Saving the U.S. auto industry

[nrc]

So now that the auto industry has lined up for a handout it seems to have occurred to a few people that they might just be enabling a fundamentally broken industry if they just throw money at it.

So what's the solution? Some folks have suggested requiring that they fire the CEOs as a step, but I'm not sure that's the problem today. Lutz is an old industry hand so he might be "part of the problem" but Mulally has come in as an outsider and started doing some things that make sense.

The problem is the same that many U.S. companies have, they're driven by Wall Street and the constant focus on quarterly results. If they really want to fix Detroit that has to end. The focus needs to change to long term market share and sustainable profitability.

To achieve that they need to replace the directors and remove the shareholders from control of the companies. Bankruptcy may be the only way to achieve that. At the same time they need to tear up all the labor contracts and bring in government mediators to negotiate (or just flat dictate) pay, benefits and work rules that are competitive with those of their competition who are also producing in the U.S.

What we absolutely cannot do is use it as an opportunity to push agendas other than giving the consumers what they want, need, and can afford. Certainly the irresponsibility of the manufacturers in the area of small, fuel efficient vehicles needs to be addressed, but government regulations that push supply where there is no demand (ie, CAFE) have been part of the problem.

[SteveH]

I'm not suggesting its solely the union's fault, but somehow this has to be addressed.

http://3.bp.blogspot.com/_otfwl2zc6Qc/SRhJ9K9U9YI/AAAAAAAAHrM/fngKmb8eiL0/s400/wages.bmp

The details are here (http://mjperry.blogspot.com/2008/11/50b-bailout-would-only-be-down-payment.html)

[opinionated ow]

Just some thoughts...

Ford:
-Assemble European Fiesta as supermini model
-Assemble European Focus as small car
-Assemble European Mondeo, label it as Fusion
-Assemble Australian Falcon, label it as Taurus
-Base Mustang on Falcon chassis
-Assemble Australian Territory, label it as Taurus X
-Get rid of most of the SUVs.
-Kill of Lincoln and Mercury

GM:
-Do the world a favour and kill off Hummer!
-Import Australian Commodores as more than just Pontiac GTO
-Reduce the amount of brands and model duplication
-Import/Assemble European Agila, Astra, Insignia OR build Korean Kalos, Viva, Epica supermini, small and medium size cars.
-Streamline SUVs.

And when the US Industry has money, use their international resources effectively. Australians know how to make good rear wheel drive big cars and related "cross over" cars. Europeans know how to make good small cars. Koreans are making reliable but cheap cars. The Japanese make particularly good utes. Muscle cars are made well by both Australians and Americans. Stupid cars like Chevy Suburbans are only sold in North America (in numbers) and really don't appeal to many outside North America. So tailor them specifically for the US market

[meadors]

Let them fail. Then get rid of the unions.
Make the companies employee owned.
Bring in management from outside the auto industry.

[cameraman]

The problem is the same that many U.S. companies have, they're driven by Wall Street and the constant focus on quarterly results.

This is true of much more than just the big three.

[Stu]

Let them fail. Then get rid of the unions.
Make the companies employee owned.
Bring in management from outside the auto industry.

close to what i think.. i'd go with:

1. let them fail.

2. someone will buy up the assets.

3. employ non union auto workers

4. get rid of dumb car designs and consolidate models.

5. profit.

[Methanolandbrats]

close to what i think.. i'd go with:

1. let them fail.

2. someone will buy up the assets.

3. employ non union auto workers

4. get rid of dumb car designs and consolidate models.

5. profit.
Wow, I had not idea it was so easy :)

[Stu]

Wow, I had not idea it was so easy :)

whats your solution? and why did you chose to quote me instead of meadors?

[KLang]

I'd prefer to see a 'tough love' approach and force the Detroit automakers to re-invent themselves.

I'll be very surprised if it happens though. I think the UAW will have to much pull in Washington very soon.

[FTG]

The big problem seems to be that if they go bankrupt, they will be unable to obtain the debtor financing they need to restructure. Seems to me, the best solution is for the government to provide the debtor financing.

Management at GM definitely needs to be sacked. They haven't cut nearly deep enough or fast enough.

Overall, I'm not optimistic. I believe that "management was stupid for giving the unions what they went on strike for," will soon turn into "the government was stupid for giving the unions what they insisted on." After sucking the stockholders dry, why wouldn't the unions try to suck every drop out of the bottomless money pit that is the government?

[trish]

The big problem seems to be that if they go bankrupt, they will be unable to obtain the debtor financing they need to restructure. Seems to me, the best solution is for the government to provide the debtor financing.

Management at GM definitely needs to be sacked. They haven't cut nearly deep enough or fast enough.

Overall, I'm not optimistic. I believe that "management was stupid for giving the unions what they went on strike for," will soon turn into "the government was stupid for giving the unions what they insisted on." After sucking the stockholders dry, why wouldn't the unions try to suck every drop out of the bottomless money pit that is the U.S. Taxpayer?

More accurate.

[Methanolandbrats]

whats your solution? and why did you chose to quote me instead of meadors? Don't have one. You took the solution to a more refined level.

[Sean Malone]

I don't believe loaning them money alone is the answer. They will eat through it and be in the same shape in a year that they are now. I think an outside assessment for streamlining product lines and even splitting of certain lines such as Cadillac into it's own stand alone company would be a start.

[Michaelhatesfans]

...why did you chose to quote me instead of meadors?

Probably because you're easier to wind up.

:cool:

[dando]

This is true of much more than just the big three.

Managing Q to Q is a pandemic problem in most public companies. There is no long term vision in most of these cos. :irked:

-Kevin

[Michaelhatesfans]

I think the UAW will have to much pull in Washington very soon.

I don't think it has to be that way, if you do it right. This time the UAW won't be negotiating wages and benefits, they will be negotiating for the very existence of the UAW.

I'd say give them one last loan on the basis that they restructure salaries, clean house in the the design department, drop their NASCAR programs (yeah, that's just me being spiteful:cool:), and find find a way to get them to think in terms of long term survival rather than quarter to quarter.

