Author Topic: Big (?) Three Bail-out  (Read 60259 times)

Witt

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Big (?) Three Bail-out
« on: December 12, 2008, 23:08:50 »
.....sooner or later that subject will come up on this site.
Recomented reading: "THE DECLINE AND FALL OF THE AMERICAN AUTOMOBILE INDUSTRY" by BROCK YATES, PUBLISHED IN 1983 (!!!!!) by EMPIRE BOOKS and distributed by HARPER & ROW  PUBLISHERS INC.

CHEERS !
WITT !

mdsalemi

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Re: Big (?) Three Bail-out
« Reply #1 on: December 13, 2008, 15:15:58 »
Witt,

While the popular press ("if it bleeds, it reads...") has been categorizing the current situation regarding the domestically-based automakers as a "bail out" the more correct term would be "loan request" in the case of Chrylser and GM.  In Ford's case, it would be "Line of Credit Request".  Few people in the USA at least, could afford a home without a mortgage loan.  We don't call that process of asking the bank for one a bailout.  We call it a loan request.

The term "bail out" is probably more appropriate to the 700 Billion given to Wall Street; that happened so fast few people including me have any idea how and what transpired with that.  Don't know exactly where that has gone but Wall Street has not sent it to Main Street; of that I can assure you.  The credit industry is as tight as ever.

At your request I'm going to see if my local library still has a copy of the long out of print "The Decline and Fall of the American Automobile Industry".  The auto industry--domestic and international has gone through so many changes since then, it might prove to be more humorous than relevant--but nonetheless probably worth a look.

I paid $1.41 a gallon for gas with my last fillup on Thursday.  I can assure you that few people--even those screaming loudly at how "wasteful" gasoline powered vehicles and the domestic's pick up trucks and SUV's are back in July when gas was $4.20 a gallon--will pony up the extra $$$ for hybrids just coming on line.  The low gas prices are just as destructive as the high ones.  While every automaker from every country is suffering a decline presently, I would suspect that the hybrid sales are down significantly with lower fuel prices here.

Of course in the next hour all of this might change...
Michael Salemi
Davidson, North Carolina (Charlotte Area) USA
1969 280SL (USA-Spec)
Signal Red 568G w/Black Leather (Restored)
2023 Ford Maverick Lariat Hybrid "Area 51"
2023 Ford Escape Hybrid
2024 Ford Mustang Mach Ex PEV

abe280SL

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Re: Big (?) Three Bail-out
« Reply #2 on: December 13, 2008, 17:43:01 »
I have concluded that these three are like Titanic...We are going to give them loans, but this time I doubt we will see the money back.  When their union refuses to have their employees take a 10% paycut (BTW with benefits these people are making $75-80/hr) they will drive these companies to bankrupcy just they did with the steel industry.  Management wasn't smart...but their overpaid CEOs is a small % of their overheads.  You are also going to have a politician overseeing this...what the heck do they know about the car industry.  They might be forcing them to make "green cars" or some ugly style cars just like centralized economy of the Soviet Union. 
I say let them go under...let free market work and start from scratch. Don't reward the bad behavior of Unions and Management by keeping the status quo.  We are the ones who are going to get screwed.  The Titanic is sinking...why throw more money at it.
abe

mdsalemi

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Re: Big (?) Three Bail-out
« Reply #3 on: December 13, 2008, 19:45:51 »
Abe,

Unfortunately your commentary contains some inaccuracies that are quite typical of those who are geographically detached from the automotive industry.

The union workers do not make $75-$80 and hour, and to continue to believe that myth only perpetuates it.  While no fan of the UAW, new hires in assembly (as opposed to skilled trades like electricians) are at $14 an hour.  But, make no mistake, the UAW labor is expensive.  It is expensive and much of that expense is for the pension and medical costs of its retirees.  Medical costs that, if not borne by the auto companies would be a direct hit to Medicare.  The 2007 UAW contracts with the Detroit 3 will separate out that part of Detroit's uncompetitive costs to a UAW-managed trust.  Without those costs, and with two-tiered wages that were also agreed to, Detroit compensation is pretty much at parity with the foreign transplants like Toyota in Kentucky or Mercedes in Alabama.  So consider those transplant wages.  The transplants are not shouldering 100+ years of manufacturing history in the US and they further must provide, competitive wages, benefits, and reasonable working conditions to keep the UAW out!  You think these companies would otherwise do these things out of the sheer goodness of their hearts and corporate policy.  I don't believe it and I don't think anyone else should either.  Make no mistake--the State of Alabama paid about $175,000 PER CREATED JOB to get foreign-owned automotive plants located there.  Probably because Kentucky had already blown its wad on Toyota's plant.  Nothing this big happens without taxpayer-assisted loans, tax abatement, or something similar.

