Auto bailout

[BadBoy@TheWheel]

But their financial problems right now aren't due to huge risks and bad business decisions. It's directly related to the fact that the financial markets are failing, the fact that people aren't spending money right now, the fact that unless you have 720 credit score you aren't getting a car loan... that's the problem right now

It's directly related to the concept that GM, for instance has been operating under a business model that they used when they HAD 50% of the market share.

That has enabled them to balloon the value of the stock and continue to mis-manage money.

The failing economy isn't the "magic bullet", auto makers have been having problems for years.

 

[Hoffa]

The problems with the "big three" American auto manufacturers are way bigger than just Union wages and benefits , and the car makers admit that. High wages/benefits don't help matters any , but that is not the cause of the failure and is changing , has been since 2005..
Auto manufacturers are failing for the same reasons , mostly, that nearly ALL American manufacturing has failed, Union or no.

The UAW has bargained down , and will continue too. Right now , the UAW is in close partnership with the automakers and will do all thats necessary to help keep the the factories alive .
They have already agreed to the two -tier system , and would likely eliminate the top tier if it helps keep the industry running.
UAW has already agreed that General Motors to contribute to a cash-balance retirement plan for new entry-level workers, rather than providing a guaranteed pension. I suspect that could be bargained further .
The Union has already agreed that union workers and retirees will be paying more of the rising costs for healthcare, and the companies less.

The current UAW agreement with GM will eventually put GM's labor costs close to Toyota's current labor costs , only slightly higher.
It could reduce GM’s labor costs from $70 an hour to about $50 an hour. Toyota’s labor cost is about $47 an hour. It would put GM within $3.00 dollars per hour of a NON - Union Toyota employee. Thats total , wages , benefits , retirement .
This has been in the works for a couple of years , and the process has already started , the thing that comes to play is politic , getting the workers to understand the situation . This is a opportunity to do just that , the workers want to save their jobs and the companies futures .
If the Automakers fail over 2 or 3 dollars per ---then they would not make it anyway , let them die.

The other problems they face are bigger , loss of sales both to imports and because of the "crash"---no demand .
I do believe American autos have got better , and industry is making strides to improve the product .
They have also been cost cutting , esp GM . Down -sizing is absolutely necessary, and that fact is recognized by both the Union, and the manufacturers.

For the American worker , under our system , they must begin to understand that the great middle class , good jobs , good benefits are disappearing . Its a race to the bottom.

American manufacturing has been failing for years , I think nearly everyone knows that . It makes no difference whether the manufacturing is unionized or not , its been going away . We don't build squat anymore--- we don't export squat --we are a debtor nation with a huge trade defiect.

I do believe the Automakers were adjusting to the new deal --slowly--trying to survive and would have . They just got caught in the "perfect storm" that our economy has become .
If we are willing to put millions out work , remove the retireds pensions , then simply stand by and see what happens overall . Its not limited to just the Automakers. >f

 

[Alien Allen]

Nice post Hoffa :thumbup

I am not laying all the blame on the union. There are a part of the problem. My point was unless those concessions you refer to actually happen that anything done now is a band aid. Everything needs to be on the table. Reasonable pay for white collar for white collar included instead of some of the ludicrous wages for the CEO's. Better fuel mileage.

 

[Minor Axis]

Yeah, one thing that I've heard is that no one on the auto side is willing to change. The workers obviously still want to stay unionized (is Ford union as well?), and the companies want to stick with their current strategies. IMO, they need to work on DOWNSIZING. It'll be a long time (if ever) that domestic auto-makers will have the same demand they've had for the past 5 years.

But that's good to hear that Ford's new CEO is making changes. They seem to be doing the best out of the big 3.

Obviously the workers don't want to give up the union but they'll need to get realistic under current economic conditions.

