I voted for Obama (I voted I voted for Obama (I voted republicans statewide and locally for lower taxes) but one big concern I have is that the Unions put in over $20 mil for Obama and the senate/congressional races and that will no doubt influence their decision.
So why did I voted Obama? On the other hand you have Halliburton, Big oil and the defense companies influencing Bush to go to Iraq. The republican’s attitude to the world: “if you are not with us, you are against us”. And Bush giving big tax cut for the rich regardless of the deficit (capital gain tax cut won’t benefit me and most of you much but will benefit Warren Buffet a lot). It is like, we can’t win with either party.
I am for bailing out the big 3 but with several conditions:
1. UAW workers will get a 33% salary cut ($30/hour to $20/hour–good living wage for uneducated workers) and 50% reduction in benefits (even with this cut in benefits it is still higer than what the average workers are getting).
2. Big 3 can layoff UAW workers if needed.
But I think with the Democrats controlling Congress and the White house these conditions will never happen.
TheBreeze
November 8, 2008 @
1:12 PM
If we are going to bail out If we are going to bail out 29 year-old investment bankers who are driving Maseratis, we should definitely be bailing out the Big 3. It is unconscionable to give trillions to rich bankers and then not give a relatively small $25 billion loan to the Big 3 to help out the Working Man.
As for the Big 3’s problems, I’m not so sure that the current crop of workers are the problem. I know several members of the UAW who retired in their 40’s with schweeet pensions. It can’t be easy trying to operate a company profitably with such huge pension obligations.
HereWeGo
November 8, 2008 @
3:33 PM
Let em go bankrupt, Let em go bankrupt, re-organize, then if the new entities want to sell preferred shares to the government, so be it, as long as the new business plan is reasonable.
Eugene
November 8, 2008 @
4:08 PM
The Big 3 are too big to The Big 3 are too big to fail. GM and Ford alone employ 500,000 people.
CA renter
November 8, 2008 @
4:21 PM
I’m with The Breeze on this I’m with The Breeze on this one. For the exact reason he/she stated. If we are bailing out the financial industry (which essentially produces nothing), then we might as well bail out the industries that actually employ people who WORK and PRODUCE for a living. The other option is adding hundreds of thousands of unemployed people to the welfare/unemployment rolls at exactly the time we can least afford it.
Naturally, we would need to require that the automakers do a better job at building safer, more efficient cars, and the patents that they (and the oil companies) hold — that are keeping fuel- efficient cars off the road — need to be dealt with, too.
Although the pension obligations can be pretty daunting, I think mismanagement is the ultimate culprit in the automakers’ demise.
an
November 8, 2008 @
4:24 PM
So those who were posturing So those who were posturing against the first bailout were just that… posturing. You guys aren’t really against the bailout after all huh?
Coronita
November 8, 2008 @
7:57 PM
esmith wrote:The Big 3 are [quote=esmith]The Big 3 are too big to fail. GM and Ford alone employ 500,000 people.
[/quote]
That’s what they said about LEH and AIG…
Except what some people don’t realize, this failure wouldn’t be causing a global financial crisis. Yes, a lot of workers are gonna get hurt, u.s. economy would go into a tailspin, but it can happen….
Most likely GM/Ford’s global operations would be picked clean. GM asia would be picked up by automakers in korea/japan/china… Ford europe operations would be picked up by european automakers…
Don’t know who would pick up u.s. operations. Private equity probably won’t want to (I think they learned their lesson with Chrysler)…
I did at one point said, GM isn’t worse off than ford, which isn’t worse off than Chrysler. I still hold that to be true…BUT this market really changes the game, doesn’t it???
an
November 8, 2008 @
1:17 PM
jimmyle wrote:It is like, we [quote=jimmyle]It is like, we can’t win with either party.[/quote]
No you can’t. Too bad you didn’t follow through with this revelation and vote 3rd party.
[quote=jimmyle]I am for bailing out the big 3 but with several conditions:
1. UAW workers will get a 33% salary cut ($30/hour to $20/hour–good living wage for uneducated workers) and 50% reduction in benefits (even with this cut in benefits it is still higer than what the average workers are getting).
2. Big 3 can layoff UAW workers if needed.
But I think with the Democrats controlling Congress and the White house these conditions will never happen.[/quote]
I don’t think your demand will ever happen. It it does, then it really render UAW and all other union useless. It was the big 3’s fault for chasing after trucks and SUV. Company should fail if it can’t stand on its own. If you bailout the big 3, then who’s next? Airlines? Builders? etc? Where would you draw the line?
meadandale
November 8, 2008 @
2:29 PM
asianautica wrote: Company [quote=asianautica] Company should fail if it can’t stand on its own. If you bailout the big 3, then who’s next? Airlines? Builders? etc? Where would you draw the line?[/quote]
See, that’s what I don’t get about TheBreeze: he railed against the wallstreet bailout but then says “We have to bailout the automakers”.
Either you are against bailouts or you aren’t.
I was against the wall street bailout and I’m against bailouts of auto makers, airlines and any other FOR PROFIT private enterprises.
Lately everyone seems to be critical of deregulation and naked capitalism however I would argue that we are experiencing the effects of exactly the opposite: having the government hand interfering with the invisible hand and screwing up what would otherwise be self-correcting market forces.
ralphfurley
November 8, 2008 @
6:02 PM
Let them go under.
It was bad Let them go under.
It was bad business decisions that leaves them where they are. Instead of seeing that we can’t run on oil forever, they decided to make tons of cash building huge gas guzzling SUVs. It was much more profitable in the short term to build these cars and push them on the American public instead of taking us into the future.
They completely gave up on R&D for better fuel economy cars and now they are paying the price. People don’t want to drive a steel boulder around town anymore. Course, Toyota ain’t doing that great either, but I imagine Chevy has to be in a world of hurt.
jpinpb
November 8, 2008 @
6:13 PM
Bailing them out will not Bailing them out will not solve the underlying problem. We import more cars than we export, especially Japan. Heck, streets in some countries aren’t even big enough to accomodate our SUVs.
The U.S. auto companies need to focus on smaller vehicles that operate on other than gasoline. They need to be more innovative. Making those big gas guzzlers just was not the answer and this outcome was foreseeable, I think.
Sadly, if we don’t help them, the economic problems will be undoubtedly exacerbated.
TheBreeze
November 8, 2008 @
6:23 PM
There’s no way Obama is going There’s no way Obama is going to let the U.S. automakers go under. That’s his base. Just as the Simian King gave trillions to his base, the banker class, Obama will give tens of billions to the automakers.
Republitards started the bailout by making sure that 29 year-old investment bankers were able to make their Maseratti payments and now Obama is going to make sure that the working man is able to make the mortgage payment on his modest abode.
That’s one of the reasons I prefer Democrats. Socialism for the poor is usually much cheaper than Republitards’ socialism for the super-rich.
HereWeGo
November 8, 2008 @
6:45 PM
If the Mutt supports a bail If the Mutt supports a bail out of the BK 3, his “honeymoon” will be over before the inaugeration.
kewp
November 8, 2008 @
6:46 PM
TheBreeze wrote:
That’s one [quote=TheBreeze]
That’s one of the reasons I prefer Democrats. Socialism for the poor is usually much cheaper than Republitards’ socialism for the super-rich.[/quote]
No kidding.
There is also the fun fact that any money going to poor folk just turns right around stimulates our economy.
Give a poor guy a dollar and he’ll use it help pay down his mortgage. Give a rich guy a dollar and he’ll by a CDS that will pay when the poor guy in the previous sentence defaults.
Which is better for the economy in the long run?
Arraya
November 8, 2008 @
7:10 PM
Eventually we will realize Eventually we will realize the car industry is never ever coming back to the way it was. These companies HAVE TO massively scale back. If Obama was smart he would insist on it before he takes office. We don’t need 90% of the cars they make. Oil peaked people, this matters.
China’s premier Wen Jiabao says “Industrialized nations should ditch unsustainable lifestyles”? Wonder if he’s been reading the same information I have…a rational person looking at global numbers of humans and how much resource is left would likely come to no other conclusion.
TheBreeze wrote:There’s no [quote=TheBreeze]There’s no way Obama is going to let the U.S. automakers go under. That’s his base. Just as the Simian King gave trillions to his base, the banker class, Obama will give tens of billions to the automakers.
Republitards started the bailout by making sure that 29 year-old investment bankers were able to make their Maseratti payments and now Obama is going to make sure that the working man is able to make the mortgage payment on his modest abode.
That’s one of the reasons I prefer Democrats. Socialism for the poor is usually much cheaper than Republitards’ socialism for the super-rich.[/quote]
You might want to thank those Democrat friends you have in congress for passing those Trillions of $ in bailouts. They were also the ones that supported FNMA and FRE, so you should be happy they spent Trillions in bailing them out.
Coronita
November 8, 2008 @
8:01 PM
TheBreeze wrote:There’s no [quote=TheBreeze]There’s no way Obama is going to let the U.S. automakers go under. That’s his base. Just as the Simian King gave trillions to his base, the banker class, Obama will give tens of billions to the automakers.
Republitards started the bailout by making sure that 29 year-old investment bankers were able to make their Maseratti payments and now Obama is going to make sure that the working man is able to make the mortgage payment on his modest abode.
That’s one of the reasons I prefer Democrats. Socialism for the poor is usually much cheaper than Republitards’ socialism for the super-rich.[/quote]
That might be true, but Bush may just very well do this. GM/Ford are running on fumes. I’m not sure without a bailout bill soon, they will make it before Obama takes office. That $25 billion earmarked for alternative energy cars apparently is hung up in red tape….
CostaMesa
November 9, 2008 @
10:23 PM
How’s about Big-3 Management How’s about Big-3 Management take responsibility for the mess they’re in?
NOBODY ever seems to blame the people running the automakers. Who sets the direction for the company? Does the union decide what cars to produce and so on? Didn’t think so.
If the bosses don’t go, there’s no reason to spend a dime on them. These morons need to be shot for sedition. They’ve singlehandedly done almost as much damage to America as the investment bankers have.
an
November 9, 2008 @
11:01 PM
CostaMesa wrote:How’s about [quote=CostaMesa]How’s about Big-3 Management take responsibility for the mess they’re in?
NOBODY ever seems to blame the people running the automakers. Who sets the direction for the company? Does the union decide what cars to produce and so on? Didn’t think so.
If the bosses don’t go, there’s no reason to spend a dime on them. These morons need to be shot for sedition. They’ve singlehandedly done almost as much damage to America as the investment bankers have.[/quote]
There’s plenty of blame to go around, well beyond the management, for how the big 3 got to their current problem. Part of the blame goes to the consumers for buying up those SUV when gas was cheap. Big 3 management didn’t look so stupid when they’re making good profit selling those SUV. SUV are very profitable, much more so than any sedan will ever be.
The other part of blame goes to the union. Employees at Toyota/Honda/Nissan plants are just as (if not more) happy as employees from the big 3, and they don’t have union. They get paid just as much (if not more) as big 3’s employees after their union dues. So, the union put additional cost burden on the big 3. This extra cost burden drives them to products that are most profitable and what people want the most at the current time, which is SUV. Also, this additional cost increase their cost per vehicle, which put them at a disadvantage in price compare to the Japanese. This then drive them to cut corners on the interior quality so that they can increase their profit per vehicle.
Obviously, the management has the largest portion of the blame. They have great cars in Europe & Australia, yet, they’re too stupid to bring them over here. Their cars over there are very competitive with the German & Japanese counterpart.
Coronita
November 10, 2008 @
6:24 AM
Quote:
Obviously, the [quote]
Obviously, the management has the largest portion of the blame. They have great cars in Europe & Australia, yet, they’re too stupid to bring them over here. Their cars over there are very competitive with the German & Japanese counterpart.[/quote]
There might bmore complex issues than this. Some of the cars made overseas might not out of the box comply with safety regulations here in the states. That’s one of the reasons why when you get an R8 overseas, you can get the cool metallic steering wheel, but here in the U.S. you get the boring steering wheel out of the vw parts bin. Takes too much time for certification.
But, your point was noted… GM/Ford overseas looks really different from GM/Ford here. Buick for example in China is considered a pseudo-luxury brand, and products from GM/Shanghai looks pretty good imho.
tc
November 8, 2008 @
4:16 PM
At some point we are going to At some point we are going to hit a tipping point. I have no idea where it is but I feel it is getting closer if it isn’t to late already. And even though I was lucky enough to get out early I worry that at some point this will start to hurt even the more prudent people. Only time will tell.
barnaby33
November 8, 2008 @
4:50 PM
As the wise Davelj once As the wise Davelj once pointed out, “it all comes down to who’s ox is being gored.” TheBreeze must have dollar cost averaged into auto maker stocks over the last few years and is hoping to salvage said investment.
That being said, I’d rather bailout bankers than the automakers precisely because, my ox is gored the other way. I need the banking infrastructure to keep limping along. A large SUV, I can do without.
GM going under and laying off hundreds of thousands is unfortunately precisely what has to happen. Its costs structures MUST become aligned with what it can generate in revenue, otherwise it will never be profitable. If you think this makes me anti-union or inhuman so be it, but the US literally CANNOT bail out the auto industry this time. The problems are too big. A lot of retirees have to lose their health care protection and have their pensions cut precisely because those promises never could be kept. In the meantime all we are talking about is stealing from everybody else to keep the scheme going.
