by Johnathan Cohn If you've been following the auto industry's crisis, then you've probably read or heard a lot about overpaid American autoworkers -- in particular, the fact that the average hourly employee of the Big Three makes $70 per hour.
That's an awful lot of money. Seventy dollars an hour in wages works out to almost $150,000 a year in gross income, if you assume a 40-hour work week. Is it any wonder the Big Three are in trouble? And with auto workers making so much, why should taxpayers--many of whom make far less -- finance a plan to bail them out?
Well, here's one reason: The figure is wildly misleading.
Let's start with the fact that it's not $70 per hour in wages. According to Kristin Dziczek of the Center for Automative Research -- who was my primary source for the figures you are about to read -- average wages for workers at Chrysler, Ford, and General Motors were just $28 per hour as of 2007. That works out to a little less than $60,000 a year in gross income -- hardly outrageous, particularly when you consider the physical demands of automobile assembly work and the skills most workers must acquire over the course of their careers.
More important, and contrary to what you may have heard, the wages aren't that much bigger than what Honda, Toyota, and other foreign manufacturers pay employees in their U.S. factories. While we can't be sure precisely how much those workers make, because the companies don't make the information public, the best estimates suggests the corresponding 2007 figure for these "transplants" -- as the foreign-owned factories are known -- was somewhere between $20 and $26 per hour, and most likely around $24 or $25. That would put average worker's annual salary at $52,000 a year.
So the "wage gap," per se, has been a lot smaller than you've heard. And this is no accident. If the transplants paid their employees far less than what the Big Three pay their unionized workers, the United Auto Workers would have a much better shot of organizing the transplants' factories. Those factories remain non-unionized and management very much wants to keep it that way.
But then what's the source of that $70 hourly figure? It didn't come out of thin air. Analysts came up with it by including the cost of all employer-provided benefits -- namely, health insurance and pensions -- and then dividing by the number of workers. The result, they found, was that benefits for Big Three cost about $42 per hour, per employee. Add that to the wages -- again, $28 per hour -- and you get the $70 figure. Voila.
Except ... notice something weird about this calculation? It's not as if each active worker is getting health benefits and pensions worth $42 per hour. That would come to nearly twice his or her wages. (Talk about gold-plated coverage!) Instead, each active worker is getting benefits equal only to a fraction of that -- probably around $10 per hour, according to estimates from the International Motor Vehicle Program. The number only gets to $70 an hour if you include the cost of benefits for retirees -- in other words, the cost of benefits for other people. One of the few people to grasp this was Portfolio.com's Felix Salmon. As he noted recently, the claim that workers are getting $70 an hour in compensation is just "not true."
Of course, the cost of benefits for those retirees -- you may have heard people refer to them as "legacy costs" -- do represent an extra cost burden that only the Big Three shoulder. And, yes, it makes it difficult for the Big Three to compete with foreign-owned automakers that don't have to pay the same costs. But don't forget why those costs are so high. While the transplants don't offer the same kind of benefits that the Big Three do, the main reason for their present cost advantage is that they just don't have many retirees.
The first foreign-owned plants didn't start up here until the 1980s; many of the existing ones came well after that. As of a year ago, Toyota's entire U.S. operation had less than 1,000 retirees. Compare that to a company like General Motors, which has been around for more than a century and which supports literally hundreds of thousands of former workers and spouses. As you might expect, many of these have the sorts of advanced medical problems you expect from people to develop in old age. And, it should go without saying, those conditions cost a ton of money to treat.
To be sure, we've known about these demographics for a while. Management and labor in Detroit should have figured out a solution it long ago. But while the Big Three were late in addressing this problem, they did address it eventually.
Notice how, in this article, I've constantly referred to 2007 figures? There's a good reason. In 2007, the Big Three signed a breakthrough contract with the UAW designed, once and for all, to eliminate the compensation gap between domestic and foreign automakers in the U.S.
The agreement sought to do so, first, by creating a private trust for financing future retiree benefits -- effectively removing that burden from the companies' books. The auto companies agreed to deposit start-up money in the fund; after that, however, it would be up to the unions to manage the money. And it was widely understood that, given the realities of investment returns and health care economics, over time retiree health benefits would likely become less generous.
In addition, management and labor agreed to change health benefits for all workers, active or retired, so that the coverage looked more like the policies most people have today, complete with co-payments and deductibles. The new UAW agreement also changed the salary structure, by creating a two-tiered wage system. Under this new arrangement, the salary scale for newly hired workers would be lower than the salary scale for existing workers.
One can debate the propriety and wisdom of these steps; two-tiered wage structures, in particular, raise various ethical concerns. But one thing is certain: It was a radical change that promised to make Detroit far more competitive. If carried out as planned, by 2010 -- the final year of this existing contract -- total compensation for the average UAW worker would actually be less than total compensation for the average non-unionized worker at a transplant factory. The only problem is that it will be several years before these gains show up on the bottom line -- years the industry probably won't have if it doesn't get financial assistance from the government.
Make no mistake: The argument over a proposed rescue package is complicated, in no small part because over the years both management and labor made some truly awful decisions while postponing the inevitable reckoning with economic reality. And even if the government does provide money, it's a tough call whether restructuring should proceed with or without a formal bankruptcy filing. Either way, yet more downsizing is inevitable.
But the next time you hear somebody say the unions have to make serious salary and benefit concessions, keep in mind that they already have -- enough to keep the companies competitive, if only they can survive this crisis.
I trust it is safe to say that when you refer to "government subsidies," you are referring to subsidies provided by both federal and state governments. And if this is in fact true, then I am sure you were adamantly against the State of Alabama offering lucrative incentives (in essence, subsidies) to Mercedes Benz in the early 1990s to lure the German automobile manufacturer to the State.
As it turned out, Alabama offered a stunning $253 million incentive package to Mercedes. Additionally, the state also offered to train the workers, clear and improve the site, upgrade utilities, and buy 2,500 Mercedes Benz vehicles. All told, it is estimated that the incentive package totaled anywhere from $153,000 to $220,000 per created job. On top of all this, the state gave the foreign automaker a large parcel of land worth between $250 and $300 million, which was coincidentally how much the company expected to invest in building the plant.
With all due respect, Senator, where was your outrage when all this was going on? Perhaps on principal you did disagree with your colleagues in the Alabama State Government over these subsidies, but I don't recall you ever going out and publicly decrying Alabama's subsidization strategy. I certainly don't recall you going in front of the nation (as you did this past Sunday) to discuss what a big mistake Alabama was making in providing subsidies to Mercedes Benz. If you had, however, you could have talked about how, applying free market principles, Alabama shouldn't have had to resort to subsidies to land Mercedes Benz.
Competitively speaking, if Alabama had been the strongest candidate under consideration (i.e. highest quality infrastructure, workforce, research and development facilities, business climate, etc.), then subsidies shouldn't have been required.
The fact is that Alabama knew that, on a level playing field, it could not compete with the other states under consideration and, thus, to lure the German car builder to the state, it offered the aforementioned unprecedented subsidies. In effect, Alabama — your state — did exactly what you said government should not do: provide subsidies for manufacturing. It's no great mystery why Alabama politicians went to such dramatic anti-free-market measures to secure Mercedes Benz — they did it for the betterment of their state through job creation and increased tax revenues. And who could blame them? Is that so different than what would occur by providing financial aid to help rescue the domestic auto industry?
Such aid would save millions of jobs and millions of dollars in lost tax revenue. Additionally, unlike the giveaways Alabama bestowed upon the foreign automaker in question, United States taxpayers would be reimbursed with interest (as they were when Chrysler received government aid in the early 1980s) for their investment in what is clearly a critically important industry for America’s present and future.
Best Regards, Peter Karmanos, Jr. Chairman and CEO Compuware Corporation
If they fail to make profits, its not a concern of the UAW since they have no stake and are but just one piece of the manufacture of the final product.
