Big (?) Three Bail-out

[Witt]

.....sooner or later that subject will come up on this site.
Recomented reading: "THE DECLINE AND FALL OF THE AMERICAN AUTOMOBILE INDUSTRY" by BROCK YATES, PUBLISHED IN 1983 (!!!!!) by EMPIRE BOOKS and distributed by HARPER & ROW  PUBLISHERS INC.

CHEERS !
WITT !

[mdsalemi]

Witt,

While the popular press ("if it bleeds, it reads...") has been categorizing the current situation regarding the domestically-based automakers as a "bail out" the more correct term would be "loan request" in the case of Chrylser and GM.  In Ford's case, it would be "Line of Credit Request".  Few people in the USA at least, could afford a home without a mortgage loan.  We don't call that process of asking the bank for one a bailout.  We call it a loan request.

The term "bail out" is probably more appropriate to the 700 Billion given to Wall Street; that happened so fast few people including me have any idea how and what transpired with that.  Don't know exactly where that has gone but Wall Street has not sent it to Main Street; of that I can assure you.  The credit industry is as tight as ever.

At your request I'm going to see if my local library still has a copy of the long out of print "The Decline and Fall of the American Automobile Industry".  The auto industry--domestic and international has gone through so many changes since then, it might prove to be more humorous than relevant--but nonetheless probably worth a look.

I paid $1.41 a gallon for gas with my last fillup on Thursday.  I can assure you that few people--even those screaming loudly at how "wasteful" gasoline powered vehicles and the domestic's pick up trucks and SUV's are back in July when gas was $4.20 a gallon--will pony up the extra $$$ for hybrids just coming on line.  The low gas prices are just as destructive as the high ones.  While every automaker from every country is suffering a decline presently, I would suspect that the hybrid sales are down significantly with lower fuel prices here.

Of course in the next hour all of this might change...

[abe280SL]

I have concluded that these three are like Titanic...We are going to give them loans, but this time I doubt we will see the money back.  When their union refuses to have their employees take a 10% paycut (BTW with benefits these people are making $75-80/hr) they will drive these companies to bankrupcy just they did with the steel industry.  Management wasn't smart...but their overpaid CEOs is a small % of their overheads.  You are also going to have a politician overseeing this...what the heck do they know about the car industry.  They might be forcing them to make "green cars" or some ugly style cars just like centralized economy of the Soviet Union. 
I say let them go under...let free market work and start from scratch. Don't reward the bad behavior of Unions and Management by keeping the status quo.  We are the ones who are going to get screwed.  The Titanic is sinking...why throw more money at it.
abe

[mdsalemi]

Abe,

Unfortunately your commentary contains some inaccuracies that are quite typical of those who are geographically detached from the automotive industry.

The union workers do not make $75-$80 and hour, and to continue to believe that myth only perpetuates it.  While no fan of the UAW, new hires in assembly (as opposed to skilled trades like electricians) are at $14 an hour.  But, make no mistake, the UAW labor is expensive.  It is expensive and much of that expense is for the pension and medical costs of its retirees.  Medical costs that, if not borne by the auto companies would be a direct hit to Medicare.  The 2007 UAW contracts with the Detroit 3 will separate out that part of Detroit's uncompetitive costs to a UAW-managed trust.  Without those costs, and with two-tiered wages that were also agreed to, Detroit compensation is pretty much at parity with the foreign transplants like Toyota in Kentucky or Mercedes in Alabama.  So consider those transplant wages.  The transplants are not shouldering 100+ years of manufacturing history in the US and they further must provide, competitive wages, benefits, and reasonable working conditions to keep the UAW out!  You think these companies would otherwise do these things out of the sheer goodness of their hearts and corporate policy.  I don't believe it and I don't think anyone else should either.  Make no mistake--the State of Alabama paid about $175,000 PER CREATED JOB to get foreign-owned automotive plants located there.  Probably because Kentucky had already blown its wad on Toyota's plant.  Nothing this big happens without taxpayer-assisted loans, tax abatement, or something similar.

"Letting them go under" via bankruptcy is certainly a possibility, but to share an idea that this somehow eliminates "the taxpayers" from pain is wrong.  You have suppliers, banks, stockholders taking a small percentage, if anything, on the dollar.  You'll have old plants abandoned, and taken over by municipalities and no further taxes will be paid on them; this is a significant burden on the cities and towns and schools where they are located.  A lot of those suppliers are large multinational companies in trouble themselves; asking them to forgive debt or take only a percentage of it doesn't make the burden go away it just shifts it.  Some of the suppliers are smaller and they'll simply be put out of business.  The 2nd and 3rd tier suppliers will take big hits.  Assuming for a moment that the people at these suppliers, and banks, including their stockholders and or bondholders are normal taxpayers, I fail to see how bankruptcy solves anything--just shifts the burden.  There's no easy solution with bankruptcy or with a loan.

When one is geographically displaced from the automotive industry, you don't get to see and know what is really going on.  Forget what Brock Yates said in 1983; take a look at these facts regarding a Ford F150.  This is a good example to use, because even through October of this year, through the summer of $4.00 gasoline, there have been more F150's sold then any other vehicle--car or truck--in the United States in 2008.  The F150 also has the greatest American content of any vehicle sold in the US, too.  So read this excerpt by someone at the LA Times trying to understand (not condemn) what is going on:

Ford Motor Co.'s F-150 pickup is the top-selling vehicle in America with more than 436,000 purchased through October. But when people stop buying the F-150 -- and 26% fewer have been sold this year than last -- it's not just Ford and its workers that suffer.  Falling sales dry up orders for antifreeze made in Illinois by a division of Honeywell International Inc., computer sensors manufactured by Germany's Robert Bosch Gmbh in South Carolina and a hood latch part made by the 110 or so employees of Amanda Bent Bolt Co. of Logan, Ohio.  All told, each truck contains 4,350 parts, made by 270 suppliers in 26 states as well as several foreign countries. Every F-150 that doesn't sell hits literally hundreds of thousands of people who play a role in putting the big machine on the road.

When it comes to the U.S. automakers and their financial troubles, politicians and the public tend to think about the 240,000 jobs that could be lost at the Big Three's assembly lines in Michigan and nearby Rust Belt states.  Yet suppliers provide about 70% of the content in most automobiles, from the seats to specialized bolts on the suspension -- everything except the sheet metal and the motor assembly. So when Ford, Chrysler or General Motors Corp. sneeze, 600,000 workers in places as widely scattered as Peachtree City, Ga., and Pittsburg, Kan., are likely to catch cold.  As the Alliance of Automobile Manufacturers trade group likes to say, "A lot of U.S. industry goes into every automobile."   What Congress decides could have serious effects on not just employees of Ford, GM and Chrysler but also those who work at such companies as Superior Industries International of Van Nuys, which makes the F-150's wheels. Superior will close its Pittsburg aluminum wheel plant next month, laying off about 600 employees, because its shipments in the third quarter dropped to the lowest level in a decade.

In Peachtree City, Panasonic Automotive Systems Co. of America has notified its approximately 500 employees who make car stereos, GPS devices and rear-seat DVD entertainment systems that they'll be out of work by the end of next year.  It's a similar story at AK Steel Corp., which relies on the auto market for 30% of its business. The company has temporarily shut down its Mansfield, Ohio, plant because of low demand for the stainless steel it produces for exhaust systems.  "This industry has just nose-dived," said Neil DeKoker, chief executive of the trade group Original Equipment Suppliers Assn. He estimates that among the roughly 5,000 U.S. suppliers, more than 100,000 jobs have been shed in the last two years as carmakers order increasingly fewer parts. According to a study by advisory firm BBK, 17% of suppliers were at risk of bankruptcy at the outset of 2008, and the study's author believes that figure has risen significantly this year.

The vast majority of suppliers get 60% or more of their orders from the auto industry, making the companies particularly vulnerable to a downturn in demand for cars. Detroit's routine requests for lower prices on parts only compound the problem, DeKoker said. "This could be the last breath for some of these suppliers. Some are just not going to make it."

The Big Three spend about $300 billion a year on equipment, supplies, tooling and parts ranging from transmissions to shop rags. In the U.S. alone, Ford spends more than $40 billion. GM spends $7 billion a year transporting parts to factories and hauling automobiles to dealers. That makes railroads and trucking firms huge clients of the Big Three. No wonder that with car sales down, Norfolk Southern Corp. reported a 30% decline in rail car business in the third quarter compared with a year earlier.  Vehicle and parts manufacturing jobs are concentrated in the Midwest and the South. Collectively, Michigan, Ohio, Indiana, Tennessee and Illinois have more than half the industry's jobs. Other states with sizable numbers include Kentucky, New York, California, Pennsylvania and North Carolina, according to the Bureau of Labor Statistics.

With such a wide base of suppliers, the effects of a big automaker failure could be felt throughout the country. "Suppliers have already been in a recession for several years now," said William Diehl, chief executive of BBK. He pointed out that many of the problems that have afflicted Ford, GM and Chrysler -- high gas prices, frozen credit markets and plummeting consumer confidence -- affect suppliers as well.  With up to 50% of suppliers "distressed" because of lack of access to new sources of financing and decreased sales, Diehl predicts a "huge increase in supplier liquidations and bankruptcy filings very soon."

That would create blow-back for automakers. In February, Plastech Engineered Products Inc. filed for bankruptcy protection. The Dearborn, Mich., molded plastic parts maker employed 7,600 people and had plants in eight states. Last year, it sold $1.4 billion worth of engine covers, grill panels, floor consoles and the like to carmakers, including $200 million in parts to Chrysler. When Plastech closed up shop, Chrysler was forced to immediately idle four plants, sending 10,500 employees home until the automaker could find a new supplier.  Most large suppliers sell parts to all three American automakers, plus European and Asian companies such as Toyota Motor Corp. that have plants in the U.S. So the failure of certain suppliers could cut off production beyond the Big Three.  "There are dozens and dozens of tiny suppliers that, if they fail, could shut down GM, Ford or even Honda," said Craig Fitzgerald of accounting and advisory firm Plante Moran. That possibility was highlighted in a recent report by the Center for Automotive Research, which predicted that the failure of a major carmaker could set off a spiraling chain of failures claiming 2.5 million jobs within a year.  Long the silent partners in the automotive world, suppliers are beginning to make noise to draw attention to their financial straits.

