Auto Bail Out?

[CentreHice]

Star Article

What to do?

What are the causes?

Is it as basic as CAW wages and coporate waste/high salaries driving up the costs?

Bush put in $25 billion. Australia $2 billion. The EU thinking about $40 billion euros.

A real conundrum.

Seems to me, if government (us) bails out an industry to keep jobs afloat...it would be incumbent upon everyone (from CEOs to front-line workers) in that industry to pull back, tighten their belts....act fiscally responsible.

[franko]

No doubt that the auto industry is important to the economy.

But tariffs will not be put on "cars that are made elsewhere", so production costs have to come down [and quality -- as much as it used to be job one -- has to go up] so that people will be enticed to buy Canadian made cars [and cash incentives have to come from somewhere -- if the Big-3-soon-to-be-2 are losing money whence comes the cash?].

I feel badly for the ones who are going to lose their jobs, but if people aren't buying vehicles [sure, keep those SUVs and 4x4s and pick-ups coming to sit on the lot and rot] something has to give.

CEOs: no bonuses -- I mean, what have you done to earn them? And to earn so much?

FLWs: be realistic. You may not get a raise for a few years. You may have to take a pay cut -- deal with it -- cut back a bit [you make a heck of a lot more than I do, and I've had 4 COL increases in the last 14 years and I've found a way to survive]. Better than 5 or 10 % reduction in pay than lose your job and after EI runs out have to work at McD's.

Unsympathetic? Not at all. Realistic. The economy is in the crapper and sometimes ya gotta give in.

Now if you give in and the CEOs keep racking in the bonuses . . . then storm the building!!!

[roke]

One thing I've been thinking about lately is why do the car dealerships have so many cars on their lots? I pass by a nearby automall somewhat regularly and if you ask me, all the dealerships are carrying way too much inventory, especially the nearby Chevrolet/Hummer dealership.

With today's technology and manufacturing procedures it takes what, 1 or 2 days to make a car from start to finish? Why don't these dealerships simply have 4 cars of each model for showing or test-driving, half with the bare bones and half with the extra features. Rather than taking up huge tracts of land and having cars sit there, you can have your customers come in, see the cars you have on the lot, test-drive each model, and decide whether or not they want to purchase it. If the customer decides on purchasing a vehicle from your dealership, provide a courtesy car of the same or similar make and year (which would have to be cars on the dealer lot other than the 4 or so model/test-drive cars), while the order goes out to the manufacturer who make the car with the features the customer wants, finish it, ship it to the dealership at which point the customer picks it up, returns the courtesy car, and everyone is happy.

That being said, the main problem I see with this is, as far as i know, most of the automobile manufacturing in Canada is in Southern Ontario so it would take far too long to ship a car by rail/truck from Southern Ontario to say, Alberta when it is manufactured. I also don't know anything about automobile dealerships or purchasing a car, but it's clear the big 3 need to drastically cut costs somehow.

Then again, maybe GM, Ford and Chrysler need the dealerships to have a large number of cars on the lots so their workforce has something to manufacture.

[franko]

Two problems off the top of my head, Roke:

1. Most of the manufacturers don't have the parts on premises -- they work via "just in time"; that is, when they know that they are going to make a specific model they order parts from their suppliers for next day delivery [which keeps parts suppliers on their toes . . . suppliers don't stock more than a day or two either]. That delays manufacturing of the finished product, as parts need to be shipped after initial order, which happens after initial order of the finished product . . . then as you say there are shipping problems to final destination . . . which leads to problem #

2. From the auto industry perspective this is a terrible idea. Most people now research their vehicle and go in with an idea of what they want ^* . . . and many will walk out with the vehicle that day. Conversely, many sales are impulse buys . . . "my car isn't working well, let's go see what's available" . . . and before they know it the couple has signed the papers and are out the door . . . if the stdealership can and it is early enough in the day they'll have them drive the car off the lot so that there is no buyers remorse -- a couple of days wait may mean the difference between a sale or not.




^* when I bought my last car I e-mailed the four closest dealership [shoulda included Kingston, I hear] and asked for their best price on a specific car with specific options. One got back to me -- the farthest away, of course. After e-mailing and talking back and forth I was told their bottom-line price. Then I went to the dealership closest to me and asked about the same car, same colour, same options and they game me the sales-pitch run-around [my wife asked what they were doing and why it was taking so long; I told her it was the game they played -- she didn't like it]. Finally I said to the salesperson "look, this is what I'm willing to pay and I'll get it elsewhere if you don't give it to me". He went to his manager and a couple of minutes later I said "enough of this" and we got up to go . . . when he saw that [watching from the wings, I'm sure] he came running back and said that his manager said "if you can get that deal somewhere else, take it!" Coupla weeks later he called and asked if I was still interested in the car. With great pleasure I said "You said that if I could get the car at that price elsewhere I should take it, so I did"

[roke]

Thanks Franko, I had forgotten that the manufacturers used a JIT inventory system and was thinking of the problem simply from the perspective of the dealership, completely ignoring the processes of the manufacturers.

