Big (?) Three Bail-out

[JimVillers]

An interesting and long winded thread.

My take is a little different; economics theories and "laws" still apply, this is not a new or different world.

I view it a simply as the free market moving to a lower cost supplier from a higher cost supplier, nothing magic other than it has taken a decade or so. As in any business, costs must be matched with prices and the competition. I don't blame the issue on the automotive product of the big three; their cars are as good as the competition (not the best but then not the worst). Detroit cars have sold well for many years.

In my mind, the issue is cost. The cost issue appears to be in the "legacy cost", funding retiree health and pension expenses from current income. Current workers are not grossly over-paid and management is also not over-paid.

As a tax payer, I do not want to subsidize the pension and benefits of well supported retirees.

The "solution" will be very painful to many. The companies cannot continue to fund their current benefit and retirement obligations and it the Union does not realistically negotiate, and then bankruptcy will be required to realign costs.

[abe280SL]

Chances are that during these holidays when you are flying...you are flying on an airline that went bankrupt.  Guess what...they are still flying and people still have their jobs and they didn't need uncle sam to bail them out.  My point, let the three go bankrupt, restructure, and move on without US getting stuck with the bill.  Its done all the time.
abe

[Witt]

Somebody suggested that I/we read this book, so I went to my local library.  It was not available there but I procured it through inter-library loan and just picked it up today.  FWIW I believe it is out of print.

Right off the bat its age and inaccuracies are showing without even reading it.  Just the liner notes are a hoot; it starts to "make fun of" the Detroit suburbs as if they are something different.  Well they are; as different as the San Diego, Pittsburgh, Boston, Long Island, and Connecticut suburbs I all once called home.  If all of them were alike, I'd get it, but they were all different, each in their own way, as is Detroit.  So exactly what was his point?

Then, the notes go into nonsense about "corporate life" talking about getting employees memberships in "the right clubs", buying their homes when they move, investing their incomes, etc.  Well, let's see...my father in law (may he rest in peace) worked for Boeing, and they had an investment plan.  Every company I worked for had something similar.  The bigger the company, the bigger the plan!  Buying homes?  Well, that's called "relocation assistance" and it is an industry unto itself.  Heck, Alcoa bought my friend's home and moved him to Cleveland..and that was just last year!  Not uncommon for manager level employees.  Club memberships?  Maybe for the top of the heap--the very top, but for 99.99% of the employees?  In your dreams.

You could substitute "Greenwich, CT" and the financial industry for much of the claims here; or Houston and the oil industry, or Seattle and aerospace then software, or any number of city/industry pairs and it would make as much sense.

So, with that being said, I'll delve into it!

Hi Michael,

It was I that recommended the book and opened this can of worms. I am reading it right now, again. Let's hear from you when you get to the part regarding the US cars being compared  to the European and Japanese products and how the US missed the boat when consumers tastes changed.

Your contributions to this subject seem to be somewhat biased, could it be because someone close to you is working for one of the "THREE" ?
(....am I opening another can of worms ? )

Isn't great to live in countries of free speech ? Nevertheless I admire your conviction !

CHEERS !
WITT !

[mdsalemi]

Witt,

There are no mysteries here.  My wife has been a Financial Analyst for Ford for 24 years, and that has been mentioned many times in many posts over the years I have been participating here.  You are too new here to know all that, unless you've ferreted out these posts over the years.  So you may say I have a vested interest in the health of the US auto industry (I do and so do you) but more importantly, I've driven as daily drivers, Fords for the past 24 years--something few people in a Mercedes group will admit to!

