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Old 11-25-2008, 11:54 AM   #267
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Things are getting Tight

We have to come up with $55,000 down on our medical building... This would make things tight for a few months.... I'm hoping the appraisal comes in a little higher. so it drops the amount down about 10 grand..

But I'm glad it's not 0 down, I may have been tempted to put less down on the building.

But this is how it should be... If you want a car or house you should save up and put something down on it.. Like it use to be, and now is....

It will all straighten itself out I hope...
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Old 11-25-2008, 04:28 PM   #268
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Bailout?

Just a few of 100's
Hudson, Packard, Studebaker, Kaiser, Nash, Cord, Pierce Arrow, Duesenberg, Stanley Steamer, Duryea,
End of the world? bailouts? nope, someone with a better idea replaced them. It's a normal evolution

There were even computers before Microsoft. Thousands of small companies fail every year.

Probably not a good time to buy a boat, horse, airplane, or vacation home Good time to grow a garden.
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Old 11-25-2008, 07:41 PM   #269
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July-September GDP decline is -0.5, if we let GM fail that number would go to -4.0 with unemployment of over 14 million people.

The U.S. economy contracted more than initially expected in the third quarter, as consumers and businesses braced for a protracted, severe downturn. Consumers' gloom and thrift reverberated through the housing market, where home prices posted double-digit declines during the third quarter.

Gross domestic product, which measures the nation's output, declined at a 0.5% annual rate in the July-September period, the Commerce Department said Tuesday. "The U.S. recession is set to get worse -- a lot worse -- in the next couple of quarters," IHS Global Insight chief economist Nariman Behravesh wrote in a note to clients. "Bottom line: We are in the early stages of one of the worst recessions in the post-war period, even factoring in a massive stimulus program."

http://online.wsj.com/article/SB122761923606056345.html?mod=googlenews_wsj


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Old 11-25-2008, 08:10 PM   #270
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Another reason I left Michigan was that I felt the houses were overpriced by about 20% - in 1993! I'm not sure a 5 year graph is the most useful tool. A ten or 15 year graph might better reflect a bubble from which we could deduce some realistic numbers. E.G. if prices were overvalued by a couple percent for 10 years, the current cost ought to be X and whether that X is more or less than the recent price, I have no idea.

You could see it coming when we started treating houses like refrigerators or (worse yet) cars: "Well, we got some upgrades and an extended warranty so we went with a new one." Hmmm.
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Old 11-25-2008, 08:15 PM   #271
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General Mortgage

Quote:
Originally Posted by overlander63 View Post
Guys, this thread is about General Motors, not General Mortgages.
For what's it's worth, GM or GMAC owns DiTech. I think it's GMAC. DiTech is still advertising a lot on TV. GM sold 51% of GMAC a while back to get cash. They sold that 51% to Cerberus Capital Management, the moneybags who later picked up Chrysler from Daimler Benz. I think they basically got paid to take Chrysler off Daimler Benz's balance sheet. Cerberus hired Robert Nardelli as one of the leaders of Chrysler, the guy who drove me and Hampstead to shop at Lowe's. I think GMAC also bought a real estate chain, though I can't remember which one, probably figuring they could steer people to give mortgages to DiTech or some other GMAC mortgage company. Maybe they got a car with it too. Cerberus is the three headed dog that guards the entrance to Hades in Greek mythology. So in a way it is about General Mortgages.

You can't make this stuff up.

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Old 11-25-2008, 08:55 PM   #272
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Tranches to hell

About the subprime loans going back decades. Banks were forbidden from redlining communities decades ago. The problem had been they drew a line around certain areas, strangely enough inhabited by blacks, and wouldn't lend to anyone there. Over the years some of these mortgages were riskier and they are called Alt. A and subprime. The homeowner for years still had to go through a credit check just like anyone else. But because of the risk the interest rates were a bit higher. That system worked pretty well for years.

But in the last 5 years or so investment houses started buying loans from banks and mortgage companies and putting them in packages and then sold them to others. No one cared whether the loans were based on reality or not because they could be sold to the fools at the end of the line. There was no transparency in the system because there were no meaningful regulations and no one could tell what anything was really worth. The regulations were thrown out in the late '90's and the last two administrations encouraged this. There's nothing new about packaging mortgages and selling the tranches* to investors. Fannie Mae, Freddie Mac, et al., have been doing it for many, many years, and those tranches were safe. What changed was the mortgage originators stopped asking for proof because everyone in the mortgage business got giddy over how much money they could make and they had no risk, they thought—certainly some of the originators knew what they were doing, but some investment houses and some banks could package it, make a bunch of money, pass it on to someone else and eventually at the end of the line, some fool. Some of those fools had MBA's, but were delusional.

