Why the Automobile Bailout May Fail
60President Bush is trying hard to bailout the automobile industry. Will the bailout work? Many say let the companies go bankrupt by filing Chapter 13. Then the companies will operate with a lot of the burden lifted off from their shoulders. This may cause the retirees to lose benefits, along with busting the unions. Therefore, the workers' wages may be cut along with their benefits.
For the bailout to work, the automobile industry has to sell cars. Consumers have to purchase these cars. Many people like to buy a new car for the warranty. To know that for the next few years, they will not have to be responsible for the repair is very attractive.
With the gloom and doom that some of the automobile companies may fail, the possibility exists that the warranties may not be worth any value. This is the main reason people are not buying vehicles right now.
Why would someone want to buy a car, that may not have parts available, and a company to stand behind it within a few months?
Car Hit by Missile
How do we boost consumer confidence?
In order for the major car companies to recover, they will need to establish the consumer's confidence, that they will be around for a while. No one has looked at this scenario. Most of what we hear is that the industry may still fail and will need more bailout money. Or, the industry is going to fail no matter what. Why would anybody want to buy a car if this is the case?
This can be compared to the old studebaker. I love old Studebaker trucks. I see them around every so often, but no one is driving them anymore. Why? They are usually broke-down without any parts easily available to fix them. Will some of the modern-day cars become like those old Studebakers?
Somehow the auto industry and the government need to develop a plan to build up the consumers' confidence and trust. One way to establish confidence is to have the warranty handled by an outside party. The warranty would act more like a bond. This insures that there is an adequate amount of funds to guarantee repairs. The funds would also insure that repair parts are available for at least the duration of the warranty, or longer. This would greatly boost the consumers' confidence that they are not buying a Studebaker.
Will the auto industry bailout work?
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Comments
Thanks Ralph, Interesting observation. How come you think that Chrysler will disappear?
Happy New Year Hubbing!
Ralph, The holding company for Chrysler is cash heavy. They could stay around. Also, ask, with the holding company being cash heavy, why do they need a bail out?
Happy New Year's Hubbing.
For the industries to survive they must do several things. The bailout should be used to buy-back all their stocks and the companies should be nationalized. All corporations should be required to exist, as they originally were, as non-profit entities. The means of production must be owned and controlled by those who produce, not those who lie, cheat and steal for their own personal gratification. That's just the tip of the proverbial iceberg.
One more thing. They must STOP building vehicles with internal combustion engines. In 1996 General Motors produced a completely viable and highly successful electric car. They were very dismayed by the success of the car and the resultant high demand. They discontinued it and attempted to recall and destroy every unit.
I have just uploaded Who Killed the Electric Car to YouTube. It's still processing but should be available soon.
http://www.youtube.com/watch?v=OpQxqFv0968
You might want to check this as well.
http://www.pbs.org/now/shows/223/electric-car-time
Things can NOT go back to the way they were. Change must be extreme and it must come now.
Coldwarbaby, Interesting concepts.
I wonder how many agree with them. Question back to you: If the electric car was such a success and they could have profitted highly from it, why did they destroy it? There is an oximoran in you logic. Those big greedy money hog managers would have jumped on this to make big money. Or were they stupid?
When was the car manufacturing a non-profit organization? Never heard of this, before. Henry Ford did it for non-profit. I guess I had better check the history books, before they get re-written.
Until the technology gets something better than internal combustion, I think we are stuck. Electric cars still take CO2 for the energy, since most of it comes from coal burning generating plants. Wind Generation is a help, but it is an expensive alternative that with our economy. It is too expensive to presue when there are cheaper fuel sources out there. And you can't convince me different because I have studied and pursued altermate fuels and energy. If they were out there, industry would be using them to save money, because they are "big money hogs" in your own language.
I have a big prediction for the wind farm addicts. I predict with in the next few years someone, somewhere will do a big study to show how wind farms are affecting the natural air movement and is changing weather. That absobing energy out of the wind is changing the weather around them and we need to stop the practice of harnishing the wind. This is in-evitable!
