Everyone is willing to pay for the skill, but no one wants to invest any money into a young worker wanting and willing to learn the skill.
Isn't paying the ultimate incentive for investing? Did you buy the house or did you invest in individual pieces of lumber and a construction company?
Also, you are talking out the wrong side of your mouth again. By your arguments against free trade and immigration (driving down wages), if someone actually invested in producing more educated workers, wouldn't that be driving down wages for educated/skilled labor? Goes to show just how silly that argument really is . . . you can't even hold onto it with any consistency.
That's why you go to school and learn a skill. You want to invest money in your own future. See, I think THAT is the problem. People want someone else to pay for something they should be doing themselves to make themselves more marketable.
It's kinda hard to finish a apprenticeship if you don't have a company willing to sponsor you so you can learn OJT which is required to get a journeymens card.
I guess you don't know whole lot about the trades ?
Isn't paying the ultimate incentive for investing? Did you buy the house or did you invest in individual pieces of lumber and a construction company?
How can you compare investing into lumbar and constuction company with investing into a skilled worker. Apples and oranges.
Also, you are talking out the wrong side of your mouth again. By your arguments against free trade and immigration (driving down wages), if someone actually invested in producing more educated workers, wouldn't that be driving down wages for educated/skilled labor?
No because the job I wanted was a union job, and BTW not everyone wants to do that kind of work for a living. I guess you might say that it's a job americans don't want to do ? :confuse: Just like the shortage of Nurses and their high pay. I could get a full ride scholarship being a male nurse if I chose to.
Goes to show just how silly that argument really is . . . you can't even hold onto it with any consistency.
No it goes to show you how silly you are because you "twist and spin" the words I say to make yourself always look good.
How can you compare investing into lumbar and constuction company with investing into a skilled worker. Apples and oranges.
How is investing in construction company different from investing into a skilled worker? What is a "skilled worker" anyway? is there a universally jack-of-all-trades "skilled worker"? Obvously not. Both are investments for the sake of returns; investing in a construction company will involve investing in workers who are skilled at working for a construction company . . . duh!
"Also, you are talking out the wrong side of your mouth again. By your arguments against free trade and immigration (driving down wages), if someone actually invested in producing more educated workers, wouldn't that be driving down wages for educated/skilled labor?"
No because the job I wanted was a union job, and BTW not everyone wants to do that kind of work for a living. I guess you might say that it's a job americans don't want to do ? Just like the shortage of Nurses and their high pay. I could get a full ride scholarship being a male nurse if I chose to.
Please enlighten me on how your reply address the question I asked. BTW, what is "a union job" anyway? Obviously not defined by what work is being done, but instead the job security, regardless whether it's just a sinecure. The last sentence you wrote just a blew a huge hole in all your arguments in the past few weeks: if a full scholarship for training towards a profession that is actually in high demand is always there for union members, what have you been whining all this time about unemployment and sky falling about? You just want to keep getting paid high wages to entertain your own male ego at consumer and taxpayer's expense.
It's kinda hard to finish a apprenticeship if you don't have a company willing to sponsor you so you can learn OJT which is required to get a journeymens card.
If all the fruit grown in this country were picked by UAW instead of illegal workers, most americans won't be able to afford to eat fruit anymore. Gas at $5/gallon might seem cheap when compared to price of an apple after paying for job banks, pensions, full family healthcare, overtime, free tuition etc.
OTOH, Why can't GM hire illegals at $5/hour to build cars so that profits stay in country not in Mexico, China or Canada? Maybe the congress should a pass bill stipulating illegals may be hired only by the Big 3, that should bring the domestic auto industry on a level playing field. I'd like to see how transplants handle that.
How is investing in construction company different from investing into a skilled worker? What is a "skilled worker" anyway? is there a universally jack-of-all-trades "skilled worker"? Obvously not. Both are investments for the sake of returns; investing in a construction company will involve investing in workers who are skilled at working for a construction company . . . duh!
I guess I should of said skilled-Trades worker. BTW-yeah the universal "jack of all trades" skilled workers are called maintence mechanics :P
Please enlighten me on how your reply address the question I asked. BTW, what is "a union job" anyway? Obviously not defined by what work is being done, but instead the job security, regardless whether it's just a sinecure. The last sentence you wrote just a blew a huge hole in all your arguments in the past few weeks: if a full scholarship for training towards a profession that is actually in high demand is always there for union members, what have you been whining all this time about unemployment and sky falling about? You just want to keep getting paid high wages to entertain your own male ego at consumer and taxpayer's expense.
You OTOH want to defend capatalism/free trade/free market every chance you get by throwing in the race card for your smoke and mirrors, whenever anyone takes a stance against it. Maybe it's to hide your true agenda as an employer, wanting to exploit illegal aliens (immigrants) that are less educated, and will work for next to nothin' and look at you as a god. Having this type of a workforce, perhaps will fulfill your male ego of wanting to be the "intellegent superior being" and make you feel dominant. Perhaps as a kid you were a bully, or was the one getting bullied. Only you know the answer. I know short people that have this "chip" on their shoulders and act the same way. They desire control and power, and other folks look at them as childish. :confuse:
Any skill trades job that requires more than a half of brain to do, employers will hire Union Journeymen skill trades men to complete the job right the first time.
If all the fruit grown in this country were picked by UAW instead of illegal workers, most americans won't be able to afford to eat fruit anymore.
Not all UAW members make $27 dollars an hour. I was a UAW member twice and I started out at $8 an hour at one job and made $11 at another job. This high union pay conspiracy that keeps going around is "smoke and mirrors" and is far from the truth.
Gas at $5/gallon might seem cheap when compared to price of an apple after paying for job banks, pensions, full family healthcare, overtime, free tuition etc.
From the ground to the gas tank, Gas is made/manufactored by union members, and are you also going to blame the high gas prices on union members. :surprise:
OTOH, Why can't GM hire illegals at $5/hour to build cars so that profits stay in country not in Mexico, China or Canada? Maybe the congress should a pass bill stipulating illegals may be hired only by the Big 3, that should bring the domestic auto industry on a level playing field. I'd like to see how transplants handle that.
I can't even comment intellegently on this topic because what I just read might be the most riduclous thing I've ever seen. I suppose you as a illegal aliens want to take my family's jobs too. :confuse:
I can't even comment intelligently on this topic because what I just read might be the most riduclous thing I've ever seen. If a two time UAW worker hasn't got the intelligence to figure out by now it was a troll, I doubt many of your comrades deserve anything more than minimum wage, much less $27/hr
I suppose you as a illegal aliens want to take my family's jobs too. I'd pick a sober illegal any day over a drunk UAW member to work for me :P
Yesterday Sen. Evan Bayh (D-Ind.) and Rep. John Conyers (D-Mich.) introduced a bankruptcy reform bill designed to eliminate some of the abuses that have occurred in the Delphi and other recent corporate bankruptcies. This bill is entitled the "Fairness and Accountability in Reorganizations Act of 2006" (FAR). The bill numbers are S. 2556 and H.R. 5113.
This bill addresses two key issues. First, it closes some of the loopholes that have allowed executives at Delphi and other companies to propose huge bonuses and other forms of lucrative executive compensation at the same time they are using the bankruptcy process to try to slash wages and benefits for workers and retirees. As a matter of fundamental fairness, management should not be allowed to enrich themselves on the backs of workers and retirees. There should be equality of sacrifice among all of the stakeholders.
Second, the bill requires the bankruptcy judge to take into consideration a company's foreign operations, as well as its domestic ones, in ruling on section 1113 and 1114 motions to reject collective bargaining agreements and retiree health benefits. Corporations should not be allowed to shift resources and production to profitable overseas operations at the same time they are pleading poverty in an attempt to cut wages, benefits and jobs in their U.S. operations.
The UAW and other unions are urging representatives and senators to show their support for these bankruptcy reforms by cosponsoring the Bayh-Conyers bill (S. 2556; H.R. 5113).
We encourage our Delphi and General Motors membership along with other UAW activists to contact your representatives and senators immediately and urge them to stand up against bankruptcy abuses by Delphi and other corporations by cosponsoring this important legislation.
What this means to us: About time some Senators and House of Reps. are fighting against corporations that file on their NA operations and corporate corruptness.
thanks about the job I have, it is a humbling profession that learning could go on and on and on while doing it. I learn at least one thing every day on that job and that's a good thing because we are helping people that are depending on us and the nurses and radiologists and lab people and, of course, the docs themselves, to get them through whatever's going on with them. As baby boomers age my job is going to get more and more in demand, because soon baby boomers are going to retire and then they'll need someone to take care of their needs, including respiratory needs.
