WaterStreet
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What should be done with the US auto industry?
What should be done with the US auto industry?
For the purposes of this thread, I intend for the term "auto industry" to mean more than just the US manufacturers. I intend for "auto industry" to include its major related US industries, distribution channels, and all of its and their employees.
Should we just throw good money after bad, or can this country treat this as an opportunity to solve multiple problems with the same good forward-thinking plan?
Can anyone here suggest a good solution that would address multiple problems in the US?
For the purposes of this thread, I intend for the term "auto industry" to mean more than just the US manufacturers. I intend for "auto industry" to include its major related US industries, distribution channels, and all of its and their employees.
Should we just throw good money after bad, or can this country treat this as an opportunity to solve multiple problems with the same good forward-thinking plan?
Can anyone here suggest a good solution that would address multiple problems in the US?
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Oh, I forgot, what about GM? Well here Bundeskanzelerin Angel Merkel has declared Opel to be "Chef Sache", which means that, technical details resolved, Opel will get the money. Now in the States if enough people are to loose their jobs, Obama might declare it to be "Chef Sache" and GM will be helped - if it is not too late. There again, perhaps George Bush will do something?
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To Calendar:
You know, the similar argument could have been made about the financial industry that we pledged 2700% of the money that the U.S. automakers are asking for.
The financial industry didn't have a plan (And what are they doing with that money? Oh, that's right, they are not lending it, although that is why they were given it - or at least what we were told was the reason), they didn't learn from the most-recent financial melt-down (the S&L collapse), and their excessive executive payouts are "legendary".
But we barely batted an eye to save them.
Sorry, but by the "mistakes were made" standard, we shouldn't bailout any industry.
You know, the similar argument could have been made about the financial industry that we pledged 2700% of the money that the U.S. automakers are asking for.
The financial industry didn't have a plan (And what are they doing with that money? Oh, that's right, they are not lending it, although that is why they were given it - or at least what we were told was the reason), they didn't learn from the most-recent financial melt-down (the S&L collapse), and their excessive executive payouts are "legendary".
But we barely batted an eye to save them.
Sorry, but by the "mistakes were made" standard, we shouldn't bailout any industry.
cdbosh,
There are important differences. The money for the bank bailout was to address a liquidity crisis, and the taxpayers got a stake in the companies for doing so. I doubt you can compare the profitability of the banks with the automakers; if you look at their track records, who would you rather lend money to?
The banks got in trouble for reasons that extended well beyond their own actions - sure, they were greedy, and that falls squarely on their shoulders, but there were a whole lot of reasons not in their control which contributed - a housing bubble, easy monetary policy, lack of oversight on lending practices, and others. This cannot be compared to the three automakers, who failed miserably even in good economic times. The whole financial industry relies on trust, and that trust depends on the perception that the other party will meet its obligations. The bailout has had some effect on this aspect of the crisis - people are now worried about a recession, which is a different sort of animal.
There are important differences. The money for the bank bailout was to address a liquidity crisis, and the taxpayers got a stake in the companies for doing so. I doubt you can compare the profitability of the banks with the automakers; if you look at their track records, who would you rather lend money to?
The banks got in trouble for reasons that extended well beyond their own actions - sure, they were greedy, and that falls squarely on their shoulders, but there were a whole lot of reasons not in their control which contributed - a housing bubble, easy monetary policy, lack of oversight on lending practices, and others. This cannot be compared to the three automakers, who failed miserably even in good economic times. The whole financial industry relies on trust, and that trust depends on the perception that the other party will meet its obligations. The bailout has had some effect on this aspect of the crisis - people are now worried about a recession, which is a different sort of animal.
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ASKER
Let's focus on going forward with constructive and maybe some really radical ideas.
It seems that if we give any kind of bail-out we own it and dictate how it operates.
The industry, formerly known as the US auto industry, gets a new boss and a new charter
So, if you were King what would you do (try to be somewhat serious).
We don't want a band-aid, we want to fix what is wrong, or come up with something else if it doesn't make sense to fix something that has design flaws
Feel free to suggest a solution that retrains and/or employs the people in these industries and/or refocuses these industries into what the country needs in the 21st century -
Hey, if I were king I'd just produce a very few versions of the car that got great mileage and lasted for 20 years, and focus the entire industry on better ways of producing energy like windmills and solar energy. If we're going to spend big bucks then let's really get our money's worth.
It seems that if we give any kind of bail-out we own it and dictate how it operates.
The industry, formerly known as the US auto industry, gets a new boss and a new charter
So, if you were King what would you do (try to be somewhat serious).
We don't want a band-aid, we want to fix what is wrong, or come up with something else if it doesn't make sense to fix something that has design flaws
Feel free to suggest a solution that retrains and/or employs the people in these industries and/or refocuses these industries into what the country needs in the 21st century -
Hey, if I were king I'd just produce a very few versions of the car that got great mileage and lasted for 20 years, and focus the entire industry on better ways of producing energy like windmills and solar energy. If we're going to spend big bucks then let's really get our money's worth.
Take a page from a success story - Honda: http://www.cnn.com/2008/US/11/20/honda.town/ Tried and proven methods are the easiest way to go. You don't have to wonder if it's going to work.
The main problem, as I see it, is that cars are not mainly about personal transportation anymore, they're about your lifestyle and your image and what have you, in that line. If proper, old fashioned engineering practices were to be applied to the problem (you want to travel from A to B over such and such suface, carrying this or that sort of load and at a certain speed), the cars would probably not be like Hummers or V-8 dreadnoughts to the extent we find that sort of vehicle today. Vehicles would probably be more like Fiat Panda, or Citroën CV2 or something like that.
