While the House of Representatives passed a $14 billion auto company bailout, the Senate did not. Do you believe that the auto companies deserve $14 billion taxpayer dollars?
I don't think anybody deserved any billions of my dollars, but I do feel for the workers of those companies if they go down right before Christmas.
I find it amazing they bail out the banks so AIG can give million dollar bonuses away but they're willing to let a huge amount of jobs die. Nobody deserved a bail out, but certainly if we can give away 700 billion we can give away 14 billion.
I feel for the workers as well, but I would be leery of bailing out these companies without any kind of restructuring. While I could see that the economic downturn of the last year or so would create a short-term dip in sales, what they are facing are systemic problems due to mismanagement. This includes all those years of concessions to the unions driving costs up so that the companies are drowning in fixed costs and unable to invest in the companies and remain competitive. If we just hand over some money without demanding that they address these issues first, we'll be handing over another $14 billion shortly.
It's a crime this crisis is being used to bash unions. The banks got their bailout with no strings attached. US automakers' probs have little to do with unions. Successful companies in Europe like BMW, Mercedes, Peugeot and Skoda manage to make a lot a great cars while giving their workers tons of benefits. Why can't US companies do that?
I'm not bashing unions. I'm just saying that the automakers have made concessions in the past that are now coming home to roost. In a way I think unions are needed, especially when dealing with very large companies.
I disagree with those bailouts as well.
Then what do they have to do with?
I think it has more to do with creating competitive products. The Big 3 here is the states have to compete with Honda, etc. who are able to create better priced, higher quality cars because their costs are low. Including benefits, etc., they pay about $40/hour to workers while the Big 3 pay about $70/hour. Therefore, they sell more cars at a higher margin than the Big 3. It's a classic broken cost structure. If you dropped a car company in Europe that could cut costs in half, it would probably crush the three you cite.
First, you need to compare apples to apples.
BMW, Mercedes, and Peugeot in general donít compete for the same customers as GM, Ford, and Chrysler. There is some crossover of markets, especially with certain brands and subsidiaries, but itís limited. As for Skoda, they donít compete with the Big Three at all in North America.
Secondly, the biggest cost of any manufacturing company is labor. A company cannot restructure in an attempt to become more competitive without addressing labor costs. Telling a company to do so sets them up for failure.
Finally, youíre argument is that other companies ďmanage to make a lot of great cars while giving their workers tons of benefits.Ē If you can show me that the cost of vehicles per labor hour for a vehicle at Ford, GM, or Chrysler is the same as BMW, Mercedes, or Peugeot for comparably priced vehicles, then youíre argument holds water. Otherwise, it does not. And although I havenít researched it, Iíd be willing to bet that the costs per labor hour at the Big Three are higher. They certainly are compared to North American Toyota operations. And that company competes with the Big Three across markets more so than BMW and Mercedes.
First, the general truth of the statement remains the same -- the subject is car companies in the comparable markets of Europe or the US and their ability to successfully manufacture cars within their own territories.
Second, Like you I do not have the figures on labor costs in Europe, But I do I know it is generally true that European workers enjoy many more benefits and at least the wages of their US counterparts. You say you would be willing to bet, but I would be surprised if the Big Three had higher labor costs.
However, one problematic factor in the comparison is employee health insurance, which in Europe is covered by the state, but here the Big Three have to supply (I assume they give their employee health insurance). Just a thought: Maybe if the US had gotten its act together to get a universal health care plan in the 20th century, US industries like the car makers and others wouldn't be crumbling now.
I'm not a huge fan of the bailout. But if it does happen, then I definitely do not want to to be with no strings attached. I would like to make sure that the money is used to the most efficiently in preserving/creating the most amount of jobs possible.
I'd like to see more room made for new, innovative, competitive companies. Let the giants fall, and their workers can move to other companies.
I'd like to see a buyout rather than a bailout.
That is a much better idea. Like I said, I don't want them to get the money unless there are serious changes promised. A buyout would pretty much do the same thing.... money would get pumped into the auto industry, jobs would be saved, and big changes would be made. If there was a buyout, new leadership would be in charge and maybe more focus would be put on developing more fuel efficient, or just better, cars.
^Exactly. When these companies go under, they're not going to just vanish into thin air... They'll be sold to whoever will pay the most for them. There's a good chance that the company's employees would be included as part of the sale, and most of them retained to keep working like the always did, just for a different company.
LOL..you have a pretty rose-tinted view of these things. The reality is somewhat different. Many companies in such situations are bought in order to asset-strip (ie you sell off the land-holdings, plant/machinery and capital assets, close down the company and pocket the proceeds). In other cases companies are bought by competitors - what better way to increase market position than buy a competitor and 'integrate it' (shorthand for 'close it down').
