Should the government bail-out include domestic automakers?

[jdoria]

Originally Posted by Len_A

Well, manufacturing unions and construction trade unions seem to be two different animals. When you hear that the Detroit Three's labor costs are $70 an hour, about $25 an hour is retiree health care. When that goes out in 2010 to a trust fund, and the rest of the two tiered wage structure kicks in, Detroit and the transplants will all be in the $40 to $42 an hour range, benefits included. To paraphrase what you said, want to stop cruel people from abusive treatment of human resources? Become a union delegate. I've seen more than my share as both a former auto worker from thirty years ago, and more recently as an industrial sales rep calling on these auto plants Unfortunately, d*ckhead supervisors still exist.

The financial rocket scientists that came up with credit swaps and derivatives - guys like you and I should get to have a crack at them. With a traditional Louisville Slugger. Nothing like the sound of hickory coming off some well deserving *******'s skull. Someone called them financial weapons of mass destruction. Turns out to be very accurate.

Guys like me?
My family owned a GM dealership for 26 years and I owned a computer contracting business for 7? Want a piece of me???

[jfelbab]

I strongly, but respectfully, disagree with your position Len. I don't dislike Detroit cars as I've owned no less than a dozen of them so don't think I have a thing up my backside about Detroit brands.

My thoughts on this is that the Big 3 have largely already failed. They have been failing for 20 years or more. They have not built their brand into something many Americans want to buy and own. Many of their dealerships still treat us like crap. Many would argue that despite huge quality improvements, their vehicles are not any better than, and many would suggest, not quite as good as, the Asian owned, American built vehicles. Their market has already imploded. Their suppliers are already shrinking and laying off their people.

Giving money to the Big 3 to build more cars that too few want to own, and they therefore can't sell at a profit, is foolhardy and it is just not worthy of taking money from our children to waste it like this. It will only delay the Big 3's ultimate fate anyway. The Big 3 are losing money on every vehicle they build. This is a fact. The most significant reason given for this is their labor cost. Pushing their medical coverage (VEBA) to the Union to manage doesn't take away the fact that the Manufacturers need to fund this plan with $56 billion dollars they clearly don't have.

I applaud the fact that the UAW agreed to suspend the Jobs Bank program and postpone VEBA contributions.

VEBA has not been too successful either. Auto Makers Push VEBA Solution for Industry Crisis | Labor Notes

Claiming that the cost of labor will be on a par with the Asian transplant workers doesn't take into account the fact that this massive VEBA debt must be paid for by the manufacturers. Also pointing to the opinion that this disparity will be fixed in 2010 belies the fact that unless they fix things in the next few months they likely won't be here in 2010. This is a long term problem that can't be fixed by a short term fix. Unless we buyers want to buy a Big 3 product, a bailout will be a failure.

The best plan I've seen put forth to date is the Corker Plan.
12/4/2008 - ‘Corker Plan’ Outlined In Hearing With Detroit 3 And UAW - Breaking News - Chattanoogan.com
Corker's middle-ground plan for Big 3 : Editorials : Memphis Commercial Appeal

Loss of the Big 3 would be a serious problem. Loss of millions of jobs and tax revenues is tragic and would be extremely painful. Even if the bailout was huge and keeps some number of the workers employed, it doesn't solve the one large problem facing the Big 3. Clearly, history shows us that too few Americans seem to want to buy the products being made by the Big 3. Even if the bail-out is approved and the Big 3 stay in business they will likely continue to lose market share at a pace that will cause many to become unemployed. Plants will need to close and suppliers will be cut back.

Unless the Big 3 can turn their brand image around and it becomes something people want to own, their future is very dim.

[jdoria]

I've fought the US labor battle with union mechanic labor and finally the IT labor going to places like Mumbai, Dubai, Shang Hai, and Good Bye. Hence my waste 0f my parents $150k on a labor relations degree with no legal studies...Im doing nothing with it!!!

Luckily I "stacked the chips" and retired at 37 this year.

Dont get mad, work with it. We are about to be the land of opportunity once again. think if the gold rush in CA, but without a commodity.

[Len_A]

Originally Posted by jfelbab

I strongly, but respectfully, disagree with your position Len. I don't dislike Detroit cars as I've owned no less than a dozen of them so don't think I have a thing up my backside about Detroit brands.