Again, I don't think it's funny that Ford and GM are having hard times. I come from a couple of decades(I worked three months short of 20 years for them)of union-represented work at The Boeing Company. Boeing is a job filled with this funky stress all the time. If you have your job you're worrying about getting laid off all the time. Needless to say the politics get pretty thick there. :sick:
I mention the Respiratory Therapy as a viable option for people to try doing after getting a pink slip. Believe me, I'm not being condescending when I mention the idea at all. I've been there-twice before from Boeing. I decided that the Boeing roller coaster ride was through after this 2nd layoff.
Any skill trades job that requires more than a half of brain to do, employers will hire Union Journeymen skill trades men to complete the job right the first time.
The 95% non-union workers must be dummies then. Talk about nonsense here. The system of apprenticeship and journeymen were invented by the trades guild to exploit new comers before the age of universal education and higher education.
Well keep up the good work (iluv) I'm sorry boeing was a roller coaster ride. The company currently is doing very well and is one of the few I really respect and wouldn't mine working for.
I agree you perhaps are better off and look at what you get to do each day. You get to help people, which I really respect.
Rocky
P.S. Hopefully someday I will beable to convince you to leave your Kia for a GM product. Wishful thinking, eh?
I might(and it's a mighty big might) leave my 2001 Kia Sportage 4x4 for a new Chevy Aveo, which, as you know, is made my GM Daewoo Auto & Tech.Co.(South Korea). Yes, I'm sure GM is helping Daewoo do a better job with their car-building efforts. Did that sound a tad sarcastic?
The 95% non-union workers must be dummies then. Talk about nonsense here. The system of apprenticeship and journeymen were invented by the trades guild to exploit new comers before the age of universal education and higher education.
You said it, I didn't. Working around the material I deal with, trust me you want the best and brightest minds brightness.
NEW YORK — Saturn has introduced its new 2007 Outlook, a full-size crossover vehicle that is a companion to the Buick Enclave that was unveiled earlier this year in Detroit, and the GMC Acadia, which has yet to be shown publicly.
The Outlook, like its siblings, will seat up to eight passengers in three rows and has been developed on a new corporate platform called Lambda that can be configured in front- and all-wheel-drive versions. It goes into production in the fourth quarter of this year.
Among its features, Saturn is touting its Smart Slide articulated second-row seat, which isn't quite as useful as Chrysler's Stow 'N' Go minivan seats that fold into the floor, but is nevertheless helpful for accessing the third row. The second and third rows both fold flat, but not into the floor.
The Outlook will be powered by a 3.6-liter V6 rated at 265 horsepower and 244 pound-feet of torque (the figures are slightly higher for the uplevel Outlook XR with dual exhaust). A new six-speed automatic transmission is standard.
The Outlook rides on an all-independent suspension and can be ordered with 18- or 19-inch wheels and tires. Four-wheel disc brakes with ABS are standard, as are side airbags for the front row and side curtain airbags for all three rows.
Saturn customers will be able to order the Outlook with such features as ultrasonic parking assist, power liftgate, remote vehicle start, heated windshield fluid, DVD entertainment system and DVD navigation system.
What this means to you: GM didn't invent crossover vehicles, but its new Lambda models could redefine the genre.
What this means to us GM fans: Saturn is back and has awaken from the dead.
Well perhaps the Old Saying of what's good for General Motors is good for America. Ya'll have to read this.....
Jubak's Journal Bad for GM, bad for America Tuesday, April 11, 2006 General Motors has launched a time bomb that could push the company into Chapter 11 -- and take down the financial markets with it.
Leave it to the guys who are driving General Motors (GM, news, msgs) off a cliff to make things worse. Thanks to their most recent "solution" -- selling off a 51% stake in the company's profitable General Motors Acceptance Corp. financial arm -- CEO Rick Wagoner and his team have actually raised the odds that General Motors will have to seek bankruptcy protection. And made sure, as an added bonus, that they can do nothing to stop what they’ve set in motion.
Pretty neat, huh?
But, wait, that isn't all that these guys managed to accomplish last week. Before you relax into some comfortable jeering from the sidelines -- unless you own GM stock or, even worse, work there or at some GM-dependent company -- you should know that last week's GMAC sale has put all of us in range if GM should blow up. Thanks to the way that Wagoner et al, structured the GMAC deal, they've created the possibility of a real blowup in the derivatives market that insures bond holders against default. If that bomb were to go off, every financial market would be in shrapnel range.
Jubak's Journal Bad for GM, bad for America advertisement
General Motors has launched a time bomb that could push the company into Chapter 11 -- and take down the financial markets with it.
By Jim Jubak
Leave it to the guys who are driving General Motors (GM, news, msgs) off a cliff to make things worse. Thanks to their most recent "solution" -- selling off a 51% stake in the company's profitable General Motors Acceptance Corp. financial arm -- CEO Rick Wagoner and his team have actually raised the odds that General Motors will have to seek bankruptcy protection. And made sure, as an added bonus, that they can do nothing to stop what they’ve set in motion.
Pretty neat, huh?
But, wait, that isn't all that these guys managed to accomplish last week. Before you relax into some comfortable jeering from the sidelines -- unless you own GM stock or, even worse, work there or at some GM-dependent company -- you should know that last week's GMAC sale has put all of us in range if GM should blow up. Thanks to the way that Wagoner et al, structured the GMAC deal, they've created the possibility of a real blowup in the derivatives market that insures bond holders against default. If that bomb were to go off, every financial market would be in shrapnel range. See the news that affects your stocks. Check out our new News center.
Cheap goods So how does a CEO manage to put his company and the entire financial market at risk with a single deal?
By making it contingent on the whims of the not-so-rational combatants at Delphi (DPHIQ, news, msgs) and the United Auto Workers, who have locked horns over wages and benefits in Delphi's bankruptcy proceedings.
General Motors did this by "selling" 51% of GMAC to a private investment group including Citigroup (C, news, msgs) and headed by hedge fund Cerberus Capital Management for $14 billion. Of course, GM won't get that $14 billion all at once. When the deal closes, Cerberus and its partners will pay General Motors $7.4 billion. GM will collect another $2.7 billion in cash from GMAC as a return of the higher taxes that GM paid on GMAC's income when it owned the financial company. GM will receive another $4 billion over three years from GMAC as income on $20 billion in leases and retail assets that GM will retain after the deal.
This isn't exactly a great deal for General Motors. GMAC is the company's most profitable unit, earning $2.8 billion in 2005, and GM has been able to tap GMAC for capital during what has become a perennial rough patch. The investor group is paying about five times net income for its 51% stake in GMAC -- and part of that price is cash from GMAC itself. If you look just at actual cash from the investor group and subtract the cash from GMAC, the price is closer to two times income.
But when you've lost $10.6 billion in a year, as General Motors did in 2005, getting a good price takes back seat to getting the deal done at all. Especially when your auto sales are dropping like a rock. GM's U.S. sales dropped 14% in March.
The no-sale sale But price isn't the real, company-crushing bad news in this sale. I'd save that moniker for this oddity: The sale isn't a sale at all. Cerberus and the rest of the group can walk away from this deal before it closes some time in the fourth quarter of 2006 if the credit rating on General Motor's unsecured long-term sinks to less than a triple-C rating from Standard & Poor's. A rating like that would be two notches deeper into junk-bond territory than General Motors' current rating of single-B. (The deal is also off if GMAC's own credit rating slips below its current double-B rating, just two notches below investment grade.)
What could drive General Motors bond ratings down another two notches just about overnight? A strike set off by supplier Delphi’s efforts to break its contracts with its unions in bankruptcy court. The company has filed a reorganization plan that includes closing or selling all but eight to 12 of its 33 North American plants and cutting as many as 30,000 jobs. For U.S. workers who keep their jobs, Delphi has proposed an immediate wage cut of $5 an hour (or 18%) to $22 an hour for production workers and another cut to $16.50 an hour -- for a package of cuts totaling $10.50 an hour -- in 2007.
The United Auto Workers, as you might imagine, has branded the proposal unacceptable and threatened a strike. Delphi has responded by asking the bankruptcy judge for a ruling that would allow the company to unilaterally break its union contracts with the company's 34,000 union workers and its 12,000 union retirees. The first hearing in this game of chicken is scheduled in U.S. Bankruptcy Court in New York on May 9-10. A ruling on the labor contract is unlikely until June.
Jubak's Journal Bad for GM, bad for America advertisement
(Page 2) of 2
Previous
A strike at Delphi would cripple GM by shutting down almost all of the auto giant’s North American production. General Motors last faced a long strike in 1998, when a 54-day work stoppage closed 95% of its North American operations. Merrill Lynch estimates that a 60-day strike at Delphi would cost General Motors $7 billion to $8 billion in cash. That sum wouldn't just come from lost production. It also comes from swings in the company's cash flow created when hard-pressed suppliers, also shot down by a Delphi strike, increase their demands that GM make prompt payments of existing bills. Payables -- what GM owes suppliers -- stand at $26 billion. And they're paid in cash. That's a significant figure even for a company like GM with $20 billion in cash.
