GM facts and fiction

[mistral blue]

Exxon made 11 billion ... in the 1st quarter of this year alone.

Float the car boys a loan and maybe the guvamint can lower your tax rate a little.

Whaddya say?

[hampstead38]

Originally Posted by Silvertwinkie

A narrow and singular vision. Again, the big 2.5 are not asking for a handout. Just loan guarantees and if need be the gov will get stock.

The bottom line is this, you can either agree to float loans to the big 2.5 or you can pay the enormous price that the unemployment, heathcare/pension will cost.

Either way, you're going to pay. The second option (picking up the unemployment, etc costs) are going to cost us far, far more, and put at least 100k or more folks out of a job (far beyond what the big 2.5 directly employ), further shrinking the already contracting job markets here.

If we are going to pay either way (which don't kid yourself, we would be), then I vote that we loan them the money, they get their acts together and we keep 1 out of 10 jobs in this country on our shores.

I think looking at this any other way is frankly shortsighted and a knee jerk reaction (no disrespect intended). There are really only two options and doing nothing is not one of them.......

I might feel differently if we hadn't already lost a boat load of jobs to outsourcing overseas. At this point, we've outsourced about as much as we can, and letting 1 out of 10 jobs evaporate just isn't in any of the compaines or the country's (meaning you and I) best interest.

PS- If you don't think other countries subsidize their business, guess again. Japan, China, etc all subsidize various industries. Why? It's in their best interest to do so. If you think Socialism isn't already here in this country, guess again, cause my feeling is the next few years, we're gonna see a LOT more of it.

Yours is the logical fallacy of the false dilemma. This is not simply a choice between "loans" and potential unemployment, health care and retirement costs. There is no assurance that loans will do anything except prolong the inevitable. GM may well absorb all of the money and then fail leaving everyone with essentially the same costs... only later. If a highly paid union worker loses his or her job, he or she is going to be forced to look for another job. The only beneficiary of a highly paid, subsidized job is the person holding the job; it's the taxpayers left holding the bag.

Yes, most countries subsidize industries. Why? Concentrated benefits and diffused costs. For a wonderful example, see the U.S. sugar industry. Everyone pays more for sugar so a handful of companies can make windfall profits... and those windfall profits are used, in part, to buy political support to ensure those price supports and tariffs remain in place. Again, this subsidization benefits a few at a cost to many.

As for job losses, until recently the U.S. enjoyed record levels of employment. While jobs have been lost; others have been created. Between 1993 and 2002, 310 million jobs were lost but 328 million jobs were created. In a modern economy, the needs for labor will constantly change. In general, mature companies like GM do not generate job growth. It's small business that do. Giving GM or other large companies bailout money (call them loans if you wish), only moves resources away from the stronger sectors of the economy.

With all due respect to the folks on this thread, some of the best and brightest economists in the world are having a tough time making heads or tails out of recent events. Frankly, no one knows what's going to happen. The basic idea of capitalism, however, is that we trust individual consumers and businesses to make decisions about where and how to invest resources and the free market sorts out the winners and losers. When the government comes in, what it's doing is supplanting the cumulative wisdom of the marketplace and substituting its own ideas about who should be winners and who should be losers. History has shown that governments do a very poor job of this as compared to market forces. The "we have to do something" argument presupposes that there's something better we can do than to let free markets work.

[Stephen Mick]

Twinkie,

It's an interesting read (I was actually re-reading it on CNN as you were posting it). And there's no doubt the pain will be felt by (most) everyone. I just don't believe, in their current incarnation, that GM can survive in the long-term. I'd prefer to see them (with federal assistance, if necessary) embrace that change now rather than later.

The statistics are sobering, no doubt. But a bailout only forestalls the inevitable, at which point the statistics will likely not have changed.

[Silvertwinkie]

Originally Posted by Stephen Mick

I'm not against helping them, but if we're going to shovel money down a hole, let's pick the shallowest hole.

I've got no issue with that at all, but my take was that the consensus here was that it better to let them die than to get them loans. I think for once the politicians know that they can't just throw money at the problem and that real tangible changes and corporate culture shocks need to happen.

You're right on that the big 2.5 cannot continue business as usual. In GM's case, Oldsmobile should not have been the only one that was chopped about a decade ago. Most of the GM cars are simply the same cars and trucks, re-badged with minor trim modifications. Same goes for Ford/Lincoln and Mercury. If Toyota can do it with 3 brands and half the number of dealers, the big 2.5 should be able to as well. The main issue now with consolidation is that there is a bloated dealer network and cleaning that mess up is not going to be easy. It was hard when it was just Olds being the sacrificial lamb....now we're talking several brands.