This had nothing to do with the laws passed to prevent racial discrimination and encourage lending to responsible, but lower income people. The mortgage originators and the mortgage packagers were irresponsible and they were good at finding people who got sucked in. I would have told 'hawk's son the same thing—don't do it. I have no doubt his son is pretty smart since I recognize that 'hawk is smart even though I disagree with him. Smart parent's usually have smart kids, but smart people can do foolish things.

For the record, some years ago I bought some houses (not at the same time) I could barely afford without enough money for a 20% down payment, managed to swing it with multiple loans, sometimes it was difficult to pay (the first time was when I was in law school and the 2nd one when I had a major back injury and couldn't work), and eventually sold them for big profits. Maybe I was lucky, maybe I was clever. People who take risks sometimes make out well, sometimes get screwed. I'm not sure what that has to do with things except we can call some people or companies entrepreneurial or idiots depending how things work out in the economy as a whole. Capitalism encourages risk taking and without people taking risks, nothing would ever change. In doing these things and getting other loans, I found it pretty easy to talk bankers into lending me money regardless of my financial standing. The lesson I learned long ago is that there's no shortage of fools and just because they have a desk in a bank and wear a suit, they don't necessarily know what they are doing.

Gene

A "tranche" is a portion of a loan. Thus mortgages are combined in a big package and then a portion (tranche) is sold to an individual.
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Old 11-25-2008, 09:14 PM   #273
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Quote:
Originally Posted by CrawfordGene View Post
People who take risks sometimes make out well, sometimes get screwed.

Evening, Gene-
I'm assuming you are speaking euphamistically, however by "screwed" do you mean that the screwee learned from his/her own mistake and avows to never repeat the transgression?

Or, conversely, do you mean that the "screwer" is still out there at large lurking in the bushes to catch another unfortunate soul who was simply walking down the street, with hands in pockets, never bothering anyone, when he/she was forced to spend the hard earned dinero?

'night!
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Old 11-25-2008, 10:09 PM   #274
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The GM board may well be hoping to be forced into a fed sponsored failure to get the old health and pension costs off their back. Let's watch and see if something like that happens and then after the smoke settles the fed takes on those "obligations".
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Old 11-26-2008, 05:53 AM   #275
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Quote:
Originally Posted by Pop Rivet View Post
Just a few of 100's
Hudson, Packard, Studebaker, Kaiser, Nash, Cord, Pierce Arrow, Duesenberg, Stanley Steamer, Duryea,
End of the world? bailouts? nope, someone with a better idea replaced them. It's a normal evolution

There were even computers before Microsoft. Thousands of small companies fail every year.

Probably not a good time to buy a boat, horse, airplane, or vacation home Good time to grow a garden.
and the Tucker, Bricklen, International, Willys,
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Old 11-26-2008, 06:50 AM   #276
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I said I wouldn't be back and that is generally true. I have not kept up reading the posts in this thread, but I recently came across a few published commentaries that I thought were fair and unbiased that I thought I'd share. Here is the first one:
Quote:
Romney on Auto Bailout: Feds Should Guarantee Fan Belts But Not Healthcare

Posted by: David Kiley on November 21
Earlier this week, former Massachusetts Governor and Republican Presidential hopeful Mitt Romney chimed in, via a New York Times op-ed column, with his argument for letting Detroit’s automakers go bankrupt as a means to fixing their problems and reorganizing.

Unfortunately, several members of his sparty, and even some members of the media, have his argument added weight because Romney’s father, George Romney, had taken over American Motors in the 1950s with some success, and because he was born in Michigan.

Following this logic, though, would mean that Hank Williams Jr. is as talented as his father.

Romney’s column was not completely devoid of sense. I would say that 94% of it was pure clap-trap, but I wouldn’t want to give clap-trap a bad name. The best way to break it down for you is to take it step-by step, and insert my rebuttals after each point the Governor tried to make. My notes are in italics.

IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.

Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.

[Romney joins a legion of pundits and kibitzers who are oblivious to two facts: the companies have been dramatically resizing and restructuring. Ford, for example, had cut its hourly workforce from 83,000 to 44,000 in five years, and its white collar workforce from 33,000 to 12,000. The numbers at GM and Chrysler are comparable. Retiree burdens? The companies entered into covenants with workers on pensions and retiree healthcare. The big burden is paying healthcare benefits of retirees and their dependents still too young for Medicare—about 400,000. If the U.S. had a healthcare policy like Germany and Japan, just to name two rival auto-making countries, this wouldn’t be an issue. Just what would you do for those families and their healthcare costs Governor Romney? Chuck them onto the heap of the uninsured? How about a more constructive suggestion like compelling through arbitration the retirees to pay more for their healthcare benefits to pitch in to the problem. Given the choice between losing all benefits and paying more for them, most families will opt for the latter.]

