Auto Bailout

[BobD]

BobD- I forgot to mention in my last post, I completely explained why I thought your military statement was a moot point. Did you miss that?

Sorry, If you don't understand what a manufacturing base is and it's strategic importance, my point was lost. A honda assembly plant is not a manufacturing base, especially if the management, design and engineering are done in other countries. Detroit became the center of arms manufacturing during world war two because all the infrastructure was already there.

The winning of WW2 was as much about the manufacturing capacities of the protagonist as it was about the battlefields. In a drawn out conflict, the country that produces more weapons and hardware wins. There are situations where that might be as true tomorrow as it was 60 odd years ago. Just having that manufacturing base is as much a deterent as the nuclear arsenal. Compared to our military spending, the bailout is peanuts.

BobD

[Trip43065]

Handing out rewards on the basis of need and not merit is bad mojo. (Comrades may disagree.)

The big three still sell a lot of cars, but not enough to cover their expenses. It's a management problem.

Ford recognized it's excess capacity two years ago and began to scale back. To deliberately reduce market share was a gutsy move. It turns out they were on the right track, but it's an evil process and labor is often involved in the business decision of each cut shift or closing.

Regarding expenses. Has anybody tracked health care insurance cost or revenue over the last ten years?

Something else to consider. Partnership for Next Generation Vehicle PNGV. Clinton era incentive to the big three to produce a realistic 80mpg car that could be in production by 2008. I think Chrysler hit the mark and Ford and Gm came in at about 78mpg. All used diesel elec hybrid technology. Bush came along and replaced that program with one to develop hydrogen fuel cell technology. So the 80mpg car gets shelved for a hydrogen car that's still decades away.

[tex1230]

I am doing alot in this area right now.

My current favorites in the push for alternative power concepts:

http://www.betterplace.com/

http://www.pickensplan.com/

http://www.lincvolt.com/

http://www.afstrinity.com/

All of the above have interesting ideas, any one of which could be ramped up rather quickly.

The US auto industry just got $14 billion - may as well just set it on fire.

and to whoever mentioned the 84 hour work week - sounds good to me! I could use a break!

[KingCrimson]

Sorry, If you don't understand what a manufacturing base is and it's strategic importance, my point was lost. Compared to our military spending, the bailout is peanuts.

BobD

Thanks, I did indeed miss the whole point. I understood the difference, but completely overlooked it.

Theo

[Jack M]

I heard it costs the big three about $2000 more to make a Malibu than it costs Toyota to make a Camry. But of course they can't sell a Malibu for $2000 more than a Camry, so the difference comes out of the quality of the car. The difference is the overhead due to unions, stupid pensions, and the way they do healthcare, among other details.

Let them go bankrupt and reorganize. The phoenix will rise and they'll be better than ever.

[bobdea]

I heard it costs the big three about $2000 more to make a Malibu than it costs Toyota to make a Camry. But of course they can't sell a Malibu for $2000 more than a Camry, so the difference comes out of the quality of the car. The difference is the overhead due to unions, stupid pensions, and the way they do healthcare, among other details.

Let them go bankrupt and reorganize. The phoenix will rise and they'll be better than ever.

healthcare is a big issue, one point raised awhile back by a right winger was the fact that in japan and germany the governments provide healthcare so when american companies try to offer decent benefits they can't really compete. His solution was to not tax essential industries at all but he was still right as far as the problem.

[John Gilmour]

Its just a misallocation of resources.. Only the corvette seems to be of value.

Americans are good with grass roots innovation.. as for mass production we are easily eclipsed by other countries when it comes to quality.

________

White Widow Seeds

[rhaskins]

Ok, I make enuf money, my job is secure, and I have all the answers. But I am not sharing them.

