Does anyone else think this is getting out of hand? I read yesterday that GM will close 5 more plants and lay off 20,000 more U.S. workers but they need $14 billion to do it. How many jobs could we lose for $28 billion? How many billion do we have to fork over to get them to eliminate ALL the jobs?
Seriously I think they had their chance and we'd be better off giving the money (which by the way we really don't have) to start ups instead--You know, companies that are ALREADY MAKING GOOD CARS.
I don't think GM and Chrysler are even serious. I think they're just banking on holding the government up for more cash and more cash by holding the threat of bankruptcy over our heads, and then waiting out the recession so they can go right back to building the same old crap.
It's not a good situation for either Gm and Chrysler or the American people. I hadn't heard they were after another $14billion! Gm is after some more I know that.
I see your point about the start ups, but that's still a lot of skilled people out of jobs! What could they do instead? "green collar" jobs are becoming more popular in America but there are no where near as many as auto jobs.
At least Ford seems to be confident it won't need the money.
Let's have a bit of perspective--$800 billion for the Wall Street bankers who caused the problem versus $20 billion or whatever it takes to save the U.S. auto companies and their employees.
Allen Mullaley Ford's CEO ranked 153rd with $12 million which reflects the fact that he was recruited recently from Boeing where he was well compensated.
Rick Wagoner GM CEO ranked 433rd with $2.05 million.
However, it's true that CEO compensation generally has been out of control in recent years.
I have to say Ralph, that I'm surprised at how little these guys have been paid. I know a lot of people will moan and complain about that. But think about it, Ford is one of the biggest car makers in the world, has been around for over 100 years and has produced countless millions of cars, and the CEO gets $12million.
Is the problem not that pension systems with these companies? Surely it's not the CEO's pay that's screwing them, it's paying the pensions of the old staff.
And no Ralph, I'm not blaming you...
You have to wonder how the poor sod makes ends meet, really.
Of course the poor sod doesn't have any trouble making ends meet. Alan Mullaly was in line to become CEO of Boeing in Seattle. He was their manufucturing expert and very well paid. Ford recruited him to move to Detroit with his family. That was what they had to pay him to get him to come (2 years) ago. Moreover, Ford has not received nor is asking for any government bailout funds.
Exactly what does "sod" mean? I gather it's not exactly complimentary. (from Sodomite or sodomist, perhaps? "makes ends meet?") I'd be surprised if that were true of Mullally. :-)
I read somewhere (CNN or BBC) that for every car GM make, the first $1000 or so goes to the pension and health system. That's before anything is even made!
It's a crazy situation that GM have got themselves into. I've never owned a GM car, but I would be sorry to see them go, they can make a half decent car and the new Camaro looks amazing!
The U.S. is the only industrial country that doesn't have a rational health care system. Health care in the U.S. costs more and provides inferior results. GM, Ford and Chrysler negotiated generous health insurance plans and pensions in the sixties and seventies and now they can't afford to keep these promises. Their competitors aren't bearing these so-called legacy costs. Also, the Big Three are saddled with a variety of plant work rules some dating back to the 1930s and others negotiated in the 70 years since the industry was unionized. These work rules are not easy to change. Here's a comment on this part of the puzzle:
Plant work rules clearly affect productivity in the auto industry. However, it’s not fair to put the blame for them entirely on the UAW because many of the most troublesome rules originated long before the industry was unionized out of the now largely discredited theories of Frederick Taylor–the proliferation of narrow job classifications composed repetitive assignments quickly learned by uneducated employees. These and other concepts did not originate with the UAW, but were incorporated in union agreements when the plants were unionized, BY AGREEMENT with management. These wage agreements and many other work rules have accumulated over 60 years and are very hard to change. Since the 1980s the company and union have recognized the need for change and cooperated to change the plant rules and culture. That was why Saturn was formed in the early 1980s. NUMMI also was used as a model for change in GM plants. Plant managers and union leaders spent time together at NUMMI to see for themselves how the Toyota production system worked, and how the number of grievances were kept down close to zero through better communications and mutual respect between UAW representatives and NUMMI managers.
The transplants were able to start with a clean slate in new plants and with policies which reflected new behavioral science concepts and policies advocated by W. Edwards Deming, e.g., very few job classifications (two production classifications: Team Member and Team Leader, and two skilled trades classifications: mechanical maintenance and electrical maintenance whereas, a typical big three plant had multiple production and skilled trades job classifications which resulted in many disputes, problems and inefficiencies.) The UAW and the auto companies have cooperated to eliminate many of these problems through “modern operating agreements” which permit more efficient production and maintenance. A number of Big Three plants equal or exceed productivity in the Japanese transplants.
From my experience in GM, the UAW deserves criticism for letting the local negotiations process get out of control when Leonard Woodcock was President and Irving Bluestone VP of the GM department. Local unions, instead of making good faith efforts to settle grievances on their merits saved them up to be bargained wholesale under the gun of a local strike deadline. This put tremendous pressure on management to concede to extreme demands at key parts plants or assembly plants for models in short supply. This process spread from triennial contract negotiations to strike authorizations during the contract over allegedly unreasonable production standards or health and safety hazards. The UAW damaged plant efficiency in many GM plants by sujecting them to the pressure of 5-day strike authorization notices. And GM management failed to develop an effective policy to deal with this problem. Instead of insisting that grievances be dealt with in the regular grienvance and arbitration procedure on their merits, out of short-run sales and profits considerations, management succumbed to countless unreasonable grievance settlements and unwise agreements on local work rules. Unravelling the accumulated mess cannot be accomplished by the stroke of a pen by the national parties. A long and arduous process is required.
At the national negotiations level mistakes were made as well. In my estimation the worst was the infamous “Jobs Bank” agreement negotiated by Alfred S. Warren, with the approval of Roger Smith, with Owen Bieber. Instead of telling the UAW that it was impossible to guarantee lifetime income security in a collective bargaining agreement; that job security could be achieved only by making attractive products and selling them at affordable prices; and this was especially true in view of the unprecedented international competition facing the company. GM didn’t tell the union that. Instead the company, at a time the need to downsize was forseeable, made an agreement that greatly increased the cost of downsizing. This 1982 agreement should have gotten a Darwin award for the worst agreement in the history of collective bargaining.
It's not really anything compared to the $53 billion that has gone missing from the "rebuild Iraq" fund!
