.

JerryofVA, like I said, I’m no fan of unions but the reality is that the UAW has been making concessions for years. This isn’t about bailing out the unions, though, or rewarding bad management decisions, it’s about avoiding economic devastation in places far removed from Detroit. Silicon Valley? Do you have any ideas how many ICs and chips are imbedded in modern cars and how big a customer Detroit is for Silicon Valley? Do you know how many computers and how much software Detroit buys for their business and engineering operations? Do you like police and fire protection? Did you know that domestic car dealers are the single biggest source of sales tax across the country? Do you like the men and women of our armed forces having sophisticated weapons to defends us and keep them safe? Well, without the supply chain that supports the domestic car industry we won’t be able to make F-22s and Patriot anti-missile systems.

Meanwhile, the banks are looting our life savings, backing their trucks up to the Treasury department, and letting retired executives fly for free on business jets.

Say what you will about the UAW and the domestic car companies but at least they make stuff. Leveraging capital to loan money doesn’t create wealth unless those loans are used to grow things, mine things, or turn raw materials into finished goods.