Should the US Government (Taxpayers) Bail Out the Big Three?

[Howard Jones]

The problems are not the current operations at GM. They make cars and trucks that they can sell AND make money doing it. Even with future collectively bargined contracts they would be OK.

They must address the unfunded libility attached to the retirees. Of cource there are other things that need to be done. Publically aceptible compensation for the management would be a good start for PR sake but it will not change the ballance sheet enough if at all in real terms. One area that they will need to address is paid non productive time off. This is stuff from 50s and 60s contracts that are no longer viable.

Should the American people step up and help? Only if doing so helps the country in the big picture. Without real changes to the contracts and management we the poeple will not be convenced that we are not throwing good money after bad. Until the public believes otherwise it just ain't gonna happen.

A viable auto industry able to compete with the rest of the world is possible but not without painfull changes. Sometime you just have to have a tooth pulled because its necessary. The problem is nobody wants to go to the dentist.

 

[Mike Christian]

do we need all three? Is it all or nothing? how about letting two of them die off and let the strongest reorg and take the other's share of business (or whatever they can capture)?

 

[Ian K]

do we need all three? Is it all or nothing? how about letting two of them die off and let the strongest reorg and take the other's share of business (or whatever they can capture)?

I am not sure we need all three, but we probably need two.

Ian

 

[Bill Dietz]

I voted no. My main reason is the big 3 did not respond well when things started sliding. Also the UAW does not want to bend or think of renegotiating existing contracts.

Both sides are at fault in this mess.

Many people have flown on Chp 11 airlines. The bankrupcy would allow them to keep working and get costs under control. The UAW needs to become realistic on their demands for health care and pension funding.

Bill

 

[Doug Clark]

I think it's funny see the unions being blamed for getting decent health care for their members. If having to pay for decent health care for its works and ex-workers is enough to bring down GM, maybe just maybe there's something screwy about the health care "system" in the USA that needs looking at?

An example I can give is of a relative of mine who needs a regular relatively expensive treatment, the cost they pay for that treament in Australia is ~2/3 what their copay is in the USA. And thats a straight paying for it situation in Australia, no issurance, no govt help nothing.

On the car co's, this reminds me of the British bike industry that had its head in the sand whilst the world changed around it, throwing govt money at that didn't save it either, or the British car industry for that matter.

 

[domtoni]

Guys,

While we discuss how the unions have made the U.S. car makers uncompetitive, and the pensions, health care etc all hang over the big three.

Has anyone ever considered how vehicle makers in the EU survive?

Broadly speaking, we have:
- a unionized work force
- expensive health insurance (for both the employer and employee)
- depending on country, a good state pension and or a private / state pension
- liablities that carry on until death

Yet, EU companies have generally:
- good management
- pretty fast on their feet to adopt new technology
- build fuel friendliery cars
- get paid more than their U.S. counterparts for something equivilant
- have consumers who are willing to spend 1 years salary to buy a car
- in the UK a good company car market
- a pretty stable workforce

As I stated earlier, the American system is broken and needs a major overhaul.

Best
Dom

 

[Jack]

Dom, you have stated the root of the problem. Well described.

 

[Brett James-McCall]

Broadly speaking, we have:
- a unionized work force
- expensive health insurance (for both the employer and employee)
- depending on country, a good state pension and or a private / state pension
- liablities that carry on until death

Dom,
Not quite all true, from my perspective at least. I haven't yet seen a company here in the UK that continues to fund medical insurance post-retirement. That in itself, as previously stated is a problem for the Big 3. Something that hopefully will be sorted out for them once the latest UAW deals kick in.

Brett

 

[domtoni]

Brett,

Correct here in the UK we pay as we earn. But those working are paying for those retired, same as with the Big 3. When the health service needs more money, the price of fuel goes up.

We have another problem as well. We have the immigrants who come here, book themselves in with their visa, and then get health cover. Someone is paying for them. Ie the tax payer.

When I lived in Koeln Germany, and tried to enter the labour force, the only company to insure me was the same one who insures the non-insurables. The charge was huge, and I couldn't afford to stay in Germany.