It's good to hear the American Government is finally looking into that! Sounds like you guys could do with every penny right now!
Then again, so could we, we might need another loan Uncle Sam...
I just heard on the news that between GM and Chrysler they are asking for $20 billion more, not $14 billion.
I don't know. At first I felt strongly the government should step in and keep these companies viable. Since that first intervention, I've been keeping up on it and I don't see GM or Chrysler really trying. I looked at their product line ups, and what do they have that's fuel efficient and affordable? Chrysler has nothing. GM has the Chevy Aveo (subcompact gasoline powered car) and the Volt (not in production until late 2010 at the earliest and already not competitive in price or capability with currently existing electric cars).
Plus, if they're going to eliminate all these workers anyway, what is the point? The point was to save the jobs. That doesn't look like its going to happen with or without government assistance.
Tesla has an all electric mid size sedan ready for production and has applied for a government grant. It will cost around $55,000, which is a lot, but Zenn has an all electric for $13,000 right now.
Sadly GM doesn't seem to have something that's going to pull them out of the fire. From what I've seen and heard about the problems, GM does seem to be pinning a lot on the Volt and the Camaro, which as you said won't be out till next year!
I find it strange that a lot of people I know who (in the UK) seem to think this is all down to the current economy downturn. How long has GM known it was running out of money?
If GM do have to let loads of their workers off, it will work for them because it will give them an excuse to ship the jobs to China or another cheap labour country like Malaysia.
One things for sure though, this won't be sorted soon.
I think GM and Chrysler haven't been competitive for the last ten years, but it is also true that the economic downturn is hurting all car companies around the world. So both things are kind of true--it's being caused by the credit crunch and the recession, but on top of that, GM and Chrysler weren't doing that hot to begin with.
So many things are wrong right now. It just feels like a losing battle trying to save the auto industry too. Why is everyone getting a bailout except ordinary taxpayers? I think I'm going to change my last name to Corp so I can put my hand out too.
Well, the latest piece of garbage from Ford includes a self-parking gadget.
There is not enough money in the world to bail out the big three. GM are trying to hold the Swedish gov to ransom and have been told to get lost -
http://business.timesonline.co.uk/tol/b … 757562.ece
OMG. I've never driven a Saab, but they have a reputation here for being finicky and constantly in the shop for repairs. At any rate, Michigan is hardly crawling with Saabs, and it looks from this article like there are about to be even fewer of them around!
Honestly, I think GM is living in the past. It still thinks that "what's good for Detroit is good for the nation," and that it can just make all these bullying demands because it's so vital to the U.S. But look at Detroit. Does it look like the U.S. gives a rat's ass about Detroit? Neither does GM. They just want the money. If they get it, they'll lay off thousands of U.S workers, close plant after plant, and sell cars in China eventually. Maybe.
I am worried for the workers here in Michigan, but I think GM will dump them anyway.
Whatever the reputation the big three have created - Saab make cars that are about a million times better than anything GM have ever turned out. Very good. But - they can't make money either.
I am waiting for some politician, somewhere to say - "Wait a minute. What is wrong with this picture?"
GM will survive with a bit more help from Uncle Sugar because the cost of letting the company fail exceeds the cost of helping it survive.
I've been driving SAAB's for many years now, and hope to continue doing so for many more to come.
Yes, they can be quirky and finicky. That's what I love about them.
Because he was driving a SAAB has allowed my son to walk away from a couple of crashes that he probably would not have survived if he had been in a car that had less of a focus on protecting the passengers.
And there are plenty of other brands of car that are constantly in for repairs. But so far, none of my SAAB's has been in that category.
I'm no expert on the management of the US car industry, but I'd say that a fair bit of the current problem would be the amounts that are paid to the US car company executives.
Apparently the head of GM is paid more per year than the total salary of the top 20 executives at Toyota.
Not only is GM looking for 14 billion more but Chrysler says it needs another 5 billion. The only way these companies are going to make it even with the latest handout is for the American public to buy more Big 3 cars.
I happen to put my money where my mouth is as I only buy Ford. I have a Ranger PU and my wife has Taurus. If there is any way American car buyers can justify it they need to buy a Big 3 car. The problem is that those companies have a lousy reputation for quality (justifiably earned) and the foreign cars have a good reputation.
I guess the only way to settle this is to have the Big 3 go bankrupt and for us just to buy foreign which will drive a few more nails into the American manufacturing coffin. We're kind of caught between a rock and a hard place.
GM's proposal is available online if you want to read it.
The cost of the bail out plan is FAR CHEAPER (in both dollars, layoffs, and economic impact both on the private sector and the government) than going into any type of bankruptcy. A bankruptcy isn't free, and will cost FAR MORE than the max. $30 Billion their plan asks for in the worst case.
Bottom line is: Their plan is a good one. I personally don't buy GM cars (I have had nothing but total satisfaction from Toyota) but their plan calls for closing down unprofitable nameplates (Saab, Hummer, etc.), consolidating operations (closing some plants), reducing compensation for management and executives, getting their cost-structure in line with the current economic reality (they are projecting VERY CONSERVATIVE figures for market share, units sold, etc.) and have a proposal that overall is very good and will get them through this rough patch and on solid footing in a couple years (profitable, and paying back all the money).
Do I believe they will execute the plan as written? Of course not, but they did do the due diligence and presented a workable plan. The plan calls for them to reach certain milestones and report back to the Govt.
1 in 10 Americans is employed either directly or indirectly from the automotive industry (manufacturing, parts, service, sales, supply-chain, etc.) and I think giving them more money now is a much better option than the alternative.
Read the plan yourself. If the US Govt. reads it before voting on it, they will most likely embrace it, because it's a no-brainer compared to the alternatives.
HOWEVER, since they voted for Porkulus without reading it, what chance is there of THAT!
When this mess first started to happen, I was all for saving the Big Three whatever it took, for all the reasons Ralph and Trophy Man list here. If they fail, the cost to the U.S. and the working people here will be much greater than anyone imagines. I do understand that.
But now I'm persuaded that good plan or not, 1) they won't follow it, and 2) they don't have the cutting edge thirst for innovation that will help them survive over the long haul.
Next month Bill and I have to buy a car. If he's lucky and his trucking company doesn't go bust, he has five years to work before his earliest retirement date. Our 2003 Mitsubishi wont' last five years. So for lots of reasons we have a short window whereby we can get a car and must, and it's important we get it right because there won't be a do-over opportunity.