Most car companies are in some sort of trouble today, it isn't limited to "the big three".  Today's paper had the head of Fiat saying, "We can't make it alone".  The US car companies spend mostly their own money on research; there's a lot of foreign governments that provide assistance to companies in their domicile.  Car companies in socialized Europe don't have these legacy health car costs or pensions to worry about.  This kind of intertwined government/private partnership in the rest of the world is not limited to automotive.  Does anyone remember the French Caravelle?  How about BAC-111 from UK?  The companies that made these aircraft failed, a French-British consortium was created specifically to employ people and market against Boeing.  So now we have "Airbus"; its legacy being created out of the ashes of failed companies by government intervention.  I bet they still get some kind of assistance to keep people working in their factories.

I don't hope to persuade anyone with anything here--goodness knows Detroit, Michigan and a whole lot of people have been trying to persuade government for a long time to no avail.  but as my mother always used to say...

"Be careful what you wish for, it might come true..."

Do you think I'm a bit angry?  Perhaps.  But don't let my anger dissuade you from your opinions.  Nationally-known and respected best-selling author and columnist Mitch Albom http://en.wikipedia.org/wiki/Mitch_Albom was a little bit ticked off this week:

Hey, you senators: Thanks for nothing
A few parting words for the senators who squashed the auto rescue
By MITCH ALBOM • FREE PRESS COLUMNIST • December 13, 2008

Do you want to watch us drown? Is that it? Do want to see the last gurgle of economic air spit from our lips? If so, senators, know this: We’re taking a piece of you with us. America isn’t America without an auto industry. You can argue whether $14 billion would have saved it, but your actions surely could have killed it.  We have grease on our hands.  You have blood.

Kill the car, kill the country. History will show that when America was on its knees, you lawmakers wanted to cut off its feet. How does this happen in America?  Suddenly, the worker is the problem? Suddenly, unless union members, overnight, drastically slash their wages with a hard deadline, you pull the plug on an industry?  Suddenly, Detroit is the symbol of economic dysfunction? Are you kidding? Have you looked in the mirror lately, Washington?

In a world where banks hemorrhaged trillions in a high-priced gamble called credit derivative swaps that you failed to regulate, how on earth do we need to be punished? In a bailout era where you shoveled billions, with no demands, to banks and financial firms — who created the problem in the first place — why do we need to be schooled on how to run a business? Who is more dysfunctional in business than you? Who blows more money? Who fashions and molds its work based on favors and pork and traded compromises?  At least in the auto industry, if folks don’t like what you make, they don’t have to buy it. In government, even your worst mistakes, we have to live with.  And now Detroit should die with this?

In bed with the foreign automakers  Kill the car, kill the country. Sen. Richard Shelby, Sen. Bob Corker, your names will not be forgotten. It’s amazing how you pretend to speak for America when you are only watching out for your political party, which would love to cripple unions, and your states, which house foreign auto plants.  Corker, you’ve got Nissan there and Volkswagen coming. Shelby, you’ve got Hyundai, Honda, Mercedes-Benz and Toyota. Oh, don’t kid yourself. They didn’t come because you earned their business, a subject on which you enjoy lecturing the Detroit Big Three. No, they came because you threw billions in state tax breaks to lure them.  And now — this is rich — you want those foreign companies, which you lured, and which get help from their governments, to dictate to American workers how much they should be paid? Tell you what. You’re so fond of the foreign model, why don’t you do what Japanese ministers do when they screw up the country’s finances? They cut their salaries.  Or they resign in shame.   When was the last time a U.S. senator resigned over the failure of his policies?  Yet you want to fire Rick Wagoner?  Who are you people?

More money for the lords of Wall Street There ought to be a law — against the selfishness and hypocrisy our government has demonstrated. The speed with which wheelbarrows of money were dumped at the feet of Wall Street versus the slow noose hung on the auto companies is reprehensible. Some of those same banks we bailed out are now saying they won’t extend credit to auto dealers. Wasn’t that why we gave them the money? To loosen credit?   Where’s your tight grip on those funds, senators? Or do you just enjoy having your hands around blue-collared throats?

No matter what the president does, history will not forget this: At our nation’s most uncertain hour, you stood ready to plunge tens of thousands of families into oblivion. Push them onto public payrolls, unemployment, no health insurance. And you were willing to put our nation’s security at risk — by squashing the American manufacturing we most rely on in times of war. And why? So you could stand on some phony principle? Crush a union? Play to your base? How is our nation better off today now that you kept $14 billion in the treasury? Are you going to balance the budget with that?

Don’t make us laugh.   Kill the car, kill the country. You tried to slam a stake into the chest of this business, and you don’t even realize how close to the nation’s heart you’re coming. Shame on your pettiness. Shame on your hypocrisy. This is how we behave two weeks before Christmas? Honestly. What has become of this country?

[graphic66]

I think a big problem is the sales and service tactics that we all have had a bad experience with at some time. Nobody likes the car dealers, and their dislike goes right through the industry.

[mdsalemi]

I think a big problem is the sales and service tactics that we all have had a bad experience with at some time. Nobody likes the car dealers, and their dislike goes right through the industry.

Are you suggesting that these "sales and service tactics" are something specific and perhaps peculiar to domestic automakers?  I hope not, because it isn't.

These "tactics" are probably present in most big ticket items, and are certainly present at Honda dealers, Toyota dealers, BMW dealers, and even Mercedes dealers.  But, all the car dealers in the USA are independent business operations, so each one is different.  I would suggest that any dealer-level sales and service tactics for any and all products has almost nothing to do with our current economic situation with or without the auto industry included.

You know of course, that it is the typical American (don't know if the same holds true for Europeans) who loves to deal and is always in search of the absolute lowest price; if that were not a true statement the Saturn dealer business model would spill over to the rest of the industry, and it has not.  I can't make a posting on Craig's List without people calling and wanting to deal on price before they even discuss the item!  Put something on the "free list" and you have 1-800-GOT JUNK calling you to take it away for a fee!  eBay is no different, on many of the items I sell, people want to deal outside of the eBay process ("will you take $x for it NOW and remove the listing?")  So, it's no wonder that ALL automotive (appliance, house, real estate, insert name here) sales people deal--that's what the public demands.  Some may not like it but those that don't are a distinct minority.  Why, with gas prices as they are today you can even deal on a Prius, so I hear.  How many times do WE here call around to 3, 4 or 5 vendors when we need a part? 

[JamesL]

From the outside looking in I would suggest that the car makers seem to be making products no-one wants (or is able) to buy

While the banks have products everyone wants/needs but they won't sell.....

[deke54]

"I think a big problem is the sales and service tactics that we all have had a bad experience with at some time. Nobody likes the car dealers, and their dislike goes right through the industry."

I hope you aren't serious. You think that the reason that the Senate rejected the bail out is because people don't like dealers? That's like saying you oppose health care reform because you think your doctor is arrogant. Over the years the manufacturers have ventured into the retail business only to meet with dismal failure. There is no doubt that the Big 3 have had significant product problems in the last several decades, but the dealer doesn't build the car or decide what products the manufacturer will offer.  The franchise system has proven to be the best means of distribution of motor vehicles, but it has the limitation of restricting the dealer to selling only the brands of new vehicles for which he or she is authorized. Why do you think you can buy virtually any brand or model used vehicle at your local Ford, Chevy, or even Mercedes dealership?  Do some research and you will find that auto dealers are not only major employers but are excellent corporate citizens, contributing to local and regional charities and expanding the tax base of their communities. The car business is broken, but the dealers are not the problem.

[mdsalemi]

From the outside looking in I would suggest that the car makers seem to be making products no-one wants (or is able) to buy

While the banks have products everyone wants/needs but they won't sell.....

Tosh,

Good assessment but incomplete.

The domestics have focused on [high margin and high profit] pickup trucks and SUV's.  No question that people want them, but it is a declining share as everyone else gets into the act, like Toyota's Tundra etc. and certainly declining overall volume when fuel prices are high.  While profits and margins are different for everyone, ANYBODY will make more money making and selling larger vehicles than smaller vehicles.  That's why Toyota invested in the Tundra, and Nissan in the Titan..they want a piece of that pie!

(Note: there's a couple of funny articles and YouTube videos floating around regarding the making of both the factory in Texas that makes the Tundra, and the great commercial they filmed for the Tundra that had it going up and down a large ramp in the desert.  If you look in the background [this is the humorous part] at the large crew filming the commercial, and at the large construction crews building the plants, they are all driving domestic pick-up trucks!)

"Is able to buy" is a spot-on assessment however...and it has created havoc for everyone selling cars and trucks in the USA.  The credit arms of the car companies can't get money (credit markets frozen); they can't sell bonds or paper, and thus can't offer financing, thus people can't buy!  Doesn't matter if its domestic or import, everyone is hurting due to credit issues now, and the economy.

The latest statistics published are for November: Toyota was down 33.9 percent, Honda off 31.6 percent, and Nissan North America Inc. down 42.2 percent. BMW recorded a 26.8 percent drop, and Volkswagen AG a 21.5 percent decline.  Daimler AG remained one of two automakers that have gained sales this year, despite a 29.9 percent slide last month. The other is Subaru. Each is up 1.2 percent after 11 months. Note: I think that MBUSA had a fall sale in September that ended before their winter sale kicked off; that explains partially, their up and down here.

It isn't just the Detroit 3 suffering at the moment.

[abe280SL]

Mdsalami,  when you add what it cost the company in benefits, w/c, retirement...it is 70-80$/hr.  Don't make any assumption because my father worked for them before he retired and 20 years ago with minimal education he was making $32/hr!.  His friend worked ten years and laid off was able to collect %95 of his salary for three years and paid for retraining by going to college.  This actually went on and off for another five years.  Who do think paid for that? What other industry can provide such benefits?  The new hires a $15/hr translates to alot more $$$/hr because of union demands....and you are assuming they all are new hires...when is the last time they hired anyone..you can't get a job there because the old ones making much more don't give up their position.  What happened to supply demand..many are willing to work for less, but can't because of the organized labor. 
With that said, organize labor serve a great purpose...but when a company is in bankrupcy it needs to do everything to save itself and
not at taxpayers expense who will be rewarding bad management and high overheads.
They need to do what every other industry does when you have a depression/recession....cut benefits, restructure or close the doors and let someone else take over.  Labor is their biggest cost..that is where they have to cut.
Don't make assumptions about people without knowing them...I don't know who you are and what you do...so please don't do the same to others.
abe

[john.mancini]

I recently read that while GM and Toyota sold approximately the same number of vehicles world wide last year, GM lost more than twice as much money as Toyota made! If true, it sounds as though there are grave management problems. (duh!!!) What are the exact union differences? Why give money until these issues are resolved? I was watching the nightly news and a commercial for Hummers came on. Hummers? Come on. Get with the program.

