Yeah, but the cheap gas distorted the business models of the North America operations of the Big 3. They chose not to focus on their car portfolio and make money on all the trucks. Granted, their pension and health liabilities to the UAW make it a lot harder for them to make money on low margin smaller, cheaper cars then trucks, but it left them with little backup plan.
Do you think Europeans and Japanese really want to drive micro cars? No, gas prices and government taxes on things like displacement force the majority of them to. Americans didn't want that, and now that there was an oil shock followed by a credit crunch, the US car makers are hurting.
Nonetheless, Mulally claims the government had to take action because the auto industry makes up about 10% of U.S. GDP. However, the U.S. Bureau of Economic Analysis pegs the entire industry as representing less than 1%, or just under 1 million motor vehicle manufacturing and supplier-related jobs. A Ford spokesman couldn't immediately say where Mulally got his numbers. The Wall Street Journal reported earlier that each of 25 states could lose 3,000 or more jobs if Ford were to disappear.
That's precisely my point. Congress can try to attach that string to the bailout package but there is no amount of legal pressure that can be put on the UAW to do anything but adhere to the letter of the contract.
In fact the reverse might occur. Imagine this. The Congress grants $50 Billion to the D3 and mandates that the UAW reopen negotiations. The UAW agrees.
And.....it tells the D3 that it will now go on strike unless it gets 20% of the $50 Billion in the form of increased wages and bene's since the detroiters are now flush with cash from the taxpayers. Unintended consequences.
UAW to D3 and Congress...'HANDS OFF or you will pay us more.'
just under 1 million motor vehicle manufacturing and supplier-related jobs
I wonder if they take dealership employees into that equation, and all the vendors that call on us, dent repair, touch up guy, coffe guy, vending machine guy, wholesaler guy, county clerk guy, etc, etc.
Yeah, but the cheap gas distorted the business models of the North America operations of the Big 3. They chose not to focus on their car portfolio and make money on all the trucks.
Partly true, BUT - gas has only been really expensive the last year or so; the Big 3 have been losing market-share and losing money for YEARS. So really the business model was never really good as a whole.
and now that there was an oil shock followed by a credit crunch, the US car makers are hurting.
Almost every manufacturers sales are down, but only certain manufacturers went into this period of time, so weak. Do you feel obligated to help those who have gotten themselves into trouble? no matter how they got there? I don't. I believe that if you don't pay for your mistakes, then neither you or anyone else will learn or stop from making mistakes.
joel, and that is why I am squarely in the camp of those who favor a Government Loan to the Big 2 and a half. This industry should not be allowed to burn to a crisp and die.
A turnaround could occur in a couple of years, who knows? And the fact is, the economy can't take that big of a hit right now, that being The General crumbling to a halt. Loan them the cash.
Not bad, OBama. You identified four out of five, "...labor, management, suppliers, lenders...all of the stakeholders coming together with a plan " What about the actual buyers of these cars and trucks. Shouldn't they have an input? Afterall, they are funding this little multi-billion dollar experiment.
Bottom line, Prez To Be, if General Motors, Ford and Chrysler cannot build reliable, high quality, high MPG vehicles which match or exceed their Asian competitors....they're done.
Except that this is not completely accurate. While it might be very true in Michigan, parts of Ohio/Indiana and certain other areas it ignores the fact that all these post-production jobs are related to the sale not to the production.
It's the total national volume of sales which is most important, not the specific location of the production. What hurts Michigan benefits Texas or Alabama or Georgia. The total volume of vehicle sales will change very little nationally whether the detroiter get bailed out or whether they go BK. It doesn't matter.
The dealership-related, sales-related jobs that you note above will still be done in the same volume, it's just that they will be done by other people in different locations.
Yes, the direct jobs related to a Chrysler store might go away...but not completely. Why? Ford's volume will increase, so will Toyota's, Honda's, Hyundai's and maybe also GM if it survives ( likely IMO ). Those other stores will benefit from increased volumes meaning that they will need extra sales people, clerks, touch up, clean up, coffee service, and the same county clerks registering the same number of vehicles.
Ahhh but what about the suppliers that directly supplied Chrysler's plants in Michigan and Toledo? Yes they will be hurt...but not completely. If these suppliers are well run they have diversified their business such that Chrysler is not their only customer. Goodyear, US Steel, AK Steel along with aluminim, glass, fabric, plastic, casting suppliers often supply all vehicle makers. One loss in one account means a gain in another account....the net effect is ZERO.
I know. I was there and I did exactly this.
The dominio effect is only unrealistic fear raising its head.
So what about American Motors? Do you want to list the ones before that?
America has a solid history of automobile makers going out of business or merging. Why now are the big three any different? Now a sudden panic, this is different and we need to bail them out - what's your reasoning? Severance rates and pension stability?
The landscape in my own community is already strewn with the casualties of pension slams and walking in on a Friday afternoon with that famous line, "We have to let you go" and that's it. They didn't work at a car company OR any industry associated with automotive. Nobody seems to care about them.
Everybody loves seeing an old AMC Gremlin or a Javelin at a car show but nobody AT that car show really seems to care that AMC is out of business and has been for years. Probably the only remark would be "Well, that's the way it goes."
And what's this fascination with "The Big Three"? One of them can't merge?
That's not a bad idea. All 3 CEO's said that auto loan defaults were far more modest than mortgages.
Anyhow, I can't see why the Gov't couldn't guarantee the loans the Big 3 owe to creditors. Just restructure the loans with a 20 year payout, no payments due for a year, and have it backed with the full faith of the US. This way, you have no out of pocket expenses, and the Gov't could still expect to see a restructuring plan in writing. Any failure to meet the demands of the "contract" (like say, not meeting CAFE reqirements, for example) would constitute a breech, and the gov't would no longer be liable for backing the loans.
One other thing, I find it interesting that the lone dissenter on the panel at the hearings, the reasercher from U. of Mayland, also said that the Government must do something about currency manipulation and trade restrictions ( he mentioned the fact that for example, GM must use Chinese suppliers when building cars for the Chinese market thus making it harder for them to utilize their US suppliers, and ironically making it much more feasible to just mfr. over there and import the parts here for use here), but was adamant that CH 11 was the only way to go.
Let's just hope the new administration puts it's foot down. The old saying goes that freedom isn't free. Well I say the free market isn't free, either.