My thoughts on this is that the Big 3 have largely already failed. They have been failing for 20 years or more. They have not built their brand into something many Americans want to buy and own. Many of their dealerships still treat us like crap. Many would argue that despite huge quality improvements, their vehicles are not any better than, and many would suggest, not quite as good as, the Asian owned, American built vehicles. Their market has already imploded. Their suppliers are already shrinking and laying off their people.

Giving money to the Big 3 to build more cars that too few want to own, and they therefore can't sell at a profit, is foolhardy and it is just not worthy of taking money from our children to waste it like this. It will only delay the Big 3's ultimate fate anyway. The Big 3 are losing money on every vehicle they build. This is a fact. The most significant reason given for this is their labor cost. Pushing their medical coverage (VEBA) to the Union to manage doesn't take away the fact that the Manufacturers need to fund this plan with $56 billion dollars they clearly don't have.

I applaud the fact that the UAW agreed to suspend the Jobs Bank program and postpone VEBA contributions.

VEBA has not been too successful either. Auto Makers Push VEBA Solution for Industry Crisis | Labor Notes

Claiming that the cost of labor will be on a par with the Asian transplant workers doesn't take into account the fact that this massive VEBA debt must be paid for by the manufacturers. Also pointing to the opinion that this disparity will be fixed in 2010 belies the fact that unless they fix things in the next few months they likely won't be here in 2010. This is a long term problem that can't be fixed by a short term fix. Unless we buyers want to buy a Big 3 product, a bailout will be a failure.

The best plan I've seen put forth to date is the Corker Plan.
12/4/2008 - ‘Corker Plan’ Outlined In Hearing With Detroit 3 And UAW - Breaking News - Chattanoogan.com
Corker's middle-ground plan for Big 3 : Editorials : Memphis Commercial Appeal

Loss of the Big 3 would be a serious problem. Loss of millions of jobs and tax revenues is tragic and would be extremely painful. Even if the bailout was huge and keeps some number of the workers employed, it doesn't solve the one large problem facing the Big 3. Clearly, history shows us that too few Americans seem to want to buy the products being made by the Big 3. Even if the bail-out is approved and the Big 3 stay in business they will likely continue to lose market share at a pace that will cause many to become unemployed. Plants will need to close and suppliers will be cut back.

Unless the Big 3 can turn their brand image around and it becomes something people want to own, their future is very dim.

OK. First, The Detroit auto makers have been reducing their manufacturing capacity, so I don't believe their going to be building cars in excess of demand. Where do you get the idea they're going to be building more cars than they have demand for? Even Toyota resorted to zero percent financing.

A lot of their dealers outside of the Detroit market suck - I can't speak to how bad they are. no argument from me.

How do you figure that the Detroit automakers lose money on every vehicle they build? I'm sorry, but that statement needs to be justified. If you're going to point to their current loses, don't bother - I know that right now they're losing money, but that as much a function of what product mix is selling as anything else. If current loses are the criteria, then Toyota lost money on every vehicle they built and imported last quarter. Toyota lost $336 million dollars last quarter in North America, and will probably lose money this quarter.

The "Giving money to the Big 3 to build more cars that too few want to own, and they therefore can't sell at a profit, is foolhardy and it is just not worthy of taking money from our children to waste it like this. " statement, I have to admit, irritates the hell out of me. Ford has so much demand already for their new F-150, they've had to add employees and production shifts to met demand. And small cars, including the much touted Asian brands, are down badly. last month: 17,690 Civics sold, down 67 percent from May. Toyota Corolla? Down 59 percent. Ford Focus, down 75 percent. Honda Accord, off 60 percent. Chevy Cobalt, 76 percent lower. Nissan Altima, off 69 percent.

"Their market has already imploded. Their suppliers are already shrinking and laying off their people." Another statement that exaggerates Detroit's problems and glosses over or ignores the transplants problems. First, Nissan's sales drop last month was as bad as GM's and Chrysler's. Toyota's and Honda's loses last month were so much worse than Ford's, that Ford picked up 1.5% market share last month. That is a big change in a month.