"Letting them go under" via bankruptcy is certainly a possibility, but to share an idea that this somehow eliminates "the taxpayers" from pain is wrong.  You have suppliers, banks, stockholders taking a small percentage, if anything, on the dollar.  You'll have old plants abandoned, and taken over by municipalities and no further taxes will be paid on them; this is a significant burden on the cities and towns and schools where they are located.  A lot of those suppliers are large multinational companies in trouble themselves; asking them to forgive debt or take only a percentage of it doesn't make the burden go away it just shifts it.  Some of the suppliers are smaller and they'll simply be put out of business.  The 2nd and 3rd tier suppliers will take big hits.  Assuming for a moment that the people at these suppliers, and banks, including their stockholders and or bondholders are normal taxpayers, I fail to see how bankruptcy solves anything--just shifts the burden.  There's no easy solution with bankruptcy or with a loan.

When one is geographically displaced from the automotive industry, you don't get to see and know what is really going on.  Forget what Brock Yates said in 1983; take a look at these facts regarding a Ford F150.  This is a good example to use, because even through October of this year, through the summer of $4.00 gasoline, there have been more F150's sold then any other vehicle--car or truck--in the United States in 2008.  The F150 also has the greatest American content of any vehicle sold in the US, too.  So read this excerpt by someone at the LA Times trying to understand (not condemn) what is going on:

Ford Motor Co.'s F-150 pickup is the top-selling vehicle in America with more than 436,000 purchased through October. But when people stop buying the F-150 -- and 26% fewer have been sold this year than last -- it's not just Ford and its workers that suffer.  Falling sales dry up orders for antifreeze made in Illinois by a division of Honeywell International Inc., computer sensors manufactured by Germany's Robert Bosch Gmbh in South Carolina and a hood latch part made by the 110 or so employees of Amanda Bent Bolt Co. of Logan, Ohio.  All told, each truck contains 4,350 parts, made by 270 suppliers in 26 states as well as several foreign countries. Every F-150 that doesn't sell hits literally hundreds of thousands of people who play a role in putting the big machine on the road.

When it comes to the U.S. automakers and their financial troubles, politicians and the public tend to think about the 240,000 jobs that could be lost at the Big Three's assembly lines in Michigan and nearby Rust Belt states.  Yet suppliers provide about 70% of the content in most automobiles, from the seats to specialized bolts on the suspension -- everything except the sheet metal and the motor assembly. So when Ford, Chrysler or General Motors Corp. sneeze, 600,000 workers in places as widely scattered as Peachtree City, Ga., and Pittsburg, Kan., are likely to catch cold.  As the Alliance of Automobile Manufacturers trade group likes to say, "A lot of U.S. industry goes into every automobile."   What Congress decides could have serious effects on not just employees of Ford, GM and Chrysler but also those who work at such companies as Superior Industries International of Van Nuys, which makes the F-150's wheels. Superior will close its Pittsburg aluminum wheel plant next month, laying off about 600 employees, because its shipments in the third quarter dropped to the lowest level in a decade.

In Peachtree City, Panasonic Automotive Systems Co. of America has notified its approximately 500 employees who make car stereos, GPS devices and rear-seat DVD entertainment systems that they'll be out of work by the end of next year.  It's a similar story at AK Steel Corp., which relies on the auto market for 30% of its business. The company has temporarily shut down its Mansfield, Ohio, plant because of low demand for the stainless steel it produces for exhaust systems.  "This industry has just nose-dived," said Neil DeKoker, chief executive of the trade group Original Equipment Suppliers Assn. He estimates that among the roughly 5,000 U.S. suppliers, more than 100,000 jobs have been shed in the last two years as carmakers order increasingly fewer parts. According to a study by advisory firm BBK, 17% of suppliers were at risk of bankruptcy at the outset of 2008, and the study's author believes that figure has risen significantly this year.

The vast majority of suppliers get 60% or more of their orders from the auto industry, making the companies particularly vulnerable to a downturn in demand for cars. Detroit's routine requests for lower prices on parts only compound the problem, DeKoker said. "This could be the last breath for some of these suppliers. Some are just not going to make it."

The Big Three spend about $300 billion a year on equipment, supplies, tooling and parts ranging from transmissions to shop rags. In the U.S. alone, Ford spends more than $40 billion. GM spends $7 billion a year transporting parts to factories and hauling automobiles to dealers. That makes railroads and trucking firms huge clients of the Big Three. No wonder that with car sales down, Norfolk Southern Corp. reported a 30% decline in rail car business in the third quarter compared with a year earlier.  Vehicle and parts manufacturing jobs are concentrated in the Midwest and the South. Collectively, Michigan, Ohio, Indiana, Tennessee and Illinois have more than half the industry's jobs. Other states with sizable numbers include Kentucky, New York, California, Pennsylvania and North Carolina, according to the Bureau of Labor Statistics.

With such a wide base of suppliers, the effects of a big automaker failure could be felt throughout the country. "Suppliers have already been in a recession for several years now," said William Diehl, chief executive of BBK. He pointed out that many of the problems that have afflicted Ford, GM and Chrysler -- high gas prices, frozen credit markets and plummeting consumer confidence -- affect suppliers as well.  With up to 50% of suppliers "distressed" because of lack of access to new sources of financing and decreased sales, Diehl predicts a "huge increase in supplier liquidations and bankruptcy filings very soon."