[Mark280SL]

I guess one of my main issues with all this is if the GM and other Detroit union workers are in fact getting paid substantially more then the US workers (wages and total benefits package) at the Toyota, Honda, etc... US plants,  then the Detroit union leader has no basis for turning down the request by congress to work at that same package rate. I can see no reason why not. That is not an unfair request given the taxpayer money being put at risk, and it is a risk.

The world has changed in a big way......they need to realize that. In my case I've had to change and adapt to keep a job over the years, they will too... if taxpayers like me and many of you are expected to be the bank of last resort and come up with money that will finance all of this then in my opinion why should it be unreasonable to ask them to take the same pay rates as others in their industry.

[Andres G]

I sincerely believe it is impossible to determine only one factor that causes the current circumstances affecting the US auto industry...

There are however, some basic issues that should have been dealt with sometime ago which have been either ignored or at least not managed adequately. I think labor unions play a significant role in taking flexibility away from the big three to be able to react to the changing environment... They are not the only ones to blame, as it seems that management has not been able to maximize the results they are able to obtain from their R&D and Design departments in key areas for example interior quality and reliability. I do not agree with people stating that all american made cars are crap and while some of them truly are, others are out there delivering performance and features only dreamt of some years back.

Although I'm not for government invervention, I believe the US could have protected the domestic auto industry with a little more enthusiasm... or to say this in a better way, the government could have done this in a creative way and without the negative effects of protective measures against imports (which tend to create the typical subsidized, inefficient, low quality products resulting from lack of competition in the market).
Credit crunch also plays a major role in this situation, hitting all car makers alike and affecting not only sales at a dealership level, but manufacturing/parts industries as well, just like Michael S. explained above. If the credit situation was more relaxed, outlook today would be at least brighter.

I personally believe the bailout should be approved, but not without an adequate long term plan coming from the automakers (no mickey mouse "gimme that much and I'll pay you back sometime deal) and not without sacrifice from the involved parties. If automakers do not learn from this, chances are that this will happen again and the next time, it will be much harder/bigger.

Andres

[66andBlue]

.... If automakers do not learn from this, chances are that this will happen again and the next time, it will be much harder/bigger. ..
 

You hit the nail on its head.
But the fact is that the GM management never wants to learn anything.  Just recently GM vice chairman Bob Lutz  was quoted as follows:
Hybrid cars like those made by Toyota “make no economic sense,” because their price will never come down, and diesel autos like those touted by Chrysler are also uneconomic...
Global warming is a “total crock of ****.”

For years they have fought the Corporate Average Fuel Efficiency (CAFE) standards, and it was Bob Lutz again who declared that  CAFE is a totally flawed strategy, ... It has never worked and it never will.

So, why should anyone believe that they will ever change their strategy?

About 10% of the retail price of a car is contributed by total labor costs that is less than GM spends on advertising and dealer incentives and rebates.
To be precise, in 1999 GM sold 13.8 million vehicles and spent on direct labor costs about $2,630/vehicle sold,  $650/vehicle sold on advertising, and $3000/vehicle sold on dealer incentives and rebates.  (Stanford U. Graduate School of Business, Case Number EC-10).
And Graphic66 is absolutely correct. The same Stanford case report states:
"Consumers’ distaste for the car-buying experience was reflected in dealers’ poor customer loyalty performance. While manufacturers enjoyed moderate rates of customer loyalty—averaging 56.9% repeat business for the industry overall —dealers saw only 20% of their customers return to buy a car"
Combine bad management with disliked dealers and your future will be bleak.

[John Eldorado]

My problem with the Big 3 bailout is, why does this particular industry get a bailout with taxpayer money, but not other industries?  All sorts of businesses may go under, is the government going to start handing out checks to everyone?  Or just the industries that have politically powerful Unions?

Also, I don't like tax dollars taken out of my paycheck to pay for "struggling" workers that are actually making more money than I do.  The average UAW worker makes over $70 an hour when you add up all the benefits.  That's an absurd amount of money for a low skilled job like working on an assembly line.





http://www.heritage.org/Research/Economy/wm2162.cfm#_ftn5

[mdsalemi]

Question: what is the salary of the President of the United States?  Does anybody know what he earns, or will earn (new guy)?

[mdsalemi]

My problem with the Big 3 bailout is, why does this particular industry get a bailout with taxpayer money, but not other industries? 

Let's see...Penn Central Railroad, Lockheed, Franklin National Bank, New York City, Chrysler, Continental-Illinois, The entire S&L Industry, Airline Industry (post 9/11), Bear Stearns, Fannie Mae, Freddie Mac, AIG, Citigroup...

That would encompass Railroads, Aerospace Manufacturing, Savings Banks, Commercial Banks, Our Largest City, an Auto Company, the entire Airline industry, Investment Banks, Mortgage Banks and Insurance companies...now what were you saying about "no other industries"?

[Andres G]

Question: what is the salary of the President of the United States?  Does anybody know what he earns, or will earn (new guy)?

About $400.000 according to this wikipedia article. (http://en.wikipedia.org/wiki/President_of_the_United_States#Salary)

Andres

[mdsalemi]

About $400.000 according to this wikipedia article. (http://en.wikipedia.org/wiki/President_of_the_United_States#Salary)

Andres

Precisely.  $400,000.  However, the incorrect logic offered by some (bundling benefits of retirees into the wages of those currently employed)—would have us thinking that the salary of our [currently working] President is about $3,300,000 if you include the pension and benefits of the former presidents. http://www.senate.gov/reference/resources/pdf/98-249.pdf  GAAP (Generally Accepted Accounting Principles) do not aggregate legacy benefit costs into direct labor, and nobody else should either.  One considers the costs in total, particularly when looking at some kind of loan, but they should not be aggregated to prove a point.  All it does is anger anybody earning less than $80 an hour!  However, this aggregation is what many are doing.  UAW labor may be expensive, they may earn more than you or less, they may have better benefits or worse, but they simply do not earn $75 to $80 an hour which is what many believe.  It's just wrong.

[Andres G]

Michael,

I believe I understand your point. My concern is not how much a union worker makes (nothing of this is really my concern) but how efficiently that expense is being utilized, that is, if the ROI on the salaries payed is acceptable, same for Sr. Management.

I am the type of person that thinks that bad results are the consecuence of poor execution, but in this case, I think that we're looking at companies that had really bad plans which were executed flawlessly.

Andres G

[Witt]

Michael,

I believe I understand your point. My concern is not how much a union worker makes (nothing of this is really my concern) but how efficiently that expense is being utilized, that is, if the ROI on the salaries payed is acceptable, same for Sr. Management.

I am the type of person that thinks that bad results are the consecuence of poor execution, but in this case, I think that we're looking at companies that had really bad plans which were executed flawlessly.

Andres G

.......WOW ! ....did I ever open a can of worms here, but I do find all the responses  very interesting and informative. mdsalem, you are really into it.....but you seem to be alone with your take on the present situation on this site anyway.

The reason I recomended Brook Yates book is that it outlines in detail that the present crisis was forseeable thirty years ago and the US automakers, set in there ways, failed to respond to a changing marked.

Was it Roger Smith ( one of the worse and grossly overpaid  CEO's GM ever had ) that stated: "GM IS IN THE BUSINES OF MAKING MONEY, NOT MAKING CARS "  I think they failed miserably on both accounts.

Sure every business needs to borow money in order to operate and they get it from a regular bank, its called a business-loan. If you where a banker would you loan money to the former biggest coperation in the "WORLD", whos exec's manage to run it into the ground for what ever reason, knowing well that they will continu to line there own pockets and have no intention of paying you back? I don't think so. So what's   the poor exec's to do.....ask for handouts from their favorit bank: Oncle Sam ! AGAIN AND AGAIN !

Suppose they get the money, why crank out more cars, good or bad, if the dealers are chocking with excess inventory and the public is not buying ?

There doesn't seem to be a perfect solution to the problem, I merly wanted to point out, via the book, that this was brewing for many years and is not the effect of the present finacial world crises alone.

If you love cars and wonder what the US auto industry did or didn't do: READ THE BOOK !

CHEERS !
WITT !



 

[Peter van Es]

Here in Europe we've heard the stories about excessive benefits making it impossible to run the Big Three effectively. We've also heard the arguments " if only they started making smaller, more fuel efficient cars earlier". In reality I don't think it is quite that easy.

If US automakers had built fuel efficient, smaller cars even just a year ago, they would not have sold. I presume that even today with fuel prices lots lower than just three months ago, people would prefer to buy their Ford F150's rather than small cars if there wasn't a credit crunch.

The problem is a systemic failure... not in credit, but in the way petrol is sold. In Europe, gas is taxed heavily. A gallon of fuels costs over €6 even today... it was over €9 a few months ago. At those prices (do the math to US$) it is no wonder that every European manufacturer produces economic models: in fact BMW advertises that they have a car in almost every range (bar the X5 and the 7 series) that qualifies for an A energy label (meaning less taxes for the owner). This includes petrol and diesel cars.

In Europe we still are amazed at the low petrol costs in the US. If we paid that little for fuel, we'd all be driving Hummers too (except for that you are a social outcast in most of Europe if you do, and your car is likely to be scratched)! So in my view the US Big Three manufacturers have missed the economic and customer demand drivers which would have forced them to innovate. It made them lazy, and the high costs of providing benefits to previous workers forced them to divert money away from innovation.

Sure, there is some mismanagement but imagine that the US car makers had only produced fuel efficient, smaller vehicles over the last 4 years... it just would not have flown.

So in Europe the general concensus is to let them go bankrupt. It's about the only way they can get out of the burden of pensions and benefits to old workers, and reinvent themselves.

Peter

[John Eldorado]

Let's see...Penn Central Railroad, Lockheed, Franklin National Bank, New York City, Chrysler, Continental-Illinois, The entire S&L Industry, Airline Industry (post 9/11), Bear Stearns, Fannie Mae, Freddie Mac, AIG, Citigroup...

That would encompass Railroads, Aerospace Manufacturing, Savings Banks, Commercial Banks, Our Largest City, an Auto Company, the entire Airline industry, Investment Banks, Mortgage Banks and Insurance companies...now what were you saying about "no other industries"?

I'm against all those previous bailouts, and I didn't say the government has never bailed out private companies, so don't put words in my mouth.

 What I was saying is it is unfair for politicians to pick and choose which ones get taxpayer dollars, and which ones don't.  What about all the silly dot.com's that went out of business, should the government have bailed those companies out also?  Of course not. 