I think it's time for the Government to take over this mess, and send those greedy corporate types to "bed w/o any supper"!!! And only when they can prove to us that they can behave, will we give them back control, and then with strict supervision.
Checked out the article you linked, found a bunch of speculation that GM would be ripe for purchase wholely or at least in large part by SAIC of China if it had to liquidate in chapter 7.
1. I think it has been inevitable for the last 2-3 years that one of these domestics (my bets were on Chrysler, but GM managed to keep its truly terrible financial state secret pretty well) would end up in the hands of the Chinese by the end of the decade. The domestics just run their businesses too poorly to remain independent much longer.
2. If GM's new owner is SAIC, I could think of worse things. I think it would do Ford sales a wonder in the short term, and I think it would protect the economy and all these jobs the fearmongers are saying we will lose in the long run. Not to mention SAIC has a vested interest in furthering GM's success because of the close association they have had for so long now, and because it sells vehicles under GM brand names in China already.
3. The writer seems to imply that it would be terrible because SAIC would get its hands on GM automotive technology and could hold licensing rights to the Volt's powertrain design hostage. To both of these I say yawn. Nothing in the automotive industry has been exclusive now for years and years. The Chinese have sliced and diced enough Japanese and American cars and built imitators that they have the crucial technology anyway. As for the Volt's powertrain, Ford, Toyota, and Honda will have similar systems running right alongside it, all of which will be just as licensable (as demonstrated by all the companies that licensed Toyota's HSD from it initially).
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
Not sure which blowhard you are referring to. Looks like a lot of the Congress is reluctant to throw money down the Big 3 rathole.
Sympathy for the industry was sparse, however, with bailout fatigue dominating Capitol Hill. Lawmakers bristled with pent-up criticism of the auto industry, and questioned whether a stopgap loan would really cure what ails the companies.
At the start of a more than four hour grilling before his committee, Sen. Christopher Dodd, D-Conn., told the leaders of GM, Chrysler and Ford Motor Co. that the industry was "seeking treatments for wounds that I believe to a large extent were self-inflicted."
It's the total national volume of sales which is most important, not the specific location of the production. What hurts Michigan benefits Texas or Alabama or Georgia. The total volume of vehicle sales will change very little nationally whether the detroiter get bailed out or whether they go BK. It doesn't matter.
I knew we would find common ground. I totally agree with that assessment. CA will hardly notice if the Big 3 shut their doors to never open again. There are enough new and used full sized PU trucks and SUVs sitting on lots in CA to last at least 2 years. That will give the other automakers plenty of time to expand operations. Competition will remain the same as before. Most people in CA do not buy domestic cars now.
...AMC made some really interesting cars. Some might argue with me, but I think the 1968 Javelin is a prettier and more modern-looking car than any of the Big Three pony cars of the time. The 1969-72 Ambassador was a really attractive ride and I liked the 1967-70 Rebel which had sort of a Mopar-esque look to it. The Matador sedan was also a great car until they trashed it with that "Jimmy Durante" nose in 1974. AMC's problem was that it was always chronically short of money. Who knows what wonderful things AMC could've come up with had they had the capital.
I think we're poorer for the loss of AMC - not that we would necessarily buy AMC cars, but that we no longer have the option.
The CEOs of the Detroit 3 flew private jets to D.C. to beg for a taxpayer bailout.
I posted a question regarding their travel on a different GM forum just yesterday. I would like to know where they also stayed - Super8? where they ate - McD's? and if they shared a cab or took to the bus to the Capitol? If I was a reporter I think that would make a good story to follow these guys around, and see what sort of expenses they will be submitting for reimbursement.
I'm sure someone here is going to point out it's really not significant; but it is significant in that it indicates that these guys do not want to change, and will continue business-as-usual; which will mean continued decreased market-share, more losses, more loans needed. This scenario would just mean that the loan-money is just going to buy a little time, but end up with the same result.
What did you expect them to do, share three seats abreast in coach? Maybe they should've appeared on their knees before Congress emaciated, barefoot, dirty, and wrapped in burlap sacks secured with rope crying, "Bre-e-e-a-ad!"
Senator Shelby of Alabama is just what you say. I listened to him Sunday morning on TV. He is living in the early 90's as far as his knowledge of the American auto industry goes.
The domestics need to change the way they do business top to bottom whether there's a bailout, or loan, or whatever you wish to call it, or not. Though I'm not sure how you force companies to make better business decisions with legislation.
The market is usually pretty good about doing that. Build junk, we don't buy it, improve your junk or pay the consequences.
The auto industry has the capacity to produce 17 million vehicles annually in North America, and sales in recent years have averaged about 15 million units. The free market at work. You're making 2 million more widgets than you need. One of two things has to happen. You either cut the price of your widgets to increase sales to match your production or you cut the production of your widgets to match the demand. But you can't expect to go on as you were.
The domestics find themsleves in a sticky spot because of labor costs and I don't see any way around a renegotiation with the UAW to move those labors cost significantly in the direction of the workers at Toyota, for example.
Toyota sales are sagging as well, and they're going to have to lay off up to 500 temporary workers at their Georgetown plant early next year. But the plant will still employ roughly 7000 permanent workers and run two shifts. The plant makes Camry, Camry Hybrid, Solara convertible and the new Venza crossover.
Toyota's temporary employees work for as long as three years at wages between $13 and $16 an hour. Many have become permanent workers at the Georgetown plant, which offers a wage scale topping in the high $20s an hour, company spokesman Rick Hesterberg said. http://www.courier-journal.com/article/20081119/BUSINESS/811190636/1003/BUSINESS-
So Toyota seems like they will have pain, but less pain, as they adjust and labor costs would seem to be a big factor in that.
So to get back to loan or no loan... no matter how this plays out, I'd need to hear specifics about how things are going to actually change in Detroit before we choose to make this loan.
Maybe this will all turn out to be a "non-bankruptcy bankruptcy" where the government will put conditions on the companies similar to what a Chapter 11 filing would do. Bankruptcy court can grant complete or partial relief from most of the companies debts and its contracts. I could see the government acting as that court.
These are shortsighted thoughts. You don't understand much about the auto industry. You think that an assembly job lost in Michigan replaced by an assembly job for Hundai in Alabama is all there is to it. Sorry, but that is just the tip of the iceberg.
The problem of paying pensions for past workers doesn't affect Hundai. 20 others could follow.