The Big 3 became big social economies, which exist to fund their liabilities.

If the Big 3 dump their liabilities onto the tax payer, we will still be paying.

More later (when I think of the stuff).

Best
Dom

 

[Ian K]

Many people have flown on Chp 11 airlines. The bankrupcy would allow them to keep working and get costs under control. The UAW needs to become realistic on their demands for health care and pension funding.

Airlines filing Chapter 11 is significantly different than automakers filing Chapter 11.

There is no long term investment in your airline ticket purchase. You buy the ticket,
you hop on the plane, your ticket is expended. However, if you buy a car, you expect
to own it for a few years, expect the warranty to be valid for its stated term, and you
hope to sell the vehicle eventually and recoup some of the expense. With a Chapter
11 airline, you gamble that you may be out $200 - $2500 for your ticket should the
company go belly up. With a Chapter 11 automaker, you're looking at no warranty
if something breaks, and no resale value if the company goes under.

Secondly, the a Chapter 11 airline still gets subsidized money from the Feds. It makes
it much easier for that airline to go looking for more financing while it restructures. Also,
I would bet that if an airline filed Chapter 11 right now, they would fail completely since
the credit crisis will hamper their efforts to secure funding. The Chapter 11 automaker
does not get Federal assistance, and with the current credit crisis, may not secure funding
to continue operations while restructuring.

Thirdly, the commercial air industry is pretty much a captive audience. If you have to
fly for business, fly over long distances or overseas, there is no substitute. And, based
upon the number of airlines vs. the number of travelers, all airlines will have customers.
So, not only will a Chapter 11 airline still get customers who need to fly and their
Federal assistance, the lenders still see it as a viable investment. The auto industry
is not in the same situation. There is plenty of competition form other makers, as well
as some public transportation alternatives and taxi/limo service. All make the disappearance
of an automaker much less of problem. As a result, while under Chapter 11, customers
will most likely go elsewhere, and the automaker will lose significant sales. As a result,
lenders will be more cautious because they do not see a guaranteed return.

So, again, for many reasons, airlines filing Chapter 11 is significantly different.

Ian

 

[Tim Kay]

We fear what we do not know.

Going the bankruptcy route can't hurt any more than handing over billions and watching it suck down the toilet only to need billions more in short order. (was it this thread that reminded us of Ross Perot and the "hugh sucking sound you hear........") And very likely through the adversity we will develop in unknown areas only to be stronger, it's truly the American way.

Seems one of the biggest hurdles we hear is people won't have confidence in purchases for warranty coverage. There can be warranties put in place on this issue in the event the worst happens, which it won't.

Frankly, I'm so sick of all these BOD's and CEO's not willing to go to the matt that I won't likely buy big three cars ever if I don't see a willingness to sacrifice from the top. Hell, if I don't lead by example in my business then how am I to expect any respect from the people I employ? Pretty simple.

 

[domtoni]

Another point.

Top exec pay is far too much. Why shouldn't it be 40 or 50 times its base wage earner, not 400 or 500 times. Back in the 1970s, I thought the Soviets had it pretty good when a doctor, etc made 4 or 5 times a worker. But today, it costs alot get an MBA, do all the right stuff, and actually the trickle down works when management is honest and sincere.

Dom

 

[Keith]

As a matter of interest, I would personally be fascinated to know from what perspective members comments are coming from regarding this emotive subject. IE, Employees, Employers, sole proprietor, unemployed, retired, disabled, etc etc. I only ask this as each persons perspective is surely based on their own particular situation?

For example, I am disabled with very few prospects, hence I feel unable to comment generally on various issues, and then only from my own perspective which may be irrelevant to the main subject...

Peace brothers.....:love:

 

[Ian K]

BTW, in case nobody has heard, but as a direct result of Chrysler's
current problems, Getrag US's Tipton, IN plant has filed for bankruptcy
protection due to Chrysler LLC pulling out of a financing agreement for
the new plant as well as pulling out of being the primary customer.
They are both suing each other to recoup costs involved in building the
$530 million facility.

Ian

 

[domtoni]

From Automotive News:

Probably a pretty good plan.

