Should the big three get a bailout?

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BondGuy's picture
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I'm getting a little tired of the talking heads as well as politicians with an agenda pointing the finger at the big three and exclaiming "Failed model!" For crying out loud together they are asking for less money than AIG got alone!
 
Yes, there are many things wrong in Detriot. Yet, correct me when i'm wrong, the current problems are caused by events outside of their control. Those events, the tripling of oil prices and the financial meltdown are not problems anyone forsaw. The big three mangement is far from the brighest, but even the brightest didn't see this one coming. Fraud is like that.
 
 To call the big three a failed model because unpresedented events have brought them to the mat is uniformed. Who knew?
 
 To say that Detroit has the wrong product mix and it should be allowed to go bankrupt for that reason is uniformed. The US auto industry had exactly the right product mix until gas prices increased 150% inside 18 months and caused an unprecedented change in consumer buying habits. Detriot built the products that american consumers wanted. And what they wanted was trucks. Pick up trucks and SUV are the products american consumers were buying. The big three sold over a million pick up trucks apiece every year until last year. In the odd year when they didn't sell a million, they didn't miss by much. Throw in another half to three quarters of a million SUVs apiece at nothing but profit and one can see why the ceded the US car market to the Asians.
 
It was exactly the inability of the Japanese car makers to crack the US truck market that has saved their butts. For the want of better products the Japanese would be suffering an even larger downturn than they are. And they are severely affected with sales off 20 to 40% across the various brands. Off course no one is talking about that.
 
The big three reacted to the paradime shift by renotiating contracts, slashing costs through layoffs and plant closings, and securing credit facilities to see them through the downturn. They acted responsibly. They were positioned to ride out the business climate storm created by oil. Then the financial meltdown all but stopped sales. Again, who caused the financial meltdown? Not the big three. The big three are mainstreet companies in that how goes main street so goes the big three. Mainstreet is a victim of the meltdown. The big three are victims of the meltdown. Those who caused the meltdown got a bailout from the government. Yet, the victims are left to fend for themselves. If you understand one thing it should be this: no company can stand a sales stoppage. And that is what the meltdown has done to Detroit. Detriot may be the first to fall, but make no mistake ALL the others will follow. It is only a matter of time. All are victims of those who are getting bailed out of their fraud and poor business decisions.
 
To those who say let them go; are you sure you want to do that? Many believe the autos will emerge as slimmer stronger companies for going through bankruptcy. Really? First that assumes that a Detriot collapse doesn't pull us into a depression. It could. If it does who are they going to sell cars to? Right now, there is no confidence in any US markets, stocks, real estate, corp bonds. An auto collapse should help that or make it worse? Think there is a crisis in consumer confidence now? You haven't seen nothin yet! An Auto meltdown will ice it, depression here we come. What happens to the US corp bond market in an auto bankruptcy? I'll tell you, it's done. Done for a long time. That alone will pull us into depression two. Any company not AAA rated will not be able to get financing. Kinda like right now only much worse and extended for years. Unemployment will go into the mid teens with an auto bankruptcy. It won't take much to tip it into the twenties as the freezing cold finance climate closes door after door down at your local industrial park. The domino effect takes place as suppliers and service providers up and down the vertical chain, far removed from the auto industry bite the big one pouring more and more deselected employees onto the street. Many small towns will be threatened as large parts of their local economies are wiped out. Regardless of national depression for much of small town america, especially in the mid west and northeast, it will be a depression.
 
But, let's say the US economy survives. What of the autos companies. Anyone here going to buy a new car from a company that might not be here to back up the 3 year warranty? With all the choices available why would you? How about parts for those cars? Many if not most parts companies won't survive the new business model. This will not only disrupt production, it will put you on a long waiting list to get your car fixed. Kinda like owning a Peugeot today. And if a company goes Chapter 7 there will be no parts at any price. Then there's the dealers. Even if the auto companies do survive, most of their dealers will not. I buy from one of the largest private dealer groups in the country, Holman Enterprises. They are a billion dollar sales company with dealerships in two states and operations up and down the east coast. They are not a mom and pop operation. And i gotta tell ya- they are scrambling. They just closed their stand alone Ford dealership- a dealership that opened in the 1920s. They've closed one of their Lincoln- Mercury stores and they are moving their Toyota dealership to the vacated Ford facility. Other dealerships in the area, a wealthy metropolitan area, are closing. As they do their employees, about 50 to 200 per store join the ranks of the unemployed. And then there's the used car delemma. Always a cash cow there are no trade ins, thus no used car inventory. In addition to putting more pressure on the cash strapped dealers this is playing havoc on a very important part of the car sales machine, the used car wholesaler. Without the wholesalers the used car market comes to a halt. Thus trade in values plummet as dealers have no outlet to turn trades into instant cash. They are forced to use Manheim or remarket the car themselves. And Manheim, may not be there as they lose most of their customer base. Ugly? Yep!
 