He said that the GM plants produce cars and trucks that Americans don't buy. Where are they all being accumulated at. We are talking over a million a month.
I just came across this perfect example, of what I said the Big3 could do. They can sell off their plants and operations to other companies, who are willing to try and make a profit on them. There's no need to shut many of the plants and suppliers down; as new owners will step in at the right price.
The total auto market of all manufacturers is currently 1M/month; that isn't just GM. GM might be 30% of that 1M. And GM still is selling 60% of that, as it's sales are down 40%.
What did you expect them to do, share three seats abreast in coach?
That's rather hypocritical of you when on one hand you bemoan the poor of Phil., and yet you think the tax $ should be directed to firms that can continue to treat their executives to 1st class travel.
Maybe they should've appeared ...
Maybe they should have felt disgraced and if not fallen on their swords, at least quit and given back their prior years bonuses to the corporation. They should not be in DC at all, the execs., UAW, suppliers, and banks need to sit in a room and come up with a plan asap, and decide whether they live in some reduced manner or die. It is their FAMILY problem.
If the state of MI, and the other states where the Big3 have plants are so concerned that they are also lobbying for theses "loans" then why don't the states themselves loan the $? The states can issue bonds to raise the $? How many states are we talking - 10? So each state issues bonds for $2.5B.
If these states feel that these are just short-term loans, then they should have no problem getting their $ back in a year or 2.
These are not shortsighted at all they are very realistic views of very real people. The workers, state tax revenues, localities in Alabama, Georgia, Texas and Mississippi are actively rooting for the detroiters to go belly up so that their local economies benefit from Michigan's pain.
Nothing new to see here, move on folks. This is capitalism. It's the model that our economy is built on. It's been this way for 230+ years.
No I'm not from one of these southern states, I'm from NY. I have no dog in this fight, I just don't care. If the detroiters can right themselves, make dynamic vehicles that the bulk of the population wants to buy and make a profit doing it then good for them they should kick azz. If not then they should go the way of T-Rex, once lord of its world - now extinct.
Right. I don't like the government doing it - whether the states or the Feds. But the people of the states who would be most affected and have the most to gain, could also come up with the $.
Is it that the states don't want to "invest" in the Big3, because just like the financial markets, they see the Big3 as a very poor investment, and frankly likely to lose all the $?
Maybe the people who want to save the Big3 - millions and millions? should take home equity loans and collectively loan the Big3 the money. Are you willing to put YOUR $ into the Big3?
sell....can't dispute what you're saying about Europe and Japan. The big difference is the Japanese roads, the European roads, can't support big iron, like US roads can.
Moreover, neither Japan, nor most of Europe has any significant access to domestically produced oil. The U.S. (if/when they decide to drill more, refine more) does have oil to tap.
I'm a big believer in less governance. Europe and Japan, IMHO, have put in place what I consider over-governance.
Let the market decide which cars stay, which cars go. Using Japan as an example, with little land mass, if someone really wants to drive, and try to park a bigger car, let them do it if it's worth the hassle to them.
Personally, in America, I don't want to be forced to drive anything I don't want to drive. Especially having the gov't telling me I have to.
No I'm not from one of these southern states, I'm from NY. I have no dog in this fight, I just don't care.
Same here, but from NH. I don't own auto-stock, though a few years ago I did buy some GM. I've bought 4 brand-new GM products in the last 15 years. But they need to change and make it on their own. I don't want to subsidize GM, IBM, MS, agricultural corp. or anyone else. And I don't want lobbyists and government officials working deals on who dies and who gets bailouts and loans.
And I also agree with you KDH that this is capitalism - I don't expect GM, IBM, MS or any other corporation to last forever. They all will fail. If you don't believe me, go back 100 years and see what companies were on the Dow 30. I'll try and google that later. Companies failing, and technologies being replaced is a normal part of the business cycle.
Yes this is a key point always ignored by those wanting to institutionalize the status quo. If all three of detroiters did go belly up then likely they would be liquidated. But liquidation doesn't mean 'disappeared'. The more valueable assets would be bought by other companies on a selective basis because there are hugely valuable products, facilities and technologies that are immediately profitable in the hands of good management.
Ford's F150 franchise GM's Silverado/Sierra franchise Ford's hybrid business GM's E-Flex technologies The Mustang, Corvette, Viper The lambda structures, the Edge The Fusion and Milan The Malibu and Aura The Cadillac franchise.
Likely all of the above will remain in existence in one form or another. They may be owned by Chinese, Indian or European companies but they are too good and too valuable to just shut down.
In addition this key fact is always ignored by the doomsayers and fear- mongerers threatening the catastrophic collapse of the US economy. Today there are about 13 million units sold in the US. This is down from 15-16 million a year ago. The recession has hit hard. A good 12-14 million units of these sales are produced in NA here by all makers. Let's say 50/50 between the detroiters and the rest. If the three detroiters went kaput and say closed 7 million units of capacity that would leave 7 million units of production open by the others.
Those 7 million units could never supply the demand of the American public at 12-14 million units of sales annually. It can't happen. Even if the survivors tried to meet the shortfall via imports they could never satisfy the demand. There wold be chaos with waiting lists months long for trucks....that's stupid.
No, even if the detroiters all go belly up someone will buy the valuable production assets noted above and use them to fill the normal demand of the NA buying public. Also since there is money to be made by doing this one can be sure that smart investors from all over the world are already lining up to pick over the remains IF ( big IF ) the detroiters throw in the towel.
This BTW means that suppliers will be supplying, line workers will be working, truckers will be delivering, clerks will be clerking, managers will be managing, sales people will be selling. It just won't be under the names of GM. Ford and Chrysler. Life goes on and the economy absorbs another change as it's done for 200+ years.
Carlos Ghosn turned Nissan around within a year, and now the company produces some of the best vehicle made and will have at least 6 Electric vehicles on the road in the US by 2011 with a 300+ mile range with the new batteries they created with NEC.
The problem I see with the Big 3 is that they lack the vision and depth that has catapulted Honda/Acura, Toyota/Lexus and Nissan/Infiniti to the top of the list for consumer confidence and quality.
Not only that, but Big Labor has suffocated profitability - with the reprehensible blessing of Corporate Management. And since the UAW actually builds these vehicles, they too share much of the blame for creating "junk products that people don't trust and depreciate terrible" and "horribly fuel inefficient" vehicles with an emphasis of power and machismo... which will not bear well in today's and tomorrows marketplace.