As long as the auto industry, in US and in other places, promotes and fulfills (and are aloowed to do so) the dream of your own personal private freeway yacht, we'll not get anywhere in this area.
/RID
As long as the auto industry, in US and in other places, promotes and fulfills (and are aloowed to do so) the dream of your own personal private freeway yacht, we'll not get anywhere in this area.
/RID
One thing to keep in mind about not having a bailout - a Big 3 bankruptcy will not be like recent airline bankruptcies, or other companies you've heard of who continue operations.
I heard this interesting bit on an NPR program. The topic came into the domain of the Big 3 problems, but it is also not restricted to them. Another financing area that has been hit by the current crises are those companies that offer DIP loans, or Debtor-In-Possession loan. When a company files a "re-org", or Chptr. 11, bankruptcy, they intend to continue to operate until they've been able to get their debt restructured into a manageable form. Trouble is, all of there current finances are frozen, so a DIP loan will give a company the money necessary to operate until they emerge from Chptr. 11.
A service-industry company like an airline can easily get a DIP loan because they have a pretty good outlook on their revenue stream, as long as consumers can be assured that the company will continue to operate.
But a product-based company like GM will have a hard time convincing lenders that they will still be able to sell cars when people are risking a much larger amount of money than airfare, and not be able to guarantee that there will be a company around to service that product for the next 5 to 10 years that they own it.
So if GM or the others get to a point that they are going broke, but can't get a DIP loan, they will have to file for Chptr. 7, and that's full liquidation - there will be no emerging from bankruptcy then.
I heard this interesting bit on an NPR program. The topic came into the domain of the Big 3 problems, but it is also not restricted to them. Another financing area that has been hit by the current crises are those companies that offer DIP loans, or Debtor-In-Possession loan. When a company files a "re-org", or Chptr. 11, bankruptcy, they intend to continue to operate until they've been able to get their debt restructured into a manageable form. Trouble is, all of there current finances are frozen, so a DIP loan will give a company the money necessary to operate until they emerge from Chptr. 11.
A service-industry company like an airline can easily get a DIP loan because they have a pretty good outlook on their revenue stream, as long as consumers can be assured that the company will continue to operate.
But a product-based company like GM will have a hard time convincing lenders that they will still be able to sell cars when people are risking a much larger amount of money than airfare, and not be able to guarantee that there will be a company around to service that product for the next 5 to 10 years that they own it.
So if GM or the others get to a point that they are going broke, but can't get a DIP loan, they will have to file for Chptr. 7, and that's full liquidation - there will be no emerging from bankruptcy then.
WaterStreet > What should be done with the US auto industry?
er, and who would that be?
Failure & anti-American activity should not be rewarded by Americans
> Should we just throw good money after bad,
Not a chance
Obama, President of US (soon), with a palty 10 million or more left in campaign to spend, files commercial US air, American Airlines to visit Bush, and his VP takes train to work.
The 'big three' (GM et al) fly in private jets, while demanding a higher salary than Obama, pay little if any taxes, and want billons from the Liberals of US, without a hint at who gets the moola once they get their fingers on it. They threw the dude who made the Corvette out of town. The big three make their vehicles in Mexico (or off shore), the also rans (non-big three) make their cars in US. I fail to see a novel question here.
I fail to see a valid question. A radical could say: "lock them up and throw away the key"
> Can anyone here suggest a good solution that would address multiple problems in the US?
"Accountability". Many in the so-called failing market lose 10% while other make 60%.
Where there are losers, there are winners. "Buy low/sell high". Allow failures to fail, and provide prison space for those violating public trust with their fraud, lies, and ill deeds, no matter whose campaign they contributed to.
As such, a ditto to Callandor opening remarks, and for " I think one needs to look at what exactly "corporate" has become and how damaging it is in fact and do something about it.
" from BigRat. See also Ponzi scheme, fraud, embezzelment, graft, bribery, theft, lies, tax evasion... & ditto to "Sorry, but by the "mistakes were made" standard, we shouldn't bailout any industry." [ cdbosh ]
What is missing so far is addressing the pension funds, and what the government officials running them have been doing despite the law of the land (ex: Wall Street)
GM, mind you, had the foresight to eliminate transportation using electicity (ex: street cars/buses) rather than fossil fuels (eg gas gussling pumpers of smoke into atmosphere), no matter how many laws they broke in the process
And mind you, with their influence, their political home state of Michigan refused to participate (legally) in the Presidential Primary for nominating a Democrat
This needs reimbursement from consumers and their children nationwide?
GM also is wasteful in non-manufacturing venues such as taking on Peta and insisting they need live pigs to drive cars into crashes for their tests.
WaterStreet: > So, if you were King what would you do (try to be somewhat serious).
"Off with their heads" - hold them responsible.
er, who is #3?
er, and who would that be?
Failure & anti-American activity should not be rewarded by Americans
> Should we just throw good money after bad,
Not a chance
Obama, President of US (soon), with a palty 10 million or more left in campaign to spend, files commercial US air, American Airlines to visit Bush, and his VP takes train to work.
The 'big three' (GM et al) fly in private jets, while demanding a higher salary than Obama, pay little if any taxes, and want billons from the Liberals of US, without a hint at who gets the moola once they get their fingers on it. They threw the dude who made the Corvette out of town. The big three make their vehicles in Mexico (or off shore), the also rans (non-big three) make their cars in US. I fail to see a novel question here.
I fail to see a valid question. A radical could say: "lock them up and throw away the key"
> Can anyone here suggest a good solution that would address multiple problems in the US?