Dom

THE AUTO INDUSTRY BAILOUT

Democrats outline conditions for Detroit 3 aid


<script>queryvar="democrats,outline,conditions,for,detroit,3,aid";</script> Harry Stoffer
Automotive News
November 21, 2008 - 12:35 pm ET

WASHINGTON -- Democratic leaders of Congress have sent a letter to the Detroit 3, spelling out what they want to see in plans the companies must file before lawmakers will consider emergency loans.
House Speaker Nancy Pelosi, D-Calif., said the Detroit 3 should regard the tough stand Democratic leaders have taken on aid to the companies as "good news." According to the letter, the plan must:
• Assess the automakers' cash-flow needs to continue operations, and their cash requirements for maintaining long-term viability;
• Estimate the financial impact of vehicle sales if they stay at current rates, if they improve slightly, and if they decline;
• Agree to share information with federal overseers;
• Grant top priority to the repayment of any government loans, ensuring that taxpayers get paid back first;
• Grant stock warrants so that taxpayers will benefit as shareholder value improves;
• Bar the payment of dividends and excessive executive compensation, including bonuses and golden parachutes;
• Indicate how the companies will pay health care and pension obligations;
• Show how the companies will meet federal fuel efficiency requirements and develop advanced technology vehicles;
• Allow the government to demand immediate repayment of loans if long-term plan benchmarks are not met.

 

[Bill Musarra]

detnews.com | Webvideo | Ford's most advanced assembly plant operates in rural Brazil

The new Ford plant that they opened in 2001. Should our bailout do this??

Bill

 

[domtoni]

Bill,

Just saw the video, and what the Detroit News shows in Brazil, is pretty much what goes on across the board here in Europe etc. The concluding remark about the UAW is, I am sure, true. The UAW guys are on good salaries, benefits and they don't want to give in.

On the other side, those autoworkers also contributed to the overall economy, and made people alot more money.

Anyway, here is another article from Automotive News. It is an interview with Lee Iacocca.
THE AUTO INDUSTRY BAILOUT

Iacocca: Detroit 3 leaders should keep their jobs


Former Chrysler chief: They're our 'best shot' for success

<script>queryvar="iacocca:,detroit,3,leaders,should,keep,their,jobs";</script> Jamie LaReau
Automotive News
December 9, 2008 - 3:36 pm ET

Former Chrysler Corp. Chairman Lee Iacocca said Detroit 3 leaders should keep their jobs as they seek government aid because they are "the best shot we have for success."
In a statement released today, Iacocca defended the management of Chrysler LLC, General Motors and Ford Motor Co.
"Running a multibillion dollar automobile company with thousands of employees, retirees, suppliers, dealers and communities counting on you is not for the weak of heart or for the timid or the untried," Iacocca said. "Especially the untried."
The comments from Iacocca, the only auto leader who has won a U.S. bailout, follows calls by some politicians and analysts for Detroit leaders to step down as a condition for aid.
On Sunday, Senate Banking Committee Chairman Christopher Dodd, D-Conn., added to the chorus when he said GM CEO Rick Wagoner should step aside.
"You've got to consider new leadership," Dodd said on CBS's "Face the Nation." Wagoner, he said, "has to move on."
That same day, President-elect Barack Obama was asked on NBC's "Meet the Press" if Congress should let current management stay in place. He answered: "It may not be the same for all companies."
Iacocca said today: "You don't change coaches in the middle of the game."
Wagoner has been GM's CEO since 2000. Ford is steered by Alan Mulally, who joined from Boeing Co. more than two years ago. Chrysler CEO Bob Nardelli led Home Depot Inc. before becoming an auto executive last year.
"The industry has been brutalized by a totally unpredictable series of events over which it had little control," Iacocca said. "The companies may not be perfect, but the guys who are running them now are the only ones with the experience and the in-depth knowledge and understanding of how the car business really works."
Legislators are putting together a $15 billion plan intended to help keep cash-strapped GM and Chrysler afloat. Conditions that may accompany a package of loans and credit lines are being negotiated.
Iacocca became a national celebrity when he secured government loan guarantees for Chrysler in 1979 and paid them back early.
Bud Liebler, a former Chrysler marketing chief who is Iacocca's spokesman, said the former chairman has received 150 requests for interviews during the crisis.
Iacocca retired 16 years ago. In October, the Reputation Institute consulting firm ranked him the sixth most-admired CEO in the nation.