OK, one observation. The free market mostly works fine, but, in relation to energy and autos, it is extremely skewed. I went to war in the early 70's and was paying about 40 cents a gallon for gas. I came home to $1.45 per gallon, a really hugh shock (today gas was $1.52 a gallon - how about that **** eh?). I went to engineering school and EVERYTHING was about saving energy, alternative energy and alternative fuels. The Government, President Carter, stepped in and got legislation to pursue these goals. And great strides were made - housing and building codes, developing alternative energy sources, etc. Then President Regan was elected and the govt programs stopped (like immediately) and all that was put by the wayside. He was a free market guy.

And nothing happed of note in the auto industry until now. The free market pursued profits - only - not any national goals. Foreign car companies always have a nationalistic component of their makup. Not in the US. Contrary to what many people believe, not all companies act in their own best interest. One of the assumed qualities of a corporation is that it would always work to perpetuate itself. In MBA school, they showed us that is not necessarily so. Current events in the financial, banking and auto industry are real world proof of that. In the lab that is the real world, the only "proof" we have of economic stability is that the free market and corporate self-interest will lead to instability. These periods of instability are periodic. Occassionally they are catastrophic, like in 1929 and today. Without direct intervention in the free market starting last March in the first bailout, the DJIA would be around 2,000 today - if we are lucky.

How can you'll bitch about a paltry $15 billion or so to support 2,000,000 actual jobs? We have spent about $1,000,000,000,000 (1 trillion) in real dollars and loan guarantees to, in essence, support the bonuses and salaries of the people that put the economy in the shape it is in today (your know, Paulson's old buddies on Wall street). I would submit that if you made a few million in the last few years, or more, the present financial mess will not be hard on you. That 1 trillion dollars supports the banks that created the housing problem. Those 2,000,000 jobs surrounding the auto industry will keep people in their homes and really help support the economy, not just prop up banks. Again, that $15 billion will come back to the economy as salaries and be spent. The $1 trillion will - not - come - back - to - the - economy. If you think it will, I will sell you a really fine bridge in San Francisco or Brooklyn, your choice.

Did you see that Paulson reinterpreted the bailout to allow banks to buy distressed bank (using money from the bailout) and to keep all losses. The banks bought the losses of the other banks, so they can use them to reduce their tax load and pay less taxes. That is not allowed under IRS interpretation of the Code and by Congress, but Paulson is going to let it happen. The banks are using the bailout money to consolidate and make more money.

Starting last March, we went away from a free market to a managed/supported/something market. We will not ever make the transisiton back. So, if we are going to manage this big puppy, lets do something in the national intrest - keep auto companies around. If GM, Ford and Chrysler tank, car prices will go up, not down. Guaranteed. More demand, less supply and, as the free market holds, prices go up. Not down. (See the converse with the gas price thingie going on right now - no demand, over supply, price down) No one will want to buy those old auto factories (unless they have loan guarantees from the govt, hehe).

Ah, what the hell. I am probably ranting on, prattling probably, making no sense.

Rick

[BobD]

Ah, what the hell. I am probably ranting on, prattling probably, making no sense.

Rick

Best argument so far

BobD

[rhaskins]

My best work is when I babble.

Rick

[big mario]

Big picture,I am scared. Plain and simple. I did not like the idea of the bank bailouts, which was supposed to unfreeze the creditmarkets, and get more money back out on the street. This has not happened. While in our office the other day, I looked at our long term schedule, and there are not a lot of new jobs on there. We can contract, as we have done in the past, with project managers like myself leaving our laptops at home, and putting our toolbelts back on. We are doing more of our work in house, which means more of our subs sit at home, but I wonder how long it will be until myself or any of my coworkers are sitting at home watching cartoons wondering wtf happend. Think about how many jobs would be lost if any more of our heavy industries go down, let alone the deepening threat to national security, as well as all of those people getting unemployment, and the shrinking of the tax base at the same time. Less and less money is spent, more jobs lost, and the cycle deepens. Thats the downside of the American Beauty rose, there has never been a human face put on it, just another check mark on the loss side of the ledger.