Finally, there are many non american car fans wanting to see the big three go down. Be careful what you wish for. With the fall of the american car companies goes almost all innovation. The V8 engine, automatic transmission, electric windows, air conditioning,  anti lock brakes, air bags, unibody construction, Stow and Go seating, DVD systems and bling sound sytems, onstar, to name but a few, all US innovations.
 
Then there are the multi billion dollar market bets. From the Pick Up truck to the Mustang to the Mini Van to the SUV all american car maker billion dollar market segment creating bets. It was Detriot that laid that money on the pass line. Not the Japanese, not the Germans, not the Koreans. They all followed. They didn't create the mousetrap. they made it better. And everybody benefitted for it. Yet without companies willing to make those billion dollar create a mousetrap bets there is nothing to improve upon. The followers are left in a position in which they do not excel, lead dog market segment innovation. No one wins in that situation. Doubt this? The Japanese have had thirty years to get trucks right, and only now were they starting to make inroads. Honda still doesn't get it. That does not a happy future foretell.
 
There are many things wrong with the big three. Unions and legacy health care costs immediately come to mind. Certainly the model needs to change. But we are far better off with them and bridge loaning them to success than we are without them. Our future if we let them go to bankruptcy? Not a bet I want to make.

greyhairedbrker's picture
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BondGuy wrote:Yes, there are many things wrong in Detriot. Yet, correct me when i'm wrong, the current problems are caused by events outside of their control. Those events, the tripling of oil prices and the financial meltdown are not problems anyone forsaw.
 
Those aren't the root causes of their problems, and throwing money at them won't slove their issues. I say let them reorganize under bankrupcy rules.

henryhill's picture
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Bond Guy,
 
I disagree.
 
(1)  The big three labor costs are $73/hr.  versus their Japanese competitors plants at $48 in the US. 
 
(2)  The big three have 7000 dealerships in the U.S.  The Japanese have 1500. 
 
The big three have very high labor costs and an ineffective distribution system.  GM in particular supports to many brands.  The contracts between unions and dealers must be ripped up and dramatically changed.  That is probably easier in bankruptcy, but it has to be done one way or the other.  I change in CAFE standards would also help the big three but the Democrats/UAW hasn't allowed that in the past.

2wheeledbeemer's picture
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Already made my nut for the day, so I had the time to read this.  Good stuff.  Great point about Peugeot.
 
So, how do we fix the union situation?  If you look at the American industries which have been crippled/mortally wounded through the years, isn't the union chokehold a common thread?  Not saying we need 11 y.o. girls in the thread factories, but if you pay a guy $75 an hour to sit and do sudoku, it's not hard to see what that does to survivability of the employing company.
 
I'd like to see the cos. survive, not only from the God Bless American perspective, but I've still got some GM and Ford bonds out there!  Ouch.  So, how do they fix it?

UNDERMINDED's picture
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The answer to the big three is the same answer to the economic/bank/credit meltdown..... CAPITALISM!  Let it run its course. 
 Top 3 hurt industries right now,
1)US Auto
2)US Airlines
3)US Steel
What is the common denominator?.... UNIONS.  they had their place in history and were very much a needed thing in their time.  Now they cost money, they cost production, and now, they're costing jobs.  Detroit knows the answer... they just don't like what it is.  GM hemoraged how many Billions of dollars last quarter? And we want to give the big 3 a combined measely $25-50B?   C'mon, less money for union wages, lobyist pay, and the Obama campaign, and learn how to run your business.