There isn't a single American maker that has a car that makes sense for us. He drives 140 miles a day just commuting to work (the barn in the city we live closed forever, so he has to drive to another city now to work). The only car that remotely makes sense for us is the Prius, which is likely what we will end up buying. I have a 1984 Honda Accord that still runs great. How many people have a 1984 model of ANY American car that they actually drive and still runs great?
Telling people to "buy American" cars is fine and I'd do it too if they'd build a car we could use at a price we could afford that would last more than four or five years.
Part of the problem is gas. We don't know what will happen but we can guess it won't be anything good, and the U.S. spent the last 30 years doing nothing about it.
Part of their plan is to increase mileage on all vehicles, move almost all vehicles to flex-fuel, launch the Chevy Volt, etc. They are addressing the market needs for better fuel-efficiency and alternative fuel sources.
The plan addresses the expected increase in fuel costs (because new refineries aren't being built and when car purchases go up in the future, there won't be enough gas to go around, increasing prices).
Besides all of that, GM is strongest in rural areas (sales-wise). AND, even though you may prefer to buy a Prius, it isn't like GM doesn't sell any cars!
I don't like GM either, but they DO have market share and people DO buy their products (quite a lot of them).
Of course they WON'T sell cars if they file bankruptcy, further compounding the problem. This has been proven out historically.
It might sound childish and un fair of me to call GM on their Economy, but the Europeans and Japanese have been making cars with good economy for the last decade and they keep getting better. What car does GM make that could possibly rival the 74mpg of a Seat Ibiza or VW Polo Tdi?
I'm guessing not much...
The thing that's really annoying me about GM though is the Saab issue. I was lucky enough to come across a cheap Saab 900turbo for my second car, and it taught me a thing about driving with loads of power! Fantastic car. They went down hill with GM bought them. Now there just a re shelled Vauxhall Vectra. However, the Swedish Government has said to Saab they will help them buy themselves out of GM as long as they move their main European plant to Sweden to create jobs (makes a lot of sense to me!)
Yet GM won't sell...
By the sounds of it I think the GM motor industry is so outdated it should go down with the Titanic. That being said, if it's no going to happen then any government funds would do better put toward a total overhaul, not just baby steps in this industry. The "Dodge truck" is such a petrol guzzler it shouldn't be allowed on the road, and anything that is not fuel efficient or environmentally friendly should not be produced.
The electric car - my choice if only I could afford it. This is the huge window of opportunity to change Detroit's face of industry to one where everyone wins - except the oil companies who I don't give a crap about. If you're going to get that much money, make good use of it.
The ripples will be pretty wide and big if GM goes down. As I recall 3 million U.S. jobs are tied to GM--suppliers, dealers, et al. This is not a good time for this.
Presumably excess production is being moth-balled in america, much as it is here in the UK. As Pam says,if you're going to keep these guys afloat, perhaps it's time the manufacturing expertise available was re-deployed in a more useful venture.
Well, the companies have finally gotten the message that more fuel efficient motor vehicles are essential. And the Obama administration has made that a condition of receiving government funds.
That's good to hear. Let's hope it translates into action further down the line.
And yet, there is still this problem of the credit freeze and rising unemployment. If people can't buy cars, it won't matter how fuel-efficient the cars that are built are, and the U.S. auto industry will continue to lose massive amounts of money.
I do wish the plants could be geared up to produce something needed right now while the financial chips fall where they will. I live in Michigan so I too have a vested interest in this getting better fast, and as of now it doesn't look like it will. If GM goes belly up I personally will be at near-ground zero. They are losing so much money, they don't look viable at this moment.
Just passing out money doesn't seem to be working.
I agree that just passing out money doesn't seem to be working. But what Obama is talking about for the auto industry will carry some pretty strict conditions along with any government bailout funding.
Why is everybody obsessing about the auto industry bailout when it's a drop in the bucket compared to what has been poured into the Wall Street bankers who were a major cause of the current crisis? For example, AIG has received $80 billion so far, if memory serves. The auto companies made some dumb moves and neglected other things they should have done, but AIG's London office were the ones who concocted the most toxic witches' brew in the history of high finance. Merrill Lynch was not far behind and it paid out $3.6 billion in last minute bonuses using taxpayers' money despite huge 2008 losses based on reckless trading.
No argument here. Joe Nocera from the NYT was on John Stewart last night and he said that so far AIG has been given closer to $175 billion all told, and their investment arm is still hemorrhaging money. Nothing has been fixed. AIG is still a big mess, a black hole we all pour money into every month or so.
I try to spread my obsessive panic around evenly but there's so much insanity right now it's hard to make sure each cluster of crooks is getting a freakout in proportion to their actual contribution to this mess.
Joe Nocera is a really good financial writer and a pen pal of mine. Occasionally I send him a link to one of my Hubs. The NYTimes has better business writers than the Wall Street Journal, in my opinion. At least they are more inclined to look out for the interest of stockholders and the general public. Gretchen Morgensen and Floyd Norris are outstanding.
Ralph - do you know how much money will be needed exactly?
$60 billion say?
$20,000 per person employed ?
What about next year? Another $40,000 per person?
Of course the ripples will be wide. But how can you be sure that the ripples of creating money out of thin air will not be worse?
Plus you are assuming that the auto companies will magically turn around and start producing cars that people want. And are dumb enough to get further into hock to buy. And some one is going to print the money to lend them to get further into hock.
And if they don't - what then? Bail them out forever. You really think the oil companies want fuel efficient cars?
I laugh at the fuel efficiency of US cars. A typical car here in Europe gets more like 60-70 miles to the gallon (US gallons) - And they aren't selling either.
Bailing them out is the easy, quick fix option. But I think it will just delay the inevitable and make things worse in the long run.
Nobody knows how much bailout money it will or would take. There are a lot of variables, the biggest one being the depth and duration of the recession. Aside from the fact that I'm living on a GM pension I wouldn't like to see the the U.S. auto industry turned over to Toyota, Honda, Nissan and the Koreans. On top of the huge disruption that would result from a failure of GM. It may take a bankruptcy to squeeze a reasonable settlement with the bond holders, however, The UAW has been much more reasonable. It looks to me like GM and Chrysler could live with the agreement the union reached with Ford.
