Automakers: about $35 Billion should do it.
The automakers of the USA are now entitled to $25,000,000,000.00 in federal loans to work towards "alternative energy" cars. That is code for "doing whatever they want." Essentially no one else wants to throw money on board the Titanic, so the Imperial Federal Government is under the "too big to fail" policy.
GM and Ford are public companies, Chrysler is now a private company. All three are on board with this plan. All three have hemorrhaged cash for more than a decade following poor strategic decisions, bad management, and an over compensated union labor force which has driven costs way, way up and a management team that ignored the growing liabilities. Toyota, Nissan, Mazda, Mercedes, Volkswagen and other (read: profitable) companies with US offices, sales forces, mechanics, and manufacturing plants are not included. Nor are several smaller independent manufacturers (Tesla being a prime example if they are really interested in alternative energy and not a handout).
Now, the "merger" of GM and Chrysler is to be subsidized to the tune of $10,000,000,000.00 in loans, equity infusions, guarantees, and handouts. For reference, you could buy GM in it's entirety this morning for less than $3.5Bil, and Chrysler was purchased for about $7Bil last year. So, both companies together are worth ~ $10.5B, but tax payers are going in for $10Bil? Makes sense...
Predictably, he $3 BIL in pension obligations the two have racked up will also be sloughed off on tax payers. Poor management, poor negotiations, and poor long term planning has set this up since the 1970's. Why should I have to fix it?
I want a strong manufacturing base in the United States. I understand that it will never be at the down and dirty level it was and that as a post-industrial nation our industry must be focused on skilled positions. I also appreciate the HUGE impact the auto industry has on everything from mining to engineering to shipping.
BUT, propping up failed companies is a drain on the entire economy. It stops better companies from entering the market. It encourages inefficient legacies to continue to lose money. If a different company, foreign or domestic, can make a better product and do so more profitable – then they have earned the supremacy. Consolidation can encourage efficiency, but in this instance the Big 3 have swallowed up all domestic competition, gotten complacent, and subsequently ceased to compete.
They should be allowed to die off. I would support a mitigation program to chop away assets, allow the companies to break up (Pontiac an independent company again), or otherwise to prevent total chaos. But throwing three times the market value of the companies in the pot to keep it fro boiling dry is a very poor decision fiscally, economically, and on principle. Certainly encouraging two bad companies to join forces to be one, definitely too big to fail, company will only have a band aid effect.
Daimler-Benz bought Chrysler to turn it around and fled taking a huge hit. Cerberus bought it thinking they could turn it around and now have their hand out. Uncle Sam is going to do better? If a well run company (Daimler) could not merge with Chrysler successfully, how will two failing companies someone succeed? Let them die.
http://www.cnbc.com/id/27409944
Full disclosure:
I own a direct stake in Ford. It was a great buy at $10, an amazing buy at $5, and now for $3 must be a real steal. Through mutual funds I'm sure I have a stake in GM and several foreign auto makers. I would personally benefit from a Ford being given a boast and bought the stock thinking that would happen. But for the economy as a whole, it is still a bad idea.
The Big Three have known alt fuel vehicles were going to be their future for some time (at least since the OPEC disaster of the early '70's).
They have squandered profits, opportunity, and time to be leaders in hybrid and other alternative technology. Develop and sell products people want and you will prosper. Fall behind and piss away opportunity to be pro-active and you will and should shrivel up and die. Don't expect people for whom you did not make useful products to come bail you out.
"Too big to fail" is a ****ty concept.
Daimler cut Chrysler as soon as it started to turn around because Daimler stockholders knew their company was profitable without Chrysler. The management at Cerberus is looking for a hand out but they have made a whole lot of changes to turn the company around including removing duplicate and low-selling models (something GM doesn't understand) beefing up service offerings and simplifying the dealer franchise offerings as well.
While I would say Chrysler may be making some of the best decisions, GM is making the worst. They are operating in 2008 the way they operated in 1998 and expect our help. GM's product offerings are more bloated than Ford an Chrysler combined. I counted 96 vehicles on GM's website, excluding chassis cabs and commercial-only models. I'm not counting different trim packages either, they list NINETY-SIX vehicles! Chrysler has 29 and I haven't counted Ford yet but I bet it's less than 70.
Concur.
Agree as well. The big three could limit their offerings to three vehicles apiece plus commercial trucks and manage to meet customer demands quite well. They did it up through the 1970's.
However, there will be a serious price we all pay if we stand by and watch as one or more of the big three die off. They each use tons of suppliers and contract work. If we're going to stick our fingers down our throat, we better have a paper bag ready and waiting.
quote:
Originally posted by waterboy
Agree as well. The big three could limit their offerings to three vehicles apiece plus commercial trucks and manage to meet customer demands quite well. They did it up through the 1970's.
However, there will be a serious price we all pay if we stand by and watch as one or more of the big three die off. They each use tons of suppliers and contract work. If we're going to stick our fingers down our throat, we better have a paper bag ready and waiting.
Honda, Toyota, Nissan, etc. all have a successful business model with their U.S. plants using U.S. suppliers and ostensibly keeping the workforce happy without insane union contracts which are finally helping to break the backs of the B-3.
Seems like two or three years ago, it was reported that for every current GM employee, the company was providing pension and benefits to three retirees. Not saying retired people should not be taken care of, but when people can retire fully-vested after 20 or 30 years, that creates a high burden on employers, especially with increasing life-expectancy.
Should any or all of the big three fail, any or all of these better-run companies can fill the void. I'd hate to see any of them fail, but if they fail to adapt and produce what the consumer wants or needs at a competitive price, it's time for their life-span to come to an end. The Gov't shouldn't be propping them up nor subsidizing their lack of planning for this day.
It strikes me that the Big 3 automakers are our national economy in microcosm.... big promises made, and yet not funded, when business was good and now they can't be funded. The demographics that thet now face are eerily similar to the demographics of the nation as a whole in the not too distant future....
We really are doing the same thing those automakers are doing. Putting most of our eggs in the "automobile" basket, building more and more roads, sprawling and becoming less efficient, and thus less competitive on the world stage. Building ever more roads and bridges, "inneficient products" while not investing as much in efficient transportation options...while watching the investment, the infrastructure previous generations built decay and fall into ruin. Havent wanted to spend the money to keep up the older stuff we already have, keep expanding and spending more on inefficient stuff that we will also have to spend money on to maintain, aaand are spending too little on more efficient forms of transportation and growth. Its just absurd the choices we have made and continue to make. Wonder how long we are going to keep at it?
Wasn't it Churchill that once said something to the effect of, "Americans always do the right thing... after they have tried everything else first." lol
NO, HELL NO.
Now they want $50,000,000,000.00 from the Federal Government:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aWj2UUIE4ofU&refer=worldwide
They are also seeking about $50,000,000,000.00 from the EU.
Ignoring the $50BIL from the EU and the $20Bil or so we have already GIVEN them, what, in the hell, is the time frame for paying back the loan? None of the three make money. Have they made $50,000,000,000 combined in the last 20 years? I doubt it.
Combined the companies are not worth 50% of that. 25% of that. American car companies are a damn joke, they build lots of cars and pay for the privilege of building each and every one. Investors are able to figure that out, so they are trying to fleece the government. Here are the automakers by market cap:
Volkswagen 204.41B (this is radically inflated as of late, usually head to head with Toyota)
Toyota Motor Corporation (ADR) 107.42B
HONDA MOTOR CO., LTD. 42.19B
BMW 42B
Daimler AG (USA) 33.37B
Volvo 20.6B
Nissan Motor Co., Ltd. 17.86B
Renault SA (French) 5.97B
ISUZU MOTORS LIMITED (private est.) 5.2B
Ford Motor Company 4.57B
Chrysler 3.2B
GM 2.8B
Tata Motors Limited (India) 1.70B
Avtovaz (Russian)~1.4Bil (estimate from 600 - 4bil, Russian companies are strange)
If we are going in for $50Bil we should get Ford, Gm, Chrysler, Nissan and Volvo outright. Loans? Who the hell gets a loan for 5 times your market value? GM has a -57 BILLION market cap. WHAT! What the hell are we buying/loaning into? They have a book value of NEGATIVE 57 BILLION, a market cap of 3Bil, and they don't make any money.
Seriously, half their value is presumed on the notion that the government will save them anyway. There is no real value there.
- - -
Anyway, the US Auto industry got in a world of trouble. They ran the show as they saw fit. From government policy, to union contracts, to what the consumer wanted. They ran it. And they ran it into the damn ground.
Sorry, welcome to capitalism. It's a two way street. You profit on the way up, but must be allowed to FAIL. Other companies are using your labor and producing products for your market under the laws you set in place, and are kicking your donkey. You failed in every imaginable way.
Please either turn it around, or die quietly.
Sorry, the US Government cannot continue to bailout every company that fails.
Poorly managed companies need to fail, so better managed ones can pick up the slack. It's painful, but in the end, the consumer will be better off.
No, they are not "failing" that bad other than by their own fault and it's GM that is failing the hardest and they want us to help them grow?
____ them and the horse they rode in on.
GM's CEO said the words Total Liquidation yesterday if GM doesn't get help.
I equated that to failing as a company.
great, I'll take 7 corvette's for a dollar.
companies that simply give up and make bull**** comments like that are not worth keeping around.
trust me, SOMEONE will buy up the assets. i dont want to hear about the hundreds of thousands of jobs lost....successful companies still need capacity and I bet there are lots of european companies that make good vehicles DYING to get a nice factory on american soil.
It's capitalism, and if we're committed to capitalism we have a duty to let them fail.
Toyota plants in this country treat their employees very well. Because of that there's a very high demand level for jobs at American Toyota plants.
Assuming we still need to buy cars, the demand will be filled by someone, most likely someone producing cars in the U.S.
I don't see the big loss if GM fails and Toyota/Honda pick up the slack. They're still gonna make the cars in the US, and they'll be much better cars made under a much better business model.
I'd be very interested to know what percentage of cars bought in the US are made in the US and how different american and non-american brands compare in that regard.
quote:
Originally posted by inteller
oh puh-lease....you drive a murano with a VQ35DE....lets not preach about efficiency.
the sooner Chrysler and all of its turd vehicles go away, the better.
Why not lol? I dont recycle, but I know its the right thing to do. I know its good to work out and exercise, but occasionally I slack. I do manage to eat well. I am not perfect and push myself to try and be better. I harp on myself for my bad choices far more than I do anyone elses, trust me.
But lets take the Murano as a case in point. The economy is slowing down and I know danged well that as an artist, its likely to hurt me more than most. That Murano aint cheap, nor is the insurance and gas etc. So if I have to make more money than my competitor does in order to get around, It could likely make me less competitive price wise. And or make it so that I have less money to spend locally.