As for buyer's remorse, impulse buys, and process of purchasing a vehicle, that's just an area I have no knowledge of, as it relates to automobiles at least, thanks for the insight.

[Cranky]

Nov 11, 2008 13:06:45 GMT -5 @roke said:

One thing I've been thinking about lately is why do the car dealerships have so many cars on their lots? I pass by a nearby automall somewhat regularly and if you ask me, all the dealerships are carrying way too much inventory, especially the nearby Chevrolet/Hummer dealership.

With today's technology and manufacturing procedures it takes what, 1 or 2 days to make a car from start to finish? Why don't these dealerships simply have 4 cars of each model for showing or test-driving, half with the bare bones and half with the extra features. Rather than taking up huge tracts of land and having cars sit there, you can have your customers come in, see the cars you have on the lot, test-drive each model, and decide whether or not they want to purchase it. If the customer decides on purchasing a vehicle from your dealership, provide a courtesy car of the same or similar make and year (which would have to be cars on the dealer lot other than the 4 or so model/test-drive cars), while the order goes out to the manufacturer who make the car with the features the customer wants, finish it, ship it to the dealership at which point the customer picks it up, returns the courtesy car, and everyone is happy.

That being said, the main problem I see with this is, as far as i know, most of the automobile manufacturing in Canada is in Southern Ontario so it would take far too long to ship a car by rail/truck from Southern Ontario to say, Alberta when it is manufactured. I also don't know anything about automobile dealerships or purchasing a car, but it's clear the big 3 need to drastically cut costs somehow.

Then again, maybe GM, Ford and Chrysler need the dealerships to have a large number of cars on the lots so their workforce has something to manufacture.

I have no proof but simple logic tells me that GM and Ford are taking the US handouts (25 billion?) and producing more cars to sell at a loss. This is simply insane.

[franko]

I think that dealerships commit to selling x number of cars in a year . . . the more they have on the lot the more selection they have and the greter possibility that one on their lot may attract someone.

[Skilly]

Nov 11, 2008 22:01:36 GMT -5 franko said:

I think that dealerships commit to selling x number of cars in a year . . . the more they have on the lot the more selection they have and the greter possibility that one on their lot may attract someone.

Stop it ... I almost bought a 2008 Dodge Charger yesterday. After taking a time-out from arguing with the service lady over an inane explanation of what she meant by "if we have to inspect your brakes it will cost extra" .... but I want you to tell me what the squeal noise is, and brake inspection is included in the maintenace schedule, you are inspecting the brakes anyway arrghhhh!!!...... The woman at the service center also tried to convince me that they could charge me $12 a tire if I wanted my winter tires put on (which are on rims!). Tire rotation was in the maintenance schedule as well, and I wanted to know why the nice mechanic couldn't just put my winter tires on instead of the summer ones, and why that was extra.... "I'm sorry sir, its $12 a tire extra" ..... I got it done for FREE at Costco.

So I had to walk away and give myself a time-out before I exploded .....

I walked up on the show room floor and browsed the vehicles and fell in love with this Charger. (it was only $22,000 - less than the Civics and Corolla we were looking at). I asked all the standard questions, trying to figure out the "catch", why so cheap ... and got sufficient answers .... then I realized why I am on the show-room floor. Sucky Service. I actually said to the salesperson, it this wasn't "insert dealership name" I'd be driving out of here today with that car.

[Yossarian]

The funny thing about all of this is over the last few years while the Big 3 have been complaining about high wages and benefits paid to plant workers, and the high cost of health insurance for US workers, the Japanese and some Euros have been building plants all over North America: BMW in South Carolina, Mercedes, Hyundai and Honda in Alabama, Toyota in Woodstock, Ontario and Texas, Nissan in Tennessee, etc. From what I understand, the base wages they pay are surprisingly commensurate to what the Big 3 pay.
By building plants to be closer to markets and to bypass tariffs, they have effectively become North American automakers, but don't share the same problems.

The reason I believe is these companies are run by car people; engineers who take control of every phase of design and production, instead of leaving it to accountants and MBA types who are only concerned about the bottom line. For anyone with a passing interest in the auto industry and manufacturing, I highly recommend reading the Toyota Way, by Jeffrey Liker. It focuses on Toyota's bottom-up engineering approach, and lean manufacturing.

Cars as appliances don’t work anymore, compared to what you can get from the competition. Over 15 years, GM did not effectively change the basic engineering of the Cavalier/Sunfire (thankfully, now defunct), and in that same time frame Honda, re-engineered the Civic 5 times. GM continues to use cheaper parts to assemble their cars, while Honda and Toyota use better quality parts. There is a reason why people who aren’t necessarily concerned with bottom line price or some nostalgic association to a brand, would rather buy a Civic or Corolla. You’re getting a better car. You pay higher at the beginning, but there is a higher residual when it comes time to sell or trade-in.