That would create blow-back for automakers. In February, Plastech Engineered Products Inc. filed for bankruptcy protection. The Dearborn, Mich., molded plastic parts maker employed 7,600 people and had plants in eight states. Last year, it sold $1.4 billion worth of engine covers, grill panels, floor consoles and the like to carmakers, including $200 million in parts to Chrysler. When Plastech closed up shop, Chrysler was forced to immediately idle four plants, sending 10,500 employees home until the automaker could find a new supplier.  Most large suppliers sell parts to all three American automakers, plus European and Asian companies such as Toyota Motor Corp. that have plants in the U.S. So the failure of certain suppliers could cut off production beyond the Big Three.  "There are dozens and dozens of tiny suppliers that, if they fail, could shut down GM, Ford or even Honda," said Craig Fitzgerald of accounting and advisory firm Plante Moran. That possibility was highlighted in a recent report by the Center for Automotive Research, which predicted that the failure of a major carmaker could set off a spiraling chain of failures claiming 2.5 million jobs within a year.  Long the silent partners in the automotive world, suppliers are beginning to make noise to draw attention to their financial straits.


Most car companies are in some sort of trouble today, it isn't limited to "the big three".  Today's paper had the head of Fiat saying, "We can't make it alone".  The US car companies spend mostly their own money on research; there's a lot of foreign governments that provide assistance to companies in their domicile.  Car companies in socialized Europe don't have these legacy health car costs or pensions to worry about.  This kind of intertwined government/private partnership in the rest of the world is not limited to automotive.  Does anyone remember the French Caravelle?  How about BAC-111 from UK?  The companies that made these aircraft failed, a French-British consortium was created specifically to employ people and market against Boeing.  So now we have "Airbus"; its legacy being created out of the ashes of failed companies by government intervention.  I bet they still get some kind of assistance to keep people working in their factories.

I don't hope to persuade anyone with anything here--goodness knows Detroit, Michigan and a whole lot of people have been trying to persuade government for a long time to no avail.  but as my mother always used to say...

"Be careful what you wish for, it might come true..."

Do you think I'm a bit angry?  Perhaps.  But don't let my anger dissuade you from your opinions.  Nationally-known and respected best-selling author and columnist Mitch Albom http://en.wikipedia.org/wiki/Mitch_Albom was a little bit ticked off this week:

Hey, you senators: Thanks for nothing
A few parting words for the senators who squashed the auto rescue
By MITCH ALBOM • FREE PRESS COLUMNIST • December 13, 2008

Do you want to watch us drown? Is that it? Do want to see the last gurgle of economic air spit from our lips? If so, senators, know this: We’re taking a piece of you with us. America isn’t America without an auto industry. You can argue whether $14 billion would have saved it, but your actions surely could have killed it.  We have grease on our hands.  You have blood.

Kill the car, kill the country. History will show that when America was on its knees, you lawmakers wanted to cut off its feet. How does this happen in America?  Suddenly, the worker is the problem? Suddenly, unless union members, overnight, drastically slash their wages with a hard deadline, you pull the plug on an industry?  Suddenly, Detroit is the symbol of economic dysfunction? Are you kidding? Have you looked in the mirror lately, Washington?

In a world where banks hemorrhaged trillions in a high-priced gamble called credit derivative swaps that you failed to regulate, how on earth do we need to be punished? In a bailout era where you shoveled billions, with no demands, to banks and financial firms — who created the problem in the first place — why do we need to be schooled on how to run a business? Who is more dysfunctional in business than you? Who blows more money? Who fashions and molds its work based on favors and pork and traded compromises?  At least in the auto industry, if folks don’t like what you make, they don’t have to buy it. In government, even your worst mistakes, we have to live with.  And now Detroit should die with this?

In bed with the foreign automakers  Kill the car, kill the country. Sen. Richard Shelby, Sen. Bob Corker, your names will not be forgotten. It’s amazing how you pretend to speak for America when you are only watching out for your political party, which would love to cripple unions, and your states, which house foreign auto plants.  Corker, you’ve got Nissan there and Volkswagen coming. Shelby, you’ve got Hyundai, Honda, Mercedes-Benz and Toyota. Oh, don’t kid yourself. They didn’t come because you earned their business, a subject on which you enjoy lecturing the Detroit Big Three. No, they came because you threw billions in state tax breaks to lure them.  And now — this is rich — you want those foreign companies, which you lured, and which get help from their governments, to dictate to American workers how much they should be paid? Tell you what. You’re so fond of the foreign model, why don’t you do what Japanese ministers do when they screw up the country’s finances? They cut their salaries.  Or they resign in shame.   When was the last time a U.S. senator resigned over the failure of his policies?  Yet you want to fire Rick Wagoner?  Who are you people?