However, I do want to say that I got rid of my old Ford Econoline van which got around 14mpg at best, and now use the Murano as my work vehicle as well. Its one of the reasons I got the Murano. Believe it or not I can put 3 levels of scaffolding plus a ladder, plus paint and other supplies in the thing. She is my heavy duty, stylin, work truck. [8D] I do keep thinking of what the options would be if I were to get something cheaper that could both look sharp to drive around as a daily vehicle, and would be able to haul my stuff?
quote:
Originally posted by HazMatCFO
GM's CEO said the words Total Liquidation yesterday if GM doesn't get help.
I equated that to failing as a company.
GM makes cars and people buy them. They are still spending millions on sponsorships and advertising and have done no significant changes to their vehicle lines and have even expanded the low-volume markets like the hummer lineup.
Failing is not having to close down a couple of lines, I'll know they're close when they make some real cuts to management and product lines and sell some stuff off.
quote:
Originally posted by TheArtist
But lets take the Murano as a case in point. The economy is slowing down and I know danged well that as an artist, its likely to hurt me more than most. That Murano aint cheap, nor is the insurance and gas etc.
I have to believe that in your line of work that image is part of the package. If the Murano meets your needs for hauling stuff and gets you work for whatever reason, then it becomes a necessary business expense. If you like the vehicle, so much the better.
Some of you guys are pretty cavalier about gutting an industry player whose ripple effects on employment and wealth would be felt all over. Especially during a time of already weakening economics. Would you support the liquidation of Exxon/Mobil or the other oil titans should they find that the world insists on greener sources of energy? We would be begging at the trough just like the automakers believe me.
That said, American automakers are incompetent and their products are clumsy trash cans for the most part that seem to have been made to enable a vehicle for financing. They have steadfastly made short term decisions paramount.
Some free market punishment is in order. They need someone like Boone Pickens to work windmill magic on them.
quote:
Originally posted by waterboy
Some of you guys are pretty cavalier about gutting an industry player whose ripple effects on employment and wealth would be felt all over. Especially during a time of already weakening economics. Would you support the liquidation of Exxon/Mobil or the other oil titans should they find that the world insists on greener sources of energy? We would be begging at the trough just like the automakers believe me.
That said, American automakers are incompetent and their products are clumsy trash cans for the most part that seem to have been made to enable a vehicle for financing. They have steadfastly made short term decisions paramount.
Some free market punishment is in order. They need someone like Boone Pickens to work windmill magic on them.
poor analogy, because the big energy companies have alternative energy waiting in the wings, they just aren't going to play those cards until people demand it. on the other hand other automakers bedies GM have invested LOTS of money in better vehicles, but GM just plodded along, making guzzling vehicles and piling tons of incentives on top to make them move. it is no one's fault but their own.
quote:
Originally posted by waterboy
American automakers are incompetent and their products are clumsy trash cans for the most part that seem to have been made to enable a vehicle for financing. They have steadfastly made short term decisions paramount.
You said enough right there. So yes, they deserve to fail. I will be 100% cavalier about that statement.
Because we are having economic problems it is MORE important to let bad companies fail. Otherwise new companies can not emerge nearly as fast. I can understand the need to ensure a smooth transition, and that is what bankruptcy trustee and the automatic stay is for.
The auto industry is not failing because the government regulated them out of business (as would be the case in the Exxon example), they are failing from nearly 40 years of incompetence. That should NOT be rewarded with free money. And if we save them, who is next? Boeing? AT&T?
quote:
They need someone like Boone Pickens to work windmill magic on them.
You realize he lost 33% of his net worth in the last 3 months?
How quickly we forget history. If you want to get an idea of what a government bailout of domestic car companies gets you, look no further than British Motor Holdings.
The UK tried to "save" its domestic autos back in the mid 20th century, but all it yielded was a slow failure instead of a swift one. It brought years of mediocrity and poor reliability as now the unions were just sucking off the government dole.
The Brits eventually figured out that this nationalized auto stuff was crap, and sold the pieces off to companies like BMW and Ford. BMW did something good with MINI, but Ford realized that you can't take crap and turn it into gold so they eshewed Land Rover and Jaguar to Tata and the Chinese.
The US should cut right to the chaise and let GM et al fail. Let the Chinese and Indians buy up the pieces and see what they can do with them. If the products are worth anything let them succeed, if not, let them remain bottom rung Chinese crap that they are.
There is a new argument going around that we should bail them out because of national security. Let me be clear, GM owns NO PART of AM General that make HUMVEEs. They just own marketing rights to the HUMMER name and design effects. H2s and H3s ARE NOT military vehicles.
Ok, so what about the gigantor workforce associated with Ford and GM? What about the city of Detroit which relies almost exclusively on the American automotive industry to survive? Not to mention smaller towns scattered across the country that are host to GM and GM-related factories. I know we're purists on this board about how capitalism should work, but what about the massive human costs associated with the collapse of any/all American automakers?
In pretty much any hypothetical collapse of GM or Ford or even Chrysler, thousands of workers -- from the factory on up to the office parks -- would be idled during the middle of a nasty nasty recession. With the credit environment the way it is, there'd be no guarantee of any of the other automakers picking up the slack. At that point, who gets to pick up the slack? The government, in the form of UI, food stamps, and any other safety net programs. So the question really is, do we give money directly to the companies and hope that they turn themselves around, or do we wait for them to fail, and spend that money on helping the workers stay afloat until they get hired again?
Also, as someone mentioned, the government can offer the money with as many strings attached as they want. So, feasibly, they could mandate that GM funnel all the bailout money into alternative fuel vehicles, as a for instance. Or whatever. Point being, the gov doesn't HAVE to just dump truckloads of cash on GM and then walk away. It can use it as a swift kick in the rear as well.
*NOTE: I don't like the fact that this rewards GM for sucking. And I understand the slippery slope argument (why not Boeing? why not McDonald's?). And Paulson has shown zero appetite for making industries who take the federal bailout hit any benchmarks whatsoever. So, yeah, I'm skeptical. Still, there're compelling reasons for this to happen.
As mentioned above. $35B, $50B, it just buys time. Time with which GM has proven they will adjust nothing.
Want to help the US auto industry, kill the "Jobs Bank" that is leeching Billions annually.
http://wsjclassroom.com/archive/06may/auto2_jobsbank.htm
quote:
Originally posted by we vs us
Ok, so what about the gigantor workforce associated with Ford and GM? What about the city of Detroit which relies almost exclusively on the American automotive industry to survive? Not to mention smaller towns scattered across the country that are host to GM and GM-related factories. I know we're purists on this board about how capitalism should work, but what about the massive human costs associated with the collapse of any/all American automakers?
In pretty much any hypothetical collapse of GM or Ford or even Chrysler, thousands of workers -- from the factory on up to the office parks -- would be idled during the middle of a nasty nasty recession. With the credit environment the way it is, there'd be no guarantee of any of the other automakers picking up the slack. At that point, who gets to pick up the slack? The government, in the form of UI, food stamps, and any other safety net programs. So the question really is, do we give money directly to the companies and hope that they turn themselves around, or do we wait for them to fail, and spend that money on helping the workers stay afloat until they get hired again?
Also, as someone mentioned, the government can offer the money with as many strings attached as they want. So, feasibly, they could mandate that GM funnel all the bailout money into alternative fuel vehicles, as a for instance. Or whatever. Point being, the gov doesn't HAVE to just dump truckloads of cash on GM and then walk away. It can use it as a swift kick in the rear as well.
*NOTE: I don't like the fact that this rewards GM for sucking. And I understand the slippery slope argument (why not Boeing? why not McDonald's?). And Paulson has shown zero appetite for making industries who take the federal bailout hit any benchmarks whatsoever. So, yeah, I'm skeptical. Still, there're compelling reasons for this to happen.
you are incorrectly assuming that the assets GM has hold no worth and will not be purchased in bankruptcy auctions by various companies. You also incorrectly assuming that employees at said assets will be swept away and new owners will hire a completely new work force. No company is that stupid to throw the baby out with the bathwater. These are chicken little sky is falling alarmist bull****, the same bull**** that scared congress to bail out banks for $700 bil.
Worthless assets that employ americans will fall by the wayside, and the governemnt will help those people through traditional unemployment means....but they will be the exception not the norm. GM has done some bad things, but most of that is in management and not the assets themselves. A smart company will see GM for its assets and buy the pieces that fit with the new owners the best. Tata Silverados and Nanjing Corvettes? Whatever it takes to fix a broken company.
quote:
Originally posted by inteller
quote:
Originally posted by we vs us
Ok, so what about the gigantor workforce associated with Ford and GM? What about the city of Detroit which relies almost exclusively on the American automotive industry to survive? Not to mention smaller towns scattered across the country that are host to GM and GM-related factories. I know we're purists on this board about how capitalism should work, but what about the massive human costs associated with the collapse of any/all American automakers?
In pretty much any hypothetical collapse of GM or Ford or even Chrysler, thousands of workers -- from the factory on up to the office parks -- would be idled during the middle of a nasty nasty recession. With the credit environment the way it is, there'd be no guarantee of any of the other automakers picking up the slack. At that point, who gets to pick up the slack? The government, in the form of UI, food stamps, and any other safety net programs. So the question really is, do we give money directly to the companies and hope that they turn themselves around, or do we wait for them to fail, and spend that money on helping the workers stay afloat until they get hired again?
Also, as someone mentioned, the government can offer the money with as many strings attached as they want. So, feasibly, they could mandate that GM funnel all the bailout money into alternative fuel vehicles, as a for instance. Or whatever. Point being, the gov doesn't HAVE to just dump truckloads of cash on GM and then walk away. It can use it as a swift kick in the rear as well.
*NOTE: I don't like the fact that this rewards GM for sucking. And I understand the slippery slope argument (why not Boeing? why not McDonald's?). And Paulson has shown zero appetite for making industries who take the federal bailout hit any benchmarks whatsoever. So, yeah, I'm skeptical. Still, there're compelling reasons for this to happen.
you are incorrectly assuming that the assets GM has hold no worth and will not be purchased in bankruptcy auctions by various companies. You also incorrectly assuming that employees at said assets will be swept away and new owners will hire a completely new work force. No company is that stupid to throw the baby out with the bathwater. These are chicken little sky is falling alarmist bull****, the same bull**** that scared congress to bail out banks for $700 bil.
Worthless assets that employ americans will fall by the wayside, and the governemnt will help those people through traditional unemployment means....but they will be the exception not the norm. GM has done some bad things, but most of that is in management and not the assets themselves. A smart company will see GM for its assets and buy the pieces that fit with the new owners the best. Tata Silverados and Nanjing Corvettes? Whatever it takes to fix a broken company.
It's a global recession. Tata and Nanjing aren't buying, either (China just announced their own bailout package. $849 billion worth.) (//%22http://www.theage.com.au/national/the-great-china-bailout-20081110-5lpe.html%22). And if they are there's no guarantee that they'll make use of the assets they purchase. It's not like Tata swoops in, retools overnight, and gets down to making a gajillion Nanos here in the US. There will be major dislocations if GM is liquidated and the assets scattered.
