Bailing out the Detroit automakers

[Gatorubet]

Originally Posted by Muck

You certainly are the king of bad analogies.

Getting your attention is a problem when you are in a posting snit big guy. We do what we have to do.

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

Muck. Please. Feel free to go with the cheap shot, but when you read my whole post, I also said:

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.

So I was talking about more than just freedom of choice. Am I wrong is assuming that you do not see a reduction in fossil fuel use as a goal in a multi-pronged effort to lessen our dependence on foreign nations and their oil? If I am wrong, then help me with the difficult problem of allowing choice, but dealing with the outcome if the "choice" is bad for the long term security of the country in a period where the demand for oil will be increasing as China and India's demand sky-rockets.

I get that you have your sarcasm button working, but I do not see you doing anything but pot-shotting lines of my post (with some valid points to be sure) without addressing what I feel is the larger issue.

To what do you attribute the recent failure of the Big 3? What is you best idea of a "fix"? And I would love to hear your solution more than I want to hear why other's proposed solutions are wrong...but hey - it's your $79.95.

[Tresselbeliever]

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. 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.

No doubt the CEOs are partly to blame here. However, let's go back to my original question: who's really protecting the workers? Recent events have shown that the notion that the union protects workers from the evil of capitalism is unfounded, that the union has only contributed to the short term benefits for its members while precipitating the eventual demise of the industry. The market simply does not value automakers' salaries the way that union leaders do, and they have the ultimate veto by the virtue of purchasing power.

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.

The premise of this argument seems to be that the market is inefficient in balancing the costs and benefits of reliance on oil. The irony is that emprical evidence supports quite the contrary. The demand for big SUVs have greatly diminished as the general demand for private automobiles have gone down. If the bankruptcy of the Big three says anything at all, it surely screams that America demands less reliance on high price unrenewable energy.

[MaxBuck]

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.

We're not talking elimination of the auto industry. We're talking thinning the herd so that the healthy (read - Honda, Toyota and Hyundai) can thrive. And the military hardware thing is a red herring. Ford doesn't make tanks or howitzers in its stamping plants.

[Sdgobucks]

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.

I disagree with this. First of all, the big three all have high mpg vehicles, people may not like them, but that doesn't mean they don't have them for sale. I think having the government dictate what types of vehicles they can build and sell would only have led to their earlier demise. People wanted the SUVs during the 90s and were willing to pay for them. The reason they had an advantage in this market, was the japs weren't used to building this type of vehicle, Honda didn't even know what a V8 looked like. I will agree that the big three need to do a better job of anticipating market trends, and building more desirable econo boxes to compete with the japs.

I think the root of the problem is that their costs are so high, they skimp out on quality materials needed to make the cars "nicer". The profits are so much lower on econo cars that they have to make sacrifices, or they lose (more) money making them. One of my cars is a GM econo box (Saturn SC1), I have no problems at all with it mechanically, but it is not a nice car, its pretty bland. Great MPG, great reliability, bland interior, bland exterior, but I guess they have to sacrifice somewhere.

I also have a 05 Vette that I love, and I would hate to have had the government tell me I can't have it because we should all only drive econo boxes.

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.

Let the market decide the price of the labor. If people will work the job for 10 bucks an hour, that's what it should start at, not 30. I agree with much of what you said here though, modernization is hurting them big time, as are brand issues, dealer issues, and pension problems.

[fourteenandoh]

this isn't really my wheel house, but i've been reading up on it. from what i understand, the immediate problem is not the quality of product. the problem is that the big 3 are not lean companies. i read that a normal car market is like 18 million cars per month sold across the industry. in october there were less than 12 million sold. a healthy company can hunker down and withstand a severe drop in cash flow. however, the big 3 have a huge cash burn rate so they can not. all a bailout will do is kick the can down the road in hopes that the car market bounces back and the big 3 can go back to financing their debt/legacy costs/pension/health care obligations etc etc with revenues from sold cars. the way i see it, they need to restructure and get out from under all of these stifling fixed costs that years of poor mgt and union negotiations have left them with. unless these get wiped out i can not support a bailout. with that said, there has to be a way to get them into bankruptcy and ensure that they can still operate.

[THEWOOD]

the union [censored]ed the car companies a long time ago. There is no reason someone is getting paid substantially higher than minimum wage to screw in some bolts on the assembly line. It is no wonder Honda, Toyota and the likes are not having issues. They do not have to pay the obscene salaries that the American automakers do. Im not saying 3 dollars a day is right either but these people do not truly deserve to be making more than 50k for what they do. It is simply absurd. Most make more than teachers!

[Piney]

Originally Posted by THEWOOD

the union [censored]ed the car companies a long time ago. There is no reason someone is getting paid substantially higher than minimum wage to screw in some bolts on the assembly line. It is no wonder Honda, Toyota and the likes are not having issues. They do not have to pay the obscene salaries that the American automakers do. Im not saying 3 dollars a day is right either but these people do not truly deserve to be making more than 50k for what they do. It is simply absurd. Most make more than teachers!

It's not the salaries that are killing the auto industry. It is the pension plans/benefits they pay to the retired auto workers. THAT is killing them. That is a HUGE cost burden that Honda, Toyota and similar car companies simply do not have.

