UAW leader says blame economy for Detroit 3 woes - Yahoo! News

someone losing their job, or many people losing their job, in Michigan does not affect me in New York. their taxes do not go towards repairing my roads in Long Island, maintaining my county's parks or any other social projects. bailing out a bank - which is national and where people go for credit - is different than bailing out a company that employs many people. i can't go to GM for a loan. they won't refinance my mortage. they don't provide me with life or home insurance. its a company. this is no different than being in a town where one big corporation employs a majority of the citizens of that town. this is no different than how ghost towns were created - when the main attraction/feature that supports a town disappears, so do the people in that town. they find employment elsewhere. they survive. they manage. obviously Detroit isn't going to become a ghost town, but the point is, yeah, its devastating - for those people. not for everyone. if people in Detroit can show me how their money somehow makes it to New York - spending money here, supporting our merchants and stores - then i'll join their cause. right now a company in Oregon is going out of business, a few hundred people are gonna lose their jobs and tonite i'll sleep like a baby cuz none of it will affect me. companies go out of business all the time and the only ones affected are the residents of the town where that company was located.

these auto workers have a higher per hour cost to their company than i do, and i actually have a college degree and numerous financial licenses in my field. the only difference is if i ever lose my job i can pick up a phone and get 10 interviews and 10 offers (albeit from companies i wouldn't want to work for and doing a role i wouldn't want to do) cuz i have a variety of options with my qualifications, and they'd have a high school education and have to find some other menial blue collar task to get paid for.

i always say if a company gets too big that it can't be allowed to fail then it shouldn't have never been allowed to get that big in the first place. instead of paying for lobbyists to encourage a hands-off role by the government these carmakers should've put those millions into R&D and rolled out huge fleets of hybrid/fuel efficient cars or tried to usher in a new era of electric cars. GM got too big to be able to take advantage of changing customer demands and that's their fault and their problem and something workers of GM need to be worried about, not me.

Not true, actually.


Parts suppliers for the Big 3 auto companies are spread throughout the U.S. They'll be tremendously affected.


I'll actually agree with this. Aside from just the "make mostly SUVs" issue, GM in particular has spent the better part of 30 years not getting flexible and competitive for the future. Maybe the lesson is that companies that get this big in the future shouldn't be allowed to be so mismanaged.

Absolutely agreed. And I would add that the people who should have not allowed them to get that big are what we lay people call "investors". The problem, much like a lot of unintended consequences of government interventions, is that these investors have known for years the government would not allow them to fail and so they continue to reward mismanagement with more investment to continue...bad company management. Rinse and repeat this in 3-5 years. While we're at it...add the airlines to this artificially propped status as well.

I really do sympathize with the workers of these companies. But the fact is that they work for a company with an unsustainable model. They cannot move and adapt quickly enough, or offer products that are profitable enough, so they fail. I've been there myself. Other companies come in, buy up whats worth something, and some of these workers now work for somebody else. Some will need to move on. Happens every day in lots of other industries and towns. Same goes for airlines in my book. They sell a service that relies upon "X" number of travellers at "$Y" price. Well...if you cant get people to fly at "$Y" rates any more, you have to trim back expenses, cut flights, and try to run a business that can survive.

Not allowing them to fail only continues to perpetuate the reasons they are failing. Using ancillary economic fallout as a reason to keep bailing them out just leads to larger leveraging and hedging by the ancillary businesses, and thats how you end up with major economic problems (not too dissimilar to what we have now, or will have more widespread in 2009, IMHO).

It is nothing about getting "too big" and we should definitely not discourage any private companies or industries from getting too big. Walmart and Exxon/Mobil are huge, same with Microsoft (same thing with Toyota and Honda, in another country), and they can adjust to market conditions easier than GM or Ford. I believe it is more about management and being saddled with overpaid union workers/retirees. However, I don't apply this thought to airlines, to some extent. It seems that so much business and commerce depend upon a good air transportation system. With autos and trucks, there are many other companies and options.

We never really need a company to 'get big', and often we should not want it. Less companies = less competition, and in general that means higher consumer prices right?

What happens when you go with the 'big is better' model? You get your competition from FOREIGN sources, they provide the competition that keeps the consumer market alive and if you look at autos you see that... we have foreign companies that dominate the economy and quality portions of the spectrum.

If we did not have super huge automakers, if there were not massive barriers to entry, you would have had the U.S. version of BMW and the U.S. version of Honda or Toyota. Some of those barriers are our own government and public loyalty to the Big Three, others include the difficulty of starting a business where there are massive established players (foreign automakers obviously grew from a base in their home countries).