I have been getting into the book, so far it is mostly related to GM and some of their decisions regarding the J-Car (Chevy Cavalier, Cadillac Cimarron, Pontiac J2000, etc) rather than the entire industry, but I have not gotten that far into yet.  It is arguably far more tabloid than investigative journalism, and I'll provide you with plenty of examples when I'm through!  Here's two, however: at that time, Detroit made the entire car or darn near all of it.  Now, they just assemble.  They are out of the parts business; Delphi doesn't just sell to GM, Visteon doesn't just sell to Ford, and Bosch doesn't just sell to Germans.  Yates made a big deal early on about how unbelievably wonderful the first Honda Accord was certainly in comparison to what few offerings were in its class.  Well, today, the Accord, the Camry are totally unremarkable cars--only because everyone has something in its class, and all are quite good: the distinctions are getting very subtle.  Why, look at the highest-end Camry--compare to the Avalon, and the low-end Lexus.  Even Toyota is competing with itself!  And in that mid size class everyone has really good offerings.  GM's tops the fuel economy; Ford in safety; you can get a lot of car for the money if you choose a Hyundai.  That was NOT the case at the time the book was written and certainly even less true when Accord Version 1.0 came out.  It is a very different world with different cars of higher quality from everyone.

But one thing is very obvious, ALL the companies are very different than the companies described in that 1983 tome.  You might not necessarly know or appreciate that unless "you are here"; you don't know or see how Ford (we have not gotten to them in the book yet) is a very different company today than it was a mere 3 years ago; vastly different than 5 years ago.  GM, Chrysler are too, as are Toyota and Honda.  Entire US industries and many companies have come and gone in the time since that book was published.

Biased, yes, in terms of the importance of the automotive to the US economy overall; but realistically, it is US manufacturing in general (of which automotive is only one part) that I find paramount.  There are those that don't understand that, and perhaps never will; and here we have our economy today.  No sanguine economy can be based on pushing paper or money around.  If you don't have value-added manufacturing (which can include of course, some non-traditional "manufacturing" such as agri-business and similar--does not have to be all "hard goods"), your economy will eventually fail.  We have in the USA too many "Wal-Mart" shoppers for everything, that put price as the one and only thing in consideration.  My goodness do we really need a Daewoo car in the USA?  Can't find an appropriate subcompact from Honda, Subaru, Toyota, Ford, GM, Chrysler, Mitsubishi, Suzuki, et al?  We do for those that have to have new for the lowest price.  They bought Yugo's too, once upon a time.  Nothing good ever came of it but a lot of great stories.

Back in May or June I made a comment that we are in a recession; I was called to task on the subject by other members here either non-believing or playing devil's advocate and asked to submit proof.  Well, 6 months later the government says we've been in one nationally since December of 2007; Michigan has been in one since December of 2000.  I tell you I'm not clairvoyant; I just live in Michigan.  Nobody was willing to admit--in an election year--the very obvious truth.

I continue to read the book, but 25 year old quotes from long-dead executives like Delorean, and old books like this are more history than a learning text.

[Benz Dr.]

Give up Mike. Not that you're wrong ( far from it ) but I was in the same boat as you 6 months ago and no one sided with me either, or at least not on the list.
At the time I was told by the BOD's that vendors could come here and defend their interests if they were being trashed. I said that wouldn't happen in a month of sunday's and knowing that I was right didn't make one bit of difference. And, several months later when I thought it best to defend myself, I was politely told to knock it off when I did.
 So what does this have to do with the big three? Not much on the outside. However, you're trying to convince the same kind of thinking I was up against last spring. Good luck........

 Three things brought this house of cards tumbling down. Greed, hubris and ideology. It's amazing to me how easy it's become for some to point fingers when there's more than enough blame to go around.

We all understand greed. It's an underlying human condition backed by eons of evolution. We all want more and when the richest man in the world was once asked, '' How much more do you need? '' He answered, holding just a small gap between his index and thumb finger,'' Just a little more.''

Hubris. Well, it's not pride in ones endeavours or accomplishments, or perhaps ones family. It's arrogant pride without purpose. Stuborn vanity that's just before the big fall. I'm sure we've all seen a few examples of this combined with greed in the past year.

Ideology. If don't know about this you're likely a fairly pragmatic individual. Ideology can go in both directions be it right wing or left wing. The former being the more dangerous of the two. Right wingers are more likely to take something away from you stating that they hold a higher moral ground, they hate unions, believe passionately in free enterprise and dislike minorities. It's always someone's fault, but it's rarely their own.