About the only thing appealing for bankruptcy is that the big 2.5 could in a second walk from the UAW bad deals, but there is a darker side to a bankruptcy filing that really makes doing it a lose/lose, which is why I say if we can give it to AIG and they blow some of it on parties, etc, then I think the big 2.5 are equally fair game to help fund.

[Stephen Mick]

C'mon, Hampstead! I like being narrow and having a singular vision.

(I owe you a beer for post #22, by the way. Perhaps one of the most level-headed, simple and insightful I've read or heard on this subject.)

[Silvertwinkie]

The way I see it is simply pay, and have a chance (knowing there is no way of knowing if it still won't die off) or, not doing it and it will die off for sure.

In my mind, we loose more in Iraq than we would helping the auto industry here and if there is even a bit of hope, then I say the money is worth the risk. I am sure 1.6 million folks would agree, but not to even try seems wrong to me in some way.

As for job created, sure, lots of Wal-Mart type jobs have been created.......they don't help or pay the bills. The jobs that matter are all going overseas....this is hardly a logical fallacy of a false dilemma, it's a reality that we are quickly becoming a service economy with the middle class disappearing. Losing the big 2.5 will only accelerate that evaporation which is why I feel trying is better than not.

[ROBERT CROSS]

"The inherent vice of of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries."
W. Churchill

Choose one...I've made my choice.

[joe3957]

Take a look at this website
Executive Compensation - CEO Salaries, Stock Options, Bonuses, Compensation for Executives
I might suggest that something major needs to happen when a company that lost $38B last year (GM) paid its top 5 execs , $38M or maybe worse Ford who lost $2B paid its top execs approx $50B. No matter what happens rank and file are likely to lose their jobs. But these guys, like the wall street chiefs pulling this sort of compensation , while destroying these instituions borders on criminal. I have little confidence a loan will change fundamentally the way Detroit behaves. Will they improve fuel efficiency to have more marketable cars, or lobby CAFE standards. Will they self impose executive pay? Can they move to an era of labor negotiations that is equivalent to Toyota and Honda and BMW in the USA, which by most folks standards is a pretty good working wage. It is sad we have come to this.

[toastie]

DEALERSHIPS - FACT
The lost of the big 3 would lead to a collapse of the new-vechicle dealerships in all 50 states. Go to below site, click on your state and take a look at what your "state" will lose just in annual employee payroll. Yes, this will effect everybody, there is no running from this.

Automotive Retailing: Driving the U.S. Economy

[hampstead38]

In the long run, wages increase with productivity and marketable skills. The key to rising incomes is not protecting union manufacturing jobs in rust belt industries; it is ensuring workers are job ready in emerging and growing sectors of the economy.

The biggest destroyer of jobs is not outsourcing; it's technology. Witness agriculture. During the past century, agriculture went from 40 percent of the American workforce to three... and we produce more food now than we ever have. Would we, as a nation, be better off today if we had subsidized mule breeders rather than allowing tractor manufacturers to compete and flourish?

GM is broken and I see no reason that loans will fix the firm's structural problems. More money won't rewrite union contracts or trim benefit costs or make better automobiles.

[HDS]

Does anyone on this board have any information on Honda, Toyota etc retirement benefits? Wait, they haven't been around here long enough to pay retirement benefits. Honda is just getting to the point where there will be significant numbers of retirees. While I don't want socialism any more than anyone else here, if 17 million workers lose potential pensions and medical insurance and over 2 million more lose what they have, what happens to them? If the contracts at the big 3 are broken, what will be the benchmark to which all other employers are compared. If the big three, for instance, stops providing medical insurance, do you really think anyone else will. The Japanese transplants only pay what they do to keep the UAW out. They, along with every other employer will cut their employee's throats in a minute if the big 3 can. To help out the big 3 thru loans or bail outs or whatever you call it won't cost anyone any more taxes, we sure as hell won't get a tax cut anytime soon no matter if they live or die. Politicians will find somewhere to spend tax money, after all, there are nations to attack. Helping them might be the best thing to do to avoid socialism.

[mustang]

I am torn on what is right as far as the big 3 go. In my line of work, I always see the slow down when the big 3 shut down at Christmas and in July for retooling.

I watched a TV program last night from out of the country, (China) Chevy accounts for 18% of there market. In China, Japan, and other markets. GM Got Dae Woo going again, Chevy is the most sought after car (Aveo)
When they interveiwed new buyers they attributed that to a better track record for longevity and a proven history by the manufacturer.

G.M.'s official said in other markets, they are doing fine. In the American market, all are hurting.