 At some point, we either have to decide whether or not we're a capitalist country that's going to allow poorly run businesses to fail, or whether we're just going to nationalize everything and let the government run all industries.

My business is down 20%, and I've had to lay off workers.  How come I don't get taxpayer dollars?  The thought never even crossed my mind, but some people think they're entitled to never fail.

[Witt]

Here in Europe we've heard the stories about excessive benefits making it impossible to run the Big Three effectively. We've also heard the arguments " if only they started making smaller, more fuel efficient cars earlier". In reality I don't think it is quite that easy.

If US automakers had built fuel efficient, smaller cars even just a year ago, they would not have sold. I presume that even today with fuel prices lots lower than just three months ago, people would prefer to buy their Ford F150's rather than small cars if there wasn't a credit crunch.

The problem is a systemic failure... not in credit, but in the way petrol is sold. In Europe, gas is taxed heavily. A gallon of fuels costs over €6 even today... it was over €9 a few months ago. At those prices (do the math to US$) it is no wonder that every European manufacturer produces economic models: in fact BMW advertises that they have a car in almost every range (bar the X5 and the 7 series) that qualifies for an A energy label (meaning less taxes for the owner). This includes petrol and diesel cars.

In Europe we still are amazed at the low petrol costs in the US. If we paid that little for fuel, we'd all be driving Hummers too (except for that you are a social outcast in most of Europe if you do, and your car is likely to be scratched)! So in my view the US Big Three manufacturers have missed the economic and customer demand drivers which would have forced them to innovate. It made them lazy, and the high costs of providing benefits to previous workers forced them to divert money away from innovation.

Sure, there is some mismanagement but imagine that the US car makers had only produced fuel efficient, smaller vehicles over the last 4 years... it just would not have flown.

So in Europe the general concensus is to let them go bankrupt. It's about the only way they can get out of the burden of pensions and benefits to old workers, and reinvent themselves.

Peter

........if the US automakers would have started to produce good quality, fuel efficient smaller vehicles alongside there usual big cars at the time the Japanese and Europeans started to get a foothold in Northamerica, they would have taken the wind right out of there sails and all the people that bought those imports would have bought those smaller cars made in the US.

CHEERS !
WITT !

[mdsalemi]

I'm against all those previous bailouts, and I didn't say the government has never bailed out private companies, so don't put words in my mouth.

 What I was saying is it is unfair for politicians to pick and choose which ones get taxpayer dollars, and which ones don't.  What about all the silly dot.com's that went out of business, should the government have bailed those companies out also?  Of course not. 

 At some point, we either have to decide whether or not we're a capitalist country that's going to allow poorly run businesses to fail, or whether we're just going to nationalize everything and let the government run all industries.

My business is down 20%, and I've had to lay off workers.  How come I don't get taxpayer dollars?  The thought never even crossed my mind, but some people think they're entitled to never fail.

Eldorado,

I didn't put words in your mouth.  Here is precisely what you said:

My problem with the Big 3 bailout is, why does this particular industry get a bailout with taxpayer money, but not other industries?

You said why auto and no other industries.  I indicated the other industries and the other bailouts; whether you believe in them wasn't the issue.  Something not clear here?

[Andres G]

Just recently GM vice chairman Bob Lutz  was quoted as follows:
Hybrid cars like those made by Toyota “make no economic sense,” because their price will never come down, and diesel autos like those touted by Chrysler are also uneconomic...
Global warming is a “total crock of ****.”

I thought that came from Jeremy Clarkson 

Aside from my humorous comment, I do agree that cars like the Prius make no economic sense, as their cost/price premium vs. a similarly equipped non-hybrid car is much higher than the expected savings in fuel costs (especially with such low fuel prices)... the gap is the price of being environmentaly friendly. Some people want to pay this premium to help save our planet, some others believe that the contamination coming from the disposal of batteries fitted to these cars is far grater than the impact of burning gas...

Andres

[mdsalemi]

Abe, Eldorado, and others:

You do not need to assume anything about me.  I’m well known here.  My name is Michael Salemi, not mdsalami (sic); I live in Michigan.  I  do not work for the UAW, nor do I work for any of the automotive companies or their suppliers.  However, quite literally everyone I know does.  From senior management, to rank and file UAW labor both retired and active, I know quite a few people.  I'm not special; it is not who I am, it is where I am.  You cannot live here and not know people, and you cannot live here and not really know what the facts are from all sides of the fence.  When you know the facts, you can separate it from the fiction that seems to be prevalent in the media.  I have respect for my fellow Michiganders and Americans, too.  We as a society generally do not kick those who are down—we try to help.

I have assumed nothing about you.  I indicated your comments are typical of those who live outside of Michigan.  Most all of this list isn't here.  I indicated that your comment of $75-$80 [UAW wage rate] is wrong.  It was wrong in your first post and continues to be incorrect now and incorrect with Eldorado’s post as well. 

When looking at wage rates for any industry it is misleading to aggregate current wages with costs for retirees.  Current hourly automotive employees receive absolutely none of the difference between the wage they are at (new hires at $14, others at around $30 plus their own benefits) and this media-suggested wage of $75-$80 an hour.  It is a simple concept.  These figures are not my opinion, they are in the contract.  Unfortunately, management came up with this illusory number!  That is what they published to try and garner public sentiment to help work down the wage costs at the last contract negotiations in 2007.  Management took the current wage rates, added the benefits and then added all the retiree benefits, too, against every principle of both financial and management accounting and then called it the “hourly wage”.  Now the media has latched onto this and won't let go.  It does not make it correct.

If for some reason you (or others) were of the opinion that all these retirees should simply be cut off—these retirees would simply be on Medicare/Medicaid, on the street, taking advantage of some social programs or other safety nets society provides.  It is OK to have that opinion, just understand that the needs and the costs do not go away--they just shift.  Abe suggested his father was overpaid because he had no higher education.  So, he was not worth the money he earned at GM, nor did he deserve the pension and benefits he received?  So, only people with higher education are worth a decent wage?  Hey Dan Caron, would you like to weigh in here on education?  Somebody ought to tell Richard Branson (Virgin Airlines, etc.) the same…maybe some of you harbor ill-will towards the concept of organized labor.  That's OK, just understand our country has a long history of it in many industries in all parts of the country.  Every public school teacher, every aerospace worker, the actors we see on TV and in the movies, and the writers that write the scripts.  Like it or not we have a history of it and all kinds of rules and laws that we all have to abide by because of it.  Hence, our cabinet "Department of Labor'.  You don't have to like it but understand it is there and not going away anytime soon.

Retirees, Abe, and anybody else listening or interested, is the crux of the overall labor costs of the Detroit 3—many retirees that are living longer.  It’s a broken model for sure, but that’s what’s there.  It does not matter what or how one chooses to deal with it—they are not going away, the costs to maintain them—remember they are people—are not going away, nor are any of their needs.  The responsibility will just shift.  They will shift in bankruptcy and they will shift in a restructuring.  Even if all the domestic 3 go down in flames, the people behind them do not!  The transplants (Honda, Toyota, MB, etc) have the same kinds of issues coming up, but without a long legacy, they have not arrived there yet.  In their home markets they are generally in socialized societies where the costs of retirees be it pension or benefits are spread out over the entire population instead of just those still working at any one company.  That’s why the marginal income tax rate in Japan is one of the highest in the world http://www.worldwide-tax.com/japan/japan_tax.asp and places like Germany are not too far behind. http://www.worldwide-tax.com/germany/germany_tax.asp  Even just across the border here, Canada has socialized medical care for all citizens, and commensurate higher tax rates than the US.  Management is all too aware of the pain of having these legacy costs, and the solution was a VEBA created out of the 2007 Master Contract with all three.   While all slightly different they were formed and in the process of being funded when the perfect storm hit this year—falling demand, rising commodity costs, skyrocketing fuel prices and the flat lining of the credit markets.  I do not know how many of you have heard of a VEBA but during all the UAW contract negotiations during the summer of 2007, it was on the news every night; in every newspaper here every day for months ad nauseum. http://www.irs.gov/charities/nonprofits/article/0,,id=154610,00.html  The main purpose of this VEBA was to remove the legacy costs from the balance sheets of the automakers, while simultaneously giving the union full control of the costs of benefits for their retirees.  It is not easy to set up or fund on such a massive scale, but it is being done.  It is in the contract.

Abe, I have assumed nothing about new hires.  But there are many, many employees with 30+, 40+ years in, and eventually they will be leaving...and replaced with $14 an hour starting wages.  That's a contractual fact, not my opinion.  At full time employment, that starting wage rate is just around $29K a year.  Sounds exciting for some until you realize that the poverty rate in the USA for a family of 4 is just over $21K a year.  It does not sound so wonderful in that context.

You indicated that labor cost—specifically speaking about the UAW labor costs, are the greatest cost component of a car.  That, too, is not a true statement.  Direct labor cost in a car is around 10%; hardly the largest cost component.  R&D, product engineering, materials, sales and marketing add up the rest; some of those have a [salaried] labor component for sure.  I left out margin and profit since there does not seem to be any now.

Another major fallacy believed by many distant from the action here is that the domestic 3 have been sitting still, watching the world crumble around them and then asking for a handout.  This is nonsense pure and simple.  At Ford, in the past few years they:

Stopped production of unpopular or older vehicles (such as Escort, Mystique, Crown Victoria, Town Car, Continental).
They have closed plants like Twin Cities and Wixom.
They have reduced its salaried and hourly workforce (tens of thousands).
They have renegotiated the UAW contract (2007)
Closed more plants (Batavia, Windsor Casting).
They closed and sold some UAW-Ford joint program operations, (too esoteric to explain).
They have reduced salaried and hourly benefits (every year without fail for salaried).
They have sold Aston Martin, Jaguar, Land Rover and part of its share of Mazda.
They have reduced costs to offset rising costs of steel, plastic, rubber, and other raw materials.
They made dramatic shifts in product line-ups and plans.
Mortgaged everything they own to shore up cash; when credit was still available.

Nevertheless, it is a very large ship with a big turning radius.  Similar things have happened at GM and Chrysler, too.  Nobody is sitting still watching the world go by, not now and not in any recent memory. 