Big only helps with economies of scale, instead of having the overhead of five companies, you have a slightly larger single company overhead, but all the production and profit of five smaller companies. That situation is a net gain for the economy, its the difference between every car being custom made and the Ford assembly line.

But this 'too big to fail' nonsense is driving me up the wall. Capitalism is based on failure and success people, if you eliminate the chance for failure you destroy the incentives for success. You end up with mediocrity in the short term and long term death of the economy. We may be at that point now.

Others have brought up Walmart or Microsoft, well what if the same thing happens there? Walmart or a oligarchy of two other supermarts, owns 95% of everything. If their credit starts to tank do we bail them out? Do we hear the lines of "Think of the people unable to buy cheap milk, or the thousands losing their minimum wage jobs! We can't let this happen?". And if anyone can say that Microsoft with their 90% share of the market is an innovative force in the software economy, obviously they are ignoring the massive piles of shovelware (or shovel frameworks!) that the company spits out, and the massive lack of creativity in their big product lines. Heck, they are an OS company that seems to be basically copying whatever Apple does lately, how long is that going to survive?

A few big companies is a sign of weakness in the economy, not a great thing. It is another reason I was against the bailout being used to buy TARP instead of anything else, I'm afraid of the U.S. buying all the crap assets off the books, and all these troubled banks being gobbled up as tasty morsels in bank mega mergers. We are already seeing this happen BTW, we'll see more of it as the bailout money disperses. Are we going to turn around in three years and say that the new megabanks are too large to fail again, in fact even larger than last time, so its even more imperative to bail them out?!

The road to total economic collapse is complete stagnation of the economy, not GM or Ford or Lehman Brothers holding X number of jobs for ransom 'OR ELSE'. If a loan is what GM needs, and they can't get credit elsewhere, than if the government decides to go through with it, why don't they charge a sky high interest rate like anyone else looking for credit right now has to go through? Would GM still accept such a loan? Even if the alternative is economic collapse? I'm doubting it, they'll look at the other bailouts and expect charity right up until the point the economy falls apart.

Of course, paying a dozen execs $30 million in bonuses while your asking for a bailout doesn't help get my support.

http://blogs.moneycentral.msn.com/to...r-bailout.aspx

Obviously you can chalk it up to horribly poor planning (probably not a good idea to contractually guarantee bonuses when your industry is bleeding, even if it means you'll lose the talent that could get you out of the mess), but it's because of articles like these that so many people are completely misinformed as to what is going on in this economy.

I'd like to hear more of your thoughts on this. As a libertarian opposed to big government, I would think you would be inclined to be opposed to big business as well. Why would government become less effective the bigger it gets, but business more effective?

Couldn't agree more. I would think that the more risk involved in a venture, the more "conservative" those participating in the venture would be. By removing the moral hazard, risky behavior is encouraged, and eventually even those who didn't engage in the risky behavior become a part of the bailout.

Why yes, I am annoyed that I didn't buy a home beyond my means. Why do you ask? :p

Take WalMart as an example. Their ability to deliver value is strictly based on their size and ability to keep costs to a minimum. They can get better prices because they buy in such mass quantity. If more local stores were as competitive on price, WalMart wouldn't exist in the same way.

Unfortunately, governments don't have competition, so 99% of the time, more of it is a bad thing.

The people you speak of only want to socialize the losses. The winnings they want to keep for themselves. :)

A quick answer would be in the legislation and regulation by the government in preventing a company from getting "too big" (in non-monopolistic way). What would such legislation and regulation look like? Since it has to apply across the board, aren't you limiting the expansion of entreprenourship and free enterprise? I agree about the ineffeciency arguments but that was not my point. You don't want to artificially discourage growth through governmental edicts but you do want to make sure that such growth is done smartly, legally, cleanly and non-monopolistic. Market conditions, free trade, supply and demand, and inventiveness should be the driving factors. If a company makes a product that is in such high demand all over the world, why not encourage that (as we have throughout history)? There will come a time when other similar products will be more popular instead and that should be encouraged too. I believe in encouraging legislations, not punitive ones.

I don't want government restriction on businesses becoming too big, or at least, nothing more than the appropriate trust-busting legislation that was created for good reason. I just want anything that is a barrier to smaller businesses to be removed, this includes regulations clearly favoring established companies, corporate pork earmarked for an obvious business, subsidies in general are suspect, and the tax code is a mess.