My point is that there're added dimensions to the what and why of a bailout that don't include how the company itself performs, but do include the ripple effects of a failure. I think it might actually be in the interest of the government to prevent a collapse.
Wevus:
Then why not guarantee all US jobs? Why let any company fail, it will cost Americans jobs!
Detroit has known for a long time that the auto industry there is failing. More auto jobs are out of Detroit than in. Most are in Southern States (Tennessee, Texas, Georgia) now. Detroit got too expensive (read: too unionized) to do business.
Tulsa had the same problem (different reason). We had to branch out and tried to get more into aviation, finance, and telecom. It happens all the time. Why should every other city in the US be forced to cough up $50BIL to help out Detroit, which failed to stay competitive? Milwaukee used to be a Mecca that rivaled Chicago, Tulsa used to be far and away the largest city in Oklahoma... things change.
And as Inteller pointed out - the jobs will not disappear. They will be shifted around (just like all the jobs lost to robots or to them there Mexicans, we still got down to 4.5% unemployment). Even if they did, a large skilled workforce would draw in new jobs. That's how the system works.
What long term good would come from this? GM would fail just the same. Give $100,000,000,000.00 to GM with no strings attached and it would be gone in 2.5 years (using current losses). There is no real plan to turn it around and hasn't been for decades. They have consistently demonstrated an ability to blow through money.
Why not have the federal government just take over GM and any other company that loses money and subsidize them to keep jobs? At that point, we can mandate gas pumpers, elevator attendants, 2 drivers per truck, and tons of other unneeded positions that make no economic sense but retain/create American jobs (actually, just drain capital and workers away from beneficial uses).
At the end of the day each employee at GM is NOT adding to our economy. The output they produce costs more to make than GM is able to sell it for. Ergo, as a whole, the company is a net LOSS for our economy. They are taking in capital, using it poorly, and putting out less capital on the other side. A magic machine that exchanges a dollar bill into 73 cents.
Economically speaking, the fact that the company is failing is telling us that the resources consumed by that company are better used elsewhere. The same skilled employee who works at GM losing money would contribute to making money for someone else. The capital that is blown and the industrial capacity would contribute better elsewhere.
Perhaps a different company would actual PAY taxes to the Federal Government! GM hasn't paid a dime yet this decade.
And to alleviate your concerns directly and to prove Government does have a role... yes, GM is too large to just evaporate. That's why we have bankruptcy laws, receivership, corporate spin offs, and the ability to buy and sell capital. Different units of GM might make sense as individual companies. For $1.5B Daimler might take back Chrysler. A private equity group would love to take Ford private (Kerkorkian tried and was rejected).
I am in favor of the government stepping in to retain order and a coherent exchange. To facilitate the beneficial use of capital (a plant and workers doing nothing is wasteful) while the process plays out. It makes sense. But throwing money into a failing venture will just drag out the process, cost tax payers money, and discourage new ventures from employing those workers.
- - -
FYI. This is how it will play out. They will get some of the money. But the BIG ticket will be the Federal assumption of retirement and medical debts. In essence, GM and Ford will pass the buck to Uncle Sam and I will pay for some union guys full pension and complete medical care. Chrysler will whine that they should get the deal too, and they will. The CEO and board will get HUGE bonuses for accomplishing this task. Union heads will get bonuses and rewards, as will the pension mangers when they lose control of the funds. There will be some mock restriction on such bonuses, but they will have no teeth.
Lesson learned: do whatever you want and the Federal government will step in and assume your debts.
quote:
Originally posted by we vs us
quote:
Originally posted by inteller
quote:
Originally posted by we vs us
Ok, so what about the gigantor workforce associated with Ford and GM? What about the city of Detroit which relies almost exclusively on the American automotive industry to survive? Not to mention smaller towns scattered across the country that are host to GM and GM-related factories. I know we're purists on this board about how capitalism should work, but what about the massive human costs associated with the collapse of any/all American automakers?
In pretty much any hypothetical collapse of GM or Ford or even Chrysler, thousands of workers -- from the factory on up to the office parks -- would be idled during the middle of a nasty nasty recession. With the credit environment the way it is, there'd be no guarantee of any of the other automakers picking up the slack. At that point, who gets to pick up the slack? The government, in the form of UI, food stamps, and any other safety net programs. So the question really is, do we give money directly to the companies and hope that they turn themselves around, or do we wait for them to fail, and spend that money on helping the workers stay afloat until they get hired again?
Also, as someone mentioned, the government can offer the money with as many strings attached as they want. So, feasibly, they could mandate that GM funnel all the bailout money into alternative fuel vehicles, as a for instance. Or whatever. Point being, the gov doesn't HAVE to just dump truckloads of cash on GM and then walk away. It can use it as a swift kick in the rear as well.
*NOTE: I don't like the fact that this rewards GM for sucking. And I understand the slippery slope argument (why not Boeing? why not McDonald's?). And Paulson has shown zero appetite for making industries who take the federal bailout hit any benchmarks whatsoever. So, yeah, I'm skeptical. Still, there're compelling reasons for this to happen.
you are incorrectly assuming that the assets GM has hold no worth and will not be purchased in bankruptcy auctions by various companies. You also incorrectly assuming that employees at said assets will be swept away and new owners will hire a completely new work force. No company is that stupid to throw the baby out with the bathwater. These are chicken little sky is falling alarmist bull****, the same bull**** that scared congress to bail out banks for $700 bil.
Worthless assets that employ americans will fall by the wayside, and the governemnt will help those people through traditional unemployment means....but they will be the exception not the norm. GM has done some bad things, but most of that is in management and not the assets themselves. A smart company will see GM for its assets and buy the pieces that fit with the new owners the best. Tata Silverados and Nanjing Corvettes? Whatever it takes to fix a broken company.
It's a global recession. Tata and Nanjing aren't buying, either (China just announced their own bailout package. $849 billion worth.) (//%22http://www.theage.com.au/national/the-great-china-bailout-20081110-5lpe.html%22). And if they are there's no guarantee that they'll make use of the assets they purchase. It's not like Tata swoops in, retools overnight, and gets down to making a gajillion Nanos here in the US. There will be major dislocations if GM is liquidated and the assets scattered.
My point is that there're added dimensions to the what and why of a bailout that don't include how the company itself performs, but do include the ripple effects of a failure. I think it might actually be in the interest of the government to prevent a collapse.
pft. China just finally got fooled by the alarmist a**holes like everyone else. The US wants China to take a bath in the sewer just like everyone else and they finally scared China enough to jump in. But socialism and communism comes easy to China, so it won't be such a hard pill to swallow like it is here in the US with real capitalists. In fact, the US should be ashamed for using China in this manner after trying to push capitalism there for so long. Looks like to me it is "capitalisim when it is convienent" What the US doesn't want is China calling in all that US debt they bought up. It is a scummy scummy deal.
GM's cash burn rate is near $7,000,000,000.00 per quarter. Their share of the $25Bil would be about $10bil, or about 4 months of life support.
http://www.businessweek.com/lifestyle/content/nov2008/bw2008117_534334.htm?campaign_id=rss_daily
Still not sure they deserve to die? The unions negotiated "job banks" in the 1980's and they persist. Instead of laying people off they pay them to do nothing. The man in the following story got $100,000 a year for six years to not work. Good business and something I should subsidize!
http://www.cbsnews.com/stories/2008/11/12/politics/otherpeoplesmoney/main4595068.shtml
And finally, we are mirroring history. Japan did this EXACT same thing. When their bubble started to burst they propped up failing institutions. The net result? A stagnant economy and a stock market which, 19 years later, remains at 1/5th of it's high.
http://www.fool.com/investing/general/2008/11/11/failing-like-japan.aspx
(The FOOL article is REALLY REALLY worth the read)
Short term knee jerk reaction will get us a pretend short term gain (borrow from jack to pay jill is NOT really a net gain) but in the long run has dire consequences. GM is a CAPITAL destroying company - it hinders out economy to the tune of $2.33 BILLION per month.
Too big to let explode, perhaps. But nothing is too big to let fail. Give GM some morphine and ease it off of life support. That very well may cost $25bil, but let it die at the end.
There's no reason to guarantee all jobs, CF -- talk about an impossibility -- but the auto industry represents about 4% of GDP and 3 million jobs or so, so it's not peanuts. And this is an industry, not just a company at risk. That's actually a pretty compelling too-big-to-fail argument right there.
A Fox commentator of all people made a grudging comment that I actually agreed with, and that was that a bailout isn't and can't be a long term fix. It's to tide the industry over till we reach calmer economic waters and they can take a cooler approach to righting themselves. While the industry track record in the last couple of decades has been crappy on balance, it doesn't mean that the whole sector is a dead duck. Arguably it's a crucial component for a national initiative to ween us off oil and onto alternative fuels.
I think you're right in that a bailout will consist of the Feds assuming autoworker pensions. It'll also probably contain a strong incentive to make alternative energy cars, and if we're lucky a taxpayer equity stake in the businesses taking the bailout (the country's gonna have to recoup this investment SOMEWHERE). I'd like to see the mgmt tossed out on their asses, frankly, and have the gov put together a team that might help retool the companies for a private sale at a later date.
I don't think you can let the US auto industry tank, quite frankly. Pretty much ever. If the options are failure or keeping it afloat to fight another day, I think it's a political and economic no-brainer.
It may be 4%, but that includes a lot of companies manufacturing here in the US that arent GM, Ford or Chrysler. As in; Honda, Toyota, Nissa, etc. Also, parts of GM et. al. would likely be bought up. It would be far far cheaper to help pay for the employees who did lose their jobs similar wages and to go college for a few years, turn Detroit into a college town and build some large research centers and universities.
quote:
Originally posted by TheArtist
It may be 4%, but that includes a lot of companies manufacturing here in the US that arent GM, Ford or Chrysler. As in; Honda, Toyota, Nissa, etc. Also, parts of GM et. al. would likely be bought up. It would be far far cheaper to help pay for the employees who did lose their jobs similar wages and to go college for a few years, turn Detroit into a college town and build some large research centers and universities.
that is a great idea but unions would be totally against it as it would allow people to rise above trade jobs and get a serious career. GM could have done that back in the 80s, but the unions made them create the jobs bank that paid people to go sit in a room and do nothing. The unions up there don't want people educating themselves, because they need to lemmings to stay in their unions.
GM employs 74,000 hourly employees and about 39,000 staff in the US. Ford employs about the same. Chrysler far less. Lets just give 300,000 as a nice number. Lets say the spin off jobs are 3 times that. Then lets add 100,000. A million jobs. We are paying $50,000 per job.
More scary - it won't work.
As I have said over and over, they are not dying because of the economy. It is a chronic mismanagement issue. Float them a guaranteed loan until the year GDP rises 5%, it won't matter. They are going to fail unless they do something SEVERE. A huge Federal Loan is a discouragement to such action.