This is my point - no one knows how much it will cost. Is america prepared to go broke "saving" a dying breed?
So - if you cannot put a cost on it, it is not possible to say it is cheaper than letting it fail. And let's face it - the Japanese and Korean manufacturers are in no position to do anything about taking them over. They are failing themselves. Any business model that relies on continual "growth" will eventually reach the point of no return.
I think we have reached that point.
I mean - if you think about it - what most of us want is a decent product that we can afford that works and lasts a long time.
What we are getting is a piece of tin that we can't afford, doesn't work very well and needs replacing in 2 years.
But - if they ever make a decent quality, affordable car that lasts 10 years - they are dead in the water because they will not be "growing," at a fast enough pace.
I want a Vespa, but I know I will not live long if I get one. So it has to be in my dreams only.
If they're going to give away truckloads of cash give it to people who need a car.
That way they'll go buy one, and the auto manufacturers have to earn it.
No need to lay off workers, because they've got work to do!
Agreed. Give these billions of dollars to the small people in form of vouchers so that they can go pick vehicles at GM.
Three months ago there was enough money and nobody was complaining. All of a sudden there is no money. Where did the money go? The money you are missing somebody else somewhere is having its equivalent.
The astonishing thing is just how much people are paid by these companies that make poor cars.
And before anyone gets all upset, I don't mean the people actually making them. But the big cheeses at the top of the company earn an absolutely ludicrous and obscene amount of money. That should be one of the first savings.
I beg to differ on both points. The quality of the cars is approximately equal to the quality of the cars produced by Toyota which has been setting the standard for some time. And the compensation of the automobile company CEOs has been modest compared to those in other industries, especially Wall Street and the big commercial banks, the tech and drug industries.
You won't find anyone from the auto industry among the top 100 CEOs on this list.
http://www.forbes.com/lists/2008/12/lea … _Rank.html
(disclaimer: I am a retired middle manager from GM.)
"versus $20 billion"
"The $34 billion in loans requested by the Big Three will not be sufficient for them to avoid bankruptcy at some point in the next two years. They would ultimately need, in my view, somewhere between $75 billion and $125 billion to avoid this fate." According to some.
Another part of GM's plan is $1/year salary for CEO (and if memory servers, their top executes too).
America is such a diversified society with international interest that i for one would hate to have the job of restoring the economy. My opinion is that we,and i'm talking as a Canadian, have built those industries and elected the officials who managed those industries in a system that is based on market value. They/we messed it up and they/we should own up to it.
The political poker game is getting out of hand.
One possible scenario is that there is enough international interest in the big three that they wouldn't allow the ship to sink if they/we decided to stop the printing press.
It's time to call the bluff.....
That's possible, but where would the money come from? Fiat has some kind of deal to allow Chrysler to sell their small cars, but Fiat hasn't come up with a penny of cash that Chrysler so desparately needs. And anybody in the world who thinks GM has prospects can buy the stock on the open market for $2.06 per share as of today. I just heard on NPR Bushinss Report that GM's Opel division in Germany is applying to the German government for financial assistance. The whold world is looking into a black abyss whose bottom is not yet visible.
Here's some perspective on the huge national debt the Republicans are moaning about. The truth is that the debt in absolute terms is huge, but as a percentage of GNP the debt is withing the range of our post World War II experience. Note from the chart linked below which shows what happened to the national debt under each president Truman through W. Bush that there has been a pronounced tendency for the debt to increase under Republican presidents and decrease under Democrats.
How about who controlled CONGRESS during that time. They write the spending bills.
Well, I think the GOP controlled Congress most of the time under Reagan and Bush I whose huge tax cuts without corresponding spending cuts ran the debt up during their administrations. I'm not sure of exactly which years the Congress was controlled by Dems and GOPers. And I'm too lazy to look it up right now.
I looked at that graph Mr Deeds and i conquer that the GDP and national debt seem sustainable for the near future if something is done to stop the leaks in the system. The ship is sinking as it was in the days of Hoover and Roosevelt. That period isn't on that chart. There was a recovery based on Industry. The War Machine and massive spending on infrastructure and giants like the big three who were busy replacing the horse and buggy with the modern combustion engine machines. Roads, bridges, electrical grids, you name it....
The recovery was based on fundamentals....this time around what is the industry that is the underlying factor or the wisdom for printing fiat at random that the little people will have to pay back to the bankers?
By the little people i don't mean the children, although in a sense it is they that we are wagering on this hand...
Are we that callous?
The rationale for the stimulus spending is that without it we are likely to lose far more in earnings, profits, dividends and tax revenues in a deep, prolonged recession or depression. This decline in GNP represents a permanent, unrecoverable loss in production. That is, when the economy finally recovers the GNP will go back up, but the production, earnings, etc, is GONE. This could well result in a much bigger loss to the country than the cost of the stimulus package. Nobody but the GOP dead-enders in the Congress believes it make sense to take this risk. When the economy recovers it will be the time to balance the budget.
this is rediculas and shameul...i feel so sorry for that employees...and their family.may god help them and all other people who have lost their jobs in this recession.....all the best..
"The whold world is looking into a black abyss whose bottom is not yet visible."
Yes it does feel that way. It's getting pretty scary.
<Instead of telling the UAW that it was impossible to guarantee lifetime income security in a collective bargaining agreement; that job security could be achieved only by making attractive products and selling them at affordable prices; and this was especially true in view of the unprecedented international competition facing the company. GM didn’t tell the union that. Instead the company, at a time the need to downsize was forseeable, made an agreement that greatly increased the cost of downsizing. This 1982 agreement should have gotten a Darwin award for the worst agreement in the history of collective bargaining.>
OK, but one of the reasons we have unions is that management has much more control over decisions that lead to "making attractive products and selling them at affordable prices" and management also gets a bigger share of the pie money-wise, so job security at the bottom is an issue. It's becoming a bigger issue, not a smaller one.
For example, a man making $12 million a year, which may or may not be competitive in terms of what financial CEOs and other top tier management people in other industries make, still makes enough money to weather a period of unemployment. Such a guy has the resources to weather a period of unemployment at any rate--he can choose to blow them I guess. A guy who makes $14-$25 an hour and has a family and no other skills may or may not weather even a short period of unemployment. When people blame the UAW and get all worked up about the Jobs Bank, I think they are not taking into account the financial realities UAW workers face. I don't think we really respect or appreciate people who do this work. So many people talk like they are unworthy and deserving of much less, but often they work their whole lives in these plants and what do they end up with? More than me, but way less than Mullally.