buyandhold's picture
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UNDERMINDED wrote:The answer to the big three is the same answer to the economic/bank/credit meltdown..... CAPITALISM!  Let it run its course. 
 Top 3 hurt industries right now,
1)US Auto
2)US Airlines
3)US Steel
What is the common denominator?.... UNIONS.  they had their place in history and were very much a needed thing in their time.  Now they cost money, they cost production, and now, they're costing jobs.  Detroit knows the answer... they just don't like what it is.  GM hemoraged how many Billions of dollars last quarter? And we want to give the big 3 a combined measely $25-50B?   C'mon, less money for union wages, lobyist pay, and the Obama campaign, and learn how to run your business.
 
Should be
1) Banks
2) Financial companies masquerading as industrial conglomerates (GE)
3) Anything to do with housing.
 
 
Were the guys on Wall Street unionized?

 

BondGuy's picture
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Some rebuttal:
Generally speaking i'm with you guys on the problems side. yeah big bloated legacy issues. unions also a problem. I read Rivethead Tales From the Assembly Line years ago and a pretty picture of life in a typical GM truck plant  it did not paint. Things have got to change. GM played hardball with the Delphi  unions so i think they know how to get that done.
Disagree that this is the root problem. Two unprecedented events have brought us to this point. Had japan been able to crack the truck market we'd be looking at them being in exactly the same position as Detroit. This is bourne out in that the most successful truck marketer among them is in the most trouble among them, Nissan. By the way Nissan is majority owned by Renault. They, Nissan/Datsun,  have a long storied history of F**king up. yet because they are Japanese this doesn't get any ink.
 
Without the oil surge/financial meltdown one two punch Detroit had years to deal with it's legacy problems. As stated GM was already in this mode as it was playing hardball with it's unions.
 
The dealership model objection shows a basic lack of understanding of how the car biz works. The dealers are the manufacturer's customers, not the end consumer. The more dealerships the more customers. As the dealerships undercut each other they sell more cars. More cars equals higher sales. The manufacturer could care less how much profit the dealership makes. It's sale is made when the dealership places it's order for more vehicles. of course it wants its customers, the dealerships, to thrive. But other than that, the more stores the more sales.
 
From a consumer POV more dealerships is better than less. No other dealership around? Good luck getting a good deal.
 
Admittedly GM's branding model is outdated. it worked 50 years ago but no so much today. Still, the Japanese are adding unneeded models. Take Honda. Use to be the Civic was the bottom of the line. Not today. Today the Fit is the bottom. The Civic, wihout any changes has been boosted up model. It is more expensive as is the Accord above it. It was no accident that Honda upsized the Accord this year. The Civic will get the same on the next 4 year cycle redo. Toyota has done the same bring in the Matrix under the former bottom model Corolla. Why are these models unneeded? Because they are filling the exact market segment that the former bottom market car filled. All without innovation. In fact, at least for Honda, the Fit is not nearly the car the 2003 Civic was. Yet it costs the same. All these cars going upmarket allows them to book more profit without the coresponding billion dollar innovation usually needed to get that done. Good for them, not good for us.

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B24
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"Admittedly GM's branding model is outdated. it worked 50 years ago but no so much today. Still, the Japanese are adding unneeded models. Take Honda. Use to be the Civic was the bottom of the line. Not today. Today the Fit is the bottom. The Civic, wihout any changes has been boosted up model. It is more expensive as is the Accord above it. It was no accident that Honda upsized the Accord this year. The Civic will get the same on the next 4 year cycle redo. Toyota has done the same bring in the Matrix under the former bottom model Corolla. Why are these models unneeded? Because they are filling the exact market segment that the former bottom market car filled. All without innovation. In fact, at least for Honda, the Fit is not nearly the car the 2003 Civic was. Yet it costs the same. All these cars going upmarket allows them to book more profit without the coresponding billion dollar innovation usually needed to get that done. Good for them, not good for us."
 
You proved everyone else's point.  No matter what the cause, Japan will continue to be more profitable.  Innovation doesn't matter - all that matters is that you sell cars that consumers want.  If it takes innovation to get there, so be it.  But Honda did just fine with 3 cars in their lineup.  But they have also added several models without having to invest hundreds of billions over the years like Ford/GM. 
 