For too many years the Big 3 have avoided engineering quality vehicles that were not large SUV’s or Pick-Up trucks. There has been some improvement over the last few years, but in no class of car other than large SUV or Pick-Up do any of the Big 3 have a car considered top or near top of the class. Maybe the Corvette or Mustang, but these are halo cars. Not high volume vehicles that produce reliable and steady profit. Go ahead and play the game; choose any class of car, and name your top choices. Take into consideration the purchase price and residual values and all other relevant variables including standard components, interior and exterior design, safety features and fuel economy, post-purchase service, and determine which dollar per dollar vehicle is your best option. I dare anyone to come up with a Big 3 vehicle. It takes at least 5-10 years of consumer buyer patterns to reverse trends and attitudes over car products to have effect on residual values. Remember the rust-bucket, oil burning cars Toyota, Datsun/Nissan and Honda used to make in the 70's, and Hyundai in the 80's? Well, they are all now making desirable, class leading vehicles.

It is going to take a reversal of car making culture for the Big 3. If not, the bail out will not solve anything.

[Cranky]

I agree with everything you say Yossarian. Failure should be rewarded with bankruptcy, not billions of dollars of bailout money.

What I find curious is that according to the Ouija board, all of this was suppose to happen AFTER Obamination made his move. Wonder why they arre jumping the gun. Is it a a cheaper pre-emptive strike against an Bailout for American Jobs?

Wow, I wonder how can I get truckloads of taxpayer
money.....

[franko]

Funny how we are a free market country until companies need a cash infusion . . .

[halihab]

Who's going to bail me out ?

[Skilly]

Nov 13, 2008 8:10:32 GMT -5 halihab said:

Who's going to bail me out ?

Ya can't get out on bail from Dorchester....

[Habs_fan_in_LA]

Nov 11, 2008 22:45:30 GMT -5 Skilly said:

Nov 11, 2008 22:01:36 GMT -5 franko said:

I think that dealerships commit to selling x number of cars in a year . . . the more they have on the lot the more selection they have and the greter possibility that one on their lot may attract someone.

Stop it ... I almost bought a 2008 Dodge Charger yesterday. After taking a time-out from arguing with the service lady over an inane explanation of what she meant by "if we have to inspect your brakes it will cost extra" .... but I want you to tell me what the squeal noise is, and brake inspection is included in the maintenace schedule, you are inspecting the brakes anyway arrghhhh!!!...... The woman at the service center also tried to convince me that they could charge me $12 a tire if I wanted my winter tires put on (which are on rims!). Tire rotation was in the maintenance schedule as well, and I wanted to know why the nice mechanic couldn't just put my winter tires on instead of the summer ones, and why that was extra.... "I'm sorry sir, its $12 a tire extra" ..... I got it done for FREE at Costco.

So I had to walk away and give myself a time-out before I exploded .....

I walked up on the show room floor and browsed the vehicles and fell in love with this Charger. (it was only $22,000 - less than the Civics and Corolla we were looking at). I asked all the standard questions, trying to figure out the "catch", why so cheap ... and got sufficient answers .... then I realized why I am on the show-room floor. Sucky Service. I actually said to the salesperson, it this wasn't "insert dealership name" I'd be driving out of here today with that car.

I thought Auto Bail Out in Newfoundland meant an electric pump in the bottom of the boat connected to a toilet bowl float.

[Cranky]

Is THIS where some of you want to give your tax payer dollars? Take food OFF your table and put it onto some guys table who doesn't need anything more then a HIGH SCHOOL education and a UNION CARD to make over a hundred thousand? Or multimillion dollar front office suits?

NOT ME!



If we are going to waste untold billions of dollars saving failling companies that caused their own demise, then we might as well burn the economy down now and save some time.

[franko]

CAW president says that they have conceeded as much as they are going to . . . as much s they can were his actual words.

Just sticking up for the employees, he says. [Nice. Wish someone would stick up for me like that -- I don't even make it to the "all workers" catagory!]

Hey, guy: when the companies go belly-up [and don't get me wrong -- they deserve to, with the inept management they have had], what will your union members say then?

[CrocRob]

Nov 20, 2008 2:24:45 GMT -5 Cranky said:

Is THIS where some of you want to give your tax payer dollars? Take food OFF your table and put it onto some guys table who doesn't need anything more then a HIGH SCHOOL education and a UNION CARD to make over a hundred thousand? Or multimillion dollar front office suits?

NOT ME!



If we are going to waste untold billions of dollars saving failling companies that caused their own demise, then we might as well burn the economy down now and save some time.

It has little to do with the unions, and largely to do with the healthcare and pension obligations GM has. Few (none?) of those other companies have been around long enough to have that problem, nor have any of them employed a million people previously.

I've read that comparatively, workers in Canada, the US and Japan are paid pretty similarly for production work. And you'd be interested to know that between benefits, off days and pay, Toyota employees are actually compensated MORE than their CAW counterparts.

If you want to talk about efficiency, then that's all on GM.

