Automakers struggle to survive past mistakes

I totally agree with you Mystic Chick. The Center for Automotive Research (shills for the Big Three CEOs) trotted out this boogeyman approach because the conventional wisdom is GM is not so big that it ought not fail. The boogeyman? Oh, if you let us die-- and we know we made all kinds of mistakes, pardon us, but, hey, think of the WORKERS, 'cause they'll lose out, too. Buddy can you spare a dime. Read your history books. Detroit won't employ anyone in the next depression anymore than they did in the last. They are already laying off workers and, before this latest round of begging, they were hoping to merge and cut even more jobs. Let GM and Ford die. They deserve it for being so smug in the eighties and for failing to recognize obvious trends in the price of gasoline.

Totally agree with you.  A bailout is the wrong approach.  Let the market work and we'll get better cars, better jobs, and a better economy.

How much will the bailout help ? Automakers will keep on producing cars assuming the sales volume will be the same as in the past years... but most people will not be able to apply for a loan for a brand new car, if they are barely keeping up with mortgage payments.

Dealers are already overstocked... it'll be worse next year. Find a better use for the bailout money; let the market regulate itself.

Are you people really this simplistic?  Jeez....

Ignoring the FACT that the vaunted free-market is what caused the problem in the first place...

Ignoring the FACT that at least GM was very successful until the economy started tanking...they did not amass, what...$10billion in reserves because they didn't produce what the market wanted or because they were badly run!

Let's see....if the big three shut down, millions across the country WILL lose their jobs. Hmmmm, I wonder how many more mortgages will affected by that? How many other small businesses who are already struggling will shutter their doors as well?  How many more dominoes will fall because you personally hate (or are jealous of?) unions and SUV's?

Talk about cutting off one's nose to spite their face!

So what.. I really dont care.. The Unions got them in this mess.. Let them die..

Florida_kes, I am very pro union, but not so big on the auto makers, so I mostly agree with the other posters here.  However, IF the gov't is willing to make any bailout conditional, then I am willing to agree to it.

1. Any auto maker receiving money must be audited every quarter for however long it takes to repay any bailout.
2. They must agree to stop making gas-guzzling autos/trucks/SUVs.
3. They must invest heavily in alternative fuel autos and high MPG autos.
4. They must agree to pay workers a fair wage and benefits (especially a severance package should the company still fail), and accept a moratorium on layoffs of blue-collar workers and middle managers.
5. For th next 10 years there can be no Executive bonuses, and pay to them is tied directly to the output of the above mentioned new autos.
6. Every US citizen gets an equity stake in the company as if they were bond holders, so should the auto maker still fail, the people get a share of the liquidation of assets ahead of share holders.
7. The bailout would be considered a loan, and any profits not reinvested in making the company work more efficiently, more innovatively or to pay higher worker salaries, or as taxes paid to the Gov't are to be given to the Treasury as part of the repayment until all of the bailout has been repaid.
8. Failure to use the bailout money for anything other than what is mentioned above will result in the immediate call on the bailout loan, liquidating all assets of the company and checks sent to every taxpayer.  No more $500K retreats for the upper management.  Additionally this failure would be considered a felony and result in no less than 10 years in jail before parole is even considered, as they would be defrauding both the Gov't and the taxpayers.  No slap on the wrist.

If that is all in the bailout bill, then I will get behind it, otherwise, I see it as just throwing good money after bad, and would rather the Gov't use any monies they would have used for a bailout to retrain the auto workers and give them a good severance package including the retention of all benefits including health care.

If we are going to let the automakers fail, I think we should get our money back from the AIG and the Wall Street bailout. It sounds like everyone is saying let the market determine if a company succeeds. That sounds fair, but it needs to be the same for every business. No picking and choosing who succeeds and who fails.

Yeah, extorsion if I've ever seen any, is what these people are doing.  Give us money or we'll have to fire all these people...  Why negotiate with bullies?