More money for the lords of Wall Street There ought to be a law — against the selfishness and hypocrisy our government has demonstrated. The speed with which wheelbarrows of money were dumped at the feet of Wall Street versus the slow noose hung on the auto companies is reprehensible. Some of those same banks we bailed out are now saying they won’t extend credit to auto dealers. Wasn’t that why we gave them the money? To loosen credit?   Where’s your tight grip on those funds, senators? Or do you just enjoy having your hands around blue-collared throats?

No matter what the president does, history will not forget this: At our nation’s most uncertain hour, you stood ready to plunge tens of thousands of families into oblivion. Push them onto public payrolls, unemployment, no health insurance. And you were willing to put our nation’s security at risk — by squashing the American manufacturing we most rely on in times of war. And why? So you could stand on some phony principle? Crush a union? Play to your base? How is our nation better off today now that you kept $14 billion in the treasury? Are you going to balance the budget with that?

Don’t make us laugh.   Kill the car, kill the country. You tried to slam a stake into the chest of this business, and you don’t even realize how close to the nation’s heart you’re coming. Shame on your pettiness. Shame on your hypocrisy. This is how we behave two weeks before Christmas? Honestly. What has become of this country?
« Last Edit: December 14, 2008, 15:42:30 by mdsalemi »
Michael Salemi
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graphic66

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Re: Big (?) Three Bail-out
« Reply #4 on: December 13, 2008, 21:32:50 »
I think a big problem is the sales and service tactics that we all have had a bad experience with at some time. Nobody likes the car dealers, and their dislike goes right through the industry.

mdsalemi

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Re: Big (?) Three Bail-out
« Reply #5 on: December 13, 2008, 23:07:46 »
I think a big problem is the sales and service tactics that we all have had a bad experience with at some time. Nobody likes the car dealers, and their dislike goes right through the industry.

Are you suggesting that these "sales and service tactics" are something specific and perhaps peculiar to domestic automakers?  I hope not, because it isn't.

These "tactics" are probably present in most big ticket items, and are certainly present at Honda dealers, Toyota dealers, BMW dealers, and even Mercedes dealers.  But, all the car dealers in the USA are independent business operations, so each one is different.  I would suggest that any dealer-level sales and service tactics for any and all products has almost nothing to do with our current economic situation with or without the auto industry included.

You know of course, that it is the typical American (don't know if the same holds true for Europeans) who loves to deal and is always in search of the absolute lowest price; if that were not a true statement the Saturn dealer business model would spill over to the rest of the industry, and it has not.  I can't make a posting on Craig's List without people calling and wanting to deal on price before they even discuss the item!  Put something on the "free list" and you have 1-800-GOT JUNK calling you to take it away for a fee!  eBay is no different, on many of the items I sell, people want to deal outside of the eBay process ("will you take $x for it NOW and remove the listing?")  So, it's no wonder that ALL automotive (appliance, house, real estate, insert name here) sales people deal--that's what the public demands.  Some may not like it but those that don't are a distinct minority.  Why, with gas prices as they are today you can even deal on a Prius, so I hear.  How many times do WE here call around to 3, 4 or 5 vendors when we need a part? 
« Last Edit: December 14, 2008, 15:26:12 by mdsalemi »
Michael Salemi
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JamesL

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Re: Big (?) Three Bail-out
« Reply #6 on: December 15, 2008, 10:41:47 »
From the outside looking in I would suggest that the car makers seem to be making products no-one wants (or is able) to buy

While the banks have products everyone wants/needs but they won't sell..... ???
James L
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deke54

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Re: Big (?) Three Bail-out
« Reply #7 on: December 15, 2008, 15:52:41 »
"I think a big problem is the sales and service tactics that we all have had a bad experience with at some time. Nobody likes the car dealers, and their dislike goes right through the industry."

I hope you aren't serious. You think that the reason that the Senate rejected the bail out is because people don't like dealers? That's like saying you oppose health care reform because you think your doctor is arrogant. Over the years the manufacturers have ventured into the retail business only to meet with dismal failure. There is no doubt that the Big 3 have had significant product problems in the last several decades, but the dealer doesn't build the car or decide what products the manufacturer will offer.  The franchise system has proven to be the best means of distribution of motor vehicles, but it has the limitation of restricting the dealer to selling only the brands of new vehicles for which he or she is authorized. Why do you think you can buy virtually any brand or model used vehicle at your local Ford, Chevy, or even Mercedes dealership?  Do some research and you will find that auto dealers are not only major employers but are excellent corporate citizens, contributing to local and regional charities and expanding the tax base of their communities. The car business is broken, but the dealers are not the problem.

mdsalemi

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Re: Big (?) Three Bail-out
« Reply #8 on: December 15, 2008, 15:55:42 »
From the outside looking in I would suggest that the car makers seem to be making products no-one wants (or is able) to buy

While the banks have products everyone wants/needs but they won't sell..... ???

Tosh,

Good assessment but incomplete.