My Opinion is many years of a free for all, on lending, CEO purks / bonuses, and unaccounted for labor wont get fixed over night. If they really want to fix the big 3 they should first sit down with the unions, explain there plans. 1st CEO salery cuts 2nd renegotiate union contracts.
making sure they protect the retired people that built those great companies. 3rd then ask for help from the government to fast track the results. Banks and Big firms included.

[wheel interested]

listen to live stream on Capital Hill now
50PlusPrime Live Webcast

[Silvertwinkie]

How ironic we are having this conversation....I just got this email:

You made the right choice when you put your confidence in General Motors, and we appreciate your past support. I want to assure you that we are making our best vehicles ever, and we have exciting plans for the future. But we need your help now. Simply put, we need you to join us to let Congress know that a bridge loan to help U.S. automakers also helps strengthen the U.S. economy and preserve millions of American jobs.

Despite what you may be hearing, we are not asking Congress for a bailout but rather a loan that will be repaid.

The U.S. economy is at a crossroads due to the worldwide credit crisis, and all Americans are feeling the effects of the worst economic downturn in 75 years. Despite our successful efforts to restructure, reduce costs and enhance liquidity, U.S. auto sales rely on access to credit, which is all but frozen through traditional channels.

The consequences of the domestic auto industry collapsing would far exceed the $25 billion loan needed to bridge the current crisis. According to a recent study by the Center for Automotive Research:

• One in 10 American jobs depends on U.S. automakers
• Nearly 3 million jobs are at immediate risk
• U.S. personal income could be reduced by $150 billion
• The tax revenue lost over 3 years would be more than $156 billion

Discussions are now underway in Washington, D.C., concerning loans to support U.S. carmakers. I am asking for your support in this vital effort by contacting your state representatives.

Please take a few minutes to go to www.gmfactsandfiction.com, where we have made it easy for you to contact your U.S. senators and representatives. Just click on the "I'm a Concerned American" link under the "Mobilize Now" section, and enter your name and ZIP code to send a personalized e-mail stating your support for the U.S. automotive industry.

Let me assure you that General Motors has made dramatic improvements over the last 10 years. In fact, we are leading the industry with award-winning vehicles like the Chevrolet Malibu, Cadillac CTS, Buick Enclave, Pontiac G8, GMC Acadia, Chevy Tahoe Hybrid, Saturn AURA and more. We offer 18 models with an EPA estimated 30 MPG highway or better — more than Toyota or Honda. GM has 6 hybrids in market and 3 more by mid-2009. GM has closed the quality gap with the imports, and today we are putting our best quality vehicles on the road.

Please share this information with friends and family using the link on the site.

Thank you for helping keep our economy viable.

Sincerely,



Troy Clarke

[85MH325]

I have to commend everyone who has posted to this thread. This is one of the most insightful and civil discussions I've seen on a very complex topic in a very long time. Each of you make excellent points in defending your views. There is little doubt that if the big three go under, the economy of the U.S. will be depressed for a very long time. There is no guarantee that a loan package, regardless of the terms, will be successful in keeping the economy out of the tank. The question becomes is it worth trying? What are the long-term costs of trying? What are the short and long-term benefits of trying? What is the downside to NOT trying?

We are absolutely in uncharted financial territory. There is no historical precedent for where we are today. I've read some fascinating commentary about the financial platforms of the Republican and Democratic parties over the past sixty years and about failures and successes of each of those policies and how the entire sixty years of policy making has led us to where we are today.

That, coupled with un-budgeted war spending and unprecedented growth of government, and a vague and uncertain energy future... there seem to just be too many variables to manipulate to make a coherent prediction about the effect of any particular input into the financial system. And then, of course, there's the minor issue of consumer confidence in government(s) and the financial system.

There's an old Chinese curse that says: "May you live in interesting times."

These are, my friends, interesting times.

Roger

[Silvertwinkie]

Originally Posted by hampstead38

Would we, as a nation, be better off today if we had subsidized mule breeders rather than allowing tractor manufacturers to compete and flourish?

I guess you're right, instead of subsidizing the farmer to farm, we subsidize them not to farm as we currently do, and it makes perfect sense. Either way the farmer gets money..and who's money? That's right, yours and mine via taxes.....

I think this is not a good comparison of a farmer to the auto industry because most farmers are not unionized and are not susceptible to the pitfalls of unionization. Look at education, similar issue as the automakers....except guess what, John and Jane Q. Taxpayer continually shovel dollar bills into the blast furnace for education and frankly, look how well the kids have been learning over the past 20 years in the public education sector...... oh and it makes no difference if you have kids in the public systems or not...don't pay, guess what, they'll put a lien on your house and eventually sell it to pay for your taxes, which around here represent 80% of the real estate tax bill.