I've heard a lot of people say "hell no, they (the auto makers) don't deserve a bailout for gross mismanagement." However when you see all the industries that the auto makers touch- steel, glass, electronic, letting them go under could mean lots more pain for you and I. I really don't have a position at this point if they should be bailed or not and I am open to suggestions, but I will say that any bailout should include "requirements".

 

[Tim]

I don't think we should bail them out... How about we give them a $25 billion loan for 7 years with 5% interest? Oh wait, that's all their asking for... Unlike the Financial system that has received hundreds of billions with no real stipulations of paying it back.

I guess if you take your shower before you go to work, the government will gladly help you out. But if you take your shower at the end of the day, then fuck off...

 

[Alien Allen]

Obviously the workers don't want to give up the union but they'll need to get realistic under current economic conditions.

I've heard a lot of people say "hell no, they (the auto makers) don't deserve a bailout for gross mismanagement." However when you see all the industries that the auto makers touch- steel, glass, electronic, letting them go under could mean lots more pain for you and I. I really don't have a position at this point if they should be bailed or not and I am open to suggestions, but I will say that any bailout should include "requirements".

agreed

Got this in an email that is being passed around.

those against a bailout I would be curious of their thoughts

As you've all undoubtedly been reading and, perhaps watching, the domestic auto companies are in deep trouble. We have been slammed first by the dramatic rise in gas prices this past summer and then, even more critically damaged by the current financial crisis.

I'd like to give you my view on this issue and ask for your help.


When I started as an attorney at GM in 1991 there were few cars produced by GM that I would have purchased if I hadn't been working for GM. Our quality was still sub-par, our interiors had a cheap appearance and our design, for the most part, was uninspired. We also had a labor contract that forced us to keep plants open and rely on sales of large trucks and SUV to make any money at all.

Today's GM is dramatically different.

Bob Lutz has led a dramatic change in our styling and interior quality and appearance. Our quality for some of our vehicles is equal to that of the best Japanese manufacturers and our overall quality is light years beyond what it was in 1991.

Last year we negotiated a dramatically different kind of labor agreement with the UAW which includes a starting wage rate reduction for new hires from more than $27 per hour to $14 per hour. So, as more of our existing (older) workforce retires, all new hires will be at this much lower wage rate. In addition, the UAW agreed that if GM funds what is called a Voluntary Employee Benefit Plan (VEBA) for health care, GM would have no future liability for health care for UAW members. GM currently spends more than $2 billion per year on prescription drug coverage alone and the total health care costs to GM under our existing arrangement adds thousands of dollars of cost to our vehicles. This new agreement with the UAW, however, does not fully benefit GM until 2010.

GM had put in place a $15 billion cost reduction plan to allow us to be competitive until those cost savings from our new union agreement kicked in.

Then came the events of last summer and this fall. We were weathering the spike in gas prices. Then the financial meltdown hit. GMAC still funds most of our dealers and many consumer purchases of new vehicles. Because of the freeze in the capital markets, GMAC can't borrow money to provide enough funding for dealers (who purchase our vehicles and then sell them to consumers) or end consumers. And despite what a number of our brilliant Senators and Congressman are saying there is simply not enough funding available to dealers to make up the shortfall in the GMAC financing. If our dealers can't buy cars from us, we don't sell cars and the lights go out. Period.

We are working with GMAC to assist in their efforts to become a bank holding company. If they become a bank holding company they will have almost immediate access to the Troubled Asset Relief Program (TARP) funds that companies like Morgan Stanley and Goldman Sachs have been able to access. With access to this fund, GMAC will be able to provide dramatically more financing to GM dealers.

Back to GM. You might have heard a number of academics, Senators and business leaders suggest that the best course of action for GM is to go through the bankruptcy process and restructure all of our legacy agreements that still burden us.
Two problems with that approach.

First, we are not like an airline where folks are paying several hundred dollars for a ticket and they don't have to look beyond whether the airline is maintaining scheduled flights. A car costs much more than a plane ticket and people want to be assured that their warranty will be honored, for example. Even if GM said it would maintain warranty coverage coming out of bankruptcy, many consumers would be wary of that promise.