And to encourage alternative energy? Are you serious? For 30 years they have known what was needed and desired. For the last 6 years the demand has been unbelievable. Heck, electric cars and hyrbids existed in the 1800's, they ignored them. The US Auto makers are the primary hindrance to alternative fuels and to mass transit.
Why should we reward them for their past mismanagement and hostility towards alternative fuels by bribing them now to participate? Honda, Toyota, Tesla motors, and plenty of start ups I've never heard of are working diligently and working hard to make it happen. Giving GM Billions to walk all over them would be a slap to their face personally and a major hurdle for the industry.
Incompetence should not be rewarded. In the long run supporting negative returning companies is worse for our economy than catastrophic failure. A waste of capital, resources, and a hindrance to companies that are successful.
- - -
Wal-Mart and McDonalds together employ 2.5 MILLION people. If either or both were to start paying burger flippers/check out ladies $45,000 a year fail, would we bail them out? Doubtful. It is a esoteric sense of connection to the American auto industry.
For that matter, the United States of America may see our bond rating cut when we attempt to fund the ~$1,000,000,000,000.00 in bailouts and new liabilities we have already guaranteed. More poor decisions and increased liabilities certainly won't help that at all.
quote:
Originally posted by cannon_fodder
GM employs 74,000 hourly employees and about 39,000 staff in the US. Ford employs about the same. Chrysler far less. Lets just give 300,000 as a nice number. Lets say the spin off jobs are 3 times that. Then lets add 100,000. A million jobs. We are paying $50,000 per job.
More scary - it won't work.
As I have said over and over, they are not dying because of the economy. It is a chronic mismanagement issue. Float them a guaranteed loan until the year GDP rises 5%, it won't matter. They are going to fail unless they do something SEVERE. A huge Federal Loan is a discouragement to such action.
And to encourage alternative energy? Are you serious? For 30 years they have known what was needed and desired. For the last 6 years the demand has been unbelievable. Heck, electric cars and hyrbids existed in the 1800's, they ignored them. The US Auto makers are the primary hindrance to alternative fuels and to mass transit.
Why should we reward them for their past mismanagement and hostility towards alternative fuels by bribing them now to participate? Honda, Toyota, Tesla motors, and plenty of start ups I've never heard of are working diligently and working hard to make it happen. Giving GM Billions to walk all over them would be a slap to their face personally and a major hurdle for the industry.
Incompetence should not be rewarded. In the long run supporting negative returning companies is worse for our economy than catastrophic failure. A waste of capital, resources, and a hindrance to companies that are successful.
- - -
Wal-Mart and McDonalds together employ 2.5 MILLION people. If either or both were to start paying burger flippers/check out ladies $45,000 a year fail, would we bail them out? Doubtful. It is a esoteric sense of connection to the American auto industry.
For that matter, the United States of America may see our bond rating cut when we attempt to fund the ~$1,000,000,000,000.00 in bailouts and new liabilities we have already guaranteed. More poor decisions and increased liabilities certainly won't help that at all.
Yeah, what he said!
I don't want to interrupt a perfectly good, and logical rant CF, but here's some complicating factors. The type of labor required to produce cars is diminishing. Partly because of education, partly because the change in our workforce in the last few decades. These jobs used to be family heritage. Now no one wants these jobs, immigrants are leaving and the training is expensive so I'm guessing Detroit tries to maintain a trained work force with this job bank program. Its kind of like paying farmers not to plant crops.
I agree that Detroit needs a good dose of reality and that may mean bankruptcy. Knowing that economics is largely based on confidence (I understood what McCain was saying, he simply screwed up the PR negative of noting the strong underlying fundamentals of our economy), having a major industry affecting around 10% of employment in the country go belly up scares the bejeezus out of our leaders. There is a suspicion that this is not just a recession but perhaps a crisis that we don't quite understand yet that may spiral out of control.
If we go quasi-socialist and buy their mismanagement, at the very least the management of the big three, that has ignored what people wanted and instead focussed on convincing buyers that they needed 300hp, 18mpg guzzlers to stay up with the cake eaters in the suburbs, should be dismissed. Remember, our country came out pretty good when we purchased stock in Chrysler to help them out and ended up making lots of money besides helping the industry. That brought us Mini-Vans and (cough)SUV's.
Best thing to me would be to take that 50 billion and invest it in Tesla, then watch as private enterprize re-tools Detroit to produce a licensed whole new line of vehicles in a big way. Talk Inhofe, Obama administration into moving one of the production lines to OK where cheap labor is still available. That may add some blue to the next election.[;)]
I totally agree with CF.
It's crazy to give billions to the very companies that have been FIGHTING against energy efficient regulations/cars for years. They enjoyed their short-term, big money gains from SUVs. Heck, they created the SUV market. (Not that many years ago, unless you lived in the Australian Outback or were filming the movie "Hatari," you didn't need an SUV!)
I think you could easily take the same billions of dollars and offer incentives to "green energy" start-up companies instead. Let GM, et al, fail, as they should. Invest the billions in green-based small businesses, education, research, transit, etc...and watch the jobs grow. It wouldn't take long to see the effects of the investment. The new jobs would be spread throughout the country, and it might just help solve the climate crisis and our foreign policy insanity (based as they are on auto/oil-dependency).
Federal and State and City government picks winners and losers every day. In reality we practice Keynesian economics and have throughout my lifetime. Supply Side makes a great abstract argument but has nothing to do with what really goes on. Read David Stockman's The Triumph of Politics.
quote:
Originally posted by we vs us
Ok, so what about the gigantor workforce associated with Ford and GM? What about the city of Detroit which relies almost exclusively on the American automotive industry to survive? Not to mention smaller towns scattered across the country that are host to GM and GM-related factories. I know we're purists on this board about how capitalism should work, but what about the massive human costs associated with the collapse of any/all American automakers?
In pretty much any hypothetical collapse of GM or Ford or even Chrysler, thousands of workers -- from the factory on up to the office parks -- would be idled during the middle of a nasty nasty recession. With the credit environment the way it is, there'd be no guarantee of any of the other automakers picking up the slack. At that point, who gets to pick up the slack? The government, in the form of UI, food stamps, and any other safety net programs. So the question really is, do we give money directly to the companies and hope that they turn themselves around, or do we wait for them to fail, and spend that money on helping the workers stay afloat until they get hired again?
Also, as someone mentioned, the government can offer the money with as many strings attached as they want. So, feasibly, they could mandate that GM funnel all the bailout money into alternative fuel vehicles, as a for instance. Or whatever. Point being, the gov doesn't HAVE to just dump truckloads of cash on GM and then walk away. It can use it as a swift kick in the rear as well.
*NOTE: I don't like the fact that this rewards GM for sucking. And I understand the slippery slope argument (why not Boeing? why not McDonald's?). And Paulson has shown zero appetite for making industries who take the federal bailout hit any benchmarks whatsoever. So, yeah, I'm skeptical. Still, there're compelling reasons for this to happen.
The city of Detroit? Get a couple hundred bull-dozers, push it all into a big pile and set it on fire. No loss there.
Apparently you have never been to Cranbrook.
As I understand it, we had to take Detroit back as part of the terms to end the war of 1812. [;)] Sorry, sorry. Detroit taught the rest of America not to marry one industry. Tough luck.
quote:
Originally posted by cannon_fodder
As I understand it, we had to take Detroit back as part of the terms to end the war of 1812. [;)] Sorry, sorry. Detroit taught the rest of America not to marry one industry. Tough luck.
Apparently Oklahoma didn't learn the lesson.[;)] Or, as I suspect, we're slow learners. They married automobiles, we married oil.
The unions hurt the big 3 alot. The car companies are doing OK overseas and even pulling in a nice profit there, but here at home it's another story. The union seems to be choking the car companies. They have something called a "Job Bank" where high senority workers go and sit and play cards or watch TV all day in the break room because there is no place to put them and they can't be layed off because of the union contract. So they sit in the lunch room doing nothing getting $30.00+ an hour and full bennies. That has been going on for 15 years. No company can be run like that. Then on top of that you got smothering government regulations and fuel mileage controls.
quote:
Originally posted by waterboy
QuoteOriginally posted by cannon_fodder
Apparently Oklahoma didn't learn the lesson.[;)] Or, as I suspect, we're slow learners. They married automobiles, we married oil.
Actually, we tried pretty hard to ween off of that tit. Tulsa, in particular, saw the writing on the wall and tried to diversify. We courted telecom (WilTel, WorldCom), Financial services (CFS, BOK), and aviation (AA, Boeing, Nordam). Unfortunately, for us all three of those industries hit road blocks after 9/11. Just as oil was taking off. There was enough oil left in Tulsa to come back to life but the city did little to spur that growth.
Anyway, it is generally recognized by areas that one industry running the show is bad. Often not even for the industry. If the big three didn't have every Michigan politician in their pocket perhaps they would of been forced to compete long ago (instead of dictating concessions for SUV drivers and the like). It appears to me that intentionally or not, Tulsa made a move to other industries and the laws of probability slapped us none the less.
My suggestions for Tulsa, to segway a little bit, is to work on alternative energies. It uses many of our strengths (heavy transportation), is a related industry that can use our labor skill set (engineers, welders, business deals, legal issues), and has the potential to boom. If we can assert Tulsa as a leader in that area we would all benefit (think San Francisco courting those new fangles tech companies in the late 1980's early 1990's).
Summary from yesterdays hearings:
Super short - the UAW is the problem.
Longer:
1) UAW has monopoly power as the only union. They have accumulated power and crashed the automaker. Almost exclusively accounting for the cost discrepancy. The UAW has federal protection as a monopoly on auto unions.
2) Average wage with benni's of factory workers, Toyota: $35. GM: $78
Now, pretend you need to hire an accountant. If you pay your line the equivalent of $150,000 a year what do you have to offer to get someone to take a white collar job?
3) GM to all questions:
We are too awesome to fail. If we fail, "tidal wave will crash over the United States" and the 4 horsemen will ride, etc. we can't declare chapter 11, if you tell us to we will liquidate and you'' be sorry.
Question: what if XYZ, what about incompetence, what about...
Answer: Our company is well run and we have made good decisions... blah blah tough economic times.
4) Chrysler: We will repay this LOAN. We have retooled and are as efficient as Toyota or anyone else.
Question: Then why do you still suck? (actually closer to why still lose $$$ and why if you are confident in repayment can't you tap credit markets?)
Answer: We are highly confident we can repay this loan.
5) Union rep:
Question: What concessions is the union willing to make?
Answer: Is everyone in the bailout required to make concessions? You just hate unions. This is union busting.
Question: (anything you want)
Answer: You hate unions. Unions are America's workers. American workers are America. You hate America.
6) Common themes:
Bankruptcy won't work.
Repaying the money is guaranteed.
Management doesn't need to change.
The economy is killing them.
More important than anyone else so need bailout.
Too important to fail.
Union contracts are just fine, not a problem (did I mention $78 an hour?).
No labor concessions needed.