When Labor also assumes some of the blame will things get better, but with the total lack of leadership at the UAW and at the Big 3 - we are seeing the net results in real time!
The chart below show's you WHY the Big 3 are sinking as fast as the Lusitania.
AMC made some really interesting cars. Some might argue with me, but I think the 1968 Javelin is a prettier and more modern-looking car than any of the Big Three pony cars of the time.
AMC made a lot of stupid cars and deserved to go out of business. Think of Pacer and Gremlin. GM had some recent goofy cars such as Aztek.
The best 68's were the Camaro RS and Mustang fastback. The very best was the 67 Green Mustang fastback of Steve McQueen in movie Bullitt.
Best AMC was the AMX, which was a shorter car than Javelin, better looking, better handling of about 69-71 (?) vintage.
In yesterday's hearings, Senator Corker (sp) of Tennessee had one of the best questions. He asked about why taxpayers should support GM paying workers to do nothing when a plant is idled. He said that he is not aware of any other business in America that would do this. Unsaid by him is fact that workers in other sectors are usually laid off when sales go down and plants close for awhile. The CEOs and the UAW Pres sidestepped this remark/questions.
Then, Senator Dodd, who got a $75K special personal discount on a mortgage from Countrywide, defended GM and UAW and lauded them for sticking up for workers and taking care of them in downturns.
Seems like Ford is in best shape and has funds to get through 2009. Other than "sticking together" with Chrysler and GM, not clear why Ford should get any bailout money at this time.
A 1974 CJ-5. And the Jeep name is still probably the most valuable asset in the Chrysler portfolio.
Eagle Talons were a bit ahead of their time and that niche was taken over by Subaru.
No love for the Javelin - I hitched a ride home from college in one and the spoiled freshman brat owner thought he was Mario Andretti, but he had none of the skills.
All these valuable factory assets that people are going to buy to build cars in - they'll have fun starting up or absorbing the dealer network out there (a problem Nissan didn't have in their turnaround). Seems like it took Penske a couple of years to set up the smart network. Maybe someone knows how long it took MINI to get its dealer network up and running.
AMC was a small company competing against giants; therefore it had to be nimble and come up with ingenious products. Hmmm.....
I put my $ into the Big Three every time I buy a new automobile. I just put a whole lot of $ to GM last November when I bought my new Cadillac DTS Performance. One year later, and I'm still very happy!
If saving them means more $, well, I might get a Buick Lucerne to replace my aging 1988 Park Avenue.
Maybe the people who want to save the Big3 - millions and millions? should take home equity loans and collectively loan the Big3 the money. Are you willing to put YOUR $ into the Big3?
Now is the time for "American car brands-only" buyers to step up. Everyone on this board either is one of these or knows friends, neighbors, relatives who have never bought anything except Amercan brands. Even American brands made in Mexico and Canada.
Give these people a method or facility to directly be a part of any $25B, and more later, bailouts. Why should Americans who only buy Hondas, Toyotas, etc. have to support GM/Ford/Chrysler brands with their tax dollars?
I think it's time for the Government to take over this mess, and send those greedy corporate types to "bed w/o any supper"!!! And only when they can prove to us that they can behave, will we give them back control, and then with strict supervision.
Goverment sanctioned car deals. YUK
I wish you all would just keep assuming Ford is in as bad of shape as the other two. Ford will survive bail out or not. We have a huge credit line we took out in 2005 that we are yet to touch and see no reason to in the furure.
The only reason Ford is on the hill is to support GM. I say its 50/50 if we even take a package if offered. If the terms are better then the LOC we have in place then obviously we will take it.
OK. Know that you are a great customer and fan of GM and car fan in general.
Why not team up with the Obama and his web infrastructure to start a movement to get GM, Ford and Chrysler loyalists to set up a fund to support these companies. Obama and Axelrod and Emanuel, being pro-union and working-class would probably endorse this. Even get Bill Clinton to spend time in U.S. rather than exclusively helping foreign countries to endorse and help out.
Doesn't Obama like grass-roots movements? You would also get the support of Philly Mayor and PA Gov. This movement would spread like wildfire. Maybe even get Jerry Lewis and Ed McMahon to do a couple of telethons. Be creative.
I'd be curious to see examples of successful, government-owned & operated automotive manufacturers. I can sure think of one notable example that wasn't.
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they'll have fun starting up or absorbing the dealer network out there (a problem Nissan didn't have in their turnaround). Seems like it took Penske a couple of years to set up the smart network. Maybe someone knows how long it took MINI to get its dealer network up and running.
Ask yourself if this would be the same scenario - is trying to setup a new network - getting people to invest in an already saturated car-market, the same as offering the current network a way to stay in business? To me there is a lot more incentive for the current network to stay in business, accepting a deal from the new owners of the plants.
The dealer network is already there. The new plant owners come in and say let's deal, or you can shutdown and when your buildings empty and auctioneed, we'll buy it (or someone who will deal with us).
Given the choice (Business/Finance 101) - does the typical dealer take a) $0 or b) take a new deal with new owners?
I think some would take it, some would sit back and sue the old manufacturers (unless bankruptcy dries up that option), and some would retire or just move on since taking the new deal may entail more risk than some want to deal with.
I think you'd see more consolidation with fewer corporate owners and fewer dealers in the cities and very few in the boonies and small towns. I'm still ~5 hours away from the nearest MINI dealer for example.
examples of successful, government-owned & operated automotive manufacturers
VW's home state of Lower Saxony has had a blocking minority in key decisions for years, but Porche's recent grab of voting stock and EU pressure has changed the game there. Lower Saxony to fight Porsche control of VW (Forbes)
VW might be a model for taking a government interest if the feds decide to loan the Big3 more cash.
sue the old manufacturers (unless bankruptcy dries up that option),
Probably depends on how quick their lawyer is, to get in before what the asset sales get distributed to other creditors.
and some would retire or just move on since taking the new deal may entail more risk than some want to deal with.
(More Business 101): And what do you think they would do with the dealership lot and building that is designed to have a showroom and service cars? Would they let it crumble and continue to pay taxes? Or might they sell it to someone who wanted to open a dealership? And the mechanics and salespeople - are they going to sit home and starve, or work for the new owner of the dealership?