Everyone has that relative that keeps coming around for more and more money, and talks about how much trouble they're going to be in if you don't help them. You worry about them, but after a while you just think that perhaps Vinny and Guido can teach them more about managing credit than you can.:\

[Methanolandbrats]

The Big Three kept chasing an old business model as their client base faded. They had decades to get on board with current auto buyer preferences. Even if they bring over decent cars from their other markets, will anyone buy them? That's the big question.

[Insomniac]

I'm personally not opposed to the U.S. Gov't being a lender of last resort for large cap corporations, but I think that a real plan has to be put forth. If the gov't simply hands money over for stock, that puts them in a position where they have to decide whether to throw more money at them or write off the entire loan. There has to be an all encompassing plan to make the company profitable. Everyone has to make concessions. I don't think it should be punitive (like just firing the whole management team), but smart. A check will just postpone the inevitable.

I think bankruptcy is the end. There will be no reorganization without continuing car sales. And who is buying a car with a warranty from a company in bankruptcy? I thought the government could offer to guarantee/insure the warranties of cars purchased during the bankruptcy period in case GM goes under and liquidates. However, I'm not sure about the practicality, cost and ultimate risk if the government is on the hook. One would hope with the understanding that it would be a last resort scenario, it would protect the government from shenanigans like using crappy parts.

Unless there is some way to ensure sales don't dry up, they're finished. Even under liquidation, no other domestic car builder has the capital to buy them up. The foreign makers may be interested in the IP, but I doubt the manufacturing (in the short term).

In normal circumstances, bankruptcy is the right way to go. I think we can all agree that we aren't in normal circumstances. Free market economics is out the window. I think it's in the best interest of the economy in general that unemployment doesn't go up. If the government is seriously considering (which by all appearances they are) about preventing foreclosures and slowing/stopping the slide of housing prices, having more people unemployed won't help those efforts.

So I'm for some type of deal that has a plan FIRST on how the auto maker getting the money is going to stay in business going forward. That means management forgoes bonuses until GM is profitable. They have common sense salaries. The unions make concessions during these times. There is a plan and phased payments to GM. Paying back the government is of highest priority. The entire goal here is to get the company back on its feet. The plan has to make that clear. The government wants its money paid back and the company wants to run autonomously. To that end, there should be an oversight board over the automaker's operations. Then it makes sense to me.

On a couple broader points. Note that the reduction in manufacturing jobs and unions in this country have directly coincided with the increasing disparity in income between management and workers. Yes, the UAW workers get "paid" a lot more than Toyota workers. I understand that Toyota workers have good jobs, but the UAW workers have better long term benefits. (Won't be much good if all of the Big 3 fail, but the main point is that there are a lot of things that make up the higher pay.) However, they have to make adjustments with the times. Just as they want more when things are going well, they have to be prudent and take less when times are tough in the bigger interests of all. (And that is supposed to be one of the purposes of unions, to look put for the interests of all their members.) Having everyone unemployed isn't really all that smart.

If the government really wants to help all these companies, getting everyone in the country health care coverage would go a long way. Health care benefits are making up bigger and bigger % of budgets. Many of the UAWs are supposed to get health care for the rest of their lives. Getting costs here more in line with the rest of the world and covering everyone would reduce and eventually could eliminate that from their balance sheets. It could make the US more competitive in the global manufacturing marketplace while still maintaining the high standard of living we enjoy (comparable to the rest of the world).

[meadors]

Don't have one. You took the solution to a more refined level.

You calling me simple? :D

[Methanolandbrats]

You calling me simple? :D
LOL :laugh:

[SurfaceUnits]

^^^ why would you want to do that?

[oddlycalm]

Some folks have suggested requiring that they fire the CEOs as a step, but I'm not sure that's the problem today. Lutz is an old industry hand so he might be "part of the problem" but Mulally has come in as an outsider and started doing some things that make sense.

Regime change in the middle of a crisis just for the sake of doing it could be the difference between a close save and hitting the wall. For the most part the people that really screwed these companies up are gone and neither is known for outlandish executive compensation. Wagoner as GM CEO is ok and Mulally is a good fit at Ford. Lutz as head of GM product planning is part of another era but he has good knowledge of how to work the levers and has a "won't take no for an answer" approach to meeting deadlines that is going to be required.

The feds are rightly terrified of 1 million people unemployed overnight and dumping $ billions in unfunded pension liabilities on the taxpayers. Preventing that is a noble cause, as is creating a new fleet of fuel efficient vehicles, but congress is too blunt an instrument to do anything more that appropriate money IMO.

Best thing I can think of is to replace the existing boards of directors with a board of oversight with technical, economic and market heavyweights to make certain that the money will be well spent and that we get the results we need as a country. My first two picks for that board would be John Doerr and Amory Lovins. Both have studied what needs to be done and both understand the technology. That group would work with GM and Ford management teams to administer the federal loans and direct the restructuring. The board and it's staff would be responsible for finding the people within these companies that have the talent and vision to drive them forward and put them in a position to do that. The should also be working toward a debt for equity swap with the creditors.

We need the best people to be put in charge at the division, plant and department level without regard to anything else. GM and Ford salaries for white collar workers are generally below scale and their should be some kind of incentive program so that good people can be attracted and kept. Bonuses for all is nonsense, but incentives for those that stand out and deserve it is a must.

The union contract needs to be brought into line with the competition. Fortunately Gettlefinger is the best leader the UAW has ever had. Obviously, the advent of any universal healthcare system would take a major load off of both company's balance sheets and make union relations that much easier.

oc

[opinionated ow]

The union contract needs to be brought into line with the competition. Fortunately Gettlefinger is the best leader the UAW has ever had. Obviously, the advent of any universal healthcare system would take a major load off of both company's balance sheets and make union relations that much easier.

oc

Can I just clarify something? As well as paying pensions for their ex staff, the US Car Manufacturers are responsible for paying for their health care? :confused: WTF?