HereWeGo
November 8, 2008 @
5:03 PM
barnaby33 wrote:As the wise [quote=barnaby33]As the wise Davelj once pointed out, “it all comes down to who’s ox is being gored.” TheBreeze must have dollar cost averaged into auto maker stocks over the last few years and is hoping to salvage said investment.
That being said, I’d rather bailout bankers than the automakers precisely because, my ox is gored the other way. I need the banking infrastructure to keep limping along. A large SUV, I can do without.
GM going under and laying off hundreds of thousands is unfortunately precisely what has to happen. Its costs structures MUST become aligned with what it can generate in revenue, otherwise it will never be profitable. If you think this makes me anti-union or inhuman so be it, but the US literally CANNOT bail out the auto industry this time. The problems are too big. A lot of retirees have to lose their health care protection and have their pensions cut precisely because those promises never could be kept. In the meantime all we are talking about is stealing from everybody else to keep the scheme going.[/quote]
A precursor of what will eventually happen to the “unfunded liabilities” of SS and Medicare.
It’s not like there are no airlines in this country, yet many carriers have gone through bankruptcy proceedings multiple times. Maybe it’s time for the automakers to go down that path as well.
It will also be an educational experience for the UAW, as its members learn the meaning of “counterparty risk.”
kewp
November 8, 2008 @
4:56 PM
I’ll only support a bailout I’ll only support a bailout (of any industry) if the the stock of the company is under a dollar, the taxpayers get preferred shares and someone from the IRS is appointed to the CFO position.
tc
November 8, 2008 @
7:09 PM
Its seems to me that the U.S Its seems to me that the U.S tends to be behind the curve much too often. The Europeans taxed gas heavily. What this did was cause the automakers to create more fuel efficient cars. The small car is the norm. How could all the bright minds that run this country not see the inevitable effects of peek oil? Why did no one care about all the money going overseas? And why did no one prepare us for the future? Unfortunately the time for action was years ago. And the fact that most of the politicians in this country are more interested in keeping their jobs then doing the right thing has put us where we are. They have refused to stand up to the people and say the truth. They have listened to us cry like babies and given us a bottle full of crap to shut us up. And the people were happy to have it because all they wanted was something cheap to suck on. Very few asked what was in the bottle. Regardless of if the milk was real or some formula from China as long as we could have more for less. Well hopefully this mess will open some eyes. It’s a shame that we are being forced to learn the hard way. But it is what it is.
Arraya
November 8, 2008 @
7:18 PM
How could all the bright How could all the bright minds that run this country not see the inevitable effects of peek oil?
Economic ideology is one big reason. Another is a coordinated effort to obfuscate. Profit is not synonymous with sustainability which is the reason “sustainability” have become a synonym for socialism in some circles.
Coronita
November 8, 2008 @
7:51 PM
Actually, I was thinking Actually, I was thinking about this…The only way that GM/Ford can possibly really re-negotiate with UAW is IF they really did go bankrupt, and via bankruptcy reorg, renegotiate contracts with UAW or no union at all….
Unfortunately, two issues facing GM/Ford really are
1) A lot of vehicle purchases were financed. and GMAC is no longer willie nillie lending to anyone. Like I said before, financing through GMAC is like with a credit score 700+…
2) GM/Ford definitely have huge costs wrto to labor and UAW. UAW isn’t gonna give in. As long as GM and Ford have money and aren’t BK, they won’t get it. They’ll keep demanding the same benefits/etc even when everything around them is drastically different. GM/Ford keeps cutting salaried workers and folks in R&D, the same people they need to put the next generation cars out the door, because that’s where they can do most of the cutting. Ford is planning to sell off some of their investments into other car manufacturers. They already offloaded Jaguar, Aston Martin, etc. Now they are thinking of offloading Mazda…Brands that are actually doing well, and don’t have the same labor issues as main ford/GM. That’s just plain suicide. The only place they can’t cut is UAW…
Me thinks these unions are going to drag them into bankruptcy. Because no investor in their right mind would be loaning GM/Ford right now…not until they can break all their contracts with UAW. And so, it’s probably a waiting game.
Congress giving GM/Ford a loan is only going to delay this problem. Unless GM/Ford can renegotiate with UAW, that loan that Congress gives them will quickly be spent on not making better cars but on pensions/healthcare/etc for union workers.
Personally, I think UAW has gone too far. At this point, if they haven’t recognized how dire the situation is for GM/Ford, I don’t know…..Hmmm, demand GM/Ford for more, or everyone goes completely jobless…Seems like a no brainer. But, they did make their own grave…over the past 20+years…
kewp
November 8, 2008 @
7:59 PM
Actually, I was thinking Actually, I was thinking about this…The only way that GM/Ford can possibly really re-negotiate with UAW is IF they really did go bankrupt, and via bankruptcy reorg, renegotiate contracts with UAW or no union at all….
There’s any idea, wait for 20% unemployment and then its no union or back to the bread lines.
Coronita
November 8, 2008 @
8:03 PM
For the folks not following For the folks not following what’s going on…
Asianautica, I’m sure you already read these threads ….
There is only one number that really matters in today’s financial report from General Motors: how much cash it has in the kitty. And the answer is, not enough. GM is now burning through its cash reserves at a rate that will run short before Christmas.
Every month GM spends $13 billion to pay all the bills that keep the company running. And it has to pay out even more on top of that to meet other obligations, like paying the UAW for the VEBA or bailing out Delphi. Like all other companies, GM keeps a reserve of cash on hand that it can dip into when it doesn’t sell enough new cars to get the money to pay its bills. But that cash reserve is running out fast.
John McElroy is host of the TV program “Autoline Detroit” and daily web video “Autoline Daily”. Every week he brings his unique insights as an auto industry insider to Autoblog readers.
Up through the first half of this year, GM burned through its cash at a rate of over $1 billion a month. Yet, as this morning’s financial report discloses, that rate increased to nearly $2 billion a month during the third quarter. And as bad as that is, it gets worse.
GMAC cost GM $1.4 billion in badly needed cash flow. Last month GM’s sales in the American market fell 45%. GM says half of that drop was due to GMAC restricting financing to its dealers and customers. Specifically, GM sales fell by nearly 140,000 vehicles. So that means GMAC alone cost GM 70,000 sales.
On average GM gets about $20,000 for every vehicle it sells so that means GMAC cost GM $1.4 billion in badly needed cash flow. And that’s just for the month of October.
With less cash coming in, that means GM will burn through its cash reserves more quickly. I’d estimate that GM’s cash burn is now more like $3 billion a month. And this is where the situation turns dire.
GM now only has a little over $16 billion in cash reserves. And the company needs a minimum of $13 billion to keep the lights on and the assembly lines humming. So it’s pretty obvious what the company is up against. In another month or so it will no longer have enough cash to pay its bills.
GM is teetering on the brink of bankruptcy and needs immediate help. OK, so let’s say I’m wrong, and assume that thanks to drastic action it’s only burning through its cash at a rate of $1 billion a month. After all, GM says it’s working on all kinds of contingencies to sell assets, borrow more money, delay product programs and stop building new plants. In fact, it has plans to raise the liquidity of the company-meaning to come up with the money it needs-to the tune of nearly $20 billion. Even so, the company admits it will hit the minimum level of cash it needs before the year is out, and it will definitely fall below that minimum early next year.
In other words, GM is teetering on the brink of bankruptcy and needs immediate help. Unless a miracle happens, there’s only one place it can realistically turn to: the Federal Government. The company needs a bridge loan to get it through this downturn. And it needs the money yesterday.
I believe the company will get the money it needs and I believe that in two to three years it will emerge as a lean, mean, profit machine. But make no mistake, as you read this right now, GM is on its last legs.
jpinpb
November 8, 2008 @
8:07 PM
Didn’t the government help a Didn’t the government help a car company before in the past? I have a very vague recollection about it. Didn’t they help an airline company once, too?
TheBreeze
November 8, 2008 @
8:14 PM
jpinpb wrote:Didn’t the [quote=jpinpb]Didn’t the government help a car company before in the past? I have a very vague recollection about it. Didn’t they help an airline company once, too?[/quote]
At least one airline tends to go bankrupt every few years. Chrysler was bailed out back in the 80’s I think.
Coronita
November 8, 2008 @
8:22 PM
jpinpb wrote:Didn’t the [quote=jpinpb]Didn’t the government help a car company before in the past? I have a very vague recollection about it. Didn’t they help an airline company once, too?[/quote]
They did. I believe chrysler…And yes, they bailed out the airline industry after 9/11.
Not sure if they are going to do this again. Bush was against bailing out the big three this time around. It will be interesting to see if he changes his tune. I don’t doubt Obama/Democrats will offer some assistance. The question is if GM/Ford can last that long, and whether Bush is gonna do anything in the meantime….
The problem is complex. GMAC is majority owned by Cerberus. I suspect Cerberus is having major $$$ problems also dealing with Chrysler. So, it’s not surprised they are cash strapped and doing some strict lending rules with GMAC…which is causing issues with GM sales….and the cycle feeds itself I guess.
If you’re in the market for a SUV made by ford/gm or any maker for that matter, it’s a great time to buy. And with gas prices today at $2.60 ish/gal at costco, that might not be so bad.
It’s gonna take a lot longer for some of these hybrid owners to break even on the premium they paid for those cars. And if gas prices keep falling, i worry that auto makers are gonna stop investing in alternative, more efficient vehicles…It costs a lot of money to do this. And when gas is cheap, there is little incentive or motivation to spend so much R&D on it.
Case in point. One of my friends has the new Lexus LS460. It’s a V8 engine 4.6L. The gas mileage on it though is according to him 22/24…I guess the fuel management is done so well, that it bests several V6’s. Why can’t they put that kind of technology into a 4 or 6 banger???I’m guessing, because it costs too much…
jpinpb
November 8, 2008 @
8:51 PM
Yes, FLU. It was Chrysler in Yes, FLU. It was Chrysler in the ’70’s, I think. Scratching the grey mater. I think they got something like 1.2 billion from the federal government. And back then, that was a lot. But Chrysler also went through something like Chapter 11 where creditors ate some losses.
Chrysler was able to pay off more than $600 million in debts at just 30 cents on the dollar, from what I understand. The objective of all this was to protect jobs, but they ended up laying off 42k workers.
I read that their problems really started after WWII. They were not retooling. I can see similarities where they don’t want to invest in new technology today.
If I’m not mistaken, Chrylser also gave the government the right to purchase stock shares at $13. They were supposed to reduce salaries of execs and they did, but then restored salaries and even made it retroactive.
Chrysler has been a mess for a long time. Even when they were profitable, they weren’t really. They were carrying forward losses. They deferred pension costs. They cut R&D.
Every decision that is made is connected to so many others. They were bailed out before and we are back were we started w/them b/c they never fixed their underlying fundamental problem.
The loudest groups get rewarded. Taxpayers get the bill.
Sales for the month of October 2008 were… ahem… not good. The auto industry in the U.S. has found a way to slide further into oblivion with only a few bright spots from Audi and MINI, the latter of which enjoyed monster sales last month we suspect on account of greater production capacity this year versus October 2007.
While all the major players were down, General Motors, the largest of them all, was hit the hardest. Its sales volume for October 2008 fell 45% compared to last year. It went from selling an average of 11,923 cars per day in October 2007 to just 6,318 last month. Each of its brands were down, with HUMMER taking the Biggest Loser crown (yet again). The real story, however, is how close behind the other brands were, with Cadillac falling 55.1%, Buick 46.3%, Chevy 40.3%, GMC 52.5%, Pontiac 48.2% and Saturn 54.6%.
What can account for GM’s entire brand portfolio taking such a hit? GMAC, the financing arm of General Motors that’s majority owned by Cerberus. Halfway through the month GMAC decreed it would only lend money only to buyers with a credit score above 700, which effectively wiped out in-house financing for the majority of GM customers. While dealers could still work with banks to secure financing (and were encouraged to do so), it appears the damage wrought by GMAC could not be undone.
UCGal
November 9, 2008 @
6:45 AM
If my employer chooses to If my employer chooses to develop products that don’t sell, over and over again… they don’t get money to retool and make products that fit the market place. (And my employer HAS done this – and is hemmoraging money.) My employer is a large, American, company. I’m sure they’d LOVE a bailout. But they won’t get one, and shouldn’t get one. The top execs are idiots and driving the company into the ground.
Why is the auto industry “special”. Why do they get bailed out after years of making the wrong products? GM designed and produced small, fuel efficient cars – that they sold in Europe… and never tried to produce and sell here. They are capable of making the right products – they chose to focus on Hummvees and Suburbans here in the U.S.
I have relatives that work for GM and friends that work for Ford… But, this sounds harsh, their jobs are no less special than anyone elses. My job is under threat of layoffs. I have other relatives that work for companies that are laying off. No one is talking about bailing out their employers.
If a company makes a series of bad marketing decisions over years – and blows through their cash like a drunk sailor on leave – then they need to see the consequences of their actions. Even the big three.
jpinpb
November 9, 2008 @
7:02 AM
Ah, UCGal. The light bulb Ah, UCGal. The light bulb should be going off in everyone’s head now. Car makers sleep w/the oil industry. I’m just stating the obvious here now.