Furthermore, No one wants Toyota's, Honda's, Nissan's or Mercedes cars any more than they want Detroit's. Slamming Detroit is just more of the same. Mercedes in Alabama, and Nissan in Tennessee are both offering $100,000 buyouts. Despite a high-profile zero-percent financing offer, Toyota's U.S. sales dropped 34 percent in November, four percentage points more than Ford. Toyota had previously said it would shut down its U.S. assembly plants on 12-22 and 12-23 (oh, and pay their employees to not build cars...where have we heard that before). Now, with the exception of the San Antonio truck plant, they're idling its factories for additional days.

The Kentucky plant, which makes the Camry, Avalon and Solara, will be shut for nine additional days in December and January, Goss said.

Toyota's NUMMI plant in Fremont, which makes the Corolla, will be shut down for 10 more days in December and January.

The Indiana plant has two assembly lines. One, making the Sienna minivan, will be idled for six additional days in December and January. The other, making the Sequoia SUV, will be idled for one additional day this month.

Quality? JD Powers for initial Quality and Consumer Reports for long term ownership, rate Ford as equal to Toyota and Honda. Consumer reports also rates the Alabama built Mercedes SUV's and the South Carolina built BMW's are poor quality, and unreliable. So Detroit isn't completely hopeless on quality.

As far as Corker's plan:

· “One, give existing bondholders 30 cents on the dollar to help reduce their overall debt load. --- Existing bonds have already been devalued in marketplace, I thought.
· “Two, bring wages immediately in-line with companies like Nissan and Volkswagen. -- Last year, Toyota factory employees made MORE money than the Big Three factory employees.
· “Three, GM owes $23 billion to the United Auto Worker’s VEBA (voluntary employees’ beneficiary association) account. The union must agree to take half of that payment in GM stock. -- They already have taken GM stock, and Ford stock at Ford. That was already part of the initial contract language on the VEBA. Corker needs to get more up to date information before publicly making proposals.
· “Four, the union must agree to do away with payments to workers who are still receiving almost full compensation up to four years after their jobs have ended. -- One, the number of workers in the Jobs Bank is down quite a bit, and they've already agreed to suspend the program.

There's nothing in his proposal that hasn't already been addressed.

As far as "not worthy of taking money from our children to waste it like this", it's OK to take it from our children to waste it, to the tune of $125,000 per transplant job? That's the price tag for the tax incentive give-aways to the transplants. Half a billion dollars in incentives for every 4000 person plant. That's OK, but helping Detroit auto makers is a waste of money?

[Len_A]

Originally Posted by jsatek

I've fought the US labor battle with union mechanic labor and finally the IT labor going to places like Mumbai, Dubai, Shang Hai, and Good Bye. Hence my waste 0f my parents $150k on a labor relations degree with no legal studies...Im doing nothing with it!!!

Luckily I "stacked the chips" and retired at 37 this year.

Dont get mad, work with it. We are about to be the land of opportunity once again. think if the gold rush in CA, but without a commodity.

I'm glad to hear that you retired at age 37!! I'm impressed and jealous as hell. Conrats on the success.

[jfelbab]

Originally Posted by Len_A

OK. First, The Detroit auto makers have been reducing their manufacturing capacity, so I don't believe their going to be building cars in excess of demand. Where do you get the idea they're going to be building more cars than they have demand for? Even Toyota resorted to zero percent financing.

From the fact that they lose money on every vehicle they sell. This is not based on the current financial crisis but on prior full year performance data. One claim they make is that they are losing money because their volume has sunk to a low level, too low to make money.

A lot of their dealers outside of the Detroit market suck - I can't speak to how bad they are. no argument from me.

How do you figure that the Detroit automakers lose money on every vehicle they build? I'm sorry, but that statement needs to be justified. If you're going to point to their current loses, don't bother - I know that right now they're losing money, but that as much a function of what product mix is selling as anything else. If current loses are the criteria, then Toyota lost money on every vehicle they built and imported last quarter. Toyota lost $336 million dollars last quarter in North America, and will probably lose money this quarter.

Detroit loses money on each vehicle sold.

Source:
Detroit: Same Old, Same Old - Jim Manzi - The Corner on National Review Online

Japanese Automakers Lead in Per-Vehicle Profit - Car News/Car News/News/Car and Driver - Car And Driver

2007 profit/vehicle


This is not based on data of the past couple months but 2007 year and 2006 year data.

