After the Democratic congress dropped the ball and went home for the holidays leaving the Detroit automakers swinging at the end of a rope, the Republican President fashions a bailout.....interesting times to be sure. The President in his announcement cited the threat of a disorderly liquidation but also hinted that an orderly restructuring process via prepackaged bankruptcy would be the preferred solution.....and I agree. These companies have shown that they cannot be competitive as presently stuctured.....ALL stakeholders must understand that until meaningful restructuring is effected, this is just pi$$ing money down a black hole. Cumulative earnings of GM and Ford from 2000-2007 - not even taking into account a dismal 08 - are a MINUS $82 Billion - this entire decade, not only have they not made a red cent, but have flushed $82 Billion in capital right down the old sh!tter. GM is responsibe for $80 of the $82 Billion. Until they restructure, they cannot be competitive. Until they become competitive, they cannot provide jobs. If the stakeholders are truly interested in providing meaningful employment opportunities and fulfulling their obligations to ALL of their stakeholders, they must be allowed to pursue an orderly chapter 11 bankruptcy and restructuring.....what am I missing here?
If only the American auto makers could be like profitable Toyota. http://industry.bnet.com/auto/1000395/how-bad-is-us-auto-market-toyotas-losing-money-too/ Oops, they lost over 1/3 billion in the first half of this fiscal year. Ya think it might have something to do with the world wide economic slowdown and credit crisis? Nah, it must be something else.
No Gipper....the Big Three have a monopoly on losing money....in spite of what the numbers say. These Japanese know how to use smoke and mirrors to emblazon into the American consciousness just how superior they are in every way....in every comparative category... to good ole American made. Those guys could never be affected by something as simple as the inability of buyers to get car loans..... :roll:
Over the course of the entire decade.....cumulative. Both of them.....and that includes the billions of earnings contributed to them by the financial arms - Ford Motor Credit and GMAC. Earnings from automobile manufacturing would be even more dismal....keep in mind that is not counting this year and the impact of the current credit climate. That was during a growing economy......until they come to grips with the fact they they have a failed business model, we're just p!$$in' money away. Failed business models need to be dissolved and restructured.....the ONLY chance these companies have, imho, to get out from under the crushing burden of the UAW and their ruinous labor obligations is chapter 11.....sounds harsh, but it is vastly superior to the status quo....and it's not even close. No rational investor, after having gotten stung to the tune of hundreds of billions of dollars, is going to provide capital to an industry that has evidenced its inability to compete over decades in its present form....they can't finance themselves so now the federal government represents the only option to finance these companies. Unless you are willing to nationalize the Detroit-based auto makers, you must be supportive of an orderly restructuring of these failed companies..... The Presidednt has given them 3 months to develop a plan to return them to economic viability. My question is, what have they been doing for 30 years?????
No Gip....not over the time frame I referenced. I didn't count Detroits losses for 08.....they will be staggering in comparison to Honda and Toyota. In fact from 2000-2007 Detroit DID have a monopoly on losing money. During that time frame, Toyota and Honda posted positive earnings in each and every year. In contrast Ford and GM posted net losses in 3 of the 8 years and in total LOST $82 Billion. In contrast, Toyota and Honda, posted positive earnings every year, in 07 earnings for both were triple what they were in 2000 and during the 8 years generated net earnings of $110 billion. Denial will not prove to be a viable strategy to restore them to competitive equality.....I could be wrong but I don't think so.
BT, If I had a hamburger stand and I produced the best available burgers in town as the only hamburger stand in town, with US bred and inspected beef then I would be sailing along and paying my cooks and meat suppliers what they said they had to have as long as I could continue to sell the burgers at a profit to the local townsfolk. This business model may not be especially desirable and possibly lacks vision with respect to what could happen down the road but once laid it is a hard one to break....especially when part of the present worker concessions involves the retired stand workers as well. Now along comes a competing hamburger stand from out of state who sets up across town where jobs are harder to get and they are starting from scratch labor and supplier wise. They pay minimum wage but cooks are willing work for those lower wages initially. The local newspaper fawns over just how good their burgers are and derides my stand for not letting their food editor...."have it his way"...on his last visit to my stand. In short....and I know this is a simpleton analogy ( but it works )....I am now saddled with a bad business model that is going to be very hard to overcome. To try and sell my financial woes to my kitchen is going to be pretty futile and the labor agreements I have agreed to in the past now are a burden too tough to overcome. It's a tough sell to my present employees to say they have to agree to be paid like the across town stand or else.....especially after they have already given up a large percentage of what they took years to negotiate. I just can't see why Americans in general think a new business model for the Big Three is so simply done. They have to ask themselves just how readily would they be to personally to give up a very large percentage of their means to earn a living.....only to be half as employed as they were before. These auto workers were making a good living yes....but here in Michigan it was not necessarily one of great wealth....just a good living. To reduce that by say 40% makes it a just above poverty level living. Why would any worker want to jump at that?
It is anything but "simply done".....it is gut-wrenching at best and with an entrenched bureaucracy with the political influence of organized labor it is near impossible.....hence, the need to let it fail and reorganize. Under the circumstances I truly can see no other way and with every fiber of my being I believe this represents the best opportunity they've had in our lifetimes..... btw, I lived in Franklin, TN - suburb of Nashville - for 10 years just up the road from Nissan, USA. I knew many Nissan guys and gals and they were living just fine....with nice homes, a couple cars in the garage and nice vacations regularly - not quite poverty.
