Should the US bailout the big three automakers?

[Don]

November 21, 2008

" AUTOWORKER WAGES.... To help explain the crisis facing the U.S. automotive industry, a growing number of conservatives have begun blaming the Big Three's workers for the companies' financial difficulties. Sen. Jon Kyl (R-Ariz.), for example, recently argued on Fox News, "For years [the companies have] been sick. They have a bad business model. They have contracts negotiated with the United Auto Workers that impose huge costs. The average hourly cost per worker in this country is about $28.48. For these auto makers, it's $73." "

Complete article:


http://www.washingtonmonthly.com/arc..._11/015760.php

[Great Asp]

Originally Posted by Wayne Maybury

I am not an economist but I feel that the government should allow GM and/or Chrysler to go bankrupt at which time they would have to really get their business in order including renegotiating their labor contracts, pension plans, etc.,
Wayne

Wayne,

That's the way I feel too, but this is more about Democrats in Washington supporting the Union voting block than doing what is right. Imagine who those votes might go to if Union people lost wage values, or even their jobs.

E

[Rick Weber]

Here's my $.02.

You can keep throwing $$$ at the automakers now and forever. The problem is...ready, here it comes...NOBODY IS BUYING!!! And it isn't just the U.S. automakers.

Rick

[What'saCobra?]

New nominal automobiles sell for variously $15K to $25K dollars per ton. Super-quality costs perhaps double. Exotics treble+. Assemblers in Detroit earn about $75 per hour.

Four-place new Aircraft cost variously $300K to $500K per ton. Assemblers earn about $35 per hour.

Aircraft are far more complex and require far more specialist skills to assemble correctly, which skills require considerably more effort and time to acquire.

Admittedly, aircraft do not have transmissions, axles and water coolant systems, very complex designs and frequently subject to failure. But, aircraft have propellers that change pitch, wing and prop de-icing systems, landing gears that fold in and out, very complex operating instrumentation, very complex navigation instrumentation that changes quicker than goosed lightning (all made of goldinium) and most importantly, much larger labor-hour content and skill requirements.

It is very upsetting if a bolt/screw falls onto the floor under the dash of our new Buick; but, it might be life-threatening if it happens in our new Beechcraft Bonanza G36.

It is a pain in the buttinski to pull-over in the slush to clean the ice off the frozen-solid windshield wipers of our new $30K Fusion; but, you are indeed in deep horse-pucky if it happens in your $6M Super King Air 350.

i love the automobile design and mfg business. Ditto in aviation, including repair, rebuild and operation.

Aviation wages are very competitive with other businesses and frequently not union, certainly not UAW, but often IAW (International Machinists and Aerospace Workers). New methods and new skills are regularly revised, reversed and eliminated as necessary, far more easily and comparatively cheaply.

The point? Aviation, though demanding far more skill requirements, pays just over half the wages of automobile assemblers, in order to compete with international competitors. Since most of the aviation companies have been bankrupt at least once, allowing the re-birth with less burdened fixed costs, there are not a large number of retirees that add thousands of dollars to the price of each airplane.

Accordingly, American aircraft exports are one of the very bright spots in our trade balance. Many foreign operators happily believe America builds the finest and safest aircraft in the world... at any price! Yet, we remain fleet competitive around the globe, even in military aircraft.

While labor wage rates and work-rule flexibility are not the whole story, particularly at the moment, it is an important part of aviation's very successful mfg and business model.

Yet, automobile design, manufacturing, regulation and marketing are so different it is hard to clearly comprehend how we can be so successful in one and so marginal in the other.

(However, do not forget the complete failure of both French, Spanish and Italian auto sales in the USA (except for a very few exotics). They are burdened with similar wage and rule and overhead problems in their auto industries.)
-------------
Ps: Watch Japan now invest in Chinese factories, to build cars for US importation... VERY cheap and very advanced efficiencies.

Pss: Having said all that, new automotive engine/transmission/hybrid designs are indeed getting VERY complex, now, at last, faster than aviation hardware (if not electronics).