[SteveH]

Can I just clarify something? As well as paying pensions for their ex staff, the US Car Manufacturers are responsible for paying for their health care? :confused: WTF?


yep

[cameraman]

Best thing I can think of is to replace the existing boards of directors with a board of oversight with technical, economic and market heavyweights to make certain that the money will be well spent and that we get the results we need as a country. My first two picks for that board would be John Doerr and Amory Lovins. Both have studied what needs to be done and both understand the technology. That group would work with GM and Ford management teams to administer the federal loans and direct the restructuring. The board and it's staff would be responsible for finding the people within these companies that have the talent and vision to drive them forward and put them in a position to do that. The should also be working toward a debt for equity swap with the creditors.

We need the best people to be put in charge at the division, plant and department level without regard to anything else. GM and Ford salaries for white collar workers are generally below scale and their should be some kind of incentive program so that good people can be attracted and kept. Bonuses for all is nonsense, but incentives for those that stand out and deserve it is a must.

The union contract needs to be brought into line with the competition. Fortunately Gettlefinger is the best leader the UAW has ever had. Obviously, the advent of any universal healthcare system would take a major load off of both company's balance sheets and make union relations that much easier.

oc

All fine and good but didn't you just nationalize the big three?

[cameraman]

Can I just clarify something? As well as paying pensions for their ex staff, the US Car Manufacturers are responsible for paying for their health care? :confused: WTF?
The truly toxic part of the union contracts the big three have been signing for the last 40 years. The boards of the big three agreed to pay health care costs for life for their union employees.

[Gnam]

Make it a one time zero interest loan, but make sure not one single business decision is made by any Gub'mint employee.

Death before Ladas.

[cameraman]

Make it a one time zero interest loan, but make sure not one single business decision is made by any Gub'mint employee.

How is that going to fix GM's owing medical coverage to its ex-employees for the next 40 years?

[opinionated ow]

yep

No wonder they're merde.

[Gnam]

They can't renegotiate? If the choice is between a job with a reduced health benefit, or no job with no health benefit, wouldn't the unions want to talk?

If the companies need some cash to cover short term expenses, ok. But they are still responsible for making their business work. If they can't or won't, they should close their doors. : pipe dream:

Can I get a federal subsidy? I promise not to be thankful for it or spend it wisely. :gomer:

[Sean Malone]

The truly toxic part of the union contracts the big three have been signing for the last 40 years. The boards of the big three agreed to pay health care costs for life for their union employees.

And not just any health care but top of the line 'beautique' level.

[Insomniac]

They can't renegotiate? If the choice is between a job with a reduced health benefit, or no job with no health benefit, wouldn't the unions want to talk?

If the companies need some cash to cover short term expenses, ok. But they are still responsible for making their business work. If they can't or won't, they should close their doors. : pipe dream:

Can I get a federal subsidy? I promise not to be thankful for it or spend it wisely. :gomer:

They can renegotiate. It's just always contentious (as you'd expect). Just remember, neither side would ever take a public position of weakness.

[oddlycalm]

All fine and good but didn't you just nationalize the big three?
Yes, just like we nationalized many of the banks as well. It would be easy enough to return them to private hands later by simply allowing shareholders (former debt holders) to vote in their own BOD and issue stock.

The likely alternative is to do the same hands off/preferred share model they are using with banks & AIG which has worked so well up until now. :gomer: What we see is companies take the money then go right on operating like brothels even while their fat is hanging in the fire. I suspect this is one reason that program has been suspended.

I really believe the best way to handle the auto companies would be bankruptcy with the court making some of the tough choices for them. Make sure the bills are paid so the suppliers aren't killed off and wash out the small remaining equity. Issue new equity shares to the debt holders and proceed. The court would be able to appoint an administrator and he could be directed by a board of experts. The Fed could replace banks in the equation to fund operations. Otherwise, I see endless haggling with the union, shareholder groups, retirees groups, etc., etc., the companies burning through whatever cash we give them, and eventually failing 9 months down the road regardless.

BTW, the EU and others will flip straight out if the guv so much as gives cash to bolster the auto companies that operate in foreign countries and bankruptcy provides better cover from that standpoint as well.

oc

[SteveH]

I really believe the best way to handle the auto companies would be bankruptcy with the court making some of the tough choices for them. Make sure the bills are paid so the suppliers aren't killed off and wash out the small remaining equity. Issue new equity shares to the debt holders and proceed. The court would be able to appoint an administrator and he could be directed by a board of experts. The Fed could replace banks in the equation to fund operations. Otherwise, I see endless haggling with the union, shareholder groups, retirees groups, etc., etc., the companies burning through whatever cash we give them, and eventually failing 9 months down the road regardless.


Not sure there is any other solution that will work. Also, the liability for warranties must be preserved and not jettisoned during bankruptcy. That would have to follow on through to the resulting new corporation.

[oddlycalm]

Not sure there is any other solution that will work. Also, the liability for warranties must be preserved and not jettisoned during bankruptcy. That would have to follow on through to the resulting new corporation.
Agreed, people buying cars would be made aware that warranty, parts and service were going to continue and actually improve.

oc

[Sean Malone]

Clear out the current inventory with 50% discounts with the promise from the buyer to purchase 2 cars from them within 10 years. I'd get in line.

[SteveH]

Clear out the current inventory with 50% discounts with the promise from the buyer to purchase 2 cars from them within 10 years. I'd get in line.

It was reported on Chicago news that Mancari Chrysler was selling new PT Cruisers for $1.00 to anyone buying a new Pacifica.

http://www.oak-lawn-il.com/mancari-chrysler-in-oak-lawn-buy-one-get-one-for-100/

[chop456]

^ Did you see Mancari on the news? Look up car dealer in the dictionary and it's him. :laugh:

[Sean Malone]

Gary Ackerman, D-NY, talked about how he couldn't get a new Cadillac in the color he wanted and couldn't get anyone to answer questions about problems with his GPS system. But he pointed out that his wife has had great service with an imported car.

"Maybe you can tell us what you're actually going to do to sell cars people want," he said. "Somebody heard that we're giving out free money in Washington. They're showing up from all over the place. But you don't want to put your last tourniquet on a dead guy."

