I'm on the fence with this.

Pros
On one hand I realize the ripple effect could be a big wave... or a small tsunami with perhaps a million people losing jobs. It isn't just the auto industry, it is the parts suppliers, the dealerships, and everything that supports those industries.

Cons
But on the other hand I realize a part of the issue is that "Detroit" has been stupid about changing over to fuel efficient vehicles and they have dragged their heels way to long. Other auto makers haven't been so stupid. So on that account, I think they need a huge spanking.

I also am concerned that if we do bail them out for a taxpayer equity position that it could easily be a losing proposition. They might go bankrupt anyway or they might do like AIG is doing and keep coming back for more money. Once you've made the choice to bail out you keep having to throw good money after bad.

I also think that the parts suppliers and so on won't be totally screwed, there is still auto makers, they're just not the big 3.

Also, I think the unions have gone a long ways towards crippling the competitiveness of the Big 3 by asking for, and getting, too much. But the only way to get them to back down on demands might to let their companies sink. I don't hear that Toyota workers are hurting compared to Detroit workers, but their health care costs are more in line with other industries and they're probably using 401k's rather than pensions.

I think, unless I hear compelling arguments to the otherwise, I might be on the Republican's side with this. :crazy:

I don't find the "Detroit has been making the wrong cars" argument to hold much water. The profit margins on trucks and SUVs were far higher than on cars. The big3 was making a killing off of their trucks/SUVs until recently - yet they've been hurting in the smaller car market for quite a long time.

Until recently, the big3 couldn't make a small car as well as the Japanese or Europeans, and the Japanese and Europeans couldn't make a truck/suv as well as the big3. Even if the big3 "could" make a small car as well as the competition, that doesn't change the fact that if you buy a car from the big3, you pay a lot for things that don't benefit the car - union benefits.

Whenever you buy a GM car (if its made in the US), $1,000-$1,500 of what you pay is just for union benefits. So, if you value union labor at $1,000-$1,500 premium, great - a GM will suit you well. However, very few Americans -even if they talk pro-union in public- are willing to pay this price. They'd rather pay a southerner a fraction of the wage to build a Toyota.

I don't feel like grabbing my compensation book so I'm just going to round, but the base wage for Toyota's American factory employees is ~$25/hr, total compensation is ~$35/hr. At GM, the the base wage for American factory employees is ~$30/hr and total compensation is ~$80/hr. While GM does have higher base compensation than Toyota, the vast majority of what they pay is in form of benefits.

But a lot could be changed w/ GM's compensation w/o "cutting" benefits so to say. They have a defined benefit pension plan and a health care plan with no copay. They could scrap their plans for 401(K)s and HMO/PPO and save money without completely sacrificing the benefits.

Kinda funny tho. The democrats stand for unions and expanding the American manufacturing base, when unions are a great way to kill the American manufacturing base. The main reason we even have some manufacturing left in this country is because of the South and their anti-union laws. And it's not that our manufacturing employees are paid poorly either, their salaries are competitive with most of the European socialist states.

TBH, I'm kind of glad this big3 mess came up. This is the best bet at preventing the employee free choice act from passing.

The current estimate for the total automotive industry workers, from the actual manufactures to suppliers is around 4.5 million workers. The big 3 problem, is not really the volume of passenger vehicles is the relatively low profitablity of the vehicles themselves, as those have always remained their highest selling vehicles volume wise, which is in large part on profitablitity due to their union concessions. They gave out way to much, instead of offerring very good wages and benefits, they overpaid, which was good in short term benefits and profits, but, pushed back the problems until much later, and thus, why the reason they have been shelling out 3 billion in losses quarterly, for quite a few years now.

General Motors will not be profitable for at least 5 years. Ford in about 2 years as long as they don't screw up. Chrysler is just screwed either way. A company I was working for, which is an automotive supplier, considered buying chrysler, we ended up walking on them with a chuckle and the finger, a few years back.

As far as to the bailout process, should it continue, the American government would end up owning Chrysler, as well as General Motors. Those two are so bad off right now, it is better to let them downsize or go bankrupt. General Motors though however, can split their company, and let them fend for themselves, in fact, a couple years ago a buddy and mine got to discussing it with some general motors management about why they haven't done that yet, which would be Gm's best bet right now, They have already been selling their hard assets for a few years now. And to top it all off with a government bailout, they would end up paying people to basically do nothing for a few years.