Some have missed the point.  Bankruptcy solves nothing.  It just shifts the burden.  It does not miraculously make anything go away.  Neither will a loan or a line of credit for that matter.  The only winners in a bankruptcy reorganization will be the lawyers structuring it.  Cash up front please.  I'm not sure a judge is any better a CEO than Congress wants to be.  What do I mean by "shift"?  OK, so GM owes $1m to Bosch.  The bankruptcy judge comes in, nullifies all the stock--now the stockholders (including many retirement and pension funds) lost their investment.  A shift to these retirees.  Bosch settles for $0.50 on the dollar.  They lose, and so do their stakeholders.  Just a shift, or passing the burden.  Someone is going to lose and they are all disparate people all over the place.

Other indicate here all kinds of problems, but Peter (vanesp) really nailed it.  We have a lack of a national energy policy.  When it takes many years to design and build a new car, how does one deal with fuel being $4.20 in July, and $1.41 in December?  I don't know, but it sure has an affect on people's buying and driving behavior.  CAFÉ does not work—never has and never did—too many stupid rules with it.  Read all the articles on it in Car and Driver, such as these: http://www.caranddriver.com/features/columns/c_d_staff/csaba_csere_the_steering_column/top_10_reasons_why_the_corporate_average_fuel_economy_law_is_d_u_m_b_column  http://www.caranddriver.com/features/columns/c_d_staff/csaba_csere_the_steering_column/higher_cafe_regulations_seem_painless_which_is_why_they_won_t_do_any_good_column__1

Keep in mind a lot of people have long memories; the cars they remember from 1974 do not resemble current US cars, but that is what they remember.  I can't tell you how many times I've heard something about somebody's American car 25 or 30 years ago, and because of the that they won't consider another one.  I remember my old Toyota rusting while I watched.  My sister’s current Honda is no panacea of reliability.  Lexus, Toyota, and all the imports have service bays and mechanics.  What was that Dan Caron, you were telling me about Mercedes Benz cars of that mid-1970’s time?  GM leads in fuel efficiency in many sectors in which it competes.  Ford leads in safety.  I don’t know about Chrysler, perhaps they lead in something but they are the smallest.  Nothing really leveraged out of their former partners, I guess.  I love my W113, but also love our new Ford and Lincoln.  Being close to them, I anxiously await the new Fiesta being brought over from Europe--and made right here in Wayne, Michigan.  For those that think American companies can't build cars that people want, explain that to the Europeans.  Ford is, on and off, the market leader in Europe.  Great solid cars that people want and buy.  Some are coming here soon.

BTW, for those interested, Toyota built a new Prius plant in the US.  But they will not open it.  So the troubles are everywhere.  http://www.bloomberg.com/apps/news?pid=20601103&sid=ad.mY4RPcZt0&refer=us

Think and believe what you choose.  Buy the cars you want.  Vote with your wallet as they say.  Write your congress about what you want.  But it sure helps to have the facts in hand and understand what is really going on.

[psmith]

I'd like to make a request from the silent minority (ie, me) that we move on.  As I may have said in the past, I'm an engineer working in the housing industry and as you might guess times are VERY tough right now.  A lot of my friends are getting laid off, and I can't figure out which is falling faster, my pension, or the value of my house!  :'(   Anyway, my point is that I come here to get away from all that and focus on something I enjoy.

I know, I know, I don't have to read this thread.  But it's like a car wreck, I can't not look!  So maybe we can get back to discussing our favorite car.

Thanks!

[Richard S]

I'd like to make a request from the silent minority (ie, me) that we move on.  As I may have said in the past, I'm an engineer working in the housing industry and as you might guess times are VERY tough right now.  A lot of my friends are getting laid off, and I can't figure out which is falling faster, my pension, or the value of my house!  :'(   Anyway, my point is that I come here to get away from all that and focus on something I enjoy.

I know, I know, I don't have to read this thread.  But it's like a car wreck, I can't not look!  So maybe we can get back to discussing our favorite car.

Thanks!

Actually, I'm rather enjoying these exchanges and learning a whole lot more about the issue than I get from the media.

[mdsalemi]

I'd like to make a request from the silent minority (ie, me) that we move on.  As I may have said in the past, I'm an engineer working in the housing industry and as you might guess times are VERY tough right now.  A lot of my friends are getting laid off, and I can't figure out which is falling faster, my pension, or the value of my house!  :'(   Anyway, my point is that I come here to get away from all that and focus on something I enjoy.

I know, I know, I don't have to read this thread.  But it's like a car wreck, I can't not look!  So maybe we can get back to discussing our favorite car.

Thanks!

Pete, I feel your pain.  If there is anything (in Michigan at least!) WORSE than the auto industry, it's housing!  Oh, the stories I could tell...but you know about them.  I promise, my last post here.

BTW did anyone know it's a small group of BRITS (sorry guys, but it's the truth) in the AIG London office that figured out how to collateralize subprime mortgages, and repackage and resell them?  Yes, just a few folks in a small office in a big company.  Thanks! http://www.propublica.org/scandal/aig/

[Peter van Es]

Michael,

I don't believe the British office of AIG invented that... check out this video: http://www.youtube.com/watch?v=mzJmTCYmo9g

It was originally shown on British TV somewhere at the end (december) of 2007. It pretty much sums it up. By the way, it really is excellent stuff!

Peter

[John Eldorado]

Eldorado,

I didn't put words in your mouth.  Here is precisely what you said:

My problem with the Big 3 bailout is, why does this particular industry get a bailout with taxpayer money, but not other industries?

You said why auto and no other industries.  I indicated the other industries and the other bailouts; whether you believe in them wasn't the issue.  Something not clear here?

When I said other industries, I meant EVERY other company and industry in the United States that is having a difficult time.  Is every other company and industry in the US receiving a federal bailout?  Obviously, it's not.

I think it was obvious the point I was making (to everyone but you), that it's unfair to bail out some companies, but not others.  Why you are harping on such a stupid detail?

[66andBlue]

Michael,
don't give up commenting yet and providing interesting links!
Need to make a small correction, though.  AIG-London did not figure "out how to collateralize subprime mortgages" they just wrote a lot of them.  At least by one account the dubious (?) credit for inventing these  "credit default swaps" [CDS] should go to Blythe Masters at JP Morgan Co:
http://www.guardian.co.uk/business/2008/sep/20/wallstreet.banking?gusrc=rss&feed=business

Mortgage-backed CDS are not the only CDS that are tainted - practically all of them are.  According to a NYT article [http://www.nytimes.com/2008/11/05/business/05swap.html]:
"The most default swaps have been written on the countries of Turkey, Italy, Brazil and Russia, according to the new data. They were followed by GMAC, the auto finance company that is partly owned by General Motor."
Now that gets us back nicely to GM and its troubles, and to the question raised by some whether the GM of late was not a financing company that also produced cars.    Cerberus - the owner of Chrysler - is now the majority owner of GMAC  - a full circle!

[John Eldorado]

Abe, Eldorado, and others:

Complete repost of article in quote removed by Admin


Think and believe what you choose.  Buy the cars you want.  Vote with your wallet as they say.  Write your congress about what you want.  But it sure helps to have the facts in hand and understand what is really going on.

I'm convinced that most of the people that passionately support the bailout have some sort of direct interest in making sure these companies stay afloat, whether it's employment, stock, a pension plan, family members, a third-party supplier, or just the local economy that depends on them.  A solid majority of Americans are against this bailout because there not directly part of it, and are upset that there tax dollars are being taken from them, who are also struggling, to people who are making more than they do.

I'm not going to convince someone whose livelihood depends on these companies to embrace free-market principles.  But at the end of the day, you really can't make a good argument for why the Big 3 car companies deserve federal tax dollars, and not other industries that are struggling, like say the housing market, or mortgage brokers.  Even the oil companies have lost billions because of the collapse in the price of oil.  Are we going to start sending federal tax dollars to Exxon and Chevron?  Almost every company in America is having problems, and is probably going to lay off workers.  Why do poorly run companies like the Big 3 get federal funds?

The only car companies that are broke, and asking for tax dollars are automobile companies that use UAW labor.  The car companies that have production facilities here in the US that don't use UAW labor, are doing fine, like Honda, Nissan, Toyota, Mercedes, etc.  Clearly, there is a link between the two, UAW labor is currently too expensive to make a competitive product. Again, you're not going to convince a UAW worker of this fact, they'll blame someone else, like management.  I have both family and friends in the Big 3 UAW "industrial complex."  There are plenty of assembly line workers there that make six-figure salaries, a lot of them have no education after high school.  It's a gravy train, and not surprisingly, no one that's part of it wants it to ever stop.

GM is losing $2 Billion a month.  It's asking for $32 Billion from the federal government.  The total company's total worth is less than $3 Billion dollars.    Does that sound fair to you?  That's like me saying, "I have a $1 million dollar company that's having tough times.  I would like a $10 million dollar check from Uncle Sam this year so I don't have to lay anyone off."  It's an absurd argument.  Even if GM gets this bailout, it will be back at the Capitol next year with it's hand out asking for another bailout.

The Big 3 will continue to build cars, even if it declares bankruptcy, it will just have to be a leaner operation.  If some workers lose their jobs, so be it.  I have worked for companies that have downsized and was laid off, and I was able to find a new job.  That's life.  Get over it.  The Big 3 have been basket cases for the last 30 years.  Throwing tax dollars at these companies aren't going to turn these companies around, but bankruptcy sure will.

[Bryan_Collins]

There are always going to be belligerent Union shills, that are going to say anything (including ridiculous lies) to try and convince people that the worthless "Little 3" need to be saved. 

These companies have been making crap for the last 25 years, and will continue to make junk in the future as long as the UAW calls the shots.  Consumer Reports did a study on reliability, and not one of the Big 3 companies made it in the top 10.  In fact, most were at the bottom of the list:
http://money.cnn.com/2008/10/22/autos/cr_best_reliability/index.htm

People have voted with their wallets, and they're not buying the junk the Big 3 are making.  The  Big 3 are now out of money, since the have Unions have killed the golden goose, so now they want to come after taxpayers to pay their $72 dollars an hour salary.  $1600 of every new car purchased goes to auto workers who no longer even work for the auto company in order to pay their benefits.  You can't run a company with those high legacy and labor costs.

The UAW also pays workers NOT to work.  They call it "Job Banks."  The Big 3 isn't allowed to lay people off, even if they don't need the workers, so they have pay them to come in to a recreation center and watch TV all day while collecting a paycheck:
http://www.detnews.com/2005/autosinsider/0510/17/A01-351179.htm

Good luck getting anyone to buy from the Big 3 after all of this, with a bailout and bankruptcy on the way.  It's over.  I'm sure Obama will give them some sort of bailout, since he owes the UAW, and wants the millions in donations he receives from them to keep coming in, but it won't matter.  These companies are simply unsustainable.

