Auto Bailout Failed

[Allisonfaye]

http://news.yahoo.com/s/ap/20081212/ap_on_go_co/congress_autos

 

[perry]

Overall - I think no bailout is the best thing for the US. Yes there will be some short term pain; but the problems in the US Auto industry will only get fixed if companies and people face up to the realities.

I do not believe that the current management of the Big 3 was ever willing to do the changes necessary to ensure long term viability - and will only do those changes if forced. Thus, any bailout money would have been a total waste that would have only delayed the inevetible.

So here is my prediction on how this will play out.

GM vanishes into chapter 7 liquidation.

The other two likely survive with Chapter 11 Reorginzations. A key feature of said reorginzations will be the voiding of the current Union Contracts and Benifit structures (which is a very common practice in Chapter 11). Notice that the Union is not willing to do so up front to avoid a bankruptcy.

What will emerge will be much leaner and better focused Auto Companies.

At the same time, the other US Auto Mfrs (mostly foreign owned) will be expanding and may pick up key pieces here and there. Ford might be in a position to best pick up some key GM product lines (Medium duty trucks - i.e. bigger than the F Series).

In the end - 5 years from now - the total numbers of Autos and Trucks produced in the US will be essentially the same.

It will be painful for the current employees. I speak from experience here. I have been through 3 plant closings in my life - and in 2 cases it was a long unemployment period before I found my next job. It took me over a decade to return to the money I was making at the first plant that closed - and in many of those years I barely scrapped by.


Perry

 

[geckodani]

It will also be painful for the already horrendous Michigan economy.

I too agree with the decision not to bail them out. That said, I am terrified for my state, and feel horrible for all the retirees that will lose their pensions, as well as the current workers that may lose their jobs.

On the other hand, the auto companies are not making it easy to buy American. We''re in the market for new cars, and the prices are horrendously high. We''re looking at other companies, just to make it affordable.

 

[bebe]

We are watching CNBC right now and the bailout is their main focus. DH and I are glued to the market news. It sends shivers down my spine
when I ponder what could happen to the market if there is any more negative news. Scary.

 

[Beacon]

I am pleased that our government didn''t just cave in and hand off OUR money to a dying bunch of badly run companies.

If they do receive funds, they need to make the cuts in pay, people, plants, etc to make the businesses run properly. Otherwise we end up funding them into eternity and for no good reason. There are plenty of businesses that grow and ultimately fade away and are replaced by better businesses.

I think Bush will hand them off enough money to hang for a short while, but the day of reckoning is coming. It''s time for these guys to move on.

 

[ang3199]

I too agree with the decision to not bail them out. I just wish some of the intended money could be given to all the people who will lose pensions and jobs. This makes me sad.

 

[zhuzhu]

If workers are not willing to make some sacrifices in pay (I heard they make $70+ an hour while the Japanese car workers in US make $40+ an hour), then I do not see why we should help them.

See their hourly pay difference below:

 

[zhuzhu]

Paygap between major car manufacturers in US.

 

[Beacon]

This tells the story!

When the cost structure is so much higher than the competition, how can a company expect to succeed? Remarkable that Honda, Toyota can make better cars, have better labor relations and lower costs all at once. Management at the big three is terrible and labor is greedy.

They need to copy the Japanese car companies.

 

[strmrdr]

Date: 12/12/2008 12:28:38 PM
Author: zhuzhu
Paygap between major car manufacturers in US.

Those are bogus numbers the 70 an hour includes the money being paid out in retirement to retired employees.
Remove the retires from the numbers and the labor costs are close to the same.

Detroit is going to burn if one of the big 3 goes down, mark my words.
There is going to be riots like the US has never seen before.

 

[MichelleCarmen]

Date: 12/12/2008 12:45:33 PM
Author: strmrdr

Date: 12/12/2008 12:28:38 PM
Author: zhuzhu
Paygap between major car manufacturers in US.

Those are bogus numbers the 70 an hour includes the money being paid out in retirement to retired employees.
Remove the retires from the numbers and the labor costs are close to the same.

Yep, I read that after you factor in retirement, etc., that the workers make around $25 an hour.

I'm glad the bailout failed, too. It urks me that so many people have lost their jobs and have had to take pay cuts by working in new industries and none of them are being bailedout.

 

[Beacon]

Well, then those riots will happen and then they will pass.

Is the idea that we as a nation should be held hostage to the threat of violence from people who are unhappy that they work for a company that is failing?

Give me a break.

 

[Beacon]

Date: 12/12/2008 12:45:33 PM
Author: strmrdr

Date: 12/12/2008 12:28:38 PM
Author: zhuzhu
Paygap between major car manufacturers in US.

Those are bogus numbers the 70 an hour includes the money being paid out in retirement to retired employees.
Remove the retires from the numbers and the labor costs are close to the same.

Detroit is going to burn if one of the big 3 goes down, mark my words.
There is going to be riots like the US has never seen before.

Those numbers are apple to apple, as they include the Japanese auto companies retirement wages as part of their total wages.

 

[strmrdr]

Date: 12/12/2008 1:25:01 PM
Author: Beacon

Date: 12/12/2008 12:45:33 PM

Author: strmrdr

Date: 12/12/2008 12:28:38 PM

Author: zhuzhu

Paygap between major car manufacturers in US.

Those are bogus numbers the 70 an hour includes the money being paid out in retirement to retired employees.

Remove the retires from the numbers and the labor costs are close to the same.


Detroit is going to burn if one of the big 3 goes down, mark my words.

There is going to be riots like the US has never seen before.

Those numbers are apple to apple, as they include the Japanese auto companies retirement wages as part of their total wages.