It is that kind of absurd mentality that shoved over a million UAW jobs to Mexico and over seas. The workers have the most to lose if a company is not making any profit. No profit, no reason to keep the place open. Exactly what is happening with the Big 3 over the last 40 years. The smart GM stockholders sold out when the stock was at $75. I made a couple bucks a share selling at $27. I don't think you will ever see GM come back. NO ONE TRUSTS THEM TO MAKE A PROFIT. Let alone a decent small high mileage car.
So if I am reading your post right. These concessions do not come into being until 2010? GM does not have that long to give. When 2008 comes to an end GM will have lost a $100 billion over the last 5 years. Their share of a $25 billion bailout will not even cover losses for 2009. This economy has no bubble to look forward to. Unless we get into a real big war somewhere. Cohn may have explained the $70 per hour wage package in vague terms. I would like to see actual dollar amounts for each expenditure. How much of that $70+ per hour goes into the UAW coffers? How much goes to retirees over 65 for health care? I have to blame the UAW totally for a contract with that kind of misconceptions built in. Are the UAW leaders getting kick backs from the Big 3. For a contract to include benefits for someone that is retired added to the current workers wage package is so Federal Government I cannot believe how stupid they have been. No wonder they have lost so many jobs. The UAW workers should be rioting and going after the real culprits. The leaders of their lame Union.
Every City, County and State uses incentives to lure jobs into their jurisdiction. The hope is getting future taxes and stabilizing the workforce. No jobs, no property tax, no schools, cops, firemen, or city managers. If Michigan and the impacted states are interested in keeping the Big 3 afloat Those states should give them the breaks they need to level the playing field. The Feds should not be playing favorites between the states. The less Federal intervention the quicker the problems will get resolved.
The contractors impacted by the housing bubble burst in CA and FL are hurting a lot more than the UAW workers. I would bet over 3 million jobs have already been lost due to the mess Congress made with sub prime lending. When you start subsidizing any entity there is no end in sight. The Banking and Insurance bailouts should show you that.
"....a - renegotiate with the lender; or b - declare bankruptcy and walk away"
Therein lies the problem. I'm sure GM would rather do A. Problem is, so many taxpayers are doing B, the banks that GM owes money to can't give them A.
Enter the taxpayer. We give these banks a big chunk of change, and they refuse to hand it out. We paid for it, why shouldn't we get it back??? Because too many of us chose B, and the bankers are still sweatting bullets, and are too scared to sit down with GM for A.
Enter the taxpayer. We give these banks a big chunk of change, and they refuse to hand it out. We paid for it, why shouldn't we get it back???
Loans are getting much easier here in CA. Those that can now qualify for a home loan has increased since last year. Mainly because of home price deflation. Lots of ads for refinance loans as low as 5.25%. I still get CC offers on a daily basis. I think the difference is they are not lending to poor risk borrowers. That would be GM for sure. Would you lend money to a company that owes $200 billion and have lost close to $100 billion over the last 5 years? One of the holdups on that original $25 billion loan program was insurance on the loans. There was a $6 billion insurance policy for every $10 billion that would be loaned to GM. GM is a horrible risk to ever pay any money back. We could loan them $25 billion tomorrow and a year from now they will be in the same mess. So when they do finally throw in the towel we will be stuck bailing out all the retirees they leave hanging. Save that $25 billion and just plan on picking up the pieces in 2009.
Here's the origin. This Professor obviously does not know more than you about the auto issues, correct? UAW-type Unions are history.
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University in Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. Since 1997, Professor Perry has been a member of the Board of Scholars for the Mackinac Center for Public Policy, a nonpartisan research and public policy institute in Michigan.
A Detroit bailout would also be unfair to other companies that make cars in the U.S. Yes, those are "foreign" companies in the narrow sense that they are headquartered overseas. But then so was Chrysler before Daimler sold most of the car maker to Cerberus, the private equity fund. Honda, Toyota and the rest employ about 113,000 American auto workers who make nearly four million cars a year in states like Alabama and Tennessee. Unlike Michigan, these states didn't vote for Mr. Obama.
But the very success of this U.S. auto industry indicates that highly skilled American workers can profitably churn out cars without being organized by the UAW. A bailout for Chrysler would in essence be assisting rich Cerberus investors at the expense of middle-class nonunion auto workers (see chart below). Is this the new "progressive" era we keep reading so much about? If Uncle Sam buys into Detroit, $50 billion would only be the start of the outlays as taxpayers were obliged to protect their earlier investment in uncompetitive companies.
"Why is it there are still PLENTY of 1960s, 70s, and 80s Detroit cars out there, yet the Japanese cars are conspicuous by their absence?"
lemko, I don't think that matters to someone who wants to buy a car new, or used under 5 years old...the fact that some 60s and 70s Big 3 cars are still on the road simply means that a few of them were cream puffs, nothing more...
Remember, all those buyers who deserted Big 3 cars in the 80s and 90s (not really that many of them in the 70s, the major onslaught started in the early to mid 80s) felt they were being sold junk at the time and turned to the imports as an alternative...just because a few Caddys and Impalas survive today does NOT offset all those who were burned, often burned multiple times...
lemko, what it boils down to is this: YOU have been treated well by Big 3 cars, and I am happy for you...but you continually post as tho you cannot understand what OTHERS have been thru, assuming that they foolishly deserted the Big 3 because of the high quality of their cars, when a GREAT number of buyers over the last 20-plus years have an experience diametrically opposed to your cream puff experiences...
Just on Thanksgiving day I met a man who is service manager at Lexus, and who worked in quality control for Cadillac from 1973-1993...he told me how cars coming off the line, Caddies, had doors that would not close and hoods that did not line up with fenders, also that he had many coffe cans on his workbench full of extra screws, nuts and bolts that were just lying various places in the vehicle...he also said that in 92 or 93 (I may be wrong on the year) someone drove up in a new product, the Lexus LS, and when the Caddy guys saw it and examined it, my new friend said his only words were "Boys, we're in serious trouble"...he knew back then that the Caddy would look like junk next to the flagship Lexus, and he was a loyal Caddy worker...he also saw the handwriting on the wall and went to work for Lexus...
So, really, the fact that you and a few others have vehicles from 20 years ago means nothing about the overall market...your experience with a 20 year old Buick will not send ANYONE to a Buick dealer solely becayse yours is still running...your experience is almost unique, and certainly has no bearing on today's market...
Plus, those Japanese rustbuckets of the 70s were improved over the last 20-30 years, whereas the Big 3 have only drawn more complaints...I still maintain my main point, buyers have deserted the Big 3 because of their own bad experiences and they went over to imports voluntarily with nobody holding a gun to their head...
So, while Toyota did have a sludge problem and Honda may have a VCM problem on their new V6s, overall many folks have had better experiences with imports as smoother cars and better fuel mileage than they did with Big 3 cars...
I hope your Buick and Caddy continue to run forever, but your experience with 20 year old GM cars is completely irrelevent in today's market...and I do appreciate the knowledge that you informed me when you taught me that the Lucerne was a DTS w/o the price and status...
I, personally, may buy a Buick or DTS from your experience with your NEW DTS, but the fact that you have 20 year old cars just means you were one of the lucky few from back then, because too many of their cars were barley qualified as boat anchors for the QE2...:):):)
"Why is it there are still PLENTY of 1960s, 70s, and 80s foreign cars out there, yet the American cars are conspicuous by their absence?"
lemko, I don't think that matters to someone who wants to buy a car new, or used under 5 years old...the fact that some 60s and 70s foreign brand cars are still on the road simply means that a few of them were cream puffs, nothing more...
....just because a few Accords and Camrys survive today does NOT offset all those who were burned, often burned multiple times...
lemko, what it boils down to is this: YOU have been treated well by foreign cars, and I am happy for you...but you continually post as tho you cannot understand what OTHERS have been thru, assuming that they foolishly deserted the foreign brands because of the high quality of their cars, when a GREAT number of buyers over the last 20-plus years have an experience diametrically opposed to your cream puff experiences...
....