Second, earlier this year there might have been funding available to GM to bridge it through the bankruptcy process (it's called debtor in possession - or DIP - financing). Today that funding is not available in the capital markets. So, if we filed for Chapter 11 bankruptcy protection without financing to get through the bankruptcy process, we would have no money to operate and would quickly be forced into Chapter 7 bankruptcy which means liquidation of the company. No restructuring of agreements with the union, dealers and suppliers. Shut the doors and hundreds of thousands of people are unemployed. When GM shuts down, thousands of suppliers and dealers will shut down. Now we're talking about millions of unemployed.

So, unless the government provides some form of bridge loans or guarantees DIP financing in a bankruptcy process (which by the way would be more than the loan we are asking for today), there is a good likelihood that GM will disappear, very likely to be followed by Chrysler, and, if the markets don't pick up, Ford as well.


Michigan's Congressional delegation is working this issue hard in the Senate and House. Senators and Congressmen and Congresswomen from other states need to hear from their constituents that this issue matters to them as well. You can easily send your Senators and Congressional reps an email showing your support by going to:

http://gmfactsandfiction.com/

Click on the "I am a Concerned American" button and follow the simple instructions. It will send a canned message to your legislators. Numbers count in this process so don't assume that a canned message will have not impact.

I apologize for making this request. Frankly it's embarrassing, but beyond the personal impact on our family, I truly believe GM's demise would be devastating for our economy particularly in the current environment.

Thanks for listening.


Jeff

 

[Fox Mulder]

Why don't the automakers just start selling Internet Porn--they will make a bundle!!!

 

[SgtSpike]

agreed

Got this in an email that is being passed around.

those against a bailout I would be curious of their thoughts

Thanks for posting that - it's changed my mind on the issue. The reasons why GM can't go through Chapter 11 are clear, and since it's a loan, not just cash given without expectation of repayment, I think this will work better than any other options they have.

 

[Alien Allen]

Thanks for posting that - it's changed my mind on the issue. The reasons why GM can't go through Chapter 11 are clear, and since it's a loan, not just cash given without expectation of repayment, I think this will work better than any other options they have.

my pleasure

I thought it was a well thought out statement. I have no reason to believe it is bull shit.

This is far different from the financial bailout.

now i saw tonite on Lou Dobbs where due to scheme used by the mass transit that they are seeking a massive bailout. when the fuck is this shit going to come to an end. this is getting to look like this country is going to colapse

 

[Fox Mulder]

Are you aware that the Japanese government subsidizes the Japanese auto industry? This is the case with many of our competitors. It's NOT a fair playing field.

And the US has closed the gap in quality cars. We are on par with the rest of the world when it comes to making a quality product. It's not like it was in the 70's and 80's

I don't know what cars you are talking about but there is no way that US automakers have closed the gap with Toyota and Honda--those cars are superior to US cars. There may be less of a gap now than the 70s or 80s, but it certainly has not been closed.

 

[Fox Mulder]

Reasonable pay for white collar for white collar included instead of some of the ludicrous wages for the CEO's.

I have to comment on this because its Minor's pet peave (and he has it from union propoganda). However, in many cases (hell most cases) buying a "cheap" CEO will cost the company far more in the long run. A CEO's salary is peanuts compared to the overall expenses of a company--especially the big ones like Ford or GM. Its easy to spout about how workers should be paid more, but the reality of mathematics makes that impossible unless you support a communist economic system. What the fuck do you propose? I've heard a "cap" on CEO salary which is the most ludicrous thing I've ever heard in my life.

