I am not familiar with the TN VW deal. Many times the city or county will give long term leases to companies to build on the land. Usually at a reduced rate. It is good business if you want to promote work in your city. I suppose you could consider it corporate welfare. I would say if they did their homework it will be money well spent and pay back multiple times over.
I can tell you if you look around at the cities that are prosperous they all give breaks to induce industry. If a state has workers to offer they are ripe for industry. Except places like CA where they do everything in their power to keep industry from moving into the state. VW could have picked Michigan. Something up there they did not like as well as TN. I would guess the labor pool.
Actualy two recent reviews come to mind. One was the Saturn Ion, where C&D claimed "We waited 8 years for this?" and the other was the Colorado/Canyon and (I think it was C&D again) they claimed "It's like GM didn't even try to compete here"
My dad had a Corsica as a company car. Outside of the gutsy engine, the car was abysmal. The Taurus of the same era was in a totally different league.
I think you are trying to parse it a bit too closely. Businesses threaten to leave one state and take their jobs to another all the time. Most every state has an economic development authority and they spend a lot of time chasing those deals.
Those inducements aren't necessarily one time grants either. Besides the infrastructure building which may be a one-time deal, often the salaries of the new hires is subsidized by the state or the feds for months or a year, and often the tax breaks stretch out over decades.
I don't consider the 2 very similar at all, except they involve $. They are more different than alike.
Let's look at it this way:
1) By one time I meant a Known-Cost-Package was given to the manufacturer. This is whether it is paid out in Year 1 or over 20 years, it is a contract that is signed at 1-Time. The bailout of the Big 3 however is not 1-Time, it will be "open-ended". Do you think this $25B loan is the end? or is it the extra $25B talked about this week? What sort of recent history is there of the Big 3 making any profit? So then what happens after this $ is gone? Another $25B for 2010? and 2011?
Also no one here has proven to me why we need to give $25B, and probably more, to the Big3? Why can't the parts of any of the Big3 be broken up and sold for whatever they get? and the new owners run the plants as they want; without any taxpayer $ being spent.
Wagoner's comments are PRECISELY why no taxpayer funds should flow their way. He's run the company into the ground yet incredibly still thinks he should keep his job.
I'm redirecting a conversation from another thread where someone posted this article that I wanted to comment on.
So, the analyst's reasoning for a bailout is to save jobs and make investors feel less "bearish."
Ya know ... I can't help but look at a bailout of GM as nothing more than a real roundabout, indirect, and inefficient form of wellfare for its employees.
And I mean REALLY inefficient. I mean, not only will the money go to pay salaries, but its paying to manufacture a product that apparently loses money. Our taxes would be better spent (not that I support this, but its still BETTER spent) on an unemployment fund specifically for these workers.
Its not like GM didn't see this coming. They've been hemorrhaging money for a LONG time and have done nothing to correct the situation. How is giving them more money to waste going to help anyone in the end? It will only delay the inevitable and take money out of my pocket in the meantime. Rip off the band-aid already. It'll be painful, but at least it will be over.
'11 GMC Sierra 1500; '98 Alfa 156 2.0TS; '08 Maser QP; '67 Coronet R/T; '13 Fiat 500c; '20 S90 T6; '22 MB Sprinter 2500 4x4 diesel; '97 Suzuki R Wagon; '96 Opel Astra; '11 Mini Cooper S
"......They've been hemorrhaging money for a LONG time and have done nothing to correct the situation...."
Thanks for the redirect.
Now I wouldn't say they've done nothing. For about 10 years they did make money selling SUV's that people WANTED. Key phrase; "people wanted". No problem giving people what they want, especially when it's profitable.
Now, they DID ignore their previous bread and butter, the family sedan, for 30 years, and that chicken has come to roost. Fortunately, the Fusion, Malibu, and Aura are as good a family sedan as their is out there. They have all gotten good reviews, better than some foreign makes, and their best reviews in 25 years. New products are soon to follow (2010 Lacrosse), and initial reviews have people liking what they see so far.
The major problem at this point is, with car sales plummeting, there goes ALL the mfrs' profit margins. Coupled with the credit crisis, a company like GM can't refinance and spread the payments out.
"We have allowed ourselves to be lulled into thinking the bills would never come due. We’ve been led to believe we could keep on borrowing our children’s money to finance a lifestyle we haven’t earned and can’t afford." Ross Perot
Our taxes would be better spent (not that I support this, but its still BETTER spent) on an unemployment fund specifically for these workers
I was thinking exactly the same thing earlier today. They should use the money to prop up suppliers while they seek out new contracts and also to retrain laid off auto workers to do something different, and let these companies find their way to the bankruptcy court. GM is unsavable without the aid of the court, and none of the domestics will turn themselves around with a one-time infusion of cash, whether gift or loan.
Sounds like Karl is on the same page I am, and his idea of slashing and burning and STARTING by terminating the employment of EVERYONE at a VP level or higher is right on target.
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
"............also to retrain laid off auto workers to do something different, "
Let me get this straight. We can't find work for 6.5% of America, but we can spend money to retrain 3 million people to do jobs that aren't out there in the first place????
I think it boils down to a little r for a few quarters vs. a big D for a few years.
You or anyone else does not make a valid case of why 1 of the Big 3 going down would cause a D. It is an incorrect message, meant to put fear into the masses and some of our less intelligent Congressmen, so that they will give the auto industry $. You are being coerced and lied to! Why would the Big3 do that? They don't lie or the financial guys plot how to get more right? No one's going to lie for $25B right? or is it $50B?