So, really, the fact that you and a few others have vehicles from 20 years ago means nothing about the overall market...your experience with a 20 year old Honda will not send ANYONE to a Honda dealer solely becayse yours is still running...your experience is almost unique, and certainly has no bearing on today's market...
Plus, those American rustbuckets of the 70s were improved over the last 20-30 years, whereas the foreign brands have only drawn more complaints...I still maintain my main point, buyers have deserted the foreign brand makers because of their own bad experiences and they went over to imports voluntarily with nobody holding a gun to their head...
So, while Chrysler did have a sludge problem and GM may have a UIM problem on their new V6s, overall many folks have had better experiences with imports as smoother cars and better fuel mileage than they did with Big 3 cars...
I really love my new DTS! It almost seems TOO NICE to drive around in my city where cars can get beat up pretty fast. I get a lot of young people who compliment me on my car. I guess the opinion of a Caddy as an old man's car is fading fast.
The old rust buckets of Cuba speak for themselves. I too love driving my CTS and playing with the navagation and listening to music on the Bose. Life is good.
So when they do finally throw in the towel we will be stuck bailing out all the retirees they leave hanging. Save that $25 billion and just plan on picking up the pieces in 2009.
Without those good paying UAW jobs, you have no one to buy/qualify for those empty homes. Its a catch 22, and now more than ever we need to stick together as Americans. I'm rather optimistic about GM and have seen may out there buying up their stock. If they are right, that bottom fishing may pay off their home and put a Cadillac on the driveway. I quite don't see a years inventory of homes moving as soon as 2009 and or the economy picking up till much later. 2012 is being optimistic.
The smart GM stockholders sold out when the stock was at $75. I made a couple bucks a share selling at $27. I don't think you will ever see GM come back. NO ONE TRUSTS THEM TO MAKE A PROFIT.
One could argue that giving all employees stock opitions would be a good thing and let them think about the bottomline. 100 shares a piece and wait a year to see if in fact that stock doubles or more.
I recall a neighbor, she worked for American Airlines, she bought all she could when its was below a dollar a share, she put up her entire 401K plan on the line. Even with the concessions her union made, she was ahead by millions. I do recall her reading Forbes and other business magazines.
I'll bet you also thought McCain was going to be president too. Where ever do you get your numbers? Even Rush/Drudge aren't that stupid?
Re “Sync, and Swim Together,” by Daniel Kahneman and Andrew M. Rosenfield (Op-Ed, Nov. 25):
The notion that Detroit automakers should simultaneously declare bankruptcy may be the single worst policy idea to address the crisis to date.
First, Detroit can make it. The car companies have introduced promising new fuel-efficient models, and U.A.W. workers outproduce their international rivals in eight out of nine categories in which their United States plants compete.
Second, the disruption of even a planned bankruptcy would sink auto suppliers, devastate communities and push states like Michigan over the edge. It would cost tens of billions of dollars in lost tax revenue and social services just to clean up the wreckage.
Instead, $25 billion in loan guarantees allows automakers to bridge the economic rapids.
The most important model Detroit produced in the 20th century was the middle class for many millions of Americans. We need to ensure that that model drives into the 21st century, not off an economic cliff.
General Motors Corp., Ford Motor Co. and Chrysler LLC sold 8.5 million vehicles in the United States last year and millions more around the world. GM outsold Toyota by about 1.2 million vehicles in the United States last year and holds a U.S. lead over Toyota of about 560,000 so far this year. Globally, GM in 2007 remained the world's largest automaker, selling 9,369,524 vehicles worldwide -- about 3,000 more than Toyota.
Ford outsold Honda by about 850,000 and Nissan by more than 1.3 million vehicles in the United States last year.
Chrysler sold more vehicles here than Nissan and Hyundai combined in 2007 and so far this year.
The creaky, leaky vehicles of the 1980s and '90s are long gone. Consumer Reports recently found that "Ford's reliability is now on par with good Japanese automakers." The independent J.D. Power Initial Quality Study scored Buick, Cadillac, Chevrolet, Ford, GMC, Mercury, Pontiac and Lincoln brands' overall quality as high or higher than that of Acura, Audi, BMW, Honda, Nissan, Scion, Volkswagen and Volvo.
Power rated the Chevrolet Malibu the highest-quality midsize sedan. Both the Malibu and Ford Fusion scored better than the Honda Accord and Toyota Camry.
All of the Detroit Three build midsize sedans the Environmental Protection Agency rates at 29-33 miles per gallon on the highway. The most fuel-efficient Chevrolet Malibu gets 33 m.p.g. on the highway, 2 m.p.g. better than the best Honda Accord. The most fuel-efficient Ford Focus has the same highway fuel economy ratings as the most efficient Toyota Corolla. The most fuel-efficient Chevrolet Cobalt has the same city fuel economy and better highway fuel economy than the most efficient non-hybrid Honda Civic. A recent study by Edmunds.com found that the Chevrolet Aveo subcompact is the least expensive car to buy and operate.
None of that money has been lent out and may not be for more than a year. In addition, it can, by law, be used only to invest in future vehicles and technology, so it has no effect on the shortage of operating cash the companies face because of the economic slowdown that's killing them now.
GM, Ford and Chrysler are idiots for investing in pickups and SUVs.
Reality
The domestic companies' lineup has been truck-heavy, but Toyota, Nissan, Mercedes-Benz and BMW have all spent billions of dollars on pickups and SUVs because trucks are a large and historically profitable part of the auto industry. The most fuel-efficient full-size pickups from GM, Ford and Chrysler all have higher EPA fuel economy ratings than Toyota and Nissan's full-size pickups.
The Detroit Three got into the hybrid business late, but Ford and GM each now offers more hybrid models than Honda or Nissan, with several more due to hit the road in early 2009.
General Motors Corp., Ford Motor Co. and Chrysler LLC sold 8.5 million vehicles in the United States last year and millions more around the world. GM outsold Toyota by about 1.2 million vehicles in the United States last year and holds a U.S. lead over Toyota of about 560,000 so far this year. Globally, GM in 2007 remained the world's largest automaker, selling 9,369,524 vehicles worldwide -- about 3,000 more than Toyota.
Ford outsold Honda by about 850,000 and Nissan by more than 1.3 million vehicles in the United States last year.
Chrysler sold more vehicles here than Nissan and Hyundai combined in 2007 and so far this year
Sounds like a picture of success. Well then, why in your opinion are these companies in such dire straits?
Can you find me a company, other than Walmart, thats not experiencing the wrath of this economy? Surely we are all aware that even the Japanese automakers are offering incentives. The DOW isn't headed in the right direction either. Maybe you have a list of stocks which will out perform? Maybe its been eons since we have experienced a down cycle. The 2000 dot com averted by lowering interest rates. Are we below 2% on interest rates? FED can help us out this time. Japan did experience a downturn which last nearly a decade. Google it, the comparisons to our present condition are eerie.
Collection agencies, pawn shops, and gun sales are doing great.
dallas: It's one thing for a company to be hurting and another for it (GM especially) to be terminal, literally on its last breath. It's especially poignant if it was formerly one of the largest corporations on earth. Pretty profound isn't it?
Not being an economist or expert, I would have thought that executives and CEO's being paid mufti-millions each year for their expertise would have seen this coming. The multifactorial reasons for these corporations failing are the reason for these unhealthy economic times not necessarily the result of these times
General Motors Corp., Ford Motor Co. and Chrysler LLC sold 8.5 million vehicles in the United States last year and millions more around the world.
Let's put that in perspective, though. 1983 was widely considered one of the bleakest years in automotive history. That year, the domestic industry sold about 5.5 million cars, and of that, GM moved about 3.5 million. Now that's just cars, not trucks. I got these numbers out of an auto encyclopedia, and they tend to separate cars from trucks, although nowadays, the two have become intertwined what with minivans, crossovers, pickups purchased as a second car, etc.
It's probably safe to assume though, that between Chevy trucks, GMC, Ford, Dodge, and Jeep, they managed to move another 2 million vehicles. So let's say 7.5 million, total.