The bottom line is if you believe in a free market system, than you can't limit or attempt to limit salaries. You can't fix prices, you can't do any of the stupid things I always hear out of liberals--emotional arguments that everyone can get behind ("Yeah--why in the fuck should that CEO make 100 million a year--that's ridiculous--cap his salary or tax the shit out of him) but do absolutely nothing to solve any problems and in fact would comppound and cause problems if every implemented. Its what's scary about having so many loony people on the left now in power because these economic suicidal ideas that appeal to the ignorant masses may actually come to fruition--one being caps or limits on executive salaries--another being the passing of a "living wage", and the list of economic suicide goes on and on.

 

[BadBoy@TheWheel]

Bottom line here folks:

Free trade=free to fail, it's survival of the fitest, so why is it the fault of the taxpayer if a company folds?

 

[Fox Mulder]

But it's not just the US auto makers that deal with unions. Just about every auto manufacturer around the globe has a unionized workforce.

But the difference is they don't have extortionist federal laws that give them the unequal bargaining power they have in the US. If union members were faced with the loss of their jobs if they went on strike, it would be a whole different ballgame. If unions functioned as free market colletive bargaining entities, it would be fine--they would just be another component of a free market system. However, the way it works in this country, is they operate as communist organizations--they only leverage a company has is solvency--that is if the unions believe the company may go out of business, they will make concessions--short of that the unions have all of the bargaining power (artificially provided) and can hold the employer hostage (and most of the time do).

But there is a huge cost that the US automakers are dealing with that the rest of the world isn't.... Health care. In just about every other country, they have single payer healthcare (state run) and that's a huge cost savings for them. Forget the argument of whether single payer health care will work in the US, just on a business standpoint alone, we are less competitive with other countries since US companies must foot the health care costs for it's employees. I know in my company alone, to cover the 7 of us in the front office is over $75,000 a year. And we have 15 union guys in the shop that we pay $14 for every hour they work to cover their benefits and retirement. That's a huge chunk of change. 15 guys X 50 Hours/week X 52 weeks X $14 = $546,000/year

How in the world do you conclude that other countries have an advantage with state run healthcare? :confused You honestly believe there is no cost to those companies associated with healthcare? Someone has to pay those costs--either it gets paid directly in the form of health insurance benefits, or its paid by taxes--but it certainly is a cost they have. The difference right now is choice. Many business can chose all different levels of care of no health care at all. To me that gives a competetive edge over a foreign company that is forced to provide healthcare through higher employment or labor taxes. One way or another its a cost. That's what so many people have no fucking clue about--that this "free" healthcare they all talk about is NOT FREE by any means.

As an example--Canada has on average taxes 10% higher than Americans do--yet they have very little in the way of costs of defense (military)--the US spends about 20% of its tax revenue on defense. There is a very large cost to the citizens of Canada--they just don't realize it because its all hidden in the form of onerous taxes. Go out to dinner in a Canadian Province and your actual bill by the time the tax and tip is included is close to double what the stated price of the meal is.

 

[BadBoy@TheWheel]

Fox gives me no cred... :24:

 

[Alien Allen]

Mulder you and I have debated before about the salaries.

I get your point.

The flaw in it is that we have excessively well paid idiots in charge. The Big 3 proved it this week. When you reach that level of power you are like a politician in DC. You have long since been separated from reality. There is no justification for these idiots making massive earnings. Same as with sports and entertainment.

I don't claim to have the answer but this shit can not continue. Worse yet I do not see anybody out there like an Iacocca that is there to lead.

 

[BadBoy@TheWheel]

Mulder you and I have debated before about the salaries.

I get your point.

The flaw in it is that we have excessively well paid idiots in charge. The Big 3 proved it this week. When you reach that level of power you are like a politician in DC. You have long since been separated from reality. There is no justification for these idiots making massive earnings. Same as with sports and entertainment.

I don't claim to have the answer but this shit can not continue. Worse yet I do not see anybody out there like an Iacocca that is there to lead.