Before you count me as being on the left wing consider this first. I have no to ties to the big three nor do I own any stock in anything. I'm not in any union nor have I ever been. I don't have any union friends that I'm aware of. I vote differently in every election and have no allegiance to any party. I have friends of all creeds and nationalities - I'm friendly and frankly, I can't afford to turn away someone because I can't understand their accent.
 I've been a farmer all my life - that's about as free trade/free enterprise as it gets. Two years ago prices were at rock bottom but there was no helping hand from my government or the general public. Of all people, I should be someone who's opposed to this loan ( it's a loan not a bail out, let's get that perfectly clear ) but I'm not. We aren't faced with an inability to produce or a lack of demand for those goods, we're faced with a lack of credit in which to produce those goods or the money to purchase them.
 One has to go back 80 years to find a similar situation. Back then the banks were left to fail - everyone failed. This time the banks were bailed out ( yes that was a bail out not a loan )  and this time it's different. Either through no fault of ones own or every fault, the whole nation will be affected by the credit crunch.

  It's been said that an iceburg sank the Titantic. And yet, greed, hubris and ideology played no lesser role in sending her and 1,500 innocent souls to a watery grave. 

 
 

[mdsalemi]

greed and hubris

Ah, yes Dan.  I remember back in the 80's in B-school, Drexel was the kingdom; Milken was the king, leveraged buyouts were all the rage and high yield bonds were the tools to buy them.  Talk about a house of cards.  Milken went to jail; Drexel vaporized, and junk bonds turned out to be, well, junk.  A little greed and hubris?  You are spot-on my friend.

Out of the mouths of farmers...maybe we ought to listen to farmers and their common sense.

[Bryan_Collins]

UAW has a $6 million dollar golf course for their members:

http://www.foxnews.com/story/0,2933,472304,00.html

Our tax dollars at work

[Bryan_Collins]

Bryan?  Aren't you here because you have a car produced by a "socialist" European country?  Don't be too critical of the free-market "socialist" systems that have produced excellent cars and nations.  I believe the oldest republic in the world is the Netherlands.  The Dutch have a long history of successful mixing of free market and social government.  Guard against jingoism in a global economy or on a global forum.

I gave both the Democrats and Republicans credit for the current credit crisis.  I don't think we can pin it on the Brits. 

The invisible hand is at work in Malthusian theory.  Smith is relevant to an industrialized Euro-American economy, but with the imbalance of consumption of resources and destruction of habitat, as I said, we should be reading Malthus.  If you restrict Malthusian theory to agriculture, you ignore its parable relevance to global forces.  There are more than 6 Billion humans on the planet and breeding. 

Finally, the Big Three (and Congress) failed to see that the economic model has changed.  Congressional action is not an invisible hand.  If we save the banks and the rich (wolves) and allow manufacturing and the middle class (calves) to starve, sicken and die, Malthus would be able to write an analogous prediction of what is next. 

And I also enjoy a nice Cuban cigar.  Does that mean Communism is the best way to organize an economy?  Hardly.

You're really mixing up a lot of your economic theories.  The "invisible hand" economic concept was coined by Adam Smith, not Malthus.  As was stated earlier, Malthus' economic theories were primarily involving famines where the population was outstripping the food supply.  His theories have nothing to do with the current economic crisis in this country. 

[mdsalemi]

UAW has a $6 million dollar golf course for their members:

http://www.foxnews.com/story/0,2933,472304,00.html

Our tax dollars at work

Bryan--if you are so unbelievably angry at ANYTHING related to the UAW and the domestic automotive industry, you ought to write your congresspeople.  Better yet, why don't you write to Mr. Gettlefinger himself and tell him what you think!

Ron Gettlefinger, President
United Auto Workers
Solidarity House
8000 East Jefferson Avenue
Detroit, Michigan 48214
or call: (313) 926-5000

Let's remember here for a moment, that the "bailout" of the big 3 is actually a loan to 2 of them.  It isn't money given to the UAW.  More to the point however, regarding golf courses, theirs is like just about all golf courses in Michigan; it is losing money.  That should be no surprise.  It has also been for sale for a long time, but like most property here in Michigan has little in the way of buyers.

