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What Now For Detroit?

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I have been watching closely the proposed bailout of US automakers, and the mess that the big 3 are in.

 

In australia we are having a similar issue with our big 3 - toyota, holden (GM) and ford. Here local makers got a billion dollar handout (that makes a few now) to try and develop a 'green'car. Toyota is outselling holden and ford - COMBINED!

 

Apparently GM only has enough $$$ until the end of the year. Ford is in a similar situation, though not quite as dire.

 

So, my question is....

 

If GM/Ford/Chrysler keep on putting out rubbish that they people expect to buy, why should they keep being bailed out by taxpayers? In addition, how long will it be before we see the big 2, the big 1 or no detroit at all? Mitsubishi in australia shut up shop when their big locally made car was selling very poorly.

 

Discuss....

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trap

The Domestic 3 will be given their bailout come Hell or High water.

 

Whatever sorry excuse of a plan that GM comes up with for returning to profitability in the next two weeks will fly. Ford has a legit and good plan, which should be allowed to fly and Chrysler will simply come along for the ride. Congress will give them the loans they so badly want with very little in terms of conditions.

 

If Bush won't allow it, Obama sure will, because he won't let his first action as president be not signing the most socialist piece of legislation ever drafted in the halls of Congress, and he won't break the campaign promise he made to Detroit that he would bring their jobs back, knowing full well that he would forever more be labeled a liar.

 

What Congress has been doing the past week is called grandstanding to their constituents back home.

 

They haul Wagoner and the rest into a Senate sub-committee hearing and verbally abuse them for a couple of days.

 

Once the abuse is over and the public is fooled into thinking that GM got what it deserved, the checkbook opens up.

 

If we are to let GM and Ford fail, millions of jobs will be lost and the blame will rest at the feet of Congress, which would cost them dearly.

 

Remember that Congress's job number 1 is to keep themselves in office.

 

GM is in bad shape, but Ford has enough cash to last until the end of 2009 and has a solid plan. Ford recently announced internally that they will be divesting themselves of a number of poor selling models and replacing them with Ford of Europe products namely the Mondeo, Focus and Fiesta. If these cars are not too watered down from their European counterparts (which they are rumored not to be), they should sell like hot cakes, as the Fiesta blows the Civic and Corolla out of the water and the Mondeo has been on the top ten best cars list in the EU for the past several years.

 

If GM could use some of their Holden's, Opels and Vauxhalls as Chevys and could reorganize their operations, they could be in better shape. As I see it, Pontiac is gutted and should be canceled. Saturn isn't the import fighter that they are supposed to be, so they can go too. Hummer should go for more than obvious reasons, Saab never sells enough units to make money, so they should also be out. Subaru should be resold to the Japanese Industrial company that they started under. Chevrolet should sell low and mid line cars only, no trucks, no SUVs. Buick should sell upscale versions of Chevrolets, no SUVs. GMC should handle ALL TRUCK AND SUV SALES PERIOD. Cadillac should stick to what they know best, large V8 powered cars and quit trying to compete with Europe because they simply can't.

 

Chrysler is just screwed. For a while when they had the Mercedes Benz parts bin and engineering files to go through for inspiration they were building some really good products. Now they are having problems that can only be fixed by a car person running the company. Their current crop of models, while good for what they are, are the wrong thing for now. Oops.

 

Of course all of this talk about model re-alignment and new models is useless if GM, Ford and Chrysler can not get out from under the crushing debts of their pensions and healthcare costs. Also, GM and Ford need to close many dealers, GM has 7000 dealers in the US, Ford has 4000, Toyota has 1500 and Honda 1000. Dealers are a huge liability for Ford and GM right now and they would benefit from getting out from under them. Yet another problem plaguing the Domestic 3 is the UAW, which still is not willing to make concessions on classifications or wages. They need to get real and sit down with Detroit so that the companies can survive.

 

The money that they will get is nothing but a band-aid if they don't make the changes I've outlined above. These changes are generally accepted as necessary for their survival by the analysts. Hopefully they will make them, if for nothing else but all the jobs that will be saved in the long run.

Edited by the99contour

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Also,

 

What Wagoner did this week in front of Congress was stupid.

 

If he had just told them what they wanted to hear, which was, "We were stupid, we gave away the farm to the UAW, we gave away the car market to the Japanese, we built poor quality cars, we told the American people what to buy instead of listening to what they wanted, we repeatedly fought safety and fuel economy legislation instead of working to comply with them , but now we realize the our ways were bad and we want to change". They would have already had their money.

 

Oh well, if he really wanted the money so bad, he'd do what it took to get it.

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I have not owned a Ford, GM, or Chrysler since 1990.

 

I have owned a Chrysler product and two Ford products since I got my driver's license.