The second part of the bridge loan/no bailout argument that I find disturbing is the attack on unions and labor, Where it is fine for Wall street to recieve all it wants, where no questions are asked about salaries and executive compensation, yet you continually hear about UAW workers pulling down 70 bucks an hour, and it is all their fault for the mess we are in. Apparently the media has never heard of burdened labor. Under the current misinformation being perpetuated on the news, I would be making 62 bucks an hour, and not the current 26.59 I make. That would certainly give me the chance to buy a lot more boards and spend a lot more time on the slopes. Why is it so wrong for someone whom works with their hands to make over 50K a year? I spent some time in college, I have an AA, on my way to a BA when I decided that academia was not for me, and followed my passion. Should all of us that build/ fix/ produce/keep things running become servents of the wealthy and exist on the meager crumbs that may fall our way? Am I sounding like I am talking about class warfare? You bet your A$$ I am, and it is being advanced those whom are to lazy to do a little bit of fact checking, finding it easier to swallow the sensationalized tripe that is forced upon us every day.

Capital cannot exist without labor.

Rant off

I rant, therefore I am

Dennis Miller( I don't even like him anymore)

mario

Ps. I am not a big fan of the bailout, but the alternative....

pps. think about the motives of those who chose to fillibuster, and look at which companies are located in their respective states, can you say vested interest?

[Steve Prokopiw]

Well said big mario.Apparently accountability is only for the working class.In my mind janitors are much more useful and deserving of a high wage than lawyers and lobbyists.I often wonder when it became the norm to devalue labor and inflate the already artificial value of execs with no one to answer to except their buddies in the boardroom.Screwing and then blaming the working class is probably the second oldest profession.

[b0ardski]

"Should all of us that build/ fix/ produce/keep things running become servents of the wealthy and exist on the meager crumbs that may fall our way? Am I sounding like I am talking about class warefare? You bet your A$$ I am, and it is being advanced those whom are to lazy to do a little bit of fact checking, finding it easier to swallow the sensationalized tripe that is forced upon us every day.

Capital cannot exist without labor."

:biggthumpWhy is it so wrong for someone whom works with their hands to make over 50K a year?

[rhaskins]

Big Mario - the NYT did an analysis of that $62 an hour versus the $40 something for the foreign auto plant workers in the US that everyone talks about. Seems that the $62 is a "loaded" value based on the company's cost for retirement payments. The actual value for the labor is pretty close to what the foreign companies pay their workers.

One of the best arguments for bankruptcy for the auto companies is that they can abandon the retirement payments, restructure all their labor costs lower and become more profitable. I may be wrong here, but doesn't that result in a lot of retirees health care and monthly support to be shifted to the US govt? Isn't that a "subsidy" to the auto companies?

Further analysis of the auto companies shows that the US companies are in the same shape as the foreign car companies, all of them have tanking sales and are burning thru cash at billions a month to keep retooling and to keep the doors open. It is a fact that GM/Chrysler/Ford were not planning for the banks , mortgage banks and others to write junk investments and have the financial system take part in a train wreck. Hardly anyone was. All the auto companies had a lot of cash ($$$ billions) at the beginning of this year. With everything crashing in the marketplace, no auto sales and we know what the results are. Same thing happened to a window manufacturer in Chicago I hear. Workers get the shaft.

As to the auto companies, no imagination, bad planning, but on the plus side they were in a free market where they could pursue the highest profit without any government interference.

The bailout is a good deal. Just MAKE the auto companies plan, and oversee them like we oversee banks (BWAHAHAHAHAHAH).

Rick

[BobD]

Wait until until you start seeing the "not hiring" signs start going up in supermarkets and fast food places because the management are fed up with telling people their waiting list for jobs is full.

BobD

[trailertrash]

A little perspective, we spend $16b a month on Iraq and Afganistan.

[rhaskins]

A little perspective, we spend $16b a month on Iraq and Afganistan.

Yep. Let's pause the war for a couple of months and get the auto industry sorted out.