"Accountability". Many in the so-called failing market lose 10% while other make 60%.
Where there are losers, there are winners. "Buy low/sell high". Allow failures to fail, and provide prison space for those violating public trust with their fraud, lies, and ill deeds, no matter whose campaign they contributed to.
As such, a ditto to Callandor opening remarks, and for " I think one needs to look at what exactly "corporate" has become and how damaging it is in fact and do something about it.
" from BigRat. See also Ponzi scheme, fraud, embezzelment, graft, bribery, theft, lies, tax evasion... & ditto to "Sorry, but by the "mistakes were made" standard, we shouldn't bailout any industry." [ cdbosh ]
What is missing so far is addressing the pension funds, and what the government officials running them have been doing despite the law of the land (ex: Wall Street)
GM, mind you, had the foresight to eliminate transportation using electicity (ex: street cars/buses) rather than fossil fuels (eg gas gussling pumpers of smoke into atmosphere), no matter how many laws they broke in the process
And mind you, with their influence, their political home state of Michigan refused to participate (legally) in the Presidential Primary for nominating a Democrat
This needs reimbursement from consumers and their children nationwide?
GM also is wasteful in non-manufacturing venues such as taking on Peta and insisting they need live pigs to drive cars into crashes for their tests.
WaterStreet: > So, if you were King what would you do (try to be somewhat serious).
"Off with their heads" - hold them responsible.
er, who is #3?
>>Let's focus on going forward with constructive and maybe some really radical ideas.
I you saw the senat hearings about GM's request for 25 billion (hands up who came here by normal airline - none, hands up who's going home by the same - none) it is not radical ideas which are required but decent managers who take their business seriously. How about breaking the company up? Whether parts would survive is another matter - I'm sure Opel would in Germany.
I you saw the senat hearings about GM's request for 25 billion (hands up who came here by normal airline - none, hands up who's going home by the same - none) it is not radical ideas which are required but decent managers who take their business seriously. How about breaking the company up? Whether parts would survive is another matter - I'm sure Opel would in Germany.
ASKER
BigRat,
They just didn't get it. They came in their corporate jets. They came without a plan and spoke the usual corporatespeak at hearing. Should have thrown them in jail for that.
The idea breaking them up goes toward what I had in mind.
In other words, if we had to go back to the drawing board what do we do with all those people, all that manufacturing resource, and all that need to become energy independant? Seems we should scale way-back on automotive portion and refocus all of the remainder into something really helpful. We didn't learn anything from the 70's.
They just didn't get it. They came in their corporate jets. They came without a plan and spoke the usual corporatespeak at hearing. Should have thrown them in jail for that.
The idea breaking them up goes toward what I had in mind.
In other words, if we had to go back to the drawing board what do we do with all those people, all that manufacturing resource, and all that need to become energy independant? Seems we should scale way-back on automotive portion and refocus all of the remainder into something really helpful. We didn't learn anything from the 70's.
If U.S. Automakers keep the UAW workforce...they are destined to fail. There is no way around it. Unions will always fail, by design...as they are nothing but a Pyramid Scheme. Whether it is now or later, the Union will bankrupt the automakers. Throwing 25 billion away to stop the bleeding, would be about like handing-out band-aids to the dying...at the Battle of Gettysburg.
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> They came in their corporate jets.
I'd really like to see the results of a survey that covered two items. First would be this 'corporate jets' issue. Second would be the "raising taxes on the rich equates with punishment for success" concept. Are those who think corporate jets were reasonable the same as those who believe that progressive taxation is unfair? If they can afford corporate jets, should they not spend the money on them? Have stockholders ever decided otherwise? It's their money, no?
Well, yes -- until a bailout happens, at which point it is converted into public monies. Every single dollar that was ever expensed against the corporate jets is a dollar that could have gone to better use in the companies. Even if each dollar had been deposited in a simple savings account, it would exist today as an asset. Every single dollar that has been spent (wasted?) on corporate jets at any time in the past, is a dollar that is being replaced by bailout dollars.
Practically speaking, every 'wasted' dollar from the past is what the bailout money is covering. Dollars spent for 'legitimate' uses would be dollars invested for a return. There have definitely been dollars over the years that gave investors reason to keep investing. Not everything was 'wasted.' But 'waste' dollars were a distinct drain, even in past years of profit.
So, 'bailout' is turning waste into asset. The companies have been around for over 75 years for GM & Chrysler, and as long as a hundred years for Ford. We're currently talking about three companies.
Hmmm... 75+75+100=250; divided by three... 85 years is good enough on average... $25B bailout is $295M waste per year...
Per company, we might think $100M waste each year for 85 years. On average.
But that's way too high for their first few decades, so let's figure only half as long with zero waste up until then. That lets us consider $200M per company per year for a little over four decades.
If all waste dollars had somehow been saved, and waste was $200M/yr for all three companies over the past 40 years, the savings account would be essentially at $25B today.
If a single corporate jet flight from Detroit to Washington costs $20k (as reported to be an estimate), is it unreasonable to think that the entire Chrysler corporation might waste $200M in a single year through all 'waste'? For Ford, I think there were two other corporate jet flights the same day, at least one flight per day seems reasonable. Weekdays alone would account for $5M/yr; $10M/yr at two flights per day.
I'm not sure if that's the biggest 'waste' expense. A single $10M/yr item makes $200M/yr seem plausible. If there are 200 work days per year, it's $1M/day waste. If employee count is 100k, then it's $10 waste per day per employee.