Now auto parts suppliers, they will take hits, downsize, but, they will survive, except, maybe the smaller companies. They have been cutting corners and shaving for awhile now to try to make up for their supplyee's screwups, taking reduced profits. Those guys aren't the ones screwing up the automotive business.

General motors did do the dumbest move like ever in europe though, not going into to much detail on this one, around 2001. They had a very good opportunity to break into the european market. They had a very good deal with Romania, but, they wanted cash instead of the reduced overhead, lower benefits, lower wages, opted for Germany instead, and of course, well....... Which did not go over to good to suffice it to say, had they went with Romania, the words bailout and General Motors would not have been in the same sentence.

yself, I am in favor of let them go bankrupt. General Motors won't actually go bankrupt, they will split, and the companies they split will go bankrupt instead, or allow some of the larger suppliers to enter the industry as manufacturers. They will actually make profits, and next after that, to improve their profit margins, they will have to come to an agreement with their union reps, to switch over their health care benefits to inferior coverages, still, good for the workers, but, with a shared cost, reduced wages, and finally, with their profits, take care of the large sums of money in pensions they owe out, with optional early retirement buyouts(slightly better than current), and they should be full rebounded within 3 years, with no bailouts, as well as more energy effienct vehicles, welcome to 4 years ago when we told them this. Ford may take the bailout, which is the only one I actually see being able to be successful in that manner, or able to go without bailout after bailout, ad nauseum.

This seemed appropriate:
http://punditkitchen.files.wordpress.com/2008/11/political-pictures-paulson-sht-sandwich.jpg

Thanks for that analysis, Palamin. I think I'll contact my senator and tell her to say "no".

Here's an opinion (http://www.nytimes.com/2008/11/19/opinion/19romney.html?_r=1&hp&oref=slogin) about letting the automakers go it alone (pro)[/url]

As far as Democrats being mindlessly pro-Union, I think that only happens during elections. I think unions played a very important role in this country, and some continue to do so, but they got too much in the auto industry. There needs to be a reset button here and unfortunately bankruptcy might the only button.

I think Union (and all employee, union or not) benefits need to look more like executive benefits (should look). They should be sharing in profits and made stock-holders, so they have a voice in the management of the company.

LOL! This is too funny...

There are 24 daily nonstop flights from Detroit to the Washington area. Richard Wagoner, Alan Mulally and Robert Nardelli probably should have taken one of them.

Instead, the chief executives of the Big Three automakers opted to fly their company jets to the capital for their hearings this week before the Senate and House -- an ill-timed display of corporate excess for a trio of executives begging for an additional $25 billion from the public trough this week.

"There's a delicious irony in seeing private luxury jets flying into Washington, D.C., and people coming off of them with tin cups in their hands," Rep. Gary L. Ackerman (D-N.Y.) advised the pampered executives at a hearing yesterday. "It's almost like seeing a guy show up at the soup kitchen in high-hat and tuxedo. . . . I mean, couldn't you all have downgraded to first class or jet-pooled or something to get here?"
http://www.washingtonpost.com/wp-dyn/content/article/2008/11/19/AR2008111903669.html?hpid=topnews

HI! Glad to see active posting!

I have an opinion on this topic...

Given the original question, I think that a political question deserves a political answer. Before Obama takes office, GM may get an offer to do a prepackaged bankruptcy if GM and the union agrees to predefined cost reductions. This means removing most or all retiree benefits beyond a pension and have the union take over the pension. It may mean firing the GM management. It could mean reducing the number GM dealers locally. Most importantly it means getting rid of the job banks, shedding retiree benefit costs and reducing the pay of existing hires.

After Obama gets into office, the government will mail GM a check for 25bil before March 1 2009 with few strings attached.

What went wrong?

In the US, I think that GM decided to give in to unions and not bother to argue for reduced compensation soon enough. I do think that management and the unions are moving in the right direction but not fast enough. On the union side, I think they ask for too much. On the management side, I think they borrowed money to pay bonsus and dividend.

I think that the assumption by GM was that the government would not let them fail if things got too bad so GM borrowed and borrowed and borrowed. Now that the cost of credit has doubled, GM can't affored to borrow any more if they could find someone to lend to them.