Don't get me wrong I am for these thing, when the technology becomes available and the cost is justifiable. If wind farm cost were less than coal burning, the fat currupt managers would be putting them up every to reap the profitis, instead of government having to subsidize them.
Oh by the way. We use electric vehicles at my work. I would never want one of these on the highway.
From your video. The car got 50 miles on a charge. I guess I own a car that I can never take a trip over 50 miles. This is what I want.
The lady on your film who said it takes 3 seconds to charge her car. Common, it may take 3 seconds to hook plug it in and throw the switch, but it takes hours to charge. I know, I use the stuff.
These cars are good for very short distance driving, and long charge up time. I would love to have one where I would plug one in at home at night, charge it, drive it to work, plug it in charge it up. My fuel costs would be lower, but when I can't drive this over 50 miles (and this is when the battery is new and worsen with time.) Forget it buster.
This is not what the public wants. I believe in supply and demand, and if the demand would be there, they would supply it. It is that simple. Because if GM wouldn't Joe the entrepreneur would get into it and get it going to make the "filthy money." Pure and simple!
Or are you telling me there is a market for electric cars that can only travel 50 mies, that there is no road service for (i.e. electric stations) I guess I had better open my company and start the business. Or better yet, why don't you start the business up if you think there is a demand for and you can make money. Proof us wrong!
I challenge anybody that feels the electric car is proven technology, and make money on it to do it. Put their money where their mouth is. You might become filthy, corruptable rich!
If others can't or affraid of doing it, why should the automobile business be forced to do it by congress!
eovery. Think for a moment. What will the electric car do to the oil indutry? What will wind and solar power do to the power companies? The only reason alternative energy is so costly and has been so slow to develop is because the oil, coal and gas industries have obstructed, blocked and hindered at every turn and opportunity.
The first automobile ever built was electric. Henry Ford built an electric car before he built an oil/gas powered one.
Fossil fuel pushers have cornered the energy market. They don't want ANYONE uspetting the status quo. Regardless of the consequences for the future of the human race they want to continue with business as usual. This has nothing to do with their altruistic and noble desire to give people a higher standard of living or to gaurantee a continuation of "our way of life". It has everything to do with a small group of people being able to continue their way of life; living off the struggles of the rest of us.
I'll tell you again; you need to come to grips with the reality that "our way of life" is the problem, not the solution.
Check out the movie. Research the EV1. The facts are out there if you care to look for them.
http://www.americanenergyindependence.com/solarene
http://www1.eere.energy.gov/solar/myths.html
You haven't studied or pursued diligently enough.
If you believe that the "American way of life" is non-negotiable then you'll need to be prepared to pass on to your children or grand children a planet that is largely uninhabitable.
http://www.pnas.org/content/98/10/5466.full
http://www.actionbioscience.org/newfrontiers/eldre
More about electric cars:
I understand that. I would love to get off from oil. Technology isn't there yet, and we shouldn't break the nation trying to force things that are not viable.
I also understand most of the new electricity plant are natural gas burning, which would give revenue back to the oil companies, too.
Just show me that the electric car technology is there. Then I can open up my electic car business and own the world! I can be filthy rich and greedy!
eovery, I'm not familiar witht he capital position of Cerberus. They may well be sitting on a wad of cash and/or credit. Apparently Cerberus is reluctance to throw good money after bad. The bailout applies to Chrysler, not Cerberus. Cerberus offered to give up it's it's interest in Chrysler to the UAW and (to bondholders?) I don't think Cerberus is obligated legally to put any more money into Chrysler. However, that's a guess. I'm not familiar witht the terms of Cerberus buyout deal with Daimler. Daimler when it sold out to Cerberus apparently decided it didn't want to put anything more into Chrysler. I live in Detroit, but I have any information on any of the companies other than what I've read in the newspapers. (Disclaimer: I retired from GM after 34 years some time ago.)
Do the research. I'm done.
Thanks Ralph,
I only know second hand stuff. And I do not have the time to study it all out.
I would like to see the UAW run the auto industry. Would they strike against themselves for more money.
Actually a strong win-win relationship between the workers and the business is very lucrative. This is usually paid out by bonus and incentive when they are making money, and none when they are not. So this holds the workers accountable for lowering costs and making money.