[Wayne Maybury]

What's a

Very interesting post which adds a different perspective to this discussion.

Wayne

[JWilly]

What'sa: I agree with WM and it is a very interesting post. My guess is the US aircraft building industry is extremely small when compared to the US car building industry. I would also guess (speculating here, I really don't know) the union representing the workers of the aircraft industry has far less clout in Washington (the root of all evil) than the UAW does. The UAW has held the automotive industry by the short ones for many years. That grip may finally be loosening. At least I hope so.

Regardless of all this, I believe the US auto industry needs to suvive. Allowing GM and Chryler (and eventually Ford too) to enter bankruptcy would be a huge risk. If the economic damage was only to GM and Chrysler then I would say let'm rot in hell. But the problem goes way beyond GM and Chryler.

[RedBarchetta]

Originally Posted by JWilly

If the economic damage was only to GM and Chrysler then I would say let'm rot in hell. But the problem goes way beyond GM and Chryler.

http://www.bloomberg.com/apps/news?p...Eg8&refer=home

Where does it all end? This latest proposal essentially pre-pays the receivables to the suppliers that GM and Chrysler can't pay back today.

Someone has to die. We can't continue saving the herd. The slowest Zebra always ends up as dinner. The medicine tastes bitter, but how else we ever going to get to the other side if we just keep printing debt that China will eventually say NO MORE! to? Then what will we do then?

If Bush was using a high school mentality to stop the bleeding, then Obama is using elementary school tactics. Just wait until they tackle entitlements, Medicare/Medicaid, etc. We haven't seen anything yet. And the airline industry is not too far behind either. Everyone is going to suck up to Uncle Sam to bail themselves out.

[Jerry Clayton]

If we let the auto industry die we won't be able to haul the bombs or fuel to the fighters and bombers---

[What'saCobra?]

THX, but:
i only wish that more folks today would understand my principal point:
it is excess regulation via unnecessary, wrong-headed and economically impossible "rule making" that causes industry to fail, not avaricious marketing departments, sleazy salesmen or failed engineering challenges.

There is only ONE rule-making entity for aviation, the FAA. Admittedly, it is, like most of government, slow to change, but not frozen. Efficiency is NOT mandated. Safety in design, manufacturing and operations is mandated, by that one entity. Satisfy them and you are in the door. AND, since the rest of the known universe uses FAA rule-making and procedures as the basis for their own aviation industry (even the Russians!), you become globally competitive at the git-go (well, nearly).

In banking, it was the forced mortgage-writing for NINJA borrowers (No Income, No Job, no Assets) with "easy" terms and scant qualifications that created the rot at the core of current banking (note: not yet solved with TARP, which was used to cannibalize smaller banks BY DIRECT CONGRESSIONAL DEMANDS via law). The problem was not lack of regulatory control, but excessive and non-economic rule-making, with threats from Reno's DoJ (and the Gorelick-encouraged stone-walling of the Bush administration's demand for improved audits and improved administrative rules by the dem House under little Tommy Dashle and Nancy "i-can't-feel-my-face" Pelosi).

It is important to recognize the significant difference between excessive regulatory interference via Law and Rule-making versus the simultaneous lack of proper administrative internal controls of FNMA and other Fed Regulatory Agencies and the subsequent big-mouthed, race-baited and turf-defended illicit defense of the indefensible loaning failures. Most folks do not yet fully comprehend the exact nature of these failures nor the frequent attempts by McCain and Bush to correct them. FNMA etc were not administered by the executive branch. They are, like the Postal Service, quantos of a sort, but after-the-fact, guaranteed by the taxpayer, despite Congressional assurances that those would NEVER be the case.

re: Autos
We certainly have the capacity to mfg and sell world-class automobiles and we do so every day, but not very much of the US fleet is exported because it is not designed to world-market standards and regulatory requirements. More later, got to go.