Give us some detail here. If GM goes belly-up in Mar09 say, and Ford and Chrysler are still in business, what happens? Specifically answer: does a person looking for a new car simply not buy one, or is it more likely that Ford and Chrysler's business picks up (as well as others - and many of those foreign cars are made here in the U.S. I known if my town has 5 restaurants, and 1 closes, this does not change how often people go out to eat!
If suppliers business to GM ceases, doesn't the business to other auto manufacturers go up?
So if GM ceases operations, or sells the divisions off, the GM employees are temporarily laid off, but this does not necessarily mean even hundreds of thousands of people out of work, never mind millions out of work! The latest scare-tactic I've heard is 1 in 10 years will be affected, if we don't give the Big3 blank checks! Bulloney!!
I think the Big3 just see this as an opportunity to jump on the wagon of easy money right now, which will go down in history as the biggest rip-off of the common man, and transfer of $ and power to the elite financial and political class of this country.
And I really wish you'd give some intelligent thought before we give billions and trillions of dollars away, rather than listening to the doomsday stories and lies of the PEOPLE WHO ARE GOING TO BENEFIT FROM THIS $!! :mad: :mad: Did you think O.J. was not-guilty because he told you so, and he loved Nicole? Geesh!
Congress is full of ignorant people that have promised the moon to get re-elected. Now they want the rest of US to pay for their promises.
You are absolutely correct that any one or all of the Big 3 could fail and within a year the other automakers would be building the cars that people want. Probably better than the Big 3 from recent experience.
Karl says:
Bottom line: these are the guys who screwed things up in the first place, I don't want to give them another chance to do it again.
BTW, this extends to the union leadership, too. I have no doubt that the average American worker grasps the concept that having some employees making some money is better than no employees making any money. But as long as union leaders make unrealistic demands for pay and benefits the industries that employee these workers will be uncompetitive and destined for failure -- meaning nobody makes nothin' (except the union leadership up until that point...).
Any bailout package should include wage and benefit cuts for ALL Union and Non-Union personnel. People here want a level playing field. Well lets level it to the Auto makers in the USA, that are succeeding, such as Toyota. The UAW agrees all contracts are cut back to the competition level. That should avoid GM and Ford from filing for bankruptcy.
The UAW agrees all contracts are cut back to the competition level.
I'm not against the UAW, or the UAW making as much as they can; UNTIL they ask me to subsidize their company. Then the UAW wages and benefits are part of my problem. The UAW is only part of the overall Big3 problems. Maybe 20%. There are all the other problems - material quality, long-term quality, wrong products, desireability, organization, leadership, too many brands, too many dealers ...
I know you've pointed these things out too in past posts, and only listed the UAW as you had a short post.
I remember back in the early 90's, that a major industry equal in size then to the suto industry crashed. When Communism failed, I remember hundreds of thousands directly and millions indirectly were affected by the major cuts in the defense industry and the closing of over 100 military bases.
The shipyard here in NH for instance cut from 9,000 to 5,000, the Air Force base closed, and all the high tech industries around here cut back temporarily. Well guess what? the Air Force base now houses various companies and workers have found other productive things to do. Our unemployment rate now is probably 4%.
As you also realize, the first of the Big3 that go under, will benefit and strengthen the others.
Now I wouldn't say they've done nothing. For about 10 years they did make money selling SUV's that people WANTED.
You're right on that point. They jumped on a bandwagon and milked it for all its worth, while neglecting all other areas of the car biz.
But, as any decent business person knows, when you've concentrated on one fad and when that fad is over, so is your business. So I can only think GM has never had a decent business person OR they fully intended to go belly up when the fad was over. Either way, they deserve to ride off into the sunset.
'11 GMC Sierra 1500; '98 Alfa 156 2.0TS; '08 Maser QP; '67 Coronet R/T; '13 Fiat 500c; '20 S90 T6; '22 MB Sprinter 2500 4x4 diesel; '97 Suzuki R Wagon; '96 Opel Astra; '11 Mini Cooper S
They should use the money to prop up suppliers while they seek out new contracts and also to retrain laid off auto workers to do something different, and let these companies find their way to the bankruptcy court.
Hmmm... don't know about the suppliers. Maybe. But, then again, if they were supplying good product, you'd think they'd have other contracts by now.
Another option I was thinking was, rather than a loan, a complete government buyout. I'd like to know folks opinions on that option. I'm really not learned enough in economics to give it full consideration. But I think it would be interesting. Would the government manage to build good cars? Probably not. Unless they were smart enough to strip the organization dry of all upper level management and hire on a couple of good, proven auto experts and let them do their job.
'11 GMC Sierra 1500; '98 Alfa 156 2.0TS; '08 Maser QP; '67 Coronet R/T; '13 Fiat 500c; '20 S90 T6; '22 MB Sprinter 2500 4x4 diesel; '97 Suzuki R Wagon; '96 Opel Astra; '11 Mini Cooper S
A. Said companies will be immune to legal action from dealers, union workers, suppliers, etc. B. All management of VP status and above must leave the company C. No government aid will take the form of direct cash injections.
Requirement A would only be possible with a bankruptcy, where all contracts and agreements could be disolved. It is inconceivable that a Democrat Congress and a new Democrat President would do anything that would diminish or disolve a large union.