Coldwarbaby.
I am an electrical engineer using ac and dc technology. Battery back ups, etc. I know what is out their. I do not have to research. The best technology for right now is internal combustion for cars. And it will be for a while. Someday, with some new breakthrough the electric car will be ready. Electric cars are the future, but technology is not there yet. Let's see in 20 - 50 years. It is basically the batteries.
Oh, by the way, if it was to get off from oil, people have been using propane in the cars for years. Bye Bye oil, but the propane still comes from oil companies.
Fuel cells hold a strong promise. But no one is marketing and getting fuel cell station across the intestates and roadway systems.
So what will electric cars change? Most power plant building today burn natural gas. So we still have the CO2 emissions. Until the solar panal can come up to par in both high output, and low cost. We, also, need lower cost wind generator systems and possible nuclear energy, We are stuck with what we have until then. The electric car actually does not solve any problems, except for being more efficient over all energy wise, if the transmition distance is not lon on electrical lines...but that is another topic.
Here's a comment I made in another forum
It's not accurate to equate plant work rules in the auto industry with featherbedding although many do result in increased production costs.
In my experience (34 years in labor relations at GM), some plant level work rules embodied in locally negotiated agreements, grievance settlements and practices can accurately be characterized as featherbedding but not all are attributable to the UAW. Other work rules define simple fair treatment in the workplace.
Many of the less justifiable practices' origins came long before the UAW--from the industrial engineering theories of Frederick Taylor most of which have been discredited (e.g. piece rates and a proliferation of narrow job classifications) and superceded long ago by behavioral scientists like Elton Mayo and quality gurus like W. Edwards Deming. These practices are hard to change. They are embedded in the plant culture of managers and union representatives alike. GM and the UAW have been working together to change these practices and improve productivity for a long time. Some UAW-represented plants are more productive than comparable non-union transplants. Others are not. It is a huge mistake in my opinion, to make a blanket comdemnation collective bargaining because of work rule issues or because of generous health care and retirement benefits negotiated in good faith many years ago. Many work rules do need to be changed and national health care reform may be the best answer to the health care cost issue at GM, Ford and Chrysler.
Many if not most of the work rules grew out of management abuses and unfair practices that preceded the union--nepotism and favoritism in pay and promotions, overtime, layoffs and recalls, disciplinary action and the like. There was good reason for the UAW's demand for "justice on the job."
Sometimes the "justice" was overdone in over-elaborated work rules, however, in plant level negotiations against a strike deadline at a key parts plant or at an assembly plant whose models were in short supply. The people at UAW headquarters can be fairly criticized for authorizing local strikes to pressing demands which should never have been granted. UAW president Leonard Woodcock and VP Irving Bluestone, along with GM managers who gave in too readily out of short-term sales considerations, allowed the local negotiations process to get out of control. This undermined the grievance arbitration procedure as grievances were saved up for local negotiations rather than being resolved on their merits in the grievance procedure. This impaired efficiency at many plants in the industry.
In recent weeks we have seen a lot of uninformed commentary blaming the UAW and GM management for problems that were many years in the making. Much of the bloviating reminds me of when our labor relations VP, George Morris, used to quote St. Thomas Aquinas "Seldom affirm. Never deny. Always distinguish." when one of his staff produced a broad brush, simplistic proposal to an issue that required additional facts and complex analysis and answers. Messrs. Becker and Posner would do well to consider Aquinas's maxim and avoid exaggerated generalizations beyond their expertise about collective bargaining and "adversarial" labor relations in the auto industry, based on gadfly comments from individuals who probably have never set foot in an auto plant.
Wow Ralph, you should have had this in a Hub and got credit for it.
I work with a union at the place I work. I understand unions, so don't bull me. Working relationship are similar other places.
A good working union management relationship in a win-win approach is the best, I have seen so far. And like I said, ususally performance based incentive works the best.
If not, it is usually the company is screwing the employees, and the company thinks the work force is screwing them. Plain and simple. I hope your big fancy auto-unions and the automobile industry does a lot more analysis on you thousands of employee, but where I work, with about 150 of us. It is if the company is profitable at the planned amount. Bottom line.