There's simply too many courses here and many of them are quite good.  (N.B. golfers--think about that for your next golf vacation.  You may not be able to golf at Augusta or Pebble Beach, but there are at least 2 Five-Star courses here that will be happy to let you on!) Many things are changing quickly in the auto industry and you can be sure the UAW brass will be trying to do something about this one.  It wasn't a new acquisition purchased with tax dollars; it was bought in a different era by the UAW's own money.  You may think the UAW is "burning through your tax dollars" but they are far better at burning through the dues of its members.  There were pretty strict rules placed on the loan to GM and Chrysler, and funding a golf course won't pass muster with anyone even if not directly mentioned.  So if that interests you, great--stay tuned to your news sources (if they don't forget about it) because they won't be putting millions into it for much longer.

While you should be concerned about this waste, why not consider a bit more while you are at it?

http://www.wiredprnews.com/2008/12/28/wall-street-executives-still-spending-money-to-fly-private-jets_200812281734.html
http://www.ajc.com/services/content/printedition/2008/12/26/natvoices.html

Similar to the last article by the San Jose Mercury News, the Detroit News queried the bank-recipients of the 350 Billion given to them in September...of the few answers they got, it was "we don't know".  Hmmm...  Most not answering the question on a direct handout; those that do can't really answer.  That's 350B. http://www.detnews.com/apps/pbcs.dll/article?AID=2008812230338

And you are worried about a golf course?  We know where that is, and it's not moving, it's not vaporizing into thin air either...like the first 350B gift, and the followup coming shortly...

But today, 29-December, is a big day for GM and Chrysler.  They get their first installment check on the loan from the Fed.  Now, all they have to do is deposit it, and those financial institutions will put a 10-day hold on it, and maybe by the end of the first week of the new year they can actually use the money...

[John Eldorado]

mdsalemi,

A lot of people are angry at the UAW, and a substantial majority of Americans are opposed to this bailout.

http://money.cnn.com/2008/12/03/news/economy/automakers_poll/

If the UAW wants to pay its assembly line workers 6 figure salaries, fund job banks for people to show up and watch TV all day on a full salary, and have multi-million dollar exclusive UAW golf courses, that's fine.  If the Big 3 want to fund this gravy train, that's their business.  It's their dime, not mine.

But now that taxpayer dollars are funding this type of nonsense, the UAW's policies are under a lot more scrutiny, as should any business or entity that receives public tax dollars.  Also, I really don't buy into this "it's a loan they're going to pay it back."  Please.  Do you really think we're ever going to see one penny of that money back?

I currently own a Big 3 truck, and after seeing all the nonsense that goes on with the UAW, I don't think I'll ever buy another UAW-made product ever again.  No wonder their quality is so bad.  The UAW is such an expensive liability that the Big 3 doesn't have the money to invest in quality for their products.  It's blown on all kinds of nonsense.

These car companies will get their tax payer dollars, and will be back begging for more money next year after they've blown through it.  My guess is the politics on this issue will be even more toxic, since they've already received a substantial bailout.  Even with the Democrats and Obama in charge, I don't think they'll have the political courage to give a second bailout to the Big 3 that probably 80%-90% of the public will be adamantly against.

It's over for the Big 3, and I place most of the blame on the UAW.

BTW, mdsalemi, didn't you say you were going to stop posting on this thread?  I don't mind reading your comments, but I just thought it was odd.