That doesn't sound so hard to do. Even at $20/hr wages, that's just a half-hour of non-productive time each day. (At $28M annual salary for a CEO, it adds up faster.) A minute here, another there, throughout a day, adds up. Parts breakage adds up. Wasted sheets of paper, lights left on, single fake sick days... all of it would be recovered through bailout money.
And every single penny of waste was approved by stockholders.
They chose the Board of Directors who hired upper management who hired lower management. They took dividends and aspects such as stock splits. They bought in knowing risks, hoping to get their share of a rising stock price for rewards when the stock was sold or leveraged as collateral for loans or whatever.
(Well, some of them did. I didn't. I suspect that some of my 401k involves some kind of twisted route through funds management to end up at somebody, or some company, owning shares in Chrysler or GM or Ford, more or less on my behalf. But I've never gotten to supply any shareholder vote.
(Somebody controls whatever votes would be represented by my shares (if it's voting stock which may or may not be likely; who knows?) Because my 401k dilutes vulnerability, whatever tiny fraction involves Chrysler/GM/Ford is probably meaningless. I hope.)
So, who gets bailed out? And for what? Who pays if the bailout isn't done?
And how will it not happen again? (Why shouldn't it happen again?)
How to "fix" it --
First, determine what, if anything, is 'wrong.' I honestly don't know what's wrong.
I really don't know what a business software developer makes in the USA auto industry. I'm not at all clear on what a plant worker on an assembly line makes. Nor what it's like to do such work. Is the pay reasonable? Too high? So low that it doesn't motivate (considering how hard or easy it is to do the job day in/day out)? Too many benefits?
IOW, I don't know enough about labor costs.
I don't know what it takes to design a new car. Federal regulations? State? Insurance? Market research? Technology challenges? Available talent/skills for hire? Distribution? Different design requirements for Denver than New Orleans? Coastal vs. wide-open Midwest differences in product?
IOW, I don't know enough about development costs.
In fact, I could list areas of the industries for a while without bumping into one that I knew enough about to make a rational comment.
I could listen to Senators asking CEOs questions, and listen to the answers, and not have a real clue about the validity at any point beyond a vague sense of "that sounds good" or "that sounds bad." I have no idea if $28M annual salary makes sense -- best I can do is say that I sure wouldn't be worth that much. For all I know, without them, the companies would need double the bailout money.
Not much value in this comment, eh?
When I first answered, I looked at the progression of the question and got the impression that it was leading towards a general resolution to "address[ing] multiple problems in the US" and "an opportunity to solve multiple problems" with many kinds of businesses." (Not sure how that twisted interpretation got in my head.)
But the auto industry specifically?
I suspect we need to be asking some real experts.
Me? I've never bought anything but a USA/Big-3 vehicle. I've seldom had anything but excellent results. I currently drive a 2002 Dodge Neon that's reaching 130k miles and never had a significant problem. Has always held above 30MPG. It replaces a '90 Dodge Caravan that finally gave up at 248k miles (but probably could've had a simple fix if I'd wanted to at that time.) Really nice 6-cyl that gave me 24MPG up to the end. Before that, a '76 Olds Cutlass, and various others. My wife drives a '96 Mercury Sable that's more for comfort than anything else, but it's in excellent condition. Mostly around-town driving, but nice for Seattle/Portland class highway drives.
Previous decades of 'planned obsolescence' were mostly wiped out by the rise of foreign imports. The recent couple decades have brought some pretty reliable cars, with notable exceptions, e.g., first year Fieros.
Down-sides still include design components that reduce choice. For example, there's no rational replacement for the radio in the Sable -- it has to be the same model because it's designed to integrate with the rest of the dash structure. Minor, perhaps, but it's an illustration. Far more modular engineering of _all_ components should be a 'must.' There's no way it should cost $50 to replace a plastic tail-light cover just because that's the _only_ possible kind of cover that can be used.
Innovation is lacking big time. I'd like to see more along the lines of, say, USB ports on the steering column. Why? Because I'd like to go choose what controls to stick in which ports.
I don't like it that my Neon has high-beams by pulling the left-side control towards me while the Sable needs the right-side control to be pushed away. I'd like to stick the same controls into any car I bought. Turn signals, wiper controls, etc., I could customize the Neon and Sable to be the same no matter which car I got in. Unplug a stick from one steering column; plug it into the other. Buy a couple sticks that have the controls that I want.
Should be simple to engineer. Why must every car require a period of learning just to figure out how to turn wipers on if it rains? Or to turn on headlights if it gets dark?
Taking it farther, why aren't entire dash assemblies modular? I should be able to plug-n-play any dash board setup I choose. But that's practically heretical.
So, to me, an early step is "Give the customer what the customer wants."
When I buy, I might want affordable; but why can't I reasonably upgrade without trading in? Why can't I simply swap out/swap in components as the opportunity comes? When I get a raise, I'll go to the parts store and buy the fancy LED-clusters to replace the cheap ones I started with.
Let dealerships offer customization. They could act as liaisons between secondary suppliers, car manufacturers and buyers.
Start moving non-essential components more into secondary businesses. Engineering a car should NOT include funding for styling for cup-holders.
So, another step is "Focus on engineering cars, not luxuries."
Take the effort in cup-holder designs and put it into utility enablement. Engineer docking ports and/or fasteners, and let secondary markets come up with what to plug in or add on.
Give me a "car" and let me change it however I choose. Or let me not change it at all, if I never want more than the bare essentials.
Next -- "Engineer simplicity."
There's far too much to rant about on that item. I'm just going to leave it at that.
Next -- "Stay in auto manufacturing."