In many cases of major corporations 'going bust', what actually happens is that the production and labour are moved to the most economic countries - normally the far east. In nearly all cases it involves significant and permenant job losses in the home country.
Agreed to a certain degree with asset stripping, but not in all cases as assets do not sell well in the current climate, i.e. BHP considering a Rio Tinto takeover and when they had to get rid of assets found it not a good climate for it. Many banks can currently shop around for expert investment advisors. I.e. Barclays Bank is restarting its Investment Division and can get the very best from those newly laid off in New York. I think the best and strategically most qualified people will survive in this climate either in a take-over or start-up package. The rest will be let go off. I was wondering also how companies will now use this as an excuse to get rid of their people, as well as to keep salaries low. Guess the pendulum is on the side of company owners right now with regard to negotiations of worker packages. It would be difficult to distinguish genuine lay-offs and those that are convenient.
I wrote most of this earlier and had to run, so here I post it late:
Millions losing their health care coverage, pensions, and going out of work for a very long time in the process - directly. With a broad cascading effect across the entire industry, and our economy as a whole. And that last point is of course assuming that there are other companies to move to.. Which keep in mind, would be foreign corporations in any event.
Though, granted, who wouldn't want to see "more room made for new, innovative, competitive companies"? I mean, honestly, that's a nice thought. But so is ending world hunger tomorrow. And I can assure you, neither will happen the way you're re-proposing the basic aggregate of Washington's crap. The reason that the Autos need this money is because the market fell out, while simultaneously credit dried up; it's a liquidity crisis. One that's breaking the back of good companies who've simply been mis-managed for far too long. They won't be able to make payroll, and you'd soon watch a collapse and literal sell-off of a major sector of our economy, and one of the last fledgling American industries that /make/ something. One that /did/ build the middle-class, and has helped protect us in war-time.
No one is there in the private sector to substantially invest in, or buyout companies this large right now. Period... (Again, the reason why they need this money to move forward in the first place.) So that's just not an option at this point, regardless of how nice it would sound in theory; that suggestion shows a lack of understanding of this industry. They need loans. That's the case. But it doesn't mean they won't pay them back. Simply that they need support, and like the foreign companies that are being squeezed, have no other place to look at the moment but their respective governments.
And although you'll say "I didn't support that either", I didn't see anyone asking for a Banking Czar or a detailed plan from the Banking and Loans arena when they approved the TARP fund to bailout out-and-out fraud. Why the hell should we hold them to the wall at knife point for much, much less, both in terms of size and scope of need, as well as indictment? The mess with Banking and Loans has been longstanding fraud and gross mis-management. The case with the Automobile manufacturers and suppliers is simply developmental-stagnation in the marketplace; something that in time, can be corrected thoroughly. It's half-baked hypocrisy with an agenda to have pushed these companies through the legislative process in a circus game when the money has already been appropriated (and is being given away) for much worse things than actually sustaining true American jobs and keeping the economy from falling into a much greater depression.
And don't forget: the reason the TARP fund was produced was to shore-up the flow of loans and transactions (multiplier effect). If you take this much activity out of the system, and let these companies fall to bankruptcy and liquidation.. It's just ridiculous.
Maybe the Autos should have taken a cue from Jimmy Carter. Maybe we all should have. But why is it that you people are so quick to effectually say "Screw you, die. We'll support Honda... Though we really don't understand this situation."? It makes no sense to me, except for overly-idealistic capitalism mixed with pessimism, and tainted by an impropriety that radiates from the Republican minority in the Senate.
The truth is, Michigan has the second worse economy in the nation - something you could easily see if you walked down many of the streets; both throughout the Detroit metropolitan and Upper Peninsular areas. Letting these jobs and the industry fall needlessly would devastate the region locally beyond anything you can obviously understand, and the result for the nation would not be pretty. These are peoples' lives and families we're talking about here. There is no other work available for the vast majority of them, as evidenced by the fact that it's very hard for /anyone/ to get work around here, whether you're an educated 40-some year old college graduate, or a kid trying to work his own way through college.
I'm sorry, but I find it very disturbing to arrogantly promote what would be needlessly shoving many, many people in front of a speeding train, in the name of what amounts to nothing.
Argh, why is the "no" first and "yes" second??? That defies all polling convention! I meant to hit "no".
The thing with these bailout is, the money that they get is just invented out of thin air. It doesn't mean they suddenly have billions of dollars more real wealth or something. I really think if the government is going to be handwaving billions of dollars into existence, it should be for universal healthcare. It's hilarious that they spent years saying, "omg, it would cost billions to give healthcare to people! We can't afford it!" But the banks want a TRILLION dollars? "Here you go, please be more careful this time."