So for GM, Ford, and Chrysler to only move a million more units 24 years after that disastrous year, really isn't saying much. Especially when you figure that most Chrysler products these days, and an alarming amount of Ford and GM cars, have been sold at deep, deep discounts.
FWIW, the only reason GM made money in 1983 was through GMAC financing. If it wasn't for that, they would've been screwed.
I'm sure that the next time Consumer Reports updates their auto encyclopedia, this current timeframe will make 1983 look like a cake walk!
And yeah, we're in a recession and times are tough for everyone. But I don't hear any rumors of Nissan, Toyota, or Honda declaring bankruptcy. They're hurting, to be sure, but nowhere to the degree that GM, Ford, and especially Chrysler are.
First, Detroit can make it. The car companies have introduced promising new fuel-efficient models, and U.A.W. workers outproduce their international rivals in eight out of nine categories in which their United States plants compete.
Eight divisions with wildly sinking market share. Only a few of the models are world-class competitive. Jobs banks. CEO compensation was $17M in 2007. GM is not going to make it without many radical changes yet to be implemented.
Power rated the Chevrolet Malibu the highest-quality midsize sedan.
Correction: "initial quality". GM has traditionally done fine in the first year. Then it's all downhill. The Malibu has not been out long enough to evaluate this. And it's only one model.
Without those good paying UAW jobs, you have no one to buy/qualify for those empty homes.
Those UAW workers will have NO impact on housing sales in the worst hit states of CA, FL & NV.
I recall a neighbor, she worked for American Airlines, she bought all she could when its was below a dollar a share, she put up her entire 401K plan on the line.
I recall 1000s of employees putting their faith in Enron stock also. GM is just about as likely to stay out of bankruptcy as ENRON.
First, Detroit can make it. The car companies have introduced promising new fuel-efficient models, and U.A.W. workers outproduce their international rivals in eight out of nine categories in which their United States plants compete.
If that is true and I don't believe it is. Why is GM losing money even when the economy was booming up to the end of 2007? GM is overweight and poorly managed. Let them die and other automakers will take their place and do a better job of building fuel efficient cars IN THE USA.
The most important model Detroit produced in the 20th century was the middle class for many millions of Americans.
It was a very poor model with NO plan of sustainability. I think GM figured they would dump all those retirees onto the public from the get go. It is run so much like our worthless Congress it is scary. The only big difference is Congress owns the mint. So they have found they can print money as needed.
Chevrolet Aveo subcompact is the least expensive car to buy and operate.
So the Koreans can build it and sell it cheaper than a UAW shop in the USA.
The most fuel-efficient full-size pickups from GM, Ford and Chrysler
Ford and Chevy trucks still the number one and two best selling vehicles. Built in the USA. High profit, yet GM has lost close to $100 billion in the last 5 years. They were bleeding red ink when everyone else was making big PROFIT. GM has a losing business model. Whether it is the UAW or management they need to just go out of business and let Ford and Chrysler pick up the slack.
The Detroit Three got into the hybrid business late, but Ford and GM each now offers more hybrid models than Honda or Nissan, with several more due to hit the road in early 2009.
Who Cares? They are money losers and will be replaced before GM ever gets their act together. Ford has had theirs for 5 years already. Don't forget I owned one of the first 300 Hybrids GMC built. It was nothing to write home about and the mileage was no better. It was just an expensive standby generator.
Collection agencies, pawn shops, and gun sales are doing great.
On that we agree. With the element that became empowered during this last election, you cannot be to well armed.
you took the words right out of my mouth! I was going to post this same article I read in our cities car section that come every Saturday. The jig is up!!! Toyota/Honda no longer own all rights to quality and reliability ratings, and even safety ratings (Ford). This article of "Six myths about the Detroit big 3 automakers refuse to die" is great stuff. This is what needs to come out more from the media. I believe with the internet and the freedom of exchange of information is what forced the media to wake up. I speak from having owned Ford products for the last 15-20 years and not having any major issues. Perception is now what GM and Ford need to conquer.
All of the Detroit Three build midsize sedans the Environmental Protection Agency rates at 29-33 miles per gallon on the highway. The most fuel-efficient Chevrolet Malibu gets 33 m.p.g. on the highway, 2 m.p.g. better than the best Honda Accord. The most fuel-efficient Ford Focus has the same highway fuel economy ratings as the most efficient Toyota Corolla. The most fuel-efficient Chevrolet Cobalt has the same city fuel economy and better highway fuel economy than the most efficient non-hybrid Honda Civic.
What about the Prius and Honda Civic Hybrid? How many mpg does the best hybrid get from the D3?
The Cobalt just rated in the bottom of the pack in the latest CU survey of cars that owners would buy again. The Prius and Civic hybrid were at the top.
The domestic companies' lineup has been truck-heavy, but Toyota, Nissan, Mercedes-Benz and BMW have all spent billions of dollars on pickups and SUVs because trucks are a large and historically profitable part of the auto industry.
So conversely, the D3 should have spent billions on small cars to make them competitive, too!
Ford and GM each now offers more hybrid models than Honda or Nissan, with several more due to hit the road in early 2009
Their hybrids are just not nearly as good, and are much farther from paying for themselves when you factor in their cost spread vs. mileage improvements.
Can you find me a company, other than Walmart, thats not experiencing the wrath of this economy? Surely we are all aware that even the Japanese automakers are offering incentives.
You might have missed the other poster's point. Every company suffering (true) is not the same as going to the government in private jets asking for $25B.
1983 was widely considered one of the bleakest years in automotive history. That year, the domestic industry sold about 5.5 million cars, and of that, GM moved about 3.5 million. Now that's just cars, not trucks.
Well, 1982 was worse, but let's go with '83 since it wasn't much better. GM moved 5.3 million vehicles that year, Ford 2.6, and Chrysler (pre-Jeep) was 1.2 million. Industry total that year was just over 12.1 million. For those keeping track, Toyota was about 714k, Nissan was around 659k, Honda was 401k, VW was 237k, and everyone else had just over a million to share.
The UAW's problem is that it built probably 10 million out of that 12 in 1983, but they'll be lucky to have half that amount this year.
I see nothing wrong with that - perhaps ironic, but I'll sell the Middle East cars all day long if they want them. They've always been fond of Suburbans there.
Both Nissan and Toyota have failed at full sized pickups. Toyota's Tundra (I owned an 05) was a great "little" truck, but never quite measured up in size or grunt. Until now, when they finally came out with the Bulldog, at exactly the wrong time. Nissan is giving up on the Titan, which has been trouble prone since inception. Not that it's a bad truck, it's not been up to Nissan dependability standards, or Fords, GM's or Chrysler's either.
Nissan is giving up on the Titan, which has been trouble prone since inception. Not that it's a bad truck, it's not been up to Nissan dependability standards, or Fords, GM's or Chrysler's either.
Nissan still got some pretty good mileage out of the Titan/Armada architecture, though. The Pathfinder, Xterra, and Frontier are all based on it...essentially stubbier, narrower renditions of it.
I think the Titan might have done better if Nissan offered it in a wider range of body styles, and with more engines. IIRC, it only came with the 5.6 V-8, and as either an extended cab 6.5 foot bed, or a crew cab, 5.5 foot bet. I've heard those two are the most popular body styles these days, though. I'm probably the only one left on this planet that actually WANTS a regular cab, 8-foot bed truck!
Also, I'd think that the 4.0 V-6 would have more than enough power to serve as a budget engine in the Titan. With 265-270 hp, I'm sure it would blow away the Chevy 4.3, Mopar 3.7, and whatever an excuse for a base engine Ford uses these days.
I always looked at the previous Tundra as a "little" truck, too! Even though you could get it with an 8-foot bed, it just seemed small inside. One problem was the seats. It felt to me like they took the seats out of something small like a Corolla or Yaris, and threw them in this truck. The seating position was too low to the floor, legroom wasn't so generous, and it just felt like my cheeks wanted to spill over the sides of the seats...and I'm anything BUT a Jenny Craig member! :P
One of my officemates briefly had an '08 Tundra, extended cab. I rode in it once or twice. I thought it was pretty roomy inside. The interior seems sort of cheap by Toyota standards, though.
