Bailing out the Detroit automakers

[THEWOOD]

let the mother [censored]er burn....

[Piney]

Originally Posted by Gatorubet

Sandgk, while I share lots of your concerns, I know of no way absent the use of a Chapter 11 to break the contractual relationships that are choking the Big 3. Absent bankruptcy, I do not see how your have the flexability to do what has to be done (read: cancel what needs to be cancelled) without spending the next ten years in court being sued and fighting injunctions for doing what they need to do to survive.

I have many of the same concerns that Sandgk has. While I would love to see the Big 3 all fail, use Chapter 11 and restructure to become stronger and without alot of the inheirant debt associated with the past. The problem is while those albatrosses are shed new ones come forward. The first one I can think of is in this current credit crunch how could a company coming out of Chapter 11 get ANY credit would be a huge burden by going through that process.

[Gatorubet]

Originally Posted by THEWOOD

let the mother [censored]er burn....

For national security and essential military manufacturing capability reasons, I can't accept that as a possibility.

If we ever have to crank out millions of vehicles for a war effort again, I don't want to depend on our buying them from Japan.

[Gatorubet]

Originally Posted by Piney

I have many of the same concerns that Sandgk has. While I would love to see the Big 3 all fail, use Chapter 11 and restructure to become stronger and without alot of the inheirant debt associated with the past. The problem is while those albatrosses are shed new ones come forward. The first one I can think of is in this current credit crunch how could a company coming out of Chapter 11 get ANY credit would be a huge burden by going through that process.

That's why the govt could offer to fund restructuring money if and only if the 11 takes away the union and dealership contractual mess. The US would be pushing them toward bankruptcy, but a lot of painful things are in our future. The complete elimination of the auto industry cannot be one of them.

[Gatorubet]

Originally Posted by Tresselbeliever

If there was any debate about who really protects the workers, I really hope that this sad lesson will resolve it. Unfair restrictions in the labor market has undeniably led to the road of death for Detroit and other cities and towns in the steel belt. The best way for Detroit to revitalize itself is to scrap all laws concerning taxes, the minimum wage and other workers' entitlements. The transition would be tough but necessary for its future vitality.

The shortsighted Detroit CEOs who got our whore congressmen to gut the increased mpg mandates for decades are to blame as well. If they had transitioned to high mpg and hybrid vehicles like they were supposed to, they would be more competitive now. They took the short term SUV cash cows over the long term welfare of the company. You cannot blame all of that on unions. Slave labor is not the freaking answer either. Spending money on factory modernization instead of big dividends is an idea too. But the dealerships have to be reduced, the brands consolidated, and the pension benefits cut to a more reasonable level. Theyworked for thirty years, you cannot throw them to the curb totally.

[mooktarr]

Positive proof that nothing works as well as lobbyist money.
But the unions did their share of destroying the industry too.
If this mess manages to clean up that industry and give it a fresh start then I'm for letting it die to get reborn

[Bucklion]

Originally Posted by THEWOOD

let the mother [censored]er burn....

I might agree except that the Big 3 owe a ton of money to a myraid of supplier companies, and if they file for bankruptcy it will probably run all of them out of business as well if they don't collect on any of the money they are owed. This would have a huge chain reaction effect.

[Piney]

Originally Posted by Gatorubet

That's why the govt could offer to fund restructuring money if and only if the 11 takes away the union and dealership contractual mess. The US would be pushing them toward bankruptcy, but a lot of painful things are in our future. The complete elimination of the auto industry cannot be one of them.

See, I was going to mention that in the post but decided not to include it. I think if any 'bailout' money goes to the Big 3 it will be to get them back on their feet with more modernized production along with securing their debts to keep the businesses owed money by the big 3 in business (ie what Bucklion said)

Originally Posted by Bucklion

I might agree except that the Big 3 owe a ton of money to a myraid of supplier companies, and if they file for bankruptcy it will probably run all of them out of business as well if they don't collect on any of the money they are owed. This would have a huge chain reaction effect.