:D

[Insomniac]

It was reported on Chicago news that Mancari Chrysler was selling new PT Cruisers for $1.00 to anyone buying a new Pacifica.

http://www.oak-lawn-il.com/mancari-chrysler-in-oak-lawn-buy-one-get-one-for-100/

Reminds me of this "deal".


If you buy one of Michael Crews Development’s luxury homes, priced at around $1.6m, you get a 2,000 square-foot cityscape row-home worth $400,000 for free. The luxury home is in San Pasqual Valley, the row-home in Escondido. Oh, and the row homes last year were selling for around $529,000.
http://www.cnbc.com/id/24951736

I guess it didn't really work so well.

[Gnam]

Mitt Romney has an op-ed piece in the NY Times advocating against a bailout, for many of the reasons mentioned already.
http://www.nytimes.com/2008/11/19/opinion/19romney.html?_r=2
But he mentioned a few things the Feds could do to help out, including:


from NY Times article by: Mitt Romney

The federal government should also rectify the imbedded tax penalties that favor foreign carmakers.

What's he talkin' 'bout Willis? :saywhat:

[oddlycalm]

Mitt Romney has an op-ed piece in the NY Times advocating against a bailout, for many of the reasons mentioned already.

What's he talkin' 'bout Willis? :saywhat:

I'd go a step further; time for a level playing field. Not only when it comes to tax issues but also when it comes to trade issues. Allowing a semi-nationalized industry one way access to our market is among the most idiotic policies we have ever suffered. Score a 10 for the lobbyists on that one.

The Japanese have never played the game by the same rules and it's time for that to change. Using MITI (Ministry of Trade & Industry) resources for basic engineering work in focus industries (including auto, optics, electronics, etc., etc.) is a great idea but it's also gives their companies a massive unfair advantage. On top of that they have de facto obstructions that effectively close their market to US companies. If they require every US vehicle to be 100% disassembled to inspect for safety then we should do return the favor.

Aside from a little tough love from Ron Brown prior to his untimely death, the US government has allowed Japanese companies largely free access to the US market while not demanding the same in return. It's almost a moot point now, but it still needs addressing and it should be part of the discussion.

In addition, their transplant companies in the US tend to have a very small footprint when it comes to US sourcing of anything other than labor and janitorial supplies. It varies by company with Honda sourcing quite a lot in the US while Toyota and Kawasaki operate like the are in Hokkaido rather than the US. The reverse would never be allowed to happen, so screw 'em.

Detroit has made a lot of mistakes but the government has been a big negative in the equation as well and that has to change. I'd simply adopt whatever the EU is doing regarding Japanese companies and move on. Let the US public get a taste of the real cost of Japanese cars.

oc

[dando]

I'd go a step further; time for a level playing field. Not only when it comes to tax issues but also when it comes to trade issues. Allowing a semi-nationalized industry one way access to our market is among the most idiotic policies we have ever suffered. Score a 10 for the lobbyists on that one.

The Japanese have never played the game by the same rules and it's time for that to change. Using MITI (Ministry of Trade & Industry) resources for basic engineering work in focus industries (including auto, optics, electronics, etc., etc.) is a great idea but it's also gives their companies a massive unfair advantage. On top of that they have de facto obstructions that effectively close their market to US companies. If they require every US vehicle to be 100% disassembled to inspect for safety then we should do return the favor.

Aside from a little tough love from Ron Brown prior to his untimely death, the US government has allowed Japanese companies largely free access to the US market while not demanding the same in return. It's almost a moot point now, but it still needs addressing and it should be part of the discussion.

In addition, their transplant companies in the US tend to have a very small footprint when it comes to US sourcing of anything other than labor and janitorial supplies. It varies by company with Honda sourcing quite a lot in the US while Toyota and Kawasaki operate like the are in Hokkaido rather than the US. The reverse would never be allowed to happen, so screw 'em.

Detroit has made a lot of mistakes but the government has been a big negative in the equation as well and that has to change. I'd simply adopt whatever the EU is doing regarding Japanese companies and move on. Let the US public get a taste of the real cost of Japanese cars.

oc

Problem is the Japs have been financing the US debt until recently when China took the lead. :irked:

-Kevin

[opinionated ow]

Why doesn't the government take over responsibility for healthcare and pensions like most other world governments do?

[Insomniac]

Why doesn't the government take over responsibility for healthcare and pensions like most other world governments do?

We don't want to be like the socialist Europeans.

[Insomniac]

I'd go a step further; time for a level playing field. Not only when it comes to tax issues but also when it comes to trade issues. Allowing a semi-nationalized industry one way access to our market is among the most idiotic policies we have ever suffered. Score a 10 for the lobbyists on that one.

The Japanese have never played the game by the same rules and it's time for that to change. Using MITI (Ministry of Trade & Industry) resources for basic engineering work in focus industries (including auto, optics, electronics, etc., etc.) is a great idea but it's also gives their companies a massive unfair advantage. On top of that they have de facto obstructions that effectively close their market to US companies. If they require every US vehicle to be 100% disassembled to inspect for safety then we should do return the favor.

Aside from a little tough love from Ron Brown prior to his untimely death, the US government has allowed Japanese companies largely free access to the US market while not demanding the same in return. It's almost a moot point now, but it still needs addressing and it should be part of the discussion.

In addition, their transplant companies in the US tend to have a very small footprint when it comes to US sourcing of anything other than labor and janitorial supplies. It varies by company with Honda sourcing quite a lot in the US while Toyota and Kawasaki operate like the are in Hokkaido rather than the US. The reverse would never be allowed to happen, so screw 'em.

Detroit has made a lot of mistakes but the government has been a big negative in the equation as well and that has to change. I'd simply adopt whatever the EU is doing regarding Japanese companies and move on. Let the US public get a taste of the real cost of Japanese cars.

oc

Someone told me a while back that in Japan they have a crazy car inspection process after (I think) 5 years where the cost makes it simpler to just buy a new car. If that is true, then that really hurts the US automakers when people are buying new cars that often.

[opinionated ow]

We don't want to be like the socialist Europeans.