You seeing similarities? Hint, hint...unions and poor mgmt? Still, why throw the baby out with the bathwater when you can maybe fix it, and make some changes because you hold the purse strings? However, the odds are like education, we'll still keep throwing money at it no matter how any of us feel here. Those who fail to heed history are destined to repeat it.

[jcanavera]

I'm on the fence on this one. The real point as to what is going on is that people aren't buying cars. The question I think of more is what will it take for me to buy another GM car? Yes the tow vehicle is always there because America at this time builds great tow vehicles. But that vehicle to me is a specialty vehicle. Gas hungry and for all intents relegated to life in the garage with occasional use for towing or hauling big items. After 5 years of use and 24,000 miles on the odometer, with proper care it will be there for a long long time.

Now my daily use vehicle is another story. After listening to my neighbor and others laud the virtues of their family Honda's and Toyota's, and seeing their vehicles running well after 200,00+ miles of service and my own experience of each of my GM cars becoming junk by 100,000 miles, I jumped the GM ship and in 1997 bought my first Honda Accord. In 10 years and 168,000 miles the Accord had no major repairs, was on its third set of tires, its second set of brakes, and its second muffler. Nothing else in that 10 years of service other than the normal required maintenance. It did 30 mpg from the day I got it until the day I traded it in. Only in its last months of service did we see the need for some repairs. With gas prices going up I decided to go to the Honda Civic line picking up an '07 that does 35+ mpg that was a little over 17K before trade in of the Accord. I can honestly tell you that these two vehicles, both assembled in the US, made me a believer that there were better alternatives than staying GM.

Are American cars better today? I'm sure they are. But the question is how do you sway me back? That's the real problem that the American auto manufacturers have gotten themselves into over the years. They virtually lost their loyalty due to quality issues and missing the pulse of what the consumer wanted. It wasn't lost overnight. It eroded over a long period of time and people like me who made the switch realized that the foreign product we bought was better.

So the American big three concentrated on the big stuff. With the economy booming and the price of oil what it was, those big vehicles were the gravy train for them......and the erosion of the auto side continued.

So where do we go from here? You can pump the $$$ into the big three.....but what will get folks to buy again? Personally I think the future of the American automobile manufacturer will be the electric car or the alternative fuel vehicle. If the American's can focus on that side they could beat the foreign manufactures at their game. The question lies if any funding will be used to break those new technology vehicles to the surface...or whether it will be used for more of the same thinking that has gone on previously.

Bottom line if you don't put out a breakthrough product, more of the same won't bring the American buyers back. The business has changed, the horse is out of the corral, and the American industry needs some new pony's.

Jack

[Gene]

I think Silvertwinkie is right on. I haven't owned an American car or truck very often because they have generally been behind the times and unreliable. Nonetheless, they are a very big part of the US economy. When the feds let Lehman Bros. go bankrupt, the shock through the banking and financial community was huge and led us to the credit medltdown mess that happened subsequently. The big 2.5 going bankrupt would likely have a similar effect.

Think of the effect in the upper midwest manufacturing states. Will they go bankrupt too? By law, the feds have to pick up pension costs which are huge. All the retired blue collar workers health benefits go away which means Medicare costs go up.

I think the big 2.5 have been horribly managed, and penalizing the idiots who run these companies is fine with me, but why penalize everyone else? Yes, the unions have tried to get the best wages and benefits possible, and why not? And they have accepted the loss of most of that in recent years. New people start at $14/hour and how many families can live decently on that, about $30,000 a year. They're certainly not going to be buying any Airstreams.

I know some people want to see unions go away. Unions have raised wages for mostly everyone by setting the standard so there could be a vibrant middle class. Since unions have been weakened in recent decades, wages have stagnated and then gone down for most everyone. Sure there are corrupt unions. There are corrupt banks, politicians, lawyers, doctors, etc., so what's new? Some people are corrupt, most in this country anyway, are not.

If you want the free market, maybe China would be a good place. The economic side of things there is pretty much free market and wages are very low for most people, there are hardly any health benefits, companies steal from employees, and if they complain, out they go. There are no real unions. There's a little problem with freedom, but some entrepreneurs can make out very well. When the US was a laissez faire, free market country, there were frequent panics, grinding poverty in the cities, farmers were regularly screwed by buyers and railroads, the aged, if they had no relatives to help, ended up in county run poor houses, monopolies raised prices whenever they wanted, many products were badly made, food could be dangerous to eat, and corruption in politics was everywhere. Not everyone did badly, especially if you were of the older WASP culture, but many did. Many suffered through no fault of their own. The rosy picture of the America in the 19th century in some history books is just not accurate.