I love cars, American cars. I was born in Detroit, the son of an auto chief executive.

[Mitt Romney shamelessly launched his unsuccessful Presidential run in Dearborn, MI in 2007 despite the fact that he hadn’t lived here in decades. Why? Because it was considered a swing state. Then, he said while campaigning that he would fight for auto industry jobs in Michigan. Why didn’t he launch his campaign in his home-state of Masssachusetts? Because the chance of a Republican winning Mass. In a Presidential race is nil.]

In 1954, my dad, George Romney, was tapped to run American Motors when its president suddenly died. The company itself was on life support — banks were threatening to deal it a death blow. The stock collapsed. I watched Dad work to turn the company around — and years later at business school, they were still talking about it. From the lessons of that turnaround, and from my own experiences, I have several prescriptions for Detroit’s automakers.

[What took place in 1954 with AMC is hardly applicable today when Detroit is competing against foreign automakers with vastly different cost structures—the cost structures they have in their home countries.]

First, their huge disadvantage in costs relative to foreign brands must be eliminated.

[Come 2010, GM says its cost of sales will be 25%, very near that of Toyota. That’s one example. Yes, they have been spending billions to off-load their healthcare obligations in the meantime. But there is a moral question here, isn’t there Governor? If the U.S. government provides the credit necessary for GM to go bankrupt, are you telling me that our tax-payer dollars are going to be specifically used to chuck hundreds of thousands, if not a few million workers and their families, onto the rolls of the un-insured while the government simultaneously does nothing for those families? I would offer that it has taken Ford, for example, five years to make such huge cuts in its workforce, and ditto GM, because it has tried to resize itself morally, through employee buyouts and the like and not flat-out dismissals.]

That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota. Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers.

[The automakers were well on their way to accomplishing this before the credit meltdown, which most would agree was a function of government over-selling home ownership, and Wall Street’s willingness to securitize any piece of crap mortgage underwriting that came down the street. Let’s see…your experience has been as a Governor (the government) and as a hedge-fund investor. Where was the clarion call from Mitt Romney warning of this toxic cocktail that has driven the U.S. economy into the ditch, taking the auto industry with it? Yes, Detroit had long played a game of maximizing cash-flow over profits in order to pay for a gradual resizing and its enormous retiree and healthcare legacy costs, and that left the companies too vulnerable for the current meltdown. But as you are fond of reminding us that we are in a global economy, how can the Big Three or whatever companies would arise from bankruptcy be expected to compete against companies in Europe, Japan and China that do get government bailout support. ]

That extra burden is estimated to be more than $2,000 per car.
[This is a number that pre-dates the last UAW contract, and, as I said, Detroit had parity in its sights in 2010 but for the credit meltdown that has made the situation so dire].

Think what that means: Ford, for example, needs to cut $2,000 worth of features and quality out of its Taurus to compete with Toyota’s Avalon. Of course the Avalon feels like a better product — it has $2,000 more put into it.

[Have you driven a 2009 Taurus that wasn't a stripped down rental? Somehow, I doubt it. I have driven both cars, and for “feel,” I would compare the two cars very favorably. The Avalon is no great shakes.]

And Considering this disadvantage, Detroit has done a remarkable job of designing and engineering its cars. But if this cost penalty persists, any bailout will only delay the inevitable.
Second, management as is must go.

[So, you are grouping GM CEO Rick Wagoner, Ford CEO Alan Mulally and Chrysler CEO Bob Nardelli in one lump the same way that GOP Alabama Senator Richard Shelby does? Mulally came from Boeing two years ago. Nardelli came from his stint at Home Depot less than two years ago. If you want to go after Wagoner, a GM lifer, go ahead. But at two-thirds of your target, the outsiders have arrived. I’m not carrying anyone’s water here, just criticizing your superficial analysis.]

New faces should be recruited from unrelated industries — from companies widely respected for excellence in marketing, innovation, creativity and labor relations.

[Ford and GM have done this at the top. In the 1990s, there was an attempt to recruit managers from packaged goods, IT, etc. We who lived through it recall it as mostly a disaster. Also, please tell me the names of the executives from, say, Silicon Valley, who are going to uproot to move to Michigan to work for car companies you want to push into bankruptcy in this economy?]

The new management must work with labor leaders to see that the enmity between labor and management comes to an end. This division is a holdover from the early years of the last century, when unions brought workers job security and better wages and benefits. But as Walter Reuther, the former head of the United Automobile Workers, said to my father, “Getting more and more pay for less and less work is a dead-end street.”