Socialist Europeans? I don't think you could get much further from socialist than Australia and New Zealand and we have both of them.

[Insomniac]

Mitt Romney has an op-ed piece in the NY Times advocating against a bailout, for many of the reasons mentioned already.
http://www.nytimes.com/2008/11/19/opinion/19romney.html?_r=2
But he mentioned a few things the Feds could do to help out, including:



What's he talkin' 'bout Willis? :saywhat:

I like Mitt. He's definitely a good businessman. With regards to not focusing on short term, they seriously need some better corporate governance laws. Boards of Directors are a joke. Stock options are out of control. The stockholders have lost complete control of companies. They just go for the ride.

[oddlycalm]

Someone told me a while back that in Japan they have a crazy car inspection process after (I think) 5 years where the cost makes it simpler to just buy a new car. If that is true, then that really hurts the US automakers when people are buying new cars that often.
They have a reverse progressive licensing system where new cars cost little to license when new but by the time a car is 5yrs old it gets very expensive.

oc

[Indy]

There will be a bailout after the new administration takes office. The purpose will be to transfer wealth to the Unions. It will not solve anything.

[Stu]

Socialist Europeans? I don't think you could get much further from socialist than Australia and New Zealand and we have both of them.

how's that filtered internet working out?

[Stu]

Clear out the current inventory with 50% discounts with the promise from the buyer to purchase 2 cars from them within 10 years. I'd get in line.

good luck negotiating prices at the dealership in 5 years when they know you HAVE to purchase one of their cars or be in breach of contract. :rofl:

[Stu]

I'd go a step further; time for a level playing field. Not only when it comes to tax issues but also when it comes to trade issues. Allowing a semi-nationalized industry one way access to our market is among the most idiotic policies we have ever suffered. Score a 10 for the lobbyists on that one.

The Japanese have never played the game by the same rules and it's time for that to change. Using MITI (Ministry of Trade & Industry) resources for basic engineering work in focus industries (including auto, optics, electronics, etc., etc.) is a great idea but it's also gives their companies a massive unfair advantage. On top of that they have de facto obstructions that effectively close their market to US companies. If they require every US vehicle to be 100% disassembled to inspect for safety then we should do return the favor.

Aside from a little tough love from Ron Brown prior to his untimely death, the US government has allowed Japanese companies largely free access to the US market while not demanding the same in return. It's almost a moot point now, but it still needs addressing and it should be part of the discussion.

In addition, their transplant companies in the US tend to have a very small footprint when it comes to US sourcing of anything other than labor and janitorial supplies. It varies by company with Honda sourcing quite a lot in the US while Toyota and Kawasaki operate like the are in Hokkaido rather than the US. The reverse would never be allowed to happen, so screw 'em.

Detroit has made a lot of mistakes but the government has been a big negative in the equation as well and that has to change. I'd simply adopt whatever the EU is doing regarding Japanese companies and move on. Let the US public get a taste of the real cost of Japanese cars.

oc


i dont see how you can fix the US auto industry by simply raising costs on foreign manufacturers. all that would do is raise their costs and hurt the general US public.

if you want to make it fair, the feds should do everything in their power to make it easier to do business in the US. not just in the auto industry but in all.

[Stu]

There will be a bailout after the new administration takes office. The purpose will be to transfer wealth to the Unions. It will not solve anything.

what are you talking about? that 600 dollar check everyone got in May completely FIXED our economy didn't it?

[Insomniac]

There will be a bailout after the new administration takes office. The purpose will be to transfer wealth to the Unions. It will not solve anything.

That doesn't even make sense. What's the point of a bridge loan (their words) if they just go under 3 months later than they would've. It would just pay salaries.

[Insomniac]

i dont see how you can fix the US auto industry by simply raising costs on foreign manufacturers. all that would do is raise their costs and hurt the general US public.

if you want to make it fair, the feds should do everything in their power to make it easier to do business in the US. not just in the auto industry but in all.

It is "fair" in the U.S. What you're suggesting doesn't change the unfair treatment the US automakers get overseas. That is what OC is talking about. The intention would be to pressure them to make it fairer in Japan. They are protecting their auto industry.

[Stu]

It is "fair" in the U.S. What you're suggesting doesn't change the unfair treatment the US automakers get overseas. That is what OC is talking about. The intention would be to pressure them to make it fairer in Japan. They are protecting their auto industry.

but what will the net result be? what leg do we have to stand on in order to pressure them. foreign manufacturers would have to make up the difference in revenue somewhere.

[FTG]

Selling 50 more SUVs in Japan ain't going to save the industry.

[Sean Malone]

what are you talking about? that 600 dollar check everyone got in May completely FIXED our economy didn't it?

I'd rather get $600, than give $600 (above the $2500 of my share towards the 700b. ) ;)

[Michaelhatesfans]

There will be a bailout after the new administration takes office. The purpose will be to transfer wealth to the Unions.

Yeah, that's what gripes me about the billions that we gave to the financial sector, it's all about the unions.

:rolleyes:

[TKGAngel]

Today's paper (http://www.buffalonews.com/145/story/503333.html) had an interesting look at how today's Big Three bailout is different from the Chrysler '79 bailout.

And it was also announced today that GM is dropping its endorsement deal with Tiger Woods at the end of the year.

[oddlycalm]

but what will the net result be? what leg do we have to stand on in order to pressure them. foreign manufacturers would have to make up the difference in revenue somewhere.

Why is unfair trade hard to understand? It's a simple concept where we open our market to a country and they, in return, open their market to us. What it costs or the net result doesn't enter into the equation. It's either bilateral trade or it's not. We haven't had that with Japan for the last 40yrs so now would be a good time to start. We don't have to pressure them, they either act appropriately or they suffer the penalties prescribed in our trade laws.

I agree that the net result won't benefit much for the auto business at this stage, but there are other industries that would. It would also send a message that predatory trade policies won't be tolerated. The EU manages to do this, so why can't we? The laws are on the books, they simply lack enforcement.

oc

[Insomniac]

but what will the net result be? what leg do we have to stand on in order to pressure them. foreign manufacturers would have to make up the difference in revenue somewhere.