Now, just where is that pause button? I guess I am too cynical. The R-party let this crap happen to the US in foreign policy with all that patriotic rah-rah, and let the finance problems happen in the name of no regulation and free-market. My son, an Iraq Marine vet, and I, a Viet-Nam vet, have talked about how fast we could withdraw from Iraq given a GO command from the top. We could probably drag all of our crap out of the country to Kuwait and Saudi Arabia in 60 to 90 days. We could have 100,000 troops home in 90 days and most of the rest after all the material was shipped out, probably take 6 months for that. Be a lot cheaper than 16 Billion a month.

Of course then the profits of KBR would tank and they would have massive layoffs. There I go again with that cynical stuff.

Rick

[rhaskins]

And, so, Canada is giving the US automakers a bail out. It looks like they will probably do it regardless of wether the US does as the heavy manufacturing in Canada provided by the US auto industry is a very large share of manufacturing (its a JOBS and national security thing I guess). And, the EU is bailing out their automakers, ditto for Japan (JAPAN!!!!).

So, we are going to compete in what way in this marketplace? In this economy? some of these countries are giving the auto manufacturers money, loan guarantees and providing stimulous to consumers to purchase autos. You know, like low interest rates and tax breaks.

Seems that the US auto industry will have some competitive disadvantages to its competitors here in the US. Abroad, the countries are supporting Ford and GM it seems, because of the JOBS they provide in this economic time.

Can we buy a clue here? How can other countries see the plan necessity of supporting heavy/light manufacturing, and we get it mired down in anti-union politics and the free market crap? Even W is breaking with his brethern and is contemplating shifting some of the bank bail-out money to loan guarantees to the auto industry if congress does not do anything. Get this: he warns them they will be known as the Herbert Hoover party of this depression/recession if they don't do something for JOBS.

I'm only disgusted with publicity seeking politicians that refuse to compromise and do what is in the best interests of the country, the ones that pander to their base. As for the other politicians ... I guess there are no other politicians. Sorry, forget this post. Nothing to see here.

What was I thinking?

Rick

[Allee]

I think that the biggest issue with the auto bailout, as opposed to a bank bailout, is a lack of confidence in the auto industry as a good bet. If things level out soon, then the government stands to at least break even and maybe even make money on some of the investments that they've bought off the banks. But for all the years of effort that have gone into restructuring the auto sector, they've proved time and time again that they simply aren't able to turn it around and make it profitable. And therein lies the problem - if they couldn't do it in the past, why would they be able to do it in a tanking market, and repay the huge government loan on top of all their other commitments? At some point, you just have to stop throwing good money after bad. At least the Japanese manufacturers have proved to be light on their feet and well able to react to market forces - they'll ride out the storm with maybe some consolidation, but their fundamentals and business practices are a whole lot more confidence inspiring than their US counterparts.

Yes, it will be catastrophic in the short term for a whole lot of people, and I really feel for the people who work in the industry. But sometimes, you have to amputate to save the patient. It's going to be interesting, that's for sure. We're all watching in Canada too - because this will have pretty far reaching consequences for our economy as well.

[rhaskins]

First we pass a law that it is mandatory to scrap all autos older than year 2000 . . .

Ford seems to have restructured in the past few years to be able to ride this out also. But they are skunked if GM goes under as their suppliers - who almost all also supply Ford - can't survive without GM's orders. So, Ford's production, along with Toyota and etc. stop in the US until suppliers can reorganize. That is one big freaking mess. In the paper today it says that GM and Chrysler owe their suppliers about 14 billlion bucks. That is a lot of credit. That is a lot of small and medium sized business with their butts hanging out in the breeze waiting for payment from their biggest customers.

BTW, there are still a heck of a lot of autos being sold in the US right now. People are buying, just not at the levels of before, sales are off on the order of 30%. Total sales volume this year is supposed to be about 13-15 million vehicles. That's lots.

BTW, I work in the medical industry. Business is good, picking up as a matter of fact.

Rick

[Derf]

Here is my point of view as an engineering technician and as a consumer. The main problems are:

• Bad business decisions on where to put their priority. They chose to focus on big cars and big trucks and they tried to outsell the Japanese with lower pricing.
  