You'd think $20 billion in cash would be enough to reassure the credit-rating agencies who have graded GM's debt "junk" or, to be polite, "below investment grade." But it's not, because there are so many demands on that cash, including the recent early retirement offer to workers at GM and Delphi that could cost GM $2.2 billion in cash, according to estimates by Bernstein Research, and $5.4 billion in pension obligations. And then add in whatever size loss General Motors is likely to show this year on its car-making operations.
All this is bad for General Motors, but why is it bad for the country?
Insurance buyers, in good hands? The short answer is that bond traders are scared enough about the possibility that General Motors itself could wind up in Chapter 11 bankruptcy that they're buying insurance, but they're not scared enough to worry how good the insurance is.
If they want to insure a debt against default, big investors turn to a kind of derivative called a credit default swap. (Derivatives are securities based on other securities -- derived from them, if you will.) Forget about the details -- they involve an investor who thinks default is relatively likely who then buys what amounts to insurance from another investor who thinks default is less likely. So that, for example, on April 6, a default swap on GMAC to insure $10 million of GMAC debt for five years cost $385,000.
This makes prices in the default swap market a good barometer of how likely investors think a default is. More likely and the price of the insurance goes up. Less likely and it falls. Recently the credit-default-swap market has been pricing in a 50/50 chance that GM will go into bankruptcy some time in the next five years.
The insurance provided by the credit-default-swap market takes some of the worry about of buying GM bonds. Oddly enough, that works to keep yields on those bonds lower than they might be. If you can insure against the bonds going bust, your risk is lower, and the yield should be lower, too. The existence of the derivative market for credit-default swaps -- where recently it cost 18.25% to insure GM bonds against default for five years -- has lowered the yield on the actual GM bond by lowering the risk of default.
On April 7, a General Motors bond due in January 2011 was priced at $73.50 per $100 of face value, a yield of 14.73%. That's a very nice yield but, I'd argue, not what I'd expect for a company with a 50/50 chance of going bust before the bond matures. (The original coupon on this bond when it was issued was 7.2%.) And I'll bet that some of those bonds, thanks to credit-default swaps, have found their way into pretty conservative portfolios.
That would be just about perfect if we could count on the credit-default-swap market to provide perfect insurance. A credit-default swap as insurance is only as good as the money of the investor on the other end of the deal. If that investor pays off in a default, great. If the demand for payment, or the prospective demand for payment, creates a scramble to sell before the insurance bill comes due, then the cost of insurance can skyrocket. That, in turn, would lead some investors to sell any credit-default swap contracts with lower "premiums" (assuming the market would allow this) and would send other investors back into the bond market, where they'd demand higher yields rather than paying higher premiums in the credit-default-swap market. And, if a weak hand fails to pay up on that insurance, then pricing in the whole credit-default-swap market runs amuck, with prices for contracts soaring or with supply collapsing -- or both.
Testing, testing No one knows, of course. This isn't an old market, and it's not well tested. Moreover, the derivatives market has failed some past tests as weak hands have proved unable to meet commitments.
And the risk in the credit-default-swap market rises as events get more uncertain. More uncertainty brings more investors to the market looking for insurance. And the growing demand increases the odds that one investor or another offering insurance will make a mistake or get overextended. That can lead to exactly the swings in price and supply that could lead to a collapse of liquidity in this market.
We've already seen clues to how volatile this market can be. The most actively traded credit-default swap in March was that of GMAC. In a matter of a few days prices moved from lows of $300,000 for $10 million in insurance to highs of $485,000. Jim Jubak's newsletter Get the latest from Jim Jubak. Sign up to receive his free weekly newsletter.
Your e-mail address:
Learn more about newsletters
That's about a 62% swing. Without a strike at Delphi or a wildcat strike against GM. Without fears that the Cerberus-GMAC deal might collapse. Without another ratings drop on GM debt.
I don't have much faith in any of the parties to this mess. But I sure do hope they work it out. I can get along without another real-life test of the derivatives market.
What this means to you: GM didn't invent crossover vehicles, but its new Lambda models could redefine the genre. Yeah right! Wasn't Cobalt expected to 'redefine' the subcompact genre when they were launched? One giant step for GM, still way behind the competition.
Unlike GM, Toy/Hon don't parade their upcoming models years before they are launched. Expect the next Higlander/Pilot to embarrass GM in crossover space again. So what is new?
I remember when first GEN of crossovers were launched, GM apologetics called them girly SUVs and decided to stick to 'rugged' Jimmys and Blazers.
Come on folks. This topic is about the current situation with the UAW, not the Great Depression, or all the other stuff that comes up here.
We cannot keep going off on long stretches of off topic discussion. I'm going back over the last 50 posts or so and taking down the off topic stuff in the hopes that we can get this back on track.
But this is going to take some assistance from you. I need you to remember what the topic is supposed to be here and stay at least in the same neighborhood. I KNOW that the argument is going to be that these things are related, but once we get completely away from the topic in the title, it's sometimes difficult to get back on track.
New users coming into a discussion have an expectation of finding a discussion that is about what the title says it is.
I guess you don't know whole lot about the trades ?
As a matter of fact I do. I taught at a tech school for two years. Here in SC, a journeyman's card is not a requirement.
Here's the point I was making. During those two years, I heard many students complaining that local industry should have picked up the tab for their two years of school. More than a few dropped out because of it. Apparently, this is what was going on:
A student from industry would come in on his own time and take classes. The company would shift his work schedule so the student could attend class and get a better education and perhaps get a better paying job. Others would see this and think , "Well, ABC company is paying him, they ought to pay me." Then, and I swear, I couldn't make this up, they would go to ABC and ask for a job where they paid to go to school (as well as having ABC pick up the tab for tuition and books). When ABC told them, no, they'd get mad and quit school.
When I asked the students why they were quitting, the response was generally, "No one will pay for my school." Nothing I could say would convince them that was their responsibility. I would even point them towards scholarships and grants.
I'm talking about people that wanted precision machining jobs, yet couldn't handle fractions or decimals.
From my perspective, you should get a basic understanding of your field of endeavor from school, then be trained in the specifics of your job through OJT.
This is how things get off topic here. We are not here to discuss how people transfer from job to job or how people should be trained for jobs. As interesting as that might be, it really isn't about the topic.
Let's get this back to the current situation with the UAW please. If we keep wandering off into the non-automotive, this one may have run its course.
What's the latest on the Chinese 3.4 experiment? Has that shown that the UAW does in fact build better enines than Chinese workers, or that Chinese engines are just as good as UAW built engines?
This program was billed as an 'experiment,' but what, if any, conclusions has GM drawn from it?
You said it, I didn't. Working around the material I deal with, trust me you want the best and brightest minds brightness.
Perhaps you are stating the truth about the environment around you . . . I rather doubt it. Personally, I would not hire anyone who depends on TV for his knowledge base. Without rehashing the off-topic subject, let's just say that you managed to get everything wrong in several posts in a row on simple facts that you can look up and cross reference: e.g. Canada and nuclear weapon (none since 1984), Royal Navy, etc. BTW, the "illegal outlaw" part about Eric the Red was not their "immigration status"; they were outlawd and forced into exile back in Norway and Iceland because of Eric and his dad were convicted of murders. Sources are not "fair and balanced" just because on their own say-so. Find something with a bibliography to read, and be critical of everything you read.
But when you've lost $10.6 billion in a year, as General Motors did in 2005, getting a good price takes back seat to getting the deal done at all.
That line pretty much answered the three posts all by themselves. Where did that $10.6 billion come from? $4-5 billion on retiree healthcare cost alone; another half billion on jobs banks; $6 bilion or more on overpaying wages and benefits. In other words, GM could have made a couple billion dollors if it had more more rational wage structure. That's before counting the losses generated by overproduction caused by the fixed wage structure. Without the massive bleeding, GM would not have to fire-sale GMAC . . . nor would it have to fire-sale cars for that matter if not for overproduction enforced by the fixed wage structure.
IMHO, GMAC has to be sold for two more reasons: (1) GMAC is a finance institution, and it simply can not afford a low credit rating, dragged down by GM union liabilities; (2) GMAC's exposure in the home mortgage market. It's just about a good time to sell anything that has big exposure in the home mortgage market.
I'm anti-idiot. GM is being run by retarded,self-centered monkeys. They only care about bonuses and personal wealth. Good old Ricky getting his multi million dollar bonus? For what? Driving the company off a cliff? Rickyboy makes Roger Smith look like an angelic genius. And Rog-baby was one of the most incompetent,evil heads of a major coporation that this country has ever produced. And where is Bob Lutz in all of this? The car magazines still seem to think he is the savior of all. I don't think he's done anything. Ugly,unrefined cars using out dated technology. Wow what a savior! The UAW is not blameless in all of this but they only build the poorly engineered crap that the company gives them. And they are'nt to blame for GMs bloated,mentally-defective bureuacracy(sp?) either. And now with all this said the kicker: I'm buying a GMC 2500HD later this month. Guess I'm retarded too!