I'm not sure if manufacturing is the main 'business' any more. At times, I get the impression that financing is a bigger part of those companies. That's not what the company charters should allow. Stick to charters that make sense.
I think I've already gone on far too long. I'm starting to feel bits of anger, so I'm cutting short.
Tom
I'd really like to see the results of a survey that covered two items. First would be this 'corporate jets' issue. Second would be the "raising taxes on the rich equates with punishment for success" concept. Are those who think corporate jets were reasonable the same as those who believe that progressive taxation is unfair? If they can afford corporate jets, should they not spend the money on them? Have stockholders ever decided otherwise? It's their money, no?
Well, yes -- until a bailout happens, at which point it is converted into public monies. Every single dollar that was ever expensed against the corporate jets is a dollar that could have gone to better use in the companies. Even if each dollar had been deposited in a simple savings account, it would exist today as an asset. Every single dollar that has been spent (wasted?) on corporate jets at any time in the past, is a dollar that is being replaced by bailout dollars.
Practically speaking, every 'wasted' dollar from the past is what the bailout money is covering. Dollars spent for 'legitimate' uses would be dollars invested for a return. There have definitely been dollars over the years that gave investors reason to keep investing. Not everything was 'wasted.' But 'waste' dollars were a distinct drain, even in past years of profit.
So, 'bailout' is turning waste into asset. The companies have been around for over 75 years for GM & Chrysler, and as long as a hundred years for Ford. We're currently talking about three companies.
Hmmm... 75+75+100=250; divided by three... 85 years is good enough on average... $25B bailout is $295M waste per year...
Per company, we might think $100M waste each year for 85 years. On average.
But that's way too high for their first few decades, so let's figure only half as long with zero waste up until then. That lets us consider $200M per company per year for a little over four decades.
If all waste dollars had somehow been saved, and waste was $200M/yr for all three companies over the past 40 years, the savings account would be essentially at $25B today.
If a single corporate jet flight from Detroit to Washington costs $20k (as reported to be an estimate), is it unreasonable to think that the entire Chrysler corporation might waste $200M in a single year through all 'waste'? For Ford, I think there were two other corporate jet flights the same day, at least one flight per day seems reasonable. Weekdays alone would account for $5M/yr; $10M/yr at two flights per day.
I'm not sure if that's the biggest 'waste' expense. A single $10M/yr item makes $200M/yr seem plausible. If there are 200 work days per year, it's $1M/day waste. If employee count is 100k, then it's $10 waste per day per employee.
That doesn't sound so hard to do. Even at $20/hr wages, that's just a half-hour of non-productive time each day. (At $28M annual salary for a CEO, it adds up faster.) A minute here, another there, throughout a day, adds up. Parts breakage adds up. Wasted sheets of paper, lights left on, single fake sick days... all of it would be recovered through bailout money.
And every single penny of waste was approved by stockholders.
They chose the Board of Directors who hired upper management who hired lower management. They took dividends and aspects such as stock splits. They bought in knowing risks, hoping to get their share of a rising stock price for rewards when the stock was sold or leveraged as collateral for loans or whatever.
(Well, some of them did. I didn't. I suspect that some of my 401k involves some kind of twisted route through funds management to end up at somebody, or some company, owning shares in Chrysler or GM or Ford, more or less on my behalf. But I've never gotten to supply any shareholder vote.
(Somebody controls whatever votes would be represented by my shares (if it's voting stock which may or may not be likely; who knows?) Because my 401k dilutes vulnerability, whatever tiny fraction involves Chrysler/GM/Ford is probably meaningless. I hope.)
So, who gets bailed out? And for what? Who pays if the bailout isn't done?
And how will it not happen again? (Why shouldn't it happen again?)
How to "fix" it --
First, determine what, if anything, is 'wrong.' I honestly don't know what's wrong.
I really don't know what a business software developer makes in the USA auto industry. I'm not at all clear on what a plant worker on an assembly line makes. Nor what it's like to do such work. Is the pay reasonable? Too high? So low that it doesn't motivate (considering how hard or easy it is to do the job day in/day out)? Too many benefits?
IOW, I don't know enough about labor costs.
I don't know what it takes to design a new car. Federal regulations? State? Insurance? Market research? Technology challenges? Available talent/skills for hire? Distribution? Different design requirements for Denver than New Orleans? Coastal vs. wide-open Midwest differences in product?
IOW, I don't know enough about development costs.
In fact, I could list areas of the industries for a while without bumping into one that I knew enough about to make a rational comment.
I could listen to Senators asking CEOs questions, and listen to the answers, and not have a real clue about the validity at any point beyond a vague sense of "that sounds good" or "that sounds bad." I have no idea if $28M annual salary makes sense -- best I can do is say that I sure wouldn't be worth that much. For all I know, without them, the companies would need double the bailout money.
Not much value in this comment, eh?
When I first answered, I looked at the progression of the question and got the impression that it was leading towards a general resolution to "address[ing] multiple problems in the US" and "an opportunity to solve multiple problems" with many kinds of businesses." (Not sure how that twisted interpretation got in my head.)
But the auto industry specifically?
I suspect we need to be asking some real experts.
Me? I've never bought anything but a USA/Big-3 vehicle. I've seldom had anything but excellent results. I currently drive a 2002 Dodge Neon that's reaching 130k miles and never had a significant problem. Has always held above 30MPG. It replaces a '90 Dodge Caravan that finally gave up at 248k miles (but probably could've had a simple fix if I'd wanted to at that time.) Really nice 6-cyl that gave me 24MPG up to the end. Before that, a '76 Olds Cutlass, and various others. My wife drives a '96 Mercury Sable that's more for comfort than anything else, but it's in excellent condition. Mostly around-town driving, but nice for Seattle/Portland class highway drives.