Arraya
November 9, 2008 @
7:20 AM
jpinpb wrote:Ah, UCGal. The [quote=jpinpb]Ah, UCGal. The light bulb should be going off in everyone’s head now. Car makers sleep w/the oil industry. I’m just stating the obvious here now. [/quote]
And GM canceled their electric car the same day they unveiled the Hummer.
Who Killed the Electric Car? is a 2006 documentary film that explores the creation, limited commercialization, and subsequent destruction of the battery electric vehicle in the United States, specifically the General Motors EV1 of the 1990s. The film explores the roles of automobile manufacturers, the oil industry, the US government, the Californian government, batteries, hydrogen vehicles, and consumers in limiting the development and adoption of this technology.
Yeah, let’s just keep Yeah, let’s just keep supporting failure. It’s now an American tradition. We teach it in our schools and our govt spreads it around like the virus that it is. We’re so screwed. It’s a race to the bottom.
kewp
November 9, 2008 @
11:45 AM
UCGal,
Here, here.
Something UCGal,
Here, here.
Something I think it good about recessions is that companies/individuals no longer have the luxury to fail. They need to make tough, smart decisions to stay solvent.
patientrenter
November 9, 2008 @
6:52 PM
UCGal wrote:Why is the auto [quote=UCGal]Why is the auto industry “special”. Why do they get bailed out after years of making the wrong products?[/quote]
Answers:
1. TBTF (Too big to fail)
2. Politics (UAW = Democratic flagship, and geographical concentration in MI = ownership of MI politicians)
urbanrealtor
November 9, 2008 @
11:50 AM
I am not somebody who seeks I am not somebody who seeks to support failed business models.
However, much of their business model was successful–if lurching and inconsistent–until recently.
People really did buy those big trucks and SUVs.
Those markets are smaller now and that is why those companies are failing.
I think that the effect of those companies having an unmitigated collapse would be sufficiently bad that trying to mitigate the effects is worth doing.
The job of any government panel or body on any industry is to smooth out the extremes (eg: the Fed). Not that they are always successful (eg: the Fed).
I think a government backed retooling and “racheting down” of the industry is the best chance of benefiting the US people.
I think that the situation that these companies are in right now means that the government can mandate realistic business plans prior to any funding.
—
Voting for government help while holding my nose.
barnaby33
November 9, 2008 @
12:15 PM
So urbanrealtor, when exactly So urbanrealtor, when exactly has a bailout in any way shape or form “smoothed” out the collapse of an otherwise profitable industry? In the history of bailouts, it hasn’t. It has allowed unprofitable business and irresponsible govt to NOT have to address those problems.
The solution is called bankruptcy reorganization. Of course nobody wants to admit that, because that would force the loss of what were tens of thousands of relatively high paying jobs with good, if untenable, benefits.
Josh
urbanrealtor
November 9, 2008 @
1:04 PM
barnaby33 wrote:So [quote=barnaby33]So urbanrealtor, when exactly has a bailout in any way shape or form “smoothed” out the collapse of an otherwise profitable industry? In the history of bailouts, it hasn’t.
[/quote]
I think that Chrysler under Iacocca and the airlines in late 2001 would be good examples. Alternatively, Amtrak, JP Morgan/Wamu, and the USDA (or at least most of its subsidies) are also examples of bailouts and/or corporate welfare that are widely seen by policy makers to be beneficial to the public.
In each of these cases turbulence appeared to be in danger of eliminating previously profitable businesses or entire business models. These examples are all dissimilar to one another (eg: takeover vs. capital infusion vs. loan vs. price control) and likely dissimilar to what would happen with the big 3. However the point remains that our government exists because the market has a tendency to chew up citizens periodically.
In several cases the industries or businesses in question did downsize or modify their models in a fairly orderly way. For example, without the brokering of the JP/WaMu deal, bankruptcy could have meant liquidation and led to additional complications (insurance filings for deposits, lots of unemployed bank workers, re-assumption by a new asset buyer of all mortgage servicing operations). This was made unnecessary.
[quote=barnaby33]
It has allowed unprofitable business and irresponsible govt to NOT have to address those problems.
[/quote]
You are right in this. Irresponsible assistance is more like enabling than helping.
[quote=barnaby33]
The solution is called bankruptcy reorganization. Of course nobody wants to admit that, because that would force the loss of what were tens of thousands of relatively high paying jobs with good, if untenable, benefits.
Josh[/quote]
The benefits and pay were not the issue per se. The issue is the crappy overall business design of which those were constituent parts.
Its not like there is something in the Japanese brain that makes them better at designing cars. Nor is there something in their steel that makes their cars comparatively less likely to fail. It comes down to a question of which option is more likely to benefit more people appreciably. If the gov’t helps them, will it be likely to improve or make worse the lives of the people affected (taxpayers and empoyees)? Will they use handouts to improve business (eg: Southwest airlines) or to just keep shambling along for a few years before we have this same conversation again (eg: United airlines)?
barnaby33
November 9, 2008 @
6:44 PM
The benefits and pay were not
The benefits and pay were not the issue per se. The issue is the crappy overall business design of which those were constituent parts.
On this we are in agreement. The overall business model is fairly broken. All options need to be on the table. As I see it, bankruptcy is the only way to do that. Union and supplier contracts can be broken and re-hammered out. People lose their jobs, more importantly people will lose their benefits. However the company can survive.
On the issue of the Wamu/JPM deal, the idea was to prevent a mark to market event in liquidating all of Wamu’s toxic crap, nothing else really mattered. Our economy does occasionally chew up good companies. In those cases you’d get zero argument from me on a govt sponsored loan to re-organize. This on the other hand is systemic. We all know that, or at least those of us on this board do. Letting the govt pick the winners is never a good idea.
Josh
no_such_reality
November 9, 2008 @
7:30 PM
We’re footing the bill We’re footing the bill whether it is through a bail-out or Pension guaranty.
Frankly, I say offer them an AIG style deal. Shred them into their viable components and retire the rest.
DWCAP
November 9, 2008 @
11:23 PM
I always love how when things I always love how when things go to hell in a handbasket the “union” left goes after the management as the problem and says they should give up everything cause they ruined the company. When thigs go great, they bitch cause management gets too much of the rewards instead of the “working man” (as if white collar workers dont work at all and anyone could do there job just as well). According to them managment should take all of the risks and none of the reward, or atleast no more reward than the lowest, newest, least educated “actual worker” got.
Theyll tell you some BS about “reasonsable” reward, but it mostly comes down to what they ‘feel’ is reasonable for those they dont represent. How about we all vote on how much each other should make? Who here thinks HS educated auto workers are worth $78.21/hr in pay and benifits? (http://money.cnn.com/2008/02/12/news/companies/gm/)
Here is an oped piece I found inlightening. It is from a op piece, most likley a biased source, but what source isnt really?
What I found most interesting:
G.M. acknowledged in its most recent annual report that from 1993 to 2007 it spent $103 billion “to fund legacy pensions and retiree health care — an average of about $7 billion a year — a dramatic competitive and cash-flow disadvantage.” During those 15 years, G.M. paid only $13 billion or so in shareholder dividends. The company has been sending far more money to its retirees than to its owners.
This is not exactly a case of the rich robbing a company, and bailing.
This company needs to fail, and be reborn in Bankruptcy court. Offload the pension plan on the pension guarentee Corp (gov program created to support pensions, ironically created due to the wake of the studebaker auto company going under in the 1960’s.), allow a total contract renegotiation, offer some low cost loans to get the ball rolling in exchange for some prefered stock (if it is good for wall street…..) and lets get things moving again. This will free up some capital for reinvestment in the company , which will benifit the suppliers and the whole manufacturing industry. Dont sell the foreign assets (mazda/volvo), they need that knowhow and foreign market exposure.
Everyone involved is to blaim here, so everyone has to pay. Gov has written some really BS laws/pension guarentees/bailouts/tax writeoff/…. and we keep electing the Aholes that do it. We the tax payers deserve this.
Unions have run these companies into the ground. They have failed to orgainze the foreign automakers, giving them a huge advantage over the big 3, and will loose it all if they keep their heads in the sand.
Auto companies managment gave into the unions, poor design development of new products, fought every MPG regulation, etc etc.
The only thing that is certain is that we have pissed away a major industrial advantage in only 50 years.
UCGal
November 10, 2008 @
1:29 PM
A couple of comments.
If GM A couple of comments.
If GM is so well run – why the @#$#@ are they introducing the H3 into this market. And spending huge $$ pushing it in ads on various news channels this weekend. They don’t understand the marketplace. A Humvee pickup is not a good, high volume, high margin product in this market. Period.
Ford’s a little better – they’re moving to a single platform for the Focus – so they can build one version that is good around the world. (Currently they have a US version and one for everywhere else.) They actually have a few small cars and they have the hybrid Escape. Their management is starting to understand things.
The talk about legacy costs due to the unions… This one drives me nuts. The top execs also have obligated pensions on a much larger scale – they’re blaming the workers, while a signifcant portion of the legacy costs are to pay the fat pensions of the corporate execs. Read this article that originally appeared in the WSJ…
I don’t have a problem with renegotiating with the Union to reduce fixed costs. But they need to make equivalent cuts on the executive benefits.
And if the big 3 fail – we’ll still have plenty of US made cars… with labels like Nisson, Toyota, Honda… built in the Southern states. Detroit may be failing, but the auto industry in the US will survive. We’ll keep that “know-how”.
an
November 10, 2008 @
1:43 PM
UCGal wrote:A couple of [quote=UCGal]A couple of comments.
If GM is so well run – why the @#$#@ are they introducing the H3 into this market. And spending huge $$ pushing it in ads on various news channels this weekend. They don’t understand the marketplace. A Humvee pickup is not a good, high volume, high margin product in this market. Period.
Ford’s a little better – they’re moving to a single platform for the Focus – so they can build one version that is good around the world. (Currently they have a US version and one for everywhere else.) They actually have a few small cars and they have the hybrid Escape. Their management is starting to understand things.
The talk about legacy costs due to the unions… This one drives me nuts. The top execs also have obligated pensions on a much larger scale – they’re blaming the workers, while a signifcant portion of the legacy costs are to pay the fat pensions of the corporate execs. Read this article that originally appeared in the WSJ…
I don’t have a problem with renegotiating with the Union to reduce fixed costs. But they need to make equivalent cuts on the executive benefits.
[/quote]
I’m not sure if you’re aware, but the H3 is based on the Colorado platform. It just have different sheet metal. It probably doesn’t cost them very much in term of engineering cost to develop the H3. So yes, it’s a smart business decision IF the H3 actually sell. Imagine if you get sell the Colorado for the profit margin of a Hummer by just changing the badge and some sheet metal. GM is the master of badge engineering.
GM is a lot better now in their small cars too. GM is in a much better position than Ford is in term of platform. You should check out their small cars. They’re sharing much more with their European and Aussie arms.
Legacy cost includes pension for the ex-big cats too. So, I don’t see why you’re trying to separate them.
[quote=UCGal]And if the big 3 fail – we’ll still have plenty of US made cars… with labels like Nisson, Toyota, Honda… built in the Southern states. Detroit may be failing, but the auto industry in the US will survive. We’ll keep that “know-how”.[/quote]
I do agree with this statement 100% though.
jpinpb
November 10, 2008 @
2:15 PM
UCGal wrote:A couple of [quote=UCGal]A couple of comments.
If GM is so well run – why the @#$#@ are they introducing the H3 into this market. And spending huge $$ pushing it in ads on various news channels this weekend. They don’t understand the marketplace. A Humvee pickup is not a good, high volume, high margin product in this market. Period.
[/quote]
Reminds me of the new Mac/PC commercial where PC is sitting at the desk going through a pile of money, setting aside a small amount to fix Vista and a large amount for advertising.
Same difference. Throwing money at the problem, but not really fixing what’s wrong.
Coronita
November 10, 2008 @
1:38 PM
…Meanwhile, in Chrysler …Meanwhile, in Chrysler land….
New deal.. Buy one, get one free….No joke….
he Dodge Avenger wasn’t exactly selling like hotcakes here in the US, even before the auto market took a nosedive. We can’t imagine the Avenger ever sold well overseas as an export to the UK, and the under-developed Dodge’s newest incentive supports our assertion. Car-buyers in the Kingdom can pick up a nicely equipped Avenger SXT 2.4 saloon at the MSRP of £18,255. As a reward for taking the Avenger off the dealer’s hands, they’ll get a second Avenger free of charge. Broadspeed.com is offering the buy one, get one sale with the aim of easing the massive amounts of stock dealers are carrying right now. The problem isn’t exclusive to the Avenger, though, as many dealers are sitting on six month inventories due to slow sales on the island. Given the massive problems selling cars in the UK, the deals on the Avenger still stand out as incredible. Maybe Dodge dealers here in the US will take note, though we’re sure there are plenty of people that think the only thing worse than owning an Avenger would be having two. Thanks for the tip, everyone!
Coronita
November 10, 2008 @
1:50 PM
More bad news at the More bad news at the General….
SideNote: If GM starts selling a Vette Z06 at $30k, I’m sold…
——–
DETROIT – Bad news kept piling up for General Motors Corp. on Monday as its shares plunged to their lowest point in 60 years and the company said in a government filing that the mortgage unit of its finance arm may not survive.
GM also said that Delphi Corp., its former parts operation that was spun off as a separate company in 1999, may not be able to emerge from Chapter 11 bankruptcy protection.