History hasn't been kind to automotive mergers. Thinking of recent history, Chrysler's "buyout" of AMC. Daimler's "merger of equals" with Chrysler.
GM buying Saab.
Ford buying Jag, LR, Aston.
This consolidation has been happening for awhile if you take the historical view.
UAW hasn't done itself any favors in the past....demanding more and more, with little thought given to the impact over the long haul. Can't deny that the "Big 3" haven't had a hand in it, either.
May as well throw the oil companies and OPEC into the equation, too. A few years ago, OPEC made a formal statement that they feared anything over $28/bbl would trigger a world wide recession. They were right. Yet, this past summer, they did damn little to halt the runup to $150+/bbl, causing demand to nose dive. Refineries used the same tired excuses why they couldn't produce more. Finally, the public woke up and decided they would no longer drive as much. Now, no one can stop the slide. At the same time, mortgage crisis hit, credit got tight. New car sales dropped 25%-30%, and will probably slide even further.
Point being, there are a lot of people who had a hand in this.....car manufacturers, UAW, OPEC, Exxon (and their ilk), banks.
Fixing the Big 3 only addresses part of the problem. The harder part will be restoring consumer confidence, showing big oil that there's a limit to what the public will tolerate (which they obviously went way over the top with this past summer), banks to quit making stupid loans (which they now have a bead on).
GM, Ford, Chrysler....and must about any other manufacturer is producing for a market that's shrunk, and will continue shrinking. Somebody's got to go. Chrysler is the company with the bullseye painted on them. But, GM isn't far behind. Ford has some cash on had to weather the storm for a little while longer, but not by much. Even Toyota and Honda are seeing the results of the contraction. That means every manufacturer in-between is at risk.
All I have is a little anecdotal example. Here in Boise, a row of car dealers left their near town location close to the river (Fairview St). and moved out to an auto row near the interstate (on aptly named Auto Drive).
This happened about the time I moved here, and most of the lots and buildings are still sitting empty, even though the location is pretty nice. The city purchased one of the dealership buildings a few years to use as a police department substation, but that fell through for various reasons, and now they are trying to exchange it in a land swap for use as a medical office building. So not only did several dealers close down there, the city managed to take a big parcel off the tax rolls. :P
The technically skilled people like mechanics can get jobs (we build locomotives here in Boise and that biz is booming). The car jockeys and admin assistants and salespeople may have more trouble finding work if a bunch of dealerships don't simply move across town, but actually close for good.
Oh, it's early yet, but the auto stocks have really tanked today. Ford has about twenty-five cents to go to hit a buck a share and GM isn't doing a whole lot better.
Comments
Do you think Europeans and Japanese really want to drive micro cars? No, gas prices and government taxes on things like displacement force the majority of them to. Americans didn't want that, and now that there was an oil shock followed by a credit crunch, the US car makers are hurting.
However, the U.S. Bureau of Economic Analysis pegs the entire industry as representing less than 1%, or just under 1 million motor vehicle manufacturing and supplier-related jobs.
A Ford spokesman couldn't immediately say where Mulally got his numbers.
The Wall Street Journal reported earlier that each of 25 states could lose 3,000 or more jobs if Ford were to disappear.
http://www.marketwatch.com/news/story/Ford-raise-540-million-cutting/story.aspx?- - guid=%7B4554627E%2D3FB6%2D4A50%2DBB25%2DFBCAD479B36A%7D
Do you believe the guy who's asking for part of $25B? or do you believe the government and Wall Street Journal analysis who don't have a $25B bias.
In fact the reverse might occur. Imagine this. The Congress grants $50 Billion to the D3 and mandates that the UAW reopen negotiations. The UAW agrees.
And.....it tells the D3 that it will now go on strike unless it gets 20% of the $50 Billion in the form of increased wages and bene's since the detroiters are now flush with cash from the taxpayers. Unintended consequences.
UAW to D3 and Congress...'HANDS OFF or you will pay us more.'
I wonder if they take dealership employees into that equation, and all the vendors that call on us, dent repair, touch up guy, coffe guy, vending machine guy, wholesaler guy, county clerk guy, etc, etc.
The domino effect is endless.
Partly true, BUT - gas has only been really expensive the last year or so; the Big 3 have been losing market-share and losing money for YEARS. So really the business model was never really good as a whole.
and now that there was an oil shock followed by a credit crunch, the US car makers are hurting.
Almost every manufacturers sales are down, but only certain manufacturers went into this period of time, so weak. Do you feel obligated to help those who have gotten themselves into trouble? no matter how they got there? I don't. I believe that if you don't pay for your mistakes, then neither you or anyone else will learn or stop from making mistakes.
A turnaround could occur in a couple of years, who knows? And the fact is, the economy can't take that big of a hit right now, that being The General crumbling to a halt. Loan them the cash.
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What about the actual buyers of these cars and trucks. Shouldn't they have an input? Afterall, they are funding this little multi-billion dollar experiment.
Bottom line, Prez To Be, if General Motors, Ford and Chrysler cannot build reliable, high quality, high MPG vehicles which match or exceed their Asian competitors....they're done.
WheelMan
It's the total national volume of sales which is most important, not the specific location of the production. What hurts Michigan benefits Texas or Alabama or Georgia. The total volume of vehicle sales will change very little nationally whether the detroiter get bailed out or whether they go BK. It doesn't matter.
The dealership-related, sales-related jobs that you note above will still be done in the same volume, it's just that they will be done by other people in different locations.
Yes, the direct jobs related to a Chrysler store might go away...but not completely. Why? Ford's volume will increase, so will Toyota's, Honda's, Hyundai's and maybe also GM if it survives ( likely IMO ). Those other stores will benefit from increased volumes meaning that they will need extra sales people, clerks, touch up, clean up, coffee service, and the same county clerks registering the same number of vehicles.
Ahhh but what about the suppliers that directly supplied Chrysler's plants in Michigan and Toledo? Yes they will be hurt...but not completely. If these suppliers are well run they have diversified their business such that Chrysler is not their only customer. Goodyear, US Steel, AK Steel along with aluminim, glass, fabric, plastic, casting suppliers often supply all vehicle makers. One loss in one account means a gain in another account....the net effect is ZERO.
I know. I was there and I did exactly this.
The dominio effect is only unrealistic fear raising its head.