The direction and support from high management to engineer and assemble competitive vehicles has been evident with designs such as Malibu, CTS, Enclave, etc. So, there is a proven ability to design/put together competitive vehicles. But, the albatross for GM as has been pointed out numerous times are:
- Union work rules and influence (inmates running the asylum) - Wages too high, way out of line with similar positions at Honda, Toyota - Benefits and legacy
Bankruptcy would get rid of union and its ability to dictate manner and use of personnel and would allow lowering of wages to competitive levels in the U.S.
Bankruptcy would allow GM to trim back or eliminate health benefits similar to other companies in the U.S.
Bankruptcy would free up GM from its agreements with dealers and GM could start over with them in that regard.
After bankruptcy, GM perhaps could hire back engineers, assembly/manufacturing positions as independent contractors. Contract would have provision to lay off at will depending upon sales of vehicles and with provision for call-back. Contract term might be 1-2 years with renewability dependent upon employee performance. Contracts would of course not allow for union representation.
Contracts would provide generous hourly rate with no benefits - holidays, vacation, sick days, health care insurance. Contractors would pay for and manage their health care premiums, but GM would set up arrangement for availability with insurance carriers.
I known if my town has 5 restaurants, and 1 closes, this does not change how often people go out to eat!
Heh, we've had 8 or 10 restaurants close around here and in fact, we aren't eating out as often.
The latest scare-tactic I've heard is 1 in 10 years will be affected
I think you mean 1 in 10 jobs? I've heard 1 in 7.
I'm of the connected to everything else school. If GM goes banko, my niece's hubby down in TN has less job security because his company does a lot of Big 3 work. He just got his MBA so he'll probably land somewhere, but you never know. One nephew is already hurting from job losses since he's a home builder. Another nephew works for a steel mill down in Alabama. Yeah, the US still makes a lot of steel - but demand is already down thanks to the little r, and if a bunch of car factories shutter, his job is at risk. Maybe it matters more to me because I can put actual faces on the people affected?
Shoot, even Karl's job could be at risk if the car companies go broke and people quit buying cars and quit coming to Edmunds to research them. Who's going to advertise here and pay our server bills? :P
A 92 year old car dealer in New Jersey has been hitting the news outlets lately: 69 years in the business and of all the ups and downs of the car biz, the credit crunch is the one that makes him finally close the doors.
Dick Gordon interviewed the guy yesterday and it's worth the listen - I can't find a link to it though. The interview mentioned that ~700 dealerships have closed this year per NADA (out of ~20,000). So maybe the financial situation is one way for the Big 3 to shed franchises without having to get a judge to do it for them.
I'm OK with loaning $$ but not if it's business as usual. GM/Ford and the unions must all agree upfront to lower the costs for legacy, current and future healthcare and pension expenses so that in five years GM/Ford will have overall operating costs/profit margins comparable to Toyota (as the benchmark). The bailout money should be made in increments as interim cost/profit improvement goals are achieved. GM/Ford and the unions have to clean up their act once and for all, otherwise no deal.
Who's going to advertise here and pay our server bills?
Will we have to bail out Edmunds?
Your site perhaps would have to go to a fee/subscription. Another possibility is asking posters to pay by each post they do, say 5 cents each. Posters would establish accounts with you, just like Illinois Tollway, and you deduct 5 cents for each post. Understand that there is cost/expense to give "free" speech to Edmunds visitors/posters.
This would increase the quality of all posts, such as this one. On Illinois Tollway, drive-through toll plazas deduct an amount from your account as you pass under detectors that read the transponder on your windshield.
Wonder if any studies done to see how level of U.S. productivity and GDP would be increased if all interactive web sites somehow vanished.
I did read an article that said to give a free high speed Internet access to your competition. I know the Internet slowed our production down a lot in the phone business. I should have been working when I was hanging out here at Edmund's. Fortunately our bosses were dumber than a box of rocks and thought I was hard at work.
The United States may be on course to lose its 'AAA' rating due to the large amount of debt it has accumulated, according to Martin Hennecke, senior manager of private clients at Tyche.
"The U.S. might really have to look at a default on the bankruptcy reorganization of the present financial system" and the bankruptcy of the government is not out of the realm of possibility, Hennecke said.
"In the United States there is already a funding crisis, and they will have to sell a lot more bonds next year to fund the bailout packages that have already been signed off," Hennecke told CNBC.
So how can we bail out GM when we may need to bail out the government?
Heh, we've had 8 or 10 restaurants close around here and in fact, we aren't eating out as often.
Yes but the fact is that the supply of restaurants, or the number of seats does not create the demand. If the demand, even the reduced-demand of now is there, then the remaining restaurants are going to do better.
Similarly if GM goes out of business, and I had intended to buy a new GM vehicle next month, this does not affect my decision to buy a vehicle, just which one I can choose. Some other vehicle manufacturer is then going to get my business, and their workers and suppliers will be busy, and they probably will need to expand - using any idled plants and workers.
I think you mean 1 in 10 jobs? I've heard 1 in 7.
They must be counting the "teenage lifeguards at the city pool" in that number, it's so high. They're using the Butterfly effect, and not telling you the details. Bulloney!
And while I hear your concern about your friends and relatives jobs, you need to understand that a healthy economy is constantly creating and destroying industries, corporations, and occupations.
I would also like each of you who think the Big3 should get loans or grants, to tell me the criteria of how the government will determine who gets $ and who doesn't. Who are the companies, executives, and stockholders who will never lose? When they succeed they will make lots of money, when they don't succeed they won't lose.