[Governor, if you bothered to read the last UAW agreement, you would see that today’s union is a far cry from the days of Walter Reuther. But I would bet what’s left of the value of my house that you didn’t read it.]

You don’t have to look far for industries with unions that went down that road. Companies in the 21st century cannot perpetuate the destructive labor relations of the 20th. This will mean a new direction for the U.A.W., profit sharing or stock grants to all employees and a change in Big Three management culture.

The need for collaboration will mean accepting sanity in salaries and perks.

[Again, Governor, your numbers and perspective are out of date. Rather than a Chapter 11 Bankruptcy, how about some high-minded political leaders make a direct appeal to workers and retirees to perhaps accelerate some of the changes the union has already agreed to in exchange for not driving the companies into bankruptcy. But when you do this, I hope you have a government solution to provide healthcare for retirees not yet eligible for medicare.]

At American Motors, my dad cut his pay and that of his executive team, he bought stock in the company, and he went out to factories to talk to workers directly. Get rid of the planes, the executive dining rooms — all the symbols that breed resentment among the hundreds of thousands who will also be sacrificing to keep the companies afloat.

[Finally, a paragraph that makes sense, but this is hardly a new idea. In fact, most of those perqs other than the planes are gone. But I’m with you on making the CEOs work for a $1 a year for the next two years, or deferring their compensation to a point where they get paid after they hit some government supervised goals. And, hell yes, make them fly commercial like the rest of us.]

Investments must be made for the future. No more focus on quarterly earnings or the kind of short-term stock appreciation that means quick riches for executives with options. Manage with an eye on cash flow, balance sheets and long-term appreciation. Invest in truly competitive products and innovative technologies — especially fuel-saving designs — that may not arrive for years. Starving research and development is like eating the seed corn.

[Hedge funds, the world you come from, are well known for not focusing on quarterly profits and long term strategy?]

[I know there is a perception that Detroit hasn;t been investing in new technology. But the only area I can find where Detroit seriously lagged was in the area of hybrid car design. No, GM nor Ford produced a Prius. Though, Ford did produce an Escape hybrid years ago that is still selling. But they are fuel-economy competitive or better than the Japanese on virtually every car where they go head to head. Look it up Gov. on Fuel Economy. The knock on Detroit is that they sold many more SUVs than small cars. However, absent an energy policy that would have kept gas prices high enough to give consumers a natural incentive to drive small cars all those years, Detroit sold the vehicles America wanted in the free market you are so fond of. Were all those Americans who craved Explorers and Trailblazers as family cars taken to Gitmo and tortured to buy them? No…they wanted them because gas was $1.50 a gallon. Toyota and Nissan followed GM, Ford and Chrysler into pickup trucks and SUVs. Sure, Toyota makes a Prius and Corolla. But they also make a Tundra, Sequoia, 4Runner, Tacoma, Highlander and Landcruiser. But you know what? Their’s aren’t as good and they suck up more gas than Detroit’s trucks and SUVs. GM could beat Toyota to the punch with plug-in electrics. And it has as many patents on electric car technology as Toyota. Ford’s Fusion Hybrid beats the Toyota Camry hybrid by five or six miles per gallon. I’m not saying there haven’t been mistakes made by Detroit, but I’m holding you accountable to make sure you at least cite mistakes truthfully. I’m weary of the perception that Toyota sells a million Priuses a year and that it’s SUVs and pickups get 50 miles per gallon. Fior the record, I wish Detroit hadn;t invested so deeply in SUVs, too. But Washington's lack of policy on energy and oil prices set the stage for that strategy. Japanese automakers were better prepared because their home market, Japan, is a market that encourages small car development because of high gas prices and shortage of real estate.]

Just as important to the future of American carmakers is the sales force. When sales are down, you don’t want to lose the only people who can get them to grow. So don’t fire the best dealers, and don’t crush them with new financial or performance demands they can’t meet.

[The only problem with Detroit’s dealers is that there are too many of them. The companies have been working with the dealers to encourage mergers. That process has been taking place. Filing Chapter 11, as you suggest, would actually do the most harm to dealers because it would probably allow the automakers to pare their dealer body more quickly with far worse repercussions for these independent businesses.]

It is not wrong to ask for government help, but the automakers should come up with a win-win proposition. I believe the federal government should invest substantially more in basic research — on new energy sources, fuel-economy technology, materials science and the like — that will ultimately benefit the automotive industry, along with many others.