America has a solid history of automobile makers going out of business or merging. Why now are the big three any different? Now a sudden panic, this is different and we need to bail them out - what's your reasoning? Severance rates and pension stability?
The landscape in my own community is already strewn with the casualties of pension slams and walking in on a Friday afternoon with that famous line, "We have to let you go" and that's it. They didn't work at a car company OR any industry associated with automotive. Nobody seems to care about them.
Everybody loves seeing an old AMC Gremlin or a Javelin at a car show but nobody AT that car show really seems to care that AMC is out of business and has been for years. Probably the only remark would be "Well, that's the way it goes."
And what's this fascination with "The Big Three"? One of them can't merge?
Anyhow, I can't see why the Gov't couldn't guarantee the loans the Big 3 owe to creditors. Just restructure the loans with a 20 year payout, no payments due for a year, and have it backed with the full faith of the US. This way, you have no out of pocket expenses, and the Gov't could still expect to see a restructuring plan in writing. Any failure to meet the demands of the "contract" (like say, not meeting CAFE reqirements, for example) would constitute a breech, and the gov't would no longer be liable for backing the loans.
One other thing, I find it interesting that the lone dissenter on the panel at the hearings, the reasercher from U. of Mayland, also said that the Government must do something about currency manipulation and trade restrictions ( he mentioned the fact that for example, GM must use Chinese suppliers when building cars for the Chinese market thus making it harder for them to utilize their US suppliers, and ironically making it much more feasible to just mfr. over there and import the parts here for use here), but was adamant that CH 11 was the only way to go.
It does when the company giving you credit for the consumers refuses to do so, like GMAC does.
"Nissan going to sell 370Z pretty soon, any competitors from GM or Ford?"
370 will be cannon fodder for the Mustang and Camaro, same as it always is. My friend has a nice 260Z, but only because he runs a CHEVY 327 in it.
I think it's time for the Government to take over this mess, and send those greedy corporate types to "bed w/o any supper"!!! And only when they can prove to us that they can behave, will we give them back control, and then with strict supervision.
Chrysler bought AMC in 1987. So yes, while the namplate disappeared, in essence the name lives under the Chrysler umbrella.
1. I think it has been inevitable for the last 2-3 years that one of these domestics (my bets were on Chrysler, but GM managed to keep its truly terrible financial state secret pretty well) would end up in the hands of the Chinese by the end of the decade. The domestics just run their businesses too poorly to remain independent much longer.
2. If GM's new owner is SAIC, I could think of worse things. I think it would do Ford sales a wonder in the short term, and I think it would protect the economy and all these jobs the fearmongers are saying we will lose in the long run. Not to mention SAIC has a vested interest in furthering GM's success because of the close association they have had for so long now, and because it sells vehicles under GM brand names in China already.
3. The writer seems to imply that it would be terrible because SAIC would get its hands on GM automotive technology and could hold licensing rights to the Volt's powertrain design hostage. To both of these I say yawn. Nothing in the automotive industry has been exclusive now for years and years. The Chinese have sliced and diced enough Japanese and American cars and built imitators that they have the crucial technology anyway. As for the Volt's powertrain, Ford, Toyota, and Honda will have similar systems running right alongside it, all of which will be just as licensable (as demonstrated by all the companies that licensed Toyota's HSD from it initially).
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Sympathy for the industry was sparse, however, with bailout fatigue dominating Capitol Hill. Lawmakers bristled with pent-up criticism of the auto industry, and questioned whether a stopgap loan would really cure what ails the companies.
At the start of a more than four hour grilling before his committee, Sen. Christopher Dodd, D-Conn., told the leaders of GM, Chrysler and Ford Motor Co. that the industry was "seeking treatments for wounds that I believe to a large extent were self-inflicted."
I knew we would find common ground. I totally agree with that assessment. CA will hardly notice if the Big 3 shut their doors to never open again. There are enough new and used full sized PU trucks and SUVs sitting on lots in CA to last at least 2 years. That will give the other automakers plenty of time to expand operations. Competition will remain the same as before. Most people in CA do not buy domestic cars now.
That sums up the situation perfectly.
I think we're poorer for the loss of AMC - not that we would necessarily buy AMC cars, but that we no longer have the option.
I posted a question regarding their travel on a different GM forum just yesterday. I would like to know where they also stayed - Super8? where they ate - McD's? and if they shared a cab or took to the bus to the Capitol? If I was a reporter I think that would make a good story to follow these guys around, and see what sort of expenses they will be submitting for reimbursement.
I'm sure someone here is going to point out it's really not significant; but it is significant in that it indicates that these guys do not want to change, and will continue business-as-usual; which will mean continued decreased market-share, more losses, more loans needed. This scenario would just mean that the loan-money is just going to buy a little time, but end up with the same result.
The market is usually pretty good about doing that. Build junk, we don't buy it, improve your junk or pay the consequences.
The auto industry has the capacity to produce 17 million vehicles annually in North America, and sales in recent years have averaged about 15 million units. The free market at work. You're making 2 million more widgets than you need. One of two things has to happen. You either cut the price of your widgets to increase sales to match your production or you cut the production of your widgets to match the demand. But you can't expect to go on as you were.
The domestics find themsleves in a sticky spot because of labor costs and I don't see any way around a renegotiation with the UAW to move those labors cost significantly in the direction of the workers at Toyota, for example.
Toyota sales are sagging as well, and they're going to have to lay off up to 500 temporary workers at their Georgetown plant early next year. But the plant will still employ roughly 7000 permanent workers and run two shifts. The plant makes Camry, Camry Hybrid, Solara convertible and the new Venza crossover.
Toyota's temporary employees work for as long as three years at wages between $13 and $16 an hour. Many have become permanent workers at the Georgetown plant, which offers a wage scale topping in the high $20s an hour, company spokesman Rick Hesterberg said.
http://www.courier-journal.com/article/20081119/BUSINESS/811190636/1003/BUSINESS-
So Toyota seems like they will have pain, but less pain, as they adjust and labor costs would seem to be a big factor in that.
So to get back to loan or no loan... no matter how this plays out, I'd need to hear specifics about how things are going to actually change in Detroit before we choose to make this loan.
Maybe this will all turn out to be a "non-bankruptcy bankruptcy" where the government will put conditions on the companies similar to what a Chapter 11 filing would do. Bankruptcy court can grant complete or partial relief from most of the companies debts and its contracts. I could see the government acting as that court.