I either read something last week or heard on the TV that the jobs dependent on the Big 3 auto makers is over one million from manufacturing, to dealerships, and the suppliers. (too lazy to hunt for a link though)

[LitlBuck]

The big 3 and the UAW made their mess a long time ago and should have learned something when everyone started to purchase foreign-made cars which were better made for less money. All the members of the UAW always wanted more money. They could never make enough $ per hour. While I feel bad for the workers and their families who were somewhat misled by the leadership of the UAW it is time for something to happen. The members of the UAW should be willing to take a severe pay cut in order to save the company's which they work for. In a way, I don't understand why all three of them can't be combined and be run by one organization. I guess I would almost say let the federal government control them but that would be some type of socialism. My problem is that the workers had demanded too much money over the years and this has led to their demise.

[Gatorubet]

Originally Posted by Bucklion

I might agree except that the Big 3 owe a ton of money to a myraid of supplier companies, and if they file for bankruptcy it will probably run all of them out of business as well if they don't collect on any of the money they are owed. This would have a huge chain reaction effect.

Well, bankruptcy in this deal is not the same as a Chapter 7 like individuals are familiar with. We are not talking about the Big 3 stiffing all of their creditors, but in reducing the amounts and in some cases lengthening the repayment terms and maybe lowering the interest on the debts owed.

We are talking about canceling contracts with dealerships that grant a certain region and pay structure, and greatly restructuring the debtors' obligation to fund union pensions and to pay certain benefits to union members.

Like any restructuring, any third party can get involved if it is in the best interests of the debtor and creditors. The Govt can come in and offer to provide certain guaranties to suppliers - just acting as financial sureties to keep the flow of parts coming would be a good deal. And the Govt could offer to purchase X amount of stock at Y price if the restructured deal goes through as an incentive to deal, thereby ensuring the cash flow that would be necessary for them to survive.

I am the least thing from an expert, but simply throwing money at them is a dead bang loser, and letting the country slip into a depression if they fail is also not a good idea, despite the attractiveness of the emotional satisfaction that would bring.

So if we do not say "[censored] 'em!" and we can't give those idiots a blank check, we have to find an out of the box middle path. Whatever it is, you can bet people will not like it. We are in tough times, as what must be done is likely not what people want to do or hear. I pray that we have some politicians who are more worried about our country than about their reelection chances........IOW, we are screwed!

[Muck]

Originally Posted by Gatorubet

The shortsighted Detroit CEOs who got our whore congressmen to gut the increased mpg mandates for decades are to blame as well. If they had transitioned to high mpg and hybrid vehicles like they were supposed to, they would be more competitive now. They took the short term SUV cash cows over the long term welfare of the company.

So the Big 3's problem was that they sold more vehicles than the competition and those vehicles were of a type that had a higher profit margin?

The solution was to sell fewer vehicle with a lower profit margin while the competition was investing billions in producing larger trucks & SUVs?

Got it.

[Gatorubet]

Originally Posted by Muck

So the Big 3's problem was that they sold more vehicles than the competition and those vehicles were of a type that had a higher profit margin?

The solution was to sell fewer vehicle with a lower profit margin while the competition was investing billions in producing larger trucks & SUVs?

Got it.

I suppose your idea - going with the larger profit on increased buggy whip sales - is a good idea too.

Muck - you do know that the industry has opposed and obstructed CAFE standards for almost two decades. Groups like the Heritage Foundation (and Rush this morning) insist that freedom to buy any vehicle the market wants is essential to the system.

So I have to ask you, are you opposed to higher CAFE reqs, and do you think that we would be in the same fix as now if we had been developing more fuel efficient vehicles the last decade or two?

I grant you people did not want what high CAFE standards would require as much as they wanted the freaking SUVs - like the one I just bought.

But here we are talking about something that is more important than consumer preference. I mean, lets say the market would want land yachts that got 7 mpg. Assuming that is what the market wants, you cannot reconcile the need for less dependence on foreign oil with the market forces wanting less efficient vehicles. And in this case, it was the failure of the auto makers to take the long term medicine that was at fault. Had they been in a slimming mode for two decades they may have been better able to compete than now - when their inventory went up a zillion % in response to the high gas prices. Hell, when I bought my used Expedition they were offering 10K off on new Sequoias and about that on the King Ranch Expeditions. Crazy amount of inventory. Local dealers were not taking suvs as trade ins. That could have been avoided with a better product line, albeit forced upon us by the CAFE req.

And - yeah - we need better quality. I researched the Ford product for some time, and it has been getting better. The Expeditions were a Consumer Reports best buy - as was the sequoia - but I went with the Ford because it was 7K cheaper.

[Muck]

Originally Posted by Gatorubet

I suppose your idea - going with the larger profit on increased buggy whip sales - is a good idea too.