GM shares dropped $1, or 23 percent, to close at $3.36.
They earlier plummeted as low as $3.02 on increasing worries about accelerating cash burn and mounting losses. That marked the automaker’s lowest share price since Dec. 2, 1946 when it hit $3, according to the Center for Research in Security Prices at the University of Chicago. The price is adjusted for splits and other changes.
Before the markets opened Monday, Brian A. Johnson of Barclays Capital cut his rating on GM to “Underweight” from “Equal Weight” and slashed his price target for the Detroit-based automaker to $1 from $4.
Johnson said that without additional funding, GM’s gross cash will likely fall below minimum levels in the first quarter of next year.
The analyst also said that while additional government assistance will likely decrease the likelihood of a bankruptcy protection filing at the nation’s largest automaker, it also would likely significantly dilute its equity.
Separately, JPMorgan’s Himanshu Patel said he expects GM to receive some form of federal aid, but advised investors to be cautious given the uncertainty. He added that he expects the automaker to end 2008 with $12.6 billion in cash on hand, just above midrange minimum cash and excluding government loans.
Both analysts said they expect the automaker’s per-share losses for this year and next to be significantly larger than what was expected. Both slashed their estimates.
Early in the afternoon, GM filed its quarterly report with the U.S. Securities and Exchange Commission that contained more bad news.
The company said that the troubled mortgage industry and frozen credit markets have raised doubts that the mortgage business of its GMAC LLC financial arm can survive.
The filing says that the value of Residential Capital’s mortgage loans have deteriorated due to weak housing prices, delinquencies and defaults. It is also having trouble raising capital.
GM owns 49 percent of GMAC LLC, with the rest owned by Cerberus Capital Management LP.
Market developments have so harmed Residential Capital, called ResCap, that there is “substantial doubt about ResCap’s ability to continue as a going concern,” GM said in the filing.
The automaker also revealed that ResCap’s deteriorating finances forced ResCap to shore up its standing with mortgage finance giant Fannie Mae, the largest U.S. buyer and backer of home loans.
ResCap said it posted an additional $200 million in collateral with Fannie Mae and sold off the rights to collect payments on $12.7 billion in loans, or 9 percent of the total amount it collects for Fannie Mae. Had ResCap not acted, Fannie Mae could have severely curtained its loan purchases from ResCap.
GM also said in the filing that Delphi Corp., its former parts-making operation that was spun off in 1999, is unlikely to emerge from bankruptcy protection in the short term and may not be able to emerge at all.
___
davelj
November 10, 2008 @
2:23 PM
Personally, here’s what I Personally, here’s what I would do about the Big 3:
Have a meeting with management and the UAW and tell the UAW that the govt (re: taxpayers) will lend the auto companies money if the UAW accepts massive cuts in pay and benefits (someone above suggested 33% – that’s in the ballpark). If the UAW won’t bite, tell them, “OK, but it’s BK and game over for the Big 3, which includes your union.” They’ll bite on this… eventually.
Then you give the automakers the billions it needs as senior secured debt – ahead of everyone else on the balance sheet in terms of liquidity preference. Yeah, the other debt holders will cry foul – “Hey, I was senior before! You’re screwing me!!” To which the reply is, “Your seniority doesn’t mean shit if these companies go BK, so bite it, pal. Get in line… behind Uncle Sam.”
The reduced labor costs along with major restructuring should make the automakers break-even propositions even in a shitty economy. They’ll limp along for another decade or so, shedding tens of thousands of jobs each year, eventually disappearing in bankruptcy – or perhaps bought by foreign car makers – but the taxpayers should at least get their principal back if its structured properly. And, most importantly, the jobs will be shed over a decade instead of all in one fell swoop – which would be pretty disastrous, frankly. Also, a number of these folks should get re-hired by foreign automakers here in the US if they’re willing to travel for the jobs. If they’re not – screw ’em.
Anyhow, that’s a plan that’s palatable that would minimize pain as well as taxpayer loss. Which is why it’ll never happen.
equalizer
November 10, 2008 @
8:47 PM
davelj,
Completely agree with davelj,
Completely agree with your assessment (as usual).
It would also be nice to increase CAFE standards and mandate safety standards recommended by Insurance Instutite for Highway safety. http://www.iihs.org
CostaMesa
November 10, 2008 @
10:19 PM
Wow, so many that will gladly Wow, so many that will gladly waste their tax money to reward incompetent management – simply in order to spite the unions. Unbelievable. Can’t wait to see the news showing their execs getting their spa day too.
There’s no reason to spend a dime on a company that has zero chance of survival. They don’t transplant livers into stage 4 cancer patients for a reason – it’s a waste.
It’s more humane to let the whole sick mess fail – management, union and company. Just like the Republican purge of the last few years, sometimes tough-love is the only effective path to getting someone’s attention.
rube
November 11, 2008 @
9:58 PM
can’t let the big three can’t let the big three die…
think what would happen to the thriving detroit real estate market.
Arraya
November 11, 2008 @
10:47 PM
25 billion? AIG spends that 25 billion? AIG spends that on hookers and blow in a year. Let’s prop up this aging dinosaur, at least to keep retirement benefits for a workforce that counted on this for a living.
It is a semi Main Street bail out, at least give some of the proletariat a chance at the pig trough.
CA renter
November 12, 2008 @
12:42 AM
Agree with that, arraya.
What Agree with that, arraya.
What some posters don’t seem to understand is that those pensions and medical benefits were part of their (UAW workers) compensation package.
The workers held up their part of the deal, and the company should hold up their end as well. Many of these people worked and planned their lives for decades, based on contractual agreements.
If nothing else, the govt should take the $25 billion and shore up the obligations already agreed to by the management and labor. After that, let the entire thing fall. I’d rather see these contracts honored than see workers’ benefits sacrificed for the benefit of shareholders and executives.
DWCAP
November 12, 2008 @
1:05 AM
CA renter wrote:
If nothing [quote=CA renter]
If nothing else, the govt should take the $25 billion and shore up the obligations already agreed to by the management and labor. After that, let the entire thing fall. I’d rather see these contracts honored than see workers’ benefits sacrificed for the benefit of shareholders and executives.
[/quote]
What are you talking about? You have some kinda instinctual hatred of “management” that makes no sense in the GM case. I posted a fact earlier that GM has spent over 100billion in the past 15 years on Employee benifits and 13 billion on divedends/stock payments. 10-1! And now you want to use taxpayer money to shore up those benifits? Look, if managment had screwed the employees by robbing them blind that would be one thing. But that isnt what happened in this case. 25 billion? after 100 billion failed? I think you are underestemating just how gold plated these benifits are when compared to the average americans. We are not talking about 25 billion in tax dollars, 250 billion sounds more inline.
an
November 12, 2008 @
1:15 AM
DWCAP wrote:I think you are [quote=DWCAP]I think you are underestemating just how gold plated these benifits are when compared to the average americans. We are not talking about 25 billion in tax dollars, 250 billion sounds more inline. [/quote]
Totally agree. The average hourly wage for Big 3’s employees are around $74/hour. While at Toyota, Honda, etc., they’re ~$48/hour. So, CA renter, please do explain why we should spend another $25 BILLION dollar of our hard earned tax $ to bail people who were making an average of $150k/yr. and some have nothing more than a HS diploma?
CA renter
November 12, 2008 @
2:35 AM
Many people have high school Many people have high school diplomas (or less) but are more valuable than ten people with degrees.
I’ve seen too many over-educated idiots with no “real life” common sense or work ethic. IMHO, this notion that everyone must have a college degree is part of the problem (we are a service/technology/finance economy…). BTW, I have a college degree and come from a long line of educators/college professors, so I’m not saying this for my own sake. It’s what I’ve seen in real life.
~~~~~~~~~~~~~~~~~
If I understand your argument correctly, you believe that U.S. automakers were at a competitive disadvantage because they had to pass on the high costs of labor to their customers. Is that correct?
If so, please tell me if you have ever met anyone who bought a Toyota or Honda because they were cheaper than comparable American cars.
During the 70s, Japanese manufacturers began taking market share from U.S. companies because of the gas shortages, and that was the beginning of the end for U.S. car companies.
We have owned American and Japanese cars (love them!), but always bought the Japanese cars because of their reliability and safety standards. Price had nothing to do with choosing Japanese over American. The Japanese build better cars, in most cases. That is a management issue, not a union issue.
Everyone else I’ve ever known who bought a Japanese car over an American car did so for the same reasons — #1 reason is perception of reliability.
It’s not the unions that are the problem, but management that was slow to respond to changing markets.
A brief history of American auto manufacturers and some of the obstacles they’ve faced, and some of the current problems (unions are just one of many problems) are here:
CA renter wrote:Many people [quote=CA renter]Many people have high school diplomas (or less) but are more valuable than ten people with degrees.
I’ve seen too many over-educated idiots with no “real life” common sense or work ethic. IMHO, this notion that everyone must have a college degree is part of the problem (we are a service/technology/finance economy…). BTW, I have a college degree and come from a long line of educators/college professors, so I’m not saying this for my own sake. It’s what I’ve seen in real life.
~~~~~~~~~~~~~~~~~
[/quote]
That is what happens when a diploma becomes commercialized by “schools” like University of Phoenix. I think the more appropriate question, is a degree in “what” and “where” matters. Of course getting a degree is not an entitlement nor is a degree an entitlement to getting a “job”. On the other hand, being purely dependent on semi-skilled to no-skilled labor, you run the risk of always being outsourced to a cheaper counterpart.
jimmyle
November 12, 2008 @
6:56 AM
Big 3 hourly salary + [img_assist|nid=9571|title=Big 3 hourly salary + benefits (legacy cost not yet included)|desc=|link=node|align=left|width=396|height=346]
My formula of 30% salary reduction and 50% benefits reduction:
CA renter wrote:Agree with [quote=CA renter]Agree with that, arraya.
What some posters don’t seem to understand is that those pensions and medical benefits were part of their (UAW workers) compensation package.
[/quote]
What I think you don’t seem to understand is that in life, there is no such thing as a “guarantee”. Take the airline industry for example. Ask a lot of airline workers about what happened to their pensions…You know, the airlines that use to offer pensions. GM/Ford/Chrysler is broke. The generous compensation negotiated with UAW…GM/Ford/Chrysler can’t live up to that higher cost and produce a car that can compete with other manufacturers that don’t have the same benefits. GM/Ford/Chrysler management and labor both failed. Management failed to meet the growing cost head on…At the same time, they couldn’t partially had their hands tied with all the generous deals with the union. UAW workers wanted to hold on to their benefits, DESPITE a clear indication of decline at GM/Ford/Chrysler.
Arraya
November 12, 2008 @
6:55 AM
Hell, I don’t even Hell, I don’t even necessarily agree with what I said. I can see where this is going though. The US is not going to have the ability to offer opportunities for a good portion of the population, degreed or not. Cutting the Auto industry back 50%, which it probably needs more, is going to affect 2-3 million jobs when looking at the industries that support it. They are going to have to migrate to find work even the degreed. I can’t imagine the local Wall Mart can support that kind of influx, actually I can see the big box stores in these areas cutting back as well after the massive job losses in the surrounding areas.
We are all going to pay for the decades of poor economic and political leadership. “We” as in the working middle and upper-middle class, the monied class will be protected and have their pick of some really cheap labor.
Chris Scoreboard Johnston
November 14, 2008 @
6:01 AM
I wish some of you had grown I wish some of you had grown up in the Detroit area like I did with many friends in this union, you would have a different perspective. There is a fair share of socialist types here who are just mad they are not wealthy and want to bring down those that are, those peoples views would not be changed by having grown up there. However, I will tell you as someone who did grow up there that these workers are the most overpaid of any trade in the world. When you look at the average cost per vehicle of our automakers attributable to the UAW vs the Japanese, you will see a ratio of several hundered to one, I think the last number I saw was $2500 for us vs $100 for them. The concept of never buying a Monday vehicle is not a myth, it is truth. This is due to these workers working hungover on Mondays and producing far lessor quality on these days. My family bought a Monday car from Ford once not knowing it, and it was later classified as a lemon and wound up in a lawsuit.
I can tell you from personal experience all the stories my friends used to tell me about how they slept on the job often, and made all kinds of mistakes on Monday’s, it was one big joke to them. They all encouraged me to get a job with them, and I used to tear into them for their lack of respect for their employer, they did not care. This was the prime job to get growing up back there due to it being the higheset paid and allowing you to screw around all day long. Let’s face it some people should lose their jobs, you are not entitled to one like some in here feel. You have to have some responsibility in your life to yourself and your family. In this day and age is this really the type of thing you want to support?
Regardless of your political leanings, how does this pencil out from a business standpoint? Do you really think you can compete with that type of disadvantage? Until the unions are broken and they come in line with their cost structure this is not a viable business model regardless of your politics. I guess management should share some blame in this, but when you are being extorted like this what can you really do?
HereWeGo
November 15, 2008 @
3:19 PM
Holy Mackeral. Pelosi just Holy Mackeral. Pelosi just said that the automakers need to restructure to ensure their long term viability. Wow.
November 8, 2008 @ 12:57 PM
I voted for Obama (I voted
I voted for Obama (I voted republicans statewide and locally for lower taxes) but one big concern I have is that the Unions put in over $20 mil for Obama and the senate/congressional races and that will no doubt influence their decision.