7) The plan as proposed:
Another $25,000,000,000.00 loan (or enough cash to burn in about 4 months).
No bonuses for people making more than $200,000 a year.
No dividends.
Loan takes first priority on repayment (read: no more capital from other sources).
My March 1st, 2009 they have to come up with a plan to show that they will have a plan to be viable companies. Then they will probably get another $50 - $100,000,000,000.00 to burn.
Yay!
Mitt Romney has an EXCELLENT article in the WSJ today:
quote:
IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won't go overnight, but its demise will be virtually guaranteed.
Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.
. . .
http://www.nytimes.com/2008/11/19/opinion/19romney.html?_r=2&oref=slogin
If we give them the money, make Mitt part of the package.
I grow tired of the anti labor rap. Its unfair comparisons. The big three are still paying benefits to workers that produced cars in the 1960's. Before Toyota imported cars to this country and made with vastly cheaper Japanese labor at the time. Japanes steel mills that we rebuilt after WWII also provided better quality, cheaper steel. Those costs are averaged into the labor/benefits cost you noted. Also, corporate America has to carry the cost of health benefits (if they want a productive workforce) because unlike the rest of the world we don't have any form of universal government funded healthcare. Toyota does.
Stop focussing on labor as an enemy and note other factors, like the following. Toyota has about 1500 dealer outlets to accomplish sales of about 40% of the American market. GM has to carry over 8000 dealerships to accomplish the same market share. Thats because the states bent over for dealer lobbyists and made it legally difficult for GM to close any unprofitable dealerships. GM foolishly set up dealerships for each of its duplicative brands (Olds,Buick,Pontiac,Chevy,Cadillac,Saturn,GMC,)back in the early sixties and now has to service these losers at extremely high cost. Ford and Chrysler have the same problems though Ford has (unsuccessfully)tried to institute company stores to change the equation.
I saw this happen in the oil industry in the seventies. Gas stations were getting old and unprofitable. Local long time lessees didn't want to invest in rebuilding. Cities Service simply stopped providing fuel to its unprofitable dealers and jobbers till they closed on their own. They then bought the locations and converted them to modern efficient stations. It was heartless but effective. The big three can't do that.
I'm not sure what the best response is. Bankruptcy would certainly alleviate the dealership problem and give the big three a chance to really put it to the UAW as you suggest they should, but I am reminded of a quote by Chauncey Gardiner played by Peter Sellars in "Being There"- "You should only prune the garden when the garden is growing in the spring or when the garden is dead".
How is it an unfair comparison? Toyota labor produces a higher quality product of less than half the cost of GM labor. Really simple comparison.
Yes, it is true that GM has very bad legacy costs. They made contracts that allowed people to retire by age 45 and get a full pension and enjoy full health care. It very possible that person will be paid longer by GM to be retired than they were paid to work. Who's fault is that if not GM's?
And yes, corporate America must pay for their workers health care. Just like Toyota plants in America have to pay for their workers health care. Generally speaking, it is cars made in the USA by other companies that are out competing the Big 3. The Toyota plants in Tennessee operate with the same laws and conditions GM faces, but they do so profitably.
And even if you consider cars made over seas - the corporate tax structures of those countries passes the cost on in much the same way. Health care gets paid for largely by corporations either by direct payments or by taxes no matter where you go.
And dealerships? GM set up too many dealerships and has bad contracts requiring it to subsidize them all. Again, a bad business decision by GM.
I'm not really blaming the unions. They got greedy, it's human nature. They rode that horse so hard that it's now dying. It was managements duty to step up and say "we can not afford to do this in the long term, strike if you must" just as it is the unions duty to figure out that a contract that bankrupts the company is not ultimately in the best interest of labor.
"Getting more and more pay for less and less work is a dead-end street." Walter Reuther, former head of the UAW.
The unions got very good contracts for their workers and the companies were very generous. Hell, I wish I could pay my lawn boy $100,000 a a year (I don't really have a lawn boy) - but it's just not possible. The cold hard fact is the labor contracts are the primary reason that the US automakers are no longer competitive. $78 an hour (wage + bennis for CURRENT workers, not servicing legacy costs) is far too much for a factory worker if you want your company to survive.
- - -
On a bit of a tangent, too many unions in the USA ride the horse too hard if they feel they have control. Airlines, steel, mining, the auto industry... anything that can be automated or draw real competition sees the industry suffer at the hands of a strong union that forces it's advantage. Just as a company can not survive by mistreating it's labor force, a labor force can destroy a business by demanding too much.
Unions have a very valid purpose. Safety, wages, benefits, bargaining many of the details in a working relationship. I've worked with unions on several capacities and have seen well run unions (Operating Engineers in Tulsa is well run) and unions that kill jobs for their own members (UAW John Deere got wages up, and saw automation halve the number of manufacturing jobs). I'm not anti-union just as I am not anti-corporation. But when either abuses it's position they cause themselves to suffer.
$35 an hour is fantastic wage for a high school graduate. Basically $20 an hour take home, health and pension benefits. That's a nice living. Better than many professionals are able to accomplish if you take into consideration their health care costs, self funded 401Ks, lost wages for years of education and student loans.
If you have agreed to pay your workers more than your competition, so be it. But don't cry to me when that competition then kicks your donkey.
quote:
Originally posted by cannon_fodder
quote:
Originally posted by waterboy
QuoteOriginally posted by cannon_fodder
Apparently Oklahoma didn't learn the lesson.[;)] Or, as I suspect, we're slow learners. They married automobiles, we married oil.
Actually, we tried pretty hard to ween off of that tit. Tulsa, in particular, saw the writing on the wall and tried to diversify. We courted telecom (WilTel, WorldCom), Financial services (CFS, BOK), and aviation (AA, Boeing, Nordam). Unfortunately, for us all three of those industries hit road blocks after 9/11. Just as oil was taking off. There was enough oil left in Tulsa to come back to life but the city did little to spur that growth.
Anyway, it is generally recognized by areas that one industry running the show is bad. Often not even for the industry. If the big three didn't have every Michigan politician in their pocket perhaps they would of been forced to compete long ago (instead of dictating concessions for SUV drivers and the like). It appears to me that intentionally or not, Tulsa made a move to other industries and the laws of probability slapped us none the less.
My suggestions for Tulsa, to segway a little bit, is to work on alternative energies. It uses many of our strengths (heavy transportation), is a related industry that can use our labor skill set (engineers, welders, business deals, legal issues), and has the potential to boom. If we can assert Tulsa as a leader in that area we would all benefit (think San Francisco courting those new fangles tech companies in the late 1980's early 1990's).
pft. CFS imploded before 9/11 due to crooked management. Wiltel was saddled with debt from Williams, which was a result of bad management (see SemGroup, same cronies, same result)
Oklahoma is the second largest producer of natural gas in the US. natural gas production is equal to or exceeds oil production. people have a really antiquated view of the oil patch in OK. Oklahoma is a leader in clean fuel production. Western Oklahoma sits in the core of the wind belt. We just need to prop up more wind mills.
I'm not concerned about Oklahoma's economic prospects. People still need to warm their houses and electric companies need to fuel their gas powered generators. Oklahoma doesn't boom spectacularly anymore when the rest of the country does....however we don't bust spectacularly either.
quote:
Originally posted by cannon_fodder
How is it an unfair comparison? Toyota labor produces a higher quality product of less than half the cost of GM labor. Really simple comparison.
Yes, it is true that GM has very bad legacy costs. They made contracts that allowed people to retire by age 45 and get a full pension and enjoy full health care. It very possible that person will be paid longer by GM to be retired than they were paid to work. Who's fault is that if not GM's?
And yes, corporate America must pay for their workers health care. Just like Toyota plants in America have to pay for their workers health care. Generally speaking, it is cars made in the USA by other companies that are out competing the Big 3. The Toyota plants in Tennessee operate with the same laws and conditions GM faces, but they do so profitably.
And even if you consider cars made over seas - the corporate tax structures of those countries passes the cost on in much the same way. Health care gets paid for largely by corporations either by direct payments or by taxes no matter where you go.
And dealerships? GM set up too many dealerships and has bad contracts requiring it to subsidize them all. Again, a bad business decision by GM.
I'm not really blaming the unions. They got greedy, it's human nature. They rode that horse so hard that it's now dying. It was managements duty to step up and say "we can not afford to do this in the long term, strike if you must" just as it is the unions duty to figure out that a contract that bankrupts the company is not ultimately in the best interest of labor.
"Getting more and more pay for less and less work is a dead-end street." Walter Reuther, former head of the UAW.
The unions got very good contracts for their workers and the companies were very generous. Hell, I wish I could pay my lawn boy $100,000 a a year (I don't really have a lawn boy) - but it's just not possible. The cold hard fact is the labor contracts are the primary reason that the US automakers are no longer competitive. $78 an hour (wage + bennis for CURRENT workers, not servicing legacy costs) is far too much for a factory worker if you want your company to survive.
- - -
On a bit of a tangent, too many unions in the USA ride the horse too hard if they feel they have control. Airlines, steel, mining, the auto industry... anything that can be automated or draw real competition sees the industry suffer at the hands of a strong union that forces it's advantage. Just as a company can not survive by mistreating it's labor force, a labor force can destroy a business by demanding too much.
Unions have a very valid purpose. Safety, wages, benefits, bargaining many of the details in a working relationship. I've worked with unions on several capacities and have seen well run unions (Operating Engineers in Tulsa is well run) and unions that kill jobs for their own members (UAW John Deere got wages up, and saw automation halve the number of manufacturing jobs). I'm not anti-union just as I am not anti-corporation. But when either abuses it's position they cause themselves to suffer.
$35 an hour is fantastic wage for a high school graduate. Basically $20 an hour take home, health and pension benefits. That's a nice living. Better than many professionals are able to accomplish if you take into consideration their health care costs, self funded 401Ks, lost wages for years of education and student loans.
If you have agreed to pay your workers more than your competition, so be it. But don't cry to me when that competition then kicks your donkey.
Maybe I'm dense.(No need to agree, its not probable!) I don't see any compelling evidence to suggest that Labor alone is the major problem with Detroit. You make unfair comparisons and no amount of fuzzing over the facts will change that. It is so easy these days to attack big labor and miss the point-
We have an uncompetitive system in America when it comes to producing durable goods and putting them on the market against subsidized goods from other countries. No one element of that system is the cause or the solution.
Why? It stems from our unrestrained market attitude that companies know whats best and have our best interests in mind. Ixnay on both counts. It stems from expenses like management cost that are way out of balance. You want to talk labor cost? Executives in America are paid at a ratio of 300 times the average wage of its front line labor. Yeah, these same executives that set up 8 different brands with 8 different cost structures to serve the same customer. In Japan it is more like 10 times! That is labor cost gone mad.
Your arguments assume that countries that have overhead like health care and research carried on the state's books through taxation, somehow have no advantage over us. They do. Ask Boeing about Airbus.