It is labor.  Did you know that early retirees got early pension/buyouts several years ago, and are making nearly full wages for the privelage of sitting at home watching Jerry Springer reruns?  I'm not talking 59 year-olds.  We're talking military-style mid-40's retirees that are making big bucks to do nothing.
 
As defined by the current United Auto Worker contract negotiated with the "Big Five" (GM, Ford, Chrysler, and top parts makers Delphi and Visteon), an auto "production worker" is a job description that covers anything from mowing grass to cleaning the toilets. In the real world, these jobs would be outsourced to $8 an hour, no-benefit wage earners, but on Planet Big Five, these jobs get the same wages as any auto line-worker: an average $26 an hour ($60,000 a year) plus benefits that bring the company's total cost per worker to a staggering $65 an hour.

Furthermore, UAW members are guaranteed a traditional "30 years and out" provision, meaning that many retirees begin drawing full pensions in their early Fifties, burdening the Big Five with unrivaled legacy costs. Delphi, for example, shoulders $22 per worker-hour in legacy costs compared to as little as 25 cents for independent competitors like Leer and Johnson Controls.

Statistics tell the tale. In his landmark study of the 2003 Big Five contract, Sean McLinden of the Center for Automotive Research (CAR) found that "in 1960, the UAW was 16 percent higher than the overall U.S. wage rate. . . . By 2003, the UAW average rate (with COLA) was 68-percent higher than the average manufacturing rate of $15.74 an hour."
The contract reads as if autoworkers labor in a vacuum, without regard for market forces. "The workers involved will not lose their jobs at the company — they must be transferred to other facilities, bought out, voluntarily retired, or supported by protected status programs (jobs banks). Workers who refuse to transfer after layoff will... eventually be paid 100 percent of their straight pay. Indeed, UAW employment can only fall at the rate of natural retirement."
 
BG,
I know you are a bleeding-heart liberal.  And that's OK.  I agree that we cannot let the Big 5 collapse (the other 2 being the parts suppliers that will naturally collapse).  But they have been living in a virtual fantasy world.  One of three things must happen for the auto industry to survive:
1. They must pay their workers a competitive manufaturing wage.  Good, bad, or in-between, all the products we buy are produced (a) oversees with cheap labor, or (b) domestically with market-rate or lower labor.  Our market simply cannot support products manufactured with unrealistically high labor costs.  Can you think of a SINGLE mature industry where this exists?  Either the product is too expensive, or the company is unprofitable (i.e. the U.S. auto-industry).
2. Every other industry must raise their wages in the U.S. so that the U.S. auto-makers can raise their prices to profitable levels, and people can earn enough to afford to buy them.
3. The industry must consolidate.  Reduce product lines, reduce # of plants, etc.  There is waaaay too much overhead in the form of infrastructure.  Japan has Honda and Acura.  The U.S. has Ford and Lincoln.  Japan has Toyota and Lexus.  The U.S. has Chevrolet and Cadillac.  See a difference here?  GM alone has 12 different brands:  Buick, Cadillac, Chevrolet, Daewoo, GMC, Holden, Hummer, Opel, Pontiac, Saab, Saturn and Vauxhall.  Ford has Ford, Lincoln, Mercury, Volvo, and Mazda.  Among all these brands, there is almost NO similarity in models, chassis deisgn, manufacturing, engineering, marketing, etc.  What the hell do Saturn and Hummer have in common?  GMC and Cadillac?  Ford and Volvo?  The Japanese automakers use common chassis design and manufacturing capabilities among many of their models (i.e. Accord-Acura TL, Camry-Lexus whatever they call it).
 