Previous decades of 'planned obsolescence' were mostly wiped out by the rise of foreign imports. The recent couple decades have brought some pretty reliable cars, with notable exceptions, e.g., first year Fieros.
Down-sides still include design components that reduce choice. For example, there's no rational replacement for the radio in the Sable -- it has to be the same model because it's designed to integrate with the rest of the dash structure. Minor, perhaps, but it's an illustration. Far more modular engineering of _all_ components should be a 'must.' There's no way it should cost $50 to replace a plastic tail-light cover just because that's the _only_ possible kind of cover that can be used.
Innovation is lacking big time. I'd like to see more along the lines of, say, USB ports on the steering column. Why? Because I'd like to go choose what controls to stick in which ports.
I don't like it that my Neon has high-beams by pulling the left-side control towards me while the Sable needs the right-side control to be pushed away. I'd like to stick the same controls into any car I bought. Turn signals, wiper controls, etc., I could customize the Neon and Sable to be the same no matter which car I got in. Unplug a stick from one steering column; plug it into the other. Buy a couple sticks that have the controls that I want.
Should be simple to engineer. Why must every car require a period of learning just to figure out how to turn wipers on if it rains? Or to turn on headlights if it gets dark?
Taking it farther, why aren't entire dash assemblies modular? I should be able to plug-n-play any dash board setup I choose. But that's practically heretical.
So, to me, an early step is "Give the customer what the customer wants."
When I buy, I might want affordable; but why can't I reasonably upgrade without trading in? Why can't I simply swap out/swap in components as the opportunity comes? When I get a raise, I'll go to the parts store and buy the fancy LED-clusters to replace the cheap ones I started with.
Let dealerships offer customization. They could act as liaisons between secondary suppliers, car manufacturers and buyers.
Start moving non-essential components more into secondary businesses. Engineering a car should NOT include funding for styling for cup-holders.
So, another step is "Focus on engineering cars, not luxuries."
Take the effort in cup-holder designs and put it into utility enablement. Engineer docking ports and/or fasteners, and let secondary markets come up with what to plug in or add on.
Give me a "car" and let me change it however I choose. Or let me not change it at all, if I never want more than the bare essentials.
Next -- "Engineer simplicity."
There's far too much to rant about on that item. I'm just going to leave it at that.
Next -- "Stay in auto manufacturing."
I'm not sure if manufacturing is the main 'business' any more. At times, I get the impression that financing is a bigger part of those companies. That's not what the company charters should allow. Stick to charters that make sense.
I think I've already gone on far too long. I'm starting to feel bits of anger, so I'm cutting short.
Tom
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> ...much more important is what their buddies in corporate think, because it's a sort of club.
That is apparently very true. But because I never operate on that level, I have no idea if it's actually important.
We have a basic 'dress code' in this office. Since it's not really "public," it hardly matters at all. But we're a professional business and expect to be perceived as such. (We also just got bought by another much bigger company after building a startup up to profitability and recognized market leadership.)
If a Big-3 CEO isn't accepted, does that business suffer? If so, how much? Enough to offset 'club membership expenses'? If not, then why aren't shareholders doing anything about it?
Almost everything has to come back to shareholders for any long-term solutions. Either that or drop any pretense of capitalism.
Tom
That is apparently very true. But because I never operate on that level, I have no idea if it's actually important.
We have a basic 'dress code' in this office. Since it's not really "public," it hardly matters at all. But we're a professional business and expect to be perceived as such. (We also just got bought by another much bigger company after building a startup up to profitability and recognized market leadership.)
If a Big-3 CEO isn't accepted, does that business suffer? If so, how much? Enough to offset 'club membership expenses'? If not, then why aren't shareholders doing anything about it?
Almost everything has to come back to shareholders for any long-term solutions. Either that or drop any pretense of capitalism.
Tom
>> If not, then why aren't shareholders doing anything about it?
That is a very simple question to answer. The answer is that they are the same people.
If you go to a shareholders meeting of any large company, you'll meet many, many people. The majority of people there will be small holders, like youself. However much you may disagree with the direction of the company, you'll be voted down by the block votes ot the major insurance and investment companies.
Just work out how much money do you "put away" every month in terms of life assurance, pension, savings? Multiply that to a yearly rate, and multiply that by all the workers in your country and you'll see how much money they have to invest every year. This money HAS to go somewhere, a lot goes into buying up government debt, a lot goes into the stock markert and a bit goes into risky business. So if a major insurance company has, say, 30% of a company, they'll have a board position. And who'll sit on that board? Why one of the board members of the insurace company. And so goes this internecine system.
That is a very simple question to answer. The answer is that they are the same people.
If you go to a shareholders meeting of any large company, you'll meet many, many people. The majority of people there will be small holders, like youself. However much you may disagree with the direction of the company, you'll be voted down by the block votes ot the major insurance and investment companies.
Just work out how much money do you "put away" every month in terms of life assurance, pension, savings? Multiply that to a yearly rate, and multiply that by all the workers in your country and you'll see how much money they have to invest every year. This money HAS to go somewhere, a lot goes into buying up government debt, a lot goes into the stock markert and a bit goes into risky business. So if a major insurance company has, say, 30% of a company, they'll have a board position. And who'll sit on that board? Why one of the board members of the insurace company. And so goes this internecine system.
>> If not, then why aren't shareholders doing anything about it?That is a very simple question to answer. The answer is that they are the same people.