I know GM was able to get the union to shift that cost, but that doesn't kick in til 2010 I believe.

[Jake]

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.

Indeed. How dare we allow consumers to drive the market? They'll buy what the Government says they should buy and like it, dammit. And if they don't, we'll limit oil supplies and make it too expensive for them to disobey us any longer.

They took the short term SUV cash cows over the long term welfare of the company.

They sold the public what they wanted. Had they not been selling they wouldn't have been producing them.

You cannot blame all of that on unions. Slave labor is not the freaking answer either.

There's a big difference between $30+ an hour and full benefits, not to mention years of "jobs banks" paying people to do nothing, and "slave labor".

Spending money on factory modernization instead of big dividends is an idea too.

That's right! [censored] the investors! Why should they get anything for buying stock in the companies?

By the way, when they spent money on modernization in the 80s the unions threatened to strike if they laid anyone off, hence the "jobs banks" were born.

The automakers spent too much money - on management and labor. They need to reduce their costs. They could start by not flying to DC on private jets to ask for billions. Talk about tone deaf!

[fourteenandoh]

car inventories in the USA are at 104 days worth right now. worst level in over 10 years. normal is around 45 days.

[jimotis4heisman]

Corporate Jets and Congress - WSJ.com

corp jets, freebies, sec filings, exec stuff vs congress and gov officials

[exhawg]

I can't find the article now, but I read something a couple weeks ago that US automakers can't sell the same cars here as they can in other countries so they have to develop 2 models for every type of car. Does anyone know anything about this? IIRC the UAW was behind this to make it harder for jobs to be moved to other countries. This would probably be a prime place to start.
Next steps:
-Go bankrupt and restructure deals with UAW and Dealers.
-Get rid of the union. I don't understand why unions are needed. Unemployment is so high there has to be people out there that will be willing to work if you say this is what we'll pay for this job. Labor should be on the free market. You pay what you have to for a job, no more, no less. From what I've read American workers do a better job than workers from cheaper countries so automakers wouldn't move many jobs south of the border especially if American labor got cheaper.
-Trim the offerings so they only need to build one type of every model. Cut any models that aren't selling and limit the number of offerings in every class.
-Combine brands that aren't needed. There is no reason that GM needs 8 brands. Cut it to Chevy (regular cars), GMC (trucks), and Cadillac (luxury).
Run the American owned European companies as separate entities or sell them if they aren't profitable. Have 1 or 2 cars in every class.

There is no reason that the Big 3 can't be successful, just not under the current conditions. I find it hard to believe that European or Japanese workers make significantly less that American workers need to make. It isn't like a majority of our cars are made in Mexico or China.

[generaladm]

Originally Posted by exhawg

I can't find the article now, but I read something a couple weeks ago that US automakers can't sell the same cars here as they can in other countries so they have to develop 2 models for every type of car. Does anyone know anything about this? IIRC the UAW was behind this to make it harder for jobs to be moved to other countries. This would probably be a prime place to start.

I believe that most American cars cannot be sold overseas because of fuel efficiency and emissions standards. Most European, and some Asain, countries signed an agreement on those standards, which are significantly tighter than the US. I had never heard of the unions being behind it. I have actually been looking for a good article on that subject lately, but with the glut of bailout news, the searches are hard to refine. If I find anything, I'll post it.

[exhawg]

Originally Posted by generaladm

I believe that most American cars cannot be sold overseas because of fuel efficiency and emissions standards. Most European, and some Asain, countries signed an agreement on those standards, which are significantly tighter than the US. I had never heard of the unions being behind it. I have actually been looking for a good article on that subject lately, but with the glut of bailout news, the searches are hard to refine. If I find anything, I'll post it.

I had an article that basically said that was false, but I can't find it. If the standards are the case it seams easy enough to fix.

[sandgk]

Originally Posted by generaladm

I believe that most American cars cannot be sold overseas because of fuel efficiency and emissions standards. Most European, and some Asain, countries signed an agreement on those standards, which are significantly tighter than the US. I had never heard of the unions being behind it. I have actually been looking for a good article on that subject lately, but with the glut of bailout news, the searches are hard to refine. If I find anything, I'll post it.

It is the converse issue really.

Most European built models meeting fuel efficiency standards, made by the Big 3, cannot be sold here due to higher Safety Standards.

Originally Posted by Jake

There's a big difference between $30+ an hour and full benefits, not to mention years of "jobs banks" paying people to do nothing, and "slave labor".

Quick - without looking it up, take a guess - how many workers from the Big 3 are in a job bank today?

Now, a follow-up question, how many of the Big 3 Japanese automakers have no equivalent program of their own?

[jimotis4heisman]

the emissions thing is interesting, i know that us restrictions are tighter than in euro.

alos no one has discussed the frills involved. one of my friends makes 250+k in a consulting jobs. he used to work for one of the big three. he had a credit card with 100k plus limits. hes told me multiple times that those limits werent enough for a lot of months, he was routinely told to spend more. he had a membership at grosse point (one of the nicest country club in the mid west) he wined and dined and dropped 1k on a bottle of wine like nothing. he had enough of the culture and quit about 10 years ago. he told me last hockey season the first time (i think) the wings came to town last year about the B word for GM.