The "Giving money to the Big 3 to build more cars that too few want to own, and they therefore can't sell at a profit, is foolhardy and it is just not worthy of taking money from our children to waste it like this. " statement, I have to admit, irritates the hell out of me. Ford has so much demand already for their new F-150, they've had to add employees and production shifts to met demand. And small cars, including the much touted Asian brands, are down badly. last month: 17,690 Civics sold, down 67 percent from May. Toyota Corolla? Down 59 percent. Ford Focus, down 75 percent. Honda Accord, off 60 percent. Chevy Cobalt, 76 percent lower. Nissan Altima, off 69 percent.
Again, I'm not looking at short term data but year after year trends at the big three. I see a steady loss of market share for the big three. A bailout might solve the short term money crisis but it won't solve long term losses of business.

"Their market has already imploded. Their suppliers are already shrinking and laying off their people." Another statement that exaggerates Detroit's problems and glosses over or ignores the transplants problems. First, Nissan's sales drop last month was as bad as GM's and Chrysler's. Toyota's and Honda's loses last month were so much worse than Ford's, that Ford picked up 1.5% market share last month. That is a big change in a month.

See my prior response. I'm much more concerned with long term growth or decline, not a good month for a specific model. That is not what will drive any long term rebound of the big 3.

Furthermore, No one wants Toyota's, Honda's, Nissan's or Mercedes cars any more than they want Detroit's. Slamming Detroit is just more of the same. Mercedes in Alabama, and Nissan in Tennessee are both offering $100,000 buyouts. Despite a high-profile zero-percent financing offer, Toyota's U.S. sales dropped 34 percent in November, four percentage points more than Ford. Toyota had previously said it would shut down its U.S. assembly plants on 12-22 and 12-23 (oh, and pay their employees to not build cars...where have we heard that before). Now, with the exception of the San Antonio truck plant, they're idling its factories for additional days.

You need to stop looking at the short term and look at the big picture. Lets look at their market share over the last couple years to see where they are headed.

Autodata, an industry sales-tracking company, pegged the market share controlled by Chrysler Group, Ford Motor (F, news, msgs) and General Motors (GM, news, msgs) at 49.5% including foreign nameplates they own such as Saab, Volvo, Land Rover and Jaguar.
Excluding the foreign nameplates, Detroit's market share drops to 48.1%, Autodata said.

The Kentucky plant, which makes the Camry, Avalon and Solara, will be shut for nine additional days in December and January, Goss said.

Toyota's NUMMI plant in Fremont, which makes the Corolla, will be shut down for 10 more days in December and January.

The Indiana plant has two assembly lines. One, making the Sienna minivan, will be idled for six additional days in December and January. The other, making the Sequoia SUV, will be idled for one additional day this month.

Yes, we can all agree that the current financial crisis has made them all decline. Again, look at the long term.

Quality? JD Powers for initial Quality and Consumer Reports for long term ownership, rate Ford as equal to Toyota and Honda. Consumer reports also rates the Alabama built Mercedes SUV's and the South Carolina built BMW's are poor quality, and unreliable. So Detroit isn't completely hopeless on quality.

I agree that the quality is up some at least with some manufacturers and models. Not necessarily the best but clearly better.

Ratings | J.D. Power

As far as Corker's plan:

· “One, give existing bondholders 30 cents on the dollar to help reduce their overall debt load. --- Existing bonds have already been devalued in marketplace, I thought.
· “Two, bring wages immediately in-line with companies like Nissan and Volkswagen. -- Last year, Toyota factory employees made MORE money than the Big Three factory employees.
· “Three, GM owes $23 billion to the United Auto Worker’s VEBA (voluntary employees’ beneficiary association) account. The union must agree to take half of that payment in GM stock. -- They already have taken GM stock, and Ford stock at Ford. That was already part of the initial contract language on the VEBA. Corker needs to get more up to date information before publicly making proposals.
· “Four, the union must agree to do away with payments to workers who are still receiving almost full compensation up to four years after their jobs have ended. -- One, the number of workers in the Jobs Bank is down quite a bit, and they've already agreed to suspend the program.

There's nothing in his proposal that hasn't already been addressed.

As far as "not worthy of taking money from our children to waste it like this", it's OK to take it from our children to waste it, to the tune of $125,000 per transplant job? That's the price tag for the tax incentive give-aways to the transplants. Half a billion dollars in incentives for every 4000 person plant. That's OK, but helping Detroit auto makers is a waste of money?