I understand what you're saying, but disagree with 'simple.' First, the various classes of stock can determine voting rights. Second, rights for small stockholders who have such rights are often "abdicted(?)" to some proxy. When funds management firms take pooled investment dollars and buy blocks of stock, there is no easy visibility into whether rights exist or not nor who obtains and/or exercises the rights. Any given block might not even be owned by large firms for an extended period as market conditions fluctuate.
Worse, my repeatedly pointing at stockholders is simplistic in itself. Our federal government (technically consisting of members selected by "We, the People," is a big part of the problem for example. That part is inextricably tied to the UAW and related groups.
Our U.S. automakers were under federal regulations to begin manufacturing higher-mileage and better-safety automobiles. They've been working at it and have definitely made progress, though not rapid. But in order to do actual manufacturing, it has had to be done at a loss in expensive plants with expensive labor. They were restricted in how much could be manufactured outside the USA and imported. This was influenced by motivation to preserve UAW wages/benefits, etc.
In that sense, "We, the People" need to consider accepting a share of the blame.
IMO, that points to another potential part to a solution -- "Do not demand a standard of living that cannot be supported indefinitely."
If a continually rising standard of living for citizens in general is deemed to be necessary, then we need to really look at more fundamental areas than just 'U.S. automakers.'
Tom
I understand what you're saying, but disagree with 'simple.' First, the various classes of stock can determine voting rights. Second, rights for small stockholders who have such rights are often "abdicted(?)" to some proxy. When funds management firms take pooled investment dollars and buy blocks of stock, there is no easy visibility into whether rights exist or not nor who obtains and/or exercises the rights. Any given block might not even be owned by large firms for an extended period as market conditions fluctuate.
Worse, my repeatedly pointing at stockholders is simplistic in itself. Our federal government (technically consisting of members selected by "We, the People," is a big part of the problem for example. That part is inextricably tied to the UAW and related groups.
Our U.S. automakers were under federal regulations to begin manufacturing higher-mileage and better-safety automobiles. They've been working at it and have definitely made progress, though not rapid. But in order to do actual manufacturing, it has had to be done at a loss in expensive plants with expensive labor. They were restricted in how much could be manufactured outside the USA and imported. This was influenced by motivation to preserve UAW wages/benefits, etc.
In that sense, "We, the People" need to consider accepting a share of the blame.
IMO, that points to another potential part to a solution -- "Do not demand a standard of living that cannot be supported indefinitely."
If a continually rising standard of living for citizens in general is deemed to be necessary, then we need to really look at more fundamental areas than just 'U.S. automakers.'
Tom
Tom, I think first you must stop looking at things from a theoretical viewpoint and look at the practices in place, and you'll see what I'm on about.
Second, I'd take issue with the phrase "They were restricted in how ..". This is a two edged sword as I was trying to point out in my comments on soot filters on diesel cars in Germany (see the Uncle Barrack wants you thread). Industry is very good at lobbying congress to prevent competition either at home or from abroad. The unions play along with this game, since the industry will always claim a loss of market and a corresponding loss of jobs. Often one industrial sector effects another, like the steel industry wanting restrictions on imports, forcing steel users, the card industry for one, to use home made steel.
On the other hand there are some things which can't be left to market forces, vehical pollution being one. Fuel efficiency being another. It seems that only regulation can control these aspects. And it seems that is it easier for the industry (management and unions) to bitch and whine about it (often sucessfully) rather than do something.
Lastly I think you're being somewhat unfair on youself. A standard of living is that which in principle is common to most people and I see no reason why that should not improve. The problem as I see it is a complete lack across the political spectrum of commonality. Although this comes out particularly at election times, one of the tenents of neo-conservatism is a basic rejection of the welfare system, even though the latter may be based on insurance contributions. It is a rejection of socialist ideals which appeal to the masses, substituting instead the dominance of market forces and the dream that everyone can become a millionaire. Now the latter is not realistic, since everybody can't be at the top of the pile, and most millionaires will in fact admit to a lot of luck on the way up. In Britain in the eighties this was called Thatcherism, sent lame companies to the wall whoever they were, wanted to destroy trade unions, and was in principle very anti-establishment. This politic was copied by Reagan, an admirer of Margaret Thatcher, and because Neo-Conservatism in the States. Neither in fact was immune to political lobby from Industry which history has shown. It was a politic which essentially said that the stockbroker may make a fortune by speculation whereas the miner may not have a three percent pay increase. It was also a politic which said that companies should go broke and thier workers should become unemployed and that was good so. Hope for the unemployed lay solely in "market forces" which basically meant that they were open to exploitation. So far this politic seems to have been stopped in the US and I hope that the Republican Party can find its roots again in traditional values and not in the arrogance of Thatcherism. Thus a standard of living for all people ought to be beyond party lines, a thing which you'll find in Scandanavia to a large degree and to a lesser degree in most European countries.
Second, I'd take issue with the phrase "They were restricted in how ..". This is a two edged sword as I was trying to point out in my comments on soot filters on diesel cars in Germany (see the Uncle Barrack wants you thread). Industry is very good at lobbying congress to prevent competition either at home or from abroad. The unions play along with this game, since the industry will always claim a loss of market and a corresponding loss of jobs. Often one industrial sector effects another, like the steel industry wanting restrictions on imports, forcing steel users, the card industry for one, to use home made steel.
On the other hand there are some things which can't be left to market forces, vehical pollution being one. Fuel efficiency being another. It seems that only regulation can control these aspects. And it seems that is it easier for the industry (management and unions) to bitch and whine about it (often sucessfully) rather than do something.