Geez, I'm out of breath.  We all agree that the auto-industry cannot be allowed to collapse.  Too much is at stake.  And I admit we cannot allow them to file traditional bankruptcy.  That would be MORE devistating than an all-out collapse (nobody would buy their cars).  MY GUESS, is that the government will come up with a special plan, unique to this situation.  It will have the same protection as Chapter 11, but it will not be bankruptcy.  It will be some sort of implicit guarantee, but without the investment by govt.  It will essentially FORCE a restructuring of the industry, without bankruptcy.  I don't know what it is yet, but I think that's what is coming.

now_indy's picture
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UNDERMINDED wrote:The answer to the big three is the same answer to the economic/bank/credit meltdown..... CAPITALISM!  Let it run its course. 
 Top 3 hurt industries right now,
1)US Auto
2)US Airlines
3)US Steel
What is the common denominator?.... UNIONS.  they had their place in history and were very much a needed thing in their time.  Now they cost money, they cost production, and now, they're costing jobs.  Detroit knows the answer... they just don't like what it is.  GM hemoraged how many Billions of dollars last quarter? And we want to give the big 3 a combined measely $25-50B?   C'mon, less money for union wages, lobyist pay, and the Obama campaign, and learn how to run your business.
 
Ditto. Good post.

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UNDERMINDED wrote:The answer to the big three is the same answer to the economic/bank/credit meltdown..... CAPITALISM!  Let it run its course. 
 Top 3 hurt industries right now,
1)US Auto
2)US Airlines
3)US Steel
What is the common denominator?.... UNIONS.  they had their place in history and were very much a needed thing in their time.  Now they cost money, they cost production, and now, they're costing jobs.  Detroit knows the answer... they just don't like what it is.  GM hemoraged how many Billions of dollars last quarter? And we want to give the big 3 a combined measely $25-50B?   C'mon, less money for union wages, lobyist pay, and the Obama campaign, and learn how to run your business.This auto bailout will be a good indirect bailout of the drug industry as well.  I read somewhere that GM via their pension and legacy costs are a large consumer of PFE's Viagra.  Bailout GM and help out the folks at Pfizer.  Win/Win!We as a nation are in some BIG trouble.  Its like a nightmare unfolding before our eyes.

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I think a bailout would last about 6 months, maybe less/more, but in the end they would be back for more.

I don't think the idea that they got the product mix wrong, has as much to do with it as does their business structure.

1. Way too many dealerships(especially in the case of GM) why must I have 35 car dealerships within 10 miles of my house
2. More people are buying used cars(because that way you don't lose $6K when you drive it off the lot) and there is no money in that for manufacturers(only dealers)
3. As everyone else said, cost are stupid high: union wages,medical expenses, design, executive pay(I am all for paying people what the market thinks they are worth, but making millions while your company goes down is stupid). UAW needs to be taught a lesson that, you should help your employees, but not at the detriment of the overall health of the company.

I let them fail, and reorganize(if thats a possibility).. "If you rip the band-aid off quick" something along those lines..

Indyone's picture
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I still think we should put them through chapter 11, kick out management and let the unions own and operate all three.  At that point, you've eliminated the adversarial relationship between the companies and the UAW, eliminated the need for union dues, and given the union some real incentive to figure out how to cut the fat and run these companies effectively.  I'm only partially kidding here...
 
Seriously, if we bail these firms out, have we really solved the issues and won't we be right back at the table in the very near future?  Honestly, I haven't solicited anything other than very short bonds in the auto industry for the better part of my career, because long ago, it was clear that the problems with the pension and healthcare liabilities were getting to the point of no return, bad economy or not.  All the current mess did is speed up the process.  Yes, we need the auto industry, but it needs a major overhaul, and I don't think a $25 billion dollar band-aid is the answer.

liquid's picture
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"The Big Three" won't need a bailout, they don't pay Union wages or tolerate that mentality. Of course that big three consists of Toyota, Nissan and Kia.

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gvf
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The problem is that I don't know that there's a good market for chapter 11 reorganization.  There is a lot of worry that they'd have to go chapter 7.  Then our bonds are screwed.  Is anyone cashing out of their GM bonds?  We've sold a few depending on client's circumstances, but with the thought of getting paid below market value at bankruptcy, and a bankruptcy that would probably take years we are a bit clueless. 

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gvf wrote:The problem is that I don't know that there's a good market for chapter 11 reorganization.  There is a lot of worry that they'd have to go chapter 7.  Then our bonds are screwed.  Is anyone cashing out of their GM bonds?  We've sold a few depending on client's circumstances, but with the thought of getting paid below market value at bankruptcy, and a bankruptcy that would probably take years we are a bit clueless. 
 