There you go again, making up numbers in order to support your points.
I already covered this in #1301 -- if you eliminated the claimed $1,500 per unit "legacy costs" from GM's 2005's income statement, the automotive unit would have still generated a $13+ billion loss. In contrast, if GM could simply sell cars in the US at the same average wholesale price as does Toyota, it would have generated a profit (albeit a modest profit.)
GM's cost structure is comprised of more than just labor costs. GM supports numerous brands and nameplates that offer little or no value in the marketplace, and probably actually damage the badges in the minds of the consumer.
GM is like every other business -- in order to prosper, it needs to provide products that consumers are willing to pay for. As it stands now, GM produces products that relatively few people are willing to buy at retail prices, hence the need for fleet sales, deep discounting, incentives, etc., etc., etc.
It's a corporate dinosaur, and the fixation on attacking the union while neglecting the product is going to simply ensure the demise of the firm. Fire every UAW worker today, and you would still have too many nameplates and not enough quality product tomorrow and for years to come. The union makes the business more cumbersome and less profitable, but it is strictly up to management that is losing sales, designing products that people don't want, misprioritizing R&D efforts, and maintaining inefficient channels. At this rate, I could only hope that a trip to BK court would result in a forced liquidation of the overseas operations and a spinout of the North American truck division, because US management is clearly incapable of leading a substantial turnaround.
Hear Hear and amen! You are absolutely right. But too many people want to bury their head in the sand. I think that the new Toyota full-size pickup might be the final nail in GMs coffin. I hope not...
Count me in, too (as being "retarded") for buying a 2001 Saab 9-5 wagon five years ago. The ownership experience has not been bad at all. The craftmanship is decent, and car is reasonably reliable (better than the two BMW 5er's that I had before it), and on top of it all, GMAC/SaabFinancial gave one kicker of a deal. The GMC 2500HD probably will serve you well too; GM heavier and higher end cars and trucks are decent, especially one consier the up-front savings on acquisition cost. So long as the company does not go belly up completely (as in a Chapter-7 liquidation, not merely Chapter-11 reorganization), we shall all be fine.
Regarding the management vs. UAW, I don't think Rickboy is getting any multi-million pay nowadays; or anybody else in the management for that matter. The last time I checked, Wagoner cut his own pay in half, to $1mil, which is really low by the standards of someone in charge of that big of a company in the private sector, and someone who has made the company several billion dollars on previous positions of responsibility. The boss of United Way made $200 million dollars a year, and that's a charity. If the rank-and-file would all take half-pay in this down period, the company would not even be running losses. I seriously doubt anyone with more talent can be found to replace Wagoner, either within GM organization or from outside. As for the car magazines, well, they are just a bunch of yahoos like many of the rest of us; probably worse, because their goal is writing up dramatic pieces catering to the lowest denominator in order to sell rags. Objectivity or accuracy are irrelevent. GM is an institution in a tight straight jacket. One or two or a dozen individuals are not going to change much on the car-making side of the business . . . a few individuals can affect the non-carmaking side, like M&A, finance etc, which GM management was doing fine, to the tune of dozens of billions of dollars when all the scores are tallied . . . however, that card has already been played out with credit rating being slashed on losses and more importantly mushrooming liability from the carmaking side of the business.
I don't think Rickboy is getting any multi-million pay nowadays; or anybody else in the management for that matter.
According to Yahoo Finance, that isn't the case at all:
Overpaid Officer, Age / Compensation G. Richard Wagoner Jr., 53 / $ 4.66M Robert A. Lutz , 74 / $ 2.95M Thomas A. Gottschalk , 63 / $ 1.69M Gary L. Cowger , 58 / $ 1.51M John M. Devine , 61 / $ 2.95M
The liability is far more than $1500 per vehicle. $1500 per vehicle barely coverd the retireee health cost once upon a time . . . with more retirees now and less vehicle sales that number isn't even accurate. The $140k per worker offer is the tip of the iceberg of how much legacy cost there is in the labor cost: GM management is obviously indicating the legacy cost is more than than by making that offer, and the union workers are agreeing to that assessment by not taking the offer.
Low wholesale price is another red erring:
(1) Union work rules make firing irresponsible workers and getting rid of shoddy workmanship impossible. It's not the 99 good hard working workers putting things together properly that consumers see; it's the 1 bad apple that leaves the yarning gap between panels that consumers immediately pick up on.
(2) Supply and Demand. With union work rules that stipulate full wage regardless whether cars are made or not, oversupply becomes a necessity . . . therefore automaticly leading to lower wholesale value and lower brand equity.
GM supports numerous brands and nameplates that offer little or no value in the marketplace
GM is like every other business -- in order to prosper, it needs to provide products that consumers are willing to pay for. As it stands now, GM produces products that relatively few people are willing to buy at retail prices, hence the need for fleet sales, deep discounting, incentives, etc., etc., etc.
We are talking about what to do with GM, right? Not how to build a brand new car company. Slashing brands obviously did not yield any positive return. Do you honestly believe that if GM were given a BMW 3 series design for free, the UAW workers would be able to produce a million copies of it and still maintain the $30k price point without discounting?? Hardly anyone buys even Toyota at full MSRP either; I bought my Highlander at $300 below _invoice_ because Toyota was offering $500 incentives. It had nothing to do with vehicle quality or even desirability, but everything to do with supply and demand. When given a lemon, you have to figure out how to make lemonaid; bitching about pineapple juice would be so much better doesn't help one diddly.
Fire every UAW worker today, and you would still have too many nameplates and not enough quality product tomorrow and for years to come.
A few years for new models to be developed for a new production line that is not under the control of UAW, perhaps, but not much longer than that.
At this rate, I could only hope that a trip to BK court would result in a forced liquidation of the overseas operations and a spinout of the North American truck division, because US management is clearly incapable of leading a substantial turnaround.
Some of the overseas operations and the truck division are the only carmaking divisions that are profitable. From what I have been reading, nobody around here or anywhere else could have done better than the current management; in most cases, far worse.
You must know something that GM management doesn't, because they're the ones citing that figure.
Union work rules make firing irresponsible workers and getting rid of shoddy workmanship impossible.
That explains why the best plant in North America according to JD Power is a GM plant in Oshawa, Ontario. (Of course, the union can't be faulted for the mediocrity of the designs that they are actually assembling.)
With union work rules that stipulate full wage regardless whether cars are made or not, oversupply becomes a necessity
That certainly explains the oversupply of Aussie made GTO's, Swedish- and Japanese-made Saab's, and Mexican-made trucks. Slashing brands obviously did not yield any positive return.
When brands that lose money are shut down, they stop losing money. That's why Daimler wisely killed off Plymouth, and (for once, it did something smart) why GM killed off Olds.
It makes perfect sense to unload dead weight -- dead weight increases losses. Too bad that didn't include some of the members of the management team.
Did you read the date on that set of data? The fiscal year prior to December 31, 2004. In other words, it was a 12-month time period between 2003 and 2004. This is 2006. GM was still profitable back in 2003-2004; $2.8 billion each on the two fiscal years on continuing operations basis.
Also notice, the total sum of the entire list even back then amounted to $15 million. The UAW excess labor cost runs to the tune of $10-15 billion! There are 1000 million in one single billion.
I'm sure it would,nt be too hard to find someone with more talent.As for the chairman of United Way his salery does'nt surprise me at all. Every few years the top dogs in that organisation get hauled off to court for illegal activities of one sort or another. I quit giving money to that place a long time ago. And I think Rickysweety CAN make major changes to GM. HE's the top dog and if he got together with the rest of those overpaid sacks of crap that run GM they can change ANYTHING they want. But they won't because they are only concerned with their own wealth. The shareholders,per hour employees and finally customers can all take a flying leap for all any executive cares. And I seem to remember reading about last year Ricky the Retard got a bonus of 14.5 million. Pretty good for all that talent it took to make stupid decsions(selling GMAC),approve loser designs(Aztek,Ion,Lucerne etc...). And of course killing off one of the best GM cars in decades(Olds Intrigue). I'm not trying to equate Rick et al with the Enron boys. I just think they are so out of touch with the market and so devoted to lousy engineering and outdated managment practices that they've pretty much given up doing anything truly effective. It would'nt surprise me if he decided that all divisions share exact platforms and the only difference between them would be grills and tailights. Oh wait, they already did that back in the 80's didn't they? But I'm sure that Rickyboy and the Funky Bunch could make it work!
If you cut Wagoner's compensation by 50%, you'd still end up north of $2 million.
I'd say that's pretty good for a guy who managed to lose over $4 billion on one transaction alone. I'm wondering how many other people in America would be able to keep their jobs after losing their employers well over $4,000,000,000
(I think I've figured it out -- Wagoner must belong to a union! I can only imagine what the shop steward must have said to keep him from getting canned...)