I'm as much of an anti-union guy as anyone, but in this case the union is a strawman argument for what's actually going on. That being inept management. GM's run by accountants instead of engineers and as such they don't produce quality cars. That's the root of the problem in my mind.

edit: HAH! I just looked back at that graph and read that it reads "selected workers." lol

[The New Guy]

Nov 20, 2008 2:24:45 GMT -5 Cranky said:

Is THIS where some of you want to give your tax payer dollars? Take food OFF your table and put it onto some guys table who doesn't need anything more then a HIGH SCHOOL education and a UNION CARD to make over a hundred thousand? Or multimillion dollar front office suits?

NOT ME!



If we are going to waste untold billions of dollars saving failling companies that caused their own demise, then we might as well burn the economy down now and save some time.

The caps lock and the pretty graph (which means absolutely nothing, frankly without context) aside, I think right now I'd rather my tax dollars go into bailing out the auto industry. Yeah, yeah - I know HA is going to rip up my right wing membership card for this (little does he know that I'm actually more centrist anyways - I just happen to be right of most people I wind up arguing with) - but honestly as much as it hurts all of us to do it, I think we have no choice.

HA is right when he says failure should be rewarded with only failure (and the lessons learned in the failing) but occasionally a failure can have repercussions that affect those who did not fail - those who will learn nothing (because they've done nothing to learn from) and only suffer needlessly.

I know what the collapse of a critical industry can do to a province. I was young when it happened in Newfoundland but I was old enough to see what was happening, to understand what was going on. Granted, Newfoundland was never very rich to begin with, but in the end the effects are clear. Too clear perhaps (none of my immediate family remained in Newfoundland - my brother is in London, I'm in Toronto and my parents moved to Iqaluit - and of the other members of my 'generation' in my family (my first cousins who were close to my age) only a handful stayed behind).

The bailout bites. But the consequences of not bailing out the auto industry - in particular for Ontario - are much, much worse.

[CrocRob]

Just as an aside, the WTO is looking into the legality of bailing out specific companies -- as opposed to an entire industry. I'm certain it had more to do with the US bailout, but they might object (though they really have no power to do anything) to a bailout that includes GM, Ford and Chrysler but didn't include Toyota, for instance.

I'm not very informed on what the Ontario bailout actually is intended to do, or accomplish. So I'll refrain from commenting on the Canadian bailout package.

[Cranky]

Nov 20, 2008 10:41:51 GMT -5 CrocRob said:

It has little to do with the unions, and largely to do with the healthcare and pension obligations GM has. Few (none?) of those other companies have been around long enough to have that problem, nor have any of them employed a million people previously.

I've read that comparatively, workers in Canada, the US and Japan are paid pretty similarly for production work. And you'd be interested to know that between benefits, off days and pay, Toyota employees are actually compensated MORE than their CAW counterparts.

If you want to talk about efficiency, then that's all on GM.

I'm as much of an anti-union guy as anyone, but in this case the union is a strawman argument for what's actually going on. That being inept management. GM's run by accountants instead of engineers and as such they don't produce quality cars. That's the root of the problem in my mind.

edit: HAH! I just looked back at that graph and read that it reads "selected workers." lol

I went fishing with that graph and caught a few! LOL!

I know the graph does not represent the hourly cost of the guy on the line, but it DOES represent what it costs GM with pensions and benefits. In the end, does it make a difference? It still the de facto cost of making their product.

The ONLY way to save GM, actually all of them is to let them go into Chapter 11. That way they can wipe the slate clean and truly reorganize. What they are doing now is as simple to see as opening any newpaper and looking at the ads. They are selling below cost and will continue to do so simply because they have no better plan. That means that 25 billion or 50 billion, or a 100 billion is nothing more then a pre-paid discount on their cars. Why the h*ll should they waste taxpayer money to save their jobs?

As for the union versus the management. They are tied at the hip. One did all it can to benefit itself and the other did nothing but look at tehir noses when it came to product and planning. And you want YOUR money to pay for that?

[Cranky]

Nov 20, 2008 11:32:16 GMT -5 The New Guy said:

The caps lock and the pretty graph (which means absolutely nothing, frankly without context) aside, I think right now I'd rather my tax dollars go into bailing out the auto industry. Yeah, yeah - I know HA is going to rip up my right wing membership card for this (little does he know that I'm actually more centrist anyways - I just happen to be right of most people I wind up arguing with) - but honestly as much as it hurts all of us to do it, I think we have no choice.

HA is right when he says failure should be rewarded with only failure (and the lessons learned in the failing) but occasionally a failure can have repercussions that affect those who did not fail - those who will learn nothing (because they've done nothing to learn from) and only suffer needlessly.

I know what the collapse of a critical industry can do to a province. I was young when it happened in Newfoundland but I was old enough to see what was happening, to understand what was going on. Granted, Newfoundland was never very rich to begin with, but in the end the effects are clear. Too clear perhaps (none of my immediate family remained in Newfoundland - my brother is in London, I'm in Toronto and my parents moved to Iqaluit - and of the other members of my 'generation' in my family (my first cousins who were close to my age) only a handful stayed behind).

The bailout bites. But the consequences of not bailing out the auto industry - in particular for Ontario - are much, much worse.