When I've been doing reviews with clients that still hold them currently, and they see a 35 bid, their reaction is usually, "Forget that, I'd rather hold them and see what happens than take that bid and walk away." 
 
 

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This is real tough one for the brain trusts in Washington.  On one hand they were held up by the fin. experts and scared to death of the functioning of the credit markets with Tarp I and II.The financial system bailout and and a non-bailout for this smokestack industry is going to have deep ramnifications about who gets what.   Some of the most insulting to the nation's collective intelligence-  ".. compensation for talent retention..." for some of the bailout money for the banking industry employees.  Some talent in that industry!This is a slippery slope to say the least.  I find it how to believe that Obama will let them go BK.  They might just have to wait to Q1. 

Squash's picture
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It would be cool to see what happens if they gave complete control to UAW, and let them see what it takes to run company with massive payroll..

Rugby's picture
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Squash wrote:It would be cool to see what happens if they gave complete control to UAW, and let them see what it takes to run company with massive payroll..Your car would something like the one Fred Flintstone drives.

gregoron's picture
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Bailout for the Big Three?  Too late.  I still won't buy their cars.PS.  Let the consumers speak, not the government.

BondGuy's picture
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B24 wrote:"Admittedly GM's branding model is outdated. it worked 50 years ago but no so much today. Still, the Japanese are adding unneeded models. Take Honda. Use to be the Civic was the bottom of the line. Not today. Today the Fit is the bottom. The Civic, wihout any changes has been boosted up model. It is more expensive as is the Accord above it. It was no accident that Honda upsized the Accord this year. The Civic will get the same on the next 4 year cycle redo. Toyota has done the same bring in the Matrix under the former bottom model Corolla. Why are these models unneeded? Because they are filling the exact market segment that the former bottom market car filled. All without innovation. In fact, at least for Honda, the Fit is not nearly the car the 2003 Civic was. Yet it costs the same. All these cars going upmarket allows them to book more profit without the coresponding billion dollar innovation usually needed to get that done. Good for them, not good for us."
 
You proved everyone else's point.  No matter what the cause, Japan will continue to be more profitable.  Innovation doesn't matter - all that matters is that you sell cars that consumers want.  If it takes innovation to get there, so be it. It does and japan is void of innovation.  But Honda did just fine with 3 cars in their lineup.  But they have also added several models without having to invest hundreds of billions over the years like Ford/GM. An here's how that works out; use to be, way back in 2004,  you could buy a Honda Civic DX as a 12k bare bones commuter car. Now you have to shell out 15k for that very same car. 12k doesn't even buy the bare bones  FIT. And the Fit isn't even an engineered from the ground up US market car. It's a retooled Japanese POS. Zero innovation-more cost. Is that what you want? Because that's what you've got.
 
It is labor.  Did you know that early retirees got early pension/buyouts several years ago, and are making nearly full wages for the privelage of sitting at home watching Jerry Springer reruns?  I'm not talking 59 year-olds.  We're talking military-style mid-40's retirees that are making big bucks to do nothing.
 
Let me guess, you couldn't get in down at the local Durango plant and you're pissed? Just kidding!  You do know that all of the big three's pension costs are fully funded. Well, unless they go chapter 7, then guess who gets to pick up that cost? OK, only 85% of it.
 
As defined by the current United Auto Worker contract negotiated with the "Big Five" (GM, Ford, Chrysler, and top parts makers Delphi and Visteon), an auto "production worker" is a job description that covers anything from mowing grass to cleaning the toilets. In the real world, these jobs would be outsourced to $8 an hour, no-benefit wage earners, but on Planet Big Five, these jobs get the same wages as any auto line-worker: an average $26 an hour ($60,000 a year) plus benefits that bring the company's total cost per worker to a staggering $65 an hour.
 
Under the current contract big three UAW members will be at parity with US counterpart Japanese manufacturer union members by the end of the current contract. Looks to me that this issue has already been dealt with. So the toilet cleaners in Marysville make the same as the guys in Michigan or will within 5 years.
 
Just so you know 25 bucks an hour to mow the lawn is about the going rate in the Philly area.
 