You certainly are the king of bad analogies.

Muck - you do know that the industry has opposed and obstructed CAFE standards for almost two decades.

Gator you do know that I don't care? CAFE isn't the problem.

Groups like the Heritage Foundation (and Rush this morning) insist that freedom to buy any vehicle the market wants is essential to the system.

Those evil bastards. Freedom of choice?! Perish the thought.

So I have to ask you, are you opposed to higher CAFE reqs,

Higher CAFE and an additional 2k or so road fatalities a year? Oh what a plethora of choices.

and do you think that we would be in the same fix as now if we had been developing more fuel efficient vehicles the last decade or two?

Of course we would. There are vehicles out there that are more fuel efficient and there have been for the past twenty years. They don't sell as well and changing the CAFE would not have affected that greatly. That extra 5-10% wasn't going to make things radically different.

The only thing that would radically change the public buying patterns is higher fuel prices making larger options less attractive.

I grant you people did not want what high CAFE standards would require as much as they wanted the freaking SUVs - like the one I just bought.

You should probably make it so those people cannot buy SUVs...in their best interest of course.

But here we are talking about something that is more important than consumer preference. I mean, the market would want land yachts that got 7 mpg. Assuming that is what the market wants, you cannot reconcile the need for less dependence on foreign oil with the market forces wanting less efficient vehicles. And in this case, it was the failure of the auto makers to take the long term medicine that was at fault. Had they been in a slimming mode for two decades they may have been better able to compete than now - when their inventory went up a zillion % in response to the high gas prices. Hell, when I bought my used Expedition they were offering 10K off on new Sequoias and about that on the King Ranch Expeditions. Crazy amount of inventory. Local dealers were not taking suvs as trade ins. That could have been avoided with a better product line, albeit forced upon us by the CAFE req.

Bull. Have you checked out Toyota & Honda's sales figures over the past few months? They're not selling like hot cakes either.

Yes the Big 3 made choices that are hurting them somewhat at the moment but they are STILL selling more vehicles than those Japanese/European competitors you believe they should emulate product wise. Furthermore those vehicle they ARE selling (at a higher rate) are still producing a higher profit margin.

The Big 3's problem isn't profit, their main issue is costs and that doesn't have a damn thing to do with evil SUVs.

And - yeah - we need better quality.

Really?

Even though Buick, Cadillac, Chevy, Ford, GMC, Mercury, Pontiac & Lincoln all score higher on JD Powers' quality studies than Acura, Audi, BMW, Honda, Nissan, Scion & Volkswagen?

I researched the Ford product for some time, and it has been getting better.

Actually Ford's quality has dropped somewhat since the late 90's (feel free to thank Bill Ford).

[sandgk]

Originally Posted by Muck

So the Big 3's problem was that they sold more vehicles than the competition and those vehicles were of a type that had a higher profit margin?

The solution was to sell fewer vehicle with a lower profit margin while the competition was investing billions in producing larger trucks & SUVs?

Got it.

The solution was to get into a position where they would be able to sell those smaller, more nimble and efficient cars at a good profit. That way they aren't over-exposed on the gas guzzling land tank SUVs.

It was that step which neither Union nor Management took. It was that part of the marketplace they ceded to the Japanese, then the Germans (VW) then the Koreans. That part worked out to 30% of unit sales. Special managerial skills and absolutely top-notch self-serving practices are simultaneously needed to achieve such a denoument.

Unless they come roaring back off this nadir they will soon cede it to TATA, or some Chinese manufacturer - then it'll truly be ta ta for now.

[Gatorubet]

Originally Posted by Muck

The solution was to sell fewer vehicle with a lower profit margin while the competition was investing billions in producing larger trucks & SUVs?

Got it.

Muck. You have to know that "the competition" would not have been investing billions in producing larger trucks & SUVs if the CAFE standards had been raised. Which was my point.

Now, it is fine to say you do not care about CAFE standards, but as they impact the type of vehicle allowed to be made and sold, they have a very direct impact on what type of vehicles the industry sells and how they tool up.

But as long as you think that none of that mattered ( the millions in lobbiest money spent on defeating CAFE reqs was a pretty silly expense then I guess ), please tell me the cause of our domestic auto industry's woes.

I am serious. What in your opinion is the problem(s)? Do you put this all at the foot of the UAW?