Caught another one! LOL! Two for the price of one graph! I knew you two wont let this graph slide so that is why I posted it. LOL!

Now, back to business....

Not really true about the consequences. Every industry changes and those that don't fail. But society keeps moving forward.

A quick story that I have written about before....

About twenty years ago, I went on a vacation on through England. At one point, we went through the Shropshire area. What struck me about the area is how manufacturing changed over the centuries. If I recall right, it went from ceramics, to coal, to steel, to ceramics again and now it's a tourist attraction. I took a life long lesson about manufacturing from that visit, which is, things change and one must plan to change along with it.......or get out......or go broke. Today, I still have a company because of that lessson.

What have the big three done? Poured billion into models that sell and did sweet bugger all to prepare for any downturn or a changing market. They negotiated union contracts that bound them into unsustainable existence at even the slightest downturn. The union in turn took every opportunity to benefit themselves with nothing more then lip service to the sustainability of those contracts in a down market. Sure, they pay great lip service for the "health of the company" ....while holding a knife at the company's throat if they didn't agree to their demands. You can even see that now with "we made as many concessions as we can" bs. They know that Chapter 11 wipes everything clean and they will do ANYTHING and EVERYTHING to avoid that.

As for industries dying...

ALL industries die....or get re-invented. The garment industry employed MILLIONS and now it's GONE but a backroom. The furniture industry employed MILLIONS in North America and now it's GONE too. There is NOTHING special about the big three other then their ability to strong arm politicians and BS the public through their narrow collective. If it was 200 companies instead of three, nothing would be done and the market would deal with them. Because it's only three companies, they hold their size as a weapon. I don't buy it one iota. Let them fail and if they are smart enough, they can re-organize after Chapter 11. If not, good bye and good riddence.

Most of you guys were young when Chrysler was bailed out. While it worked for a few decades while the economy was booming, they are RIGHT BACK where they were before that bailout. Nothing changed because the same players were there before and after the bailout. Same thing is happing now and the same results will repeat themselves.

As for the human cost. Well, let's look at some hard reality. Were these people paid for what they did? Of course they were..and then some. They got extremely well paid for what is essantially "two hand" labour and it was up to them to spend their money wisely and with one eye to the future. Now the company can no longer survive and yet, they expect from some illusionary, delusional entitlement to their paycheck and a very comfortable way of life. Well, life is not like that...and WE shouldn't pay to make it so.

As for your right wing card, you already earned it in spades.

[CrocRob]

Nov 20, 2008 22:32:07 GMT -5 Cranky said:

Nov 20, 2008 10:41:51 GMT -5 CrocRob said:

It has little to do with the unions, and largely to do with the healthcare and pension obligations GM has. Few (none?) of those other companies have been around long enough to have that problem, nor have any of them employed a million people previously.

I've read that comparatively, workers in Canada, the US and Japan are paid pretty similarly for production work. And you'd be interested to know that between benefits, off days and pay, Toyota employees are actually compensated MORE than their CAW counterparts.

If you want to talk about efficiency, then that's all on GM.

I'm as much of an anti-union guy as anyone, but in this case the union is a strawman argument for what's actually going on. That being inept management. GM's run by accountants instead of engineers and as such they don't produce quality cars. That's the root of the problem in my mind.

edit: HAH! I just looked back at that graph and read that it reads "selected workers." lol

I went fishing with that graph and caught a few! LOL!

I know the graph does not represent the hourly cost of the guy on the line, but it DOES represent what it costs GM with pensions and benefits. In the end, does it make a difference? It still the de facto cost of making their product.

The ONLY way to save GM, actually all of them is to let them go into Chapter 11. That way they can wipe the slate clean and truly reorganize. What they are doing now is as simple to see as opening any newpaper and looking at the ads. They are selling below cost and will continue to do so simply because they have no better plan. That means that 25 billion or 50 billion, or a 100 billion is nothing more then a pre-paid discount on their cars. Why the h*ll should they waste taxpayer money to save their jobs?

As for the union versus the management. They are tied at the hip. One did all it can to benefit itself and the other did nothing but look at tehir noses when it came to product and planning. And you want YOUR money to pay for that?

Stuck between a rock and a hard place. You can prop up the business, or they go into Chapter XI (though I've been told it'd be more realistically VII) and then you're supporting every retiree who's due a pension (not to mention the dole that needs to be handed out to the newly unemployed).
You're paying for it no matter what. I imagine the 2nd one is far more expensive, too. But the 2nd one would allow the organization to reorganize and become profitable, as doubtful as I am that it would actually happen.

The $25B is already gone, it's just a matter of where it's going.

[Cranky]

Nov 21, 2008 0:16:37 GMT -5 CrocRob said:

Stuck between a rock and a hard place. You can prop up the business, or they go into Chapter XI (though I've been told it'd be more realistically VII) and then you're supporting every retiree who's due a pension (not to mention the dole that needs to be handed out to the newly unemployed).
You're paying for it no matter what. I imagine the 2nd one is far more expensive, too. But the 2nd one would allow the organization to reorganize and become profitable, as doubtful as I am that it would actually happen.