In my opinion, the root of the problem is the stangle hold that the union has on GM and manufacturing in the US. If management tries to fight the union then that pisses off the workers. So management wants happy workers so they give in and run the company into the dirt. The "rich guys" at the top are going to get their money before the company goes bankrupt and throws hundreds of thousands of people on the unemployment line.

Fallout:
There will be fall out from this situation regardless of what happens. On the one hand, you have billions of debt owned by retirement funds that may go bad. This may freeze up the junk bond market and drive other junk rated companies into bankruptcy like Rite Aid. This will drag investment grade companies into junk status because borrowing costs will go up. Also, a few states may declare bankruptcy along with the cities within. This could freeze up the muncipal bond market in certain states.

In addition to the junk credit market freezing further, there is an arguement that no one will buy a vehicle from a bankrupt company. GM will, most likely, become a shadow of itself if it goes into bankruptcy. That is, you may save the company but the company will end up being sold. As a matter of fact, I cant recall call a successful company that entered bankruptcy and became successful afterwards. Chrysler is a good example.

Other:
I remember back in 95' when GM talked about competing against domestic vehicles. They did not talk about competing against Toyota. I thought that showed arrogance at the time but they were making money. Today they are not and the internals of GM has to change to make GM competitive with Toyota in the car market. I do not believe that the problem is making vehicles that people do not want. The problem is focusing in the high margin business and not trying to compete in the low margin car market. GM can build a good vehicle that people want but they can not make any money on it.

Hi Weoden!
WASHINGTON — Democratic Congressional leaders said on Thursday that the executives of America’s foundering automakers had failed miserably in persuading Congress or the public that $25 billion in aid from the government would be well-spent and they gave industry leaders 12 days to come back with a plan showing otherwise.
I had a session of evil laugh over that private jet thing. I was just stunned that these guys could be so stupid. Talk about Welfare Queens.

Ya, they are not very bright at times over their company owned private jets, amongst many other things as well. Following up this is one of them.

Quote"There will be fall out from this situation regardless of what happens. On the one hand, you have billions of debt owned by retirement funds that may go bad."

They already have had this the last 4-5 years or so, probably longer than that, it has already gone bad, hence alot of the trouble they are having anyways. They have been offering retirement buyouts for pensions already. Their plan was without the buyout, they would shift it on taxpayers through a failing company clause I forget where, but, the government stockpiles some money for pensions to pay people when businesses go under, which totals up to $50k total maximum. Neat plan ehh? Supposed to be for something else like legitimitely failing businesses that could not pay out pensions, not for companies who drove their own business into the ground.

Are you talking about Federally Insured Pension Benefits?
What is the Pension Benefit Guaranty Corporation (PBGC)?

PBGC is a federal agency that insures and protects pension benefits in
certain pension plans. If your plan is insured by PBGC, we guarantee
your pension benefits, up to certain legal limits. If your employer has
financial difficulty and cannot fund the plan, and the plan does not
have enough money to pay all promised benefits, your plan ends (plan
termination). PBGC then takes the plan over as the trustee and begins to
pay pension benefits. The amount and types of pension benefits we pay
are determined by your plan and the Employee Retirement Income Security
Act (ERISA), which established PBGC. PBGC is not funded by taxes. Our
financing comes mainly from insurance premiums paid by companies whose
plans we protect. If your plan is the type of plan insured by PBGC, your
plan is insured even if your employer fails to pay the required
premiums.

It sounds like it is funded by pension plans, not taxpayers.

I don't find the "Detroit has been making the wrong cars" argument to hold much water. The profit margins on trucks and SUVs were far higher than on cars. The big3 was making a killing off of their trucks/SUVs until recently - yet they've been hurting in the smaller car market for quite a long time.

Until recently, the big3 couldn't make a small car as well as the Japanese or Europeans, and the Japanese and Europeans couldn't make a truck/suv as well as the big3. Even if the big3 "could" make a small car as well as the competition, that doesn't change the fact that if you buy a car from the big3, you pay a lot for things that don't benefit the car - union benefits.

Whenever you buy a GM car (if its made in the US), $1,000-$1,500 of what you pay is just for union benefits. So, if you value union labor at $1,000-$1,500 premium, great - a GM will suit you well. However, very few Americans -even if they talk pro-union in public- are willing to pay this price. They'd rather pay a southerner a fraction of the wage to build a Toyota.