The domestics have focused on [high margin and high profit] pickup trucks and SUV's.  No question that people want them, but it is a declining share as everyone else gets into the act, like Toyota's Tundra etc. and certainly declining overall volume when fuel prices are high.  While profits and margins are different for everyone, ANYBODY will make more money making and selling larger vehicles than smaller vehicles.  That's why Toyota invested in the Tundra, and Nissan in the Titan..they want a piece of that pie!

(Note: there's a couple of funny articles and YouTube videos floating around regarding the making of both the factory in Texas that makes the Tundra, and the great commercial they filmed for the Tundra that had it going up and down a large ramp in the desert.  If you look in the background [this is the humorous part] at the large crew filming the commercial, and at the large construction crews building the plants, they are all driving domestic pick-up trucks!)

"Is able to buy" is a spot-on assessment however...and it has created havoc for everyone selling cars and trucks in the USA.  The credit arms of the car companies can't get money (credit markets frozen); they can't sell bonds or paper, and thus can't offer financing, thus people can't buy!  Doesn't matter if its domestic or import, everyone is hurting due to credit issues now, and the economy.

The latest statistics published are for November: Toyota was down 33.9 percent, Honda off 31.6 percent, and Nissan North America Inc. down 42.2 percent. BMW recorded a 26.8 percent drop, and Volkswagen AG a 21.5 percent decline.  Daimler AG remained one of two automakers that have gained sales this year, despite a 29.9 percent slide last month. The other is Subaru. Each is up 1.2 percent after 11 months. Note: I think that MBUSA had a fall sale in September that ended before their winter sale kicked off; that explains partially, their up and down here.

It isn't just the Detroit 3 suffering at the moment.
Michael Salemi
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abe280SL

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Re: Big (?) Three Bail-out
« Reply #9 on: December 15, 2008, 18:21:41 »
Mdsalami,  when you add what it cost the company in benefits, w/c, retirement...it is 70-80$/hr.  Don't make any assumption because my father worked for them before he retired and 20 years ago with minimal education he was making $32/hr!.  His friend worked ten years and laid off was able to collect %95 of his salary for three years and paid for retraining by going to college.  This actually went on and off for another five years.  Who do think paid for that? What other industry can provide such benefits?  The new hires a $15/hr translates to alot more $$$/hr because of union demands....and you are assuming they all are new hires...when is the last time they hired anyone..you can't get a job there because the old ones making much more don't give up their position.  What happened to supply demand..many are willing to work for less, but can't because of the organized labor. 
With that said, organize labor serve a great purpose...but when a company is in bankrupcy it needs to do everything to save itself and
not at taxpayers expense who will be rewarding bad management and high overheads.
They need to do what every other industry does when you have a depression/recession....cut benefits, restructure or close the doors and let someone else take over.  Labor is their biggest cost..that is where they have to cut.
Don't make assumptions about people without knowing them...I don't know who you are and what you do...so please don't do the same to others.
abe
« Last Edit: December 15, 2008, 19:01:04 by abe280SL »

john.mancini

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Re: Big (?) Three Bail-out
« Reply #10 on: December 15, 2008, 18:42:13 »
I recently read that while GM and Toyota sold approximately the same number of vehicles world wide last year, GM lost more than twice as much money as Toyota made! If true, it sounds as though there are grave management problems. (duh!!!) What are the exact union differences? Why give money until these issues are resolved? I was watching the nightly news and a commercial for Hummers came on. Hummers? Come on. Get with the program.
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Mark280SL

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Re: Big (?) Three Bail-out
« Reply #11 on: December 15, 2008, 22:00:05 »
I guess one of my main issues with all this is if the GM and other Detroit union workers are in fact getting paid substantially more then the US workers (wages and total benefits package) at the Toyota, Honda, etc... US plants,  then the Detroit union leader has no basis for turning down the request by congress to work at that same package rate. I can see no reason why not. That is not an unfair request given the taxpayer money being put at risk, and it is a risk.

The world has changed in a big way......they need to realize that. In my case I've had to change and adapt to keep a job over the years, they will too... if taxpayers like me and many of you are expected to be the bank of last resort and come up with money that will finance all of this then in my opinion why should it be unreasonable to ask them to take the same pay rates as others in their industry.

« Last Edit: December 16, 2008, 02:34:24 by Mark280SL »
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Andres G

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Re: Big (?) Three Bail-out
« Reply #12 on: December 16, 2008, 02:33:43 »
I sincerely believe it is impossible to determine only one factor that causes the current circumstances affecting the US auto industry...

There are however, some basic issues that should have been dealt with sometime ago which have been either ignored or at least not managed adequately. I think labor unions play a significant role in taking flexibility away from the big three to be able to react to the changing environment... They are not the only ones to blame, as it seems that management has not been able to maximize the results they are able to obtain from their R&D and Design departments in key areas for example interior quality and reliability. I do not agree with people stating that all american made cars are crap and while some of them truly are, others are out there delivering performance and features only dreamt of some years back.