All this led to the progressive era with direct election of senators, the Sherman Anti Trust Act, the Food and Drug Administration, and the like. We haven't pure capitalism since, and we never have had pure socialism. Neither work well and we have had a blend of both for a century, with the blend going back and forth between left and right. If you wantchaos in financial markets and a poverty class working in many companies, the free market is for you. We're now seeing gthe effect of an emphasis on the free market in the blend—the worst economic crisis since the free market decade of the 1920's.

If the gov't can loan $25 B to banks that don't need or want it with no strings attached, why can't we loan the same amount to the auto companies with strings attached? I don't like those company execs., but the companies are needed. I sure would like them to make a truck with good gas mileage and reliability so I can buy it someday. Otherwise, they may well get chopped up and parts of them sold to Asian companies and rest goes away. Maybe bankruptcy would work out, but the risks are enormous.

Gene

[hampstead38]

If your brother-in-law asked for a $25,000 loan to cover gambling debts, do you think the loan would prompt him to change his behavior? What are the odds he would repay the loan? If the bank wouldn't lend your brother-in-law money, why should you?

The bottom line is that no amount of loans will change the fundamental problems at GM. Loans won't dissolve the UAW contracts or lower retiree costs. The execs at GM will burn through any grants or loans and they'll be in the same position in 12 to 18 months that they are today.

As for K-12 public education, it is a government program, not a private business. The local public elementary school exists to educate children, not make a profit. Would market forces like school choice make a positive impact on public schools? I think so. Look at the success of charter and magnet schools in some areas.

As for farming, the example was meant to show the job displacing force of technology... not to serve as a model of free market economics. I'm against all farm subsidies and think we do a serious disservice to the lesser developed countries throughout the world by subsidizing agri-behemoths like Cargill and Conagra.

As for blaming unions and management... well, who's left? Yes, I think it's safe to say the problems at a given company are to at least some extent the responsibilty of the workers and the managers. I mean, you could blame the UPS guy, but I'm not seeing it.

[ROBERT CROSS]

Originally Posted by Silvertwinkie

How ironic we are having this conversation....I just got this email:

You made the right choice when you put your confidence in General Motors, and we appreciate your past support. I want to assure you that we are making our best vehicles ever, and we have exciting plans for the future. But we need your help now. Simply put, we need you to join us to let Congress know that a bridge loan to help U.S. automakers also helps strengthen the U.S. economy and preserve millions of American jobs.

Despite what you may be hearing, we are not asking Congress for a bailout but rather a loan that will be repaid.

The U.S. economy is at a crossroads due to the worldwide credit crisis, and all Americans are feeling the effects of the worst economic downturn in 75 years. Despite our successful efforts to restructure, reduce costs and enhance liquidity, U.S. auto sales rely on access to credit, which is all but frozen through traditional channels.

The consequences of the domestic auto industry collapsing would far exceed the $25 billion loan needed to bridge the current crisis. According to a recent study by the Center for Automotive Research:

• One in 10 American jobs depends on U.S. automakers
• Nearly 3 million jobs are at immediate risk
• U.S. personal income could be reduced by $150 billion
• The tax revenue lost over 3 years would be more than $156 billion

Discussions are now underway in Washington, D.C., concerning loans to support U.S. carmakers. I am asking for your support in this vital effort by contacting your state representatives.

Please take a few minutes to go to www.gmfactsandfiction.com, where we have made it easy for you to contact your U.S. senators and representatives. Just click on the "I'm a Concerned American" link under the "Mobilize Now" section, and enter your name and ZIP code to send a personalized e-mail stating your support for the U.S. automotive industry.

Let me assure you that General Motors has made dramatic improvements over the last 10 years. In fact, we are leading the industry with award-winning vehicles like the Chevrolet Malibu, Cadillac CTS, Buick Enclave, Pontiac G8, GMC Acadia, Chevy Tahoe Hybrid, Saturn AURA and more. We offer 18 models with an EPA estimated 30 MPG highway or better — more than Toyota or Honda. GM has 6 hybrids in market and 3 more by mid-2009. GM has closed the quality gap with the imports, and today we are putting our best quality vehicles on the road.

Please share this information with friends and family using the link on the site.

Thank you for helping keep our economy viable.

Sincerely,



Troy Clarke

Got it this morning.
I'll bet this thread was started as a result.
Maybe Troy should start reading it.