They aren't idiots...they are the smartest guys in the room, they run billion dollar companies into the ground then the taxpayers will hand them a golden parachute

 

[Alien Allen]

They aren't idiots...they are the smartest guys in the room, they run billion dollar companies into the ground then the taxpayers will hand them a golden parachute

silly me

I think they all came from the same fraternity. How many damn big businesses get run in the ground and the fucking CEO gets a nice payoff. There are so many it is absurd.

 

[BadBoy@TheWheel]

silly me

I think they all came from the same fraternity. How many damn big businesses get run in the ground and the fucking CEO gets a nice payoff. There are so many it is absurd.

what I fucking hate is this salary cap bullshit.

You have any idea what the unions would do if the government said "Okay fellas, you can only make X amount per hour..period, no ifs ands or buts"

Man...Minor would de-forest the countryside with the kleenex he would need:24:

 

[Fox Mulder]

Mulder you and I have debated before about the salaries.

I get your point.

The flaw in it is that we have excessively well paid idiots in charge. The Big 3 proved it this week. When you reach that level of power you are like a politician in DC. You have long since been separated from reality. There is no justification for these idiots making massive earnings. Same as with sports and entertainment.

I don't claim to have the answer but this shit can not continue. Worse yet I do not see anybody out there like an Iacocca that is there to lead.

Yeah, and I'd like to have world peace but got no answer for that either!!

By griping with out knowing the "facts" you play right into the hands of the unions--check out this propoganda site:

2008 Executive PayWatch

They rile people like you and minor up by using the ABSOLUTE EXCEPTIONS in the pay scale to make it look like corporate executives are raking in hundreds of millions of dollars when in actuality, the pay scales aren't close to these claims figures.

I posted this before, but here is from Wikipedia:

During 2003, about half of Fortune 500 CEO compensation was in cash pay and bonuses, and the other half in vested restricted stock, and gains from exercised stock options according to Forbes magazine.[2] Forbes magazine counted the 500 CEOs compensation to $3.3 billion during 2003 (which makes $6.6 million a piece). Notice that this figure includes gains from stock call options used; the options may have been rewarded many years before the option to buy is used

Forbes categories of compensation

The categories that Forbes use are (1) salary (cash), (2) bonus (cash), (3) other (market value of restricted stock received), and (4) stock gains from option exercise (the gains being the difference between the price paid for the stock when the option was exercised and that days market price of the stock). If you see someone "making" $100 million or $200 million during the year, chances are 90% of that is coming from options (earned during many years) being exercised.

Typical compensation

The typical salary in the top of the list is $1 million - $3 million.[3]

And that's the fortune 500 and only in the top of the list are they making 1 to 3 million (most are makign less than a million)--there are tens of thousands of smaller companies--most Americans are employed by smaller companies. Yet even in the top companies in the world the "typcial" salary is only 1 million to 3 million--that's not a lot of fucking money if you are running a company with hundreds of millions of dollars in revenue and thousands of employees worldwide. Hell, most professional athletes are making 1 to 3 million--the mid level exception for an NBA veteran is 5 million for Godsakes.

The problem is you buy into the same liberal hysteria union bullshit that has the country riled up to pass some stupid legislation that is totally unnecessary. What do you proposes to "fix" the problem? A cap of $1,000,000? A cap of $3,000,000?

What is scary is that people actually consider these stupid arguments simply because they are angry that some CEO is making a few hundred million off stock options that when given were 1/100th of that value. Most of these executives are top-loaded with lots of stock options whne originally hired on with the goal being that if they can grow the company their stock becomes a lot more valuable. As the article said, that's how 90% of them make such big dollars. You really want to take that away???

 

[Alien Allen]

what I fucking hate is this salary cap bullshit.

You have any idea what the unions would do if the government said "Okay fellas, you can only make X amount per hour..period, no ifs ands or buts"

Man...Minor would de-forest the countryside with the kleenex he would need:24:

Like I said I do not have any solutions

I agree with the issue of salary caps being bad.

But lets face it the top are making way too much fucking money at the Big 3

Too bad the stock holders could not vote on it. instead of the bull shit proxy stuff