You must know something that GM management doesn't, because they're the ones citing that figure.
Are you basicly saying you know something the GM management doesn't this whole time all along??
That explains why the best plant in North America according to JD Power is a GM plant in Oshawa, Ontario. (Of course, the union can't be faulted for the mediocrity of the designs that they are actually assembling.)
Is there a non-union GM plant in North America at all? The best union plant is . . . tada . . . a union plant. Actually Oshawa plant making an old car is very much the result of union politics. CAW split from UAW, so the latter gave the former short shrifts in labor negotiations, just like UAW did to Saturn, another experiement at wiggling free from normal UAW rules.
That certainly explains the oversupply of Aussie made GTO's, Swedish- and Japanese-made Saab's, and Mexican-made trucks.
Notice, these are niche products. Niche products have longer supply duration.
When brands that lose money are shut down, they stop losing money. That's why Daimler wisely killed off Plymouth, and (for once, it did something smart) why GM killed off Olds
The case on shutting down Olds still has not been proven positive; we have gone through this before. You see, if a division is losing money because of fixed cost that can not be slashed even if the division is shut down, it makes no sense whatsoever to shut down the business.
It makes perfect sense to unload dead weight -- dead weight increases losses. Too bad that didn't include some of the members of the management team.
Questionable managers get fired much faster than quesitonable UAW workers, which is like, never. What you are not realizing is that UAW is the dead weight. Look at your earlier list, even if GM laid off that entire list in 2004 and left the positions empty, the saving would have come to less than $15 million; even less today, because Devine is already gone, and Wagoner is taking $1mil instead of $4mil, and the rest probably lower too. That's less than $10 mil expense some of us are having a fit over, while desperately covering up $10,000-15,000 million a year that's draining through UAW.
Once again, you are so off-track that it seems impossible to get you back on:
-JD Power rated all of the auto plants in North America, unionized or not. Not sure what your response has to do with anything -- the point illustrated is that unionized plants can produce high quality work (even if the cars themselves are nothing to write home about.)
-The case for shutting down Olds is obvious: It was losing market share and money, and it isn't losing money anymore. Unless someone had a plan to invigorate the badge, why keep it?
What you are not realizing is that UAW is the dead weight.
For all of its faults, the union doesn't design the products that don't meet consumer needs, doesn't operate the channels of badges that can't sell cars, didn't decide to buy foreign car makers that lost GM billions of dollars, or ignore Demming's ideas in improving the assembly process.
Funny how the UAW is able to work with Daimler to implement flexible work rules, and Chrysler has been able to maintain its market share, in spite of fierce competition. Both companies have unions; how Chrysler differs is that it is now better managed than GM, and makes an effort to build competitive products that meet consumer needs. Quite a coup, as I never in my life had ever expected to see a day when Chrysler's prospects would be far brighter than GM's.
Comments
Isn't paying the ultimate incentive for investing? Did you buy the house or did you invest in individual pieces of lumber and a construction company?
Also, you are talking out the wrong side of your mouth again. By your arguments against free trade and immigration (driving down wages), if someone actually invested in producing more educated workers, wouldn't that be driving down wages for educated/skilled labor? Goes to show just how silly that argument really is . . . you can't even hold onto it with any consistency.
It's kinda hard to finish a apprenticeship if you don't have a company willing to sponsor you so you can learn OJT which is required to get a journeymens card.
I guess you don't know whole lot about the trades ?
Rocky
How can you compare investing into lumbar and constuction company with investing into a skilled worker. Apples and oranges.
Also, you are talking out the wrong side of your mouth again. By your arguments against free trade and immigration (driving down wages), if someone actually invested in producing more educated workers, wouldn't that be driving down wages for educated/skilled labor?
No because the job I wanted was a union job, and BTW not everyone wants to do that kind of work for a living. I guess you might say that it's a job americans don't want to do ? :confuse: Just like the shortage of Nurses and their high pay. I could get a full ride scholarship being a male nurse if I chose to.
Goes to show just how silly that argument really is . . . you can't even hold onto it with any consistency.
No it goes to show you how silly you are because you "twist and spin" the words I say to make yourself always look good.
Rocky
How is investing in construction company different from investing into a skilled worker? What is a "skilled worker" anyway? is there a universally jack-of-all-trades "skilled worker"? Obvously not. Both are investments for the sake of returns; investing in a construction company will involve investing in workers who are skilled at working for a construction company . . . duh!
"Also, you are talking out the wrong side of your mouth again. By your arguments against free trade and immigration (driving down wages), if someone actually invested in producing more educated workers, wouldn't that be driving down wages for educated/skilled labor?"
No because the job I wanted was a union job, and BTW not everyone wants to do that kind of work for a living. I guess you might say that it's a job americans don't want to do ? Just like the shortage of Nurses and their high pay. I could get a full ride scholarship being a male nurse if I chose to.
Please enlighten me on how your reply address the question I asked. BTW, what is "a union job" anyway? Obviously not defined by what work is being done, but instead the job security, regardless whether it's just a sinecure. The last sentence you wrote just a blew a huge hole in all your arguments in the past few weeks: if a full scholarship for training towards a profession that is actually in high demand is always there for union members, what have you been whining all this time about unemployment and sky falling about? You just want to keep getting paid high wages to entertain your own male ego at consumer and taxpayer's expense.
And most real jobs don't need a journeymens card.
If all the fruit grown in this country were picked by UAW instead of illegal workers, most americans won't be able to afford to eat fruit anymore. Gas at $5/gallon might seem cheap when compared to price of an apple after paying for job banks, pensions, full family healthcare, overtime, free tuition etc.
OTOH, Why can't GM hire illegals at $5/hour to build cars so that profits stay in country not in Mexico, China or Canada? Maybe the congress should a pass bill stipulating illegals may be hired only by the Big 3, that should bring the domestic auto industry on a level playing field.
I'd like to see how transplants handle that.
I guess I should of said skilled-Trades worker.
BTW-yeah the universal "jack of all trades" skilled workers are called maintence mechanics :P
Please enlighten me on how your reply address the question I asked. BTW, what is "a union job" anyway? Obviously not defined by what work is being done, but instead the job security, regardless whether it's just a sinecure. The last sentence you wrote just a blew a huge hole in all your arguments in the past few weeks: if a full scholarship for training towards a profession that is actually in high demand is always there for union members, what have you been whining all this time about unemployment and sky falling about? You just want to keep getting paid high wages to entertain your own male ego at consumer and taxpayer's expense.
You OTOH want to defend capatalism/free trade/free market every chance you get by throwing in the race card for your smoke and mirrors, whenever anyone takes a stance against it. Maybe it's to hide your true agenda as an employer, wanting to exploit illegal aliens (immigrants) that are less educated, and will work for next to nothin' and look at you as a god. Having this type of a workforce, perhaps will fulfill your male ego of wanting to be the "intellegent superior being" and make you feel dominant. Perhaps as a kid you were a bully, or was the one getting bullied. Only you know the answer. I know short people that have this "chip" on their shoulders and act the same way. They desire control and power, and other folks look at them as childish. :confuse:
Rocky
Any skill trades job that requires more than a half of brain to do, employers will hire Union Journeymen skill trades men to complete the job right the first time.
Rocky
Rocky
Not all UAW members make $27 dollars an hour. I was a UAW member twice and I started out at $8 an hour at one job and made $11 at another job. This high union pay conspiracy that keeps going around is "smoke and mirrors" and is far from the truth.
Gas at $5/gallon might seem cheap when compared to price of an apple after paying for job banks, pensions, full family healthcare, overtime, free tuition etc.
From the ground to the gas tank, Gas is made/manufactored by union members, and are you also going to blame the high gas prices on union members. :surprise:
Rocky
I'd like to see how transplants handle that.
I can't even comment intellegently on this topic because what I just read might be the most riduclous thing I've ever seen. I suppose you as a illegal aliens want to take my family's jobs too. :confuse:
Rocky
If a two time UAW worker hasn't got the intelligence to figure out by now it was a troll, I doubt many of your comrades deserve anything more than minimum wage, much less $27/hr
I suppose you as a illegal aliens want to take my family's jobs too.
I'd pick a sober illegal any day over a drunk UAW member to work for me :P
If I was in your situation I would to. The UAW worker would be smarter than his employer.
Rocky :P
Bayh, Conyers introduce bankruptcy reform bill
Yesterday Sen. Evan Bayh (D-Ind.) and Rep. John Conyers (D-Mich.) introduced a bankruptcy reform bill designed to eliminate some of the abuses that have occurred in the Delphi and other recent corporate bankruptcies. This bill is entitled the "Fairness and Accountability in Reorganizations Act of 2006" (FAR). The bill numbers are S. 2556 and H.R. 5113.