It further assumes that local and state governments are hands off in the process. They aren't. The lobbying by dealerships to keep GM from shutting down unprofitable dealerships was basically allowing advantage to existing dealerships at other potential dealers' expense. The same politicians that ran on less regulation, less government and trickle down voodoo accepted these anti competitive measures. Now, since GM has no incentive to open new dealerships in a state that has these laws, existing dealerships have become gold. Kind of like a baseball franchise. So even though the dealerships were unprofitable, they increase in value and are passed around to the highest paid salesman or investor who knows the game. Sound familiar? They were and are, artificially inflated in value.
We keep looking at the cracks in the wall of our foundations and then assume its the bricklayer. If you identify labor as the main problem and neuter them in this process you will destroy the future American auto industry for sure.
I suspect the Republicans know this instinctively and are willing to sacrifice the industry to blame the opposition, regain control and destroy labor all at once. They can then rebuild it with $10hr labor.
In a completely unscientific study of talking heads on CNBC, there seems to be a good amount of hesitation on the "let them fail" front. Lots of the talk has centered around perception vs reality and how the perceptions have taken on an ideological flavor. The perception is that the American car industry is still mired in the thinking and problems of 5 or more years ago, while the reality is much different. GM and others (Ford was namechecked a lot) have done some major retooling, both on the management and labor front and on the research and design pipelines for newer models. Obviously there're still problems, but the industry is much farther along on its way to becoming a going concern than most of the pundits and politicians (and people on chat boards) give them credit for.
Complicating the "let it fail" argument further is the fact that both Ford and GM have successful overseas brands and divisions, especially in emerging markets. Also, the credit freeze has made it next to impossible for an actual Chapter 7 restructuring to go forward. GM won't be able to qualify for Debtor-In-Possesson financing, which would be the private version of the bridge loan they're asking congress for. The alternative is going into Chapter 11, which would liquidate the companies entirely. As we've said before, the downstream and upstream ramifications -- not just to other suppliers, but to other carmakers NOT currently in danger -- would be horrendous.
Point being, it isn't as easy as "GMs should fail because it can't support itself in a downturn. End of story." The "can't support itself" is a complicated story in its own right.
Just like I said:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aHG4iPWMWpZA
Companies will swoop in and buy up the pieces of GM should they go under, and jobs will be retained.
Wevus:
If we give them another $25Billion, or $100Billion, do you honestly think it will matter? Even if it is a flat out gift it just prolongs their failure. Their entire business model has failed (deferring rising labor costs). They lose money on every car sold... selling more cars will not cure their problems. If you lose money on your primary business, you are doomed.
We're talking MAJOR overhauls are needed. The painful kind that will not come from handouts. Once the government is in to the for $100 Billion you think we will be prepared to step back or just and out more and more cash?
Furthermore, the Big 3 would qualify perfectly well for Chapter 11 (NOTE: chapter 7 is liquidation) on the most basic of tests - they are worth more as a whole that in pieces. In pieces, GM has a negative value. Selling off the pieces creditors will not get their money back, pension funds will be assumed by the Feds, and the UAW would lose everything (I use GM because they are the worst off). The fact that they have profitable over seas arms further supports this argument.
Market Cap: 1.6B
Book Assets: 110B
Liabilities: 170B
Book Value: -60B
GM's hyperbole about liquidation is a maneuver to get a handout. A handout which would ensure the long term continued failure of the industry. If they are really in a position that would require liquidation than the are far beyond saving with handouts.
Waterboy:
First, it is clear to everyone who looks at the situation that labor costs are the most prominent difference between the successful and the failing automakers. The labor costs per pickup in the United States:
GM - $1,800
Toyota - $800
$1,000 extra per vehicle? That's very significant. I've seen comparisons that show evern worse (Ford Taurus +2000 over Toyota Camry for labor). It is THE most significant variable cost in a vehicle manufacturing.
Both present and legacy costs are crushing them to death.
And yes, management is overpaid. I will readily fight any government interference on compensation limits for anyone. However, shareholders should step up and object when an executive making poor decisions gets a FAT bonus.
There are several trains of thought on the subject, but an executive is at the top of the game. It is a bidding war to get the best and the brightest. At the end of the day you can get 100,000 other guys that can run a punch press machine, but finding the person who can turn around a major corporation is a position with far less applicants qualified to fill it. Basic supply and demand principles.
HOWEVER, when the ship is sinking good management will accept a big hit. They are charged with making the big picture decisions and they have failed. If you have confidence, take long term stock compensation or set your compensation to performance goals. The GM executives flew private jets (G5) to beg Congress for money. Screw that.
But at the end of the day, executive compensation is not a significant contributing factor. The CEO makes nearly $9mil a year, or about $1 per vehicle sold. Inconsequential in the overall picture of a major corporation. The heinous executive salaries are a drop in the bucket of the $50,000,000,000.00 in unfunded retirement liabilities or other poor decisions made in the past.
Labor and management need to suffer if GM wants to have a prayer of turning it around. Losing $2 BILLION in cash flow per month is simply not a viable business. Even if the government assumed the $60Billion in liabilities, they may still lose money. For god's sake, liabilities associated with labor exceed $60,000,000,000.00.
That's simply insane.
Please justify why a GM worker is worth 50% more per hour than a Toyota worker. What do they do better? You're argument distills to the notion that a worker should make whatever he thinks he is entitled too, not what the market is willing to pay. The result is failed companies.
- - -
The UAW got too greedy and has created a situation in which their labor is not competitive with any other market - including non-UAW labor in the United States. Non-union labor makes a good wage ($20+ and benefits) and produces higher quality products. They offer no competitive advantage to companies but instead serve as a competitive disadvantage.
When a company sucks more from it's workers than is acceptable the workers leave, strike, or produce poor products or productivity due to a lack of moral. When labor extracts more from a company than is justifiable the company fails. It is really that simple.
What competitive advantage does the UAW provide for GM, Ford, or Chrysler? We are not talking about a fight to stop black lung or to ensure bathroom breaks, we are fighting to make sure a company pays a non-high school graduate at least $50,000 plus benefits. Then we wonder why we lost our manufacturing base.
Pay them what you will, demand whatever pay you think is just... but don't ask me for a handout when you are not competitive. Management, organized labor, or otherwise.
Hey, I got an idea! There are too many attorneys in Tulsa. Attorneys in Tulsa have severely suppressed wages compared to neighboring areas (very true statement, btw). I think we need government help to inflate our wages because it just isn't fair. I cant demand $300 an hour and still be employed.
- - -
Inteller:
Don't care why they failed and I realize they did not fail because of 911. My point was that Tulsa attempted to branch out and got stuffed just the same. The overall picture being areas have long known that single sector economies are dangerous.
Unless that sector is government... who always spends more and more ad more. Centers of government employment benefit relatively from economic recessions. They are, in effect, recession proof.
tulsa didn't get stuffed because the sectors were bad. tulsa got stuffed because they all had crooked management.
CFS: failure due to crooked management
Wiltel: failure due to shifted debt by crooked management (Williams almost failed from same cronies)
Worldcom: failed due to crooked management
SemGroup: (see WilTel)
likewise the auto sector isn't failing. a couple of companies are failing due to inept management. However, as was mentioned before, Ford is getting lumped in with GM and Chyrlser when they have actually made great strides righting their ship. Of the 3 I think Ford needs the least help. I think they would show leadership if they rejected bailout money.
quote:
Originally posted by cannon_fodder
Wevus:
Waterboy:
First, it is clear to everyone who looks at the situation that labor costs are the most prominent difference between the successful and the failing automakers. The labor costs per pickup in the United States:
GM - $1,800
Toyota - $800
$1,000 extra per vehicle? That's very significant. I've seen comparisons that show evern worse (Ford Taurus +2000 over Toyota Camry for labor). It is THE most significant variable cost in a vehicle manufacturing.
Both present and legacy costs are crushing them to death.
And yes, management is overpaid. I will readily fight any government interference on compensation limits for anyone. However, shareholders should step up and object when an executive making poor decisions gets a FAT bonus.
There are several trains of thought on the subject, but an executive is at the top of the game. It is a bidding war to get the best and the brightest. At the end of the day you can get 100,000 other guys that can run a punch press machine, but finding the person who can turn around a major corporation is a position with far less applicants qualified to fill it. Basic supply and demand principles.
HOWEVER, when the ship is sinking good management will accept a big hit. They are charged with making the big picture decisions and they have failed. If you have confidence, take long term stock compensation or set your compensation to performance goals. The GM executives flew private jets (G5) to beg Congress for money. Screw that.
But at the end of the day, executive compensation is not a significant contributing factor. The CEO makes nearly $9mil a year, or about $1 per vehicle sold. Inconsequential in the overall picture of a major corporation. The heinous executive salaries are a drop in the bucket of the $50,000,000,000.00 in unfunded retirement liabilities or other poor decisions made in the past.
Labor and management need to suffer if GM wants to have a prayer of turning it around. Losing $2 BILLION in cash flow per month is simply not a viable business. Even if the government assumed the $60Billion in liabilities, they may still lose money. For god's sake, liabilities associated with labor exceed $60,000,000,000.00.
That's simply insane.
Please justify why a GM worker is worth 50% more per hour than a Toyota worker. What do they do better? You're argument distills to the notion that a worker should make whatever he thinks he is entitled too, not what the market is willing to pay. The result is failed companies.
- -
You have a future in politics judging by the way you ignore my cogent points and stay on the party message so well (in this case the businessman's pov). I also do not enjoy having my viewpoints summarized into indefensible Palinesque positions like "a worker making what he feels he's entitled to."
A truly unencumbered, capitalist driven, supply and demand market would decide the value of that punch machine operator and the executives with soft manicured hands alike. Like some wag once said, "Capitalism is a great system. America should try it some time!". Instead their pay is decided only tangentially by natural factors. You way, way overestimate the value of executive skills. Proof is in their failure in the world market.
You simply can't ignore that its the domestic automobile
system that is failing, not its labor. Your argument would be akin to suggesting that employees of Lehman Bros. were the real problem with Wall Street, but ignoring its executives or its systemic flaws. The two costs you compare are simply not representative of the true cost of labor. Might as well compare the labor costs of a 1950's Russian vehicle to the cost of a 1950's American vehicle. That comparison would also have shown a great advantage for the Russian vehicle. No, there are too many unequal elements to make it meaningful, much less THE determining factor in declining profitability.
Lets say you and I decide to run the 100yd dash, but I get to set the time, date and what food you have to eat prior to the race. You'll be hungover trying to overcome the effects of Mexican food at 4:30am on New Years day. I can win that race. [;)] Japan, Germany, France, Sweden can win the profitability race when the state assumes major liabilities like health care, R&D, and serves as a cheap source of capital. They can win that race when the social environment of their countries dictates that education is more important than it is here and where the thought of executive pay in the realm of American businesses is considered obscene and unacceptable to stockholders and the general public.