Mystic Chic--I agree.  The logical choice would be to get rid of the unions, cut exorbitant salaries at the top levels, and pay every worker a FAIR wage.  I would rather have a job than not.

The Union has agreed to a competitive  wage. Unfortunately, no one read the fine print.  When you have layoffs, the low seniority people get laid off.  The lower tier ($15 per hour) wage people are the ones who lose their jobs. Therefore, the $30 per hour people are the ones that GM, Ford and Chrysler have to keep on their payroll. No cost savings there! 

All who think the auto industry should fail.... I'd like to hear what you would say if it's your job on the line.

  I agree!

 The UAW, realizing that the companies were in trouble, agreed to a landmark new contract last year that nearly eliminated the labor cost difference between the Detroit Three and the Japanese, shifting retiree health care costs to a union-administered trust fund.

As GM, Ford and Chrysler saw their market share start to slip, the 90s arrived and high profits returned as Americans snapped up trucks and SUVs.

But just as the cost cuts started to take hold and new products were rolling out, gas prices rose rapidly to around $4 per gallon and Wall Street collapsed, virtually eliminating credit that 60 percent of car buyers need.

Easy to blame Unions but Unions base their pay scales on prifitability of the company and the company's agree or disagree.

This is a sad case of mismanagement in the big three. They rolled the dice on big gas guzzling cars in the face of a declining fossil fuel market and are paying the price.

BTW the bail out is a loan not a giveaway. My take is the should all three combine into one company.  

Oh bull crap, Florida, GM has been hanging by a thread since the summer of 2001. Its market share shrinking every year after. It workers being laid off as they went. Its tier one supplier Delphi in bankruptsy and GM making them payments to stay afloat. Has Delphi came out of bankruptsy to date? Delphi is a reflection of GM.

Give GM money to survive today and they will be back a year from now with their hands open again asking for more.....I say cut them loose and force them to restructure or disappear.

Interesting that the government attacks the auto companies because their policies caused problems, yet overlooks it's own policies that have caused the financial messes in the first place.  When are the democrat 'leaders' going to be held responsible for the fannie/freddie mess that led to the credit mess that led to the Wall Street problems.  All anyone does is point their finger at Bush while ignoring the real culprits, congressional democrats and their obstructionist, antiConstitutional agenda.

Yes, the US auto companies haven't reacted to the world market as well as they could've, but they didn't cause the credit problems, the fannie/freddie problems nor the gas price problems.  They did have to deal with government regulations and union demands that others don't have to.  I've had some great vehicles built by US companies and some very poor ones built by 'union craftsmen' that were literally falling apart.

Ok, Jim B, explain why Honda, Toyota, Nissian, and Subaru are not at the pig trough asking for a handout? These companies are right here in America building cars with American labor and selling them to Americans. Why are they not going under in the same market conditions as the Big 3.

I say no bailout. The Big 3 are not in this position because of external factors, they are in it because of internal poor management.

why not let the workers apply for jobs at Toyota, Honda etc?  They might have to give up a few of their cushy benefits and live like the rest of us for a while...Boy, I wish I could make $40 per hour with only a high school education and get free healthcare and a pension.  It must have been great while it lasted...

What we are seeing right now is capital shifting in the economy.   The demand for cars in general went down when gas prices went up.  People decided they better save their money for other things instead of a new car, and if they did buy a new car, it would have to get good gas mileage.  First the housing market suffered, now the car companies suffer.  Okay.

Now here is the thing we need to realize: with the shift in capital, there are going to be jobs lost.  However, once the capital resettles (which it will, it will have to), then there will be jobs created.  We can't artificialy prop up a market that no longer exists, it is too costly.  Instead, we have to let things change as they are supposed to.  What would have happened if the government decided to prop up the train industry?  Oh wait, they did, and it was a waste of billions of dollars.  Until demand for cars goes up again, the number of suppliers will naturally have to decrease, and the Detroit suppliers appear to be the weakest.  Just like the demand for candles was permanantly decreased by the popularization of the lightbulb, the demand for cars has decreased due to alternative methods.