 

[Keith]

As a matter of interest, I would personally be fascinated to know from what perspective members comments are coming from regarding this emotive subject. IE, Employees, Employers, sole proprietor, unemployed, retired, disabled, etc etc. I only ask this as each persons perspective is surely based on their own particular situation?

For example, I am disabled with very few prospects, hence I feel unable to comment generally on various issues, and then only from my own perspective which may be irrelevant to the main subject...

Peace brothers.....:love:

Oooops, stony ground.........

 

[Pete McCluskey.]

A Modern Parable.

A Japanese company (Toyota) and an American company (GM) decided to have a canoe race on the Missouri River Both teams practised long and hard to reach their peak performance before the race.
On the big day, the Japanese won by a mile.

The Americans, very discouraged and depressed, decided to investigate the reason for the crushing defeat. A management team made up of senior management was formed to investigate and recommend appropriate action.

Their conclusion was the Japanese had 8 people rowing and 1 person steering, while the American team had 7 people steering and 2 people rowing.

Feeling a deeper study was in order; American management hired a consulting company and paid them a large amount of money for a second opinion.

They advised, of course, that too many people were steering the boat, while not enough people were rowing.
Not sure of how to utilize that information, but wanting to prevent another loss to the Japanese, the rowing team's management structure was totally reorganized to 4 steering supervisors, 2 area steering superintendents and 1 assistant superintendent steering manager.

They also implemented a new performance system that would give the 2 people rowing the boat greater incentive to work harder. It was called the 'Rowing Team Quality First Program,' with meetings, dinners and free pens for the rowers.
There was discussion of getting new paddles, canoes and other equipment, extra vacation days for practices and bonuses.
The pension program was trimmed to 'equal the competition' and some of the resultant savings were channeled into morale boosting programs and teamwork posters.

The next year the Japanese won by two miles.

Humiliated, the American management laid-off one rower, halted development of a new canoe, sold all the paddles, and cancelled all capital investments for new equipment. The money saved was distributed to the Senior Executives as bonuses.

The next year, try as he might, the lone designated rower was unable to even finish the race (having no paddles,) so he was laid off for unacceptable performance, all canoe equipment was sold and the next year's racing team was out-sourced to India .

Sadly, the End.

Here's something else to think about: GM has spent the last thirty years trying to move its factories out of the US, claiming they can't make money paying American wages.

TOYOTA has spent the last thirty years building more than a dozen plants inside the US. The last quarter's results:

TOYOTA makes $4 billion in profits while GM racked up over $20 billion in losses.

GM folks are still scratching their heads, and collecting bonuses... and now wants the Government to 'bail them out'.

IF THIS WEREN'T SO TRUE IT MIGHT BE FUNNY

 

[Cliff Beer]

That's BS that these three CEO's are somehow uniquely qualified and essential elements of a successful turn around implementation. They're f'ups, just like the previous CEOs - they all collectively drove these American institutions into the ground with pig headed ego and arrogance. Bob N was a total screw up in the CEO role at HomeDepot for example. The company performed horribly, the stock price tumbled and he made off with something like $100M+ in total comp. He should have fired himself and then the Board should have had the balls to fire themselves as well. If I screwed up like him I would want to crawl off under a rock in Mexico out of embarassment. But no, ego goes to work and there he is back in the corporate world f'ing it up for the next big company.

And Alan Mullaly? He had very modest success at Boeing in an environment with minimal competition (1 real competitor - Airbus). He is completely unqualified to operate a global company in a highly competitive environment such as a US automaker.

There are thousands of better qualified CEOs out there for this role. These three CEO's already showed their ineptitude and weak leadership by showing up in D.C without a fully cooked plan the first time around. I think a fresh MBA out of a middle tier business school could do a better job. Fire these losers.