[joe g]

Here in ct two more dealerhips that have been around for over 70 years just folded. Both family owned, on top of 25 that have gone in the past 6 months.
Between slow sales and no money from banks for new inventory they just could not survive.
I'm not sure where i stand, but if we do give them money, then no more 95.00er hour or being paid 80% of there paid when laid off for 5 years.
joeg

[TButtrick]

Originally Posted by 392cobra

"UAW leader: Workers will make no more concessions
By MARK WILLIAMS, AP Business Writer Mark Williams, Ap Business Writer – Sat Nov 15, 3:41 pm ET AP – COLUMBUS, Ohio –

Even as Detroit's Big Three teeter on collapse, United Auto Workers President Ron Gettelfinger said Saturday that workers will not make any more concessions and that getting the automakers back on their feet means figuring out a way to turn around the slumping economy."

Here the Unions are at the root cause of the Big 3's problems and their leader throws this out.

The current and past Union workers have no right to the taxpayers money for their real and imagined self worth.

They will not make any concessions but expect the U.S. Taxpayer to make concessions to them ?

I would like to see Chapter 11 put into play and let these azzholes see how unemployment works for them.

Yeeeeeeup!

[Dwight]

I have not read this whole thread, just part of it. But I have to say something

I'm a Union construction worker in the South. We are the minority here (13% of the work). With our insurance and retirement we make twice what our non union brothers make. But, our union contractors bid work, get the job and we make them money. That's the only way that we can survive. I have done a lot of work in the auto plants over the years, so I've seen what's going on inside the plants. The public it not getting the whole story. Remember that the profits from the foreign car companies is sent back to Japan, Germany, Korea etc. Our state and federal government gives foreign company land, roads, tax exemptions, etc. to build here. The reason they build cars here is because it is cheaper to do so.

Oh yes, with my Union pay I have paid for 27 1/2 years of college for my wife and kids, no loans, grants or handouts.

Dwight

I copy this from the FFR Forum http://www.ffcobra.com/forums/showthread.php?t=210296

--------------------------------------------------------------------------------

This was in today's paper (Press Enterprise) Riverside Ca. Full page paid advertisement.

AN OPEN LETTER TO OUR NEIGHBORS
THE FORD STORY.

Dear Friends, Neighbors, & Fairview Customers,

As I watch the coverage of the fate of the US Auto Industry, one alarming and frustrating fact hits me right between the eyes. The fate of our nations economic survival is in the hands of some congressmen who are completely out of touch and act without knowledge of an industry that affects almost every person in our nation. The same lack of knowledge is shared with many journalists whom are irresponsible when influencing the opinion of millions of viewers.

Sen. Richard Shelby of Alabama has doomed the industry, calling it a dinosaur. No Mr. Shelby, you are the dinosaur, with ideas stuck in the 70's, 80's, and 90's. You and the uniformed journalist and senators that hold myths that are not relevant in today's world.

When you say that the Big Three build vehicles nobody wants to buy, you must have overlooked that GM outsold Toyota by about 1.2 million vehicles in the US, and FORD outsold Honda by 850,000 and Nissan by 1.2 Million in the US. GM was the worlds No. 1 automaker beating Toyota by 3000 units.

When you claim inferior quality comes from the Big Three, did you realize that Chevy makes the Malibu and Ford makes the Fusion that where both rated over the Camry and Accord by J. D. Power independent survey on initial quality? Did you bother to read the consumer report that rated Ford on par with good Japanese auto makers?

Did you realize Big Three's gas guzzlers include a 2010 Ford Hybrid Fusion whose 39 mpg is the best midsize, beating Camry hybrid? Fords Focus beats the Corolla and Civic

When you ask how many times are we going to bail them out you must be referring to 1980. The only Big Three bailout was Chrysler, who paid back $1 Billion, plus interest.
GM and FORD have never received government aid.

When you criticize the Big Three for building so many pickups, surely you've noticed the attempts Toyota and Nissan have made spending billions to try to get a piece of that pie. Perhaps it bothers you that for 32 straight years Ford's F-series has been the best selling vehicle. Ford and GM have dominated this market and when you see the new '09 F-150 you'll agree this won't change soon.