This bill addresses two key issues. First, it closes some of the loopholes that have allowed executives at Delphi and other companies to propose huge bonuses and other forms of lucrative executive compensation at the same time they are using the bankruptcy process to try to slash wages and benefits for workers and retirees. As a matter of fundamental fairness, management should not be allowed to enrich themselves on the backs of workers and retirees. There should be equality of sacrifice among all of the stakeholders.
Second, the bill requires the bankruptcy judge to take into consideration a company's foreign operations, as well as its domestic ones, in ruling on section 1113 and 1114 motions to reject collective bargaining agreements and retiree health benefits. Corporations should not be allowed to shift resources and production to profitable overseas operations at the same time they are pleading poverty in an attempt to cut wages, benefits and jobs in their U.S. operations.
The UAW and other unions are urging representatives and senators to show their support for these bankruptcy reforms by cosponsoring the Bayh-Conyers bill (S. 2556; H.R. 5113).
We encourage our Delphi and General Motors membership along with other UAW activists to contact your representatives and senators immediately and urge them to stand up against bankruptcy abuses by Delphi and other corporations by cosponsoring this important legislation.
What this means to us: About time some Senators and House of Reps. are fighting against corporations that file on their NA operations and corporate corruptness.
Rocky
Again, I don't think it's funny that Ford and GM are having hard times. I come from a couple of decades(I worked three months short of 20 years for them)of union-represented work at The Boeing Company. Boeing is a job filled with this funky stress all the time. If you have your job you're worrying about getting laid off all the time. Needless to say the politics get pretty thick there. :sick:
I mention the Respiratory Therapy as a viable option for people to try doing after getting a pink slip. Believe me, I'm not being condescending when I mention the idea at all. I've been there-twice before from Boeing. I decided that the Boeing roller coaster ride was through after this 2nd layoff.
2021 Kia Soul LX 6-speed stick
The 95% non-union workers must be dummies then. Talk about nonsense here. The system of apprenticeship and journeymen were invented by the trades guild to exploit new comers before the age of universal education and higher education.
Rocky
I agree you perhaps are better off and look at what you get to do each day. You get to help people, which I really respect.
Rocky
P.S. Hopefully someday I will beable to convince you to leave your Kia for a GM product. Wishful thinking, eh?
2021 Kia Soul LX 6-speed stick
You said it, I didn't. Working around the material I deal with, trust me you want the best and brightest minds brightness.
Rocky
Date posted: 04-11-2006
NEW YORK — Saturn has introduced its new 2007 Outlook, a full-size crossover vehicle that is a companion to the Buick Enclave that was unveiled earlier this year in Detroit, and the GMC Acadia, which has yet to be shown publicly.
The Outlook, like its siblings, will seat up to eight passengers in three rows and has been developed on a new corporate platform called Lambda that can be configured in front- and all-wheel-drive versions. It goes into production in the fourth quarter of this year.
Among its features, Saturn is touting its Smart Slide articulated second-row seat, which isn't quite as useful as Chrysler's Stow 'N' Go minivan seats that fold into the floor, but is nevertheless helpful for accessing the third row. The second and third rows both fold flat, but not into the floor.
The Outlook will be powered by a 3.6-liter V6 rated at 265 horsepower and 244 pound-feet of torque (the figures are slightly higher for the uplevel Outlook XR with dual exhaust). A new six-speed automatic transmission is standard.
The Outlook rides on an all-independent suspension and can be ordered with 18- or 19-inch wheels and tires. Four-wheel disc brakes with ABS are standard, as are side airbags for the front row and side curtain airbags for all three rows.
Saturn customers will be able to order the Outlook with such features as ultrasonic parking assist, power liftgate, remote vehicle start, heated windshield fluid, DVD entertainment system and DVD navigation system.
What this means to you: GM didn't invent crossover vehicles, but its new Lambda models could redefine the genre.
What this means to us GM fans: Saturn is back and has awaken from the dead.
Jubak's Journal
Bad for GM, bad for America
Tuesday, April 11, 2006
General Motors has launched a time bomb that could push the company into Chapter 11 -- and take down the financial markets with it.
Leave it to the guys who are driving General Motors (GM, news, msgs) off a cliff to make things worse. Thanks to their most recent "solution" -- selling off a 51% stake in the company's profitable General Motors Acceptance Corp. financial arm -- CEO Rick Wagoner and his team have actually raised the odds that General Motors will have to seek bankruptcy protection. And made sure, as an added bonus, that they can do nothing to stop what they’ve set in motion.
Pretty neat, huh?
But, wait, that isn't all that these guys managed to accomplish last week. Before you relax into some comfortable jeering from the sidelines -- unless you own GM stock or, even worse, work there or at some GM-dependent company -- you should know that last week's GMAC sale has put all of us in range if GM should blow up. Thanks to the way that Wagoner et al, structured the GMAC deal, they've created the possibility of a real blowup in the derivatives market that insures bond holders against default. If that bomb were to go off, every financial market would be in shrapnel range.
Continue this article...
Bad for GM, bad for America
advertisement
General Motors has launched a time bomb that could push the company into Chapter 11 -- and take down the financial markets with it.
By Jim Jubak
Leave it to the guys who are driving General Motors (GM, news, msgs) off a cliff to make things worse. Thanks to their most recent "solution" -- selling off a 51% stake in the company's profitable General Motors Acceptance Corp. financial arm -- CEO Rick Wagoner and his team have actually raised the odds that General Motors will have to seek bankruptcy protection. And made sure, as an added bonus, that they can do nothing to stop what they’ve set in motion.
Pretty neat, huh?
But, wait, that isn't all that these guys managed to accomplish last week. Before you relax into some comfortable jeering from the sidelines -- unless you own GM stock or, even worse, work there or at some GM-dependent company -- you should know that last week's GMAC sale has put all of us in range if GM should blow up. Thanks to the way that Wagoner et al, structured the GMAC deal, they've created the possibility of a real blowup in the derivatives market that insures bond holders against default. If that bomb were to go off, every financial market would be in shrapnel range. See the news
that affects your stocks.
Check out our
new News center.
Cheap goods
So how does a CEO manage to put his company and the entire financial market at risk with a single deal?
By making it contingent on the whims of the not-so-rational combatants at Delphi (DPHIQ, news, msgs) and the United Auto Workers, who have locked horns over wages and benefits in Delphi's bankruptcy proceedings.
General Motors did this by "selling" 51% of GMAC to a private investment group including Citigroup (C, news, msgs) and headed by hedge fund Cerberus Capital Management for $14 billion. Of course, GM won't get that $14 billion all at once. When the deal closes, Cerberus and its partners will pay General Motors $7.4 billion. GM will collect another $2.7 billion in cash from GMAC as a return of the higher taxes that GM paid on GMAC's income when it owned the financial company. GM will receive another $4 billion over three years from GMAC as income on $20 billion in leases and retail assets that GM will retain after the deal.
But when you've lost $10.6 billion in a year, as General Motors did in 2005, getting a good price takes back seat to getting the deal done at all. Especially when your auto sales are dropping like a rock. GM's U.S. sales dropped 14% in March.
The no-sale sale
But price isn't the real, company-crushing bad news in this sale. I'd save that moniker for this oddity: The sale isn't a sale at all. Cerberus and the rest of the group can walk away from this deal before it closes some time in the fourth quarter of 2006 if the credit rating on General Motor's unsecured long-term sinks to less than a triple-C rating from Standard & Poor's. A rating like that would be two notches deeper into junk-bond territory than General Motors' current rating of single-B. (The deal is also off if GMAC's own credit rating slips below its current double-B rating, just two notches below investment grade.)
What could drive General Motors bond ratings down another two notches just about overnight? A strike set off by supplier Delphi’s efforts to break its contracts with its unions in bankruptcy court. The company has filed a reorganization plan that includes closing or selling all but eight to 12 of its 33 North American plants and cutting as many as 30,000 jobs. For U.S. workers who keep their jobs, Delphi has proposed an immediate wage cut of $5 an hour (or 18%) to $22 an hour for production workers and another cut to $16.50 an hour -- for a package of cuts totaling $10.50 an hour -- in 2007.
The United Auto Workers, as you might imagine, has branded the proposal unacceptable and threatened a strike. Delphi has responded by asking the bankruptcy judge for a ruling that would allow the company to unilaterally break its union contracts with the company's 34,000 union workers and its 12,000 union retirees. The first hearing in this game of chicken is scheduled in U.S. Bankruptcy Court in New York on May 9-10. A ruling on the labor contract is unlikely until June.
Bad for GM, bad for America
advertisement
(Page 2) of 2
Previous
A strike at Delphi would cripple GM by shutting down almost all of the auto giant’s North American production. General Motors last faced a long strike in 1998, when a 54-day work stoppage closed 95% of its North American operations. Merrill Lynch estimates that a 60-day strike at Delphi would cost General Motors $7 billion to $8 billion in cash. That sum wouldn't just come from lost production. It also comes from swings in the company's cash flow created when hard-pressed suppliers, also shot down by a Delphi strike, increase their demands that GM make prompt payments of existing bills. Payables -- what GM owes suppliers -- stand at $26 billion. And they're paid in cash. That's a significant figure even for a company like GM with $20 billion in cash.