Is IBM or Microsoft too big to fail, and should get a bailout? How about GE? or Dupont and Dow? Are we treating the workers and investors fairly between these companies? I'd say no. I don't like playing favorites, we should have 1 set of rules and laws applied equally and fairly.
Now you may say Congress has always played favorites. Well don't you think we should try and put a stop to it? If you don't, then I guess you don't have much of a moral-stand to complain about any other seemingly unfair/unjust decision.
on the radio about this issue - on a rock station, believe it or not. Anyway, a man phoned in stating that he's the GM of two dealerships - one selling domestics, one selling imports. He indicated that the biggest difference/problem he notices is that while import manufacturers tend to base their production targets on vehicle sales, domestic manufacturers decide what and how much they're going to produce first, THEN base their sales targets off of those numbers.
Interesting. Even though it might affect this man's livelihood, he indicated that he would not be for a bailout of any kind barring a total re-vamp of such sales & marketing strategies (which he feels have contributed to these massive rebates).
I've gotta agree. I hadn't paid a whole lot of attention to this issue until it became a very real, very much talked about probability over the past week.
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That's a good correlation and I was wondering the same thing myself. Are we helping out a failing business model and at what expense? I like the example one of the previous posters has made. If I'm about to buy a Chevy and they go bankrupt just before I buy, then I shift my business over to Toyota. One company loses and one company gains.
I used to work for IBM, who was taken down by Microsoft as we all know. The net result was an increase in IT professionals needed. Lots of displaced workers and local communities that got hurt, but in the end the American economy and consumer benefited.
My opinion is boo hoo for the failing auto companies. If they had run their business correctly all along they wouldn't be in this situation. Let them fail.
Yes but the fact is that the supply of restaurants, or the number of seats does not create the demand. If the demand, even the reduced-demand of now is there, then the remaining restaurants are going to do better.
Well, it could be like the ol' one lawyer in town starves, two thrive saw too. Less variety in food choices does damper the urge to eat out. I'm not going to MickeyDee's more now that the Euro-Latino fusion place has closed.
GM may be DOA, but there's little chance for a soft landing or renewal if they simply shut their doors.
The real purpose of granting bailouts to the auto industry is mainly to pay the retired UAW union people's pension and medical benefits. Huge burden it is.
Congress is just using a manufacturing entity to filter funds to pepetuate the pension and medical insurance for non workers whose union failed to cover that event that has come to pass.
Using tax payer money for this purpose is unacceptable before the assets of the little 3 are liquidated.
Less variety in food choices does damper the urge to eat out.
A little loophole in my choice of analogies, as all foods aren't the same. But if you're trying to say that if GM closes that potential buyers can't find a similar or better vehicle from any other manufacturer, you're going to get laughed off these forums. :P
but there's little chance for a soft landing or renewal if they simply shut their doors.
I'd doubt they'd shut their doors. GM would probably declare B and continue operations at least for a while. The factories and land and such have value, no matter if it is only 10% or 20% of what it was valued at. The fully assembled and partially assembled vehicles have value. Factories that make models like the CTS and the Corvette might be highly prized. Saab could be sold and operate. Opel could be sold and would operate.
The economy will be much worse off for much longer if we continue to support the failed organizations and methods. You need to weed the garden, before fertilizing it.
Speaking of food, you may like these links. New term for me:
"the practice in supposedly free market capitalist economies in which the government steps in to bailout or otherwise subsidize weak or failing firms.
A government attempting to transition from capitalism to socialism by this method takes control of the worst industries — the "lemons" — first, which undermines such an approach." (Wikipedia)
I wonder if the PBGC alreadys covers that; if so, I don't see where any taxpayer savings would lie.
1) If we pay pensioners through GM, we'd pay them about twice as much. 2) Also the other incentive is if GM or the union is not going to have the funds to fund future payments, then you want to stop as many current workers from moving into the pension system.
Sounds cruel, but they should be entitled to what is legitimately theirs.
If the government would like to bailout my 401K losses to pre-financial crisis levels, then maybe I can see how it would be fair to subsidize someone else's job and retirement.
PBGC only guarantees the pension up to a certain amount. .
And PBGC doesn't cover health care benefits. Our neighbor received a pension from a company that went bankrupt after he retired. When it went bankrupt, his pension was guaranteed by PBGC, but he lost is health care benefits. He had to work at Walmart to pay for this prescription drugs.
Just to be clear, I don't have a problem with successful people making big money. If you possess even a shred of economic wisdom you know that's what the whole system is predicated on. But I hate the idea of unsuccessful people making big money, which is exactly what happens when a government bailout maintains a failed CEO's position (and income).
So to wrap up, I would like to see the government save the domestic automobile industry only if the following requirements are met:
A. Said companies will be immune to legal action from dealers, union workers, suppliers, etc. These guys would have no one to sue if the companies actually failed, so saving them with taxpayer money doesn't mean they are now perfectly positioned to sue when it's time to downsize, modernize and restructure.
B. All management of VP status and above must leave the company before any government aid arrives, and they must leave the company with nothing! No golden parachutes, no stock options, zip! They've been making plenty of money for years, they obviously have something stuck away for a rainy day (and if they don't it's further proof of their idiot business skills, so let 'em live in a cardboard box).