If we had a decent social safety net in this country we'd be instantly more competitive, plus, workers who were laid off wouldn't be facing the kind of stress they do now. Americans will probably still love to trash blue collar workers, but our businesses would be in better shape.
I've been told by more than one person this week that we don't even need unions anymore because corporations are so nice now to workers. Does anybody read history any more?
We're pretty much in agreement. My point wrt the jobs bank is that it was unfunded, i.e., paid out of pocket. And when the pockets became empty the agreement wasn't worth the paper it was written on. Moreover, from the compnay's point of view at a time when it was losing market share to its Japanese, Korean and European competitors and needed to downsize, the agreement significantly increased the cost of downsizing. And the agreement made no sense from a public policy point of view because un-needed workers at closed plants should be helped to transition to other jobs where they are needed, not paid high wages to remain idle for long periods.
"Three months ago there was enough money and nobody was complaining. All of a sudden there is no money. Where did the money go?"
I hear it went off-shore to tax free Caribian Islands.
The money disappeared the last week of October 2008 when most of the world began to suspect it was imaginary. Credit has been frozen ever since--though not as badly as it was at first. And the money is imaginary. That's the whole problem. You can't restore confidence in the assets banks are holding when lack of confidence is totally warranted.
We are told it was imaginary money and we have to buy it because there is no much we can do. But when I reflect on the fact that US has one of the finest economists in the world, I wonder why they only spotted it only after the last week of October 2008.
When I look at the volume of money that is short the underlying assets, short futures, short stocks and the money that have been made since the last week of October 2008 by selling short the underlying assets, I am left wondering that the so called “finest economists” may not be very sincere to the common man.
Even after the government has added $780 billions to the economy, the markets have to do what “they them” want.
Sometimes you can start a fire and its not always you’ll be able to stop it. With God, the fire they started will eventually start hunting them.
I am coming around to thinking that the banks are actually terrorist organizations. They have certainly done more damage to the "Free world" than Al Queda.
We have laws to deal with these people..........
What laws would does be exactly....the same oligarchs who manage the IMF and Central banks do not function by national laws....the Detroit bailout is just another payment to them that will take generations to pay back by all of the little people....i call that evil genius
The loss of jobs, production, income, profits, dividents and tax revenues that will occur if we let the world economy spiral down into a deep, prolonged recession or depression will greatly exceed the bailouts. GM, Chrysler, Ford bankruptcies would be extremely disruptive and costly.
We've all heard that on the news but is it the best proposition.
I studied gambling for a long time without ever gambling. I know how odds work.
The bailout is a bad bet. It throwing good money against bad money. It may make the pot more interesting but it's just going to cost more and be more painful in the long game.
If terrorism is defined as instilling fear in the minds of people then you are certainly correct about the ter---ror====ist part....people are being held hos---ta---ge by the f-or--ces that be.
People are afraid of what's coming next......big brother is watching over us....
People are worried about what has happened to them already--40 million without health care, 3.9 million unemployed, millions of foreclosures, etc. This is the most serious situation since the Great Depression. No one is sure exactly what to do about it. Obama is following the advice of some very smart economists. The best economists worry about whether the recovery package is too small, not whether it is too big.
It goes back to the GDP graphs you pointed to before. Will those economists be able to stop that debt from rising or is this the great demise.
It's a good argument that could be summed up in two popular phrases.
Just do it.....or....Just say no.
It's the optimists side against the economically driven addict side.
We will soon see....
pGrundy really hit a nerve with this one for me....
I think you are under-estimating the costs here. Another $20 billion to the car companies is not going to do it. They are going to fail anyway, so it just adds to the problem. If I thought these bailouts would do it, I would agree with them - but they won't.
I also think you are clinging to old-school thinking and the amount of money that will need to be printed to "fix" the problem can only result in massive inflation.
I genuinely believe that we can not buy ourselves out of this one. We are paying the cost of buying ourselves out of the last several recessions. We have reached a crux. This is the big one. I honestly did not expect to see it in my lifetime, but here we are.
We either re-invent the system or we are doomed to years of deflation, stagnation and hyper-inflation with spiraling governments that are already all out of proportion. I know that sounds weird, but it will happen if we do not look for an alternative.
And I see no one in power saying, "What about doing something different?"
I don't recall providing an estimate of the costs of reviving the American auto companies. Nobody knows because nobody can tell how long or how deep the current recession or depression will be. Also, predicting sales of particular car companies and their models is always difficult. To some extent this will be affected by the price of oil and gasoline which nobody seems able to predict with any exactitude. That said, I completely agree that considerably more than $20 billion will be required. However, I submit that the cost of letting them go down would dwarf any likely bailout figure.
I can't imagine it being any harder than it is right now as far as product development. No one has a clue what is going to sell or when. It's fine to push for electric vehicles, but what if someone comes out with an affordable LP vehicle that just takes off like crazy and then suddenly the electric vehicles are a bust because electricity has gone off the chart and so has gasoline? It's very confusing for buyers, so I can't imagine it's any easier for car makers.
I think Ford and GM will survive but be much, much smaller, and maybe they will make it in the U.S. and maybe they won't. I think Chrysler is already on life support, can't be revived, and no one in the family had the sense to sign a DNR order. I think there's a good chance we'll preserve the U.S. auto industry in smaller form and they'll end up hauling it all overseas anyway, after laying off thousands. But it is technically true that if they go belly up NOW, it will be bad beyond belief. I live in MI. It's already bad beyond belief here.
I'm glad I'm not President.
Well, you have estimated that the cost of the bailout will be less than allowing them to fail.
I am not so sure they can be bailed out effectively. If you take a look at the rest of the world, all the car companies are facing financial difficulties and GM and Chrysler are not exactlly efficient.
Personally, I would like to see an attempt at creating a new financial model that does not rely solely on selling little tin boxes that are paid for from increasing real estate values.
See current financial crisis.
The simple fact is that almost no one can actually afford to buy a car unless they get themselves into debt to do so.
And we are starting to discover that the size of the debts is too vast to deal with.
I estimate we are about halfway through the downswing in the US, and I do not think there is enough money in the coffers to invigorate the US makers. Which means they will go broke anyway. Which means that all that money will have been wasted when it could perhaps have been spent in other directions.