The same goes for all other government bailouts.  We are only artificially supplying markets that are prone to shrink every now and then.  The housing market was never worth as much as people thought it was, and once people realized it's true value, other people got screwed who were too ignorant to notice the bubble.  Now we can't go in and fix their mistakes, people have to suffer for making bad decisions, it's a fact of life.  If we bail people out for every bad decision made, bad decisions will only continue to be made.

Final point: If we continue to bail all these companies out, we'll see massive inflation.  If we stop now, the money supply will continue to decrease, but inflation will not.  What it adds up to is that either way there are hard times for everyone, but in the second option, things will recover faster because the government won't then be a constant drain on the economy trying to repay it's debt.

I worked on automation of the auto companies in the 1980's. I did the first successful plantwide integration system for Ford Motor Company. (Which will tell a few people my real name.) These companies have consistently failed to aim at where things will be. I understand the need to keep American jobs. But the idiots running these companies have to go - lock, stock and barrel. All of them - the first 4 layers from the CEO on down.

It would make a lot more sense to give a $2 billion loan to Tesla Motors than to bail out Chrysler.

Let's start weighing the return on investment from giving money to an existing company that has been driven over a cliff, to giving money to a new company that is lean, mean and heading up. Which one will do better?

I agree with your approach. Don't help the people that got the companies into this mess! But do help the workers who have had to endure the bad decisions, the programs that have done nothing but spend money and put bonuses in the managers pockets and cost them their jobs.  

As for the electric cars, more than just building them will have to be done. There is an entire infrastructure that needs to be developed, which, if done correctly would create jobs for those who lost their's in the traditional auto industry.

The problem is... those who would direct the growth of that infrastucture would be no different than those who directed the auto industry.  Out for themselves, and screw the rest. If it works, that's a windfall to the program!

Who do you know that is smart enough to make it work without being greedy?

Yes, on the one hand we loan money we don't have to industries that have made major mistakes vs. letting them tank, which means even more job losses and a worsening economy.  Jamie R, I'm with you--glad I don't have to sort it all out! 

Actually, labor cost amount to a very small % of these auto co's. overhead.  These big co's. have always been top heavy.  In other words, too many chiefs and not enough indians.  It's kind of like the saying, too many cooks spoil the pot.  Too many good decisions are being over riden.  When your paying hundreds of CEO's multi-million dollar salleries, and multi-million dollar bonuses on top of it, regardless of performance, there's no way a co. can survive.  So instead of doing the logical thing and cut into management, they cut into labor, think that that may be the problem.  In addition, they hire young punk engineers, fresh out of college, making dumb design flaws, and the product winds up having major recalls.  The auto makers should indeed deal with their own stupidity, and just go bankrupt.  There will be others to follow. 

Actually, labor cost amount to a very small % of these auto co's. overhead.  These big co's. have always been top heavy.

The article points out that the US auto industry pays $30 per hour MORE than foreign manufacturers.  That's got to be the primary source of the problem.

Are they also paying their management 100% more than the foreign guys?  Maybe, but I doubt it.

The solution that MUST be applied is to scale back labor and management costs to the same (or less) of their competitors. 

yea unions are always the problem lets just go back to the company store ,company housing and scrip.like the old tennessee erine ford song 16 TONS labor is always the problem so all labor should go back to where the company take care of everthing GEE YOU ARE REAL SMART it is greed that caused this whole mess and its human nature also.so quit crying that all unions fault

The unions had their place.  Now ther is legislated relief, and a generally different corporate outlook.  Unions are destroying this country from their inflated self worth to their liberal voting blocs.