C. No government aid will take the form of direct cash injections. It will come from government secured loans/bonds, and the government will be first in line to make money if/when the companies become profitable (just like Chrysler in the '80s).
Unfortunately, that won't happen so it will delay the inevitable. Get ready for a $25B lesson in cloak and dagger! Let's warm it up a bit, shall we?
D) Employees and retirees will be paid last each month, after all other bills are paid, with the UAW then paid first of the employees, and the salary people paid next. The lowest paid of the salary positions get paid first of that group.
Maybe that would provide some incentive to change, and management gets paid last as they need to make the changes happen.
Sure, then they don't report to work (read strike) and nothing get done for several weeks even with hiring scabs, meaning even LESS money comes in, and the whole thing snowballs.
Maybe what the government should do is buy all the Big 3's debt and work out payments with them directly, and take it off the top of the bailout for the banks.
The only group on strike relating to the Big 3 are the CUSTOMERS. That's why $25B will just prolong the agony. The jobs go away one way or the other so let's see how long the cash burn continues in this recession. I give it 4 months and we'll be back to square one.
I agree it isn't easy bailout or bankruptcy but rebuilding the company through a bailout will NOT result in a successful industry business model. Why? The cost will be far more than this initial funding and without strings, the fire will continue without result. The same team is on the field. How many times do we count failure?
The pay comes as support of the business. That will never change! When it becomes excessive the pendulum swings with an axe.
If there is work, they should get paid. At $72/hr. compensation, in this market, it just is going to swing faster and the cuts deeper.
Do you want survival or a healthy industry. All groups need to be put back in line so the product attracts sales...oh, and the business can weather unexpected stormy weather.
Comments
I can tell you if you look around at the cities that are prosperous they all give breaks to induce industry. If a state has workers to offer they are ripe for industry. Except places like CA where they do everything in their power to keep industry from moving into the state. VW could have picked Michigan. Something up there they did not like as well as TN. I would guess the labor pool.
Actualy two recent reviews come to mind. One was the Saturn Ion, where C&D claimed "We waited 8 years for this?" and the other was the Colorado/Canyon and (I think it was C&D again) they claimed "It's like GM didn't even try to compete here"
My dad had a Corsica as a company car. Outside of the gutsy engine, the car was abysmal. The Taurus of the same era was in a totally different league.
Those inducements aren't necessarily one time grants either. Besides the infrastructure building which may be a one-time deal, often the salaries of the new hires is subsidized by the state or the feds for months or a year, and often the tax breaks stretch out over decades.
We are bankrupting the country.
Let's look at it this way:
1) By one time I meant a Known-Cost-Package was given to the manufacturer. This is whether it is paid out in Year 1 or over 20 years, it is a contract that is signed at 1-Time. The bailout of the Big 3 however is not 1-Time, it will be "open-ended". Do you think this $25B loan is the end? or is it the extra $25B talked about this week? What sort of recent history is there of the Big 3 making any profit? So then what happens after this $ is gone? Another $25B for 2010? and 2011?
Also no one here has proven to me why we need to give $25B, and probably more, to the Big3? Why can't the parts of any of the Big3 be broken up and sold for whatever they get? and the new owners run the plants as they want; without any taxpayer $ being spent.
Anyone else?
So, the analyst's reasoning for a bailout is to save jobs and make investors feel less "bearish."
Ya know ... I can't help but look at a bailout of GM as nothing more than a real roundabout, indirect, and inefficient form of wellfare for its employees.
And I mean REALLY inefficient. I mean, not only will the money go to pay salaries, but its paying to manufacture a product that apparently loses money. Our taxes would be better spent (not that I support this, but its still BETTER spent) on an unemployment fund specifically for these workers.
Its not like GM didn't see this coming. They've been hemorrhaging money for a LONG time and have done nothing to correct the situation. How is giving them more money to waste going to help anyone in the end? It will only delay the inevitable and take money out of my pocket in the meantime. Rip off the band-aid already. It'll be painful, but at least it will be over.
'11 GMC Sierra 1500; '98 Alfa 156 2.0TS; '08 Maser QP; '67 Coronet R/T; '13 Fiat 500c; '20 S90 T6; '22 MB Sprinter 2500 4x4 diesel; '97 Suzuki R Wagon; '96 Opel Astra; '11 Mini Cooper S
Thanks for the redirect.
Now I wouldn't say they've done nothing. For about 10 years they did make money selling SUV's that people WANTED. Key phrase; "people wanted". No problem giving people what they want, especially when it's profitable.
Now, they DID ignore their previous bread and butter, the family sedan, for 30 years, and that chicken has come to roost. Fortunately, the Fusion, Malibu, and Aura are as good a family sedan as their is out there. They have all gotten good reviews, better than some foreign makes, and their best reviews in 25 years. New products are soon to follow (2010 Lacrosse), and initial reviews have people liking what they see so far.
The major problem at this point is, with car sales plummeting, there goes ALL the mfrs' profit margins. Coupled with the credit crisis, a company like GM can't refinance and spread the payments out.
I was thinking exactly the same thing earlier today. They should use the money to prop up suppliers while they seek out new contracts and also to retrain laid off auto workers to do something different, and let these companies find their way to the bankruptcy court. GM is unsavable without the aid of the court, and none of the domestics will turn themselves around with a one-time infusion of cash, whether gift or loan.
Sounds like Karl is on the same page I am, and his idea of slashing and burning and STARTING by terminating the employment of EVERYONE at a VP level or higher is right on target.