The $25B is already gone, it's just a matter of where it's going.

I don't think that unemployment costs as much and it's a one time thing. This bailout is going to cost at least $40,000 per job THIS time and guarantee that they will need another bailout not too far into the future. For example, there is simply NO WAY that 300,000 GM employees can support 800,000 people on pensions. Not now, not ever. Not even if GM could sell Yugo's for $30,000. Now, I don't know if those GM pensioners get government pensions too, but that's a moot point. That pension plan will collapse regardless, it's only a matter of time.

Chapter 11......and if not....adios.

[The New Guy]

Nov 20, 2008 23:05:32 GMT -5 Cranky said:

Caught another one! LOL! Two for the price of one graph! I knew you two wont let this graph slide so that is why I posted it. LOL!

Now, back to business....

Not really true about the consequences. Every industry changes and those that don't fail. But society keeps moving forward.

A quick story that I have written about before....

About twenty years ago, I went on a vacation on through England. At one point, we went through the Shropshire area. What struck me about the area is how manufacturing changed over the centuries. If I recall right, it went from ceramics, to coal, to steel, to ceramics again and now it's a tourist attraction. I took a life long lesson about manufacturing from that visit, which is, things change and one must plan to change along with it.......or get out......or go broke. Today, I still have a company because of that lessson.

What have the big three done? Poured billion into models that sell and did sweet bugger all to prepare for any downturn or a changing market. They negotiated union contracts that bound them into unsustainable existence at even the slightest downturn. The union in turn took every opportunity to benefit themselves with nothing more then lip service to the sustainability of those contracts in a down market. Sure, they pay great lip service for the "health of the company" ....while holding a knife at the company's throat if they didn't agree to their demands. You can even see that now with "we made as many concessions as we can" bs. They know that Chapter 11 wipes everything clean and they will do ANYTHING and EVERYTHING to avoid that.

As for industries dying...

ALL industries die....or get re-invented. The garment industry employed MILLIONS and now it's GONE but a backroom. The furniture industry employed MILLIONS in North America and now it's GONE too. There is NOTHING special about the big three other then their ability to strong arm politicians and BS the public through their narrow collective. If it was 200 companies instead of three, nothing would be done and the market would deal with them. Because it's only three companies, they hold their size as a weapon. I don't buy it one iota. Let them fail and if they are smart enough, they can re-organize after Chapter 11. If not, good bye and good riddence.

Most of you guys were young when Chrysler was bailed out. While it worked for a few decades while the economy was booming, they are RIGHT BACK where they were before that bailout. Nothing changed because the same players were there before and after the bailout. Same thing is happing now and the same results will repeat themselves.

As for the human cost. Well, let's look at some hard reality. Were these people paid for what they did? Of course they were..and then some. They got extremely well paid for what is essantially "two hand" labour and it was up to them to spend their money wisely and with one eye to the future. Now the company can no longer survive and yet, they expect from some illusionary, delusional entitlement to their paycheck and a very comfortable way of life. Well, life is not like that...and WE shouldn't pay to make it so.

As for your right wing card, you already earned it in spades.

You speak the truth, oh cranky one, but you seem to miss the point completely.

It is not just the Big Three execs who will suffer. In fact, they likely have a golden parachute and enough investments to ensure they are well kept until the next economic boom, if not the rest of their lives.

It is not just the employees of the Big Three who will suffer. You poo-poo their suffering with a callous "they should've been preparing for the future and this possibility" but I'll do you one better. I'll dismiss it with a wave of my hand and a general apathy-filled 'meh' because really the suffering of a few thousand employees is immaterial (it happens more often than we like to admit - as you point out business go under every day and people hit the unemployment all the time).

It is the rest of the local economy (in this case most of Ontario) that I would be concerned with. When one thing happens other things tend to fall shortly thereafter. When the fishplant closed at home there was nowhere for those workers to go, so most of them left. Suddenly there weren't as many people around buying food and clothes and so a number of commerical stores took a hit. More people get let go and move away. And a vicious cycle starts. Marystown was never a big community. 1996 (as far back as I can find, but suffice it to say this is after the first wave moved away in the wake of the fishery collapse) - 6,742. 2001 - 5,908. 2006 - 5,436. The numbers don't lie. That's 1306 people in a little over ten years. Almost 20% of the population.

Yeah, businesses need to reinvent themselves. And bailing out the industry is a band-aid only (frankly, I'd hope that the bailout comes with a number of strings attach). But the wound the band-aid is covering could easily bleed Ontario dry. I know you don't want to give money away to bail them out, but if they go under then there'll be money coming out of your pocket anyways. And it might be a lot more.

[clear observer]

Nov 21, 2008 10:43:51 GMT -5 The New Guy said:

Nov 20, 2008 23:05:32 GMT -5 Cranky said:

Caught another one! LOL! Two for the price of one graph! I knew you two wont let this graph slide so that is why I posted it. LOL!