You'd think $20 billion in cash would be enough to reassure the credit-rating agencies who have graded GM's debt "junk" or, to be polite, "below investment grade." But it's not, because there are so many demands on that cash, including the recent early retirement offer to workers at GM and Delphi that could cost GM $2.2 billion in cash, according to estimates by Bernstein Research, and $5.4 billion in pension obligations. And then add in whatever size loss General Motors is likely to show this year on its car-making operations.
All this is bad for General Motors, but why is it bad for the country?
Insurance buyers, in good hands?
The short answer is that bond traders are scared enough about the possibility that General Motors itself could wind up in Chapter 11 bankruptcy that they're buying insurance, but they're not scared enough to worry how good the insurance is.
If they want to insure a debt against default, big investors turn to a kind of derivative called a credit default swap. (Derivatives are securities based on other securities -- derived from them, if you will.) Forget about the details -- they involve an investor who thinks default is relatively likely who then buys what amounts to insurance from another investor who thinks default is less likely. So that, for example, on April 6, a default swap on GMAC to insure $10 million of GMAC debt for five years cost $385,000.
This makes prices in the default swap market a good barometer of how likely investors think a default is. More likely and the price of the insurance goes up. Less likely and it falls. Recently the credit-default-swap market has been pricing in a 50/50 chance that GM will go into bankruptcy some time in the next five years.
The insurance provided by the credit-default-swap market takes some of the worry about of buying GM bonds. Oddly enough, that works to keep yields on those bonds lower than they might be. If you can insure against the bonds going bust, your risk is lower, and the yield should be lower, too. The existence of the derivative market for credit-default swaps -- where recently it cost 18.25% to insure GM bonds against default for five years -- has lowered the yield on the actual GM bond by lowering the risk of default.
On April 7, a General Motors bond due in January 2011 was priced at $73.50 per $100 of face value, a yield of 14.73%. That's a very nice yield but, I'd argue, not what I'd expect for a company with a 50/50 chance of going bust before the bond matures. (The original coupon on this bond when it was issued was 7.2%.) And I'll bet that some of those bonds, thanks to credit-default swaps, have found their way into pretty conservative portfolios.
That would be just about perfect if we could count on the credit-default-swap market to provide perfect insurance. A credit-default swap as insurance is only as good as the money of the investor on the other end of the deal. If that investor pays off in a default, great. If the demand for payment, or the prospective demand for payment, creates a scramble to sell before the insurance bill comes due, then the cost of insurance can skyrocket. That, in turn, would lead some investors to sell any credit-default swap contracts with lower "premiums" (assuming the market would allow this) and would send other investors back into the bond market, where they'd demand higher yields rather than paying higher premiums in the credit-default-swap market. And, if a weak hand fails to pay up on that insurance, then pricing in the whole credit-default-swap market runs amuck, with prices for contracts soaring or with supply collapsing -- or both.
No one knows, of course. This isn't an old market, and it's not well tested. Moreover, the derivatives market has failed some past tests as weak hands have proved unable to meet commitments.
And the risk in the credit-default-swap market rises as events get more uncertain. More uncertainty brings more investors to the market looking for insurance. And the growing demand increases the odds that one investor or another offering insurance will make a mistake or get overextended. That can lead to exactly the swings in price and supply that could lead to a collapse of liquidity in this market.
We've already seen clues to how volatile this market can be. The most actively traded credit-default swap in March was that of GMAC. In a matter of a few days prices moved from lows of $300,000 for $10 million in insurance to highs of $485,000. Jim Jubak's newsletter
Get the latest from Jim Jubak. Sign up to receive his free weekly newsletter.
Your e-mail address:
Learn more about newsletters
That's about a 62% swing. Without a strike at Delphi or a wildcat strike against GM. Without fears that the Cerberus-GMAC deal might collapse. Without another ratings drop on GM debt.
I don't have much faith in any of the parties to this mess. But I sure do hope they work it out. I can get along without another real-life test of the derivatives market.
http://moneycentral.msn.com/content/P148486.asp#msnhp
Rocky
Yeah right! Wasn't Cobalt expected to 'redefine' the subcompact genre when they were launched? One giant step for GM, still way behind the competition.
Unlike GM, Toy/Hon don't parade their upcoming models years before they are launched. Expect the next Higlander/Pilot to embarrass GM in crossover space again. So what is new?
I remember when first GEN of crossovers were launched, GM apologetics called them girly SUVs and decided to stick to 'rugged' Jimmys and Blazers.
We cannot keep going off on long stretches of off topic discussion. I'm going back over the last 50 posts or so and taking down the off topic stuff in the hopes that we can get this back on track.
But this is going to take some assistance from you. I need you to remember what the topic is supposed to be here and stay at least in the same neighborhood. I KNOW that the argument is going to be that these things are related, but once we get completely away from the topic in the title, it's sometimes difficult to get back on track.
New users coming into a discussion have an expectation of finding a discussion that is about what the title says it is.
As a matter of fact I do. I taught at a tech school for two years. Here in SC, a journeyman's card is not a requirement.
Here's the point I was making. During those two years, I heard many students complaining that local industry should have picked up the tab for their two years of school. More than a few dropped out because of it. Apparently, this is what was going on:
A student from industry would come in on his own time and take classes. The company would shift his work schedule so the student could attend class and get a better education and perhaps get a better paying job. Others would see this and think , "Well, ABC company is paying him, they ought to pay me." Then, and I swear, I couldn't make this up, they would go to ABC and ask for a job where they paid to go to school (as well as having ABC pick up the tab for tuition and books). When ABC told them, no, they'd get mad and quit school.
When I asked the students why they were quitting, the response was generally, "No one will pay for my school." Nothing I could say would convince them that was their responsibility. I would even point them towards scholarships and grants.
I'm talking about people that wanted precision machining jobs, yet couldn't handle fractions or decimals.
From my perspective, you should get a basic understanding of your field of endeavor from school, then be trained in the specifics of your job through OJT.
Let's get this back to the current situation with the UAW please. If we keep wandering off into the non-automotive, this one may have run its course.
This program was billed as an 'experiment,' but what, if any, conclusions has GM drawn from it?
Perhaps you are stating the truth about the environment around you . . . I rather doubt it. Personally, I would not hire anyone who depends on TV for his knowledge base. Without rehashing the off-topic subject, let's just say that you managed to get everything wrong in several posts in a row on simple facts that you can look up and cross reference: e.g. Canada and nuclear weapon (none since 1984), Royal Navy, etc. BTW, the "illegal outlaw" part about Eric the Red was not their "immigration status"; they were outlawd and forced into exile back in Norway and Iceland because of Eric and his dad were convicted of murders. Sources are not "fair and balanced" just because on their own say-so. Find something with a bibliography to read, and be critical of everything you read.
That line pretty much answered the three posts all by themselves. Where did that $10.6 billion come from? $4-5 billion on retiree healthcare cost alone; another half billion on jobs banks; $6 bilion or more on overpaying wages and benefits. In other words, GM could have made a couple billion dollors if it had more more rational wage structure. That's before counting the losses generated by overproduction caused by the fixed wage structure. Without the massive bleeding, GM would not have to fire-sale GMAC . . . nor would it have to fire-sale cars for that matter if not for overproduction enforced by the fixed wage structure.
IMHO, GMAC has to be sold for two more reasons:
(1) GMAC is a finance institution, and it simply can not afford a low credit rating, dragged down by GM union liabilities;
(2) GMAC's exposure in the home mortgage market. It's just about a good time to sell anything that has big exposure in the home mortgage market.
The UAW is not blameless in all of this but they only build the poorly engineered crap that the company gives them. And they are'nt to blame for GMs bloated,mentally-defective bureuacracy(sp?) either.
And now with all this said the kicker: I'm buying a GMC 2500HD later this month. Guess I'm retarded too!
I already covered this in #1301 -- if you eliminated the claimed $1,500 per unit "legacy costs" from GM's 2005's income statement, the automotive unit would have still generated a $13+ billion loss. In contrast, if GM could simply sell cars in the US at the same average wholesale price as does Toyota, it would have generated a profit (albeit a modest profit.)
GM's cost structure is comprised of more than just labor costs. GM supports numerous brands and nameplates that offer little or no value in the marketplace, and probably actually damage the badges in the minds of the consumer.
GM is like every other business -- in order to prosper, it needs to provide products that consumers are willing to pay for. As it stands now, GM produces products that relatively few people are willing to buy at retail prices, hence the need for fleet sales, deep discounting, incentives, etc., etc., etc.