[Fine, but who oversees this? The Clinton Administration spent a billion or more on a program that made no sense. If the government wants to invest in technology, let them put money directly at what we know works—lithium batteries. Government investment can make it easier to scale up the technology faster, and provide tax credits to encourage the first waves of customers to buy them. That goes for cellulosic ethanol as well. We know corn ethanol is a boondoggle.]

I believe Washington should raise energy research spending to $20 billion a year, from the $4 billion that is spent today. The research could be done at universities, at research labs and even through public-private collaboration. The federal government should also rectify the imbedded tax penalties that favor foreign carmakers.

But don’t ask Washington to give shareholders and bondholders a free pass — they bet on management and they lost.

[Your second worthwhile point. Stay with what you know Gov. Shareholders have to take the pipe—what’s left of it. And bond-holders will have to write down their losses. This has to be part of the bailout proposition. ]

The American auto industry is vital to our national interest as an employer and as a hub for manufacturing. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs.

[You have clearly been talking to too many Chap. 11 lawyers who would be the only winners in this scenario. I recall at a debate last year, when asked whether you would attack a known nuclear facility in Iran, you said you would assemble your lawyers to decide. Why do you listen to so many lawyers?]

It would permit the companies to shed excess labor, pension and real estate costs.

[Real estate costs? Since when is that part of the company’s problems? Excess labor and pension costs? You realize that the government will wind up eating a lot of this, right? The cost to the government of rolling bankruptcies in the auto sector would be well over $100 billion at minimum. For far less money, why not keep people working and help the automakers with loans get to the restructured place they were on their way to before the credit crunch?]

The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.

[So, you want the tax-payer to guarantee a fan-belt, but not healthcare for families who, for example, may have a dependents with with cancer or diabetes? No wonder you lost to McCain.]

In a managed bankruptcy, the federal government would propel newly competitive and viable automakers, rather than seal their fate with a bailout check.

[I can’t believe The New York Times printed this
Mitt Romney, the former governor of Massachusetts, was a candidate for this year’s Republican presidential nomination. ]

[How'd that work out for ya?]

TrackBack URL for this entry: http://blogs.businessweek.com/mt/mt-tb.cgi/ 12477.1234013875
EDIT: I am posting these commentaries "as found", including the comments in italics. I have added comments to the quotes myself.
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Old 11-26-2008, 06:52 AM   #277
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Here are the second and third commentaries:

Quote:
Who Killed Detroit?
humanrights.com
By Patrick J. Buchanan (Commentary)
Nov. 21, 2008

Who killed the U.S. auto industry?

To hear the media tell it, arrogant corporate chiefs failed to foresee the demand for small, fuel-efficient cars and made gas-guzzling road-hog SUVs no one wanted, while the clever, far-sighted Japanese, Germans and Koreans prepared and built for the future.

I dissent. What killed Detroit was Washington, the government of the United States, politicians, journalists and muckrakers who have long harbored a deep animus against the manufacturing class that ran the smokestack industries that won World War II. As far back as the 1950s, an intellectual elite that produces mostly methane had its knives out for the auto industry of which Ike's treasury secretary, ex-GM chief Charles Wilson, had boasted, "What's good for America is good for General Motors, and vice versa."

"Engine Charlie" was relentlessly mocked, even in Al Capp's L'il Abner cartoon strip, where a bloviating "General Bullmoose" had as his motto, "What's good for Bullmoose is good for America!"

How did Big Government do in the U.S. auto industry?

Washington imposed a minimum wage higher than the average wage in war-devastated Germany and Japan. The Feds ordered that U.S. plants be made the healthiest and safest worksites in the world, creating OSHA to see to it. It enacted civil rights laws to ensure the labor force reflected our diversity. Environmental laws came next, to ensure U.S. factories became the most pollution-free on earth.

It then clamped fuel efficiency standards on the entire U.S. car fleet.

Next, Washington imposed a corporate tax rate of 35 percent, raking off another 15 percent of autoworkers' wages in Social Security payroll taxes

State governments imposed income and sales taxes, and local governments property taxes to subsidize services and schools.

The United Auto Workers struck repeatedly to win the highest wages and most generous benefits on earth -- vacations, holidays, work breaks, health care, pensions -- for workers and their families, and retirees.

Now there is nothing wrong with making U.S. plants the cleanest and safest on earth or having U.S. autoworkers the highest-paid wage earners. That is the dream, what we all wanted for America.

And under the 14th Amendment, GM, Ford and Chrysler had to obey the same U.S. laws and pay at the same tax rates. Outside the United States, however, there was and is no equality of standards or taxes.