What will keep you from being a politician however is that you blithely suggest that these legacy expenses can be just done away with to make our cars cheaper. Those legacees vote. Anyway, after the bankruptcy and demise of our auto makers and the related 10% of national employment as collateral damage, just who exactly will be left to buy the cars?
We need to let capitalism run its course.
I don't understand why this is even being considered. They bail-out the banks, so now every big company thinks it is entitled to government funding.
This is a sad, sad, time for America. History will not be kind in its judgement of this period, I suspect.
GM wouldn't go away if it filed Chapter 11, it would simply restructure, downsize, and become more efficient.
The execs from the Big Three who flew into Washington on their own private jets should retire and let the free market run its course, instead of begging for handouts.
God help us all.
Despite my typical English major Chapter 7/Chapter 11 confusion, I think this comes down to outlook and a blanket mistrust of government. I actually DO believe that a bridge loan -- properly applied and with adequate strings attached -- can help the industry out of a tight spot.
You're right: GM is worth more in one piece than in pieces. It's worth more not only as a component of the Dow but as critical part of American industry. And I can definitely admit that excessive labor costs are part of the problem. However, we've also talked about other parts of the problem, too; mostly having to do with a succession of managers and CEOs that couldn't or wouldn't respond to market pressure. I can agree to all of that.
I think just letting it all fail is a monumental 1) abdication of responsibility and 2) failure of imagination.
You're arguing from base positions of "GM is a failed company," and "They will never get better." I think both of those are flawed. My premises are: "GM is a weakened company," and "Throwing the baby out with the bathwater serves no one." The difference between the two viewpoints is based on whether you think the gov can force positive change, and it's obvious you think not. I think the gov can and does do it.
Look at the FDIC and how it's worked with IndyMac, (//%22http://www.businessweek.com/magazine/content/08_42/b4104000057649.htm%22) to not only ensure continuity of service to its depositors but how it's also done an excellent job of refinancing mortgages in its portfolio. To me this is (unsurprising) proof that a government entity can reform a failed institution and prepare it for re-entry into the private world.
I'm not saying it can happen all the time, and it's not a perfect solution. Ideally, I'd love market forces to reform companies and leave the govt out of it. But sometime the market malfunctions and doesn't reflect reality. That's the core of my argument, really. We're in an environment that distorts the free market, so it's no wonder that companies are in distress. To simply let a sector fall apart and try to reform itself at market pace and on market terms when the market's broke just won't cut it.
The failure of imagination part comes right back to the idea that there is opportunity in chaos. We have a boatload of systemic problems with our economy, our education system, our healthcare system, our environment . . . you name it, we're deep in it. We have a partial opportunity to play large and play smart . . . and we have the leverage to do it.
Of course, if you're a Norquistian, what I just wrote probably made your eyes bleed. But hey, what would we do without at least a token big govt liberal on this board?
And PS, the private jet thing, while deplorable, is just big media bull**** populism. It doesn't have anything to do with the issue. Full stop. These guys do similarly egregious things all the time. Welcome to the world of the disgustingly wealthy. Welcome to capitalism!
Mitt Romney's take on letting the Big 3 going Chapter 11:
http://hotair.com/archives/2008/11/19/romney-let-detroit-go-bankrupt/
quote:
Originally posted by we vs us
And PS, the private jet thing, while deplorable, is just big media bull**** populism. It doesn't have anything to do with the issue. Full stop. These guys do similarly egregious things all the time. Welcome to the world of the disgustingly wealthy. Welcome to capitalism!
I agree wholeheartedly Wevus. However, Congress above everyone else bows to populism. If I were asking for a monster handout I'd make sure my PR was as good as my congressional donkey kissing.
On your other points, government has provided the tools to effectuate change in a going concern: Chapter 11 Bankruptcy. That's what it is for.
Under Chapter 11 the company would be forced into receivership and the government would step in to reform it. Simply put, that's how it works. Government has done very well forcing change as needed from time to time, I certainly do not discredit that.
But, pouring money in forces no change what-so-ever. It will not erase the fact that they lose money on every vehicle sold. It doesn't change their outstanding liabilities. Nor will it encourage management to do anything but maintain the status quo.
Unfortunately, another $25B thrown at this problem is like changing out the propellers on the Titanic as water gushes in through giant holes. Don't fix the holes, don't worry about the ice berg slamming the side. But it will look pretty as she goes down.
- - -
Waterboy:
I don't believe I ignored any of your major premises. I gave a fairly detailed reply and merely extrapolated your argument. What party line am I holding? As many Democrats and Republicans are hostile to this proposal and I am hostile to both parties.
The "business man's point of view?" I bet the executives that are begging for money would disagree with that assessment. I am arguing to let four large companies fail (Ford, GM, Chrysler, and the UAW). Hardly in support of big business.
My pov is a economists perspective.
If I failed to address any of your concerns I am happy to do so. I did not intentionally avoid them for any reason.
1) The free market solely dictates the salaries of management. Executives make large sums of money because people are willing to pay them large sums of money, pure market capitalism. Large company directors, shareholders, and employees alike want the best people running the company. Wanting anything else would be foolish.
What the general public considers obscene is not my concern at all. If paying someone $1 Trillion will make me more money, I'll pay them. If shareholders think it will increase their value, they will vote YES on the package. The owner of my company dictates my salary, likewise the owner of any company. If they don't like it, do something.
When every company wants the best people, the best people become suddenly expensive. The same reason an ERA < 2 or a batting average > 300 earns baseball players millions of dollars. Does hiring a big name previously performing person guarantee future results? Absolutely not (see the Yankees). But if given the choice between an expensive winner or a cheap loser/unknown, who would you want running your company?
Is management too often an entitlement club (he was the ceo of XYZ Corp, lets hire him!)? Damn straight. Should underperformed CEO's be dropped with lead parachutes, yes.
Is management ultimately responsible for the failure of a company? Most of the time (other forces can kill it, see the asbestos industry) they are. Do the workers suffer as a result? Yes.
In the present instance, management at the big 3 have wholeheartedly FAILED. Labor has continued to perform to their contract. It is managements fault for giving in to contracts that they can not sustain. Unfortunately, labor costs is the only avenue that those expenses can be addressed. While existing management should be ousted, cutting executive pay in a draconian style would only ensure that the best executives available go elsewhere.
So I'm not blaming the downfall on laborers. Management is in charge of keeping costs in check. But I will say that the organized labor played their strong hand to forcefully against a weak management and may have busted the house.
See where I'm coming from there?
2) The system is not failing. Most auto makers in the world continue to make money. Including in the United States using United States labor. Even the Big 3 make money over seas. They just can't do it with their US labor contracts and legacy costs.
It is NOT akin to cars manufactured in Russia. Cars manufactured in the United States were better in features, quality, and power. There was no aspect that made Russian cars superior in any way. They were merely cheaper. They didn't even compete in the same markets.
I assume you are trying to show that labor costs int he Soviet Union would have been cheaper. However, the comparison fails miserably on many levels. The products were not comparable, there was no direct competition, and certainly the Soviets never manufactured cars on America soil.
I'm talking about the same labor pool (Americans) making comparable and competitive cars for the same market (Americans) in the same or similar locations (America) under the same laws (American). The Toyota plant next door to the GM plant makes as good of a product for less. Using the same "true cost of labor." Do you agree with that basic premise?
The system that is failing is compensation that exceeds the companies ability to pay. Very simple. $62,000,000,000 in present and deferred labor liabilities that are being paid for by each and every car sold. They promised workers retirement and health benefits for 30 years... you can't afford that. Simple. Is it really nice to offer such things? Yep. I'll offer anyone on this board $1,000,000 a year to clean my house and lifelong retirement - doesn't mean a damn thing if I can't pay it.
3) If socialist companies have an insurmountable advantage, why are free market companies dominating most industries? The most socialist of countries rarely produce innovative or excelling companies. That's why even after recessions the USA out performs the rest of the world time and time again. We let cancerous companies die off and new growth take the place. Ask Japan how subsidizing dying companies works out (article linked in previous post).
When countries subsidize industry it does give them greater profits. However, it does NOT give them greater profitability. Efficiency does that. For dollars in most of those companies offer less dollars out than free-market industries.
The fact is for every shortfall that our free-market system yields to a socialist system, we enjoy advantages. The Europeans have always been more socialist than us, yet the Big 3 used to compete very well. Korea is very free market oriented, yet Hyndai is profitable.
And all that doesn't matter. At the end of the day Toyota USA has the EXACT same conditions GM does. Toyota makes money, GM loses money. Toyota USA does not get special socialist health care from Japan for their American workers. Nor does VW, BMW, Honda, or any other foreign auto companies in the USA. Yet they manage to make money.
4) Education system?
Are you argue that it is the lack of education of GM's workers that is costing them money? American Engineers are well respected worldwide. We import the brightest from around the world to fill any gaps.
I fail to see how a lack of education is hindering the Big 3 in the United States. Please extrapolate.
5) We've already covered the executive pay angle, but consider that the CEO of GM made $3mil last year (stock options don't cost the company any $, they cost shareholders, he did not exercise any options anyway). Let's pretend the other 10 executives made that much. Lets pretend they each had 2 VPs making as much as the top man.
That's 31 people making $3 mil. Or $93 million. It is of no consequence to the big picture. Of the $2,000,000,000.00 they lose each month, .003 of that is for executive pay.
Fire all the executives. Don't pay them a dime. GM would only lose $1,992,500,000.00 a month. Woot!
For fun want to pretend 100 people make as much as the CEO? Fire all of them and GM is only losing $1,975,000,000.00 a month.
Lets say the top 1000 executives & managers at GM all make as much money as the CEO. Every executive, president, VP, chairmen, unit manager, and plant manager, plus line managers, marketing directors, whoever all make the same as the CEO. If we fired all of them, GM would STILL lose $1,750,000,000.00 each month.
Wow, lets drop down to finance directors, shift managers, and department heads. Lets say 5,000 people working for GM make as much as the CEO. If we fired all of them GM is still losing $750,000,000.00 per month.
You would have to find 8,000 GM employees making the same pay as the top executive to fire before GM would break even. Unfortunately the #5 man in the company, Mr. Thomas Stephens P.E., 59, Exec. VP of Global Powertrain and Global Quality, makes $1.4mil per year. I assume the chart drops off from there and we quickly get below the $1,000,000 thresh hold.
Executive pay, while it may be absurd, is not a large enough piece of the pie to be the deciding factor in this failure.
6) Arguement #6 is that they are too big to fail. This argument fails on the face of it. Keeping the company alive will cost the economy money. For every $1 put in GM outputs 75 cents of economic activity. The company eats huge amounts of money.
Subsidizing failing companies removes capital from more productive uses.
7) If I were to eat Mexican food at 4am and run a marathon, I would not demand the government change the results of the race when I lost.
8) I would make a lousy politician because I saw what I think and work to support my position. I detest populism and hyperbole. Yeah, it wouldn't be good.