As for encouraging business, bailouts are bad, it rewards stupidity of the highest degree. Go direct to the assets and encourage those somehow... in mortgage world that means government taking land, not worthless paper... in autos that means government giving employment credits and decent interest loans (not low-cost which is another word for subsidy)... in credit markets it may mean the government greases short term transactions directly, rather than injecting megaloads of money into the system that gets eaten up and the market still fears trading with the other idiots.

I think the capital gains tax should certainly not be decreased in the short term, in my opinion if anyone has a gain this year its because they either were one of the crooks in the system, absurdly lucky (and therefore not likely to repeat), or a mad speculator (generally not the sort of creature that creates real economic growth). I think the push for gains rate tax cuts has been coming from the mega-wealthy crowd trying to lock in even more of their parachute money to weather the coming crapstorm.

Since it is inevitable the government is going to throw money at the problem, I would likely to see as much of it land at positive incentive areas as possible. So if anyone has any suggestions other than throwing billions of dollars at giant failures like GM or AIG, I'd like to hear them.

The unions say no concessions...so all I can say is, after we throw $25-$50 billion at the problem...what happens 2-4 years down the road when we're back at the same place again?

if the UAW isn't willing to budge then i openly wish for GMs failure now.

I'll throw a wild idea out here for fun. This applies to GM & Chrysler, but not to Ford, since Alan Mulally at Ford seems to have been doing a good job changing the company around. Maybe just float Ford a $25 billion loan.

GM & Chrysler:

1. Tell them to enter bankruptcy. If they refuse, nationalize them, and then take them into bankruptcy.

2. Transfer their pension obligations to the government. (This has been done before.) Resulting from this, only pay out pensions fully for workers over the age of 50 with 20+ years with the company. Maybe do a sliding scale for younger/less senior workers so you don't automatically screw the 49-year-old with 19 years at GM.

3. Break all existing contracts (labor, parts, dealerships).

4. Assemble a team of objective pragmatists to determine what to do with the two companies. Leave nothing off the table, from bringing them out of bankruptcy as whole companies minus all the previous obligations, to selling off the assets to foreign auto companies.

Of course, it'll never happen.

GM appears to be getting pretty desparate. They're now sending out propaganda e-mails to associated suppliers/dealers to pressure lawmakers............

Interesting related Op-Ed in the New York Times by Mitt Romney:

Why should taxpayers have to cover the pensions for private workers? If the UAW is unwilling to give anything up and Big 3 management can't manage, they deserve to go bankrupt. I'm so stick of the "Made in America" crap. Toyota, BMW, Honda, ect. make cars in the US (I believe Toyota has a marketing campaign built around this). They understand how to manage, understand what the market wants, and builds and markets it cars as commodities, not as toys (not that automakers shouldn't build appealing, sporty cars that people can afford, but that's not what will make automakers profitable).

I do think that Ford, Chrysler, GM have much better management now (Ford has a lot nepotism). They seem to understand the problems. However, they can't erase the past mistakes of poor management with the UAW contracts (a biggie in my book, and one that can't easily be changed), the supply chain, quality control, and cost management.

Partly as a means to an end, partly so those people don't get immediately dumped into welfare, and partly because for the long-serving employees, it's the right thing to do.


I disagree. Only Mulally at Ford has shown any comprehension of the considerable strategic change that has to happen to become competitive.

Wagoner at GM has held some sort of leadership position (COO, CEO) for 10 years, and in those 10 years GM has continued to hemmorhage money and shown barely any proclivity to change directions.

Bob Nardelli is even worse. Following a very mixed tenure at Home Depot, he's done very little at Chrysler so far to address its core issues, aside from bringing in management loyal to him. Plus, his public statements have seemed to show him out of his depth when trying to understand the industry.

I think Nardelli got a bad rap as the CEO at Home Depot. Aside from his insane package, he just couldn't get the stock to up. He increase return on capital, revenues, and profits; but investors didn't buy into his management style and ideas.

The fact is, though, that Nardelli couldn't get the share price to budge in 7 years despite aggressively pursuing the bottom-line at the expense of a) turning over basically the entire management structure, b) alienating workers in part by switching from full-time to part-time later, c) alienating customers in part by understaffing so much of the retail operation and d) spending a huge amount of money in a stock buyback.

It's clear that there's a lot about both retail companies and public companies that Nardelli just doesn't understand, or doesn't understand well.

Namely, that trying to manipulate stock price is a fool's errand.