It's especially poignant if it was formerly one of the largest corporations on earth.
Bear Sterns was said to be the third largest bank, one of its hedge fund snubbed the shareholders during it officers meeting. They halted redemptions, because of cash flow problems. Much like a run on the bank. Since banks are only required to keep about 20% as a reserve requirement. If all the depositors showed up wanting cash, 20% could be serviced. The system works only because those who take out their cash, spend it on goods/services. Say you buy a car, the car dealer deposits the cash in the bank and not in some coffee can in the backyard. This is known as the creation of money, whereby your $1 deposit is loaned out five times. You seriously didn't think they only loaned it out once? By loaning it out five or so times, they can pay their shareholders, employees, and other operation cost.
As we all know credit cards are unsecured debt and that is factored into the interest rate, along with the credit worthiness of the borrower, the inflation rate, and lastly real return. Autos and homes are secured with tangible property and merit a lower rate. Less tan stellar credit earn a higher interest rate. All these debts are sold on a secondary market as a package. When Wall Street folks slip in some risky loans with the usual safe loans, you have a credit crisis. Fixed or low interest bearing funds are sold to traditionally conservative low yield money funds. When they balk and see a few rotten eggs in these packages. They pass because of the risk, which should merit a higher interest rate. Fix and stable value funds seek safety rather than yield for their shareholders. Junk bonds seek risk and high yields as a reward for their investors. For the first time in history a money market fund has failed.
GM and many others have and will continue to borrow for many reasons. Many companies borrow seasonally or yearly. They pay off their loans and go about business. Those with good credit may float bond issues, much like a city/municipality would. Some with less than desirable credit might be forced into the junk bond market. However, since these Wall Street folks committed fraud, money for loans is hard to come by. The only show in town is govt and thats doesn't help the small business, but rather the big concerns.
To me if there ever was a good use for capital punishment, this is it. No matter what we do ENRON's have no deterrent. Teaching ethics in the business schools has failed to curb calculated white collar crime. Now we can all feel what it was like to be an ENRON employee or shareholder.
I always looked at the previous Tundra as a "little" truck, too!
Here in Texas we have the same feeling about the prior Tundra. The wheel base was smaller than a full size truck too. Then the bones were tiny and not worthy of a truck. Toyota has been going to small screws and parts in all of their cars and trucks. Truck people seem to work on their own and noticed this from day one. So they beefed everything up American standards. The whole thing reminds me of the T100.
The Titan was geared too low to compete with American trucks. Americans have the need for speed.
To me if there ever was a good use for capital punishment, this is it. No matter what we do ENRON's have no deterrent. Teaching ethics in the business schools has failed to curb calculated white collar crime. Now we can all feel what it was like to be an ENRON employee or shareholder.
Sounds like a good plan to me. Better get it done in TX, most other states have forgotten how. The stockholders need to get organized and stop the theft by those on the top. Toss a few out of the top floor of their Ivory Towers.
Comments
If you've been following the auto industry's crisis, then you've probably read or heard a lot about overpaid American autoworkers -- in particular, the fact that the average hourly employee of the Big Three makes $70 per hour.
That's an awful lot of money. Seventy dollars an hour in wages works out to almost $150,000 a year in gross income, if you assume a 40-hour work week. Is it any wonder the Big Three are in trouble? And with auto workers making so much, why should taxpayers--many of whom make far less -- finance a plan to bail them out?
Well, here's one reason: The figure is wildly misleading.
Let's start with the fact that it's not $70 per hour in wages. According to Kristin Dziczek of the Center for Automative Research -- who was my primary source for the figures you are about to read -- average wages for workers at Chrysler, Ford, and General Motors were just $28 per hour as of 2007. That works out to a little less than $60,000 a year in gross income -- hardly outrageous, particularly when you consider the physical demands of automobile assembly work and the skills most workers must acquire over the course of their careers.
More important, and contrary to what you may have heard, the wages aren't that much bigger than what Honda, Toyota, and other foreign manufacturers pay employees in their U.S. factories. While we can't be sure precisely how much those workers make, because the companies don't make the information public, the best estimates suggests the corresponding 2007 figure for these "transplants" -- as the foreign-owned factories are known -- was somewhere between $20 and $26 per hour, and most likely around $24 or $25. That would put average worker's annual salary at $52,000 a year.
So the "wage gap," per se, has been a lot smaller than you've heard. And this is no accident. If the transplants paid their employees far less than what the Big Three pay their unionized workers, the United Auto Workers would have a much better shot of organizing the transplants' factories. Those factories remain non-unionized and management very much wants to keep it that way.
But then what's the source of that $70 hourly figure? It didn't come out of thin air. Analysts came up with it by including the cost of all employer-provided benefits -- namely, health insurance and pensions -- and then dividing by the number of workers. The result, they found, was that benefits for Big Three cost about $42 per hour, per employee. Add that to the wages -- again, $28 per hour -- and you get the $70 figure. Voila.
Except ... notice something weird about this calculation? It's not as if each active worker is getting health benefits and pensions worth $42 per hour. That would come to nearly twice his or her wages. (Talk about gold-plated coverage!) Instead, each active worker is getting benefits equal only to a fraction of that -- probably around $10 per hour, according to estimates from the International Motor Vehicle Program. The number only gets to $70 an hour if you include the cost of benefits for retirees -- in other words, the cost of benefits for other people. One of the few people to grasp this was Portfolio.com's Felix Salmon. As he noted recently, the claim that workers are getting $70 an hour in compensation is just "not true."
Of course, the cost of benefits for those retirees -- you may have heard people refer to them as "legacy costs" -- do represent an extra cost burden that only the Big Three shoulder. And, yes, it makes it difficult for the Big Three to compete with foreign-owned automakers that don't have to pay the same costs. But don't forget why those costs are so high. While the transplants don't offer the same kind of benefits that the Big Three do, the main reason for their present cost advantage is that they just don't have many retirees.
The first foreign-owned plants didn't start up here until the 1980s; many of the existing ones came well after that. As of a year ago, Toyota's entire U.S. operation had less than 1,000 retirees. Compare that to a company like General Motors, which has been around for more than a century and which supports literally hundreds of thousands of former workers and spouses. As you might expect, many of these have the sorts of advanced medical problems you expect from people to develop in old age. And, it should go without saying, those conditions cost a ton of money to treat.
To be sure, we've known about these demographics for a while. Management and labor in Detroit should have figured out a solution it long ago. But while the Big Three were late in addressing this problem, they did address it eventually.
Notice how, in this article, I've constantly referred to 2007 figures? There's a good reason. In 2007, the Big Three signed a breakthrough contract with the UAW designed, once and for all, to eliminate the compensation gap between domestic and foreign automakers in the U.S.
The agreement sought to do so, first, by creating a private trust for financing future retiree benefits -- effectively removing that burden from the companies' books. The auto companies agreed to deposit start-up money in the fund; after that, however, it would be up to the unions to manage the money. And it was widely understood that, given the realities of investment returns and health care economics, over time retiree health benefits would likely become less generous.
In addition, management and labor agreed to change health benefits for all workers, active or retired, so that the coverage looked more like the policies most people have today, complete with co-payments and deductibles. The new UAW agreement also changed the salary structure, by creating a two-tiered wage system. Under this new arrangement, the salary scale for newly hired workers would be lower than the salary scale for existing workers.
One can debate the propriety and wisdom of these steps; two-tiered wage structures, in particular, raise various ethical concerns. But one thing is certain: It was a radical change that promised to make Detroit far more competitive. If carried out as planned, by 2010 -- the final year of this existing contract -- total compensation for the average UAW worker would actually be less than total compensation for the average non-unionized worker at a transplant factory. The only problem is that it will be several years before these gains show up on the bottom line -- years the industry probably won't have if it doesn't get financial assistance from the government.