So why did I voted Obama? On the other hand you have Halliburton, Big oil and the defense companies influencing Bush to go to Iraq. The republican’s attitude to the world: “if you are not with us, you are against us”. And Bush giving big tax cut for the rich regardless of the deficit (capital gain tax cut won’t benefit me and most of you much but will benefit Warren Buffet a lot). It is like, we can’t win with either party.
I am for bailing out the big 3 but with several conditions:
1. UAW workers will get a 33% salary cut ($30/hour to $20/hour–good living wage for uneducated workers) and 50% reduction in benefits (even with this cut in benefits it is still higer than what the average workers are getting).
2. Big 3 can layoff UAW workers if needed.
But I think with the Democrats controlling Congress and the White house these conditions will never happen.
November 8, 2008 @ 1:12 PM
If we are going to bail out
If we are going to bail out 29 year-old investment bankers who are driving Maseratis, we should definitely be bailing out the Big 3. It is unconscionable to give trillions to rich bankers and then not give a relatively small $25 billion loan to the Big 3 to help out the Working Man.
As for the Big 3’s problems, I’m not so sure that the current crop of workers are the problem. I know several members of the UAW who retired in their 40’s with schweeet pensions. It can’t be easy trying to operate a company profitably with such huge pension obligations.
November 8, 2008 @ 3:33 PM
Let em go bankrupt,
Let em go bankrupt, re-organize, then if the new entities want to sell preferred shares to the government, so be it, as long as the new business plan is reasonable.
November 8, 2008 @ 4:08 PM
The Big 3 are too big to
The Big 3 are too big to fail. GM and Ford alone employ 500,000 people.
November 8, 2008 @ 4:21 PM
I’m with The Breeze on this
I’m with The Breeze on this one. For the exact reason he/she stated. If we are bailing out the financial industry (which essentially produces nothing), then we might as well bail out the industries that actually employ people who WORK and PRODUCE for a living. The other option is adding hundreds of thousands of unemployed people to the welfare/unemployment rolls at exactly the time we can least afford it.
Naturally, we would need to require that the automakers do a better job at building safer, more efficient cars, and the patents that they (and the oil companies) hold — that are keeping fuel- efficient cars off the road — need to be dealt with, too.
Although the pension obligations can be pretty daunting, I think mismanagement is the ultimate culprit in the automakers’ demise.
November 8, 2008 @ 4:24 PM
So those who were posturing
So those who were posturing against the first bailout were just that… posturing. You guys aren’t really against the bailout after all huh?
November 8, 2008 @ 7:57 PM
esmith wrote:The Big 3 are
[quote=esmith]The Big 3 are too big to fail. GM and Ford alone employ 500,000 people.
[/quote]
That’s what they said about LEH and AIG…
Except what some people don’t realize, this failure wouldn’t be causing a global financial crisis. Yes, a lot of workers are gonna get hurt, u.s. economy would go into a tailspin, but it can happen….
Most likely GM/Ford’s global operations would be picked clean. GM asia would be picked up by automakers in korea/japan/china… Ford europe operations would be picked up by european automakers…
Don’t know who would pick up u.s. operations. Private equity probably won’t want to (I think they learned their lesson with Chrysler)…
I did at one point said, GM isn’t worse off than ford, which isn’t worse off than Chrysler. I still hold that to be true…BUT this market really changes the game, doesn’t it???
November 8, 2008 @ 1:17 PM
jimmyle wrote:It is like, we
[quote=jimmyle]It is like, we can’t win with either party.[/quote]
No you can’t. Too bad you didn’t follow through with this revelation and vote 3rd party.
[quote=jimmyle]I am for bailing out the big 3 but with several conditions:
1. UAW workers will get a 33% salary cut ($30/hour to $20/hour–good living wage for uneducated workers) and 50% reduction in benefits (even with this cut in benefits it is still higer than what the average workers are getting).
2. Big 3 can layoff UAW workers if needed.
But I think with the Democrats controlling Congress and the White house these conditions will never happen.[/quote]
I don’t think your demand will ever happen. It it does, then it really render UAW and all other union useless. It was the big 3’s fault for chasing after trucks and SUV. Company should fail if it can’t stand on its own. If you bailout the big 3, then who’s next? Airlines? Builders? etc? Where would you draw the line?
November 8, 2008 @ 2:29 PM
asianautica wrote: Company
[quote=asianautica] Company should fail if it can’t stand on its own. If you bailout the big 3, then who’s next? Airlines? Builders? etc? Where would you draw the line?[/quote]
See, that’s what I don’t get about TheBreeze: he railed against the wallstreet bailout but then says “We have to bailout the automakers”.
Either you are against bailouts or you aren’t.
I was against the wall street bailout and I’m against bailouts of auto makers, airlines and any other FOR PROFIT private enterprises.
Lately everyone seems to be critical of deregulation and naked capitalism however I would argue that we are experiencing the effects of exactly the opposite: having the government hand interfering with the invisible hand and screwing up what would otherwise be self-correcting market forces.
November 8, 2008 @ 6:02 PM
Let them go under.
It was bad
Let them go under.
It was bad business decisions that leaves them where they are. Instead of seeing that we can’t run on oil forever, they decided to make tons of cash building huge gas guzzling SUVs. It was much more profitable in the short term to build these cars and push them on the American public instead of taking us into the future.
They completely gave up on R&D for better fuel economy cars and now they are paying the price. People don’t want to drive a steel boulder around town anymore. Course, Toyota ain’t doing that great either, but I imagine Chevy has to be in a world of hurt.
November 8, 2008 @ 6:13 PM
Bailing them out will not
Bailing them out will not solve the underlying problem. We import more cars than we export, especially Japan. Heck, streets in some countries aren’t even big enough to accomodate our SUVs.
The U.S. auto companies need to focus on smaller vehicles that operate on other than gasoline. They need to be more innovative. Making those big gas guzzlers just was not the answer and this outcome was foreseeable, I think.
Sadly, if we don’t help them, the economic problems will be undoubtedly exacerbated.
November 8, 2008 @ 6:23 PM
There’s no way Obama is going
There’s no way Obama is going to let the U.S. automakers go under. That’s his base. Just as the Simian King gave trillions to his base, the banker class, Obama will give tens of billions to the automakers.
Republitards started the bailout by making sure that 29 year-old investment bankers were able to make their Maseratti payments and now Obama is going to make sure that the working man is able to make the mortgage payment on his modest abode.
That’s one of the reasons I prefer Democrats. Socialism for the poor is usually much cheaper than Republitards’ socialism for the super-rich.
November 8, 2008 @ 6:45 PM
If the Mutt supports a bail
If the Mutt supports a bail out of the BK 3, his “honeymoon” will be over before the inaugeration.
November 8, 2008 @ 6:46 PM
TheBreeze wrote:
That’s one
[quote=TheBreeze]
That’s one of the reasons I prefer Democrats. Socialism for the poor is usually much cheaper than Republitards’ socialism for the super-rich.[/quote]
No kidding.
There is also the fun fact that any money going to poor folk just turns right around stimulates our economy.
Give a poor guy a dollar and he’ll use it help pay down his mortgage. Give a rich guy a dollar and he’ll by a CDS that will pay when the poor guy in the previous sentence defaults.
Which is better for the economy in the long run?
November 8, 2008 @ 7:10 PM
Eventually we will realize
Eventually we will realize the car industry is never ever coming back to the way it was. These companies HAVE TO massively scale back. If Obama was smart he would insist on it before he takes office. We don’t need 90% of the cars they make. Oil peaked people, this matters.
China’s premier Wen Jiabao says “Industrialized nations should ditch unsustainable lifestyles”? Wonder if he’s been reading the same information I have…a rational person looking at global numbers of humans and how much resource is left would likely come to no other conclusion.
http://www.breitbart.com/article.php?id=081107145825.op2k0ggd&show_article=1
.
November 8, 2008 @ 7:19 PM
TheBreeze wrote:There’s no
[quote=TheBreeze]There’s no way Obama is going to let the U.S. automakers go under. That’s his base. Just as the Simian King gave trillions to his base, the banker class, Obama will give tens of billions to the automakers.
Republitards started the bailout by making sure that 29 year-old investment bankers were able to make their Maseratti payments and now Obama is going to make sure that the working man is able to make the mortgage payment on his modest abode.
That’s one of the reasons I prefer Democrats. Socialism for the poor is usually much cheaper than Republitards’ socialism for the super-rich.[/quote]
You might want to thank those Democrat friends you have in congress for passing those Trillions of $ in bailouts. They were also the ones that supported FNMA and FRE, so you should be happy they spent Trillions in bailing them out.
November 8, 2008 @ 8:01 PM
TheBreeze wrote:There’s no
[quote=TheBreeze]There’s no way Obama is going to let the U.S. automakers go under. That’s his base. Just as the Simian King gave trillions to his base, the banker class, Obama will give tens of billions to the automakers.
Republitards started the bailout by making sure that 29 year-old investment bankers were able to make their Maseratti payments and now Obama is going to make sure that the working man is able to make the mortgage payment on his modest abode.
That’s one of the reasons I prefer Democrats. Socialism for the poor is usually much cheaper than Republitards’ socialism for the super-rich.[/quote]
That might be true, but Bush may just very well do this. GM/Ford are running on fumes. I’m not sure without a bailout bill soon, they will make it before Obama takes office. That $25 billion earmarked for alternative energy cars apparently is hung up in red tape….
November 9, 2008 @ 10:23 PM
How’s about Big-3 Management
How’s about Big-3 Management take responsibility for the mess they’re in?
NOBODY ever seems to blame the people running the automakers. Who sets the direction for the company? Does the union decide what cars to produce and so on? Didn’t think so.
If the bosses don’t go, there’s no reason to spend a dime on them. These morons need to be shot for sedition. They’ve singlehandedly done almost as much damage to America as the investment bankers have.
November 9, 2008 @ 11:01 PM
CostaMesa wrote:How’s about
[quote=CostaMesa]How’s about Big-3 Management take responsibility for the mess they’re in?
NOBODY ever seems to blame the people running the automakers. Who sets the direction for the company? Does the union decide what cars to produce and so on? Didn’t think so.
If the bosses don’t go, there’s no reason to spend a dime on them. These morons need to be shot for sedition. They’ve singlehandedly done almost as much damage to America as the investment bankers have.[/quote]
There’s plenty of blame to go around, well beyond the management, for how the big 3 got to their current problem. Part of the blame goes to the consumers for buying up those SUV when gas was cheap. Big 3 management didn’t look so stupid when they’re making good profit selling those SUV. SUV are very profitable, much more so than any sedan will ever be.
The other part of blame goes to the union. Employees at Toyota/Honda/Nissan plants are just as (if not more) happy as employees from the big 3, and they don’t have union. They get paid just as much (if not more) as big 3’s employees after their union dues. So, the union put additional cost burden on the big 3. This extra cost burden drives them to products that are most profitable and what people want the most at the current time, which is SUV. Also, this additional cost increase their cost per vehicle, which put them at a disadvantage in price compare to the Japanese. This then drive them to cut corners on the interior quality so that they can increase their profit per vehicle.
Obviously, the management has the largest portion of the blame. They have great cars in Europe & Australia, yet, they’re too stupid to bring them over here. Their cars over there are very competitive with the German & Japanese counterpart.
November 10, 2008 @ 6:24 AM
Quote:
Obviously, the
[quote]
Obviously, the management has the largest portion of the blame. They have great cars in Europe & Australia, yet, they’re too stupid to bring them over here. Their cars over there are very competitive with the German & Japanese counterpart.[/quote]
There might bmore complex issues than this. Some of the cars made overseas might not out of the box comply with safety regulations here in the states. That’s one of the reasons why when you get an R8 overseas, you can get the cool metallic steering wheel, but here in the U.S. you get the boring steering wheel out of the vw parts bin. Takes too much time for certification.
But, your point was noted… GM/Ford overseas looks really different from GM/Ford here. Buick for example in China is considered a pseudo-luxury brand, and products from GM/Shanghai looks pretty good imho.
November 8, 2008 @ 4:16 PM
At some point we are going to
At some point we are going to hit a tipping point. I have no idea where it is but I feel it is getting closer if it isn’t to late already. And even though I was lucky enough to get out early I worry that at some point this will start to hurt even the more prudent people. Only time will tell.
November 8, 2008 @ 4:50 PM
As the wise Davelj once
As the wise Davelj once pointed out, “it all comes down to who’s ox is being gored.” TheBreeze must have dollar cost averaged into auto maker stocks over the last few years and is hoping to salvage said investment.
That being said, I’d rather bailout bankers than the automakers precisely because, my ox is gored the other way. I need the banking infrastructure to keep limping along. A large SUV, I can do without.
GM going under and laying off hundreds of thousands is unfortunately precisely what has to happen. Its costs structures MUST become aligned with what it can generate in revenue, otherwise it will never be profitable. If you think this makes me anti-union or inhuman so be it, but the US literally CANNOT bail out the auto industry this time. The problems are too big. A lot of retirees have to lose their health care protection and have their pensions cut precisely because those promises never could be kept. In the meantime all we are talking about is stealing from everybody else to keep the scheme going.
November 8, 2008 @ 5:03 PM
barnaby33 wrote:As the wise
[quote=barnaby33]As the wise Davelj once pointed out, “it all comes down to who’s ox is being gored.” TheBreeze must have dollar cost averaged into auto maker stocks over the last few years and is hoping to salvage said investment.