I don't feel like grabbing my compensation book so I'm just going to round, but the base wage for Toyota's American factory employees is ~$25/hr, total compensation is ~$35/hr. At GM, the the base wage for American factory employees is ~$30/hr and total compensation is ~$80/hr. While GM does have higher base compensation than Toyota, the vast majority of what they pay is in form of benefits.

But a lot could be changed w/ GM's compensation w/o "cutting" benefits so to say. They have a defined benefit pension plan and a health care plan with no copay. They could scrap their plans for 401(K)s and HMO/PPO and save money without completely sacrificing the benefits.

Kinda funny tho. The democrats stand for unions and expanding the American manufacturing base, when unions are a great way to kill the American manufacturing base. The main reason we even have some manufacturing left in this country is because of the South and their anti-union laws. And it's not that our manufacturing employees are paid poorly either, their salaries are competitive with most of the European socialist states.

TBH, I'm kind of glad this big3 mess came up. This is the best bet at preventing the employee free choice act from passing.

You don't honestly believe that Toyota's wages would be anywhere near that high if there was no UAW to worry about, do you?

Non-unionized labor reaps the benefits of the mere existance of unions. But, hey, go ahead, ignore the past and try and destroy unions. Then see how much Toyota will be willing to pay you wjhen they don't have to compete with the wages negotiated by the UAW.

It is telling that so many of the GOP were willing to bail out financial institutions...but now they see a means of destroying one of the most powerful unions in the nation by witholding a bailout for the big 3. Meanwhile, they've ignored the fact that for strategic purposes we must have an industrial base.

People ignore history in the interest of short term financial gain and then wonder why things break.

Hi Weoden!

I had a session of evil laugh over that private jet thing. I was just stunned that these guys could be so stupid. Talk about Welfare Queens.

You do realize that it is likely less expensive for them to fly on the private jet they already own than then the time, hassle, and expense of sending three top exec's over commercial air?

Lets focus on true executive and corporate excess...(of which there is plenty), not look foolish for jumping on board with some senator's soundbyte.

You don't honestly believe that Toyota's wages would be anywhere near that high if there was no UAW to worry about, do you?
You are probably right because the average person can be trained to do a pretty good job doing most of these jobs fairly quickly. The UAW has done good work on the front of safety and having living wages for its workers.

Non-unionized labor reaps the benefits of the mere existance of unions. But, hey, go ahead, ignore the past and try and destroy unions. Then see how much Toyota will be willing to pay you wjhen they don't have to compete with the wages negotiated by the UAW.

This is true and with free trade unions are competing with third world wages.

It is telling that so many of the GOP were willing to bail out financial institutions...but now they see a means of destroying one of the most powerful unions in the nation by witholding a bailout for the big 3. Meanwhile, they've ignored the fact that for strategic purposes we must have an industrial base.

I just disagree with this. The house is controlled by the Dems and the senate is going to be controlled by the Dems. Also, there are Dems from the south that do not want to vote money for the UAW either. Placing your gripe on the GOP is not fair. All politics is local.

Also, the money allotted for the fincial bailout was for that specfically. Either money for development of efficient vehicles needs to be changed to loans to vehicle companies or additional money needs to made available. By law, money legislated for fincial instutions can not be loaned to nonfincial instutions. GMAC may receive something but GM can not by law passed by congress.

People ignore history in the interest of short term financial gain and then wonder why things break.

I think the UAW has a public opportunity to get a wage bottom for their workers with the hopes of negotiating higher wages in two years. This would remove the constant drip drip of lower compensation and build a broad sympathy for UAW workers by offering wage consessions in a very public way.

You guys are absolutely off base comparing GM and Toyota. They are apples and oranges.

GM uses a circa-Henry Ford assembly line w/ robots thrown in. Workers on a GM assembly line are a cog in a giant chain, doing the same repetitive task all day. Since stopping that giant chain costs so much money, workers are discouraged to troubleshoot on the fly, so critical thinking isn't needed.

At Toyota, they use team building methods. Workers are highly encouraged to troubleshoot on the fly, they benefit greatly from workers who critically think and trouble shoot on the fly. They rotate workers through different jobs to keep the variety up so they stay motivated. Unlike GM, its in Toyota's financial self interest to hire highly skilled American workers as opposed to shipping jobs to Mexico. In addition, the UAW would never agree to Toyota's pay-for-performance compensation.