I don't dispute those numbers but I would like the source. But isn't this totally a state incentive. Was there a payback for the incentive? Didn't the state of Michigan have any incentives to offer to bring the transplant to MI?

[FlowRate]

jfelbab, I'm glad you get where I'm coming from. Long term viability is much more important than short term cushioning and inflation.

[Len_A]

Originally Posted by jfelbab

I don't dispute those numbers but I would like the source. But isn't this totally a state incentive. Was there a payback for the incentive? Didn't the state of Michigan have any incentives to offer to bring the transplant to MI?

Wall Street Journal, April 3, 2002

In 1993, Alabama persuaded Mercedes-Benz to build its first U.S. auto plant here by offering the luxury-car maker $253 million worth of incentives -- $169,000 for every job Mercedes promised the state.

Honda to Build Light-Truck Plant in Alabama - Los Angeles Times

The Honda plant will be built in Lincoln, a small town 40 miles east of Birmingham along Interstate 20. The company was enticed in part by a $158-million public-private incentive package that includes tax abatements, employee training and infrastructure development.

In answer to your question, no, we in Michigan, couldn't even come close to matching those incentives. At that time a Republican, John Engler, was trying to trim the size of Michigan state government. In fact, the State of Michigan was outraged that so much money was going to subsidize competitors to the Big Three. Partly because of things like this, we in Michigan pay out more in federal taxes than we get back in federal dollars to our state.

And, no, it's not truly "totally a state incentive" - in fact, the illusion that it's totally state tax dollars as an incentive is a nice PR con job. The fact is that each transplant locates in a "greenfield" area that needs significant highway and rail spur improvements - paid with federal tax dollars. My federal tax dollars. here's a link to a 2003 DOT study for more improvements needed in Alabama, citing the Vance, AL Mercedes plant and the Lincoln, AL Honda plant: Study of US 43 and US 80 Corridor Potential, Alabama - Economic Development - Planning - FHWA

My tax dollars, helping to improve the federal highway system, for Detroit competitors, to help unemploy me. Nice. Real fair. And I really don't care about the payback to that state. Incentives like that, especially to highly profitable foreign owned companies, is not only corporate welfare, but on a national level, killing more jobs than it helps to create. The bottom, indisputable line, is that the Big Three lost more jobs than the transplants, including the few Japanese and German suppliers that located in the USA, ever created and ever will hope to create. What you have is a negative payback. Subsidized by the American tax payer.

Which renders the whole transplant-vs-domestic manufacturing cost debate invalid, because the true transplant costs are seriously blurred by the size of the huge taxpayer funded subsidies. The American tax payer has been unfairly funding the destruction of domestically owned manufacturing.

I understand that half the market doesn't like Detroit cars, but you don't taxpayer subsidize foreign owned manufacturing to displace existing domestic manufacturing. You don't want a Detroit brand car, fine. You want foreign owned brands to be built here, fine. They're profitable companies. Let them pay 100% of the cost of the plants, the acquisition of the land, the training of the employees, and the infrastructure improvements. All those things I mention - every f*cking one of them has been paid for in part, or in whole, by the tax payers, for every transplant. What taxpayer incentives GM, Ford, and Chrysler receive, including property tax abatements, drastically pales in comparison. Or else let them export to the United States, and then let's see how many current non-Detroit brand customers will continue to buy Toyota, Honda, and Nissan is they're all imported, rather than blurring their origins by using taxpayer subsidized manufacturing in North America. My best educated guess is, under those conditions, for all the carping about Detroit's quality, half the current non-Detroit customers won't buy an all import car brand.

[jfelbab]

Originally Posted by Len_A

Wall Street Journal, April 3, 2002



Honda to Build Light-Truck Plant in Alabama - Los Angeles Times




In answer to your question, no, we in Michigan, couldn't even come close to matching those incentives. At that time a Republican, John Engler, was trying to trim the size of Michigan state government. In fact, the State of Michigan was outraged that so much money was going to subsidize competitors to the Big Three. Partly because of things like this, we in Michigan pay out more in federal taxes than we get back in federal dollars to our state.

