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Comments
Rocky
Interesting observation: If a worker earns an additional $2 per hour, you get thrown into a lather. But have a group of managers with multi-million dollar salary packages lose several billion dollars, and everything's A-OK.
I'm curious from where you got that accounting lesson. My guess that it's either The Fountainhead or Atlas Shrugged (neither of which I recall being on my B-school reading list...)
Well, let's see: Olds was a loser of money and market share for quite some time.
What will GM lose on Olds sales next year? Zero.
What will GM lose on marketing tired Olds products next year? Zero.
What will GM lose on supporting the Olds dealer network next year? Zero.
Not paying for Olds frees up resources to be dedicated to making some of the remaining badges and nameplates stronger, which one would hope could be returned to profitability. That being said, whether GM's management will actually bother doing that is an entirely different matter. I have my doubts that they'll pull it off. Controlling costs is important to turning any bad business around, but without products to match, the cuts only prolong the inevitable.
So many americans look at what a hourly employees makes versus how much a CEO and his cronies loses in buisness decisions and/or makes in salary's. Why ?
I guess I'm not the only one who can see this. We however are the few that can. :confuse:
Rocky
I'm not sure if I've ever asked you this question. What vehicles do you currently own ? What new vehicles are you considering as your next ?
Rocky
That's the problem with M&A, as I'm sure you know -- just about any mature company that has acquired assets and debt capacity can look good if you stare at its balance sheet long enough. The problem with simply looking at the ratios out of context is that it doesn't tell you much about the future product and sales performance of the entity, nor the ability of the parent to marry the culture of that entity with the acquiring firm.
I don't believe Toyota is doing everything right, but it was smart for it to create its own brands, rather than buy other mediocre ones. It's hard for me to think of a mass market automaker that went up on the auction block during the 90's buying spree that it would have made sense for Toyota to have bought, at any price.
Would you have agreed with socala4 if your dad was one of the thousands that lost their jobs when Oldsmobile was chopped? He preaches pro labor, while ripping management for not getting rid of more jobs. Hard to have it both ways.
Rocky
If GM was producing products that people wanted, there wouldn't be much need for job cuts. If GM management handles things competently (and don't hold your breath that it will), then the money saved by dumping poor performers will be more than made back by selling higher volumes of the remaining nameplates, which would be designed so that customers are actually happy to buy them, and wish to continue to buy them.
One thing I've been emphasizing here is creating a customer focus that allows GM to compete effectively. Unfortunately, management has bungled it so badly that now market share losses are probably inevitable going forward. They could turn it around if they simply sold better cars more efficiently, but I doubt that they will.
In my opinion, we have spent years developing a middle-class workforce of what I'll call gray-collar workers (they do fairly repetitive work, but inside of offices instead of on assembly lines) who erroneously believe that they are superior to the blue-collar worker, and who have forgotten that they are only a few paychecks away from poverty themselves. They identify more strongly with the elite than with the common worker, even though they have far less in common with the likes of Rick Wagoner than they do with Joe Sixpack.
The thing that they don't realize is most Americans will never join the elite, their best hope is that they buy a house in an improving market that can give them the illusion of prosperity, and to get enough credit card debt and borrowing capacity so that they can own stuff that they likely can't afford. Too many people with minimal resources and few skills seem to believe that having an interest-only mortgage and a car lease means that they have arrived and are above the fray, when they are just as dependent upon their jobs and the whims of their employers as is the assembly line worker whom they think is beneath them.
Rocky
How would GM build a car comparable to the Camry paying wages and benefits, more than twice per hour of Toyota & Honda? I think GM should pull back on all but the vehicles that make them money. The PU trucks and large SUVs are still the best built by any maker. Let Toyota & Honda fight off Hyundai & Nissan for the low margin car market.
So have been many other divisions.
What will GM lose on Olds sales next year? Zero.
How is that any different from spreading what would have been Olds loss onto other divisions?
What will GM lose on marketing tired Olds products next year? Zero.
How is that any different from spreading what would have been Olds loss onto other divisions?
What will GM lose on supporting the Olds dealer network next year? Zero.