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
Let me get this straight. We can't find work for 6.5% of America, but we can spend money to retrain 3 million people to do jobs that aren't out there in the first place????
You or anyone else does not make a valid case of why 1 of the Big 3 going down would cause a D. It is an incorrect message, meant to put fear into the masses and some of our less intelligent Congressmen, so that they will give the auto industry $. You are being coerced and lied to! Why would the Big3 do that? They don't lie or the financial guys plot how to get more right? No one's going to lie for $25B right? or is it $50B?
Give us some detail here. If GM goes belly-up in Mar09 say, and Ford and Chrysler are still in business, what happens? Specifically answer: does a person looking for a new car simply not buy one, or is it more likely that Ford and Chrysler's business picks up (as well as others - and many of those foreign cars are made here in the U.S. I known if my town has 5 restaurants, and 1 closes, this does not change how often people go out to eat!
If suppliers business to GM ceases, doesn't the business to other auto manufacturers go up?
So if GM ceases operations, or sells the divisions off, the GM employees are temporarily laid off, but this does not necessarily mean even hundreds of thousands of people out of work, never mind millions out of work! The latest scare-tactic I've heard is 1 in 10 years will be affected, if we don't give the Big3 blank checks! Bulloney!!
I think the Big3 just see this as an opportunity to jump on the wagon of easy money right now, which will go down in history as the biggest rip-off of the common man, and transfer of $ and power to the elite financial and political class of this country.
And I really wish you'd give some intelligent thought before we give billions and trillions of dollars away, rather than listening to the doomsday stories and lies of the PEOPLE WHO ARE GOING TO BENEFIT FROM THIS $!! :mad: :mad: Did you think O.J. was not-guilty because he told you so, and he loved Nicole? Geesh!
Congress is full of ignorant people that have promised the moon to get re-elected. Now they want the rest of US to pay for their promises.
You are absolutely correct that any one or all of the Big 3 could fail and within a year the other automakers would be building the cars that people want. Probably better than the Big 3 from recent experience.
Karl says:
Bottom line: these are the guys who screwed things up in the first place, I don't want to give them another chance to do it again.
BTW, this extends to the union leadership, too. I have no doubt that the average American worker grasps the concept that having some employees making some money is better than no employees making any money. But as long as union leaders make unrealistic demands for pay and benefits the industries that employee these workers will be uncompetitive and destined for failure -- meaning nobody makes nothin' (except the union leadership up until that point...).
Any bailout package should include wage and benefit cuts for ALL Union and Non-Union personnel. People here want a level playing field. Well lets level it to the Auto makers in the USA, that are succeeding, such as Toyota. The UAW agrees all contracts are cut back to the competition level. That should avoid GM and Ford from filing for bankruptcy.
I'm not against the UAW, or the UAW making as much as they can; UNTIL they ask me to subsidize their company. Then the UAW wages and benefits are part of my problem. The UAW is only part of the overall Big3 problems. Maybe 20%. There are all the other problems - material quality, long-term quality, wrong products, desireability, organization, leadership, too many brands, too many dealers ...
I know you've pointed these things out too in past posts, and only listed the UAW as you had a short post.
I remember back in the early 90's, that a major industry equal in size then to the suto industry crashed. When Communism failed, I remember hundreds of thousands directly and millions indirectly were affected by the major cuts in the defense industry and the closing of over 100 military bases.
The shipyard here in NH for instance cut from 9,000 to 5,000, the Air Force base closed, and all the high tech industries around here cut back temporarily. Well guess what? the Air Force base now houses various companies and workers have found other productive things to do. Our unemployment rate now is probably 4%.
As you also realize, the first of the Big3 that go under, will benefit and strengthen the others.
You're right on that point. They jumped on a bandwagon and milked it for all its worth, while neglecting all other areas of the car biz.
But, as any decent business person knows, when you've concentrated on one fad and when that fad is over, so is your business. So I can only think GM has never had a decent business person OR they fully intended to go belly up when the fad was over. Either way, they deserve to ride off into the sunset.
'11 GMC Sierra 1500; '98 Alfa 156 2.0TS; '08 Maser QP; '67 Coronet R/T; '13 Fiat 500c; '20 S90 T6; '22 MB Sprinter 2500 4x4 diesel; '97 Suzuki R Wagon; '96 Opel Astra; '11 Mini Cooper S
Hmmm... don't know about the suppliers. Maybe. But, then again, if they were supplying good product, you'd think they'd have other contracts by now.
Another option I was thinking was, rather than a loan, a complete government buyout. I'd like to know folks opinions on that option. I'm really not learned enough in economics to give it full consideration. But I think it would be interesting. Would the government manage to build good cars? Probably not. Unless they were smart enough to strip the organization dry of all upper level management and hire on a couple of good, proven auto experts and let them do their job.
'11 GMC Sierra 1500; '98 Alfa 156 2.0TS; '08 Maser QP; '67 Coronet R/T; '13 Fiat 500c; '20 S90 T6; '22 MB Sprinter 2500 4x4 diesel; '97 Suzuki R Wagon; '96 Opel Astra; '11 Mini Cooper S
A. Said companies will be immune to legal action from dealers, union workers, suppliers, etc.
B. All management of VP status and above must leave the company
C. No government aid will take the form of direct cash injections.
Requirement A would only be possible with a bankruptcy, where all contracts and agreements could be disolved. It is inconceivable that a Democrat Congress and a new Democrat President would do anything that would diminish or disolve a large union.