The net result if nothing changes is foreign cars cost more. It's a matter of fair trade. It isn't really free trade when on our end there are no restrictions but on the other end our goods are restricted.

[Stu]

Why is unfair trade hard to understand? It's a simple concept where we open our market to a country and they, in return, open their market to us.

I am all for fair trade, I was just debating whether this would actually help the auto industry.


What it costs or the net result doesn't enter into the equation.

I figured it did.


We don't have to pressure them, they either act appropriately or they suffer the penalties prescribed in our trade laws.

That sounds like pressure to me.


I agree that the net result won't benefit much for the auto business at this stage, but there are other industries that would.

That answers my question.

[Indy]

Yeah, that's what gripes me about the billions that we gave to the financial sector, it's all about the unions.

:rolleyes:

I am not your garden variety Union hater saying that. I just know that, quite predictably, the crooks in charge will pay off the crooks who put them there. We have had eight years of one gang, now we will get more of the same, but with different beneficiaries.

The fundamental problem of the Big Three is that few consumers who can afford better want their garbage. Their fundamental financial problem, however, is the enormous expense of labor + retirees. I expect to see government relieve them of that burden, one way or another, and it will be the Unions who benefit the most financially (which does not necessarily mean that the employees will benefit as well). The automakers will still be stuck with their primary problem, which is that though a $38,000 Buick is better than a $43,000 Buick, it is still less attractive than a $38,000 import.

[Sean Malone]

The automakers will still be stuck with their primary problem, which is that though a $38,000 Buick is better than a $43,000 Buick, it is still less attractive than a $38,000 import.

Which begs the question, does America need more $38,000 imported SUVs?

[oddlycalm]

One thing that is abundently clear is that there are different standards for the auto business than there are for the finanancial business. Maybe GM should wait until it's insolvent and call Paulson on a Friday evening....? :gomer:


oc

[Gnam]

Well, it was a little like asking for bail money before the evening started. ;)

[Andrew Longman]

Their fundamental financial problem, however, is the enormous expense of labor + retirees.

And huge portion of that cost is for healthcare. US manufacturers of all types are at a competitive disadvantage because they are competing with nations that provide nationalized healthcare and do it at a lower cost.

The packages negotiated years ago with the unions didn't anticipate they massive run up in costs in the last decades.

That isn't going to fix the automakers anytime soon but it underscores the need to fix our healthcare system.

[TrueBrit]

Funny how congress berates the big 3 for building too many gas-guzzlers when all they had to do was raise the CAFE standards and force Detroit to get on the fuel-economy band-wagon. Of course if the Big 3 hadn't hired lobbyists to get congress to keep the CAFE standards nice and low they wouldn't be in the bind they're in now...

Of course the REAL enemy here is the damn Auto Unions....making sure that the workers don't get screwed by the management (who are pure as the driven snow) and all that rot has forced the companies to the edge...it has NOTHING to do with them manufacturing Pieces of S that no-ones wants to buy anymore...nothing at all....:rolleyes:

Who doesn't love it when Nancy Pelosi acts all tough with the Big 3 CEO's, whilst Tres. Sec Skeletor simply hands out the $$$ by the truckload when his Wall Street buddies stick out their hands...:yuck: Madame Speaker seems to forget that Paulson showed up to congress with a three page proposal that basically said "Gimme the money or the economy gets it" and Congress rolled over and gave it to them...the Big 3 then breeze into town in their corporate jets ( a truly bone-headed move) and say if you don't help us 3 million people lose their livelihoods and THEN Congress gets all "we need a plan and transparency and stuff"....:irked:

Saving the Big 3 makes more sense to me than stopping a bunch of too-rich risk-takers from paying for their greedy mistakes...now we ALL get to pay for that....

I guess Big Government isn't all bad afterall...especially if it cleans up your mess for you...

What a mess...

[Michaelhatesfans]

We don't want to be like the socialist Europeans.

Indeed. Our system works much better. Oh, wait...:\

[Sean Malone]

And huge portion of that cost is for healthcare. US manufacturers of all types are at a competitive disadvantage because they are competing with nations that provide nationalized healthcare and do it at a lower cost.

The packages negotiated years ago with the unions didn't anticipate they massive run up in costs in the last decades.

That isn't going to fix the automakers anytime soon but it underscores the need to fix our healthcare system.

Fix the healthcare system or the healthcare packages that the unions demand from the auto industry that us taxpayers are now helping bailout?

[Michaelhatesfans]

And huge portion of that cost is for healthcare. US manufacturers of all types are at a competitive disadvantage because they are competing with nations that provide nationalized healthcare and do it at a lower cost.

The packages negotiated years ago with the unions didn't anticipate they massive run up in costs in the last decades.

That isn't going to fix the automakers anytime soon but it underscores the need to fix our healthcare system.

I've always found it interesting that a national healthcare system would actually weaken the unions bargaining postition, but many of the same people opposed to unions are also opposed to national healthcare.

[Michaelhatesfans]

I am not your garden variety Union hater saying that. I just know that, quite predictably, the crooks in charge will pay off the crooks who put them there. We have had eight years of one gang, now we will get more of the same, but with different beneficiaries.

Fair enough. I'm not your garden variety union supporter. I just think this has more to do with cars that no one wants than it does with unions. Anyway, I'm reserving judgement on the next administration (although I'm always up for the opportunity to quote Pete Townshend:cool:). I think that some people who voted for him are going to be disappointed, and the people who opposed him are still going to oppose him - could be good news for those of us in the middle!:laugh:

Fingers crossed, either way.

[Michaelhatesfans]

how's that filtered internet working out?

Oh, come on - even you know that censorship and socialism are two different things. The most socialized nations in Europe can't figure out why we don't allow boobs and swearing on television. Neither can I, for that matter. I like them both very much. If I could use boobs as often as I do swearing, I certainly would. But I digress.

[Michaelhatesfans]

Nothing to add, I just really wanted to have four posts in a row. Thanks.