Although I'm not for government invervention, I believe the US could have protected the domestic auto industry with a little more enthusiasm... or to say this in a better way, the government could have done this in a creative way and without the negative effects of protective measures against imports (which tend to create the typical subsidized, inefficient, low quality products resulting from lack of competition in the market).
Credit crunch also plays a major role in this situation, hitting all car makers alike and affecting not only sales at a dealership level, but manufacturing/parts industries as well, just like Michael S. explained above. If the credit situation was more relaxed, outlook today would be at least brighter.

I personally believe the bailout should be approved, but not without an adequate long term plan coming from the automakers (no mickey mouse "gimme that much and I'll pay you back sometime deal) and not without sacrifice from the involved parties. If automakers do not learn from this, chances are that this will happen again and the next time, it will be much harder/bigger.

Andres

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Re: Big (?) Three Bail-out
« Reply #13 on: December 16, 2008, 05:20:09 »
.... If automakers do not learn from this, chances are that this will happen again and the next time, it will be much harder/bigger. ..
 
You hit the nail on its head.
But the fact is that the GM management never wants to learn anything.  Just recently GM vice chairman Bob Lutz  was quoted as follows:
Hybrid cars like those made by Toyota “make no economic sense,” because their price will never come down, and diesel autos like those touted by Chrysler are also uneconomic...
Global warming is a “total crock of ****.”


For years they have fought the Corporate Average Fuel Efficiency (CAFE) standards, and it was Bob Lutz again who declared that  CAFE is a totally flawed strategy, ... It has never worked and it never will.

So, why should anyone believe that they will ever change their strategy?

About 10% of the retail price of a car is contributed by total labor costs that is less than GM spends on advertising and dealer incentives and rebates.
To be precise, in 1999 GM sold 13.8 million vehicles and spent on direct labor costs about $2,630/vehicle sold,  $650/vehicle sold on advertising, and $3000/vehicle sold on dealer incentives and rebates.  (Stanford U. Graduate School of Business, Case Number EC-10).
And Graphic66 is absolutely correct. The same Stanford case report states:
"Consumers’ distaste for the car-buying experience was reflected in dealers’ poor customer loyalty performance. While manufacturers enjoyed moderate rates of customer loyalty—averaging 56.9% repeat business for the industry overall —dealers saw only 20% of their customers return to buy a car"
Combine bad management with disliked dealers and your future will be bleak.



« Last Edit: December 16, 2008, 06:00:44 by 66andBlue »
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John Eldorado

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Re: Big (?) Three Bail-out
« Reply #14 on: December 16, 2008, 05:51:18 »
My problem with the Big 3 bailout is, why does this particular industry get a bailout with taxpayer money, but not other industries?  All sorts of businesses may go under, is the government going to start handing out checks to everyone?  Or just the industries that have politically powerful Unions? ;)

Also, I don't like tax dollars taken out of my paycheck to pay for "struggling" workers that are actually making more money than I do.  The average UAW worker makes over $70 an hour when you add up all the benefits.  That's an absurd amount of money for a low skilled job like working on an assembly line.





http://www.heritage.org/Research/Economy/wm2162.cfm#_ftn5
« Last Edit: December 16, 2008, 05:54:57 by John Eldorado »

mdsalemi

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Re: Big (?) Three Bail-out
« Reply #15 on: December 16, 2008, 15:08:11 »
Question: what is the salary of the President of the United States?  Does anybody know what he earns, or will earn (new guy)?
« Last Edit: December 16, 2008, 15:10:10 by mdsalemi »
Michael Salemi
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mdsalemi

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Re: Big (?) Three Bail-out
« Reply #16 on: December 16, 2008, 15:19:02 »
My problem with the Big 3 bailout is, why does this particular industry get a bailout with taxpayer money, but not other industries? 

Let's see...Penn Central Railroad, Lockheed, Franklin National Bank, New York City, Chrysler, Continental-Illinois, The entire S&L Industry, Airline Industry (post 9/11), Bear Stearns, Fannie Mae, Freddie Mac, AIG, Citigroup...

That would encompass Railroads, Aerospace Manufacturing, Savings Banks, Commercial Banks, Our Largest City, an Auto Company, the entire Airline industry, Investment Banks, Mortgage Banks and Insurance companies...now what were you saying about "no other industries"?
Michael Salemi
Davidson, North Carolina (Charlotte Area) USA
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2023 Ford Maverick Lariat Hybrid "Area 51"
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Andres G

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Re: Big (?) Three Bail-out
« Reply #17 on: December 16, 2008, 16:25:00 »
Question: what is the salary of the President of the United States?  Does anybody know what he earns, or will earn (new guy)?