You don't understand much about the auto industry.
You think that an assembly job lost in Michigan replaced by an assembly job for Hundai in Alabama is all there is to it.
Sorry, but that is just the tip of the iceberg.
The problem of paying pensions for past workers doesn't affect Hundai.
20 others could follow.
http://www.marketwatch.com/news/story/SolarWorld-offers-buy-four-GM/story.aspx?g- uid=%7B01B4E36B%2D762B%2D4225%2D8B7B%2DD27D6153C82C%7D
The total auto market of all manufacturers is currently 1M/month; that isn't just GM. GM might be 30% of that 1M. And GM still is selling 60% of that, as it's sales are down 40%.
That's rather hypocritical of you when on one hand you bemoan the poor of Phil., and yet you think the tax $ should be directed to firms that can continue to treat their executives to 1st class travel.
Maybe they should've appeared ...
Maybe they should have felt disgraced and if not fallen on their swords, at least quit and given back their prior years bonuses to the corporation. They should not be in DC at all, the execs., UAW, suppliers, and banks need to sit in a room and come up with a plan asap, and decide whether they live in some reduced manner or die. It is their FAMILY problem.
If these states feel that these are just short-term loans, then they should have no problem getting their $ back in a year or 2.
Ron Gettelfinger also testified yesterday. Someone needs to check on how he got to DC and which union family's spare bedroom he borrowed.
Nothing new to see here, move on folks. This is capitalism. It's the model that our economy is built on. It's been this way for 230+ years.
No I'm not from one of these southern states, I'm from NY. I have no dog in this fight, I just don't care. If the detroiters can right themselves, make dynamic vehicles that the bulk of the population wants to buy and make a profit doing it then good for them they should kick azz. If not then they should go the way of T-Rex, once lord of its world - now extinct.
Is it that the states don't want to "invest" in the Big3, because just like the financial markets, they see the Big3 as a very poor investment, and frankly likely to lose all the $?
Maybe the people who want to save the Big3 - millions and millions? should take home equity loans and collectively loan the Big3 the money. Are you willing to put YOUR $ into the Big3?
Moreover, neither Japan, nor most of Europe has any significant access to domestically produced oil. The U.S. (if/when they decide to drill more, refine more) does have oil to tap.
I'm a big believer in less governance. Europe and Japan, IMHO, have put in place what I consider over-governance.
Let the market decide which cars stay, which cars go. Using Japan as an example, with little land mass, if someone really wants to drive, and try to park a bigger car, let them do it if it's worth the hassle to them.
Personally, in America, I don't want to be forced to drive anything I don't want to drive. Especially having the gov't telling me I have to.
Same here, but from NH. I don't own auto-stock, though a few years ago I did buy some GM. I've bought 4 brand-new GM products in the last 15 years. But they need to change and make it on their own. I don't want to subsidize GM, IBM, MS, agricultural corp. or anyone else. And I don't want lobbyists and government officials working deals on who dies and who gets bailouts and loans.
And I also agree with you KDH that this is capitalism - I don't expect GM, IBM, MS or any other corporation to last forever. They all will fail. If you don't believe me, go back 100 years and see what companies were on the Dow 30. I'll try and google that later. Companies failing, and technologies being replaced is a normal part of the business cycle.
Ford's F150 franchise
GM's Silverado/Sierra franchise
Ford's hybrid business
GM's E-Flex technologies
The Mustang, Corvette, Viper
The lambda structures, the Edge
The Fusion and Milan
The Malibu and Aura
The Cadillac franchise.
Likely all of the above will remain in existence in one form or another. They may be owned by Chinese, Indian or European companies but they are too good and too valuable to just shut down.
In addition this key fact is always ignored by the doomsayers and fear- mongerers threatening the catastrophic collapse of the US economy. Today there are about 13 million units sold in the US. This is down from 15-16 million a year ago. The recession has hit hard. A good 12-14 million units of these sales are produced in NA here by all makers. Let's say 50/50 between the detroiters and the rest. If the three detroiters went kaput and say closed 7 million units of capacity that would leave 7 million units of production open by the others.
Those 7 million units could never supply the demand of the American public at 12-14 million units of sales annually. It can't happen. Even if the survivors tried to meet the shortfall via imports they could never satisfy the demand. There wold be chaos with waiting lists months long for trucks....that's stupid.
No, even if the detroiters all go belly up someone will buy the valuable production assets noted above and use them to fill the normal demand of the NA buying public. Also since there is money to be made by doing this one can be sure that smart investors from all over the world are already lining up to pick over the remains IF ( big IF ) the detroiters throw in the towel.
This BTW means that suppliers will be supplying, line workers will be working, truckers will be delivering, clerks will be clerking, managers will be managing, sales people will be selling. It just won't be under the names of GM. Ford and Chrysler. Life goes on and the economy absorbs another change as it's done for 200+ years.
The problem I see with the Big 3 is that they lack the vision and depth that has catapulted Honda/Acura, Toyota/Lexus and Nissan/Infiniti to the top of the list for consumer confidence and quality.
Not only that, but Big Labor has suffocated profitability - with the reprehensible blessing of Corporate Management. And since the UAW actually builds these vehicles, they too share much of the blame for creating "junk products that people don't trust and depreciate terrible" and "horribly fuel inefficient" vehicles with an emphasis of power and machismo... which will not bear well in today's and tomorrows marketplace.
When Labor also assumes some of the blame will things get better, but with the total lack of leadership at the UAW and at the Big 3 - we are seeing the net results in real time!
The chart below show's you WHY the Big 3 are sinking as fast as the Lusitania.
AMC made a lot of stupid cars and deserved to go out of business. Think of Pacer and Gremlin. GM had some recent goofy cars such as Aztek.
The best 68's were the Camaro RS and Mustang fastback. The very best was the 67 Green Mustang fastback of Steve McQueen in movie Bullitt.
Best AMC was the AMX, which was a shorter car than Javelin, better looking, better handling of about 69-71 (?) vintage.
In yesterday's hearings, Senator Corker (sp) of Tennessee had one of the best questions. He asked about why taxpayers should support GM paying workers to do nothing when a plant is idled. He said that he is not aware of any other business in America that would do this. Unsaid by him is fact that workers in other sectors are usually laid off when sales go down and plants close for awhile. The CEOs and the UAW Pres sidestepped this remark/questions.