Lastly I think you're being somewhat unfair on youself. A standard of living is that which in principle is common to most people and I see no reason why that should not improve. The problem as I see it is a complete lack across the political spectrum of commonality. Although this comes out particularly at election times, one of the tenents of neo-conservatism is a basic rejection of the welfare system, even though the latter may be based on insurance contributions. It is a rejection of socialist ideals which appeal to the masses, substituting instead the dominance of market forces and the dream that everyone can become a millionaire. Now the latter is not realistic, since everybody can't be at the top of the pile, and most millionaires will in fact admit to a lot of luck on the way up. In Britain in the eighties this was called Thatcherism, sent lame companies to the wall whoever they were, wanted to destroy trade unions, and was in principle very anti-establishment. This politic was copied by Reagan, an admirer of Margaret Thatcher, and because Neo-Conservatism in the States. Neither in fact was immune to political lobby from Industry which history has shown. It was a politic which essentially said that the stockbroker may make a fortune by speculation whereas the miner may not have a three percent pay increase. It was also a politic which said that companies should go broke and thier workers should become unemployed and that was good so. Hope for the unemployed lay solely in "market forces" which basically meant that they were open to exploitation. So far this politic seems to have been stopped in the US and I hope that the Republican Party can find its roots again in traditional values and not in the arrogance of Thatcherism. Thus a standard of living for all people ought to be beyond party lines, a thing which you'll find in Scandanavia to a large degree and to a lesser degree in most European countries.
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It becomes a never-ending cycle, as we'll see again. The savings and loan debacle wasn't as expensive as the financial bailout, and the next one will make this one look small. ENOUGH ALREADY!
If you can't maintain without the feds propping it up, you shouldn't be running a business.
If you can't maintain without the feds propping it up, you shouldn't be running a business.
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Tom,
That's when they are not working in the sweatshops for pennies a day.
Make a suggestion as to what should be done. Use your imagination, be bold and inventive -- what you would do if you were king?
Often in mfg plants the plant will shutdown for a specific week(s) of the year, and employees *must* take that as vacation time. In other words, yes, you get, say, 4 wks of vac, but you may have to take 1 (or 2) of them at Christmas or an another designated plant-closing time.
> In other words, yes, you get, say, 4 wks of vac, but you may have to take 1 (or 2) of them at Christmas or an another designated plant-closing time.
I've worked in such plants for two large international companies in different industries in Washington and California, but annual plant shutdowns didn't affect my vacation accruals. My vacation time was always on my schedule. We took the shutdown time off without any affect on accruals.
It wasn't clear from the parts that I read of the linked UAW/GM contract how it was handled. In the parts that I did read, everything pointed to a separation between the two; but I could have simply interpreted things in the way I was familiar.
My employment in both of those cases was not in a "right-to-work" state. I have no idea if that matters nor if which 'State' matters. AFAIK, much of Big-3 UAW employment is not 'right-to-work'. It might also not be meaningful, but it seems that much of the opposition to the formal Big-3 bailout came from Senators representing 'right-to-work' states.
It'd be useful for this if anyone knows where in the linked contract it was defined.
@WaterStreet:
I'd love to make concrete suggestions. Unfortunately, the situation is so complex, with so many elements that are interrelated to too many other things, that I can't get a clear picture of it all.
I have no clue how many retirees, for example, are currently drawing pensions that _might_ be affected by bankruptcies. (I'd hope that those were funded and protected, but who knows?) I have no clue how many investors are receiving any meaningful income from stock dividends (if dividends are even still being distributed.) I don't know if anybody knows how many previously laid-off workers are drawing the "95%" Jobs Bank salaries that UAW workers get after layoffs.
I have no clue even how many _groups_ of people there are like those three I just mentioned. I.e., other than actual (estimated) current employee counts, I don't know of any way to determine who all will be affected nor what any effects might be.
Without a big bunch of serious facts, any suggestion has as much chance of being useful as of being harmful.
Tom
I've worked in such plants for two large international companies in different industries in Washington and California, but annual plant shutdowns didn't affect my vacation accruals. My vacation time was always on my schedule. We took the shutdown time off without any affect on accruals.
It wasn't clear from the parts that I read of the linked UAW/GM contract how it was handled. In the parts that I did read, everything pointed to a separation between the two; but I could have simply interpreted things in the way I was familiar.
My employment in both of those cases was not in a "right-to-work" state. I have no idea if that matters nor if which 'State' matters. AFAIK, much of Big-3 UAW employment is not 'right-to-work'. It might also not be meaningful, but it seems that much of the opposition to the formal Big-3 bailout came from Senators representing 'right-to-work' states.
It'd be useful for this if anyone knows where in the linked contract it was defined.
@WaterStreet:
I'd love to make concrete suggestions. Unfortunately, the situation is so complex, with so many elements that are interrelated to too many other things, that I can't get a clear picture of it all.
I have no clue how many retirees, for example, are currently drawing pensions that _might_ be affected by bankruptcies. (I'd hope that those were funded and protected, but who knows?) I have no clue how many investors are receiving any meaningful income from stock dividends (if dividends are even still being distributed.) I don't know if anybody knows how many previously laid-off workers are drawing the "95%" Jobs Bank salaries that UAW workers get after layoffs.
I have no clue even how many _groups_ of people there are like those three I just mentioned. I.e., other than actual (estimated) current employee counts, I don't know of any way to determine who all will be affected nor what any effects might be.
Without a big bunch of serious facts, any suggestion has as much chance of being useful as of being harmful.
Tom
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Thank you
ASKER
Some interesting ideas, but how do we shift the "auto industry" into those directions?