[abe280SL]

Big day for the auto industry and Union....sad day for the tax payers who will never see the money back.    This isn't like the Chrysler bailout. Wake up people...do you think that this recession is going to be over in 3 months and that people are going to go out there and start buying cars again and we'll live happily ever after? In three months these companies and Unions are going to be begging for more money as they deplete their resources.  You are going to continue paying for their pension plans, inflated salaries, workers who are getting paid while staying at home, private jets, and country clubs.
Well, I have to go now... got to work to pay my taxes so that others can enjoy the fruit of my labor.
abe

[Bryan_Collins]

I am completely aware of the author of the "Invisible Hand" theory.  I've read it and don't think it was invalid, I just think it may be being overtaken.  Even though Malthus was talking about a natural environment, I see an analogy to global macro-economics.  My reference suggested Smithian subsets of a Malthusian universe.  Supply and demand is tempered by rapidly increasing consumers and limited resources. 

I guess it was my lack of understanding of economics that led me to get out of the market at the peak.  It probably also explains why I'm now adding jobs, just gave every one of my employees a 15% or better raise, and improved their health insurance.  I've only been in business 20 years, so I guess it must be beginners luck.

Anyway, this is way off into the weeds.  The simple fact is that Congress is no more likely to find a consensus on the Big 3 than we posters to this forum.

Sure, the reason why we currently have a financial crisis in this country is because our population has exceeded our food supply.  If you asked any economist if Malthus theories are applicable in any way to our situation, you would be laughed at.  Our food supply and production is more abundant, and cheaper than it has been at any point in history.  Americans are more likely to have a problem with obesity than they are hunger.  Malthus theories have been rejected by most rational economists.  He basically said the world was going to run out food shortly, dubbed a "Malthusian catastrophe".  This was in the late 1700's.

You may think your some expert in economics, but you're talking in circles and exposing your lack of knowledge on the subject.  You earlier in this thread that Adam Smith's theories have become "irrelevant", and Malthus theories are the ones we need to embrace.   Now you're referring to "Smithian subsets of a Malthusian universe"  which makes no sense, you're just contradicting yourself, again.  I suggest you brush up on economics before you label yourself an expert.

[abe280SL]

This is fun. Just because someone is making money in th eir business doesn't imply they know something about economics. Maybe if you were really good....you could be expanding twice as fast! Look at all those in Hollywood making money in the entertainment industry...but can't add 2+2. Today, many CEOs of major companies know alot about economics and business but many  are having financial problems.  Another silly arguement and post that shows lack of knowledge.  Beware of people who must tell you they are experts and successful...blablabla. Again, make your arguement an intelligent one, rather than  "look at me...blablabla".
Finally, I am pretty sure there are alot of financially successful prostitutes in Vegas that run a great show....but know nothing about
Smith, Milton Freedman, or that Alexandar Hamilton was the father of our financial institutions. IMHO, the  best indicator for our economy is what I call the BBII (booby breast implant indicator)...talk to any plastic surgeon and they will tell you that they know before anyone else when the economy is turning up or down.  That sector of the medical field gets hit first on downturns and pick up first on upturns .
That would make a great research project for any graduate student in economics
abe

[John Eldorado]

This is fun. Just because someone is making money in th eir business doesn't imply they know something about economics. Maybe if you were really good....you could be expanding twice as fast! Look at all those in Hollywood making money in the entertainment industry...but can't add 2+2. Today, many CEOs of major companies know alot about economics and business but many  are having financial problems.  Another silly arguement and post that shows lack of knowledge.  Beware of people who must tell you they are experts and successful...blablabla. Again, make your arguement an intelligent one, rather than  "look at me...blablabla".
abe

I'm also laughing about this.  I love the ego of some people!  An Econ 101 course at a Community College, and suddenly they're a financial genius.

If a person truly knew all the coming financial turmoil and stock market crash, they could have could have made millions and billions of dollars shorting stocks and securities in a matter of a few weeks.  I read where Warren Buffet's Berkshire Hathaway fund is down by about half right now.  Maybe some posters on this board should run a hedge fund on Wall Street since they're so brilliant, and also become billionaires.  Then they could own a fleet of Pagoda SL's.

[69280sl]

Moderator:

Maybe this thread should be terminated. It has always been off topic and disparate views are o.k., but now it is getting personal and ugly. Something I've not seen here before in the four years that I have been a member.