This is a great, down to earth, common sense contribution! Simple and to the point, I like it. It is almost like the Emperor with no clothes. Everyone is told that he is wearing a fantastic outfit, yet the Emperor is truly naked. So since we are dreaming up the fantastic outfit, why not dream up a few billion healthcare dollars instead of banks and cars? Will probably be much more practical, as the purpose is for people to go out, spend and consume the money, and with healthcare dollars the dollars will definitely be spent. But will the banks circulate through money to people to spend and do we need healthcare more than cars? Another way possibly would be to print helicopters full of money, to be dumped on cities and towns from the sky for people to spend and consume? Guaranteed that money will definitely be spent. I am serious, what difference would there be in dumping cash loads of money from the sky and billions to the banks? One major benefit would be that at least other sections of the community will stand a chance to benefit and the money would be guaranteed to be spent. With banks what guarantee is there that the money will be filtered through to the consumers?
The issue here is that they need operating capital to sustain work, else one will go under, and it will more than likely pull the others down along with much of the supply-structure, and many other underlying/surrounding businesses-both related to the auto-industry and not. But sure, what you're getting at is a question of inflation and a lack of good judgment by elected officials. (I'm also a supporter of universal health care. :))
And.. I'm getting a feeling that the idea (a legitimate one) of creative destruction will come up here. But for the record I simply don't believe that it's applicable in this situation.
Erm, how is it that they have been mismanaged for a long time, and yet are 'good' companies? Everything that I can think of that you could use to determine the goodness of a company is demonstrably lacking in the auto industry.
-fledgling? If they haven't managed to become stable, productive, and competitive by now, when will they? They're some of the oldest auto companies around!
-helping us during wartime does not earn them a free eternal gratitude certificate. of all the reasons for a bailout, sentimentality would be the worst.
Why not just skip the auto industry, give the tax money directly to those people, and call ourselves the USSA, United Socialist States of America?
Yes, it will create hardship. But propping the companies up artificially will only delay the inevitable, and delay the day when we rise up to be truly competitive afterwards.
'Cause we don't feel like being forced to give our money away.
Well, now we see the danger inherent in a totally un-diversified local economy. They'll just have to tough it out, or move somewhere where there are jobs.
We're talking about people loosing jobs here, not being run over by trains... Anyway, the bailout doesn't take the people off of the train tracks, it just slows the train down a little.
Agree with letting them die or not, we do need a more intelligent solution than just forking over scads of money and hoping for the best.
The people on top came into a relatively stable platform and now that it's shaking, they take the course andy good entrepreneur would make and cry over to big daddy government for some coin to keep their poor, unresponsive management. Maybe instead of paying all this money to them we can appoint someone that knows how to lead a business.
Like the people at AIG
US Federal Debt as of mid-November: $10.6 trillion
We'd be just adding more and more, the government itself is broke, doesn't someone understand that one day someone will have to take action to pay off this debt?
I remember the first day the CEOs came to Washington they flew in private corporate jets.............. not a good impression, eh?
Here you are flying in a private corporate jet, come to Washington, and tell them you are going bankrupt?
The collapse of the auto industry would definitely affect the US tremendously. A monopoly of Japanese and German cars is on the horizon.
The government can do what it wants, but we will not pay off our debt by making more debt.
When we go to a bank to get a loan we need to have some kind of collateral to secure the loan. Now, more so than ever before. What collateral do the Big Governments have, for example the United States? It is currently printing enormous quantities of bonds, who are buying them, and how at 10 trillion dollars debt can the bonds still be AAA rated? Where is the collateral?
The government actually does have a lot of collateral, when you consider all the assets it owns, everything from interstate highways to military hardware... And it also has great ways of making money if it really had to.
I would look for an up-and-coming Indian car industry to add more competition in.
I'd also like to see Tesla motors come out with their family-car model, buy a factory from one of the defunct big three, and keep an American interest involved. That's just wishful thinking though.
Yes, but to make it an actual x=x comparison, you must make a number of adjustments on both sides to balance them (monetary valuation, cost of living, corporate tax rates, any government protectionism, vertical integration, costs of supplies, energy costs, etc.) And the fact that they donít compete directly in the majority of markets is extremely valid, not something to be shrugged off as lightly as you do so. The margins on luxury vehicles are much higher than those of mid-priced vehicles. Hypothetically, a BMW 5-series could be produced at a production rate of 70% efficiency and still be more profitable when sold than a Ford Focus produced at 90% efficiency.
While itís true that one motor company can learn from another (technologies ,techniques, philosophies, etc.), it does not necessarily translate into more market success. A NASCAR team may learn from an Indy team, but applying those lessons doesnít necessarily translate into victories on the NASCAR circuit. Theyíre still two different races.