Make no mistake: The argument over a proposed rescue package is complicated, in no small part because over the years both management and labor made some truly awful decisions while postponing the inevitable reckoning with economic reality. And even if the government does provide money, it's a tough call whether restructuring should proceed with or without a formal bankruptcy filing. Either way, yet more downsizing is inevitable.
But the next time you hear somebody say the unions have to make serious salary and benefit concessions, keep in mind that they already have -- enough to keep the companies competitive, if only they can survive this crisis.
As it turned out, Alabama offered a stunning $253 million incentive package to Mercedes. Additionally, the state also offered to train the workers, clear and improve the site, upgrade utilities, and buy 2,500 Mercedes Benz vehicles. All told, it is estimated that the incentive package totaled anywhere from $153,000 to $220,000 per created job. On top of all this, the state gave the foreign automaker a large parcel of land worth between $250 and $300 million, which was coincidentally how much the company expected to invest in building the plant.
With all due respect, Senator, where was your outrage when all this was going on? Perhaps on principal you did disagree with your colleagues in the Alabama State Government over these subsidies, but I don't recall you ever going out and publicly decrying Alabama's subsidization strategy. I certainly don't recall you going in front of the nation (as you did this past Sunday) to discuss what a big mistake Alabama was making in providing subsidies to Mercedes Benz. If you had, however, you could have talked about how, applying free market principles, Alabama shouldn't have had to resort to subsidies to land Mercedes Benz.
Competitively speaking, if Alabama had been the strongest candidate under consideration (i.e. highest quality infrastructure, workforce, research and development facilities, business climate, etc.), then subsidies shouldn't have been required.
The fact is that Alabama knew that, on a level playing field, it could not compete with the other states under consideration and, thus, to lure the German car builder to the state, it offered the aforementioned unprecedented subsidies. In effect, Alabama — your state — did exactly what you said government should not do: provide subsidies for manufacturing. It's no great mystery why Alabama politicians went to such dramatic anti-free-market measures to secure Mercedes Benz — they did it for the betterment of their state through job creation and increased tax revenues. And who could blame them? Is that so different than what would occur by providing financial aid to help rescue the domestic auto industry?
Such aid would save millions of jobs and millions of dollars in lost tax revenue. Additionally, unlike the giveaways Alabama bestowed upon the foreign automaker in question, United States taxpayers would be reimbursed with interest (as they were when Chrysler received government aid in the early 1980s) for their investment in what is clearly a critically important industry for America’s present and future.
Best Regards,
Peter Karmanos, Jr. Chairman and CEO Compuware Corporation
It is that kind of absurd mentality that shoved over a million UAW jobs to Mexico and over seas. The workers have the most to lose if a company is not making any profit. No profit, no reason to keep the place open. Exactly what is happening with the Big 3 over the last 40 years. The smart GM stockholders sold out when the stock was at $75. I made a couple bucks a share selling at $27. I don't think you will ever see GM come back. NO ONE TRUSTS THEM TO MAKE A PROFIT. Let alone a decent small high mileage car.
The contractors impacted by the housing bubble burst in CA and FL are hurting a lot more than the UAW workers. I would bet over 3 million jobs have already been lost due to the mess Congress made with sub prime lending. When you start subsidizing any entity there is no end in sight. The Banking and Insurance bailouts should show you that.
b - declare bankruptcy and walk away"
Therein lies the problem. I'm sure GM would rather do A. Problem is, so many taxpayers are doing B, the banks that GM owes money to can't give them A.
Enter the taxpayer. We give these banks a big chunk of change, and they refuse to hand it out. We paid for it, why shouldn't we get it back??? Because too many of us chose B, and the bankers are still sweatting bullets, and are too scared to sit down with GM for A.
Loans are getting much easier here in CA. Those that can now qualify for a home loan has increased since last year. Mainly because of home price deflation. Lots of ads for refinance loans as low as 5.25%. I still get CC offers on a daily basis. I think the difference is they are not lending to poor risk borrowers. That would be GM for sure. Would you lend money to a company that owes $200 billion and have lost close to $100 billion over the last 5 years? One of the holdups on that original $25 billion loan program was insurance on the loans. There was a $6 billion insurance policy for every $10 billion that would be loaned to GM. GM is a horrible risk to ever pay any money back. We could loan them $25 billion tomorrow and a year from now they will be in the same mess. So when they do finally throw in the towel we will be stuck bailing out all the retirees they leave hanging. Save that $25 billion and just plan on picking up the pieces in 2009.
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University in Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. Since 1997, Professor Perry has been a member of the Board of Scholars for the Mackinac Center for Public Policy, a nonpartisan research and public policy institute in Michigan.
A Detroit bailout would also be unfair to other companies that make cars in the U.S. Yes, those are "foreign" companies in the narrow sense that they are headquartered overseas. But then so was Chrysler before Daimler sold most of the car maker to Cerberus, the private equity fund. Honda, Toyota and the rest employ about 113,000 American auto workers who make nearly four million cars a year in states like Alabama and Tennessee. Unlike Michigan, these states didn't vote for Mr. Obama.
But the very success of this U.S. auto industry indicates that highly skilled American workers can profitably churn out cars without being organized by the UAW. A bailout for Chrysler would in essence be assisting rich Cerberus investors at the expense of middle-class nonunion auto workers (see chart below). Is this the new "progressive" era we keep reading so much about?
If Uncle Sam buys into Detroit, $50 billion would only be the start of the outlays as taxpayers were obliged to protect their earlier investment in uncompetitive companies.
Regards,
OW
lemko, I don't think that matters to someone who wants to buy a car new, or used under 5 years old...the fact that some 60s and 70s Big 3 cars are still on the road simply means that a few of them were cream puffs, nothing more...
Remember, all those buyers who deserted Big 3 cars in the 80s and 90s (not really that many of them in the 70s, the major onslaught started in the early to mid 80s) felt they were being sold junk at the time and turned to the imports as an alternative...just because a few Caddys and Impalas survive today does NOT offset all those who were burned, often burned multiple times...
lemko, what it boils down to is this: YOU have been treated well by Big 3 cars, and I am happy for you...but you continually post as tho you cannot understand what OTHERS have been thru, assuming that they foolishly deserted the Big 3 because of the high quality of their cars, when a GREAT number of buyers over the last 20-plus years have an experience diametrically opposed to your cream puff experiences...
Just on Thanksgiving day I met a man who is service manager at Lexus, and who worked in quality control for Cadillac from 1973-1993...he told me how cars coming off the line, Caddies, had doors that would not close and hoods that did not line up with fenders, also that he had many coffe cans on his workbench full of extra screws, nuts and bolts that were just lying various places in the vehicle...he also said that in 92 or 93 (I may be wrong on the year) someone drove up in a new product, the Lexus LS, and when the Caddy guys saw it and examined it, my new friend said his only words were "Boys, we're in serious trouble"...he knew back then that the Caddy would look like junk next to the flagship Lexus, and he was a loyal Caddy worker...he also saw the handwriting on the wall and went to work for Lexus...
So, really, the fact that you and a few others have vehicles from 20 years ago means nothing about the overall market...your experience with a 20 year old Buick will not send ANYONE to a Buick dealer solely becayse yours is still running...your experience is almost unique, and certainly has no bearing on today's market...
Plus, those Japanese rustbuckets of the 70s were improved over the last 20-30 years, whereas the Big 3 have only drawn more complaints...I still maintain my main point, buyers have deserted the Big 3 because of their own bad experiences and they went over to imports voluntarily with nobody holding a gun to their head...
So, while Toyota did have a sludge problem and Honda may have a VCM problem on their new V6s, overall many folks have had better experiences with imports as smoother cars and better fuel mileage than they did with Big 3 cars...
I hope your Buick and Caddy continue to run forever, but your experience with 20 year old GM cars is completely irrelevent in today's market...and I do appreciate the knowledge that you informed me when you taught me that the Lucerne was a DTS w/o the price and status...