You may be right that a complete overhaul of the union/auto company relationship is necessary. Necessary but I wonder if it is doable. Many auto suppliers have filed or are near bankruptcy due to restructuring and it has already cost plenty of jobs. The recent downturn and cost cutting has left me personally out in the cold. It's pretty grim already around here......not a lot of easily found fat to be cut.
As you well know, my home state Ohio is very heavily exposed to the struggles of the industry. I have many friends and family members who have been impacted dramatically by the issue. I don't take the issue lightly and understand the difficulties will be enormous......I just don't see any other viable alternative that would be superior and, long term, more beneficial to the economies of those areas.
Terry The auto industry began scaling down labor costs years ago. They have a tiered labor system that puts newer hirees at a lower wage scale. As more new employees are hired the cost continues to drop and they become more and more competitive. Unfortunately, we have a worldwide economic shutdown and the companies have to downsize. The newer workers are the first laid off and the labor cost solution begins to be ineffective. This drastic downturn couldn't have come at a worse time. As I pointed out even Toyota can't make money in this environment.
Terry, I understand that a lot of what you say is absolutely correct and the model will have to be rebuilt. Now one question, will the new model also reflect what those foreign companies do with executive compensation? My understanding is that executives in other countries do not have the same multiples of the workers salaries as in this country. Way to long short term incentives have led to massive bonus's that I don't think the heads of corporations get elsewhere. Years ago there was a lament that there was not enough long term planning in our corporations. That's while I was working and before I retired. It doesn't seem to me much has changed. So yes the UAW will need to make concessions but I also hope that executive compensation will also. And I have to agree with gipper that we need to be careful as to what we lay at the feet of existing executives who may not have been on the job very long.
There is no doubt that they are being punished in large measure due to the sins of their fathers, so to speak. "Planned obsolescence", inferior products resulting in the changed perceptions on the part of a generation of car buying American citizens, caving to what we see now as ruinous labor demands, and making promises that were unsustainable, etc putting them in an untenable competitive situation with a failed business model....but make no mistake, that is where they are. If we continue to sustain them in their present state without forcing material change, we are as guilty as they.....
Dude you continue to take these shots like we're all just barefoot hicks living in the sticks. I've told you that you're welcome down here anytime you want. I've flat called you out on this as it is crap. The year I bought my house in Decatur (prior to my divorce), I bought a 3 bedroom/2 bath home for 112k. One year later, my sister bought a 3bedroom/2bath home in Southern California for just over $700k. I passionately love my home state of California. I do so the way you hear Virginians speak about their home state... and I can assure you, without a doubt in my entire being, that there isn't nearly 600k worth of difference between the homes. While mine was 20 years older, my house was: -In a better neighborhood -Better school district (my sister has to shop her kids to private schools 30 minutes away the way my parents had to with me). -Cleaner and better community. Just about any way you wanted to compare the two, mine was better.. but the price was so much less. Jennifer and her husband, Grady, were offered a chance to move to TN at the same pay rate and declined. They talked about the kids being in school and all that, but after a more careful examination of their concerns it was clear that they just didn't want to reduce themselves to living with all those barefoot, banjo pickin, redneck hicks... It truly is their loss. Since the divorce, I've moved to Florence. I currently live in a 2400 sq ft 2 bed/2bath loft for $600 a month on lease right smack dab in the middle of the downtown historic district. Come this spring, I will be moving into a 5 bedroom, 2.5 bath house for $625 a month. This too will be in a historical district a few miles down the road. I read report after report about the teams that come to visit here for the NCAA title game and to a person they are in awe of how beautiful it is here and how much more they could have here...and yes, that includes people from Michigan. When I worked for Walgreen's Health Initiatives, they'd send guys down from Chicago and Danville, IL. One was a Trojan, so naturally he and I baited each other, but in between taunts he had already shared that he planned on cashing out his house in Southern California to move here and live right off the Tennessee River. Yes, the pay is less. At the same time, the cost of living is less. I think you may want to come around some time. You'd be surprised. I've lived in several states and regions of this country.. This area is as good as any as I've lived in, if not better.
I don't know how anyone 2 and 3 decades ago could have predicted the incredible increase in health care costs. Social Security isn't properly funded, medicare isn't properly funded, longer life expectancy and staggering health care costs have caused the same problem for auto companies as it has for the government. The only difference is that the auto companies can't borrow forever and don't call lawmakers in front of them and call them out for their terrible fiscal planning. Oh yeah, and today, Congress is giving itself a pay raise.
And Corey....you need to understand that I was referring to 40% less.....here in Michigan.....not in the south where the COL is much better in general than it is around here. Your nice $625/mo. pad would easily be $1200/mo or more in Michigan and you would pay a 4.6% state income tax out of whatever you earned here. So 40 % less here for an auto worker is very significant and tough financially to deal with.
I looked up Florence and it looks like a really nice little town. Lots of water around and fishing/huntiing. That historical district looks nice and you even have a little bit of Texas.
Dang Corey, seems like the south has converted you! :wink: :wink: BT, I understand where you are coming from. Now how about remarking on the Executive salaries as compared to the rest of the world. It's my understanding that our's is a much high multiple of the workers salaries than elsewhere. That was an issue a few years ago. If we expect the UAW to take a hit, and I do, then I would hope we see the same in the executive suite. I know that several of the auto companies sold their jet airplanes, so that's a start.
Dave, I get all that. I just don't understand why you cling to a place that offers you so little and charges you so much.