Did you realize that both GM and Ford offer more hybrid models than Nissan or Honda? Between 2005 and 2007, Ford alone has invested more than $22 billion in research and development of technologies such as Eco Boost, Flex Fuel, Clean Diesel, Hybrids, Plug-Hybrids and Hydrogen cars.

It's 2009 and the quality of the vehicles coming out of Detroit are once again the best in the world. Perhaps Sen. Shelby isn't really that blind. Maybe he realizes the quality shift to American. Maybe it's the fact that his state of Alabama has given so much to land factories from Honda, Hyundai and Mercedes Benz that he is more concerned about their continued growth than he is about the people of our country. Sen. Shelby's dist ain for "government subsidies" is very hypocritical. In the early 90's he was the driving force behind a $253 million incentive package to Mercedes. Plus, Alabama agreed to purchase 2,500 vehicles from Mercedes. While the bridge loan that GM and Chrysler is requesting will be paid back, Ford Motor Company has withdrawn it's request for government assistance and Alabama's $180,000-plus per job was pure incentive. Sen. Shelby, not only are you out of touch, you are a self serving hypocrite, who is prepared to ruin our nation because of the lack of knowledge and lack of due diligence in making your opinions and decisions.

After 9/11, the Detroit Three and Harley Davidson gave $40 million-plus emergency vehicles to the recovery efforts. What was given to the 9/11 relief effort by the Asian and European Auto Manufactures? $0, Nada, Zip!

We live in a world of free trade, world economy and we have not been able to produce products as cost efficiently. While the governments of other auto producing nations subsidize their automakers , our government may be ready to force its demise. While our automakers have paid union wages, benefits and legacy debt, our Asian competitors employ cheap labor. We are at an extreme disadvantage in production cost. Although many UAW concessions begin in 2010, many lawmakers think it's not enough.

Some point the blame to corporate management. I would like to speak of Ford Motor Co.
The company has streamlined by reducing our workforce by 51,000 since 2005, closing 17 plants and cutting expenses. Product and future product is excellent and the company is focused on one Ford. This is a company poised for success. Ford product quality and corporate management have improved light years, thank you Alan Mulally and the best auto company management team in the business.

The financial collapse caused by the secondary mortgage fiasco and the greed of Wall Street has led to a $700 billion bailout of the industry that created the problem. AIG spent nearly $1 million on three company excursions to lavish resorts and hunting destinations. Paulson is saying no to $250 billion foreclosure relief and the whole thing is a mess. So when the Big Three ask for 4 percent of that $700 billion, $25 billion to save the country's largest industry, there is obviously oppositions. But does it make sense to reward the culprits of the problem with $700 billion unconditionally, and ignore the victims?

As a Ford dealer, I feel our portion of the $25 billion will never be touched and is nit necessary. ford currently has $29 billion of liquidity. However, the effect of a bankruptcy by GM will hurt the suppliers we all do business with. A Chapter 11 bankruptcy by any manufacture would cost retirees their health care and retirements. Chances are GM would recover from Chapter 11 with a better business plan with much less expense. So who foots the bill if GM or all three go Chapter 11? All that extra health care, unemployment, loss of tax base and some forgiven debt back to the taxpayer, us. With no chance of repayment, this would be much worse than a loan with the intent of repayment.

So while it is debatable whether a loan or chapter 11 is better for the Big Three, a $25 billion loan is definitely better for the taxpayer and the economy of our country.

Can you tell me, have you driven a Ford lately?

Sincerely,

Nick DePasquale
Fairview Ford Lincoln-Mercury

[Ron61]

Dwight,

You make some very good points. I still think the unions should be gone, but greed is what has caused the local Ford Dealership here to be on the verge of going under. Example, three weeks ago a man from out here went in and made a deal with them for a new pick up and he went back the next morning with the money to get it and was informed that the deal they made the day before was no longer good and they had to have an extra $5,500. He did what almost everyone here does that buys a Ford. He went to Corning which is about a 30/45 minute drive down the freeway and got the same pick up for less than the local dealers original deal was. I would never deal with this local Ford dealer and now they are really hurting as is the other big dealership left here. Three dealerships that had been here for 40 to 50 years have closed up. Now this local Ford dealer is on TV telling everyone that all of them pay the same for the cars and it is what they sell them for that makes a difference. Amazing that a vehicle that costs both dealers the same can be sold for thousands less just 50 miles down the road.