I, personally, may buy a Buick or DTS from your experience with your NEW DTS, but the fact that you have 20 year old cars just means you were one of the lucky few from back then, because too many of their cars were barley qualified as boat anchors for the QE2...:):):)
lemko, I don't think that matters to someone who wants to buy a car new, or used under 5 years old...the fact that some 60s and 70s foreign brand cars are still on the road simply means that a few of them were cream puffs, nothing more...
....just because a few Accords and Camrys survive today does NOT offset all those who were burned, often burned multiple times...
lemko, what it boils down to is this: YOU have been treated well by foreign cars, and I am happy for you...but you continually post as tho you cannot understand what OTHERS have been thru, assuming that they foolishly deserted the foreign brands because of the high quality of their cars, when a GREAT number of buyers over the last 20-plus years have an experience diametrically opposed to your cream puff experiences...
....
So, really, the fact that you and a few others have vehicles from 20 years ago means nothing about the overall market...your experience with a 20 year old Honda will not send ANYONE to a Honda dealer solely becayse yours is still running...your experience is almost unique, and certainly has no bearing on today's market...
Plus, those American rustbuckets of the 70s were improved over the last 20-30 years, whereas the foreign brands have only drawn more complaints...I still maintain my main point, buyers have deserted the foreign brand makers because of their own bad experiences and they went over to imports voluntarily with nobody holding a gun to their head...
So, while Chrysler did have a sludge problem and GM may have a UIM problem on their new V6s, overall many folks have had better experiences with imports as smoother cars and better fuel mileage than they did with Big 3 cars...
2014 Malibu 2LT, 2015 Cruze 2LT,
Without those good paying UAW jobs, you have no one to buy/qualify for those empty homes. Its a catch 22, and now more than ever we need to stick together as Americans. I'm rather optimistic about GM and have seen may out there buying up their stock. If they are right, that bottom fishing may pay off their home and put a Cadillac on the driveway. I quite don't see a years inventory of homes moving as soon as 2009 and or the economy picking up till much later. 2012 is being optimistic.
One could argue that giving all employees stock opitions would be a good thing and let them think about the bottomline. 100 shares a piece and wait a year to see if in fact that stock doubles or more.
I recall a neighbor, she worked for American Airlines, she bought all she could when its was below a dollar a share, she put up her entire 401K plan on the line. Even with the concessions her union made, she was ahead by millions. I do recall her reading Forbes and other business magazines.
The secret to Automotive Manufacturing success will be sans UAW. Regardless of Religion, Politics or color of your skin!
Regards,
OW
Let me see, $25B divided by $3Billon per month = 8 months. What happens then?
Based on economic recovery in 2012, the Big 3 are going to be history, no?
Regards,
OW
Re “Sync, and Swim Together,” by Daniel Kahneman and Andrew M. Rosenfield (Op-Ed, Nov. 25):
The notion that Detroit automakers should simultaneously declare bankruptcy may be the single worst policy idea to address the crisis to date.
First, Detroit can make it. The car companies have introduced promising new fuel-efficient models, and U.A.W. workers outproduce their international rivals in eight out of nine categories in which their United States plants compete.
Second, the disruption of even a planned bankruptcy would sink auto suppliers, devastate communities and push states like Michigan over the edge. It would cost tens of billions of dollars in lost tax revenue and social services just to clean up the wreckage.
Instead, $25 billion in loan guarantees allows automakers to bridge the economic rapids.
The most important model Detroit produced in the 20th century was the middle class for many millions of Americans. We need to ensure that that model drives into the 21st century, not off an economic cliff.
Harley Shaiken
Berkeley, Calif., Nov. 25, 2008
Reality
General Motors Corp., Ford Motor Co. and Chrysler LLC sold 8.5 million vehicles in the United States last year and millions more around the world. GM outsold Toyota by about 1.2 million vehicles in the United States last year and holds a U.S. lead over Toyota of about 560,000 so far this year. Globally, GM in 2007 remained the world's largest automaker, selling 9,369,524 vehicles worldwide -- about 3,000 more than Toyota.
Ford outsold Honda by about 850,000 and Nissan by more than 1.3 million vehicles in the United States last year.
Chrysler sold more vehicles here than Nissan and Hyundai combined in 2007 and so far this year.
Reality
The creaky, leaky vehicles of the 1980s and '90s are long gone. Consumer Reports recently found that "Ford's reliability is now on par with good Japanese automakers." The independent J.D. Power Initial Quality Study scored Buick, Cadillac, Chevrolet, Ford, GMC, Mercury, Pontiac and Lincoln brands' overall quality as high or higher than that of Acura, Audi, BMW, Honda, Nissan, Scion, Volkswagen and Volvo.
Power rated the Chevrolet Malibu the highest-quality midsize sedan. Both the Malibu and Ford Fusion scored better than the Honda Accord and Toyota Camry.
Reality
All of the Detroit Three build midsize sedans the Environmental Protection Agency rates at 29-33 miles per gallon on the highway. The most fuel-efficient Chevrolet Malibu gets 33 m.p.g. on the highway, 2 m.p.g. better than the best Honda Accord. The most fuel-efficient Ford Focus has the same highway fuel economy ratings as the most efficient Toyota Corolla. The most fuel-efficient Chevrolet Cobalt has the same city fuel economy and better highway fuel economy than the most efficient non-hybrid Honda Civic. A recent study by Edmunds.com found that the Chevrolet Aveo subcompact is the least expensive car to buy and operate.
Reality
None of that money has been lent out and may not be for more than a year. In addition, it can, by law, be used only to invest in future vehicles and technology, so it has no effect on the shortage of operating cash the companies face because of the economic slowdown that's killing them now.
Reality
The domestic companies' lineup has been truck-heavy, but Toyota, Nissan, Mercedes-Benz and BMW have all spent billions of dollars on pickups and SUVs because trucks are a large and historically profitable part of the auto industry. The most fuel-efficient full-size pickups from GM, Ford and Chrysler all have higher EPA fuel economy ratings than Toyota and Nissan's full-size pickups.
Reality
The Detroit Three got into the hybrid business late, but Ford and GM each now offers more hybrid models than Honda or Nissan, with several more due to hit the road in early 2009.
General Motors Corp., Ford Motor Co. and Chrysler LLC sold 8.5 million vehicles in the United States last year and millions more around the world. GM outsold Toyota by about 1.2 million vehicles in the United States last year and holds a U.S. lead over Toyota of about 560,000 so far this year. Globally, GM in 2007 remained the world's largest automaker, selling 9,369,524 vehicles worldwide -- about 3,000 more than Toyota.
Ford outsold Honda by about 850,000 and Nissan by more than 1.3 million vehicles in the United States last year.
Chrysler sold more vehicles here than Nissan and Hyundai combined in 2007 and so far this year
Sounds like a picture of success. Well then, why in your opinion are these companies in such dire straits?
Collection agencies, pawn shops, and gun sales are doing great.
Not being an economist or expert, I would have thought that executives and CEO's being paid mufti-millions each year for their expertise would have seen this coming. The multifactorial reasons for these corporations failing are the reason for these unhealthy economic times not necessarily the result of these times
Let's put that in perspective, though. 1983 was widely considered one of the bleakest years in automotive history. That year, the domestic industry sold about 5.5 million cars, and of that, GM moved about 3.5 million. Now that's just cars, not trucks. I got these numbers out of an auto encyclopedia, and they tend to separate cars from trucks, although nowadays, the two have become intertwined what with minivans, crossovers, pickups purchased as a second car, etc.
It's probably safe to assume though, that between Chevy trucks, GMC, Ford, Dodge, and Jeep, they managed to move another 2 million vehicles. So let's say 7.5 million, total.
So for GM, Ford, and Chrysler to only move a million more units 24 years after that disastrous year, really isn't saying much. Especially when you figure that most Chrysler products these days, and an alarming amount of Ford and GM cars, have been sold at deep, deep discounts.
FWIW, the only reason GM made money in 1983 was through GMAC financing. If it wasn't for that, they would've been screwed.