And, no, it's not truly "totally a state incentive" - in fact, the illusion that it's totally state tax dollars as an incentive is a nice PR con job. The fact is that each transplant locates in a "greenfield" area that needs significant highway and rail spur improvements - paid with federal tax dollars. My federal tax dollars. here's a link to a 2003 DOT study for more improvements needed in Alabama, citing the Vance, AL Mercedes plant and the Lincoln, AL Honda plant: Study of US 43 and US 80 Corridor Potential, Alabama - Economic Development - Planning - FHWA

My tax dollars, helping to improve the federal highway system, for Detroit competitors, to help unemploy me. Nice. Real fair. And I really don't care about the payback to that state. Incentives like that, especially to highly profitable foreign owned companies, is not only corporate welfare, but on a national level, killing more jobs than it helps to create. The bottom, indisputable line, is that the Big Three lost more jobs than the transplants, including the few Japanese and German suppliers that located in the USA, ever created and ever will hope to create. What you have is a negative payback. Subsidized by the American tax payer.

Which renders the whole transplant-vs-domestic manufacturing cost debate invalid, because the true transplant costs are seriously blurred by the size of the huge taxpayer funded subsidies. The American tax payer has been unfairly funding the destruction of domestically owned manufacturing.

I understand that half the market doesn't like Detroit cars, but you don't taxpayer subsidize foreign owned manufacturing to displace existing domestic manufacturing. You don't want a Detroit brand car, fine. You want foreign owned brands to be built here, fine. They're profitable companies. Let them pay 100% of the cost of the plants, the acquisition of the land, the training of the employees, and the infrastructure improvements. All those things I mention - every f*cking one of them has been paid for in part, or in whole, by the tax payers, for every transplant. What taxpayer incentives GM, Ford, and Chrysler receive, including property tax abatements, drastically pales in comparison. Or else let them export to the United States, and then let's see how many current non-Detroit brand customers will continue to buy Toyota, Honda, and Nissan is they're all imported, rather than blurring their origins by using taxpayer subsidized manufacturing in North America. My best educated guess is, under those conditions, for all the carping about Detroit's quality, half the current non-Detroit customers won't buy an all import car brand.

It's not like Detroit isn't asking for these tax dollars. They are looking for $25 billion of federal money, this on top of the bailout for the auto industry.

Granholm pleads for auto, Michigan infrastructure aid | Freep.com | Detroit Free Press

Want to tally up who will end up with more tax dollars? I suspect we both know it will be Michigan.

I'm not opposed to tax incentives. I think a lot of our problems can be solved by using tax incentives. I'd like to see hefty tax incentives for the purchase of hybrid or electric vehicles that are made in America.

[Len_A]

Originally Posted by jfelbab

It's not like Detroit isn't asking for these tax dollars. They are looking for $25 billion of federal money, this on top of the bailout for the auto industry.

Granholm pleads for auto, Michigan infrastructure aid | Freep.com | Detroit Free Press

Want to tally up who will end up with more tax dollars? I suspect we both know it will be Michigan.

I'm not opposed to tax incentives. I think a lot of our problems can be solved by using tax incentives. I'd like to see hefty tax incentives for the purchase of hybrid or electric vehicles that are made in America.

No argument from me. If Michigan ends up with more tax dollars, then it's the pendulum swing back toward Detroit, after decades of swinging away. My point is that these huge taxpayer funded giveaways to foreign owned plants helped put us in this position today.

[Len_A]

Originally Posted by jsatek

Guys like me?
My family owned a GM dealership for 26 years and I owned a computer contracting business for 7? Want a piece of me???

No, no, no, I don't want apiece of you - I said guys like you & me ought to get a piece of the guys who came up with the credit swaps and derivatives, that dd nothing to help business like yours, and helped make this credit situation worse for the manufacturing side of the auto business. Sheesh, how did ya read that backwards!! LOL!

[Len_A]

Originally Posted by FlowRate

jfelbab, I'm glad you get where I'm coming from. Long term viability is much more important than short term cushioning and inflation.

Long term viability of who? Taxpayer subsidized, profitable foreign companies? Or doesn't it matter than all the newer plants the Detroit car makers have to compete with had nine figure taxpayer funded incentives? And before you ask, no, the Detroit automakers never, in any state they operated in, ever get taxpayer funded incentives in the hundreds of millions of dollars. Not even GM for Saturn's Spring Hill, TN operations.