All it will do is delay the inevitable and cause a bigger problem down the road.
The problem is that they - along with the banks and governments - are too big. If we are not careful we are going to end up with all the banks and all the car makers all being owned by their respective governments. They swallow all the resources and leave no room for any smaller operations.
Plus they start getting all nationalistic. I already heard Obama say "buy American," the German gov is giving E1,000 to any one that trades in an old car - if they buy a German car. Sarkozy bailed out the French car makers - on the understanding that if they shed jobs - they shed them in Eastern Europe.
We now have riots all over the Balkans as their imported jobs have now vanished.
BMW just fired hundreds of staff - But in the UK.
On top of that - where did all the BS about dropping emissions go?
We have an opportunity here to consider a new approach. But not one single politician is even considering that as a possibility. No - what we need is to go into debt to buy a new car
Plus - you still have to persuade people to get further into debt to buy the damn things.
Where is that money going to come from?
Ahhh yes-- didn't Gordon Brown apply those laws to Iceland recently????
Mark & nguerco, I agree. Why do I get the feeling we're just witnessing the looting of a carcass?
I'm also really sick of hearing what Wall Street wants and doesn't want. If this was France, the populace would have burned down Wall Street already. We just sit and fret.
Yes, I keep hearing the MSM saying things like "Wall Street isn't happy" with various plans coming out of the Obama administration and absolutely boggling. Of course Wall Street isn't happy. Wall Street is always going to want more blank checks into their pocketbooks and less regulation, but they've proven exactly what they do with that when they get it in the last few years (and over and over again in the past if anyone bothers to study history any more) and if they genuinely think that anyone in the general public gives a frak whether they are or are not "happy," I have less sympathy for them than Marie Antoinette. MUCH less, in fact.
Now if only Obama would develop the guts to get up there and admit that they've been shuffling imaginary money around for years and it's unlikely we're ever going to return to the kind of economy we saw in the 90's. Nor should we. Deep in his heart, I suspect he knows it, but he is a politician after all, and look what happened to Carter and his cardigan. When it comes to facing the writing on the wall, I'm afraid America is a nation of cowards, and over a lot more things than just race. (I lean towards Kunstler, btw, though I think he's dead wrong about the future of the suburbs. Speaking of doom and gloom. )
Speaking of the MSM I just heard Mara Eliason on NPR talking about the budget deficit and national debt. She attributed the debt to domestic entitlement programs and didn't mention the Iraq war or the "defense" budget. Then she went on to claim that the solution lies in "reforming" Social Security and Medicare which the Republicans and Blue Dog Democrats have been salivating to do for a long time.
Yes, I'm always hearing from the right about how NPR is this hotbed of leftist polemics, but I see them as kind of center-right.
When there is no social safety net at all and people have nothing to lose, it will get ugly. I can't even listen to the news these days, I get too upset. I just want to start throwing things at the radio and the TV. It's all idiot punditry and very light on facts and reality checks.
kerryg, I agree. I think Obama is doing what he can now, which is not enough, knowing that this economic correction will be hard and very long. We will NEVER go back to where we were, and as you say, we shouldn't. It was totally over-the-top messed up, and now the whole economy has to hit 'reset'. It won't be easy but it has to happen.
The programs in the stimulus bill are often criticized by the right for not being truly stimulative. But that criticism assumes that some trick of legislation can jolt the bloated corpse of the U.S. economy back to life and things will go on as before. They never will.
Republicans complain that too much of the stimulus is just social programs for poor people. With each passing day though, 'poor people' get more and more plentiful. If there aren't measures in place to sustain subsistence survival needs, there will be violence when it all reaches critical mass. I personally think Obama knows this. He's not a stupid man. If we can figure it out, he can figure it out. I think he gets sold short a lot.
It's not a stimulus package. It's the first in a series of life rafts. The Titanic is goin' down I think!
But we'll start over. We will.
Yep. Wonder if they still have the tooling for the Model T hanging around?
We need to get back to the notion that a car is for transportation. Not a fashion accessory.
Hey congratulations Pam - you're on 100!
LOL! Thanks Eric. I hit it now and then.
Everything I know about Saab's I learned from 'Click and Clack', these radio mechanics who have an NPR show. I've never been in a Saab. I MIGHT have seen a Saab, but I'm not sure. I had to learn about cars for a blogging job I got (I dropped it, OMG that's another tale...) and it was pretty interesting, but in my personal life, I hate cars. I do. I've owned a 1967 Pontiac Tempest, a 1981 Chevy Chevette, a 1991 Ford Escort, and now I drive this 1984 Honda Accord. I drive them until they fall apart in my hands, and to show you how NOT into cars I am, you know what my favorite was out of all of them? The Chevette! God I loved that car. It had a nervous breakdown when the speedometer hit 60, and it literally disintegrated underneath me at 66,000 miles when it was 13 years old. But I loved it.
I trust that puts my 'expertise' in perspective!
That's an interesting concept, however consider this...
Some time back a group of people spent a whopping amount of cash to reverse engineer the Wright Brothers flying machine and on their first actual flight test crashed.
As for the latest comments on community living and self sustenance...i suggest we pool the little resources that we have left or find a willing mega millionaire and by one of those communities where the 10k houses are boarded up and turn it into our own little commune.
Right back to the hippie days....peace and love
Yes, I'm hoping for the reset button myself, though not looking forward to the process at all, but I suspect what will actually happen is that they'll create another bubble (probably green energy, which could be worse, at least) and we'll end up in some endless bubble-and-crash cycle of enriching the wealthy and impoverishing the poor, until people start hauling out the guillotines.
Gosh, I am in a cheery mood this morning. Hopefully, it's just the weather.
LOL! That's why I've been turning off the TV and the radio. At some point I just have to quit thinking about it and try to have a little fun.
Can't change it anyway. Que sera sera!
Hey Amanda, we should start a knitting circle for when it all goes down.
Time to start planting those seeds, Ralph!
On a more serious note, I keep thinking of this for our busted up neighborhoods. Spring is around the corner, and its not like I don't have lots to do with grubbing for freelance projects and planting our own garden, but I keep thinking, people will need food and they will be upset--it would be so good actually to start community gardens in the poorer neighborhoods. Not just for the food, but for the focus. For something positive to focus on.