• Bad engineering/design that led to unreliable cars.
  
• Bad production methods (that could go into bad engineering) that led to badly assembled cars.

Production employees are not at fault here. Some great and reliable Japanese cars are manufactured in the same North American cities as North American cars.

[John Gilmour]

In the old days- when the USA got in trouble...we just printed more money... The rest of the world who weighed their currency against "The Almighty Dollar" took the hit with us.

Everything was structured to support the dollar. Even OPEC nations are forced to sell OIL in Dollars.. so lets say the Germans want oil....well they will ahve to buy dollars FIRST . These petrodollars helped support the dollar somewhat.. Saddam tried an OIL for FOOD Program which... OIL concerned people (Bush Admin...even Condoleezza Rice sat on the board of Chevron and has a freaking Supertanker named after her) were not willing to allow to happen. IMHO that is why we went into IRAQ using any weak INTEL we could find. Allowing Sadam to get off the dollar for oil would set a nervous precedent for others.

Meanwhile the Euro surges against the Dollar as Arabs try to divest into another currency..And why shouldn't they? Do you think they want our Chinese made Wal-Mart crap? No they want luxury goods made in Europe. Besides Europe is closer to them- and since the Gulf Wars..more friendly than the USA. It was said in the 1970's that if the Arabs were to divest of their dollars the dollar would have collapsed before they could have dumped 1/2 of their dollars. So you could imagine as what the dollar could buy got worse..and also as our investments looked less attractive... they would divest.

Go to Dubai... whose building it all? German firms and American firms.. Of course the Germans don't want dollars.

So we tried printing more currency and instead of dragging all the other currencies down- investment in the Euro proved to be more immune. So the Euro gained strength against the Dollar.

As the dollar weakened we would expect Exports to rise.. but the USA has outsourced a lot of its production. So why would a multinational bring a product into the USA first only to export it later? (Some exceptions to this exist).

Demand for US cars abroad has been eclipsed by Toyota.

So that left the current administration in a quandry.

Greenspan... was asked to keep it running. Without doing maintence... Ever know a really good mechanic who can keep a car going by tweaking a bit here and there... until finally there is nothing left to tweak and the whole car just dies at once?

Greenspan did exactly that... fine tuning interest rates like leaning a gas mix..

So we would have steady predictable rise in real estate sales. That "funny money" would fuel our "consumption economy" for more than a decade.

We were originally a hunter gatherer economy (Pilgrims/Indians) then an agrarian economy, then the Industrial revolution came in and we were a production economy (and very healthy at this point like most top production economies). Then we switched to a "distribution economy" (cheap fuel and good infrastructure allowed this) no one could compete with our distribution. Finally we became a Marketing and logistic economy (Fed by Reagan's deregulation of industries such as trucking- which allowed trucks that were too heavy for our road beds to continuously destroy our infrastructure- they were no longer restricted).

So as Greenspan tweaked... there were two trains of thought going on. banks who desire to insure longevity by becoming too big to fail, and US Gov't who wanted to lure foreign investment with low relative currency valuation, steady real estate returns, and leave these foreign investors holding the proverbial bag. Also it could be seen that Wall Street is a TAX on US investment- and when it restructures it will be leaner so that fewer dollars of each investment will go to lining the pockets of Brokers, Bond Traders, and investment bankers. We will see a more direct form of investment with more middle men cut out in the coming years. This is normal as efficiencies go up... like in the 1970's when stock brokers commissions were drastically cut.

Top Banks contrary to current belief... are not idiots. Far from it. They see over a decade ahead- and they also have good hindsight. They remember all too well the Saving and Loan scandal and Real Estate Investment Trust REITs which made loans to properties based on Comparables... in the 1980's. They saw that current loan practices were similar in the consumer market.

Failure was imminent with interest rates being keep artificially low to fuel the economy. Salaries in relation to the Real Estate value were out of whack and people were buying on specualtion... a sure sign of impending doom.