About $400.000 according to this wikipedia article. (http://en.wikipedia.org/wiki/President_of_the_United_States#Salary)

Andres

mdsalemi

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Re: Big (?) Three Bail-out
« Reply #18 on: December 16, 2008, 16:37:58 »
About $400.000 according to this wikipedia article. (http://en.wikipedia.org/wiki/President_of_the_United_States#Salary)

Andres

Precisely.  $400,000.  However, the incorrect logic offered by some (bundling benefits of retirees into the wages of those currently employed)—would have us thinking that the salary of our [currently working] President is about $3,300,000 if you include the pension and benefits of the former presidents. http://www.senate.gov/reference/resources/pdf/98-249.pdf  GAAP (Generally Accepted Accounting Principles) do not aggregate legacy benefit costs into direct labor, and nobody else should either.  One considers the costs in total, particularly when looking at some kind of loan, but they should not be aggregated to prove a point.  All it does is anger anybody earning less than $80 an hour!  However, this aggregation is what many are doing.  UAW labor may be expensive, they may earn more than you or less, they may have better benefits or worse, but they simply do not earn $75 to $80 an hour which is what many believe.  It's just wrong.
« Last Edit: December 16, 2008, 16:46:00 by mdsalemi »
Michael Salemi
Davidson, North Carolina (Charlotte Area) USA
1969 280SL (USA-Spec)
Signal Red 568G w/Black Leather (Restored)
2023 Ford Maverick Lariat Hybrid "Area 51"
2023 Ford Escape Hybrid
2024 Ford Mustang Mach Ex PEV

Andres G

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Re: Big (?) Three Bail-out
« Reply #19 on: December 16, 2008, 18:08:23 »
Michael,

I believe I understand your point. My concern is not how much a union worker makes (nothing of this is really my concern) but how efficiently that expense is being utilized, that is, if the ROI on the salaries payed is acceptable, same for Sr. Management.

I am the type of person that thinks that bad results are the consecuence of poor execution, but in this case, I think that we're looking at companies that had really bad plans which were executed flawlessly.

Andres G

Witt

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Re: Big (?) Three Bail-out
« Reply #20 on: December 16, 2008, 20:03:02 »
Michael,

I believe I understand your point. My concern is not how much a union worker makes (nothing of this is really my concern) but how efficiently that expense is being utilized, that is, if the ROI on the salaries payed is acceptable, same for Sr. Management.

I am the type of person that thinks that bad results are the consecuence of poor execution, but in this case, I think that we're looking at companies that had really bad plans which were executed flawlessly.

Andres G

.......WOW ! ....did I ever open a can of worms here, but I do find all the responses  very interesting and informative. mdsalem, you are really into it.....but you seem to be alone with your take on the present situation on this site anyway.

The reason I recomended Brook Yates book is that it outlines in detail that the present crisis was forseeable thirty years ago and the US automakers, set in there ways, failed to respond to a changing marked.

Was it Roger Smith ( one of the worse and grossly overpaid  CEO's GM ever had ) that stated: "GM IS IN THE BUSINES OF MAKING MONEY, NOT MAKING CARS "  I think they failed miserably on both accounts.

Sure every business needs to borow money in order to operate and they get it from a regular bank, its called a business-loan. If you where a banker would you loan money to the former biggest coperation in the "WORLD", whos exec's manage to run it into the ground for what ever reason, knowing well that they will continu to line there own pockets and have no intention of paying you back? I don't think so. So what's   the poor exec's to do.....ask for handouts from their favorit bank: Oncle Sam ! AGAIN AND AGAIN !

Suppose they get the money, why crank out more cars, good or bad, if the dealers are chocking with excess inventory and the public is not buying ?

There doesn't seem to be a perfect solution to the problem, I merly wanted to point out, via the book, that this was brewing for many years and is not the effect of the present finacial world crises alone.

If you love cars and wonder what the US auto industry did or didn't do: READ THE BOOK !

CHEERS !
WITT !



 
« Last Edit: December 17, 2008, 00:25:29 by Witt »

Peter van Es

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Re: Big (?) Three Bail-out
« Reply #21 on: December 16, 2008, 21:59:38 »
Here in Europe we've heard the stories about excessive benefits making it impossible to run the Big Three effectively. We've also heard the arguments " if only they started making smaller, more fuel efficient cars earlier". In reality I don't think it is quite that easy.

If US automakers had built fuel efficient, smaller cars even just a year ago, they would not have sold. I presume that even today with fuel prices lots lower than just three months ago, people would prefer to buy their Ford F150's rather than small cars if there wasn't a credit crunch.

The problem is a systemic failure... not in credit, but in the way petrol is sold. In Europe, gas is taxed heavily. A gallon of fuels costs over €6 even today... it was over €9 a few months ago. At those prices (do the math to US$) it is no wonder that every European manufacturer produces economic models: in fact BMW advertises that they have a car in almost every range (bar the X5 and the 7 series) that qualifies for an A energy label (meaning less taxes for the owner). This includes petrol and diesel cars.

In Europe we still are amazed at the low petrol costs in the US. If we paid that little for fuel, we'd all be driving Hummers too (except for that you are a social outcast in most of Europe if you do, and your car is likely to be scratched)! So in my view the US Big Three manufacturers have missed the economic and customer demand drivers which would have forced them to innovate. It made them lazy, and the high costs of providing benefits to previous workers forced them to divert money away from innovation.

Sure, there is some mismanagement but imagine that the US car makers had only produced fuel efficient, smaller vehicles over the last 4 years... it just would not have flown.