Yes Michael, the CEOs and the executives at the BIG 3 are being paid 10 times as much as the foreign automakers. Not only that, but the BIG 3 all live in emerald palaces in detroit that sucks up all the profits into their overhead. Nothing is produced in these palaces but egos. Have you ever been inside Ford and GMs emerald palace in Detroit? I have and its beyond rediculous the amount of money that was squandered for those places. I spent a while trying to locate the kings court and golden throne, but it was to big of a place to search all the empty rooms not in use.

The foreign car manufactures have their presidents and excutives running the business right inside the main factories front office. 

Rick - creative, I like it!  :)

I don't agree with the nationalization idea, and voiding all stockholder equity would be punitive and adversarial to the stockholders. Slow, fat, and self-interested upper management and unions are a big problem. This would be an implementation of the worst parts of socialism.

If Federal government provides any money to keep the auto makers alive, it should be done on the condition that they make electric and compressed national gas (CNG) vehicles. The unions will need to agree that any new vehicles will either be made by non-union employees or under new contracts that will not doom the futures of American auto workers.

The current company/union sponsored medical coverage is killing the competitiveness of American vehicles. In this context, fixing the medical coverage problems is of strategic nation industrial interest.

Well...

1- Yes, the compensation packages are obcene but have nothing to do with the problem at hand.

2- Uhmmmm...car manufacturing IS a long term planing process. And executves can't really show a "spine" towards Wall $treet because once a corporation goes public, it's Wall $treets @!$%#.

3- Yes, union greed is part of the problem and they can (if not must) be part of the solution . Notice that I did not say that the concept of UNIONS is part of the problem.

4- Blaming this on Federal regs makes no sense. If Federal regs were part of the problem, then NO car company could be successful.  Politicians aren't there to run a "successful business", they are there, in theory, to protect the interests of the people of America...which includes EVERYONE.

Ok, Worried, explain how the Hondas, Toyotas, and Nissians built here on US soil and sold here to Americans on US soil can turn a profit, make a better quality vehicle, and still meet all the goverment regulations placed on the BIG 3 - plus double the gas milage of their vehicles?

Your argument does not have any weight. The problem with the BIG 3 is poor management planning, and I do not believe the American tax payer should have to belly up the cost in increased taxes so these excutives and over paid union workers can keep their houses in the Hamptons. 

Similar to Florida_kes' comments I generally agree with 1 (compensation).

Regarding 2. Executive compensation, this should be based upon factors that are not related to stock prices but on performance; the current golden compensation should be cut back drastically to something similar to that see in Japan. If they argue that the current compenation packages mean that they will go somewhere else, fine! These upper managers SUCK ANYWAY!!! There are people who can do as good a job and are willing to work for much less. I'd do it for $200K, but a performance incentive would be nice.

Regarding 3: Auto unions and union employees are totally wacked. A local Ford plant closed here, and the former union employees are making a small fraction of what they are making. They are not competitive and have been killing the Amercian automobile industry.

Regarding 4: Trying to put blame on the Federal government becuase of OSHA or SOX is crazy. The writer must be a Republican "no regulations" person, and any reasonalble person can see what deregulation has done to the Financial and mortgage markets. SOX is a necessary standard to protect against abuses of companies like Enron and Worldcom.

One big Corporate governance issue that needs to be fixed is to give the stockholders more power, demand arms-length direction by boards of directors, and clean out the self-interested poorly competent upper management in the American automobile companies.

The problem here is that the big-three were selling products that the simple minded in the public demanded.....the "bigger is better" non-sense. 

The public's wants/needs changed overnight...unfortunately, you can't change large scale production facilities any where near as quickly.....let alone cheaply.

Get rid of the unions?  I am not now, nor have I ever been a member of a union, but without the unions would any of us have health insurance, 40 hour work weeks, paid vacations, holidays, etc.  Some unions do abuse their power and make unreasonable demands and the Autoworkers have done that for decades.  But let's not condemn all unions because of the excesses of a few.