Furthermore, UAW members are guaranteed a traditional "30 years and out" provision, meaning that many retirees begin drawing full pensions in their early Fifties, burdening the Big Five with unrivaled legacy costs. Delphi, for example, shoulders $22 per worker-hour in legacy costs compared to as little as 25 cents for independent competitors like Leer and Johnson Controls.
So it goes with 80 and 90 year old companies. Again, dealt with.
 
Statistics tell the tale. In his landmark study of the 2003 Big Five contract, Sean McLinden of the Center for Automotive Research (CAR) found that "in 1960, the UAW was 16 percent higher than the overall U.S. wage rate. . . . By 2003, the UAW average rate (with COLA) was 68-percent higher than the average manufacturing rate of $15.74 an hour."

The contract reads as if autoworkers labor in a vacuum, without regard for market forces. "The workers involved will not lose their jobs at the company — they must be transferred to other facilities, bought out, voluntarily retired, or supported by protected status programs (jobs banks). Workers who refuse to transfer after layoff will... eventually be paid 100 percent of their straight pay. Indeed, UAW employment can only fall at the rate of natural retirement."
 
Is that the way it works with government workers as well?
 
BG,
I know you are a bleeding-heart liberal.  And that's OK.  Wrong take, but thanks anyway, I think?I agree that we cannot let the Big 5 collapse (the other 2 being the parts suppliers that will naturally collapse).  But they have been living in a virtual fantasy world.  One of three things must happen for the auto industry to survive:
1. They must pay their workers a competitive manufaturing wage.  Good, bad, or in-between, all the products we buy are produced (a) oversees with cheap labor, or (b) domestically with market-rate or lower labor.  Our market simply cannot support products manufactured with unrealistically high labor costs.  Can you think of a SINGLE mature industry where this exists?  Either the product is too expensive, or the company is unprofitable (i.e. the U.S. auto-industry).
2. Every other industry must raise their wages in the U.S. so that the U.S. auto-makers can raise their prices to profitable levels, and people can earn enough to afford to buy them.
3. The industry must consolidate.  Reduce product lines, reduce # of plants, etc.  There is waaaay too much overhead in the form of infrastructure.  Japan has Honda and Acura. No Japan has Honda. Honda has Acura. The U.S. has Ford and Lincoln.  Japan has Toyota and Lexus. No japan has Toyota. Toyota has Lexus. The U.S. has Chevrolet and Cadillac.  See a difference here?  GM alone has 12 different brands:  Buick, Cadillac, Chevrolet, Daewoo, GMC, Holden, Hummer, Opel, Pontiac, Saab, Saturn and Vauxhall.  Holden, vauxhall, Volvo are foreign subs. Ford has Ford, Lincoln, Mercury, Volvo, and Mazda.  Among all these brands, there is almost NO similarity in models, chassis deisgn, manufacturing, engineering, marketing, etc.  No no no! Way wrong. Ford and Gm share their engineering and platforms across the product mix. With Ford this even extended to Jaguar before they cut'em loose. Jaguar X-type and S-type were off the same platform as the Lincoln LS.  The Ford Crown Vic, Mercury Grand Marquis, and Lincoln Towncar are all the same platform. And on and on it goes across the Ford line up. Milan-Fusion, Taurus-Sable etc. Essentially both Jags mentioned were parts bin cars not requiring the ground up developement cost of most completely new models. GM in a joint effort with Fuji Heavy industries built the newest drab  Saab. Ever notice how it looks like a Subaru? Lot of the same sheet metal there because they are essentially the same car. GM's joint venture with Toyota , the Nummi plant, has produced a generation of common platform cars and taught GM Japanese manufacturing methods. And the Pontiac GTO is an americanized Holden.What the hell do Saturn and Hummer have in common?  Nothing which is the point. GMC and Cadillac?  Shared platforms on the SUVs and engine technology.Ford and Volvo?  Newst lineup of Volvo's also built on Ford platforms of the Fusion generation.The Japanese automakers use common chassis design and manufacturing capabilities among many of their models (i.e. Accord-Acura TL, TL was built on a Civic chasis at one point. i've lost track a few years ago.Camry-Lexus whatever they call it). The Toyota Avalon is a parts bin car marketed soley to placate pissed off Toyota dealers after Toyota broke its promise by bringing the low level lexus ES to market and thus eviserating Toyota dealers highest profit sale- the loaded to the gills Camry. Still, even though the Avalon is a thoughtless non engineered car with out a dime spent to develope it you still have to pay 35k to buy a decently optioned copy. And people are dumb enough to buy them. But my favorite KY gel Japanese model is the Lexus LX. This is their biggest SUV. In all fairness it is an excellent truck. But how do you get Americans to shell out another 15k for a Toyota Land Cruiser? AH! Spend $1.50 per Land Cruiser to rebadge them as the Lexus LX 470, add 15k to the sticker and wait for the dumb ass american consumers to buy them up. Which the done in spades.
Still, it is the american companies that innovate and the Japanese follow. Though in 1993 Ford did have to cut apart a Mercedes convertible to see how it was counter weighted. That single act saved the Mustang. Mustang convertable proto types vibrated at 60 mph. Ford couldn't figure it out. Without the rag top the 94 Mustang production wouldn't get green lighted. Frustrated the project managers went out to dinner to review their options. In the parking lot of the restuarant sat a new Benz rag top. The next morning the Ford guys bought one from the local mercedes dealer, drove it the only miles that car would ever see and had it cut down to its frame by lunch time. They got their answer and the Mustang got a new lease on life.
 