I'm sure that the next time Consumer Reports updates their auto encyclopedia, this current timeframe will make 1983 look like a cake walk!
And yeah, we're in a recession and times are tough for everyone. But I don't hear any rumors of Nissan, Toyota, or Honda declaring bankruptcy. They're hurting, to be sure, but nowhere to the degree that GM, Ford, and especially Chrysler are.
Eight divisions with wildly sinking market share. Only a few of the models are world-class competitive. Jobs banks. CEO compensation was $17M in 2007. GM is not going to make it without many radical changes yet to be implemented.
Correction: "initial quality". GM has traditionally done fine in the first year. Then it's all downhill. The Malibu has not been out long enough to evaluate this. And it's only one model.
Those UAW workers will have NO impact on housing sales in the worst hit states of CA, FL & NV.
I recall a neighbor, she worked for American Airlines, she bought all she could when its was below a dollar a share, she put up her entire 401K plan on the line.
I recall 1000s of employees putting their faith in Enron stock also. GM is just about as likely to stay out of bankruptcy as ENRON.
First, Detroit can make it. The car companies have introduced promising new fuel-efficient models, and U.A.W. workers outproduce their international rivals in eight out of nine categories in which their United States plants compete.
If that is true and I don't believe it is. Why is GM losing money even when the economy was booming up to the end of 2007? GM is overweight and poorly managed. Let them die and other automakers will take their place and do a better job of building fuel efficient cars IN THE USA.
The most important model Detroit produced in the 20th century was the middle class for many millions of Americans.
It was a very poor model with NO plan of sustainability. I think GM figured they would dump all those retirees onto the public from the get go. It is run so much like our worthless Congress it is scary. The only big difference is Congress owns the mint. So they have found they can print money as needed.
Chevrolet Aveo subcompact is the least expensive car to buy and operate.
So the Koreans can build it and sell it cheaper than a UAW shop in the USA.
The most fuel-efficient full-size pickups from GM, Ford and Chrysler
Ford and Chevy trucks still the number one and two best selling vehicles. Built in the USA. High profit, yet GM has lost close to $100 billion in the last 5 years. They were bleeding red ink when everyone else was making big PROFIT. GM has a losing business model. Whether it is the UAW or management they need to just go out of business and let Ford and Chrysler pick up the slack.
The Detroit Three got into the hybrid business late, but Ford and GM each now offers more hybrid models than Honda or Nissan, with several more due to hit the road in early 2009.
Who Cares? They are money losers and will be replaced before GM ever gets their act together. Ford has had theirs for 5 years already. Don't forget I owned one of the first 300 Hybrids GMC built. It was nothing to write home about and the mileage was no better. It was just an expensive standby generator.
Collection agencies, pawn shops, and gun sales are doing great.
On that we agree. With the element that became empowered during this last election, you cannot be to well armed.
If that's water under the bridge, then what happened in 1993 should be too. What's good for the goose.....
Plus more products that people (besides some on this board) want to buy.
I will say taht I;d expect anyone buying a Fusion or a Malibu rather than a Camry or Accord will likely be pretty OK with it.
What about the Prius and Honda Civic Hybrid? How many mpg does the best hybrid get from the D3?
The Cobalt just rated in the bottom of the pack in the latest CU survey of cars that owners would buy again. The Prius and Civic hybrid were at the top.
So conversely, the D3 should have spent billions on small cars to make them competitive, too!
Their hybrids are just not nearly as good, and are much farther from paying for themselves when you factor in their cost spread vs. mileage improvements.
You might have missed the other poster's point. Every company suffering (true) is not the same as going to the government in private jets asking for $25B.
Well, 1982 was worse, but let's go with '83 since it wasn't much better. GM moved 5.3 million vehicles that year, Ford 2.6, and Chrysler (pre-Jeep) was 1.2 million. Industry total that year was just over 12.1 million. For those keeping track, Toyota was about 714k, Nissan was around 659k, Honda was 401k, VW was 237k, and everyone else had just over a million to share.
The UAW's problem is that it built probably 10 million out of that 12 in 1983, but they'll be lucky to have half that amount this year.
Nissan still got some pretty good mileage out of the Titan/Armada architecture, though. The Pathfinder, Xterra, and Frontier are all based on it...essentially stubbier, narrower renditions of it.
I think the Titan might have done better if Nissan offered it in a wider range of body styles, and with more engines. IIRC, it only came with the 5.6 V-8, and as either an extended cab 6.5 foot bed, or a crew cab, 5.5 foot bet. I've heard those two are the most popular body styles these days, though. I'm probably the only one left on this planet that actually WANTS a regular cab, 8-foot bed truck!
Also, I'd think that the 4.0 V-6 would have more than enough power to serve as a budget engine in the Titan. With 265-270 hp, I'm sure it would blow away the Chevy 4.3, Mopar 3.7, and whatever an excuse for a base engine Ford uses these days.
I always looked at the previous Tundra as a "little" truck, too! Even though you could get it with an 8-foot bed, it just seemed small inside. One problem was the seats. It felt to me like they took the seats out of something small like a Corolla or Yaris, and threw them in this truck. The seating position was too low to the floor, legroom wasn't so generous, and it just felt like my cheeks wanted to spill over the sides of the seats...and I'm anything BUT a Jenny Craig member! :P
One of my officemates briefly had an '08 Tundra, extended cab. I rode in it once or twice. I thought it was pretty roomy inside. The interior seems sort of cheap by Toyota standards, though.
Bear Sterns was said to be the third largest bank, one of its hedge fund snubbed the shareholders during it officers meeting. They halted redemptions, because of cash flow problems. Much like a run on the bank. Since banks are only required to keep about 20% as a reserve requirement. If all the depositors showed up wanting cash, 20% could be serviced. The system works only because those who take out their cash, spend it on goods/services. Say you buy a car, the car dealer deposits the cash in the bank and not in some coffee can in the backyard. This is known as the creation of money, whereby your $1 deposit is loaned out five times. You seriously didn't think they only loaned it out once? By loaning it out five or so times, they can pay their shareholders, employees, and other operation cost.
As we all know credit cards are unsecured debt and that is factored into the interest rate, along with the credit worthiness of the borrower, the inflation rate, and lastly real return. Autos and homes are secured with tangible property and merit a lower rate. Less tan stellar credit earn a higher interest rate. All these debts are sold on a secondary market as a package. When Wall Street folks slip in some risky loans with the usual safe loans, you have a credit crisis. Fixed or low interest bearing funds are sold to traditionally conservative low yield money funds. When they balk and see a few rotten eggs in these packages. They pass because of the risk, which should merit a higher interest rate. Fix and stable value funds seek safety rather than yield for their shareholders. Junk bonds seek risk and high yields as a reward for their investors. For the first time in history a money market fund has failed.
GM and many others have and will continue to borrow for many reasons. Many companies borrow seasonally or yearly. They pay off their loans and go about business. Those with good credit may float bond issues, much like a city/municipality would. Some with less than desirable credit might be forced into the junk bond market. However, since these Wall Street folks committed fraud, money for loans is hard to come by. The only show in town is govt and thats doesn't help the small business, but rather the big concerns.
To me if there ever was a good use for capital punishment, this is it. No matter what we do ENRON's have no deterrent. Teaching ethics in the business schools has failed to curb calculated white collar crime. Now we can all feel what it was like to be an ENRON employee or shareholder.
Here in Texas we have the same feeling about the prior Tundra. The wheel base was smaller than a full size truck too. Then the bones were tiny and not worthy of a truck. Toyota has been going to small screws and parts in all of their cars and trucks. Truck people seem to work on their own and noticed this from day one. So they beefed everything up American standards. The whole thing reminds me of the T100.
The Titan was geared too low to compete with American trucks. Americans have the need for speed.
Sounds like a good plan to me. Better get it done in TX, most other states have forgotten how. The stockholders need to get organized and stop the theft by those on the top. Toss a few out of the top floor of their Ivory Towers.
I believe the Aveo is actually built 100% by Suzuki.
2021 Kia Soul LX 6-speed stick