How is that any different from spreading what would have been Olds loss onto other divisions?
Also, your "zero" math is very wrong. One-time big write-off is no better off than small losses over time. There is opportunity cost associated with that $2 billion dollars spent on closing down Olds. Even at 5% a year, which is way below the borrowing cost of GM with its junk status, that is $100 million a year lost in interest income.
Controlling costs is important to turning any bad business around, but without products to match, the cuts only prolong the inevitable.
The products that could save the company are certainly not small cars like you have been suggesting. Small cars are a huge drain on cash so long as there is union labor price structure. Besides big vehicles, financial services, high-tech components and entertainment are probably what the company should have transitioned into over the past two decades, just like GE did . . . that would also have trimmed down union influence, again like GE did.
BTW- Gagrice, Toyota assembly workers top wages are $21 bucks an hour at the San Antonio, Tx Tundra plant. They start out more per hour $15.25 then new Delphi workers. After training is complete they go up to $21 an hour from what a friend of mine said. He went through 3 interviews.
Supervisors (Team leaders) make $22. So yes GM workers when compared to Toyota workers make more. (old tymers) However cost of living in the south somewhat makes it comparable. The biggest difference between the two is retirements. This has already been resolved since new workers only get 401K's. I suppose if GM goes belly up or moves all operations to China, then us buy american crowd won't have a choice but to root for the Japanese
(new american domestic) car company's. Our Big 3 might look like this. Toyota, Honda, Nissan. :surprise:
Rocky
I'm curious from where you got that accounting lesson.
No accounting lessons necessary. Just second grade arithmatics will do. How many managers have multi-million dollar salary at GM? 5 or 10 or 0? Wagoner's own salary is only $2 million a year, which he is voluntarily cutting in half, so $1 million a year; not even Wagoner has a multi-million dollar salary. Whose salary is higher than Wagoner's? So the total expenditure on managers' non-existent multi-million dollar salary packages is ZERO!
Compared to that, billions were spent on excessive union salaries and benefits. With 650k members at UAW, annual union membership dues alone is close to half a billion dollars! Union members must be receiving at least 10 times if not 100 times the benefit from robbing the company and consumers before it makes sense to pay union dues.
Like I said, only 4th grade arithmatics is necessary, once you look beyond the hot rhetorics.
Just to add to your argument, how would GM build a car comparable to the Camry, when it can not incentivise or discipline indidividual workers? or even fire the real incompetent? How would GM bulid a car comparable to the Camry, when it can not retrain workers to adopt modern production techniques without myriads of red tape?
When GM is not facing those union imposed hurdles, it can indeed build a car to compete successfully against Camry; it already does in GM China.
Like they say, one of the most brain-dead easy way to make a small fortune is starting out with a big one ;-)
"ice water" flowed through his veins. he was very intimidating to the guys under him and wasn't afraid to use people as examples by replacing them while they were on vacation. She said management was always afraid of vacations, wondering if they would have a job when they got back. She said she felt sorry for them. Alot of them were good folks, that were doing a good job for the company, but when they reached a certain point in salary it seemed they were replaced. She also currently lives by ex-GE management and they offered their points of view to her. Many still conform to GE dress codes to this day because it was such a big part of their lives and is such a natural feeling.
Rocky
B-school, eh?? I missed that earlier. So you are one of the much maligned "suits" yourself? ;-) Reading lists are quite off topic, but for what it's worth, Das Kapital offers much more econometrics than either Fountainhead or Atlas Shrugged. I would strongly recommend reading all three of them, plus Wealth of Nations, before drawing your own conclusions. At least, after acquiring some basic knowledge in socioeconomics, one would avoid making nonesense argument that free market produces serfdom; it's so far off the wall (even Das Kaptal had to introduce the institution of bougeoise-controlled state machinery before linking "capitalism" and "wage slavery"; in other words, the "capitalism" under discussion was "monopoly capitalism" not free market). No you did not make that argument, thank goodness, someone else did.