Health insurance? Sure, I've got it. I pay for it just like the rest of the non-union people I know.

I want to work where you work, if you only have to put in 40 hours a week. I haven't done that for 15 years!

I concede the rest.  But there are just a few unions that have the strangleold on the American business scene like the UAW, and they have got to have a "come-to jesus" meeting soon, to decide to really help the industry, rather than come up with some sneaky plan that doesn't save the companies anything!

I'm in complete agreement with you, Jacob.  Watching American automakers over the past few decades has been like watching dinosaurs blithely going about their business totally unaware of their imminent extinction.  We shouldn't expect our taxpayers and workers now to bear the burden of management's stupidity and laziness, and the excessive cost of our current healthcare system!

Jacob you are full of crap.. Those countries healtcare sucks compared to ours.. Why do you think they all come here for anything they really need for healthcare? And did you happen to see the tax rate of those countries?  I thought not.. You just run off at the mouth with no research.. Healthcare is not a human right.. There is NO RIGHT to Healthcare.. That is about as assinine as my 16 yr old telling me it is his right to drive.. LOL

 I agree with you as well and I cant believe how Anti union the people on here are. I guess they want us to be like China where the average worker has to live in a small apartment with 8 other people and have no health care.   This seems to be OK with alot of people on here.   "There is NO RIGHT to Healthcare" easy to say when you have healthcare.

  I have been on the poor side of the fence and I can tell you they all dont deserve to be there. There seems to be this perception that if you are poor you made bad decisions in life. Some people yes. But for every one person that is a "good for nothing" there are 5 that are struggling who are smart, hard working, and in most cases college educated.  How can somebody possible get a start in the workforce? The average price of a small house in the boston area is $300,000 and up...... a car (and a fairly good one because you have to commute so far) $20,000 and up, starting salary $45000, health care, daycare, energy...... yeah!  the numbers dont add up.   But at least we have some brain surgeons on here who want to cut employee benifits.

Hey guys--Who said anything about cutting healthcare?  The unions need to be more flexible, top management's inflated salaries need to be cut and there needs to be a center ground for everyone.  Just remember, the autoworker isn't the only one that is going to feel the pain if the industry fails.  WE THE TAXPAYER WILL as well.  I'm not going to say anything about healthcare--you don't want me to get started--I work in healthcare and the bottom line on that is people need basic healthcare.  They also need to take responsibility for their own health before it becomes a downhill slide.  That will entail regulating the insurance industry, regulating malpractice claims and premiums for physicians and then, maybe then we could keep out socialized medicine.  No one wants to wait a year for an operation.  In this nation, we shouldn't have to.

Jacob- are you crazy!!!  I live in Arizona and you can't get an appointment for a doctor, lab work or, god forbid,  a hospital bed from October to April.  Guess why?  All of  theose beautiful Canadian citizens that pay exhorbitant taxes for their "free" healthcare that they can't access!  When they visit AZ for the winter, they pay cash and get EVERYTHING they possibly can get done while they are here.  I sat next to a woman in her 60's the other day who had a lump in her breast and was put on a 2 year waiting list in Canada for a mammogram.

Should have gotten a Grand Prix GTP.

Same with Ford.  I was raised to buy American and always had.  My last one was a 96 Mustang -took it in 8-9 times in the first 20K miles for overheating, they could never find anything wrong -claimed it wouldn't overheat at the dealership, even though at the first red light on the way home it would get hot again.  It ended up overheating and cracking the block at 24k miles -they wouldn't honor the warranty because it was MY FAULT for allowing it to overheat.  Will never buy Ford POS again.  Love my 2004 Honda with 95k miles!  Have never paid for anything but oil changes and new tires!