That being said, I’d rather bailout bankers than the automakers precisely because, my ox is gored the other way. I need the banking infrastructure to keep limping along. A large SUV, I can do without.
GM going under and laying off hundreds of thousands is unfortunately precisely what has to happen. Its costs structures MUST become aligned with what it can generate in revenue, otherwise it will never be profitable. If you think this makes me anti-union or inhuman so be it, but the US literally CANNOT bail out the auto industry this time. The problems are too big. A lot of retirees have to lose their health care protection and have their pensions cut precisely because those promises never could be kept. In the meantime all we are talking about is stealing from everybody else to keep the scheme going.[/quote]
A precursor of what will eventually happen to the “unfunded liabilities” of SS and Medicare.
It’s not like there are no airlines in this country, yet many carriers have gone through bankruptcy proceedings multiple times. Maybe it’s time for the automakers to go down that path as well.
It will also be an educational experience for the UAW, as its members learn the meaning of “counterparty risk.”
November 8, 2008 @ 4:56 PM
I’ll only support a bailout
I’ll only support a bailout (of any industry) if the the stock of the company is under a dollar, the taxpayers get preferred shares and someone from the IRS is appointed to the CFO position.
November 8, 2008 @ 7:09 PM
Its seems to me that the U.S
Its seems to me that the U.S tends to be behind the curve much too often. The Europeans taxed gas heavily. What this did was cause the automakers to create more fuel efficient cars. The small car is the norm. How could all the bright minds that run this country not see the inevitable effects of peek oil? Why did no one care about all the money going overseas? And why did no one prepare us for the future? Unfortunately the time for action was years ago. And the fact that most of the politicians in this country are more interested in keeping their jobs then doing the right thing has put us where we are. They have refused to stand up to the people and say the truth. They have listened to us cry like babies and given us a bottle full of crap to shut us up. And the people were happy to have it because all they wanted was something cheap to suck on. Very few asked what was in the bottle. Regardless of if the milk was real or some formula from China as long as we could have more for less. Well hopefully this mess will open some eyes. It’s a shame that we are being forced to learn the hard way. But it is what it is.
November 8, 2008 @ 7:18 PM
How could all the bright
How could all the bright minds that run this country not see the inevitable effects of peek oil?
Economic ideology is one big reason. Another is a coordinated effort to obfuscate. Profit is not synonymous with sustainability which is the reason “sustainability” have become a synonym for socialism in some circles.
November 8, 2008 @ 7:51 PM
Actually, I was thinking
Actually, I was thinking about this…The only way that GM/Ford can possibly really re-negotiate with UAW is IF they really did go bankrupt, and via bankruptcy reorg, renegotiate contracts with UAW or no union at all….
Unfortunately, two issues facing GM/Ford really are
1) A lot of vehicle purchases were financed. and GMAC is no longer willie nillie lending to anyone. Like I said before, financing through GMAC is like with a credit score 700+…
2) GM/Ford definitely have huge costs wrto to labor and UAW. UAW isn’t gonna give in. As long as GM and Ford have money and aren’t BK, they won’t get it. They’ll keep demanding the same benefits/etc even when everything around them is drastically different. GM/Ford keeps cutting salaried workers and folks in R&D, the same people they need to put the next generation cars out the door, because that’s where they can do most of the cutting. Ford is planning to sell off some of their investments into other car manufacturers. They already offloaded Jaguar, Aston Martin, etc. Now they are thinking of offloading Mazda…Brands that are actually doing well, and don’t have the same labor issues as main ford/GM. That’s just plain suicide. The only place they can’t cut is UAW…
Me thinks these unions are going to drag them into bankruptcy. Because no investor in their right mind would be loaning GM/Ford right now…not until they can break all their contracts with UAW. And so, it’s probably a waiting game.
Congress giving GM/Ford a loan is only going to delay this problem. Unless GM/Ford can renegotiate with UAW, that loan that Congress gives them will quickly be spent on not making better cars but on pensions/healthcare/etc for union workers.
Personally, I think UAW has gone too far. At this point, if they haven’t recognized how dire the situation is for GM/Ford, I don’t know…..Hmmm, demand GM/Ford for more, or everyone goes completely jobless…Seems like a no brainer. But, they did make their own grave…over the past 20+years…
November 8, 2008 @ 7:59 PM
Actually, I was thinking
Actually, I was thinking about this…The only way that GM/Ford can possibly really re-negotiate with UAW is IF they really did go bankrupt, and via bankruptcy reorg, renegotiate contracts with UAW or no union at all….
There’s any idea, wait for 20% unemployment and then its no union or back to the bread lines.
November 8, 2008 @ 8:03 PM
For the folks not following
For the folks not following what’s going on…
Asianautica, I’m sure you already read these threads ….
——————————————–
http://www.autoblog.com/2008/11/07/autoline-on-autoblog-with-john-mcelroy/
GM IS ON ITS LAST LEGS
There is only one number that really matters in today’s financial report from General Motors: how much cash it has in the kitty. And the answer is, not enough. GM is now burning through its cash reserves at a rate that will run short before Christmas.
Every month GM spends $13 billion to pay all the bills that keep the company running. And it has to pay out even more on top of that to meet other obligations, like paying the UAW for the VEBA or bailing out Delphi. Like all other companies, GM keeps a reserve of cash on hand that it can dip into when it doesn’t sell enough new cars to get the money to pay its bills. But that cash reserve is running out fast.
John McElroy is host of the TV program “Autoline Detroit” and daily web video “Autoline Daily”. Every week he brings his unique insights as an auto industry insider to Autoblog readers.
Up through the first half of this year, GM burned through its cash at a rate of over $1 billion a month. Yet, as this morning’s financial report discloses, that rate increased to nearly $2 billion a month during the third quarter. And as bad as that is, it gets worse.
GMAC cost GM $1.4 billion in badly needed cash flow. Last month GM’s sales in the American market fell 45%. GM says half of that drop was due to GMAC restricting financing to its dealers and customers. Specifically, GM sales fell by nearly 140,000 vehicles. So that means GMAC alone cost GM 70,000 sales.
On average GM gets about $20,000 for every vehicle it sells so that means GMAC cost GM $1.4 billion in badly needed cash flow. And that’s just for the month of October.
With less cash coming in, that means GM will burn through its cash reserves more quickly. I’d estimate that GM’s cash burn is now more like $3 billion a month. And this is where the situation turns dire.
GM now only has a little over $16 billion in cash reserves. And the company needs a minimum of $13 billion to keep the lights on and the assembly lines humming. So it’s pretty obvious what the company is up against. In another month or so it will no longer have enough cash to pay its bills.
GM is teetering on the brink of bankruptcy and needs immediate help. OK, so let’s say I’m wrong, and assume that thanks to drastic action it’s only burning through its cash at a rate of $1 billion a month. After all, GM says it’s working on all kinds of contingencies to sell assets, borrow more money, delay product programs and stop building new plants. In fact, it has plans to raise the liquidity of the company-meaning to come up with the money it needs-to the tune of nearly $20 billion. Even so, the company admits it will hit the minimum level of cash it needs before the year is out, and it will definitely fall below that minimum early next year.
In other words, GM is teetering on the brink of bankruptcy and needs immediate help. Unless a miracle happens, there’s only one place it can realistically turn to: the Federal Government. The company needs a bridge loan to get it through this downturn. And it needs the money yesterday.
I believe the company will get the money it needs and I believe that in two to three years it will emerge as a lean, mean, profit machine. But make no mistake, as you read this right now, GM is on its last legs.
November 8, 2008 @ 8:07 PM
Didn’t the government help a
Didn’t the government help a car company before in the past? I have a very vague recollection about it. Didn’t they help an airline company once, too?
November 8, 2008 @ 8:14 PM
jpinpb wrote:Didn’t the
[quote=jpinpb]Didn’t the government help a car company before in the past? I have a very vague recollection about it. Didn’t they help an airline company once, too?[/quote]
At least one airline tends to go bankrupt every few years. Chrysler was bailed out back in the 80’s I think.
November 8, 2008 @ 8:22 PM
jpinpb wrote:Didn’t the
[quote=jpinpb]Didn’t the government help a car company before in the past? I have a very vague recollection about it. Didn’t they help an airline company once, too?[/quote]
They did. I believe chrysler…And yes, they bailed out the airline industry after 9/11.
Not sure if they are going to do this again. Bush was against bailing out the big three this time around. It will be interesting to see if he changes his tune. I don’t doubt Obama/Democrats will offer some assistance. The question is if GM/Ford can last that long, and whether Bush is gonna do anything in the meantime….
The problem is complex. GMAC is majority owned by Cerberus. I suspect Cerberus is having major $$$ problems also dealing with Chrysler. So, it’s not surprised they are cash strapped and doing some strict lending rules with GMAC…which is causing issues with GM sales….and the cycle feeds itself I guess.
If you’re in the market for a SUV made by ford/gm or any maker for that matter, it’s a great time to buy. And with gas prices today at $2.60 ish/gal at costco, that might not be so bad.
It’s gonna take a lot longer for some of these hybrid owners to break even on the premium they paid for those cars. And if gas prices keep falling, i worry that auto makers are gonna stop investing in alternative, more efficient vehicles…It costs a lot of money to do this. And when gas is cheap, there is little incentive or motivation to spend so much R&D on it.
Case in point. One of my friends has the new Lexus LS460. It’s a V8 engine 4.6L. The gas mileage on it though is according to him 22/24…I guess the fuel management is done so well, that it bests several V6’s. Why can’t they put that kind of technology into a 4 or 6 banger???I’m guessing, because it costs too much…
November 8, 2008 @ 8:51 PM
Yes, FLU. It was Chrysler in
Yes, FLU. It was Chrysler in the ’70’s, I think. Scratching the grey mater. I think they got something like 1.2 billion from the federal government. And back then, that was a lot. But Chrysler also went through something like Chapter 11 where creditors ate some losses.
Chrysler was able to pay off more than $600 million in debts at just 30 cents on the dollar, from what I understand. The objective of all this was to protect jobs, but they ended up laying off 42k workers.
I read that their problems really started after WWII. They were not retooling. I can see similarities where they don’t want to invest in new technology today.
If I’m not mistaken, Chrylser also gave the government the right to purchase stock shares at $13. They were supposed to reduce salaries of execs and they did, but then restored salaries and even made it retroactive.
Chrysler has been a mess for a long time. Even when they were profitable, they weren’t really. They were carrying forward losses. They deferred pension costs. They cut R&D.
Every decision that is made is connected to so many others. They were bailed out before and we are back were we started w/them b/c they never fixed their underlying fundamental problem.
The loudest groups get rewarded. Taxpayers get the bill.
EDIT:
This is an interesting site I stumbled upon:
Bailout history
November 8, 2008 @ 8:10 PM
October sales
October sales numbers…Ouch….
http://www.autoblog.com/2008/11/03/by-the-numbers-october-2008-thanks-gmac-edition/
Sales for the month of October 2008 were… ahem… not good. The auto industry in the U.S. has found a way to slide further into oblivion with only a few bright spots from Audi and MINI, the latter of which enjoyed monster sales last month we suspect on account of greater production capacity this year versus October 2007.
While all the major players were down, General Motors, the largest of them all, was hit the hardest. Its sales volume for October 2008 fell 45% compared to last year. It went from selling an average of 11,923 cars per day in October 2007 to just 6,318 last month. Each of its brands were down, with HUMMER taking the Biggest Loser crown (yet again). The real story, however, is how close behind the other brands were, with Cadillac falling 55.1%, Buick 46.3%, Chevy 40.3%, GMC 52.5%, Pontiac 48.2% and Saturn 54.6%.
What can account for GM’s entire brand portfolio taking such a hit? GMAC, the financing arm of General Motors that’s majority owned by Cerberus. Halfway through the month GMAC decreed it would only lend money only to buyers with a credit score above 700, which effectively wiped out in-house financing for the majority of GM customers. While dealers could still work with banks to secure financing (and were encouraged to do so), it appears the damage wrought by GMAC could not be undone.
November 9, 2008 @ 6:45 AM
If my employer chooses to
If my employer chooses to develop products that don’t sell, over and over again… they don’t get money to retool and make products that fit the market place. (And my employer HAS done this – and is hemmoraging money.) My employer is a large, American, company. I’m sure they’d LOVE a bailout. But they won’t get one, and shouldn’t get one. The top execs are idiots and driving the company into the ground.
Why is the auto industry “special”. Why do they get bailed out after years of making the wrong products? GM designed and produced small, fuel efficient cars – that they sold in Europe… and never tried to produce and sell here. They are capable of making the right products – they chose to focus on Hummvees and Suburbans here in the U.S.
I have relatives that work for GM and friends that work for Ford… But, this sounds harsh, their jobs are no less special than anyone elses. My job is under threat of layoffs. I have other relatives that work for companies that are laying off. No one is talking about bailing out their employers.
If a company makes a series of bad marketing decisions over years – and blows through their cash like a drunk sailor on leave – then they need to see the consequences of their actions. Even the big three.
November 9, 2008 @ 7:02 AM
Ah, UCGal. The light bulb
Ah, UCGal. The light bulb should be going off in everyone’s head now. Car makers sleep w/the oil industry. I’m just stating the obvious here now.