Haha, only the basics, but good enough for a decent Madame Defarge impression, I should imagine.
I am not a terribly crafty person in general and would be better off in Ralph's grow-your-own food coop, though.
I was inspired to write a hub in an attempt to feel more optimistic: http://hubpages.com/hub/The-Future-of-Suburbia
So I haven't been following the whole thread but figured I'd drop a thought in:
"Compound interest is the most powerful force in the universe."
yes, as long as the banks are paying interest LOL--nice to see you Wedding Consultant. I just noticed your avatar-- your baby has grown soooooooo much and is just beautiful!!!! You must be proud:-)
I find it interesting that car companies in so many countries seem to be dependent on goverment subsidy. I know the Australian car makers have been getting grants from the government for years. Recently I've heard of French and Swedish car companies getting handouts, too. And of course, the American bailouts dwarf either of them.
Does this mean we're all driving cars that are far cheaper than they should be?
Maybe if the car companies weren't subsidised, the cost of cars would reflect reality and we'd all think twice about having one - which would be great for the environment!
Various car companies have had money chucked at them here, too, but only in the last couple of months.
What we need to do is push the 'reset' button. But nobody is even looking for it. They're all trying to jolt the corpse back to life. We all know that nothing good happens if you successfully jolt a corpse back to live. Geesh, that's Basic Horror Movie 101.
I'm with Ralph--it's more than a political issue or even a financial issue at the moment. It's about the entire infrastructure of our society. And damned short sighted of those 'in charge,' and even of 'users' of the products, but what else is new? The pill just isn't going down well with tax payers, and that is actually a valid feeling.
LOL. It is well known that liberals drive either very new or very old Volkswagens, Mercedes, Audis or Volvos, OR ride bikes, walk, or take public transportation, lol, so! We all should be all right..... (Just a little humor to leaven things up, )
Btw, I think those who buy the most new cars have figured out how to basically lease the vehicles (even if they are buying them), so if they want, they have a new car every year at no cost....
14 billion for the Auto industry ? Seriously?
Nah, they're not serious at all. That was just the merest opening gambit.
GM now wants 30 billion just for them!
AIG is lining up for it's 4th helping of bailout funds.
I used to be disgusted. Now I'm just amused.
It has got to the point where it is just funny. The Bank of England has finally admitted to turning on the electronic printing presses. Won't be long before everyone else has to admit to that. Next will be the Euro when Eastern Europe comes a-begging. We can either start shooting them or start printing money. Not sure which is the better option. Only a matter of time in the US.
$60 cup of coffee anyone?
And that's at the cheap place
Probably not the right place here, but I'll have a little rantlet anyway.
People have been dumbed down to the extent that they almost don't know how to make their own cup of coffee. Or change their own light bulbs.
In some places, I believe it's already illegal to change a tap washer if you're not a licensed plumber.
We live under the burden of so many stupid rules, regulations, and edicts spewed forth by highly paid bureaucrats. And have our lives shaped by hare brained financial systems concocted by people whose only aim is to make as much money as possible for themselves.
This bailout stuff is really making me want to throw up.
It's like trying to cure a lung cancer patient by making smoke more and more cigarettes.
At least some of the politicians and economists are starting to admit that they don't know what the hell they are doing, that we are in "uncharted waters", but they reckon that throwing even more credit at the credit problem will magically fix it.
About this time next year Mark, you'll probably be lucky to find anywhere where you can even buy a cup of coffee.
Even at $60.
Eric, that is what troubles me about all the people arguing for no government, every man for himself--as if that will go well? Rilly? I mean, we're on the track to get there anyway, to total chaos, but why paint it as some idyllic scene? It won't be. There are a LOT of stupid people in the world, and by stupid I mean no survival skills at all. I'm one of them. If I had to "live off the land" by my own wits I'd starve before that happened and so would most of us.
GM is looking about to go belly up any day here. That will be a fun day for the DOW.
Dow 200 anyone?
Black humour seems to be finding it's natural home on hub-pages these days. Recently, there's a whiff of panic too. We still need government. They're not all stupid, morally corrupt and vacuous. Some of the people who get into the political arena hope to make a difference in the world. I'm hoping that there are enough of those around that can make a difference. anarchy is not an appealing scenario in my book either.
Pam, Pam, Pam. Settle down girl
I didn't say that ALL government rules are bad, nor that I did not say that ALL government is bad, nor am I advocating anarchy.
And I can't recall painting an idyllic scene where everyone will gambol through the tulip fields if governments are abolished.
I'm saying that SOME government regulations are over the top, and that they've been pulling on the financial levers so bloody hard that they've come off, and nobody really knows what to do.
At the risk of invoking your ire yet again, I'll refer to Ayn Rand's "Atlas Shrugged", which contains a pretty good description of many of the things that are happening now, and their effects.
(And no, I don't advocate EVERYTHING Rand writes about either )
It's not looking good for GM though. Nor SAAB - my vehicle of choice for many years.
LOL! I didn't mean you personally Eric!
I've just been noticing all these "tear it all down, return to the Stone Age every man for himself" types at HP lately and I get annoyed sometimes. There's this idea floating out there that we can just let everything fail and return to the land or some such nonsense, but that in fact would throw millions into starvation and violence.
Plus, the media here in the U.S have this steady stream of "stop the presses" and an endless supply of do nothing Republicans making non-suggestions, day and night. Right now their big idea is a total spending freeze through the rest of 2009.
Yeah that'll thaw the credit markets!
Fortunately, I make the best cup of coffee this side of a Colombian brothel (they are famous for making the best coffee ).
It is making everyone sick. Just listening to Gordon Brown is enough to make anyone puke. The man is ruining my country and there is nothing I can do to prevent it. We Brits may be slow to anger but expect blood in the streets if this carries on.
How anyone is swallowing the idea that you can fix this problem - which was caused by over-borrowing - by borrowing more is beyond me.
We already have too much government the world over, and we are just headed towards even more. Include the car workers, insurance agents and bank employees and we are going to end up with 25% of the population supporting the other 75% who work for the government Inc.
The way to deal with it is to go through the painful process of de-leveraging and devaluing. All this is doing is turning a 4 year issue into a 40-year one. Not a happy bunny. Especially as I am not well poised to take advantage of the inevitable hyper-inflation - because I do not owe a penny to anyone.