Neither of us can dispute the other without facts. If I have time maybe Iíll peruse their respective financial reports (theyíre public companies, therefore their statements are available on their websites), but I havenít done that for another company besides my own since grad school, and I honestly donít think theyíd have all the details needed for this argument even if either of us wanted to take the time to examine them.
As I mentioned above, it would be one of the many factors for which one needs to adjust in order to arrive at an x=x comparison of companies. However I donít think the lack of universal healthcare is a significant root cause variable of the auto companyís current woes. Healthcare is a cost that all U.S. companies incur, whether they compete in manufacturing sectors or others. Nevertheless I donít see companies across the U.S. crying foul because universal healthcare systems in competing nations handicap them in the markets.
On a related note, in one article I saw that the average wage of a UAW employee is about $30/hour, with their total package being more than $70/hour. Thatís a fringe benefit of approximately 133%. At the manufacturing plant where I work, the fringe benefit for hourly (and yes, union) employees is 81%. And theyíd most all agree that their salary/benefits package is very generous (by comparison, the salary fringe benefit package is 38%, and Iím very content with it). Furthermore, my plant is in a city where the cost of living is 33% higher than Detroit and the housing is 80% higher.
I personally could care less what employees at the ďBig ThreeĒ make. Thatís the companyís business. But salaries and benefits have to be within limits that allow the company to operate profitably. If $70 an hour in total salaries and benefits is reasonable, then so be it. Who am I to question it? We all just know from reports in the media that compared to some of their competitors, like Toyota, the Detroit salary/benefit costs are considerably higher for factories in the United States. (I havenít seen any articles on what employees make at the BMW plant in South Carolina.) Therefore, in order to compete they must have competitive advantages elsewhere (higher production efficiencies, better vehicle to labor ratios, lower energy costs, lower supply costs, etc.)
Strikingly similar, really, except with more parties.
Here is a new wrinkle in the auto bailout question: what if the American government gives billions of taxpayer dollars to the GM and Chrysler, but then Tesla motors undercuts them by selling an affordable electric car? Does the government squash Tesla to save its investement or let Tesla succeed, GM and Chrysler collapse anyway, and the taxpayers lose billions?
I thought the bailout was more about the workers in the industry as well as service industries and related companies that would go bust, than the actual cars that are manufactured? Even if Tesla can make an affordable electric car, which I doubt as the rest of the industry would always have a cheaper model that would compete more effectively, the market would still opt for GM and Chrysler while they are still alive. Sort of traditional and psychologically part of society. Who is Tesla anyway?
I've been following Tesla Motors since 2006 and hope that they'll do well. Heck, I'd buy a roadster if my wife would let me! However, I predict that they will go the same way as Tucker.
The demand just isn't there for 100% electric cars and the Big Three will rapidly catch up with any technological achievements Tesla makes. Chrysler already has plans for electric versions of many of their vehicles, and even plans for an electric roadster based on a Lotus body (sound familiar?). Tesla cannot compete with the economies of scale at Chrysler, GM, or Ford. Furthermore, the Detroit auto companies already have an extensive support and sales infrastructure. If I buy a Tesla, I have to send it back to San Jose for maintenance. Not a big deal since I am less than two hours away from their facilities, but for others even in California it is a consideration. And that's a consideration people don't have to worry about if they buy the (certain to be cheaper) Chrysler knock-off or a Chevy Volt.
I cannot imagine any business model in which Tesla can build its vehicles less than Chrysler, GM, or Ford. To survive they'll have to focus where they are now: the exotic and expensive niche market, competing not with the Big Three and the middle class, but with Ferrari, Lotus, Porsche, etc. and the wealthy.
They made the world's first commercially available, and performance-competitive all-electric sports car.
(only $100,000 each, but they compare nicely with gas-powered cars that cost nearly as much.)
Competing with Lotus? Maybe I'm just completely wrong (which I probably am on this one), but I thought the two had some sort of partnership going? Or am I just confused?
I was aiming more at the hypothetical: what if the American government invests in GM and Chrysler but another company slides in and undercuts them. Does the government squash the competition to save its own investment, or watch that investment go down the drain? Tesla was just a far-fetched example of a known rival.
Here is my distilled argument: The American government bails out a large company with billions of taxpayer dollars. Another company then moves in and outcompetes the bailed out company. Does the goverment destroy the new company in order to save the billions of taxpayers money or does is let the new company take over and lose the billions?
Excellent point Voodoocat. Once the Government gets involved in the corporate world, it probably will have to become corporate itself? So now I was wondering. Something similar happaned with a Bank in Belgium. The Netherlands Bank bought portion of it, and a large number of shareholders are very unhappy about it and are thinking of putting in a court action against the unlawful takeover of the Bank by Government. This is a good point, how lawful is it for Governments to become corporate bodies? Are there legal rammifications in this that still has to surface? And yes, your comment about sorting out the competition then has to be very valid.