[Sean Malone]

Fair enough. I'm not your garden variety union supporter. I just think this has more to do with cars that no one wants than it does with unions. Anyway, I'm reserving judgement on the next administration (although I'm always up for the opportunity to quote Pete Townshend:cool:). I think that some people who voted for him are going to be disappointed, and the people who opposed him are still going to oppose him - could be good news for those of us in the middle!:laugh:

Fingers crossed, either way.

I agree that it comes down to the products for the most part. There are a few stand outs from the Big 3 but overall there is a corresponding import that outshines at an equal price across 95% of their product line. But, take into consideration the points brought up in this thread i.e. fair trade standards, competitive labor costs and higher quality products the landscape changes dramatically. I believe that those elements need to happen in order for the Big 3 to survive and I wouldn't be surprised if we lose at least one of them along the way.

[Michaelhatesfans]

But, take into consideration the points brought up in this thread i.e. fair trade standards, competitive labor costs and higher quality products the landscape changes dramatically. I believe that those elements need to happen in order for the Big 3 to survive and I wouldn't be surprised if we lose at least one of them along the way.

I'm not discounting those factors at all. But at the end of the day, it does come down to the product. Even if it's an inferior product at a lower price, it's still the second biggest investment that most people are going to make. People will buy cheap or semi-reliable blenders and see them as disposable items. New cars aren't seen in the same light.

[Insomniac]

The most socialized nations in Europe can't figure out why we don't allow boobs and swearing on television. Neither can I, for that matter. I like them both very much. If I could use boobs as often as I do swearing, I certainly would. But I digress.

And we wonder why they won't show violence on TV. :D

[Insomniac]

I'm not discounting those factors at all. But at the end of the day, it does come down to the product. Even if it's an inferior product at a lower price, it's still the second biggest investment that most people are going to make. People will buy cheap or semi-reliable blenders and see them as disposable items. New cars aren't seen in the same light.

I think the problem is it's an inferior product at a higher price.

[oddlycalm]

Most of what gets discussed about the domestic auto companies is history; what has been. Maybe more interesting would be to discuss what we would like to see them become?

oc

[JLMannin]

Most of what gets discussed about the domestic auto companies is history; what has been. Maybe more interesting would be to discuss what we would like to see them become?

oc

Remember the 1990's Saturn, before it became just another division of GM? That's what I would like to see them become.

[cameraman]

Remember the 1990's Saturn, before it became just another division of GM? That's what I would like to see them become. Ummm, I went in and looked at the shiny new 1995 Saturn then left the building and bought a Legacy Outback and never looked back.

[Michaelhatesfans]

And we wonder why they won't show violence on TV. :D

Yes, but if I have to choose, I'm going with boobs.:thumbup:

[Stu]

Yes, but if I have to choose, I'm going with boobs.:thumbup:

girls are available in real life too buddy.

[Michaelhatesfans]

girls are available in real life too buddy.

Got one, thanks.

[Napoleon]

I'm not suggesting its solely the union's fault, but somehow this has to be addressed.

http://3.bp.blogspot.com/_otfwl2zc6Qc/SRhJ9K9U9YI/AAAAAAAAHrM/fngKmb8eiL0/s400/wages.bmp

The details are here (http://mjperry.blogspot.com/2008/11/50b-bailout-would-only-be-down-payment.html)

The $73 for US workers as been proved to be bull s--t propaganda that some are pushing.

[SteveH]

The $73 for US workers as been proved to be bull s--t propaganda that some are pushing.

Check this (http://www.google.com/hostednews/canadianpress/article/ALeqM5gN_RRvKZJznG4eQ4w1jfs32SK-xQ)out Nappy

BTW, nice to see you again. :thumbup:

[oddlycalm]

The $73 for US workers as been proved to be bull s--t propaganda that some are pushing.
Yup, with the three tier contract the differences are minor. The real differences are the legacy health care and retirement burden.

It's unlikely that anyone has been more vocally critical of GM management or product decisions than me over the last 40yrs, so I have to say that I'm amazed that people are making up all sorts of disinformation to try to drive a stake through the heart of the US auto business. There are plenty of real mistakes, so why make stuff up...? :confused:

Nobody talks about Roger Smith taking GM from the lowest cost producer in the industry to the highest cost in a single decade. Or, how he invested in unproven bleeding edge technology because he was an accountant and had no experience on the mfg. side of the business. Nobody talks about how GM management continue to use the Lopez purchasing system long after Lopez was revealed to be a eurotrash scam artist. I could go on for 1000 pages and not have to make up a single piece of information, so why do that....?

The focus now has to be on what we want the industry to be, not what the mistakes of the past were.

oc

[Napoleon]

BTW, nice to see you again. :thumbup:

Thank you, its good to be back and I think I will be posting more.

By the way here is a direct take down of your original link to Perry


http://www.portfolio.com/views/blogs/market-movers/2008/11/18/the-return-of-the-70-per-hour-meme


And the same arguement fleshed out a little more.

http://www.tnr.com/story_print.html?id=1026e955-541c-4aa6-bcf2-56dfc3323682

[Napoleon]

It's unlikely that anyone has been more vocally critical of GM management or product decisions than me over the last 40yrs, so I have to say that I'm amazed that people are making up all sorts of disinformation to try to drive a stake through the heart of the US auto business.


And I bet I have you beat. I almost certainly posted this at sometime on this board how the only American car I ever bought was my first one, a GM product, and ever since then I have told about a million people the happiest day of my life would be the day GM goes into bankruptcy. But if anyone thinks that could happen, at least now or in the near future, without sending the nation into a catastrophic depression they are nuts.

Many of you know, but for those of you who don't I am an attorney who does almost 100% of my work in commercial real estate and finance, and as bad as many of you may think the economy is I can tell you from where I sit it is twice as bad as you think.

[Andrew Longman]

Remember the 1990's Saturn, before it became just another division of GM? That's what I would like to see them become.