Quite aside from wondering about your experiences in Columbian brothels (LOL!) I'm also wondering how much longer we have to put up with Mr Brown and co. Even here in the South-East (I'm based near Brighton) we're already seeing a slow deterioration creeping in. I now know six people who have lost jobs since October, and not a one of them seems any closer to finding work. I have very mixed feelings about the various bail-outs, but my biggest mis-giving is about the poor way that the government handled the issue of bonuses when dishing out succour to the banks. I'm also concerned about the idea of helping out the motor industry. Whatever is the point in churning out new cars only for them to be mothballed on dis-used airfields up and down the country. If Gordon wants to help he should put his own guys into some of these newly nationalised banks, and give them the shake-up they deserve.
Well, I was slowly coming to the conclusion that we don't actually need the cars. We just pay the makers not to make them, and the workers not to build them, and the salesmen not to sell them.
Just kidding - goodness' knows how deep a hole Gordon "no more boom and bust" Brown will have dug, but you can bet your last worthless pound that he will be given a very, very, very nice job consulting for the banking industry after he eventually gets booted out of office.
If no one shoots him first.
Amanda, I think that is so true. People are getting a bit panicky and dark--I know I am!
I believe that we need government too, that government has a place and a function and that part of our job as citizens is to come to some kind of consensus on what that function should be.
Living in Michigan, I'm pretty nervous about the coming collapse of GM. Unemployment is already pushing 11% here.
Well, Mr. Brown got a very chilly reception here with his "world bailout" idea. Like the U.S. isn't already wasting more money than it has on its own bailout.
Mark you mention "just pay the auto companies not to build them" but seriously, why not make them build something else for awhile? Wind generators, solar panels, I don't know--Something like what happened when Roosevelt made them build arms for Britain, only not arms this time.
Yeah, I was only half kidding. And we could certainly take this as an opportunity to go in a different direction, but I do not see one single solitary politician saying so. Everyone has swallowed this garbage that it will be cheaper in teh long run to bail out the auto companies. Which is BS - because -
1. We don't know how much it will cost
2. We don't know what damage or good will come out of them failing - because they have never been let fail. There is actually a good argument that many of our skilled workers and useful brains are being wasted in the car industry. And the financial services industry. Just imagine what they could do - thousands of hungry, eager minds looking to go in a new direction.
But no - they say definitively that this is the best way. Just ask yourself who benefits from maintaining the status quo.
It ain't you and me.
The best thing we could all do is stop buying this crap. I have been saying it for years. Money does talk, and if we suck it up and stop spending money or borrowing money to buy the garbage that keeps the economy heading over a cliff, maybe things will change?
What are they going to do - arrest you for not consuming? Actually.............
That is a seriously good idea Pam. My next-door-but-one neighbour is a pilot and the info about the giant car-parks on dis-used airfields came from him. Quite apart from anything else, on this little island we'll run out of spare storage capacity eventually. At least wind turbines and solar panels would be useful.
Ah - you are obviously not aware that wind turbines are a threat to our national security and they are going to make them illegal
http://markpknowles.com/best-websites-o … -websites/
That is my own most paranoid fear--that they will arrest us for not consuming. They'll call it something else. In a way, it is already happening with our current prison population. It is filled with people who weren't consuming, just getting high and engaging in petty theft. So we throw those people in prison at a cost to the rest of us of about $45K per prisoner, and that creates jobs in craphole podunk towns in Texas and Arkansas and what have you where no other jobs exist, so the prison guards and staff can go buy cheap plastic garbage like good little Americans. We have more people in prison for nonsense than China does, and yet Bernie Madoff is arguing in court that he should get to keep his penthouse.
Well, these car company bailouts are the equivalent of forcing me to buy a new car.
I didn't buy one, so the government bought one on my behalf. Without asking me. And I didn't get the car.
"Any business model that relies on continual "growth" will eventually reach the point of no return." That's capitalism in a nutshell. We are doomed to a cycle of death and regrowth, recession, depression and restart. Peaks and troughs. Big sigh!
Since Christmas we've had this commercial in Australia - the voice of a guy with an American accent selling GM motor vehicles - Dodge, Chrysler, Jeep with the catch cry "Can you afford a Jeep for $47,990, yes you can!" Like riding on Obama's election mantra. It's desperate and quite pathetic. At the same time you hear on the news the loss loss loss of jobs jobs jobs. You wonder who would want one of those petrol guzzling yank tanks (no offense but that's what they're called in Oz). Who could really afford one in an economic climate that could see you lose your job and not be able to afford the petrol. It sounds like an off note when you see this ad under the circumstances.
I think some of youse guys have been "Limbaugh-tomized!"
http://www.nytimes.com/2009/03/07/opini … ef=opinion
Misha, I think we would disagree about almost everything if we met in person and yet we would still be friends.
by phion 6 years ago
Taxpayers pay for $49,000 of the $89,000 dollars it cost to build a Chevy Volt. Sound like a good deal to you? That President Obama really wasn't joking when he said energy costs will have to sky-rocket was he? What a joke. See what happens when we rely on government?
by Ralph Deeds 8 years ago
Linked below is one of the most astute analyses of the decline of the Big 3 U.S. auto companies. The article linked below by NY Times chief financial writer Floyd Norris focuses on one of several factors that led to the decline--going farther and farther into debt as a result of failure to adjust...
by earnestshub 8 years ago
GM reckon that although they had a lousy year, the will be in profit this year and all the bailout money is to be paid back by June.There have been quite a few companies paying the bailout money back. Is this another positive indicator?
by Randy Godwin 9 days ago
Despite Trumps promises to the contrary GM announced it was closing several plants and firing thousands of employees including upper level management. This wasn't a huge surprise as GM announced last summer they were having problems selling certain models of their cars.So much for Trump's grandiose...
by Jen King 8 years ago
NEW YORK (CNNMoney.com) -- General Motors has made a final payment of $5.8 billion to the U.S. and Canadian governments, paying off the last of its $6.7 billion in loans, the company said Wednesday."I am very pleased to announce that, as of today, General Motors has repaid, in full and with...
by MikeNV 8 years ago
You can read it for yourself... and you should. And you should vote out every Democrat and Republican that supported this giveaway of your tax dollars to the wealthy. Everyone here knows that the Chrysler GM Handout wouldn't be repaid.http://news.yahoo.com/s/ap/20100517/ap_ …...
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