It's a corporate dinosaur, and the fixation on attacking the union while neglecting the product is going to simply ensure the demise of the firm. Fire every UAW worker today, and you would still have too many nameplates and not enough quality product tomorrow and for years to come. The union makes the business more cumbersome and less profitable, but it is strictly up to management that is losing sales, designing products that people don't want, misprioritizing R&D efforts, and maintaining inefficient channels. At this rate, I could only hope that a trip to BK court would result in a forced liquidation of the overseas operations and a spinout of the North American truck division, because US management is clearly incapable of leading a substantial turnaround.
Regarding the management vs. UAW, I don't think Rickboy is getting any multi-million pay nowadays; or anybody else in the management for that matter. The last time I checked, Wagoner cut his own pay in half, to $1mil, which is really low by the standards of someone in charge of that big of a company in the private sector, and someone who has made the company several billion dollars on previous positions of responsibility. The boss of United Way made $200 million dollars a year, and that's a charity. If the rank-and-file would all take half-pay in this down period, the company would not even be running losses. I seriously doubt anyone with more talent can be found to replace Wagoner, either within GM organization or from outside. As for the car magazines, well, they are just a bunch of yahoos like many of the rest of us; probably worse, because their goal is writing up dramatic pieces catering to the lowest denominator in order to sell rags. Objectivity or accuracy are irrelevent. GM is an institution in a tight straight jacket. One or two or a dozen individuals are not going to change much on the car-making side of the business . . . a few individuals can affect the non-carmaking side, like M&A, finance etc, which GM management was doing fine, to the tune of dozens of billions of dollars when all the scores are tallied . . . however, that card has already been played out with credit rating being slashed on losses and more importantly mushrooming liability from the carmaking side of the business.
According to Yahoo Finance, that isn't the case at all:
Overpaid Officer, Age / Compensation
G. Richard Wagoner Jr., 53 / $ 4.66M
Robert A. Lutz , 74 / $ 2.95M
Thomas A. Gottschalk , 63 / $ 1.69M
Gary L. Cowger , 58 / $ 1.51M
John M. Devine , 61 / $ 2.95M
Low wholesale price is another red erring:
(1) Union work rules make firing irresponsible workers and getting rid of shoddy workmanship impossible. It's not the 99 good hard working workers putting things together properly that consumers see; it's the 1 bad apple that leaves the yarning gap between panels that consumers immediately pick up on.
(2) Supply and Demand. With union work rules that stipulate full wage regardless whether cars are made or not, oversupply becomes a necessity . . . therefore automaticly leading to lower wholesale value and lower brand equity.
GM supports numerous brands and nameplates that offer little or no value in the marketplace
GM is like every other business -- in order to prosper, it needs to provide products that consumers are willing to pay for. As it stands now, GM produces products that relatively few people are willing to buy at retail prices, hence the need for fleet sales, deep discounting, incentives, etc., etc., etc.
We are talking about what to do with GM, right? Not how to build a brand new car company. Slashing brands obviously did not yield any positive return. Do you honestly believe that if GM were given a BMW 3 series design for free, the UAW workers would be able to produce a million copies of it and still maintain the $30k price point without discounting?? Hardly anyone buys even Toyota at full MSRP either; I bought my Highlander at $300 below _invoice_ because Toyota was offering $500 incentives. It had nothing to do with vehicle quality or even desirability, but everything to do with supply and demand. When given a lemon, you have to figure out how to make lemonaid; bitching about pineapple juice would be so much better doesn't help one diddly.
Fire every UAW worker today, and you would still have too many nameplates and not enough quality product tomorrow and for years to come.
A few years for new models to be developed for a new production line that is not under the control of UAW, perhaps, but not much longer than that.
At this rate, I could only hope that a trip to BK court would result in a forced liquidation of the overseas operations and a spinout of the North American truck division, because US management is clearly incapable of leading a substantial turnaround.
Some of the overseas operations and the truck division are the only carmaking divisions that are profitable. From what I have been reading, nobody around here or anywhere else could have done better than the current management; in most cases, far worse.
Data you are quoting is from 2004. What did they make in 2005? anybody know?
You must know something that GM management doesn't, because they're the ones citing that figure.
Union work rules make firing irresponsible workers and getting rid of shoddy workmanship impossible.
That explains why the best plant in North America according to JD Power is a GM plant in Oshawa, Ontario. (Of course, the union can't be faulted for the mediocrity of the designs that they are actually assembling.)
With union work rules that stipulate full wage regardless whether cars are made or not, oversupply becomes a necessity
That certainly explains the oversupply of Aussie made GTO's, Swedish- and Japanese-made Saab's, and Mexican-made trucks.
Slashing brands obviously did not yield any positive return.
When brands that lose money are shut down, they stop losing money. That's why Daimler wisely killed off Plymouth, and (for once, it did something smart) why GM killed off Olds.
It makes perfect sense to unload dead weight -- dead weight increases losses. Too bad that didn't include some of the members of the management team.
Also notice, the total sum of the entire list even back then amounted to $15 million. The UAW excess labor cost runs to the tune of $10-15 billion! There are 1000 million in one single billion.
And I think Rickysweety CAN make major changes to GM. HE's the top dog and if he got together with the rest of those overpaid sacks of crap that run GM they can change ANYTHING they want. But they won't because they are only concerned with their own wealth. The shareholders,per hour employees and finally customers can all take a flying leap for all any executive cares.
And I seem to remember reading about last year Ricky the Retard got a bonus of 14.5 million. Pretty good for all that talent it took to make stupid decsions(selling GMAC),approve loser designs(Aztek,Ion,Lucerne etc...). And of course killing off one of the best GM cars in decades(Olds Intrigue).
I'm not trying to equate Rick et al with the Enron boys. I just think they are so out of touch with the market and so devoted to lousy engineering and outdated managment practices that they've pretty much given up doing anything truly effective. It would'nt surprise me if he decided that all divisions share exact platforms and the only difference between them would be grills and tailights. Oh wait, they already did that back in the 80's didn't they? But I'm sure that Rickyboy and the Funky Bunch could make it work!
I'd say that's pretty good for a guy who managed to lose over $4 billion on one transaction alone. I'm wondering how many other people in America would be able to keep their jobs after losing their employers well over $4,000,000,000
(I think I've figured it out -- Wagoner must belong to a union! I can only imagine what the shop steward must have said to keep him from getting canned...)
Are you basicly saying you know something the GM management doesn't this whole time all along??
That explains why the best plant in North America according to JD Power is a GM plant in Oshawa, Ontario. (Of course, the union can't be faulted for the mediocrity of the designs that they are actually assembling.)
Is there a non-union GM plant in North America at all? The best union plant is . . . tada . . . a union plant. Actually Oshawa plant making an old car is very much the result of union politics. CAW split from UAW, so the latter gave the former short shrifts in labor negotiations, just like UAW did to Saturn, another experiement at wiggling free from normal UAW rules.
That certainly explains the oversupply of Aussie made GTO's, Swedish- and Japanese-made Saab's, and Mexican-made trucks.
Notice, these are niche products. Niche products have longer supply duration.
When brands that lose money are shut down, they stop losing money. That's why Daimler wisely killed off Plymouth, and (for once, it did something smart) why GM killed off Olds
The case on shutting down Olds still has not been proven positive; we have gone through this before. You see, if a division is losing money because of fixed cost that can not be slashed even if the division is shut down, it makes no sense whatsoever to shut down the business.
It makes perfect sense to unload dead weight -- dead weight increases losses. Too bad that didn't include some of the members of the management team.
Questionable managers get fired much faster than quesitonable UAW workers, which is like, never. What you are not realizing is that UAW is the dead weight. Look at your earlier list, even if GM laid off that entire list in 2004 and left the positions empty, the saving would have come to less than $15 million; even less today, because Devine is already gone, and Wagoner is taking $1mil instead of $4mil, and the rest probably lower too. That's less than $10 mil expense some of us are having a fit over, while desperately covering up $10,000-15,000 million a year that's draining through UAW.
-JD Power rated all of the auto plants in North America, unionized or not. Not sure what your response has to do with anything -- the point illustrated is that unionized plants can produce high quality work (even if the cars themselves are nothing to write home about.)
-The case for shutting down Olds is obvious: It was losing market share and money, and it isn't losing money anymore. Unless someone had a plan to invigorate the badge, why keep it?
What you are not realizing is that UAW is the dead weight.
For all of its faults, the union doesn't design the products that don't meet consumer needs, doesn't operate the channels of badges that can't sell cars, didn't decide to buy foreign car makers that lost GM billions of dollars, or ignore Demming's ideas in improving the assembly process.
Funny how the UAW is able to work with Daimler to implement flexible work rules, and Chrysler has been able to maintain its market share, in spite of fierce competition. Both companies have unions; how Chrysler differs is that it is now better managed than GM, and makes an effort to build competitive products that meet consumer needs. Quite a coup, as I never in my life had ever expected to see a day when Chrysler's prospects would be far brighter than GM's.
You don't want to wait for the much better 2007' model trucks pal ?
Rocky