I'm not sure that is relevant. It may be the reason Japan is building plants in the USA. The issue is comparing the total package for UAW workers and HonToy workers in the USA. I would say that it is just about double for the average UAW worker. Why else would they be offering $130k buyout? I know my health and retirement costs my employer $14.21 per hour. Something the HonToy is not shackled with. When Health care goes up they just tell the employee it will cost more for you to have healthcare. My point earlier and still is that even if GM had the best designed car in the CamCord class, they could not build it competitively with the current labor situation. The margins are too tight on cars. GM has no problem beating Toyota in every class of large SUV and PU trucks. The margins are much better and can absorb the higher cost of employees.
It's easy to get lost in the histrionics, but let's get real, how much is steak and lobster for half a dozen people? How much is $1 million spread across 650k people? $1 dollar and a half! Can't even buy a cup of coffee! The total expenditure on executive lavishness, while tantalizing in news reports, is peanuts compared to across-board benefits and pay raises that cover hundreds of thousands of people.
I'm by no means endorsing executive lavishness; in fact, when they go overboard, there are laws waiting for them. In any case, it does not take away from the fact that, modest amount multipled hundreds of thousands times makes for huge sums of money. That's why free market is a much more efficient mechanims for deciding marginal pricing than collective bargaining, where billions of dollars could be influenced by $50 spent on steak and lobsters.
Everything you find wrong with GM is the unions fault. My GAWD, you give the management, government, etc a free pass. Well you will get your wish for low costs since GM appears to be sending more facility's to China and Mexico. Why isn't GM importing cobalts from China yet to get your low cost small car that's of better quality. I suppose that's the unions fault too. :confuse:
Rocky :confuse:
In exchange for "job banks," where workers are paid full salary to do nothing at all.
The Chinese plants are new and modern, thus keeping "just in time delivery" a reality. I suppose having the old plants is the unions fault also
As a matter of fact, yes. The cost of putting new plants in place would have been much much less if the company does not have to provide "job banks" for everyone who no longer has a place on the new production line.
Everything you find wrong with GM is the unions fault. My GAWD, you give the management, government, etc a free pass.
Not at all. Like I said, the management should have refocused the buiness away from domestic carmaking, thereby rendering union impotent . . . like GE did.
Well you will get your wish for low costs since GM appears to be sending more facility's to China and Mexico.
That might just be the only way possible for GM to keep its legacy commitment to UAW members . . . squeezing the sweat and blood of poor Mexicans and Chinese to feed the union . . . American consumers and non-union workers are surely not interested in feeding the union.
Why isn't GM importing cobalts from China yet to get your low cost small car that's of better quality. I suppose that's the unions fault too.
GM only started making small cars in China in the last few years after a long streak of success with big Buick sales. The market there seems to be absorbing all the output for now. Rest assured, GM will import cars from China, hopefully before Chinese brands do. Down the road, it's either the Chinese and Mexican workers support UAW retirees or the American taxpayers do through the Pension Guarantee Corp (with a more and more strigent cap).
Rocky
What would be the projected profit at GM with the same legacy costs and contractual obligations of the transplant foreign manufacturers in the U.S.(per vehicle)? What is the burden (for the Japanese)per vehicle if that same product is manufactured in Japan without Government Subsidy.?
What percentage of the population (In Japan) would even CONSIDER the purchase a Non-NIPPON vehicle. (Nationalist Attitude).
What percentage of the total (U.S) profits are used to subsize EXISTING legacy costs in JAPAN ?
As I said before this is a very complex issue !
Rocky
Rocky
Maybe for trucks and SUVs, but not for cars. And most definitely not for entry-level cars.
Without a highly desirable entry-level car, any automaker will have difficult garnering young buyers. Without young and satisfied car buyers, you'll not see a repeat customer. Nor see any of their friends, either.
Equalling a dwindling market share.
IE - GM in a nutshell.
