Somehow we're now on the hook for GM and Chrysler Warranties. I always thought experience was overplayed in elections, I'll rethink that.
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Somehow we're now on the hook for GM and Chrysler Warranties. I always thought experience was overplayed in elections, I'll rethink that.
They both ought to be merged and renamed Volkswagon, because very soon you'll all have a piece of them.
The warranty guarantee probably isn't a bad idea.
In 2007, GM paid out $5.14 billion in warranty-related expenses on 9.37 million vehicles sold, globally. That's $548.55 per vehicle. Given that in 2001 they sold 4.9 million vehicles in the USA, that translates to $2.68 billion in warranty-related expenses, if we assume that warranty costs don't vary by country. I think that's a reasonable upper-limit for the yearly exposure to the US government on account of this warranty guarantee. Also consider that I used US sales figures from 2001 because it was GM's best year in terms of US sales. In 2008, for example, GM only sold 2.98 million cars in the US, leading to a warranty exposure of only $1.6 billion / year.
If lack of customer confidence in future warranty coverage is essentially the straw that will break the camel's back, then this $1.6 - $2.68 billion per year investment is probably worth preventing the collapse of the domestic auto (read: manufacturing) industry.
I'm not even going to bring up the "what competence does government have in this industry" line of questions, given that, thanks to recent CEO defenestrations by the White House, one can expect that this gives part and parcel policy control over to the President over these affairs (because it does). What I want to know is how can this argument not be transported to absolutely anything? We've seen the U.S. stock market fall by half, job losses in the hundreds of thousands, and a number of other fairly intimidating economic indicators. If car warranties can destabilize the world economy once and for all, for what project CAN'T this logic be applied?Quote:
Originally posted by Snrrub
If lack of customer confidence in future warranty coverage is essentially the straw that will break the camel's back, then this $1.6 - $2.68 billion per year investment is probably worth preventing the collapse of the domestic auto (read: manufacturing) industry.
Note: if that draws you to the conclusion that government can and should simply fund any project it likes at all, whatsoever:
1) Admit you're bringing about the de facto nationalization of the economy, and
2) Admit that you don't believe America should retain the antiquated notion of a government of limited scope.
Secondary note: why is it a sine qua non that America should make cars in the first place anymore?
Clarification: when I used the phrase "straw that breaks the camel's back" I was referring to the collapse of GM, and not the world economy. Therefore, as part of an existing policy to assist GM, warranty guarantees offer a good bang-for-the-buck according to my estimates of its potential downside cost. It is reasonable to say that perhaps the government should not have attempted to save GM in the first place. However, since billions have already been invested in GM, the warranty guarantee is important to protect that already-made investment.Quote:
Originally posted by Gaviani
If car warranties can destabilize the world economy once and for all, for what project CAN'T this logic be applied?
The strongest case for preserving a robust national manufacturing industry is, in my opinion, for national defense purposes.Quote:
Originally posted by Gaviani
Secondary note: why is it a sine qua non that America should make cars in the first place anymore?
...your estimates of "it could make GM melt down?" I mean this without sarcasm, and without reference to whether or not this could lead to a great number of procompetitive benefits: what do you base that estimate on?Quote:
Originally posted by Snrrub
Therefore, as part of an existing policy to assist GM, warranty guarantees offer a good bang-for-the-buck according to my estimates of its potential downside cost.
As I mentioned to you in private, there is absolutely no axiomatic need to follow the proverbial sunken cost fallacy here. I have not yet seen it demonstrated (though perhaps it can be?) how this particular propping up is preventing GM's implosion - again, granting that prevention is a good thing, which I do not. Can you demonstrate GM's likely or even plausible failure without this -additional- artificial propping up?Quote:
It is reasonable to say that perhaps the government should not have attempted to save GM in the first place. However, since billions have already been invested in GM, the warranty guarantee is important to protect that already-made investment.
Naturally, nothing is certain. The warranty guarantee is not a sufficient condition to save GM, but I do think it is a necessary one. I say this because I can't imagine anyone buying a car from a company that is so near to (or in) Chapter 11 bankruptcy - for fear of losing the warranty. I have heard of some recent public opinion polls indicating as much, but I am unable to find them online.Quote:
Originally posted by Gaviani
As I mentioned to you in private, there is absolutely no axiomatic need to follow the proverbial sunken cost fallacy here. I have not yet seen it demonstrated (though perhaps it can be?) how this particular propping up is preventing GM's implosion
If GM doesn't fail, then this additional propping up won't cost anyone a dime.Quote:
Originally posted by Gaviani
Can you demonstrate GM's likely or even plausible failure without this -additional- artificial propping up?
Wow.Quote:
Originally posted by Snrrub
If GM doesn't fail, then this additional propping up won't cost anyone a dime.
Really?
You're:
1) Ignoring the next best possible expenditure or investment of that, say, 2 billion dollars that could have been done by its original, private owners (remember, taxes don't get created sui generis by the government - they're wealth confiscated by the citizenry);
2) Ignoring the next best possible return on the investment by paying off 2 billion of debt;
3) Ignoring the interest accruing in the meantime of this plausibly borrowed money (remember the deficit);
4) Ignoring the discount rate of time for future revenue streams - ASSUMING GM remains solvent and ASSUMING they pay it back dollar-for-dollar, a future dollar is worth less than a present dollar (for more on this, google the phrase 'discount rate of money')
5) Ignoring the probability GM will "settle" with the government for some smaller, cents-on-the dollar sum;
6) Ignoring the probability GM will go bankrupt in the meantime anyway.
So, yes. I suppose if you want to ignore four or five economic principles and also assume that GM doesn't continue to use its at this point proven method of political lobbying in lieu of sensible business management in order to stick the taxpayers of the U.S. for yet another bill, AND you assume GM survives in the first place, all we lose is the opportunity cost of two billion dollars.
Let me represent that out in numbers.
$2,000,000,000.00 USD.
Yeah, doesn't cost us anything at all.
Among other things, I like this. Maybe to take it a step further: Why the big three especially? Plenty of start-up auto manufacturers have come and gone in the past 20-30 years alone. Most of them have been either pushed out or bought out by these three manufacturers. Saturn, for instance, produced quality cars at cheap prices until pressure from GM and the unions left them to incubate in GM's downward spiralling dysenteric bosom. Recently, they broke away and will again be distributing under their own name and facilities (at least, the initial process has been started). Our money is wasted on a malfunctioning/mishandled corporate dinosaur. If the situation were merely left to run its course- I think -and this is conjecture- that there will be other companies arriving on the scene to take their place. It would take time, but in the end we would have a stronger manufacturing backbone with more competition devoid of the failed institutions set by these three (See Tesla). If my 8-track tape player breaks. Sure, its a bit of nostalgia lost, but i'm not going to spend 100 bucks to get it fixed...i'm going to move on to something better.Quote:
Originally posted by Gaviani
Secondary note: why is it a sine qua non that America should make cars in the first place anymore?
Instead of throwing money at GM while insisting that the cars that were already made (that didn't meet the hightened epa standard) sit in a lot who-knows-where, perhaps the govt should have given GM a break, let them sell their already manufactured vehicles by lowering the epa standard back down to its previous level, and give taxpayers the same break for buying a GM car that they are currently eligible for with the overrated "hybrid". What was it again, 5,000? Yeah, I'd be tempted to buy a Prius too. I don't think anyone "really" wants to save GM.
(I can't site any sources because I'm regurgitating a bunch of info I've fed up on over some time, and I'm too lazy to use the interwebz to find all the info again.)