Now, back to business....

Not really true about the consequences. Every industry changes and those that don't fail. But society keeps moving forward.

A quick story that I have written about before....

About twenty years ago, I went on a vacation on through England. At one point, we went through the Shropshire area. What struck me about the area is how manufacturing changed over the centuries. If I recall right, it went from ceramics, to coal, to steel, to ceramics again and now it's a tourist attraction. I took a life long lesson about manufacturing from that visit, which is, things change and one must plan to change along with it.......or get out......or go broke. Today, I still have a company because of that lessson.

What have the big three done? Poured billion into models that sell and did sweet bugger all to prepare for any downturn or a changing market. They negotiated union contracts that bound them into unsustainable existence at even the slightest downturn. The union in turn took every opportunity to benefit themselves with nothing more then lip service to the sustainability of those contracts in a down market. Sure, they pay great lip service for the "health of the company" ....while holding a knife at the company's throat if they didn't agree to their demands. You can even see that now with "we made as many concessions as we can" bs. They know that Chapter 11 wipes everything clean and they will do ANYTHING and EVERYTHING to avoid that.

As for industries dying...

ALL industries die....or get re-invented. The garment industry employed MILLIONS and now it's GONE but a backroom. The furniture industry employed MILLIONS in North America and now it's GONE too. There is NOTHING special about the big three other then their ability to strong arm politicians and BS the public through their narrow collective. If it was 200 companies instead of three, nothing would be done and the market would deal with them. Because it's only three companies, they hold their size as a weapon. I don't buy it one iota. Let them fail and if they are smart enough, they can re-organize after Chapter 11. If not, good bye and good riddence.

Most of you guys were young when Chrysler was bailed out. While it worked for a few decades while the economy was booming, they are RIGHT BACK where they were before that bailout. Nothing changed because the same players were there before and after the bailout. Same thing is happing now and the same results will repeat themselves.

As for the human cost. Well, let's look at some hard reality. Were these people paid for what they did? Of course they were..and then some. They got extremely well paid for what is essantially "two hand" labour and it was up to them to spend their money wisely and with one eye to the future. Now the company can no longer survive and yet, they expect from some illusionary, delusional entitlement to their paycheck and a very comfortable way of life. Well, life is not like that...and WE shouldn't pay to make it so.

As for your right wing card, you already earned it in spades.

You speak the truth, oh cranky one, but you seem to miss the point completely.

It is not just the Big Three execs who will suffer. In fact, they likely have a golden parachute and enough investments to ensure they are well kept until the next economic boom, if not the rest of their lives.

It is not just the employees of the Big Three who will suffer. You poo-poo their suffering with a callous "they should've been preparing for the future and this possibility" but I'll do you one better. I'll dismiss it with a wave of my hand and a general apathy-filled 'meh' because really the suffering of a few thousand employees is immaterial (it happens more often than we like to admit - as you point out business go under every day and people hit the unemployment all the time).

It is the rest of the local economy (in this case most of Ontario) that I would be concerned with. When one thing happens other things tend to fall shortly thereafter. When the fishplant closed at home there was nowhere for those workers to go, so most of them left. Suddenly there weren't as many people around buying food and clothes and so a number of commerical stores took a hit. More people get let go and move away. And a vicious cycle starts. Marystown was never a big community. 1996 (as far back as I can find, but suffice it to say this is after the first wave moved away in the wake of the fishery collapse) - 6,742. 2001 - 5,908. 2006 - 5,436. The numbers don't lie. That's 1306 people in a little over ten years. Almost 20% of the population.

Yeah, businesses need to reinvent themselves. And bailing out the industry is a band-aid only (frankly, I'd hope that the bailout comes with a number of strings attach). But the wound the band-aid is covering could easily bleed Ontario dry. I know you don't want to give money away to bail them out, but if they go under then there'll be money coming out of your pocket anyways. And it might be a lot more.

The economic "ripple-effect".

[Skilly]

Nov 21, 2008 10:43:51 GMT -5 The New Guy said:

Marystown was never a big community. 1996 (as far back as I can find, but suffice it to say this is after the first wave moved away in the wake of the fishery collapse) - 6,742. 2001 - 5,908. 2006 - 5,436. The numbers don't lie. That's 1306 people in a little over ten years. Almost 20% of the population.

Alot less now after Harper and McKay screwed over the shipyard and refused to give them the Navy/Coast Guard contracts.

[The New Guy]

Nov 21, 2008 11:53:06 GMT -5 Skilly said:

Nov 21, 2008 10:43:51 GMT -5 The New Guy said:

Marystown was never a big community. 1996 (as far back as I can find, but suffice it to say this is after the first wave moved away in the wake of the fishery collapse) - 6,742. 2001 - 5,908. 2006 - 5,436. The numbers don't lie. That's 1306 people in a little over ten years. Almost 20% of the population.

Alot less now after Harper and McKay screwed over the shipyard and refused to give them the Navy/Coast Guard contracts.

The screwing started long before Harper & McKay my friend. Long before.