[psmith]

I second that request...

There's nothing like a heated argument to shut down enthusiasm for the rest of us.  Let's get back to Pagodas PLEASE.

[Peter van Es]

I also think this topic has run its course.

I have been tracking it, and as you know, I've asked about two weeks ago if I should close this topic. Then there were no outspoken supporters for that, now there are, so I'll close it.

However, in the interest of this community I'd like to tell you about some of the "behind the scenes" things that have gone on. 66andBlue (Alfred) alerted me to a very personal attack in the first post by Bryan_Collins. I edited his post to take the attack out, a couple of hours after he first posted it. So very few people will have seen it, but 66andBlue and I did. I sent a personal message to Bryan_Collins asking him to refrain from personal attacks, as that's not called for in this community. Bryan never reacted to that personal message.

I decided to check out Bryan_Collins using the tracking and tracing tools that this system gives me. I quickly developed the suspicion (based on his registration timing, e-mail address but most of all his IP (or Internet address)) that the Bryan_Collins name was purposefully created by another member, already on the board.

Both members were posting in this topic, both members supported similar points of view. One of the two members, John Eldorado, has posted exactly one message with a question about a Pagoda. All other contributions by John Eldorado and Bryan_Collins are on this topic only.

Yesterday I sent both members an e-mail from the administrator:

I have strong indications that you use multiple "identities"  to post material on the board. This is in conflict with the terms of use you agreed to when you signed up with the board, and in conflict with the purposes of our group. We provide an on-line community for real people and some of the messages you post are disrespectful of long standing members of our group.

I hereby request you to provide further proof of your real life identity, such as real name, location, and your interest in Pagoda's. Please enter such information in your profile.

If you do not comply, I shall remove your access to the board.

Peter van Es

Neither person responded to my e-mail. Today I have banned them both temporarily from the board... meaning they cannot log on or post, until they have responded to my e-mail.

I would ask you to reread this topic-thread, and verify for yourself that if John Eldorado and Bryan_Collins are indeed one and the same person, and if you realise that neither is prepared to act under his real name, that this intrigant has been able to successfully stir up trouble in our community. Should I be contacted by one or both of them and should they convince me of their intent to honour our terms of conduct and charter, I will retract or modify this message and remove the ban.

So henceforth, lets all be focused on our common interest, Mercedes-Benz Pagoda's and our love of old cars. In future, please refrain from topics that lead into strong political, religious or other arguments.

I will leave this topic open for another day or so that you can respond to my message, then I'll shut it down.

Peter

[bpossel]

Peter,

I would also support closing this topic.  Let's move on and stick with, as you recommended, topics related to our Pagoda's.
Thanks for all your hard work with monitoring and maintaining this great site!
Bob 

[J. Huber]

Agreed. So before we go: Peter, I appreciate your moderating. Letting it go on was fine -- we all hoped it would come around to good old fashioned discussion. Whatever the motivation the various posters had in mind -- something is terribly wrong when aspersions are cast toward Mike. He is a straight-up guy and has brought tremendous insight to us about the Michigan mindset for years. Honesty is what he is all about. And he has an awesome Pagoda!

[Witt]

....since I am the one that started that whole thing, I agree to stop the discussion and get back to our Pagodas....however In my opinion this was a good and very interesting airing of opinions on the subject.

In my initial post I recommended Brook Yates book as a historical insight in the turbulent past of the American Automobile industry.  Not in my wildest dreams did I expected things to get out of hand.

Do I owe anybody an apology?

CHEERS !
WITT !

PS: I see that Dan the Benz Doctor is still around, did you receive my e-mails ? Please advise.

[abe280SL]

For those I have offended...I am sorry...most of this stuff is just fun for me without any ill intention.
For those that I will offend... I am sorry too...history repeats itself  :'(
May we all have a happy new year and may it better than 2008...I am certainly going to put 08 in my scrap book never
to be looked at again. Now its time to scape the worlds problems by watching college football....go Trojans
And if we end this thread right now...I got the last words in
abe