Thus when America was thrust into the Global Economy, GM and Ford had to compete with cars made overseas in factories in postwar Japan and Germany, then Korea, where health and safety standards were much lower, wages were a fraction of those paid U.S. workers, and taxes were and are often forgiven on exports to the United States.

All three nations built "export-driven" economies.

The Beetle and early Japanese imports were made in factories where wages were far beneath U.S. wages and working conditions would have gotten U.S. auto executives sent to prison.

The competition was manifestly unfair, like forcing Secretariat to carry 100 pounds in his saddlebags in the Derby.

Japan, China and South Korea do not believe in free trade as we understand it. To us, they are our "trading partners." To them, the relationship is not like that of Evans & Novak or Fred Astaire and Ginger Rogers. It is not even like the Redskins and Cowboys. For the Cowboys only want to defeat the Redskins. They do not want to put their franchise out of business and end the competition -- as the Japanese did to our TV industry by dumping Sonys here until they killed it.

While we think the Global Economy is about what is best for the consumer, they think about what is best for the nation.

Like Alexander Hamilton, they understand that manufacturing is the key to national power. And they manipulate currencies, grant tax rebates to their exporters and thieve our technology to win. Last year, as trade expert Bill Hawkins writes, South Korea exported 700,000 cars to us, while importing 5,000 cars from us.

That's Asia's idea of free trade.

How has this Global Economy profited or prospered America?

In the 1950s, we made all our own toys, clothes, shoes, bikes, furniture, motorcycles, cars, cameras, telephones, TVs, etc. You name it. We made it.

Are we better off now that these things are made by foreigners? Are we better off now that we have ceased to be self-sufficient? Are we better off now that the real wages of our workers and median income of our families no longer grow as they once did? Are we better off now that manufacturing, for the first time in U.S. history, employs fewer workers than government?

We no longer build commercial ships. We have but one airplane company, and it outsources. China produces our computers. And if GM goes Chapter 11, America will soon be out of the auto business.

Our politicians and pundits may not understand what is going on. Historians will have no problem explaining the decline and fall of the Americans.
Quote:
Pundits Peddle Revisionism in Attacking U.S. Automakers
Washington Post
By Warren Brown (Commentary)
Nov. 23, 2008

The Mob of Pundits (MOP) is out to lynch the domestic automobile industry.

MOP members, many of them compensated substantially more than the $71,000 annually in wages and benefits paid to United Auto Workers union-represented employees, are much in favor of hanging GM, Ford and Chrysler from the nearest bankruptcy tree.

It is a fate deserved by the American car companies, according to MOP leaders Thomas L. Friedman of The New York Times and George F. Will, a conservative columnist, whose stuff frequently appears on the op-ed pages of The Washington Post.

"Few companies more deserve failure," said commentator Michael Gerson, oddly arguing in a Washington Post op-ed column last week that General Motors should be allowed to collapse, but that the consequences of such a failure would do grave harm to the American economy.

According to the MOP crowd, American car companies have messed up -- making too many trucks and sport-utility vehicles, ignoring consumer and governmental demands for more fuel-efficient vehicles and, as Will stated in a column last week, entering "improvident labor contracts" with the UAW.

It's baloney.

Americans went truck crazy in the 1990s and in the early years of this century, making light trucks more than 50 percent of new vehicles annually sold in this country, for the same reason they are in danger of re-embracing that madness -- cheap gasoline. They were enabled by lawmakers who, with one hand, pushed car companies to increase technical fuel efficiency while using the other to give American consumers the least-expensive gasoline in the developed world.

Increased technical fuel efficiency plus low-cost gasoline fueled consumer demand for more driving and bigger and more powerful vehicles with which to do that driving. Gasoline consumption in the United States soared . . . until high fuel prices restored some sanity to the U.S. consumer automotive market.

The MOP crowd blames American car companies for causing truck mania. It is a faulty allegation. Car companies follow market demand much more than they generate it. Nearly all automobile manufacturers doing business in the United States aggressively pursued the truck market, offering some version of a pickup truck (Honda Ridgeline, Nissan Titan, Toyota Tundra) or some kind of SUV (Mercedes-Benz M-Class, BMW X-Class, Toyota Land Cruiser, Nissan Pathfinder).

In a cheap-gas economy, trucks and big engines made big money for everybody. Were GM, Ford and Chrysler supposed to sacrifice that market in favor of fuel-sippers, which, before high fuel prices in the summers of 2007 and 2008, barely constituted 4 percent of new U.S. vehicle sales?

The MOP brigade says American car companies should have seen high fuel prices coming. If that's true, what about Toyota, which chose to introduce a revamped, super-sized, fuel-consumptive version of its Tundra pickup this year just as gasoline prices were spiking? New Tundra sales tanked as a result, forcing Toyota to curtail production of that model.