Ron

[Dwight]

I worked at the Louisville Ford truck plant is '98. The workers told me that a truck cost $7,832 or some close to that at the time. They sold for $21,000 plus. The cost is per unit, six wheels, four wheel, two door, four door, it did not matter. They look at unit cost. In 2001 I worked at the Ford plant in St Louis. One day I asked a guy in a white shirt and tie how much is cost to make the 4 door Explorer. His reply was " Corporate pays me $10,500 per unit". I asked "who are you"? he replied "I'm the plant manager". We talked more about the cost of the Explorers. Very nice guy. The Explorer sticker price was $28,000 to $34,000. I have worked in a couple of Toyota plants in Ky and Ala. Toyota builds their plants with union contractors but most are non union production/maintenance.
Without UNIONS everyone would have 70 hour work weeks, no holidays, no insurance, no retirement, no child labor laws, nothing. Only what you as an individual could negotiate with your boss. Read the history of America 1800's thru 1940's. Or look at Russia last year.

Union are not perfect organizations and we have our share of greedy corrupt people but I know that I'm a lot better off because of my union. They gave me a chance to go to school for 4 years to learn my trade and work to provide for my family. I was out of work 5 months last year but did not lose the house or Cobra because I had saved some of my money to get me through hard times. This year could be a lot worst.

If enough people lose their house, car, TV, whatever, it will trickle down to you. Even doctors and lawyers (I use them because we all think they have lots of money) will feel the pain.

We are all in to this together. If the rich importer cannot sell his cheap made goods in the good old U.S.A. can he make "more" money? Every service and product has to have someone to pay for it. We make money off of each other. The Doctor builds a new house or office, I get to do the electrical work. He pays me. I pay the dentist to work on my kids teeth. The dentist buys a car. The car dealer puts his money into the bank and my buddy borrow it to buy a bass boat. We are all into this together.
Please don't tell me that Unions are the cause of "all" our problems.
Dwight

[Cobrabill]

[quote=Dwight;Without UNIONS everyone would have 70 hour work weeks, no holidays, no insurance, no retirement, no child labor laws, nothing. Only what you as an individual could negotiate with your boss. Read the history of America 1800's thru 1940's. Or look at Russia last year.
Dwight[/QUOTE]


"Look at Russia"-this isn't Russia
"Look at the US 60 to 100 years ago"-this is 2009


"If not for the unions-there'd be no insurance,child labor laws or retirement".

B-U-L-L-S-H-I-T

Unions...suck-period.

[thudmaster]

The man who made the buggy-whip did not get a bailout..............

[TButtrick]

Originally Posted by Dwight

Without UNIONS everyone would have 70 hour work weeks, no holidays, no insurance, no retirement, no child labor laws, nothing.

So every person that works a 40 hour work week, has insurance, holidays and has saved for retirement should thank the Unions? My company pays me what I'm worth. If I don't perform, they can fire me. If I don't like them, I can go elsewhere.

Sorry. I just can't swallow that. Everyone has the opportunity to improve their self worth, make themselves more valuable, and more competitive. If you've got yourself locked into a 70 hour work week, no holidays, no insurance, no retirement, or being beaten by your boss, then you either really like what you do or need to go back to school. This isn't Russia and it's not 1940.

[sdfletch]

Jamo,

Your comment/attack on one of the members here is out of line. Mod take note.

[TButtrick]

Originally Posted by sdfletch

Jamo,

Your comment/attack on one of the members here is out of line. Mod take note.

I'm gonna have a drink on that one..

[392cobra]

Originally Posted by sdfletch

Jamo,

Your comment/attack on one of the members here is out of line. Mod take note.

Jamo,You can borrow my patch if wanted/needed.....