Then, Senator Dodd, who got a $75K special personal discount on a mortgage from Countrywide, defended GM and UAW and lauded them for sticking up for workers and taking care of them in downturns.
Seems like Ford is in best shape and has funds to get through 2009. Other than "sticking together" with Chrysler and GM, not clear why Ford should get any bailout money at this time.
A 1974 CJ-5. And the Jeep name is still probably the most valuable asset in the Chrysler portfolio.
Eagle Talons were a bit ahead of their time and that niche was taken over by Subaru.
No love for the Javelin - I hitched a ride home from college in one and the spoiled freshman brat owner thought he was Mario Andretti, but he had none of the skills.
All these valuable factory assets that people are going to buy to build cars in - they'll have fun starting up or absorbing the dealer network out there (a problem Nissan didn't have in their turnaround). Seems like it took Penske a couple of years to set up the smart network. Maybe someone knows how long it took MINI to get its dealer network up and running.
AMC was a small company competing against giants; therefore it had to be nimble and come up with ingenious products. Hmmm.....
If saving them means more $, well, I might get a Buick Lucerne to replace my aging 1988 Park Avenue.
Now is the time for "American car brands-only" buyers to step up. Everyone on this board either is one of these or knows friends, neighbors, relatives who have never bought anything except Amercan brands. Even American brands made in Mexico and Canada.
Give these people a method or facility to directly be a part of any $25B, and more later, bailouts. Why should Americans who only buy Hondas, Toyotas, etc. have to support GM/Ford/Chrysler brands with their tax dollars?
Goverment sanctioned car deals. YUK
I wish you all would just keep assuming Ford is in as bad of shape as the other two. Ford will survive bail out or not. We have a huge credit line we took out in 2005 that we are yet to touch and see no reason to in the furure.
The only reason Ford is on the hill is to support GM. I say its 50/50 if we even take a package if offered. If the terms are better then the LOC we have in place then obviously we will take it.
OK. Know that you are a great customer and fan of GM and car fan in general.
Why not team up with the Obama and his web infrastructure to start a movement to get GM, Ford and Chrysler loyalists to set up a fund to support these companies. Obama and Axelrod and Emanuel, being pro-union and working-class would probably endorse this. Even get Bill Clinton to spend time in U.S. rather than exclusively helping foreign countries to endorse and help out.
Doesn't Obama like grass-roots movements? You would also get the support of Philly Mayor and PA Gov. This movement would spread like wildfire. Maybe even get Jerry Lewis and Ed McMahon to do a couple of telethons. Be creative.
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Ask yourself if this would be the same scenario - is trying to setup a new network - getting people to invest in an already saturated car-market, the same as offering the current network a way to stay in business? To me there is a lot more incentive for the current network to stay in business, accepting a deal from the new owners of the plants.
The dealer network is already there. The new plant owners come in and say let's deal, or you can shutdown and when your buildings empty and auctioneed, we'll buy it (or someone who will deal with us).
Given the choice (Business/Finance 101) - does the typical dealer take a) $0 or b) take a new deal with new owners?
I think you'd see more consolidation with fewer corporate owners and fewer dealers in the cities and very few in the boonies and small towns. I'm still ~5 hours away from the nearest MINI dealer for example.
examples of successful, government-owned & operated automotive manufacturers
VW's home state of Lower Saxony has had a blocking minority in key decisions for years, but Porche's recent grab of voting stock and EU pressure has changed the game there. Lower Saxony to fight Porsche control of VW (Forbes)
VW might be a model for taking a government interest if the feds decide to loan the Big3 more cash.
Probably depends on how quick their lawyer is, to get in before what the asset sales get distributed to other creditors.
and some would retire or just move on since taking the new deal may entail more risk than some want to deal with.
(More Business 101): And what do you think they would do with the dealership lot and building that is designed to have a showroom and service cars? Would they let it crumble and continue to pay taxes? Or might they sell it to someone who wanted to open a dealership? And the mechanics and salespeople - are they going to sit home and starve, or work for the new owner of the dealership?
GM buying Saab.
Ford buying Jag, LR, Aston.
This consolidation has been happening for awhile if you take the historical view.
UAW hasn't done itself any favors in the past....demanding more and more, with little thought given to the impact over the long haul. Can't deny that the "Big 3" haven't had a hand in it, either.
May as well throw the oil companies and OPEC into the equation, too. A few years ago, OPEC made a formal statement that they feared anything over $28/bbl would trigger a world wide recession. They were right. Yet, this past summer, they did damn little to halt the runup to $150+/bbl, causing demand to nose dive. Refineries used the same tired excuses why they couldn't produce more. Finally, the public woke up and decided they would no longer drive as much. Now, no one can stop the slide. At the same time, mortgage crisis hit, credit got tight. New car sales dropped 25%-30%, and will probably slide even further.
Point being, there are a lot of people who had a hand in this.....car manufacturers, UAW, OPEC, Exxon (and their ilk), banks.
Fixing the Big 3 only addresses part of the problem. The harder part will be restoring consumer confidence, showing big oil that there's a limit to what the public will tolerate (which they obviously went way over the top with this past summer), banks to quit making stupid loans (which they now have a bead on).
GM, Ford, Chrysler....and must about any other manufacturer is producing for a market that's shrunk, and will continue shrinking. Somebody's got to go. Chrysler is the company with the bullseye painted on them. But, GM isn't far behind. Ford has some cash on had to weather the storm for a little while longer, but not by much. Even Toyota and Honda are seeing the results of the contraction. That means every manufacturer in-between is at risk.
This happened about the time I moved here, and most of the lots and buildings are still sitting empty, even though the location is pretty nice. The city purchased one of the dealership buildings a few years to use as a police department substation, but that fell through for various reasons, and now they are trying to exchange it in a land swap for use as a medical office building. So not only did several dealers close down there, the city managed to take a big parcel off the tax rolls. :P
The technically skilled people like mechanics can get jobs (we build locomotives here in Boise and that biz is booming). The car jockeys and admin assistants and salespeople may have more trouble finding work if a bunch of dealerships don't simply move across town, but actually close for good.
Oh, it's early yet, but the auto stocks have really tanked today. Ford has about twenty-five cents to go to hit a buck a share and GM isn't doing a whole lot better.