Ah, the critics say, but look at that fuel-efficient, gas-electric Toyota Prius hybrid.

Go ahead and look at it, preferably in Japan, where the Ministry of International Trade and Industry (MITI) has done a marvelous job of coordinating industrial and energy policy into a vehicle development and consumption strategy that makes sense. We have no such government-industry cooperation in the United States. We have no industrial policy, no energy policy, which largely is why we now have a core segment of our natively owned manufacturing infrastructure teetering on the brink of collapse.

Neither the Japanese, nor the Germans, nor the Chinese, nor the Koreans have been as stupid as we've been in this country in the management of the automobile industry.

European and Asian countries tax horsepower. They heavily tax the least-efficient motor fuels, such as gasoline, while giving more favorable treatment to more efficient fuels, such as diesel. In short, they make automobile manufacturers and consumers share the real costs of auto-mobility.

That cost-sharing creates a kind of honesty. Car companies aren't inclined to design, develop and produce gas-guzzlers because European and Asian consumers are not inclined to buy them. It creates market predictability, contrary to what we have in the United States, where vehicle markets can flower or wither in an instant, depending on the price of fuel. It creates a more realistic sense of value. Smaller and more efficient are seen as high values in European and Asian car markets, where consumers are willing to pay handsomely for those attributes.

Compare that with consumer attitudes in the United States, where bigger and more powerful usually command bigger bucks and more respect, and where small and efficient get short shrift.

It is the rankest hypocrisy for well-paid journalists to decry the "high" pay of UAW-represented employees. I doubt that there is one UAW critic in the media, or on Capitol Hill, who would be willing to settle for a UAW paycheck. I'm almost certain there isn't one who would be willing to trade his or her relatively cushy employment for a year on an auto plant assembly line.
Criticism of "improvident labor contracts" thus smacks of class bias. It reeks of the notion that some work, such as that involving manual labor, inherently deserves less compensation than others, such as expressing one's opinion. It's more baloney.

None of this is to excuse the American car companies for mistakes they have made. They've made many. But they've also done many things right, contributing to the defense of this country; helping to create a viable middle class, especially in America's minority communities; and contributing to technological advancements in the global automobile industry, as any historical evaluation of automobile technology would demonstrate.

Many adjustments will have to be made to insure the continued survival of domestic car companies. The UAW will have to organize those unorganized foreign manufacturers producing cars and trucks in the United States; or the union must agree to less-expensive wage and benefit packages commensurate with what those competitors are paying their employees. Consumer demand dictates compromise in a market where product value -- quality plus price -- trumps affection for the union label.

But the most important adjustment will have to come in our national mind-set. We must decide if, like Germany, Japan, China and Korea, we value the development and reasonable protection of core, native-owned manufacturing.

"Protection" here refers to protection from external events, such as the collapse of credit markets, which largely have caused the recent severe slump in U.S. auto sales. It does not mean protection from fair competition -- allowing foreign carmakers to sell here as long as we have equal, reciprocal rights to sell in their countries.

The potential failure confronting GM, Ford and Chrysler is not Detroit's alone. It belongs to all of us. We've failed to step up with a workable industrial policy, a meaningful energy policy and an educational system that prepares Americans for global competition. It's way past time that we do so.
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Old 11-26-2008, 09:04 AM   #278
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Sorry Gene, but I lived and worked in DC for almost twenty years and here's how it works.

It's a sure bet that Lawmakers knew what was going on in the Mortgage industry. Even Bush and McCain spoke up and tried to get it curtailed. However I am sure lots of lawmakers saw an advantage in the whole thing. Probably were even making some money in it.

Now here's the deal. You can't blame anyone for taking advantage of a situation that is totally legal, albeit maybe not so ethical. It is the job of Congress to oversee this sort of thing and rectify any loopholes like this that exist. They did the opposite. They encouraged it!!! I only hope their house of cards took away a lot of their gains when it fell.

See, being a non-lawyer, I, unlike my wife who is, can say something in 200 words or less.
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Old 11-26-2008, 10:02 AM   #279
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Quote:
Originally Posted by 66Overlander View Post
EDIT: I am posting these commentaries "as found", including the comments in italics. I have added comments to the quotes myself.
ARRGGHH! Typo alert. I have NOT added comments to the quotes myself!
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Old 11-26-2008, 10:05 AM   #280
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And while I am at it, here is another recent intertesting commentary, that like the others, says things more eloquently than I ever could:
Quote:
Compuware chief takes on Detroit Three senate critic
BY PETER KARMANOS JR. • November 19, 2008

U.S. Sen. Richard Shelby, R-Alabama, has emerged as the leading Senate critic of the proposed aid package for the Detroit auto industry. It’s pretty clear Shelby has nothing but disdain for Ford, GM, Chrysler and the United Auto Workers, not surprising considering he comes from a state with assembly plants for Mercedes-Benz, Honda and Hyundai. Shelby is in a key position on the Detroit rescue as senior Republican on the Senate Banking Committee.