In short, Toyota's employees hold jobs that entail a lot more than GM's. Toyota compensates high for skill, GM compensates high for the negative aspects of the jobs (ie the repetitiveness.) You can't easily outsource skill, because people have to actually have skill, but can you very easily outsource compensating differentials at a cheap price. That is why Toyota continues to open up American plants while the big3 have been focusing on expanding operations in Mexico since NAFTA.

Are you talking about Federally Insured Pension Benefits?

Quote:
What is the Pension Benefit Guaranty Corporation (PBGC)?

PBGC is a federal agency that insures and protects pension benefits in
certain pension plans. If your plan is insured by PBGC, we guarantee
your pension benefits, up to certain legal limits. If your employer has
financial difficulty and cannot fund the plan, and the plan does not
have enough money to pay all promised benefits, your plan ends (plan
termination). PBGC then takes the plan over as the trustee and begins to
pay pension benefits. The amount and types of pension benefits we pay
are determined by your plan and the Employee Retirement Income Security
Act (ERISA), which established PBGC. PBGC is not funded by taxes. Our
financing comes mainly from insurance premiums paid by companies whose
plans we protect. If your plan is the type of plan insured by PBGC, your
plan is insured even if your employer fails to pay the required
premiums.


It sounds like it is funded by pension plans, not taxpayers."

This plan and another one as well. But, the catch is/was setup for more limited companies, smaller companies and such. They do not have the cash resources to pay for very large companies slamming them all at once. So, taxpayers would have to fit the bill. Now also, keep in mind, they are also capped at $50k. So, if you are owed out pension at 150k, you only get 50k, as an example, unless that changed without my knowledge.

Is that 50k a year or total?

PBGC is not funded by taxes.
I suppose that'd be likely to change if a bunch of big companies went bankrupt. :\

You do realize that it is likely less expensive for them to fly on the private jet they already own than then the time, hassle, and expense of sending three top exec's over commercial air?
*boggle* Paying a pilot, hanger costs, fuel, insurance is cheaper than a first class ticket?

Economics is tricky! Glad you explained that to me.

Oh, and Hi there Aidon! Nice to argue with you again.

That would be 50k total.

Gas is 179 a gallon now.

*boggle* Paying a pilot, hanger costs, fuel, insurance is cheaper than a first class ticket?
Not likely.

Wagoner's private jet trip to Washington cost his ailing company an estimated $20,000 roundtrip. In comparison, seats on Northwest Airlines flight 2364 from Detroit to Washington were going online for $288 coach and $837 first class. (http://www.abcnews.go.com/Blotter/WallStreet/story?id=6285739&page=1)

Irrespective of the costs, it looks spectacularly bad to show up on a $35 million private jet to ask for a handout.

http://news.yahoo.com/s/ap/congress_autosAuto bailout stalled, GOP seeks UAW concessions

WASHINGTON – A $14 billion auto industry bailout bill stalled in the Senate on Thursday, and Republicans demanded upfront concessions from the United Auto Workers as the price for support needed for passage.

UAW officials were in talks with key Republicans and Democrats at the Capitol, although it wasn't clear what, if any, givebacks the union was willing to discuss.

The developments unfolded after Senate Republican leader Mitch McConnell of Kentucky joined other GOP lawmakers in announcing his opposition to a White House-backed bill that was approved by the House on Wednesday. He called for an alternative that would reduce the wages and benefits of the Big Three automakers to bring them in line with those paid by Japanese carmakers Nissan, Toyota and Honda.

Sen. Bob Corker, R-Tenn., the sponsor of that proposal, was in closed-door meetings with UAW officials and Democratic Sen. Chris Dodd of Connecticut, the Banking Committee chairman, to see if it could be modified to win the support of Democrats, who count labor unions among their strongest political allies.

A growing number of Republicans and Democrats were turning against the House-passed bill — itself the product of hard-fought negotiations between the Bush White House and congressional Democrats — despite urgent entreaties from both President George W. Bush and President-elect Barack Obama for quick action to spare the economy the added pain of a potential automaker collapse.Figures. The greedy UAW would rather see the car companies fail than negotiate reasonable wages.

http://news.yahoo.com/s/ap/congress_autosFigures. The greedy UAW would rather see the car companies fail than negotiate reasonable wages.
Unions have killed their own employers before. That is not new.
Of course there should be UAW concessions.