I'd rather be more honest about the whole arrangement, and have these auto workers lose their job and collect unemployment and welfare, because that's what it really is.  It would also be cheaper than taxpayers paying worthless UAW workers $100,000 a year for a job that requires no skills or education.

[abe280SL]

Thank You Bryan Collins,
Incredible that there are people on this site who truly believe that these auto workers have little benefits, and barely making above minimum wage.  Got to hand  it to the UAW chief...he has done a superb job with his propaganda. He should have been hired by the Bush administration! Lord knows, people would be in the streets demanding the constitution  be ammended so we can have him for four more years.
Amen (aka "I believe")
abe

[Mike Hughes]

Hi, Bryan -

It has been so popular to bash the "Big 3" domestic for lo these many years that no one is paying attention to the fact that great improvements in quality have taken place in the domestic auto industry, and these improvements have been taking place for well over a decade!  Both GM and Ford have market segment leaders among their current models.  What is surprising is that Chrysler didn't seem to improve its quality as dramatically after so many years as part of Daimler-Chrysler.  Rather, Mercedes-Benz quality went downhill for most of that association!  Daimler finally dumped Chrysler as an act of self preservation!  If you read the article you posted about the October Consumer Reports you would have found that 8 out of 21 total paragraphs in the article were devoted to the great strides Ford has made in class leading quality in several market segments.  If you went on to read that issue of Consumer Reports you would have found that they made a point of praising Ford especially, but also GM, for their well deserved results in the latest Consumer Reports quality surveys.  In fact, if you can still find an issue of the Consumer Reports October Auto Guide you will notice that a Ford Fusion is on the cover - the first time in many, many years that any domestic car has been on the cover of the annual Consumer Reports Auto Guide.

[mdsalemi]

Michael,
don't give up commenting yet and providing interesting links!

Alfred,

Don't worry, I won't give up posting.  Just on this [relevant content for this] topic.  Eldorado and Abe want the last word, so they have it.

Thanks for the update on AIG, JP Morgan, et. al.  I always thought when financial institutions started calling the services they provide "products" we were all doomed.  I actually am surprised it took so long to collapse!  What I had heard was from old NPR and WSJ offerings earlier in the year.  I guess they were accusatory and incomplete.

[abe280SL]

Anybody wonder what DeLorean would have done in times like this?
BTW, I won, I won, I won, ...I am the last post.
People need to lighten up around here...don't take this crap too seriously Salami or you may end up needing
an md....
abe

[mdsalemi]

Anybody wonder what DeLorean would have done in times like this?
abe

Sell cocaine?

[Peter van Es]

Time for me to close this topic before someone hurts himself or someone else now that the bailout has been approved ?


Peter

[JamesL]

Delorean was set up!

Twas a fix, a conspiracy and the car would have been a worldbeater (in an alternate universe, Doc)

[Dash808]

Sell cocaine?

See now that's funny!

IMHO it seems Chrysler could have a prob.  Ford & GM will pull through.
As far as quality and style they have been getting better but it's all relative.   I enjoy my two Ford F150 Lightning's (1st & 2nd Gen), and if Ford ever made a 3rd Gen it would be right there next to the other two

[glenn]

I can't wait for the government bail-out car(the Trabant/Yugo) down at the dealer(SSI office) serviced by them(Post office folk) warranted by the IRS.  Aint life goina be grand-----  We'll be able to sell our vintage iron to Uncle under mandatory removal progams for scrap price.  Hope and Change.

[hauser]

Ford and GM already have econo cars.  They just don't have them here in the US.  I am referring to Opel and other offerings from Ford. 

[Bryan_Collins]

Network news catches UAW workers drinking while on the job:

http://www.clickondetroit.com/video/10235271/index.html

This type of behavior is very much a part of the culture at UAW auto plants.

Yea, these guys deserve our taxpayer dollars to save their jobs.

[Bryan_Collins]

And, finally, we can't blame the Brits for the current Republican Recession.  It took the Gramm-Leahy-Bliley Act of 1999 to deregulate the investment banking to near the state of the wild west, and it has taken the complicity of the Democrats in Congress to lie timidly in their pool of campaign contributions while Wall Street bankers and colossal executive greed submerged us in a sea of red ink.

Now, all of the world is getting a lesson in the realities of the economy.  Adam Smith has become irrelevant.  Thomas Malthus is the economist we should be reading.

Who was President in 1999? Oh yea, it was Bill Clinton, the Democrat, that signed that bill into law.  And a Democrat Senator's name is also on that particular bill, Pat Leahy's.  HE was one of the writers of that particular piece of legislation.  So I guess we can blame this entire depression/recession on the Democrats and Bill Clinton?  Of course not, but that's using your logic.

People are blaming things on Bush when he wasn't even President.

This current recession is global, and would have occurred regardless of who was President.  Similar to the tech and dot-com bust in the late nineties.  I don't blame that on Bill Clinton, it would have happened regardless of who was President.  Every economy is going to have up and down cycles, regardless of who's in charge.

I would still rather take my chances with free-market capitalism than European-style socialism. 

[abe280SL]

Most people in economics think that Malthus is really an outdated theory based on agricultural society that is irrelevant to todays advance economics and may work only in third world countries with limited amount of food production.  Under his theory if you have more wolves than cattle then eventually you will have famine as the wolves will eat all the cattle and eventually too many wolves would starve. This is what was happening in India where he was responsible for solving some  of its economic famines cycles. With man...the more demand there is for cattle...we just don't sit there and eat it all...we create cattle ranches and produce more cattle for the population.  Long live the laws of supply and deman...Malthus is so outdated no one really brings him up.
I guess if you would to introduce these theories to the car industry it would go like this. Under Malthus a limited amount of Porsches would
be built and thats it...under Adam Smith more Porsches would be build to supply the demand. With Smith less Porsches will be built because of less demand.  With Malthus, the same amount of Porsche will continue to exist untill the population catches up to the constant
number of Porsches out there...then they will all have to fight when the demand overtakes supply because the supply is constant.  It assumes
that man does not have the ability to expand supplies..again only relevant in overpopulated third world countries without the aid of techonology to expand supply.  Hello...we have the industrial revolution, technology, and other advances!
 But not to worry a few nukes going off killing billions will decrease the population so we can start all over again and Malthus would be happy that there will be lots of food for the decreasing population untill the population grows again outeating its supply..
Adam Smith is relevant very relevant....just funny to see people throw names out there who are really irrelevant in todays economy..and I am sorry to say nothing to do with what is happening now. Okay, if you want to take world famine and food supply, I'll give you that.
abe

[mdsalemi]

Somebody suggested that I/we read this book, so I went to my local library.  It was not available there but I procured it through inter-library loan and just picked it up today.  FWIW I believe it is out of print.

Right off the bat its age and inaccuracies are showing without even reading it.  Just the liner notes are a hoot; it starts to "make fun of" the Detroit suburbs as if they are something different.  Well they are; as different as the San Diego, Pittsburgh, Boston, Long Island, and Connecticut suburbs I all once called home.  If all of them were alike, I'd get it, but they were all different, each in their own way, as is Detroit.  So exactly what was his point?

Then, the notes go into nonsense about "corporate life" talking about getting employees memberships in "the right clubs", buying their homes when they move, investing their incomes, etc.  Well, let's see...my father in law (may he rest in peace) worked for Boeing, and they had an investment plan.  Every company I worked for had something similar.  The bigger the company, the bigger the plan!  Buying homes?  Well, that's called "relocation assistance" and it is an industry unto itself.  Heck, Alcoa bought my friend's home and moved him to Cleveland..and that was just last year!  Not uncommon for manager level employees.  Club memberships?  Maybe for the top of the heap--the very top, but for 99.99% of the employees?  In your dreams.

You could substitute "Greenwich, CT" and the financial industry for much of the claims here; or Houston and the oil industry, or Seattle and aerospace then software, or any number of city/industry pairs and it would make as much sense.

So, with that being said, I'll delve into it!

[benzportland]

My opinion is that the unions and environmentalists have done them in.  They simply can't compete with Toyota and others in employment and legacy costs, and our reluctance to produce more domestic crude killed the SUVs, their most profitable product. 

[JimVillers]

An interesting and long winded thread.

My take is a little different; economics theories and "laws" still apply, this is not a new or different world.

I view it a simply as the free market moving to a lower cost supplier from a higher cost supplier, nothing magic other than it has taken a decade or so. As in any business, costs must be matched with prices and the competition. I don't blame the issue on the automotive product of the big three; their cars are as good as the competition (not the best but then not the worst). Detroit cars have sold well for many years.

In my mind, the issue is cost. The cost issue appears to be in the "legacy cost", funding retiree health and pension expenses from current income. Current workers are not grossly over-paid and management is also not over-paid.

As a tax payer, I do not want to subsidize the pension and benefits of well supported retirees.

The "solution" will be very painful to many. The companies cannot continue to fund their current benefit and retirement obligations and it the Union does not realistically negotiate, and then bankruptcy will be required to realign costs.

[abe280SL]

Chances are that during these holidays when you are flying...you are flying on an airline that went bankrupt.  Guess what...they are still flying and people still have their jobs and they didn't need uncle sam to bail them out.  My point, let the three go bankrupt, restructure, and move on without US getting stuck with the bill.  Its done all the time.
abe

[Witt]

Somebody suggested that I/we read this book, so I went to my local library.  It was not available there but I procured it through inter-library loan and just picked it up today.  FWIW I believe it is out of print.

Right off the bat its age and inaccuracies are showing without even reading it.  Just the liner notes are a hoot; it starts to "make fun of" the Detroit suburbs as if they are something different.  Well they are; as different as the San Diego, Pittsburgh, Boston, Long Island, and Connecticut suburbs I all once called home.  If all of them were alike, I'd get it, but they were all different, each in their own way, as is Detroit.  So exactly what was his point?

Then, the notes go into nonsense about "corporate life" talking about getting employees memberships in "the right clubs", buying their homes when they move, investing their incomes, etc.  Well, let's see...my father in law (may he rest in peace) worked for Boeing, and they had an investment plan.  Every company I worked for had something similar.  The bigger the company, the bigger the plan!  Buying homes?  Well, that's called "relocation assistance" and it is an industry unto itself.  Heck, Alcoa bought my friend's home and moved him to Cleveland..and that was just last year!  Not uncommon for manager level employees.  Club memberships?  Maybe for the top of the heap--the very top, but for 99.99% of the employees?  In your dreams.

You could substitute "Greenwich, CT" and the financial industry for much of the claims here; or Houston and the oil industry, or Seattle and aerospace then software, or any number of city/industry pairs and it would make as much sense.