The direction and support from high management to engineer and assemble competitive vehicles has been evident with designs such as Malibu, CTS, Enclave, etc. So, there is a proven ability to design/put together competitive vehicles. But, the albatross for GM as has been pointed out numerous times are:
- Union work rules and influence (inmates running the asylum)
- Wages too high, way out of line with similar positions at Honda, Toyota
- Benefits and legacy
Bankruptcy would get rid of union and its ability to dictate manner and use of personnel and would allow lowering of wages to competitive levels in the U.S.
Bankruptcy would allow GM to trim back or eliminate health benefits similar to other companies in the U.S.
Bankruptcy would free up GM from its agreements with dealers and GM could start over with them in that regard.
After bankruptcy, GM perhaps could hire back engineers, assembly/manufacturing positions as independent contractors. Contract would have provision to lay off at will depending upon sales of vehicles and with provision for call-back. Contract term might be 1-2 years with renewability dependent upon employee performance. Contracts would of course not allow for union representation.
Contracts would provide generous hourly rate with no benefits - holidays, vacation, sick days, health care insurance. Contractors would pay for and manage their health care premiums, but GM would set up arrangement for availability with insurance carriers.
Heh, we've had 8 or 10 restaurants close around here and in fact, we aren't eating out as often.
The latest scare-tactic I've heard is 1 in 10 years will be affected
I think you mean 1 in 10 jobs? I've heard 1 in 7.
I'm of the connected to everything else school. If GM goes banko, my niece's hubby down in TN has less job security because his company does a lot of Big 3 work. He just got his MBA so he'll probably land somewhere, but you never know. One nephew is already hurting from job losses since he's a home builder. Another nephew works for a steel mill down in Alabama. Yeah, the US still makes a lot of steel - but demand is already down thanks to the little r, and if a bunch of car factories shutter, his job is at risk. Maybe it matters more to me because I can put actual faces on the people affected?
Shoot, even Karl's job could be at risk if the car companies go broke and people quit buying cars and quit coming to Edmunds to research them. Who's going to advertise here and pay our server bills? :P
Economy crashing party for dealerships (North Jersey.com).
Dick Gordon interviewed the guy yesterday and it's worth the listen - I can't find a link to it though. The interview mentioned that ~700 dealerships have closed this year per NADA (out of ~20,000). So maybe the financial situation is one way for the Big 3 to shed franchises without having to get a judge to do it for them.
Will we have to bail out Edmunds?
Your site perhaps would have to go to a fee/subscription. Another possibility is asking posters to pay by each post they do, say 5 cents each. Posters would establish accounts with you, just like Illinois Tollway, and you deduct 5 cents for each post. Understand that there is cost/expense to give "free" speech to Edmunds visitors/posters.
This would increase the quality of all posts, such as this one. On Illinois Tollway, drive-through toll plazas deduct an amount from your account as you pass under detectors that read the transponder on your windshield.
Wonder if any studies done to see how level of U.S. productivity and GDP would be increased if all interactive web sites somehow vanished.
Hey now, let's not stoop to scare tactics.
The United States may be on course to lose its 'AAA' rating due to the large amount of debt it has accumulated, according to Martin Hennecke, senior manager of private clients at Tyche.
"The U.S. might really have to look at a default on the bankruptcy reorganization of the present financial system" and the bankruptcy of the government is not out of the realm of possibility, Hennecke said.
"In the United States there is already a funding crisis, and they will have to sell a lot more bonds next year to fund the bailout packages that have already been signed off," Hennecke told CNBC.
So how can we bail out GM when we may need to bail out the government?
Perhaps it's the other way around...you and lots of others aren't eating as often, and therefore the restaurants closed.
Yes but the fact is that the supply of restaurants, or the number of seats does not create the demand. If the demand, even the reduced-demand of now is there, then the remaining restaurants are going to do better.
Similarly if GM goes out of business, and I had intended to buy a new GM vehicle next month, this does not affect my decision to buy a vehicle, just which one I can choose. Some other vehicle manufacturer is then going to get my business, and their workers and suppliers will be busy, and they probably will need to expand - using any idled plants and workers.
I think you mean 1 in 10 jobs? I've heard 1 in 7.
They must be counting the "teenage lifeguards at the city pool" in that number, it's so high.
And while I hear your concern about your friends and relatives jobs, you need to understand that a healthy economy is constantly creating and destroying industries, corporations, and occupations.
I would also like each of you who think the Big3 should get loans or grants, to tell me the criteria of how the government will determine who gets $ and who doesn't. Who are the companies, executives, and stockholders who will never lose? When they succeed they will make lots of money, when they don't succeed they won't lose.
Is IBM or Microsoft too big to fail, and should get a bailout? How about GE? or Dupont and Dow? Are we treating the workers and investors fairly between these companies? I'd say no. I don't like playing favorites, we should have 1 set of rules and laws applied equally and fairly.
Now you may say Congress has always played favorites. Well don't you think we should try and put a stop to it? If you don't, then I guess you don't have much of a moral-stand to complain about any other seemingly unfair/unjust decision.
Anyway, a man phoned in stating that he's the GM of two dealerships - one selling domestics, one selling imports. He indicated that the biggest difference/problem he notices is that while import manufacturers tend to base their production targets on vehicle sales, domestic manufacturers decide what and how much they're going to produce first, THEN base their sales targets off of those numbers.