There was a lot right about Saturn. Flexible manufacturing systems in their plant -- Away from Detroit in TN. Breakthrough partner-like negotiations with the UAW. Innovative design -- dent proof body panels. No haggle pricing. Real care given to the customer experience. Remember the ad about delivering a repacement seat via seaplane in Alaska (of course it prompted the question why the seat needed replacing in the first place).

But they had begun to develop a loyal almost cult following a la Honda from folks who wanted to reward GM for finally getting it right.

But I think they got it too right for the rest of GM and with an exonomic downturn GM cannibalized it leaving them with the one thing they didn't need -- another nameplate.

[Andrew Longman]

Fix the healthcare system or the healthcare packages that the unions demand from the auto industry that us taxpayers are now helping bailout?

Regretably we probably have to do both. But long term removing the healthcare liability of the big 3 by providing healthcare for all (by some means) is necessary for the long term survival of the industry. And people have known this cold and square for at least 15 years and done nothing

[Napoleon]

But long term removing the healthcare liability of the big 3 by providing healthcare for all (by some means) is necessary for the long term survival of the industry. And people have known this cold and square for at least 15 years and done nothing

Amazingly executives at the big 3 actually helped axe Clinton's plan about 15 years ago.

[cameraman]

by providing healthcare for all (by some means) is necessary for the long term survival of the industry.

I work for a state university and health care costs are running us into the ground. The problem needs to be fixed for every employer and employee in this nation.

And the people who keep claiming that private industry can do it better for less - open you eyes and look around. The private industry model has failed in an epic manner. They have had 20 years to figure it out and they comprehensively failed.:irked:

[trish]

I like my health insurance plan and am afraid of any type of government plan.

[oddlycalm]

Ummm, I went in and looked at the shiny new 1995 Saturn then left the building and bought a Legacy Outback and never looked back.
Gotta agree on that. Fuji Heavy has done a job with the Subaru line of AWD cars. The are hugely popular in the Northwest and Northeast. Great all weather family cars that are easy to live with over time. Every other house in our neighborhood has a Subaru in front.

I agree, the challenge for Detroit isn't to create a new Saturn it's to come up with something compelling enough to get families out of the Subaru, Toyoda and Honda they currently drive in large enough numbers to make a viable sustained business. The only way that can do that is by offering a significant advantage. And, they are only going to have one chance to get it right. Incremental improvement isn't going to make a dent at this point. The new Malibu may be a decent car but is it a better car with a better dealer experience and will it be better over 5yrs of ownership?

GM should pick it's 10 best models, kill the rest and completely kill their separate divisions. Duplication of effort on any scale is unacceptable. They need moon shot level transformations from product planning to dealer service and they need it in 24 months. Kill half the dealers and keep the best. GM has plenty of good people so they should take the opportunity to lose the dead weight from the top down. They should kill the excess capacity and sell off the associated real estate. That's only the start though.

They need the plug-in hybrid. 48 months from now is an midsized crossover vehicle that uses enough CF composite that a small turbo diesel will give good performance and 35mpg. They need entry level cars that are good enough to make first time owners become repeat customers even if it's a break even proposition initially. Most of all, they need to be making cars that have a feel of quality and value about them whatever the price point.

On that last point, we recently bought a CTS for my guy in Atlanta because it looked to be a good deal at the massively discounted price. I looked at the same car here and drove it and while it drove just fine the interior had a cheap feel to it and this is one of their premium products. That has to end.

oc

[Sean Malone]

I like my health insurance plan and am afraid of any type of government plan.

Amen. We have nationalized health care already, it's called Medicare/Medicaid. Ask their members about quality of care.

[cameraman]

There are plenty of very good nationwide heath plans in this world that are not "nationalized". Quit writing off the health care system of every other nation on the planet when you have no idea how any of them work. The plan you have now will either drive your employer into bankruptcy or they will just cancel it as it gets 15% more expensive every single year.

[Sean Malone]

Gotta agree on that. Fuji Heavy has done a job with the Subaru line of AWD cars. The are hugely popular in the Northwest and Northeast. Great all weather family cars that are easy to live with over time. Every other house in our neighborhood has a Subaru in front.

I agree, the challenge for Detroit isn't to create a new Saturn it's to come up with something compelling enough to get families out of the Subaru, Toyoda and Honda they currently drive in large enough numbers to make a viable sustained business. The only way that can do that is by offering a significant advantage. And, they are only going to have one chance to get it right. Incremental improvement isn't going to make a dent at this point. The new Malibu may be a decent car but is it a better car with a better dealer experience and will it be better over 5yrs of ownership?

No. It is a start in the right direction but they don't have the time to nurture it. To me it really comes down to two things; make mediocre cars and sell them for a significantly less price than the imports or make cars as good as the imports for a significantly less price. The latter being unrealistic. The Malibu is not changing the minds of Toyota/Honda owners.



GM should pick it's 10 best models, kill the rest and completely kill their separate divisions. Duplication of effort on any scale is unacceptable. They need moon shot level transformations from product planning to dealer service and they need it in 24 months. Kill half the dealers and keep the best. GM has plenty of good people so they should take the opportunity to lose the dead weight from the top down. They should kill the excess capacity and sell off the associated real estate. That's only the start though.

I agree. All three of them should immediately stop production on the cars they know they don't need to be wasting time building. That stupid new Ford station wagon, the Chevy HHR, the Dodge Nitro etc. It might not be a bad idea to use an idea that was suggested during the CART/Champ Car fiasco in that the Big 3 would take a year off from producing cars, execute a complete makeover from the top down and emerge a clean, efficient world class model of automobile manufacturing.



They need the plug-in hybrid. 48 months from now is an midsized crossover vehicle that uses enough CF composite that a small turbo diesel will give good performance and 35mpg. They need entry level cars that are good enough to make first time owners become repeat customers even if it's a break even proposition initially. Most of all, they need to be making cars that have a feel of quality and value about them whatever the price point.

the problem is Toyota/Honda will beat them to it and make a better vehicle.



On that last point, we recently bought a CTS for my guy in Atlanta because it looked to be a good deal at the massively discounted price. I looked at the same car here and drove it and while it drove just fine the interior had a cheap feel to it and this is one of their premium products. That has to end.

oc