Wednesday, he continued his anti-Detroit rhetoric, saying he didn’t think the U.S.-based industry was going to turn around without a bankruptcy and the ouster of its leadership.

“I don’t think they have immediate plans to change their model, which is a model of failure,” Shelby said, dismissing the $25 billion in bridge loan being requested as “life support” for Detroit.

“I believe their best option would be some type of Chapter 11 bankruptcy,” Shelby said. “These leaders have been failures and they need to go.”

Shelby actually ratcheted up his anti-Detroit campaign on the Sunday morning talk show circuit, which drew an interesting response from Motor City defender Peter Karmanos, chairman and CEO of Compuware Corp., which moved its headquarters into a new downtown building just a few years ago.

Here’s part of what Karmanos said in a letter to Shelby:

I watched with great interest Meet the Press, during which you and Sen. Carl Levin debated the merits of (or, concerning your position, the folly) providing financial aid to America’s domestic auto industry.

I must admit that I was more than a little taken aback by how out of touch you really are about what Detroit’s Big Three automakers have been doing for some time and continue to do to transform their businesses to both survive in today’s debilitating economic climate and thrive in the future. The steps have been extremely significant and take it from me—someone who lives and works in the Motor City—incredibly painful as well.

… I can only trust that you will take some time and conduct the proper due diligence before continuing to espouse your inaccuracies. At minimum, I believe the domestic auto industry (and its millions of hardworking, tax-paying employees), which helped make America great, deserve as much.


Don’t you?

The intent of this letter, however, is not to take you to task for the inaccuracy of your comments or for the over-simplicity of your views, but rather to point out the hypocrisy of your position as it relates to Alabama’s (the state for which you have served as senator since 1987) recent history of providing subsidies to manufacturing. During the segment on Meet the Press, you stated that:

“We don’t need government — governmental subsidies — for manufacturing in this country. It’s the French model, it’s the wrong road. We will pay for it. The average American taxpayer is going to pay dearly for this, if I’m not wrong.”

I trust it is safe to say that when you refer to “government subsidies,” you are referring to subsidies provided by both federal and state governments. And if this is in fact true, then I am sure you were adamantly against the State of Alabama offering lucrative incentives (in essence, subsidies) to Mercedes Benz in the early 1990s to lure the German automobile manufacturer to the State.

As it turned out, Alabama offered a stunning $253 million incentive package to Mercedes. Additionally, the State also offered to train the workers, clear and improve the site, upgrade utilities, and buy 2,500 Mercedes Benz vehicles. All told, it is estimated that the incentive package totaled anywhere from $153,000 to $220,000 per created job. On top of all this, the State gave the foreign automaker a large parcel of land worth between $250 and $300 million, which was coincidentally how much the company expected to invest in building the plant.

With all due respect, Senator, where was your outrage when all this was going on? … I certainly don’t recall you going in front of the nation (as you did this past Sunday) to discuss what a big mistake Alabama was making in providing subsidies to Mercedes Benz. If you had, however, you could have talked about how, applying free market principles, Alabama shouldn’t have had to resort to subsidies to land Mercedes Benz. Competitively speaking, if Alabama had been the strongest candidate under consideration (i.e. highest quality infrastructure, workforce, research and development facilities, business climate, etc.), then subsidies shouldn’t have been required.
The fact is that Alabama knew that, on a level playing field, it could not compete with the other states under consideration and, thus, to lure the German car builder to the State, it offered the aforementioned unprecedented subsidies. In effect, Alabama — your state — did exactly what you said government should not do: provide subsidies for manufacturing.
It’s no great mystery why Alabama politicians went to such dramatic anti-free-market measures to secure Mercedes Benz — they did it for the betterment of their state through job creation and increased tax revenues. And who could blame them? Is that so different than what would occur by providing financial aid to help rescue the domestic auto industry? Such aid would save millions of jobs and millions of dollars in lost tax revenue.
Additionally, unlike the giveaways Alabama bestowed upon the foreign automaker in question, United States tax payers would be reimbursed with interest (as they were when Chrysler received government aid in the early 1980s) for their investment in what is clearly a critically important industry for America’s present and future.

Peter Karmanos, Jr. is Chairman and CEO Compuware Corporation
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