So in Europe the general concensus is to let them go bankrupt. It's about the only way they can get out of the burden of pensions and benefits to old workers, and reinvent themselves.

Peter


1970 280SL. System Admin of the site. Please do not mail or PM me questions on Pagoda's... I'm not likely to know the answer.  Please post on the forum instead!

John Eldorado

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Re: Big (?) Three Bail-out
« Reply #22 on: December 16, 2008, 22:30:34 »
Let's see...Penn Central Railroad, Lockheed, Franklin National Bank, New York City, Chrysler, Continental-Illinois, The entire S&L Industry, Airline Industry (post 9/11), Bear Stearns, Fannie Mae, Freddie Mac, AIG, Citigroup...

That would encompass Railroads, Aerospace Manufacturing, Savings Banks, Commercial Banks, Our Largest City, an Auto Company, the entire Airline industry, Investment Banks, Mortgage Banks and Insurance companies...now what were you saying about "no other industries"?

I'm against all those previous bailouts, and I didn't say the government has never bailed out private companies, so don't put words in my mouth.

 What I was saying is it is unfair for politicians to pick and choose which ones get taxpayer dollars, and which ones don't.  What about all the silly dot.com's that went out of business, should the government have bailed those companies out also?  Of course not. 

 At some point, we either have to decide whether or not we're a capitalist country that's going to allow poorly run businesses to fail, or whether we're just going to nationalize everything and let the government run all industries.

My business is down 20%, and I've had to lay off workers.  How come I don't get taxpayer dollars?  The thought never even crossed my mind, but some people think they're entitled to never fail.

Witt

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Re: Big (?) Three Bail-out
« Reply #23 on: December 17, 2008, 00:39:51 »
Here in Europe we've heard the stories about excessive benefits making it impossible to run the Big Three effectively. We've also heard the arguments " if only they started making smaller, more fuel efficient cars earlier". In reality I don't think it is quite that easy.

If US automakers had built fuel efficient, smaller cars even just a year ago, they would not have sold. I presume that even today with fuel prices lots lower than just three months ago, people would prefer to buy their Ford F150's rather than small cars if there wasn't a credit crunch.

The problem is a systemic failure... not in credit, but in the way petrol is sold. In Europe, gas is taxed heavily. A gallon of fuels costs over €6 even today... it was over €9 a few months ago. At those prices (do the math to US$) it is no wonder that every European manufacturer produces economic models: in fact BMW advertises that they have a car in almost every range (bar the X5 and the 7 series) that qualifies for an A energy label (meaning less taxes for the owner). This includes petrol and diesel cars.

In Europe we still are amazed at the low petrol costs in the US. If we paid that little for fuel, we'd all be driving Hummers too (except for that you are a social outcast in most of Europe if you do, and your car is likely to be scratched)! So in my view the US Big Three manufacturers have missed the economic and customer demand drivers which would have forced them to innovate. It made them lazy, and the high costs of providing benefits to previous workers forced them to divert money away from innovation.

Sure, there is some mismanagement but imagine that the US car makers had only produced fuel efficient, smaller vehicles over the last 4 years... it just would not have flown.

So in Europe the general concensus is to let them go bankrupt. It's about the only way they can get out of the burden of pensions and benefits to old workers, and reinvent themselves.

Peter


........if the US automakers would have started to produce good quality, fuel efficient smaller vehicles alongside there usual big cars at the time the Japanese and Europeans started to get a foothold in Northamerica, they would have taken the wind right out of there sails and all the people that bought those imports would have bought those smaller cars made in the US.

CHEERS !
WITT !

mdsalemi

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Re: Big (?) Three Bail-out
« Reply #24 on: December 17, 2008, 14:13:49 »
I'm against all those previous bailouts, and I didn't say the government has never bailed out private companies, so don't put words in my mouth.

 What I was saying is it is unfair for politicians to pick and choose which ones get taxpayer dollars, and which ones don't.  What about all the silly dot.com's that went out of business, should the government have bailed those companies out also?  Of course not. 

 At some point, we either have to decide whether or not we're a capitalist country that's going to allow poorly run businesses to fail, or whether we're just going to nationalize everything and let the government run all industries.

My business is down 20%, and I've had to lay off workers.  How come I don't get taxpayer dollars?  The thought never even crossed my mind, but some people think they're entitled to never fail.

Eldorado,

I didn't put words in your mouth.  Here is precisely what you said:

My problem with the Big 3 bailout is, why does this particular industry get a bailout with taxpayer money, but not other industries?

You said why auto and no other industries.  I indicated the other industries and the other bailouts; whether you believe in them wasn't the issue.  Something not clear here?
Michael Salemi
Davidson, North Carolina (Charlotte Area) USA
1969 280SL (USA-Spec)
Signal Red 568G w/Black Leather (Restored)
2023 Ford Maverick Lariat Hybrid "Area 51"
2023 Ford Escape Hybrid
2024 Ford Mustang Mach Ex PEV