In any event, populism is a pathetic reason to make an economic decision. I don't want to do away with legacy costs, but it is apparent that such a thing is mandatory for GM to be a going concern. The alternative, which I assume you are supporting, is for the Federal Government to assume those costs.
In that scenario you and I end up paying for someone elses promise. They made a bargain they could not live up to, both parties involved knew or should have known this. If I promise to pay you a sum I can not afford, no one will step in to cover for me. You are simply out of that money.
It is highly unfortunate in this instance for the retirees, but they had the benefit of being over paid for decades. The Union continually allowed underfunding of the pension plans and continually refused to take responsibility for it. It sucks all around to be sure, but I am not responsible for the poor contracting of another.
Please promise ME exuberant sums of money then ask the government for it when you can't pay.
#9) 10% of the economy will not go away. America will suddenly not need cars? Existing companies won't open up new plants, dealerships? No parts will be required? The increased production of other companies won't consume those mining resources?
Units of these companies are still viable. Bankruptcy would entail MOST of them to keep operating. The 10% loss scenario is propagandist doom and gloom. The airlines tried it, the steel industry tried it, unions have tried it for nearly every mechanized piece of machinery that came along. Things adjust and the market works. It always has before.
Yes, it will probably be painful. Even in Chapter 11. But in the long run the economy, and by extension workers, will be far better off.
And who didn't see this coming 10 or 15 years ago? GASP! Detroit failing. The news is they want Billions of money... not that they are failing. They've failed.
#10) This grew retardedly long because I tried to address all of your points.
I guess after the car makers ask for their hand-out (and/or corp. welfare), the Home Builders will be next asking for a hand out. The housing industry is in the dumper big time. Did ya hear that according to Reuters the Dow fell another 427 points today 11-19-08 and is now at the lowest since March, 2003. IMO Investors are dumping stocks in fear of Obama's tax increases. It's really looking grim..[xx(]
quote:
Originally posted by we vs us
And PS, the private jet thing, while deplorable, is just big media bull**** populism. It doesn't have anything to do with the issue. Full stop. These guys do similarly egregious things all the time. Welcome to the world of the disgustingly wealthy. Welcome to capitalism!
While I admit the private jet thing looks very bad, the people preaching to the auto industry on how they spend money and run their companies is so ironic. The congress folks doing the preaching spend way more money then they have and fly all over the world on government jets, spending more money they don't have.
I'd love to hear one of those auto execs give it right back to one of those panelist, although, their bailout money would go down the tube.
quote:
Originally posted by sauerkraut
I guess after the car makers ask for their hand-out (and/or corp. welfare), the Home Builders will be next asking for a hand out. The housing industry is in the dumper big time. Did ya hear that according to Reuters the Dow fell another 427 points today 11-19-08 and is now at the lowest since March, 2003. IMO Investors are dumping stocks in fear of Obama's tax increases. It's really looking grim..[xx(]
So let me get this straight. You think the Dow has lost close to 4k in value over the last couple of months because investors are afraid of possible Obama tax cuts?
Please. Clarify for me.
quote:
Originally posted by we vs us
quote:
Originally posted by sauerkraut
I guess after the car makers ask for their hand-out (and/or corp. welfare), the Home Builders will be next asking for a hand out. The housing industry is in the dumper big time. Did ya hear that according to Reuters the Dow fell another 427 points today 11-19-08 and is now at the lowest since March, 2003. IMO Investors are dumping stocks in fear of Obama's tax increases. It's really looking grim..[xx(]
So let me get this straight. You think the Dow has lost close to 4k in value over the last couple of months because investors are afraid of possible Obama tax cuts?
Please. Clarify for me.
He'll have to check with Sean Hannity, Rush Limberger and Dick Morris before he can answer that Wevus. That's what they're preaching these days.[;)]
quote:
Originally posted by we vs us
And PS, the private jet thing, while deplorable, is just big media bull**** populism. It doesn't have anything to do with the issue. Full stop. These guys do similarly egregious things all the time. Welcome to the world of the disgustingly wealthy. Welcome to capitalism!
It wasn't brought up by the media though, it was a question asked by Rep. Brad Sherman, D-California, according to the article I read.
I can't believe we still call this country the United States. We should rename it something that more accurate describes whats going on here. The "Fuedilism States of America," perhaps.
What is going on here is the taxpayers (the serfs) are being asked to give money to help keep the old money corporations (the Lords) in business.
Is capitalism dead?
quote:
Originally posted by cannon_fodder
QuoteOriginally posted by we vs us
Dang you're wordy. Maybe you could go into politics!
Communicating online is so messy. You make some valid, defensible points. It is not an easy situation to assess. Maybe if I had as much confidence in the free market as you do it would be easier but my lifetime experience with American style capitalism makes me skeptical of market solutions. I also think market failures are more painful than most people can imagine. Stories from my parents enduring the depression and my going through "minor" recessions in this state during the late 60's and early eighties are still fresh to me. I can't imagine a country that would say "sorry folks. You made too much money back in the 60's when your UAW contract was forced down Detroit's throat. We're cutting you off. Enjoy Social Security while you can. We're going after it next."
I look for errors in logic in popularly held opinions and explore them. I don't care what party or position they come from. Ain't nothing more popular than Union bashing in Okiehoma. I still think your assessment that labor is both the reason and the solution is faulty and more political than logical. To me its not worth the risk to find out if you're right. I did not understand that your comparison of wages was GM wages vs Toyota US wages. I would like to see a description of those wage comparisons. Maybe COI in Georgia is so low that they can effect that lower wage and benefit schedule. Maybe they decided to forego higher profits for market share. Maybe the parent company could absorb lower profit margins because of the economies provided from the homeland operations. Nonetheless its important to note that Toyotas cost a lot more than comparable Chevrolets.
And, lower wages sure didn't work in OKC with the Alera plant. Toyotas lower wages may only reflect better management of resources and costs by Toyota than GM is able to effect. One could also argue that they have more modern plants with less total labor required.
Yes, I believe, judging from the final result, that Japanese and German cars reflect better engineering which reflects better educated engineers. Our cars are pretty and fast...their cars work better, last longer and get better mileage. They have better management as well. Yes, I believe it is cultural. Our cars suffer by comparison.
Bottom line- there are way, way too many factors involved to simply scapegoat labor or labor costs. Lower them to $10 across the board. They'll still be broke. Only allow benefits after a year of employment. They'll still fail. Fire all employees the year before they become vested in their retirement plan. They will still fail. This system of producing cars is not competitive. Ask the Germans who bought Chrysler then ran away after a coupla years. Ask Volvo or Jaguar after Ford castrated their products. Latest news? GM may have an electric on the market by 2012. Woo Hoo! Prius beat them by a decade. Tesla by 5 years.
Anyway I have enjoyed the differing pov's.
Now, I hate to say I told ya' so... but I told ya' so.
About 2 months after their first massive "we need cash now or will go bankrupt" infusion of government money, they are both back with their hands out needing "cash now or will go bankrupt." At least another $18 Billion or so to get them over the hump. GM expects to need at least $2,000,000,000.00 in government money each month for the foreseeable future.
GM also plans on selling off Saab, Hummer and other brands. Gee, who saw that coming?
Chrysler needs another $3Billion, wait.. never mind, they need at least another $5 Billion to survive. More than double the initial $4 Bil they received.
Now, neither has that plan ready that shows how they will become profitable companies... but they need another $23,000,000,000 to figure it out. Did I mention the State of Oklahoma has a budget of $7 Billion for the entire year? GM loses more government money than that in a quarter.
http://apnews.myway.com/article/20090217/D96DJ4080.html
So how deep into this do we go? We are about $30,000,000,000 in. If we double that and jump in for $60,000,000,000 will we then walk away, or drop another $60 Bil? To save an industry that the Federal government already subsidizes more than any other (except maybe health care)?
A bit off topic...
Just for fun, and to anger the urban planners among us, Chrysler owns portions of the LA Subway system. They bought it in the 1950's along with Firestone, shut it down and bricked up the tunnels so people would have to drive more. They were afraid LA was starting to develop like NYC or central Chicago where people wouldn't need cars and it would be hard to retroactively get the government to build tons of freeways. Solution: By the subways and shut them down.
Thank you History Channel!
quote:
Originally posted by cannon_fodder
A bit off topic...
Just for fun, and to anger the urban planners among us, Chrysler owns portions of the LA Subway system. They bought it in the 1950's along with Firestone, shut it down and bricked up the tunnels so people would have to drive more. They were afraid LA was starting to develop like NYC or central Chicago where people wouldn't need cars and it would be hard to retroactively get the government to build tons of freeways. Solution: By the subways and shut them down.
Thank you History Channel!
GM bought Tulsa's trolleys up and replaced them with Busses. So stick that in there and break it off.
Really? I didn't know that. How cool would it be to have a trolley system that the city grew around (unlike Houston that tried to superimpose one onto the existing car heavy street scape and had limited results). Blast!
This guy is angry but he covers how it happened.
http://www.lovearth.net/gmdeliberatelydestroyed.htm
In the late 1920s, General Motors secretly began to purchase trolley systems throughout the United States, using a number of front corporations. Trolley systems in Tulsa, Oklahoma, and Montgomery, Alabama, in Cedar Rapids, Iowa, and El Paso, Texas, in Baltimore, Chicago, New York City, and Los Angeles-more than one hundred trolley systems in all-were purchased by GM and then completely dismantled, their tracks ripped up, their overhead wires torn down. The trolley companies were turned into bus lines, and the new buses were manufactured by GM.
General Motors eventually persuaded other companies that benefited from road building to help pay for the costly takeover of America's trolleys. In 1947, GM and a number of its allies in the scheme were indicted on federal antitrust charges. Two years later, the workings of the conspiracy, and its underlying intentions, were exposed during a trial in Chicago. GM, Mack Truck, Firestone, and Standard Oil of California were all found guilty on one of the two counts by the federal jury. The investigative journalist Jonathan Kwitny later argued that the case was "a fine example of what can happen when important matters of public policy are abandoned by government to the self-interest of corporations." Judge William J. Campbell was not so outraged. As punishment, he ordered GM and the other companies to pay a fine of $5,000 each. The executives who had secretly plotted and carried out the destruction of America's light rail network were fined $1 each. And the postwar reign of the automobile proceeded without much further challenge.
It's even worse:
GM says they are also going to go loot other govt's as well to keep them afloat, so this is only what they are asking the U.S. gov't for.
They act as if they have a lot of leisure time to make things happen. They are still planning on sticking to multi-branding (Chevy, GMC, Buick, Caddy- no mention of Pontiac in their plans) and will phase out Saturn by 2011.
I guess they know better, but it sure would make sense to me to ****-can the GMC truck line all into Chevy, make Buick the lower tier Caddy, and looks like Pontiac is not in their long-term plans. I figured Pont. could become sort of like Chevy's version of an "SVO".
Then you only have to pay to brand, badge, and distribute two vehicle lines. So that might wind up with a lot of dealer consolidation, but looking around, it appears that's starting to happen anyhow.