[CrocRob]

Nov 21, 2008 2:51:03 GMT -5 Cranky said:

Nov 21, 2008 0:16:37 GMT -5 CrocRob said:

Stuck between a rock and a hard place. You can prop up the business, or they go into Chapter XI (though I've been told it'd be more realistically VII) and then you're supporting every retiree who's due a pension (not to mention the dole that needs to be handed out to the newly unemployed).
You're paying for it no matter what. I imagine the 2nd one is far more expensive, too. But the 2nd one would allow the organization to reorganize and become profitable, as doubtful as I am that it would actually happen.

The $25B is already gone, it's just a matter of where it's going.

I don't think that unemployment costs as much and it's a one time thing. This bailout is going to cost at least $40,000 per job THIS time and guarantee that they will need another bailout not too far into the future. For example, there is simply NO WAY that 300,000 GM employees can support 800,000 people on pensions. Not now, not ever. Not even if GM could sell Yugo's for $30,000. Now, I don't know if those GM pensioners get government pensions too, but that's a moot point. That pension plan will collapse regardless, it's only a matter of time.

Chapter 11......and if not....adios.

You don't think that several hundred thousand people on EI (which, generally speaking, costs $24k per person per year) wouldn't cost as much? Where do you get that $40k figure?

And if Chapter XI is declared, then those 800,000 pensions get tossed over to the PBGC, which means the taxpayers are paying them out. If you'd like to know how much that will cost, then head on over here: www.pbgc.gov/workers-retirees/benefits-information/content/page789.html
Hmm. 800,000 people on pensions that range between $1k and $4k monthly. Releasing the Detroit Three of their obligations on that front will cost MUCH more than a bailout, and even several bailouts. So we force them into Chapter XI, put the onus on the taxpayer to pay the pensions and EI, and let those companies reap the profits from having low overhead costs to eventually make the same mistakes again.

The point I'm putting across is that absolving the organization completely of pension obligations isn't a better solution, but something that would become some kind of pension partnership would be something to think about.

I'm not saying that bailing them out is the best option, but it's not as cut-and-dried as you seem to suggest.

[Cranky]

Nov 21, 2008 12:58:55 GMT -5 CrocRob said:

You don't think that several hundred thousand people on EI (which, generally speaking, costs $24k per person per year) wouldn't cost as much? Where do you get that $40k figure?

And if Chapter XI is declared, then those 800,000 pensions get tossed over to the PBGC, which means the taxpayers are paying them out. If you'd like to know how much that will cost, then head on over here: www.pbgc.gov/workers-retirees/benefits-information/content/page789.html
Hmm. 800,000 people on pensions that range between $1k and $4k monthly. Releasing the Detroit Three of their obligations on that front will cost MUCH more than a bailout, and even several bailouts. So we force them into Chapter XI, put the onus on the taxpayer to pay the pensions and EI, and let those companies reap the profits from having low overhead costs to eventually make the same mistakes again.

The point I'm putting across is that absolving the organization completely of pension obligations isn't a better solution, but something that would become some kind of pension partnership would be something to think about.

I'm not saying that bailing them out is the best option, but it's not as cut-and-dried as you seem to suggest.

Hold on for a second....

Do the pensioners on the Big Three ALSO get US Social security? If so, what difference does it make? They are aleady on the public purse.Second, why give them the same pension that they would receive from the Big Three? The company they use to work for is now dead and gone so is their elite pesnions.

I am going to ask the question on another forum and get back on this.

The $40k was the cost to buy each job for the big three with the $25B bailout.

Lastly....

You avoided the core of my argument in that post. There is NO WAY that GM can fund all their pernsion and health care obligations regardless of how many bailouts. So why start going inot the black hole?

[Cranky]

Nov 21, 2008 10:43:51 GMT -5 The New Guy said:

Yeah, businesses need to reinvent themselves. And bailing out the industry is a band-aid only (frankly, I'd hope that the bailout comes with a number of strings attach). But the wound the band-aid is covering could easily bleed Ontario dry. I know you don't want to give money away to bail them out, but if they go under then there'll be money coming out of your pocket anyways. And it might be a lot more.

Ontario already lost 350,000 manufacturing jobs and the soup lines are still short (for now).

I am not as callous as I am skeptical, actually, I am uber cynical of the "give us the money and we will change" BS the big three are spouting. Do you REALLY believe the union will take a 30% cut in pay/benefits and the pensioners a 50% pay cut for GM to survive? Or that they will produce cars that don't stop DEAD in the middle of the highway?






Side note: My 12,000 km 2006 GM minivan STOPPED DEAD in the middle of the 427 and nearly killed my wife and me (also caused "ripple" accidents) because the feul indicator showed a quarter tank while completely dry. The sender was "rusted". This happend three weeks ago. When I asked the dealer, he tells me that GM send a notice that there may be a problem with the sending units PLUS the tanks pick-up point creates a problem when the van is parked in an uphill or driving in an uphill. They "recommend" that the tank minimum is at least a quarter full. They know this for several YEARS and yet done nothing to change it.