Geez, I'm out of breath.  We all agree that the auto-industry cannot be allowed to collapse.  Too much is at stake.  And I admit we cannot allow them to file traditional bankruptcy.  That would be MORE devistating than an all-out collapse (nobody would buy their cars).  MY GUESS, is that the government will come up with a special plan, unique to this situation.  It will have the same protection as Chapter 11, but it will not be bankruptcy.  It will be some sort of implicit guarantee, but without the investment by govt.  It will essentially FORCE a restructuring of the industry, without bankruptcy.  I don't know what it is yet, but I think that's what is coming.
 
I'm out of breath too.

GWB43's picture
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Joined: 2008-07-31

Any money given ta Detroit will be flushed away Some Ford cars iz made in Mexico Some Honda cars iz made in Alabama Go figure.... ya'll is mad stupid.

BondGuy's picture
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Joined: 2006-09-21

Ice,
The rotary engine,as cool as it is, is not an automotive innovation. I'll give props to Mazda for trying to make something of it and spending some dough in that effort. As you know Mazda did not invent the rotary. The improved it and tried to mainstream it.
I'm a big fan of Rotary engines. I've flown ultra light aircraft powered by Rotax rotary engines. I love that sound!
VTEC not a japanese innovation, they didn't invent the VTEC mousetrap, they made it better.
 
Supra in any form is an awesome machine but not innovative. Innovation is creating something completely new. Or, significantly improving an existing design. A great example would be the Mini Van. Prior to the mid 80's there was no such thing. Chrysler created it via multi -billion dollar investment on the hope it would sell. It did. So well that everyone else came to market with their cloned copy. Over the past 20 something years what are the major improvements to the Mini van? Dual side doors, Power slide doors, and Stowaway seating. None invented by japan. American companies created one of the world's biggest automotive segments and has brought it to its current high level of design.  
 
The Fit? I agree to say it is no better than a Civic DX is inaccurrate. To be clear, it's not even close to being as good a car as the Civic. It's a kid car imported to compete with the Scion. The problem is Honda is using it to anchor the bottom of the line and by including it as a mainstream offering has increased the price of the base Civic by over 20%. Inflation hasn't been 20% in the last 4 years. We the consumers lose.
 
While i agree engine tech may be more advanced on some models that's of low importance to most american consumers. Most never look under the hood before making a purchase. Things like ipod jacks aren't important. Would putting an ipod jack in a Grand Marquis mean anything? How about spending the 20 bucks a car to make them Blue tooth enabled? Meaningless. the car is still what it is.
 
Good catch on theLX 470. I misspoke. I meant top of the line Land Crusier/Lexus. By the way, the Land Crusier it's a Land Rover clone.
 
Infinity dropped the ball from day one. Why do they exist? like i said they are the industry's screw ups.
 
Japan is getting a lot of heat in the cloning from the rest of Asia, the Koreans in particular who are building Accord look alike clones. Still, nothing new.

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