November 9, 2008 @ 7:20 AM
jpinpb wrote:Ah, UCGal. The
[quote=jpinpb]Ah, UCGal. The light bulb should be going off in everyone’s head now. Car makers sleep w/the oil industry. I’m just stating the obvious here now. [/quote]
And GM canceled their electric car the same day they unveiled the Hummer.
November 9, 2008 @ 7:30 AM
Thanks arraya. Interesting
Thanks arraya. Interesting link.
November 9, 2008 @ 9:44 AM
Yeah, let’s just keep
Yeah, let’s just keep supporting failure. It’s now an American tradition. We teach it in our schools and our govt spreads it around like the virus that it is. We’re so screwed. It’s a race to the bottom.
November 9, 2008 @ 11:45 AM
UCGal,
Here, here.
Something
UCGal,
Here, here.
Something I think it good about recessions is that companies/individuals no longer have the luxury to fail. They need to make tough, smart decisions to stay solvent.
November 9, 2008 @ 6:52 PM
UCGal wrote:Why is the auto
[quote=UCGal]Why is the auto industry “special”. Why do they get bailed out after years of making the wrong products?[/quote]
Answers:
1. TBTF (Too big to fail)
2. Politics (UAW = Democratic flagship, and geographical concentration in MI = ownership of MI politicians)
November 9, 2008 @ 11:50 AM
I am not somebody who seeks
I am not somebody who seeks to support failed business models.
However, much of their business model was successful–if lurching and inconsistent–until recently.
People really did buy those big trucks and SUVs.
Those markets are smaller now and that is why those companies are failing.
I think that the effect of those companies having an unmitigated collapse would be sufficiently bad that trying to mitigate the effects is worth doing.
The job of any government panel or body on any industry is to smooth out the extremes (eg: the Fed). Not that they are always successful (eg: the Fed).
I think a government backed retooling and “racheting down” of the industry is the best chance of benefiting the US people.
I think that the situation that these companies are in right now means that the government can mandate realistic business plans prior to any funding.
—
Voting for government help while holding my nose.
November 9, 2008 @ 12:15 PM
So urbanrealtor, when exactly
So urbanrealtor, when exactly has a bailout in any way shape or form “smoothed” out the collapse of an otherwise profitable industry? In the history of bailouts, it hasn’t. It has allowed unprofitable business and irresponsible govt to NOT have to address those problems.
The solution is called bankruptcy reorganization. Of course nobody wants to admit that, because that would force the loss of what were tens of thousands of relatively high paying jobs with good, if untenable, benefits.
Josh
November 9, 2008 @ 1:04 PM
barnaby33 wrote:So
[quote=barnaby33]So urbanrealtor, when exactly has a bailout in any way shape or form “smoothed” out the collapse of an otherwise profitable industry? In the history of bailouts, it hasn’t.
[/quote]
I think that Chrysler under Iacocca and the airlines in late 2001 would be good examples. Alternatively, Amtrak, JP Morgan/Wamu, and the USDA (or at least most of its subsidies) are also examples of bailouts and/or corporate welfare that are widely seen by policy makers to be beneficial to the public.
In each of these cases turbulence appeared to be in danger of eliminating previously profitable businesses or entire business models. These examples are all dissimilar to one another (eg: takeover vs. capital infusion vs. loan vs. price control) and likely dissimilar to what would happen with the big 3. However the point remains that our government exists because the market has a tendency to chew up citizens periodically.
In several cases the industries or businesses in question did downsize or modify their models in a fairly orderly way. For example, without the brokering of the JP/WaMu deal, bankruptcy could have meant liquidation and led to additional complications (insurance filings for deposits, lots of unemployed bank workers, re-assumption by a new asset buyer of all mortgage servicing operations). This was made unnecessary.
[quote=barnaby33]
It has allowed unprofitable business and irresponsible govt to NOT have to address those problems.
[/quote]
You are right in this. Irresponsible assistance is more like enabling than helping.
[quote=barnaby33]
The solution is called bankruptcy reorganization. Of course nobody wants to admit that, because that would force the loss of what were tens of thousands of relatively high paying jobs with good, if untenable, benefits.
Josh[/quote]
The benefits and pay were not the issue per se. The issue is the crappy overall business design of which those were constituent parts.
Its not like there is something in the Japanese brain that makes them better at designing cars. Nor is there something in their steel that makes their cars comparatively less likely to fail. It comes down to a question of which option is more likely to benefit more people appreciably. If the gov’t helps them, will it be likely to improve or make worse the lives of the people affected (taxpayers and empoyees)? Will they use handouts to improve business (eg: Southwest airlines) or to just keep shambling along for a few years before we have this same conversation again (eg: United airlines)?
November 9, 2008 @ 6:44 PM
The benefits and pay were not
On this we are in agreement. The overall business model is fairly broken. All options need to be on the table. As I see it, bankruptcy is the only way to do that. Union and supplier contracts can be broken and re-hammered out. People lose their jobs, more importantly people will lose their benefits. However the company can survive.
On the issue of the Wamu/JPM deal, the idea was to prevent a mark to market event in liquidating all of Wamu’s toxic crap, nothing else really mattered. Our economy does occasionally chew up good companies. In those cases you’d get zero argument from me on a govt sponsored loan to re-organize. This on the other hand is systemic. We all know that, or at least those of us on this board do. Letting the govt pick the winners is never a good idea.
Josh
November 9, 2008 @ 7:30 PM
We’re footing the bill
We’re footing the bill whether it is through a bail-out or Pension guaranty.
Frankly, I say offer them an AIG style deal. Shred them into their viable components and retire the rest.
November 9, 2008 @ 11:23 PM
I always love how when things
I always love how when things go to hell in a handbasket the “union” left goes after the management as the problem and says they should give up everything cause they ruined the company. When thigs go great, they bitch cause management gets too much of the rewards instead of the “working man” (as if white collar workers dont work at all and anyone could do there job just as well). According to them managment should take all of the risks and none of the reward, or atleast no more reward than the lowest, newest, least educated “actual worker” got.
Theyll tell you some BS about “reasonsable” reward, but it mostly comes down to what they ‘feel’ is reasonable for those they dont represent. How about we all vote on how much each other should make? Who here thinks HS educated auto workers are worth $78.21/hr in pay and benifits? (http://money.cnn.com/2008/02/12/news/companies/gm/)
Here is an oped piece I found inlightening. It is from a op piece, most likley a biased source, but what source isnt really?
http://www.nytimes.com/2008/07/10/opinion/10lowenstein.html
What I found most interesting:
G.M. acknowledged in its most recent annual report that from 1993 to 2007 it spent $103 billion “to fund legacy pensions and retiree health care — an average of about $7 billion a year — a dramatic competitive and cash-flow disadvantage.” During those 15 years, G.M. paid only $13 billion or so in shareholder dividends. The company has been sending far more money to its retirees than to its owners.
This is not exactly a case of the rich robbing a company, and bailing.
This company needs to fail, and be reborn in Bankruptcy court. Offload the pension plan on the pension guarentee Corp (gov program created to support pensions, ironically created due to the wake of the studebaker auto company going under in the 1960’s.), allow a total contract renegotiation, offer some low cost loans to get the ball rolling in exchange for some prefered stock (if it is good for wall street…..) and lets get things moving again. This will free up some capital for reinvestment in the company , which will benifit the suppliers and the whole manufacturing industry. Dont sell the foreign assets (mazda/volvo), they need that knowhow and foreign market exposure.
Everyone involved is to blaim here, so everyone has to pay. Gov has written some really BS laws/pension guarentees/bailouts/tax writeoff/…. and we keep electing the Aholes that do it. We the tax payers deserve this.
Unions have run these companies into the ground. They have failed to orgainze the foreign automakers, giving them a huge advantage over the big 3, and will loose it all if they keep their heads in the sand.
Auto companies managment gave into the unions, poor design development of new products, fought every MPG regulation, etc etc.
The only thing that is certain is that we have pissed away a major industrial advantage in only 50 years.
November 10, 2008 @ 1:29 PM
A couple of comments.
If GM
A couple of comments.
If GM is so well run – why the @#$#@ are they introducing the H3 into this market. And spending huge $$ pushing it in ads on various news channels this weekend. They don’t understand the marketplace. A Humvee pickup is not a good, high volume, high margin product in this market. Period.
Ford’s a little better – they’re moving to a single platform for the Focus – so they can build one version that is good around the world. (Currently they have a US version and one for everywhere else.) They actually have a few small cars and they have the hybrid Escape. Their management is starting to understand things.
The talk about legacy costs due to the unions… This one drives me nuts. The top execs also have obligated pensions on a much larger scale – they’re blaming the workers, while a signifcant portion of the legacy costs are to pay the fat pensions of the corporate execs. Read this article that originally appeared in the WSJ…
http://www.post-gazette.com/pg/06177/701286-28.stm
I don’t have a problem with renegotiating with the Union to reduce fixed costs. But they need to make equivalent cuts on the executive benefits.
And if the big 3 fail – we’ll still have plenty of US made cars… with labels like Nisson, Toyota, Honda… built in the Southern states. Detroit may be failing, but the auto industry in the US will survive. We’ll keep that “know-how”.
November 10, 2008 @ 1:43 PM
UCGal wrote:A couple of
[quote=UCGal]A couple of comments.
If GM is so well run – why the @#$#@ are they introducing the H3 into this market. And spending huge $$ pushing it in ads on various news channels this weekend. They don’t understand the marketplace. A Humvee pickup is not a good, high volume, high margin product in this market. Period.
Ford’s a little better – they’re moving to a single platform for the Focus – so they can build one version that is good around the world. (Currently they have a US version and one for everywhere else.) They actually have a few small cars and they have the hybrid Escape. Their management is starting to understand things.
The talk about legacy costs due to the unions… This one drives me nuts. The top execs also have obligated pensions on a much larger scale – they’re blaming the workers, while a signifcant portion of the legacy costs are to pay the fat pensions of the corporate execs. Read this article that originally appeared in the WSJ…
http://www.post-gazette.com/pg/06177/701286-28.stm
I don’t have a problem with renegotiating with the Union to reduce fixed costs. But they need to make equivalent cuts on the executive benefits.
[/quote]
I’m not sure if you’re aware, but the H3 is based on the Colorado platform. It just have different sheet metal. It probably doesn’t cost them very much in term of engineering cost to develop the H3. So yes, it’s a smart business decision IF the H3 actually sell. Imagine if you get sell the Colorado for the profit margin of a Hummer by just changing the badge and some sheet metal. GM is the master of badge engineering.
GM is a lot better now in their small cars too. GM is in a much better position than Ford is in term of platform. You should check out their small cars. They’re sharing much more with their European and Aussie arms.
Legacy cost includes pension for the ex-big cats too. So, I don’t see why you’re trying to separate them.
[quote=UCGal]And if the big 3 fail – we’ll still have plenty of US made cars… with labels like Nisson, Toyota, Honda… built in the Southern states. Detroit may be failing, but the auto industry in the US will survive. We’ll keep that “know-how”.[/quote]
I do agree with this statement 100% though.
November 10, 2008 @ 2:15 PM
UCGal wrote:A couple of
[quote=UCGal]A couple of comments.
If GM is so well run – why the @#$#@ are they introducing the H3 into this market. And spending huge $$ pushing it in ads on various news channels this weekend. They don’t understand the marketplace. A Humvee pickup is not a good, high volume, high margin product in this market. Period.
[/quote]
Reminds me of the new Mac/PC commercial where PC is sitting at the desk going through a pile of money, setting aside a small amount to fix Vista and a large amount for advertising.
Same difference. Throwing money at the problem, but not really fixing what’s wrong.
November 10, 2008 @ 1:38 PM
…Meanwhile, in Chrysler
…Meanwhile, in Chrysler land….
New deal.. Buy one, get one free….No joke….
http://www.autoblog.com/2008/11/10/uk-site-offering-two-dodge-avengers-for-price-of-one/
he Dodge Avenger wasn’t exactly selling like hotcakes here in the US, even before the auto market took a nosedive. We can’t imagine the Avenger ever sold well overseas as an export to the UK, and the under-developed Dodge’s newest incentive supports our assertion. Car-buyers in the Kingdom can pick up a nicely equipped Avenger SXT 2.4 saloon at the MSRP of £18,255. As a reward for taking the Avenger off the dealer’s hands, they’ll get a second Avenger free of charge. Broadspeed.com is offering the buy one, get one sale with the aim of easing the massive amounts of stock dealers are carrying right now. The problem isn’t exclusive to the Avenger, though, as many dealers are sitting on six month inventories due to slow sales on the island. Given the massive problems selling cars in the UK, the deals on the Avenger still stand out as incredible. Maybe Dodge dealers here in the US will take note, though we’re sure there are plenty of people that think the only thing worse than owning an Avenger would be having two. Thanks for the tip, everyone!
November 10, 2008 @ 1:50 PM
More bad news at the
More bad news at the General….
SideNote: If GM starts selling a Vette Z06 at $30k, I’m sold…
——–
DETROIT – Bad news kept piling up for General Motors Corp. on Monday as its shares plunged to their lowest point in 60 years and the company said in a government filing that the mortgage unit of its finance arm may not survive.
GM also said that Delphi Corp., its former parts operation that was spun off as a separate company in 1999, may not be able to emerge from Chapter 11 bankruptcy protection.