Interesting. Even though it might affect this man's livelihood, he indicated that he would not be for a bailout of any kind barring a total re-vamp of such sales & marketing strategies (which he feels have contributed to these massive rebates).
I've gotta agree. I hadn't paid a whole lot of attention to this issue until it became a very real, very much talked about probability over the past week.
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I used to work for IBM, who was taken down by Microsoft as we all know. The net result was an increase in IT professionals needed. Lots of displaced workers and local communities that got hurt, but in the end the American economy and consumer benefited.
My opinion is boo hoo for the failing auto companies. If they had run their business correctly all along they wouldn't be in this situation. Let them fail.
Well, it could be like the ol' one lawyer in town starves, two thrive saw too. Less variety in food choices does damper the urge to eat out. I'm not going to MickeyDee's more now that the Euro-Latino fusion place has closed.
GM may be DOA, but there's little chance for a soft landing or renewal if they simply shut their doors.
Congress is just using a manufacturing entity to filter funds to pepetuate the pension and medical insurance for non workers whose union failed to cover that event that has come to pass.
Using tax payer money for this purpose is unacceptable before the assets of the little 3 are liquidated.
A little loophole in my choice of analogies, as all foods aren't the same. But if you're trying to say that if GM closes that potential buyers can't find a similar or better vehicle from any other manufacturer, you're going to get laughed off these forums. :P
but there's little chance for a soft landing or renewal if they simply shut their doors.
I'd doubt they'd shut their doors. GM would probably declare B and continue operations at least for a while. The factories and land and such have value, no matter if it is only 10% or 20% of what it was valued at. The fully assembled and partially assembled vehicles have value. Factories that make models like the CTS and the Corvette might be highly prized. Saab could be sold and operate. Opel could be sold and would operate.
The economy will be much worse off for much longer if we continue to support the failed organizations and methods. You need to weed the garden, before fertilizing it.
"the practice in supposedly free market capitalist economies in which the government steps in to bailout or otherwise subsidize weak or failing firms.
A government attempting to transition from capitalism to socialism by this method takes control of the worst industries — the "lemons" — first, which undermines such an approach." (Wikipedia)
The Turkey Theory of Government and Lemon Socialism
Lemon socialism squeezes taxpayers
1) If we pay pensioners through GM, we'd pay them about twice as much.
2) Also the other incentive is if GM or the union is not going to have the funds to fund future payments, then you want to stop as many current workers from moving into the pension system.
Sounds cruel, but they should be entitled to what is legitimately theirs.
If the government would like to bailout my 401K losses to pre-financial crisis levels, then maybe I can see how it would be fair to subsidize someone else's job and retirement.
My sister's benefits didn't change when the PBGC took over her pension (money and health care).
Should note that the PBGC was self funded until recent years, so the taxpayer hit will be bigger as more company pensions fail.
http://atdetroit.net/forum/messages/5843/158540.html?1223873823
And PBGC doesn't cover health care benefits. Our neighbor received a pension from a company that went bankrupt after he retired. When it went bankrupt, his pension was guaranteed by PBGC, but he lost is health care benefits. He had to work at Walmart to pay for this prescription drugs.
That's probably the difference - she was already retired and receiving benefits when UAL filed banko.
You will see approval next week. The vote will be a landslide approval.
The inevitable CH 11 will be delayed.
Regards,
OW
Just to be clear, I don't have a problem with successful people making big money. If you possess even a shred of economic wisdom you know that's what the whole system is predicated on. But I hate the idea of unsuccessful people making big money, which is exactly what happens when a government bailout maintains a failed CEO's position (and income).
So to wrap up, I would like to see the government save the domestic automobile industry only if the following requirements are met:
A. Said companies will be immune to legal action from dealers, union workers, suppliers, etc. These guys would have no one to sue if the companies actually failed, so saving them with taxpayer money doesn't mean they are now perfectly positioned to sue when it's time to downsize, modernize and restructure.
B. All management of VP status and above must leave the company before any government aid arrives, and they must leave the company with nothing! No golden parachutes, no stock options, zip! They've been making plenty of money for years, they obviously have something stuck away for a rainy day (and if they don't it's further proof of their idiot business skills, so let 'em live in a cardboard box).
C. No government aid will take the form of direct cash injections. It will come from government secured loans/bonds, and the government will be first in line to make money if/when the companies become profitable (just like Chrysler in the '80s).
Unfortunately, that won't happen so it will delay the inevitable. Get ready for a $25B lesson in cloak and dagger! Let's warm it up a bit, shall we?
Regards,
OW
D) Employees and retirees will be paid last each month, after all other bills are paid, with the UAW then paid first of the employees, and the salary people paid next. The lowest paid of the salary positions get paid first of that group.
Maybe that would provide some incentive to change, and management gets paid last as they need to make the changes happen.
Maybe what the government should do is buy all the Big 3's debt and work out payments with them directly, and take it off the top of the bailout for the banks.
I agree it isn't easy bailout or bankruptcy but rebuilding the company through a bailout will NOT result in a successful industry business model. Why? The cost will be far more than this initial funding and without strings, the fire will continue without result. The same team is on the field. How many times do we count failure?
Regards,
OW
If there is work, they should get paid. At $72/hr. compensation, in this market, it just is going to swing faster and the cuts deeper.
Do you want survival or a healthy industry. All groups need to be put back in line so the product attracts sales...oh, and the business can weather unexpected stormy weather.
Regards,
OW