That is because:
1: the Japanese plants have practically no one in retirement compared to the big 3.
2: use a 401k system rather than a traditional retirement you can not expect someone with 25 years to switch over to 401k and have a retirement.
This is BS they should have let wall street fail and saved the manufacturing sector.
That just shows how warped the US has become.
The people who caused the mess and add nothing to the economy get the bailout.

 

[Beacon]

Wall street is shedding jobs at a pace that is surreal.

Calling things "BS" does not make a very sound argument.

 

[Italiahaircolor]

We''re living in a scary economic time...and that is something everyone can agree upon.

I don''t have an opinion on the bail out, but if I''m being honest I don''t want to see the economic situation become even worse because now we have thousands and thousands of additional unemployeed people. Thats my fear,

 

[perry]

I only have a few minutes as I have to be on the way to Chicago shorly.

1) The major difference is not in wages but in other benifits (health and retirement).

2) The Union would not allow the US Auto Companies to switch to a 401K (or similar) system. The US Auto companies suggested the switch (phased transition) at least 10 years ago. Thus, the Union bears some responsibility here.

3) The Japanise (and European) companies who have built factories in the US have retirement plans - and decent ones; but they are based on the 401 and similar systems; with no long term company exposure.

4) In response to Karl''s comments about riots in Detroit. Let them riot. The US has survived riots before.

The thing that I don''t get... is how everyone believes that we can''t allow these companies to fail... companies fail all the time. People get put out of work all the time.

I get so tired of people claiming that disaster is going to occur. Every year or two disaster is predicted for a lot of reasons... yet never seems to occur.

I do not think it will be a disaster if these companies - and wall street companies - and even banks are allowed to fail.

It will allow the companies that are in good shape to prosper.

Perry

 

[Beacon]

Right on Perry!

 

[starsapphire]

Survival of the fittest! Let the weak fail. It''s a law of nature. In the end, only the strong survive.

 

[ksinger]

Ah! That re-animated pseudo-science of Social Darwinism raises it''s hoary head and LIVES! It LIVES!!! Everything old is new again!

Wooo! Let''s all party like it''s 1877!!!

 

[MoonWater]

Date: 12/12/2008 6:46:44 PM
Author: ksinger
Ah! That re-animated pseudo-science of Social Darwinism raises it''s hoary head and LIVES! It LIVES!!! Everything old is new again!

Wooo! Let''s all party like it''s 1877!!!

LMAO! I have a full bladder and you almost made me lose it!

 

[Beacon]

Ha, ha. It is funny. But sad too.

GM had a total dominance of the auto business in America. We recently watched the old movie, The French Connection, set in the mid 70s. They feature cars alot in that film. There were no Japanese cars to be seen. Because of course, the Japanese cars hardly existed at all in the States.

For a company to surrender a number one total ownership of a whole industry is a remarkable testament to bad management, bad strategy, arrogance, and ineffective cost structure.

They have been on a slippery slide down for decades.

 

[Allisonfaye]

Do you people watch all the experts opinions on this? Many economists think this will for sure propel us into a depression. 3 MILLION jobs are predicted to be lost. Our current economy can''t afford this kind of hit right now.

 

[zhuzhu]

The latest news indicates that the White House is going to find money from somewhere, somehow, to bail them out.

My concern is not the actual rescue plan itself, but the unwillingness of workers and executives to sacrifice some of their benefits in this extraordinarily serious situation.

 

[starsapphire]

Um hello, I was SAYING that if these companies are not fit to continue, then let them DIE. Sometimes a statement is made and others seem to infer what others are saying without really thinking about it.

 

[ksinger]

Date: 12/13/2008 9:22:44 AM
Author: starsapphire
Um hello, I was SAYING that if these companies are not fit to continue, then let them DIE. Sometimes a statement is made and others seem to infer what others are saying without really thinking about it.

Relax Starsapphire.

It wasn''t a joke about YOU personally. That survival of the fittest thing as applied to business is quite old, and has been used for ages, that was all I meant. Of course back then they didn''t call it "Social Darwinism"....

 

[Rank Amateur]

GM sold 9+ million cars last year. Toyota sold 9+ million cars last year.

Toyota made $15+ billion while GM lost $25+ billion.

How does Wagoner keep his job?

 

[geckodani]

Michigan resident here. Not directly tied to the auto industry in any way. Please remember as you're joking about Detroit burning, that a lot of other people live in the state. Please don't be so cavalier about that horrible possibility.

 

[Beacon]

There is some hope out there. I am impressed with Ford and the fact that even laboring under the onerous compensation rules demanded by the unions they were able to hold up well enough to not necessarily need the government to bail them out.

If the companies can be restructured and this includes debt rewrites, massive changes in compensation for all parties, trimming ineffective brands, closing ineffective plants then they can compete very well with Japan.

Right now the Yen is very high against the dollar, bad for Japanese makers. The US cars are definitely cheaper than Japanese and in bad times that will make people consider buying them. Plus I don''t think the cars are so much worse than the Japanese cars like they used to be.

If they can take the pain and restructure, I would seriously consider buying their stock and I believe we could keep a viable US auto business in America.

But they have to do the hard stuff or they will die. It''s not about emotions, it''s about math.

 

[crown1]

Date: 12/12/2008 6:46:44 PM
Author: ksinger
Ah! That re-animated pseudo-science of Social Darwinism raises it''s hoary head and LIVES! It LIVES!!! Everything old is new again!

Wooo! Let''s all party like it''s 1877!!!

drama anyone? yes, i do believe at least some things are new again. i believe this country experienced a very bad financial situation during the "great depression" and this is getting to be too close to that for comfort. i think a little fittness would serve all of us well. it sure would beat what we have now, a whole lot of people with the gimme gimme mindset, and a bunch of whinners, who want somebody to provide for them, in the fashion to which they have become accustomed.