So, with that being said, I'll delve into it!

Hi Michael,

It was I that recommended the book and opened this can of worms. I am reading it right now, again. Let's hear from you when you get to the part regarding the US cars being compared  to the European and Japanese products and how the US missed the boat when consumers tastes changed.

Your contributions to this subject seem to be somewhat biased, could it be because someone close to you is working for one of the "THREE" ?
(....am I opening another can of worms ? )

Isn't great to live in countries of free speech ? Nevertheless I admire your conviction !

CHEERS !
WITT !

[mdsalemi]

Witt,

There are no mysteries here.  My wife has been a Financial Analyst for Ford for 24 years, and that has been mentioned many times in many posts over the years I have been participating here.  You are too new here to know all that, unless you've ferreted out these posts over the years.  So you may say I have a vested interest in the health of the US auto industry (I do and so do you) but more importantly, I've driven as daily drivers, Fords for the past 24 years--something few people in a Mercedes group will admit to!

I have been getting into the book, so far it is mostly related to GM and some of their decisions regarding the J-Car (Chevy Cavalier, Cadillac Cimarron, Pontiac J2000, etc) rather than the entire industry, but I have not gotten that far into yet.  It is arguably far more tabloid than investigative journalism, and I'll provide you with plenty of examples when I'm through!  Here's two, however: at that time, Detroit made the entire car or darn near all of it.  Now, they just assemble.  They are out of the parts business; Delphi doesn't just sell to GM, Visteon doesn't just sell to Ford, and Bosch doesn't just sell to Germans.  Yates made a big deal early on about how unbelievably wonderful the first Honda Accord was certainly in comparison to what few offerings were in its class.  Well, today, the Accord, the Camry are totally unremarkable cars--only because everyone has something in its class, and all are quite good: the distinctions are getting very subtle.  Why, look at the highest-end Camry--compare to the Avalon, and the low-end Lexus.  Even Toyota is competing with itself!  And in that mid size class everyone has really good offerings.  GM's tops the fuel economy; Ford in safety; you can get a lot of car for the money if you choose a Hyundai.  That was NOT the case at the time the book was written and certainly even less true when Accord Version 1.0 came out.  It is a very different world with different cars of higher quality from everyone.

But one thing is very obvious, ALL the companies are very different than the companies described in that 1983 tome.  You might not necessarly know or appreciate that unless "you are here"; you don't know or see how Ford (we have not gotten to them in the book yet) is a very different company today than it was a mere 3 years ago; vastly different than 5 years ago.  GM, Chrysler are too, as are Toyota and Honda.  Entire US industries and many companies have come and gone in the time since that book was published.

Biased, yes, in terms of the importance of the automotive to the US economy overall; but realistically, it is US manufacturing in general (of which automotive is only one part) that I find paramount.  There are those that don't understand that, and perhaps never will; and here we have our economy today.  No sanguine economy can be based on pushing paper or money around.  If you don't have value-added manufacturing (which can include of course, some non-traditional "manufacturing" such as agri-business and similar--does not have to be all "hard goods"), your economy will eventually fail.  We have in the USA too many "Wal-Mart" shoppers for everything, that put price as the one and only thing in consideration.  My goodness do we really need a Daewoo car in the USA?  Can't find an appropriate subcompact from Honda, Subaru, Toyota, Ford, GM, Chrysler, Mitsubishi, Suzuki, et al?  We do for those that have to have new for the lowest price.  They bought Yugo's too, once upon a time.  Nothing good ever came of it but a lot of great stories.

Back in May or June I made a comment that we are in a recession; I was called to task on the subject by other members here either non-believing or playing devil's advocate and asked to submit proof.  Well, 6 months later the government says we've been in one nationally since December of 2007; Michigan has been in one since December of 2000.  I tell you I'm not clairvoyant; I just live in Michigan.  Nobody was willing to admit--in an election year--the very obvious truth.

I continue to read the book, but 25 year old quotes from long-dead executives like Delorean, and old books like this are more history than a learning text.

[Benz Dr.]

Give up Mike. Not that you're wrong ( far from it ) but I was in the same boat as you 6 months ago and no one sided with me either, or at least not on the list.
At the time I was told by the BOD's that vendors could come here and defend their interests if they were being trashed. I said that wouldn't happen in a month of sunday's and knowing that I was right didn't make one bit of difference. And, several months later when I thought it best to defend myself, I was politely told to knock it off when I did.
 So what does this have to do with the big three? Not much on the outside. However, you're trying to convince the same kind of thinking I was up against last spring. Good luck........

 Three things brought this house of cards tumbling down. Greed, hubris and ideology. It's amazing to me how easy it's become for some to point fingers when there's more than enough blame to go around.

We all understand greed. It's an underlying human condition backed by eons of evolution. We all want more and when the richest man in the world was once asked, '' How much more do you need? '' He answered, holding just a small gap between his index and thumb finger,'' Just a little more.''

Hubris. Well, it's not pride in ones endeavours or accomplishments, or perhaps ones family. It's arrogant pride without purpose. Stuborn vanity that's just before the big fall. I'm sure we've all seen a few examples of this combined with greed in the past year.

Ideology. If don't know about this you're likely a fairly pragmatic individual. Ideology can go in both directions be it right wing or left wing. The former being the more dangerous of the two. Right wingers are more likely to take something away from you stating that they hold a higher moral ground, they hate unions, believe passionately in free enterprise and dislike minorities. It's always someone's fault, but it's rarely their own.

Before you count me as being on the left wing consider this first. I have no to ties to the big three nor do I own any stock in anything. I'm not in any union nor have I ever been. I don't have any union friends that I'm aware of. I vote differently in every election and have no allegiance to any party. I have friends of all creeds and nationalities - I'm friendly and frankly, I can't afford to turn away someone because I can't understand their accent.
 I've been a farmer all my life - that's about as free trade/free enterprise as it gets. Two years ago prices were at rock bottom but there was no helping hand from my government or the general public. Of all people, I should be someone who's opposed to this loan ( it's a loan not a bail out, let's get that perfectly clear ) but I'm not. We aren't faced with an inability to produce or a lack of demand for those goods, we're faced with a lack of credit in which to produce those goods or the money to purchase them.
 One has to go back 80 years to find a similar situation. Back then the banks were left to fail - everyone failed. This time the banks were bailed out ( yes that was a bail out not a loan )  and this time it's different. Either through no fault of ones own or every fault, the whole nation will be affected by the credit crunch.

  It's been said that an iceburg sank the Titantic. And yet, greed, hubris and ideology played no lesser role in sending her and 1,500 innocent souls to a watery grave. 

 
 

[mdsalemi]

greed and hubris

Ah, yes Dan.  I remember back in the 80's in B-school, Drexel was the kingdom; Milken was the king, leveraged buyouts were all the rage and high yield bonds were the tools to buy them.  Talk about a house of cards.  Milken went to jail; Drexel vaporized, and junk bonds turned out to be, well, junk.  A little greed and hubris?  You are spot-on my friend.

Out of the mouths of farmers...maybe we ought to listen to farmers and their common sense.

[Bryan_Collins]

UAW has a $6 million dollar golf course for their members:

http://www.foxnews.com/story/0,2933,472304,00.html

Our tax dollars at work

[Bryan_Collins]

Bryan?  Aren't you here because you have a car produced by a "socialist" European country?  Don't be too critical of the free-market "socialist" systems that have produced excellent cars and nations.  I believe the oldest republic in the world is the Netherlands.  The Dutch have a long history of successful mixing of free market and social government.  Guard against jingoism in a global economy or on a global forum.

I gave both the Democrats and Republicans credit for the current credit crisis.  I don't think we can pin it on the Brits. 

The invisible hand is at work in Malthusian theory.  Smith is relevant to an industrialized Euro-American economy, but with the imbalance of consumption of resources and destruction of habitat, as I said, we should be reading Malthus.  If you restrict Malthusian theory to agriculture, you ignore its parable relevance to global forces.  There are more than 6 Billion humans on the planet and breeding. 

Finally, the Big Three (and Congress) failed to see that the economic model has changed.  Congressional action is not an invisible hand.  If we save the banks and the rich (wolves) and allow manufacturing and the middle class (calves) to starve, sicken and die, Malthus would be able to write an analogous prediction of what is next. 

And I also enjoy a nice Cuban cigar.  Does that mean Communism is the best way to organize an economy?  Hardly.

You're really mixing up a lot of your economic theories.  The "invisible hand" economic concept was coined by Adam Smith, not Malthus.  As was stated earlier, Malthus' economic theories were primarily involving famines where the population was outstripping the food supply.  His theories have nothing to do with the current economic crisis in this country. 

[mdsalemi]

UAW has a $6 million dollar golf course for their members:

http://www.foxnews.com/story/0,2933,472304,00.html

Our tax dollars at work

Bryan--if you are so unbelievably angry at ANYTHING related to the UAW and the domestic automotive industry, you ought to write your congresspeople.  Better yet, why don't you write to Mr. Gettlefinger himself and tell him what you think!

Ron Gettlefinger, President
United Auto Workers
Solidarity House
8000 East Jefferson Avenue
Detroit, Michigan 48214
or call: (313) 926-5000

Let's remember here for a moment, that the "bailout" of the big 3 is actually a loan to 2 of them.  It isn't money given to the UAW.  More to the point however, regarding golf courses, theirs is like just about all golf courses in Michigan; it is losing money.  That should be no surprise.  It has also been for sale for a long time, but like most property here in Michigan has little in the way of buyers.

There's simply too many courses here and many of them are quite good.  (N.B. golfers--think about that for your next golf vacation.  You may not be able to golf at Augusta or Pebble Beach, but there are at least 2 Five-Star courses here that will be happy to let you on!) Many things are changing quickly in the auto industry and you can be sure the UAW brass will be trying to do something about this one.  It wasn't a new acquisition purchased with tax dollars; it was bought in a different era by the UAW's own money.  You may think the UAW is "burning through your tax dollars" but they are far better at burning through the dues of its members.  There were pretty strict rules placed on the loan to GM and Chrysler, and funding a golf course won't pass muster with anyone even if not directly mentioned.  So if that interests you, great--stay tuned to your news sources (if they don't forget about it) because they won't be putting millions into it for much longer.