GM shares dropped $1, or 23 percent, to close at $3.36.
They earlier plummeted as low as $3.02 on increasing worries about accelerating cash burn and mounting losses. That marked the automaker’s lowest share price since Dec. 2, 1946 when it hit $3, according to the Center for Research in Security Prices at the University of Chicago. The price is adjusted for splits and other changes.
Before the markets opened Monday, Brian A. Johnson of Barclays Capital cut his rating on GM to “Underweight” from “Equal Weight” and slashed his price target for the Detroit-based automaker to $1 from $4.
Johnson said that without additional funding, GM’s gross cash will likely fall below minimum levels in the first quarter of next year.
The analyst also said that while additional government assistance will likely decrease the likelihood of a bankruptcy protection filing at the nation’s largest automaker, it also would likely significantly dilute its equity.
Separately, JPMorgan’s Himanshu Patel said he expects GM to receive some form of federal aid, but advised investors to be cautious given the uncertainty. He added that he expects the automaker to end 2008 with $12.6 billion in cash on hand, just above midrange minimum cash and excluding government loans.
Both analysts said they expect the automaker’s per-share losses for this year and next to be significantly larger than what was expected. Both slashed their estimates.
Early in the afternoon, GM filed its quarterly report with the U.S. Securities and Exchange Commission that contained more bad news.
The company said that the troubled mortgage industry and frozen credit markets have raised doubts that the mortgage business of its GMAC LLC financial arm can survive.
The filing says that the value of Residential Capital’s mortgage loans have deteriorated due to weak housing prices, delinquencies and defaults. It is also having trouble raising capital.
GM owns 49 percent of GMAC LLC, with the rest owned by Cerberus Capital Management LP.
Market developments have so harmed Residential Capital, called ResCap, that there is “substantial doubt about ResCap’s ability to continue as a going concern,” GM said in the filing.
The automaker also revealed that ResCap’s deteriorating finances forced ResCap to shore up its standing with mortgage finance giant Fannie Mae, the largest U.S. buyer and backer of home loans.
ResCap said it posted an additional $200 million in collateral with Fannie Mae and sold off the rights to collect payments on $12.7 billion in loans, or 9 percent of the total amount it collects for Fannie Mae. Had ResCap not acted, Fannie Mae could have severely curtained its loan purchases from ResCap.
GM also said in the filing that Delphi Corp., its former parts-making operation that was spun off in 1999, is unlikely to emerge from bankruptcy protection in the short term and may not be able to emerge at all.
___
November 10, 2008 @ 2:23 PM
Personally, here’s what I
Personally, here’s what I would do about the Big 3:
Have a meeting with management and the UAW and tell the UAW that the govt (re: taxpayers) will lend the auto companies money if the UAW accepts massive cuts in pay and benefits (someone above suggested 33% – that’s in the ballpark). If the UAW won’t bite, tell them, “OK, but it’s BK and game over for the Big 3, which includes your union.” They’ll bite on this… eventually.
Then you give the automakers the billions it needs as senior secured debt – ahead of everyone else on the balance sheet in terms of liquidity preference. Yeah, the other debt holders will cry foul – “Hey, I was senior before! You’re screwing me!!” To which the reply is, “Your seniority doesn’t mean shit if these companies go BK, so bite it, pal. Get in line… behind Uncle Sam.”
The reduced labor costs along with major restructuring should make the automakers break-even propositions even in a shitty economy. They’ll limp along for another decade or so, shedding tens of thousands of jobs each year, eventually disappearing in bankruptcy – or perhaps bought by foreign car makers – but the taxpayers should at least get their principal back if its structured properly. And, most importantly, the jobs will be shed over a decade instead of all in one fell swoop – which would be pretty disastrous, frankly. Also, a number of these folks should get re-hired by foreign automakers here in the US if they’re willing to travel for the jobs. If they’re not – screw ’em.
Anyhow, that’s a plan that’s palatable that would minimize pain as well as taxpayer loss. Which is why it’ll never happen.
November 10, 2008 @ 8:47 PM
davelj,
Completely agree with
davelj,
Completely agree with your assessment (as usual).
It would also be nice to increase CAFE standards and mandate safety standards recommended by Insurance Instutite for Highway safety. http://www.iihs.org
November 10, 2008 @ 10:19 PM
Wow, so many that will gladly
Wow, so many that will gladly waste their tax money to reward incompetent management – simply in order to spite the unions. Unbelievable. Can’t wait to see the news showing their execs getting their spa day too.
There’s no reason to spend a dime on a company that has zero chance of survival. They don’t transplant livers into stage 4 cancer patients for a reason – it’s a waste.
It’s more humane to let the whole sick mess fail – management, union and company. Just like the Republican purge of the last few years, sometimes tough-love is the only effective path to getting someone’s attention.
November 11, 2008 @ 9:58 PM
can’t let the big three
can’t let the big three die…
think what would happen to the thriving detroit real estate market.
November 11, 2008 @ 10:47 PM
25 billion? AIG spends that
25 billion? AIG spends that on hookers and blow in a year. Let’s prop up this aging dinosaur, at least to keep retirement benefits for a workforce that counted on this for a living.
It is a semi Main Street bail out, at least give some of the proletariat a chance at the pig trough.
November 12, 2008 @ 12:42 AM
Agree with that, arraya.
What
Agree with that, arraya.
What some posters don’t seem to understand is that those pensions and medical benefits were part of their (UAW workers) compensation package.
The workers held up their part of the deal, and the company should hold up their end as well. Many of these people worked and planned their lives for decades, based on contractual agreements.
If nothing else, the govt should take the $25 billion and shore up the obligations already agreed to by the management and labor. After that, let the entire thing fall. I’d rather see these contracts honored than see workers’ benefits sacrificed for the benefit of shareholders and executives.
November 12, 2008 @ 1:05 AM
CA renter wrote:
If nothing
[quote=CA renter]
If nothing else, the govt should take the $25 billion and shore up the obligations already agreed to by the management and labor. After that, let the entire thing fall. I’d rather see these contracts honored than see workers’ benefits sacrificed for the benefit of shareholders and executives.
[/quote]
What are you talking about? You have some kinda instinctual hatred of “management” that makes no sense in the GM case. I posted a fact earlier that GM has spent over 100billion in the past 15 years on Employee benifits and 13 billion on divedends/stock payments. 10-1! And now you want to use taxpayer money to shore up those benifits? Look, if managment had screwed the employees by robbing them blind that would be one thing. But that isnt what happened in this case. 25 billion? after 100 billion failed? I think you are underestemating just how gold plated these benifits are when compared to the average americans. We are not talking about 25 billion in tax dollars, 250 billion sounds more inline.
November 12, 2008 @ 1:15 AM
DWCAP wrote:I think you are
[quote=DWCAP]I think you are underestemating just how gold plated these benifits are when compared to the average americans. We are not talking about 25 billion in tax dollars, 250 billion sounds more inline. [/quote]
Totally agree. The average hourly wage for Big 3’s employees are around $74/hour. While at Toyota, Honda, etc., they’re ~$48/hour. So, CA renter, please do explain why we should spend another $25 BILLION dollar of our hard earned tax $ to bail people who were making an average of $150k/yr. and some have nothing more than a HS diploma?
November 12, 2008 @ 2:35 AM
Many people have high school
Many people have high school diplomas (or less) but are more valuable than ten people with degrees.
I’ve seen too many over-educated idiots with no “real life” common sense or work ethic. IMHO, this notion that everyone must have a college degree is part of the problem (we are a service/technology/finance economy…). BTW, I have a college degree and come from a long line of educators/college professors, so I’m not saying this for my own sake. It’s what I’ve seen in real life.
~~~~~~~~~~~~~~~~~
If I understand your argument correctly, you believe that U.S. automakers were at a competitive disadvantage because they had to pass on the high costs of labor to their customers. Is that correct?
If so, please tell me if you have ever met anyone who bought a Toyota or Honda because they were cheaper than comparable American cars.
During the 70s, Japanese manufacturers began taking market share from U.S. companies because of the gas shortages, and that was the beginning of the end for U.S. car companies.
We have owned American and Japanese cars (love them!), but always bought the Japanese cars because of their reliability and safety standards. Price had nothing to do with choosing Japanese over American. The Japanese build better cars, in most cases. That is a management issue, not a union issue.
Everyone else I’ve ever known who bought a Japanese car over an American car did so for the same reasons — #1 reason is perception of reliability.
It’s not the unions that are the problem, but management that was slow to respond to changing markets.
A brief history of American auto manufacturers and some of the obstacles they’ve faced, and some of the current problems (unions are just one of many problems) are here:
http://hbswk.hbs.edu/item/5290.html
http://www.scripophily.net/chryscor.html
November 12, 2008 @ 4:31 AM
CA renter wrote:Many people
[quote=CA renter]Many people have high school diplomas (or less) but are more valuable than ten people with degrees.
I’ve seen too many over-educated idiots with no “real life” common sense or work ethic. IMHO, this notion that everyone must have a college degree is part of the problem (we are a service/technology/finance economy…). BTW, I have a college degree and come from a long line of educators/college professors, so I’m not saying this for my own sake. It’s what I’ve seen in real life.
~~~~~~~~~~~~~~~~~
[/quote]
That is what happens when a diploma becomes commercialized by “schools” like University of Phoenix. I think the more appropriate question, is a degree in “what” and “where” matters. Of course getting a degree is not an entitlement nor is a degree an entitlement to getting a “job”. On the other hand, being purely dependent on semi-skilled to no-skilled labor, you run the risk of always being outsourced to a cheaper counterpart.
November 12, 2008 @ 6:56 AM
Big 3 hourly salary +
[img_assist|nid=9571|title=Big 3 hourly salary + benefits (legacy cost not yet included)|desc=|link=node|align=left|width=396|height=346]
My formula of 30% salary reduction and 50% benefits reduction:
$30*0.7 + $43*0.5 = $42.5 (still too high)
http://seekingalpha.com/article/105061-should-we-really-bail-out-the-big-three-automakers-with-73-20-per-hour-labor?ref=patrick.net
November 12, 2008 @ 4:26 AM
CA renter wrote:Agree with
[quote=CA renter]Agree with that, arraya.
What some posters don’t seem to understand is that those pensions and medical benefits were part of their (UAW workers) compensation package.
[/quote]
What I think you don’t seem to understand is that in life, there is no such thing as a “guarantee”. Take the airline industry for example. Ask a lot of airline workers about what happened to their pensions…You know, the airlines that use to offer pensions. GM/Ford/Chrysler is broke. The generous compensation negotiated with UAW…GM/Ford/Chrysler can’t live up to that higher cost and produce a car that can compete with other manufacturers that don’t have the same benefits. GM/Ford/Chrysler management and labor both failed. Management failed to meet the growing cost head on…At the same time, they couldn’t partially had their hands tied with all the generous deals with the union. UAW workers wanted to hold on to their benefits, DESPITE a clear indication of decline at GM/Ford/Chrysler.
November 12, 2008 @ 6:55 AM
Hell, I don’t even
Hell, I don’t even necessarily agree with what I said. I can see where this is going though. The US is not going to have the ability to offer opportunities for a good portion of the population, degreed or not. Cutting the Auto industry back 50%, which it probably needs more, is going to affect 2-3 million jobs when looking at the industries that support it. They are going to have to migrate to find work even the degreed. I can’t imagine the local Wall Mart can support that kind of influx, actually I can see the big box stores in these areas cutting back as well after the massive job losses in the surrounding areas.
We are all going to pay for the decades of poor economic and political leadership. “We” as in the working middle and upper-middle class, the monied class will be protected and have their pick of some really cheap labor.
November 14, 2008 @ 6:01 AM
I wish some of you had grown
I wish some of you had grown up in the Detroit area like I did with many friends in this union, you would have a different perspective. There is a fair share of socialist types here who are just mad they are not wealthy and want to bring down those that are, those peoples views would not be changed by having grown up there. However, I will tell you as someone who did grow up there that these workers are the most overpaid of any trade in the world. When you look at the average cost per vehicle of our automakers attributable to the UAW vs the Japanese, you will see a ratio of several hundered to one, I think the last number I saw was $2500 for us vs $100 for them. The concept of never buying a Monday vehicle is not a myth, it is truth. This is due to these workers working hungover on Mondays and producing far lessor quality on these days. My family bought a Monday car from Ford once not knowing it, and it was later classified as a lemon and wound up in a lawsuit.
I can tell you from personal experience all the stories my friends used to tell me about how they slept on the job often, and made all kinds of mistakes on Monday’s, it was one big joke to them. They all encouraged me to get a job with them, and I used to tear into them for their lack of respect for their employer, they did not care. This was the prime job to get growing up back there due to it being the higheset paid and allowing you to screw around all day long. Let’s face it some people should lose their jobs, you are not entitled to one like some in here feel. You have to have some responsibility in your life to yourself and your family. In this day and age is this really the type of thing you want to support?
Regardless of your political leanings, how does this pencil out from a business standpoint? Do you really think you can compete with that type of disadvantage? Until the unions are broken and they come in line with their cost structure this is not a viable business model regardless of your politics. I guess management should share some blame in this, but when you are being extorted like this what can you really do?
November 15, 2008 @ 3:19 PM
Holy Mackeral. Pelosi just
Holy Mackeral. Pelosi just said that the automakers need to restructure to ensure their long term viability. Wow.