:sick:
Rocky
Delphi is the #1 employer in Mexico, but GM in a few years will be a close second it looks like. :sick:
Rocky
You should really take a trip to China, and see for yourself just how far off from reality your characterization is. Even I was quite surprised at how far they have come along in terms of living standard. More Chinese households probably have large screen TV than Amerians households do; every single one of the distant relative families that I visited there had a larger screen TV than I do back in the US. None of them are among the wealthy there either. There is just such a huge upswelling of material wealth . . . it's mind boggling . . . almost like the first time I saw an American Supermarket when I left a poverty-stricken China behind nearly two decades ago; your description is much more appropriate for that old China under command-economy: everyone had a job, but there was a dearth of goods.
That kind of combination of job security and dearth of goods, result of noboy having any incentive to produce anything because their jobs were nearly 100% protected by the government, is not what I want for America. For UAW members, there is a problem even closer to heart: the only way GM can avoid bankruptcy, thereby pushing all retiree obligations to the Pension Guarantee Corp, is actually importing from China as quickly as it can. Using the benefit of cheap Chinese labor to pay for legacy union obligations.
As for cheap imports hurting the economy in general, that just makes no sense. Do you ever donate to charitable cause? I doubt the charities turn around to sell the goods to disaster relief area at prices higher than local production. The consumers are much better off with cheap imports even if domestic producers have to look for new ways of making a profit.
The roman empire lasted a thousand years, and we will be lucky to see 300 years.
Roman Empire lasted about four centuries. It was killed off by high taxation and inflation (another way of taxation). Roman Empire started to fall apart when their currency Dinar lost 98% of its value over 200 years (as the coin literally went from pure silver to 2% silver or less). Our currency the US Dollar lost 95% of its value since the 1913 Federal Reserve Act (gold was roughly $22/oz back then, as measured by the $20 coin being 1oz weight of 91% pure gold). Why the Federal Reserve Act? Because in a normal free market with free floating real cash (as in metal not Federal Reserve Notes), wages go down along with everthing else during productivity increases and economic expansion. Of course, the union members got very unhappy despite their reduced wages can buy the same amount of goods as before because all prices had come down too (sound familiar?). Enough rioting from the union and bankrupt companies from labor unrest convinced the politicians that we needed an ever-inflating currency. Not so co-incidentally, the "economic security" provided by the fiat paper currency also guarantees profit for the consortium of bankers issuing the currency and guaranteed that nations could wage wars beyond their financial means. As they say, the rest is history. We are 95% to zero ;-)
Rocky
Rocky
(1) have small cars made in Mexico, Korea and China
(2) drasticly cut domestic worker wages
Which solution would you prefer? ;-)
GM dealer network will be a huge asset when it imports Chinese made cars. It took Hyundai and Kia over a decade to build up their national dealer network, and they are still very inadequate.
I however won't buy it.
Rocky
My point proven.
Rocky
(1) really expensive luxury cars made in Japan
(2) still expensive BMW, MB made in China
(3) reasonably priced GM cars made in China
(4) really cheap cars made in China under Chinese brand that have scanty dealer network in the US.
Look it this way, at least some of the money you pay towards that GM car will go towards the retirees ;-)
I will buy those expensive Japanese or European brands that are made in this country or Canada.
Rocky
Rocky
Rocky
Rocky
sent them to an american concentration camps and tortured them for supplying the enemy. :mad:
Rocky
Equalling a dwindling market share.
Exactly right, you get it. Which is of course exactly why Toyota, Honda, Nissan and now Hyundai have all used this small car strategy as part of their US market development plan.
The small cars may not themselves earn great margins (although probably better margins than all the rental specials built by the Big 2.5), but they serve as the gateway to turning that customer into a long-term customer.
The fact is that no one would have given Nissan (Datsun) a chance if its first car had been meant to take on a Cadillac, as no one would have taken it seriously. Instead, they started small (with the 510) in a category largely ignored by the established makers, and built their line-up from there.
GM has no credibility with the young, small car buyer, which is going to hurt its long-term prospects. If a twentysomething develops loyalty to Honda, Toyota or whomeever, they will be harder and more costly to win over. If you could sell them a small GM car today, you'd stand a better chance of selling them a larger car, minivan, etc. as they get older and more affluent. Unless you are a niche maker such as BMW, you can't cherry pick your customers, you have to cultivate them.