While you should be concerned about this waste, why not consider a bit more while you are at it?

http://www.wiredprnews.com/2008/12/28/wall-street-executives-still-spending-money-to-fly-private-jets_200812281734.html
http://www.ajc.com/services/content/printedition/2008/12/26/natvoices.html

Similar to the last article by the San Jose Mercury News, the Detroit News queried the bank-recipients of the 350 Billion given to them in September...of the few answers they got, it was "we don't know".  Hmmm...  Most not answering the question on a direct handout; those that do can't really answer.  That's 350B. http://www.detnews.com/apps/pbcs.dll/article?AID=2008812230338

And you are worried about a golf course?  We know where that is, and it's not moving, it's not vaporizing into thin air either...like the first 350B gift, and the followup coming shortly...

But today, 29-December, is a big day for GM and Chrysler.  They get their first installment check on the loan from the Fed.  Now, all they have to do is deposit it, and those financial institutions will put a 10-day hold on it, and maybe by the end of the first week of the new year they can actually use the money...

[John Eldorado]

mdsalemi,

A lot of people are angry at the UAW, and a substantial majority of Americans are opposed to this bailout.

http://money.cnn.com/2008/12/03/news/economy/automakers_poll/

If the UAW wants to pay its assembly line workers 6 figure salaries, fund job banks for people to show up and watch TV all day on a full salary, and have multi-million dollar exclusive UAW golf courses, that's fine.  If the Big 3 want to fund this gravy train, that's their business.  It's their dime, not mine.

But now that taxpayer dollars are funding this type of nonsense, the UAW's policies are under a lot more scrutiny, as should any business or entity that receives public tax dollars.  Also, I really don't buy into this "it's a loan they're going to pay it back."  Please.  Do you really think we're ever going to see one penny of that money back?

I currently own a Big 3 truck, and after seeing all the nonsense that goes on with the UAW, I don't think I'll ever buy another UAW-made product ever again.  No wonder their quality is so bad.  The UAW is such an expensive liability that the Big 3 doesn't have the money to invest in quality for their products.  It's blown on all kinds of nonsense.

These car companies will get their tax payer dollars, and will be back begging for more money next year after they've blown through it.  My guess is the politics on this issue will be even more toxic, since they've already received a substantial bailout.  Even with the Democrats and Obama in charge, I don't think they'll have the political courage to give a second bailout to the Big 3 that probably 80%-90% of the public will be adamantly against.

It's over for the Big 3, and I place most of the blame on the UAW.

BTW, mdsalemi, didn't you say you were going to stop posting on this thread?  I don't mind reading your comments, but I just thought it was odd.

[abe280SL]

Big day for the auto industry and Union....sad day for the tax payers who will never see the money back.    This isn't like the Chrysler bailout. Wake up people...do you think that this recession is going to be over in 3 months and that people are going to go out there and start buying cars again and we'll live happily ever after? In three months these companies and Unions are going to be begging for more money as they deplete their resources.  You are going to continue paying for their pension plans, inflated salaries, workers who are getting paid while staying at home, private jets, and country clubs.
Well, I have to go now... got to work to pay my taxes so that others can enjoy the fruit of my labor.
abe

[Bryan_Collins]

I am completely aware of the author of the "Invisible Hand" theory.  I've read it and don't think it was invalid, I just think it may be being overtaken.  Even though Malthus was talking about a natural environment, I see an analogy to global macro-economics.  My reference suggested Smithian subsets of a Malthusian universe.  Supply and demand is tempered by rapidly increasing consumers and limited resources. 

I guess it was my lack of understanding of economics that led me to get out of the market at the peak.  It probably also explains why I'm now adding jobs, just gave every one of my employees a 15% or better raise, and improved their health insurance.  I've only been in business 20 years, so I guess it must be beginners luck.

Anyway, this is way off into the weeds.  The simple fact is that Congress is no more likely to find a consensus on the Big 3 than we posters to this forum.

Sure, the reason why we currently have a financial crisis in this country is because our population has exceeded our food supply.  If you asked any economist if Malthus theories are applicable in any way to our situation, you would be laughed at.  Our food supply and production is more abundant, and cheaper than it has been at any point in history.  Americans are more likely to have a problem with obesity than they are hunger.  Malthus theories have been rejected by most rational economists.  He basically said the world was going to run out food shortly, dubbed a "Malthusian catastrophe".  This was in the late 1700's.

You may think your some expert in economics, but you're talking in circles and exposing your lack of knowledge on the subject.  You earlier in this thread that Adam Smith's theories have become "irrelevant", and Malthus theories are the ones we need to embrace.   Now you're referring to "Smithian subsets of a Malthusian universe"  which makes no sense, you're just contradicting yourself, again.  I suggest you brush up on economics before you label yourself an expert.

[abe280SL]

This is fun. Just because someone is making money in th eir business doesn't imply they know something about economics. Maybe if you were really good....you could be expanding twice as fast! Look at all those in Hollywood making money in the entertainment industry...but can't add 2+2. Today, many CEOs of major companies know alot about economics and business but many  are having financial problems.  Another silly arguement and post that shows lack of knowledge.  Beware of people who must tell you they are experts and successful...blablabla. Again, make your arguement an intelligent one, rather than  "look at me...blablabla".
Finally, I am pretty sure there are alot of financially successful prostitutes in Vegas that run a great show....but know nothing about
Smith, Milton Freedman, or that Alexandar Hamilton was the father of our financial institutions. IMHO, the  best indicator for our economy is what I call the BBII (booby breast implant indicator)...talk to any plastic surgeon and they will tell you that they know before anyone else when the economy is turning up or down.  That sector of the medical field gets hit first on downturns and pick up first on upturns .
That would make a great research project for any graduate student in economics
abe

[John Eldorado]

This is fun. Just because someone is making money in th eir business doesn't imply they know something about economics. Maybe if you were really good....you could be expanding twice as fast! Look at all those in Hollywood making money in the entertainment industry...but can't add 2+2. Today, many CEOs of major companies know alot about economics and business but many  are having financial problems.  Another silly arguement and post that shows lack of knowledge.  Beware of people who must tell you they are experts and successful...blablabla. Again, make your arguement an intelligent one, rather than  "look at me...blablabla".
abe

I'm also laughing about this.  I love the ego of some people!  An Econ 101 course at a Community College, and suddenly they're a financial genius.

If a person truly knew all the coming financial turmoil and stock market crash, they could have could have made millions and billions of dollars shorting stocks and securities in a matter of a few weeks.  I read where Warren Buffet's Berkshire Hathaway fund is down by about half right now.  Maybe some posters on this board should run a hedge fund on Wall Street since they're so brilliant, and also become billionaires.  Then they could own a fleet of Pagoda SL's.

[69280sl]

Moderator:

Maybe this thread should be terminated. It has always been off topic and disparate views are o.k., but now it is getting personal and ugly. Something I've not seen here before in the four years that I have been a member.

[psmith]

I second that request...

There's nothing like a heated argument to shut down enthusiasm for the rest of us.  Let's get back to Pagodas PLEASE.

[Peter van Es]

I also think this topic has run its course.

I have been tracking it, and as you know, I've asked about two weeks ago if I should close this topic. Then there were no outspoken supporters for that, now there are, so I'll close it.

However, in the interest of this community I'd like to tell you about some of the "behind the scenes" things that have gone on. 66andBlue (Alfred) alerted me to a very personal attack in the first post by Bryan_Collins. I edited his post to take the attack out, a couple of hours after he first posted it. So very few people will have seen it, but 66andBlue and I did. I sent a personal message to Bryan_Collins asking him to refrain from personal attacks, as that's not called for in this community. Bryan never reacted to that personal message.

I decided to check out Bryan_Collins using the tracking and tracing tools that this system gives me. I quickly developed the suspicion (based on his registration timing, e-mail address but most of all his IP (or Internet address)) that the Bryan_Collins name was purposefully created by another member, already on the board.

Both members were posting in this topic, both members supported similar points of view. One of the two members, John Eldorado, has posted exactly one message with a question about a Pagoda. All other contributions by John Eldorado and Bryan_Collins are on this topic only.

Yesterday I sent both members an e-mail from the administrator:

I have strong indications that you use multiple "identities"  to post material on the board. This is in conflict with the terms of use you agreed to when you signed up with the board, and in conflict with the purposes of our group. We provide an on-line community for real people and some of the messages you post are disrespectful of long standing members of our group.

I hereby request you to provide further proof of your real life identity, such as real name, location, and your interest in Pagoda's. Please enter such information in your profile.

If you do not comply, I shall remove your access to the board.

Peter van Es

Neither person responded to my e-mail. Today I have banned them both temporarily from the board... meaning they cannot log on or post, until they have responded to my e-mail.

I would ask you to reread this topic-thread, and verify for yourself that if John Eldorado and Bryan_Collins are indeed one and the same person, and if you realise that neither is prepared to act under his real name, that this intrigant has been able to successfully stir up trouble in our community. Should I be contacted by one or both of them and should they convince me of their intent to honour our terms of conduct and charter, I will retract or modify this message and remove the ban.

So henceforth, lets all be focused on our common interest, Mercedes-Benz Pagoda's and our love of old cars. In future, please refrain from topics that lead into strong political, religious or other arguments.

I will leave this topic open for another day or so that you can respond to my message, then I'll shut it down.

Peter

[bpossel]

Peter,

I would also support closing this topic.  Let's move on and stick with, as you recommended, topics related to our Pagoda's.
Thanks for all your hard work with monitoring and maintaining this great site!
Bob 

[J. Huber]

Agreed. So before we go: Peter, I appreciate your moderating. Letting it go on was fine -- we all hoped it would come around to good old fashioned discussion. Whatever the motivation the various posters had in mind -- something is terribly wrong when aspersions are cast toward Mike. He is a straight-up guy and has brought tremendous insight to us about the Michigan mindset for years. Honesty is what he is all about. And he has an awesome Pagoda!

[Witt]

....since I am the one that started that whole thing, I agree to stop the discussion and get back to our Pagodas....however In my opinion this was a good and very interesting airing of opinions on the subject.

In my initial post I recommended Brook Yates book as a historical insight in the turbulent past of the American Automobile industry.  Not in my wildest dreams did I expected things to get out of hand.

Do I owe anybody an apology?

CHEERS !
WITT !

PS: I see that Dan the Benz Doctor is still around, did you receive my e-mails ? Please advise.

[abe280SL]

For those I have offended...I am sorry...most of this stuff is just fun for me without any ill intention.
For those that I will offend... I am sorry too...history repeats itself  :'(
May we all have a happy new year and may it better than 2008...I am certainly going to put 08 in my scrap book never
to be looked at again. Now its time to scape the worlds problems by watching college football....go Trojans
And if we end this thread right now...I got the last words in
abe