They need to kill the Jobs Bank, that has 12,000 auto workers earning next to full wage not working.

They need to reset pensions, healthcare, and all other legacy costs.
They need to reset hourly wages.
They need to reset all management and suit salaries, across the board.
They will need to stop, split off, or sell brands.
Several of them are for sale already, Michael Moore should think about buying one, and see if he can run a car company.
They need to lay off management and suits.
They need to sell their private jet fleets, though I don't know who should or would buy them.

Honestly, GM should give MM Saab, just to get it off their hands, and to put him in his place. Teach him, and his adherents a lesson. They have a plant in Flint Michigan, I am sure he could use(or did they demolish it?).

And I don't really have a problem with a loan. Other countries infuse economic help in their car companies, and have ever since WW2 ended. That would make the US car companies more competitive. We have done it before, back in the 80s with Chrysler. All that money was paid back. Of course there were 10s of thousands of people who bought J and K cars, but that was the price that needed to be paid. And there were draconian measures that Chrysler submitted to, and needed to do to pull through.

I don't buy the notion that they were making cars that Americans did not or do not want. Exactly the opposite. They all just happen to be too expensive for people right now.

I think that GM can make cars that Americans want if their cost structure is brought in line with the Southern auto producers and Cafe standards are removed. Cafe standards did not save the Automakers during this oil bull market and it did not save the automakers in the 70's either. Get rid of failed policy!

Well, it's official (http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2008/12/11/national/w094020S37.DTL&type=politics&tsp=1), the deal has collapsed in the Senate.

I hope unemployment is enough to cover UAW dues, for all the good the UAW has done for to its members.

Personally, I'm glad the Republicans gave the UAW the finger.They need to kill the Jobs Bank, that has 12,000 auto workers earning next to full wage not working.They need to kill the UAW first.I don't buy the notion that they were making cars that Americans did not or do not want.Correction: They were making the cars that Americans did not and do not need.

There were/are 3500 people (http://www.usatoday.com/money/autos/2008-12-03-uaw-auto-bailout_N.htm) on the jobs bank. What's really killing the Big 3 is the obligations to pay extremely generous pensions and health care to all their retirees. Otherwise the wages were pretty much in line with what Toyota pays their employees here in the states.

There was an interesting discussion on NPR recently about the subject of why labor rates are higher for the Big 3, it mostly boils down to retirees.
How much should you be paid to build a car? (http://www.npr.org/templates/story/story.php?storyId=97960766)

Well, I think I covered the retirees and so on in another thread, but, the UAW is not exactly the brightest in the world, they just refuse to give up concessions, less pay, less benefits, they honestly are acting as if they just can not be replaced. Bunch of assholes, acting as if it is a freaking crime to have a shared cost health care with the company. Acting as if the underpaid supplier companies do not exist, nor have their jobs riding on the line, but, what do they care right? Honestly, this could be the best thing for them really, force the companies to split, drop the fat, keep the profitable business. Put a couple million out of jobs.

Honestly, this could be the best thing for them really, force the companies to split, drop the fat, keep the profitable business. Put a couple million out of jobs.
Yeah, I think a lot of people at least somewhat feel that way. Might be better to let the demolition crew in and rebuild from scratch.

Unfortunately, now the Treasury is going to step in (http://news.yahoo.com/s/afp/20081212/ts_afp/usautoeconomygovernmentpublicaid) and consider using the $700 billion bailout money to save the car companies.

Funny, I thought that was marketed to us as a way to buy up those toxic mortgage assets, not as life support for car companies and greedy unions.

By the way Harry Reid, you were wrong, Wall Street greeted your failure with definite apathy.

The best thing that can happen is Chapter 11 for these companies. It lets a judge sit down and determine what the creditors get, what the owners (stock holder), and what the employees will end up with.

The parties don't want that due to losing out. They want us tax payers to foot the bill for their greed and stupid decisions.

The airlines and steel companies all went through this. It is hard, but the bottom line is these companies can't make money due to their current structure, agreement, and debts. Let chapter 11 kick in and it will sort itself out.