I'd like to say that going back to my support of the 750$ tarp plan and my continual hammering home that it was more about confidence than anything else, by Paulson making his most recent statements regarding NOT purchasing bad assets he has completely undermined the #1 purpose of the Tarp (regardless of whether or not they spent a dime). {shaking head} Now we will see what a lack of confidence looks like when you put a nice deep slice in the parachute. Get ready for ugly.

I'm not sure what exactly is going on with the massive bailout money, I don't think it ever truly inspired confidence in the market, unless your talking about the sheep watching CNBC.

In the world of autos, I agree with some of what Mitt Romney is saying. We need a shakedown of the broken culture in autos, and I particularly liked the line about eating the seed corn. I think a lot of CEO-culture has been eating up massive capital built up over decades since they thought it was too huge to notice... and now we are seeing the result, supposedly 25 billion necessary in external funding to keep the companies afloat (we know that number is going to explode too, thats just the starter number to test the waters).

most of the people spending money are sheep and will react to the verbiage and effort taking place. If you roll out a 'bail out' this will instill confidence no matter who in those you discount as being unaffected. When the same person asking for the bailout money to 'save the day' and then he says we're not going to buy the 'bad' assets that we said we would the 'sheep' are going to be scared. The headlines pile up.

Call them sheep if it makes you feel better but the masses, the GREAT majority of those driving this economy fall under whatever category you want to lump them into and they take their direction from the stimuli they get no matter the 15 second source or headline. This is proven time and time again.

Those that argued for a bailout stated that we'd be able to put in a floor in the confidence of the economy, within weeks of its passage we had a range put in, we have now efficiently killed the range through this new tact and we're in essence fucked without spending hardly a pittance of what will be needed. Bond yields in the tank, spreads widen, confidence is tanking along with the stock market(s).

BTW St. Cronin was right a year ago, i was wrong.

my .02, which by the time youre done reading that will be .01

I'm sorry for belittling the problem.

I think there is something very wrong with the economy when it oscillates wildly based on the actions or inaction of a Treasury Secretary, Fed Chairman, President, etc. To me CNBC and the media in general, our government, and corporations are fostering what I consider panic economics... extreme short term fixation, irrational explanations for every market change, flipflopping or outright lying in public that gets exposed eventually and is almost ignored, or further explained away.

That is not an economic system, it is madness, at least to me. I'm concerned a lot of 'investors' don't have a plan, and therefore are susceptible to less than optimal behaviors based off things like bailout bills or sound bytes. Eventually that behavior limits my own ability to predict what is going on, leading me to be annoyed and throw out insults, so I should apologize.

I am personally hoping that by not spending the 750 billion right away, it will still be around so that when the next scandal hits, instead of passing more money through the printing press, the existing bundle will be used. I'm hopeful that the economy will get out of this choking phase eventually, although I'm distressed that I'm still not seeing any leadership showing up.... business as usual at the giants, even those running on public funds now.

This is very surprising, what was I right about?

My personal feel at the moment is that things will start to turn around so long as companies manage to stay afloat just a little longer.

Reason being simply the lower gas prices - a year ago people were paying $70 to fill up their SUV, today they're only spending $35 ....

Considering for most commuters filling up as at LEAST a weekly occurance thats $140/month extra they have to spend on something other than gas.

To put this in perspective over a year and presuming a 2 car household (as most have at least this) thats $3,360 per annum extra being spent on something other than gas.

(the other way to look at this is that a large part of the consumer spending downturn at retail etc. could probably be attributed to that $3.5k having had to be spent on gas instead of other retail items)

My company was paying a half a million more a month two months ago as the same time last year. My guess is they are looking at almost a 3/4 million dollars swing down now. Pretty good cabbage.

I like the use of annum. :)

Good point about the extra income from lower prices. Do you think Americans (and others around the world) are realizing this? How long do you think prices will stay this low?If so, are they using it? I just hope drivers move towards more fuel-friendly automobiles so they don't whine when prices go up.

Airlines should start seeing the red stop bleeding a little.

Gas prices make a tremendous difference to our finances, as we live about 30 miles from anything. We drive about 1000 miles a week. The change in gas prices is @ $200 a month in our budget.

you inferred that we were in bigger trouble than even I thought encouraging us to stay on the sideline(s) in cash.

Interesting article:

It's North vs. South in Big Three bailout fight - Capitol Hill- msnbc.com

The gas prices are a shocker to me, my only guess is that speculation is a crazy powerful force if it can swing the price of oil up to over 140 and down to 50 in the span of a year. I think its being pushed lower than it would be because of the fear of economic downturn, but nothing indicates it will be more than temporary so I'd say enjoy the cheap gas while you can get it, but don't plan on it being their for long.