You cannot deny, however that GM is way heavy on benefits, that is dragging the company down. For them to become profitable, and for the employees to keep there jobs, these benefits have to be trimmed down. I don't like to see workers lose money, but it least they may have a job.
My last company I work for, when they were making money, that gave gigantic bonuses out. When the times got lean, did the employes put any of their money back into help out. Yeah, share the wealth, but screw you when times get rough. If the company would have kept some of the money, invested it in the plant to cut costs and align the plant right, it could have made it through the hard time. Instead they "gave the farm away." Pretty much as GM has. I haven't followed Ford and Chrysler as close.
As far as your comments earlier on Cerburus not wanting to put more money into Chrysler. Well, if they don't, why should we be bailing them out. They don't want to spend their own money. Sorry, I can't support a bailout of them. The business must not be lugritive enough to stay open, then it doesn't deserve bailed out.
Thanks for your comments, Ralph on helping me understand this more.
Like I said, I'm done.
Coldwarbaby,
Thanks for you comments. I appreciate them, and they helped me learn.
For who ever may follow this hub, I found a good article on electric cars
http://encarta.msn.com/encyclopedia_761580732/elec
This artcle points out most electric cars get less than 100 miles on a charge. They require 3-10 hours to recharge. And charging stations on the road is limited. Using they are at parking lots, that is in areas that are trying to use them i.e. California.
Someday, when the technolgy advances on batteries, electric cars may replace the internal combustino car. However, right now it appears that the technology may switch over to fuel cell cars, and not electric cars. I have found enough data, that I may write an actual hub on the subject to let everyone learn more about the subject. And the actual facts on energy savings of gas versus electric.
Scary, very scary. Without investing in future non carbon based transport or at least some kind of sustainable energy program, these dinasours are just asking for a handout until the same old game resumes.
Thanks for stopping by Danjutsu.
Realistically, is there a viable non-carbon based energy solution? I surely haven't been convinced to buy any of the other on the market.
Keep on Hubbing.
Since you have written this hub, now the government has not only bailed some of these companies out, but owns a majority share in them and is directing which dealerships can stay open and which ones have to close. Some PROFITABLE dealerships are being forced to close. What makes sense about that? What of those people who worked hard, built their businesses, paid their employees, made money and now...the government is directing that they must close? This is creating the LOSS OF JOBS...the exact opposite of what is the proposed goal. Scary thing is that this could happen in other industries. Is this the America we want?????
You said it Peggy,
I agree this is totally wrong and crazy.
Is this the change we were promised. 2012 cannot come around fast enough. We can end some of this idiocracy next year. Vote them all out! Let's get some checks and balances at least. This free rain to do the democrats will is rediculous.
Keep on Hubbing!
You know I am still not comfortable with this bailout and yes they have sold a lot of cars but to who? What happens if others are laid off? The housing market is turning but to whom the investors? Informative Hub!!! :)
AEvans,
You know this hub was written several months ago. And see where what has happened since.
Housing is turning because the ones who are working are buying because they see great deals. And with hope as the market do return, they can make money on the housing. Same game, but hopefully better lending rules than what Clinton, Bush and all of congress, including Bawney Fwank, did in the past.
As in buying cars. That is a big questions. I do see some buying because of the deals they think they are getting with the cash for clunkers, but I understand the government is not paying on these, and the dealers are coming back on the buyer to pay for it. That's our government at work. And they want to run healthcare! Other countries may be able to do it, but not ours.
Thanks for stopping by, I always love hearing from you.
Keep on Hubbing!
You're right; consumer confidence is a huge component of reversing the situation we're in, and for the most part it's been overlooked.
I must say, however, that it's hard to take you seriously with that dog serving as the Hub photo!
Thanks for hubbing over, glassvisage,
I guess the next car I am going to be is the only American own company, Ford.
Keep on Hubbing!
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Ralph Deeds says:
12 months ago
IMHO, Ford will survive. GM will survive in a diminished version. Chrysler will disappear.