So taking a cue from the 1980's the way to survive was to look at who survived in the 1980's crash. Smaller banks were left to fail but the larger ones Like Fleet (now Bank Of America) were propped up.

You saw wave after wave of consolidation in banking preparing for this all throughout the 1990's. I know sign merchants who told me 80-% of their business was making new bank signs to keep up with the next merger. I had Shawmut bank- hated them switched to Bank of New England because I disliked Bank Of Boston- who later bought Bank of New England, So I left and went to Baybank, who was bought by Bank of Boston, and then Fleet bought them! I had stacks of unused checks.

So the banks were getting ready. Americans in finance are no dummies. They are the best swindlers in the entire world..even rivaling the Dutch.

check out Barry Minkow wiki him.

Barry Minkow ran the largest Ponzi scheme in US history at the time. A Ponzi is when you pay people large dividends to keep investing with you and re investing. You start to attract more investors which pay the "juice" for incoming investors and so on. it's a pyramid scheme and the final round investors are left holding the bag. Minkow's was I think 100 million dollar Ponzi. investors thought they were buying a 100 million dollar carpet cleaning/disaster restoration company when in fact the assets and receivables were values at well under under 2 million.

So by allowing the dollar to fall downwards in value and also by showing steady returns in real estate with using low interest rates,

Greenspan formed the largest Real Estate PONZI of all time.

In the end US people could not compete to buy US assets with their weak currency. But foreigners could...and they did. The Chrysler building was sold off, Budweiser was sold off, tons of "Prime Real Estate" was sold.. lots in Florida ... etc.

And who was left holding the bag at the final round of the Ponzi? Foreigner investors were hit hard- and our intertwined banking system made it really hard for them to exit.

Our banks will recover at a far faster rate than European counterpart banks.. The Europeans are screwed for over a decade.

This probably was the only way we could sink the Euro. A near classic poker play. And it seems to have worked. Like a really bad poison pill... but we will survive.

The automakers, well, with bailouts (and if we set this precedent they will be like the airlines in a constant state of bankruptcy) we are in a sense supporting them with gov't capital... So it might help in terms of global competition. for instance look at another transportation industry... Aerospace...

Airbus gets tons of subsidies from the French gov't making it hard for Boeing to compete on level turf.

But because of management structure I doubt these bail out monies will go to improvemants and will just be on the bargaining table for management and union compensation..

Personally..... I think if you don't hold a title to an american car and hold a title to a Foreign car... you should get a tax right off to offset the bailout. Because you have proven you have no vested interest in US car companies.

________

Mazda capella

[Transistor Rhythm]

Ford kind of surprised me, they have quite a good reputation Europe, and roughly equal to Opel (a German car manufacturer that probably doesn't sell in the US) in reputation I guess. Inexepensive Western cars that aren't overly luxurious but are reliable. I drive a Fiesta myself, and there is nothing American about that car in a negative way. Are they even selling Fiestas and Escorts in the US?

[bobdea]

No, the fiesta just says ford on it. The aspire and festiva are actually Japanese cars. The same as somthing sold in japan with aslightly different body.

They stopped selling those cars here around 2000 or so.

They have devoted following in us though. I have one and I hope to have one of the new ones that run diesel if they ever bring them to market here.

[Transistor Rhythm]

No, the fiesta just says ford on it. The aspire and festiva are actually Japanese cars. The same as somthing sold in japan with aslightly different body.

Yeah it's marketed also as a Mazda 121, and the new one is also sold as a Mazda 2. But they're not manufactured in Japan. The Mazda brand is probably needed to sell cars in Japan. Also the 121 looks different, the Festiva and the 121 are not quite the same as the Fiesta.

They stopped selling those cars here around 2000 or so.

They have devoted following in us though. I have one and I hope to have one of the new ones that run diesel if they ever bring them to market here.

In 2010 their Mexican plant will be producing it for the US market. (yes, I'd googled that )

It seems strange Ford's fate should be tied to other companies that haven't been half as adaptive. I'd say soften the crashing of the other two, but don't try to prevent it from happening.