I'm concerned we might get to where we are about to turn the corner in the economy and then the oil price corrects too dramatically and it blows out the fire before it gets going.

As for the south being against the bailout, I don't like their reason because I think its as short sighted as the proponents of the bailout... but if it kills the auto bailout, yippee. Although I think I wouldn't mind giving a $25 billion dollar loan if the government will charge an interest rate with some teeth. At least comparable to what they would have to pay to get funding through the bond market in normal times.

Really though, we shouldn't be voting on this based on which state gets the most grease from the Big Three, it should really come down to staying out of business in general, and not subsidizing losers who are giving us the finger whenever you ask them to not do something. (like give bonuses for bad behavior, build inefficient cars, manipulate carbon credits to pay them for polluting, strongarm for tax breaks every time they open a plant)

Ouch, that North vs South article on the second page is a fun read. The senator from Tennesee is mentioning 'fund the ones that were going to succeed' and mentioning the plant in Tennessee as very competitive so it would survive. I would really hate to see the government create some patchwork bailout custom fit to spread pork to states in a completely new way.

Imagine, rather than just silly social spending disparity, you can bailout and own parts of big industry, and control where they build plants as yet another political bargaining chip.

Man we're about to have the most messed up socialist state in existence if this trend continues.

Did I read right that Toyota and Honda opened up two new plants last week?

Amazing what happens when you make a quality car that people want to buy and you aren't burdened with outdated union contracts.

I think you have to divide 'investors' into more than one category and I'm just going to make 2 but I know there are more. There are those of us in it for the long haul, invested in our 401K's, hoping the people who manage our money like Fidelity (I just use them since that's who does ours), know what they are doing and this is looking more and more like a bad decision.

Then there are those who just look to game the system to make a quick buck, who take advantage of how they know the previous group, the slower moving group, are going to behave, and take advantage of it. If there's money to be made by artificially lowering prices, then why would they act otherwise?

SI

Yeah, but that TN plant is one of the newer plants. It actually does make sense. You don't want to fund plants that have been losing money because they are old and inefficient.

In today's AJC, there was a full page ad/article from the car dealership association pointing out that if wasn't just the big 3 but thousand's of dealerships that would also be impacted by a failed bailout.

I am somewhat torn. IMO the big 3 and unions have it coming. Joe the mechanic at a dealership or Bob the service desk manager does not.

I am leaning towards some sort of bailout but would like comprehensive changes etc and government taking some equity stake/ownership.

hence the above job estimates that, while a range, are scary nonetheless.

Nationalise the three main car manufacturers.

Lay off any incompetant management, take pension legacies of them and into the goverment domain then turn them around producing hybrid/alternative fuel cars ... then privatise them again, in effect the goverment would buy low (they're near bust) and sell high (if they can make them profitable).

Giving them money without a plan of turnaround would be very silly imho - flushing good money after bad comes to mind.

Yup, I agree. The biggest problem in implementing is the unions. Once some bailout/nationalization is underway and they are no longer staring down a gun barrel, suspect the unions will fight to maximize their benefits (as they are suppose to do) and lose sight of the better good. With the historical union support of democrats, I think Obama and co. will have special interests fighting them all the way.

Yeah, this is one area were the new President is going to have a very difficult time walking the tight-rope. There is no chance he is going to end making anyone happy.

Unions only have power if they're allowed to by the goverment - in the present circumstances they SHOULD have next to none.

Unions are designed to protect workers against unfair management practices not to create a situation where the rest of society subsidises an inefficient industry.

The goverment if it has any sense will negotiate with the unions before the companies are nationalised, using the stick of 'well if you mess about we'll let the whole lot collapse' ... but if they take that route they had better mean it as if the unions are as stupid as the coal miner unions in the UK were (which is the nearest equivalent to the present situation imho) they might need a fair bit of persuasion.

The big problem isn't current workers, but legacy benefits. Much of the labor cost issue goes away with nationalized health care. It wouldn't fix everything, but taking away health care expenses would do a lot more good than a bailout.

unfortunately the timelines arent in sync to save them.

Just heard Bill Kristol on Fox Sunday roundtable say (paraphrased) people he has spoken with (economists?) are concerned about a Depression.

He sounded concerned. Bill has always seemed to be even handed (as opposed to Britt and Juan) and I like him.

Consensus is some sort of huge stimulus package.