Rubin--I do agree with part of what you said.  I ranted about free trade treaties in another blog--get rid of them.  They want us to buy from them but they won't buy from us. These other treaties and trade agreements  need to be re-visited and modified for TODAY'S world.  Congress needs to worry about important issues facing WE THE PEOPLE, not whether to take Lieberman's committee post.  :)

Right on Rubin. American Industry has been handed over to foreigners for the sake of greed for far too long. Look at our job losses, stagnant salaries and rising cost of commodities. We need good paying jobs to stay here in the USA, to grow our tax base and start paying down our debt to Japan and CHINA. We would be foolish to not bailout the Big Three. It is one of our last vestiges of of American manufacturing that supports communities and provides good paying jobs. We have enriched China and Japan. It's time to get back to buying American made! The survival of the U.S. depends on putting people back to work and paying them a living wage.

it is Pelosi they went to see, She is beholding to the Unions.. They gave her a President she can push around..They are under her skirt.. She will find a way to give them what they want.. I say call your congressman and senator and tell them HELL NO they get nothing..

joe,

Colorful post, but I certainly agree with your conclusion.  Bankruptcy laws are structured for this purpose.  Airlines have led the way.  Auto companies can do it, too.  If government bails them out, no lessons will be learned.  Instead, execs and unions need to come together and begin making changes.  I say, Chapter 11!!

Ellie Phat--Right on!!  Spread the pain around, it hurts less.  Are you listening execs and unions???

Yo bepatient, maybe you need to start reading the business section of your favorite newspaper or turn on the news occasionally to keep up.

sd - we used to say "Found on road dead", lol.  I try to buy American, but my husband will not.

Grant, I question if you worked for Saturn, (now GM-Spring Hill Assbly). I have worked there for many years. If a woman was sitting in a chair and putting, what I suspect you are trying to say, FLOOR MATS for $25/hr, I suspect she was on a limited restriction w/out a chair. If you were to visit the plant today, you would see no chairs on the floor, many in the plant have retired and we have young workers making $15/hr (max rate) doing jobs that are over 100 percent loaded and are ergonomically challenging. Many have left the jobs due to the heavy job load. Many of the old timers on the floor have to live with Rotary Cuff dislocations, Back surgeries, carpel tunnel, bursitis, and many other maladies. I certainly would not work there for $15/hr only to have my body wracked after a few years. These workers do not receive a pension or health-care benefits after retirement. We both know why the import competitors have low costs, it is because they have a high turn over rate. The workforce is young, because once you get injured on the job and cannot perform your job duties, you are kicked out the door and in comes another body, therefore not many raises. I have friends who work down the road at Nissan. They have no respect for the company and feel their is no humanism in the Japanese way of business. The Union has made Concessions. No pay raises for the past 5 yrs and poor health care plans. I have worked for GM for roughly twenty years and have never made the $30/hr people on here are stating. Furthermore, if in fact you did work for GM, you would be more loyal unless you are bitter because you were fired for insubordination.

4awareness, I worked for Johnson Controls which assembled the seats for Saturn from 1995 to 2001. I also helped install the seats at the Saturn's plant for the last 3 years where I worked right next to UAW workers. I was making 11 dollars an hour at that time the men working next to me were making 23 dollars an hour. So I have done my research. I recall one night were I was working my a-- off on the line and the UAW worker standing next to me said " You couldn't pay me enough to do that job." There must have been a Sh-t load of workers on light duty the days that I worked there. I bet the American people don't know about the UAW contract that stated you couldn't layoff workers! I know for a fact that the last 2 years most of the days you watched training videos in the break room and painted your tool boxes. The reason was because the UAW contract guaranteed 40hrs of pay know matter what. When at any other job you would have been laid off. Gee, I wonder why they would need bail out money. As far as being fired or insubordination far from it I finished school got my degree and went to work for the Giles County Sheriff's office as a corrections officer. Then I relocated to Minnesota and became a Sheriff's Deputy so I don't have a dog in the race anymore. I suspect if you've worked for GM & UAW of 20 yrs then you don't know which end is up anymore. I know one thing I refuse to buy American made crap anymore.