 

The Chrysler was well put together and the car would still be in my possession if the electrical system had not been totally corroded by years of living next to the Atlantic Ocean. The Ford products were a '99 and a '98 Mystique. Both cars were very well designed and excellent to drive (handling, brakes, etc.) but they were really a Ford of Europe product, so that was to be expected. Their 2.5L V6 engines had 170hp, which made for peppy acceleration and the 4 speed automatics were smooth as silk and always knew the right gear to be in. The interior on the Mystique was very nice. It's power leather seats and woodgrain trim made it feel even nicer. The problem with both of those cars was that Ford had cheaped out on certain parts on the car where going cheap was a bad idea. The Mystique had a flywheel that was super thin to save money, but it was too thin and it warped, making it difficult to start the car sometimes. The Contour suffered from many quality problems such as dash warping, shifter sticking, glovebox door warping to the point where the door wouldn't stay shut, etc.

 

I traded the Contour in on my Corolla because while the Corolla was no where near as fast or fun to drive, I knew I could drive it for three years with very little in the way of problems. I was right. When it came time to give the Corolla back, I was looking at coupes to replace it. The Focus was new at the time, so I went to look at one. Just based on my perceived quality of the car sitting on the lot I was somewhat impressed, the cars were at least higher quality than those built in Mexico. However, the impression that I got from seeing the car on the lot was quickly forgotten when I drove one and then subsequently found out that to lease one with the same terms as my Solara was going to cost me another 15 dollars a month for a less expensive car.

 

I ended up with the Solara and after hearing all the complaints about the way the interior in the Focus coupe looks and rattles, I'm glad I did.

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The Detroit Big 3 are failing because they have one common problem: Incredibly high priced labor. The United Auto Workers union has made American autoworkers 6-figure earners doing a mid-5 figure job. I've heard that some autoworkers are earning upwards of $70 an hour. Without overtime factored in, that's over $145K per year gross wages! And that probably doesn't include their benefits, which most likely bring each one up to near the quarter-million dollar point in total annual gross earnings. And all this just for sticking bolts on an assembly line! And, apparently, not doing a particularly good job of it. I've heard that Toyota's U.S. auto workers are earning only $48 per hour, or around $98K per annum. That's a lot more like it, but still a fabulously high wage for the kind of relatively low-skilled labor involved.

 

Such high wages have several effects on our economy. First, and most importantly, it makes the production cost of U.S. automakers so high as to place an automatic obstacle on their competitive pricing and profitability. Then, considering the poor quality, reliability, and overall reputation of their products, people seek better quality, lower-priced alternatives (such as Toyota, Honda, Suburu, etc.) The high wages of auto workers are not justified by the quality of their individual performance on-the-job. For the most part, U.S. autoworkers are poorly educated, lacking in ambition and overall personal dedication to the job, but have a highly developed sense of entitlement matched only by their poor work ethic. They have enormous problems involving substance abuse, poor attendance, and just about every social disorder one can imagine due to our permissive society which ridicules traditional values such as God, Country, Family, and personal integrity. So, all things considered, the auto industry reflects our general social decay. The Japanese auto makers, with their foundation of more enlightened and principled management, their sense of loyalty to the company and a dedication to producing a higher quality product, are making the U.S. automakers irrelevant. And deservedly so.

 

Sure, Obama will bail out the U.S. automakers. He has to, since the unions which have total control of their workforce and which extract high dues from them have financed a large part of his fabulously expensive election campaign, in spite of the fact that he (Obama) initially stated that he'd campaign using ONLY public funds -- as did Sen. McCain. So, all of the U.S. taxpayers will now have an ownership stake in an auto manufacturing industry which is already sick and dying -- and has no prospects of improving. They should be allowed to fail. Their nearly 1 million employees should be allowed to feel the sting of the consequences of living lives of undeserved wealth on the basis of their own greed and that of their union leaders. However, liberal socialist democrats don't accept responsibility for their actions, or the negative consequences. And they don't have to, since the media is 100% behind them. We truly live in a world where every bad thing has the full popular support of the government and the media, and the sound traditional values which could make us ALL prosperous beyond our wildest dreams is swept aside.

 

Nothing could be better for the future of our economy than to allow the Detroit automakers to fail. That will never happen, and we have no hope of ever fixing our economy as long as ignorance and greed motivate those who lead our country and those who elect those leaders. We are most certainly doomed unless we have a collective awakening and stop the socialist madness.

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Larry,

 

I know many fine people who work as engineers and designers for the American Automobile Industry. They work hard every day to develop and improve the products they sell, but time and time again, they are told that what they want to do is too expensive and just simply can't be done. They show up to work on time every day, work for their 8 full hours and often times then some, without paid overtime. They pay more for their healthcare on less salary than the UAW worker, and don't have nearly the cushy retirement system that the UAW has.

 

These people do not deserve to lose their jobs, as they have done nothing but try to prop their employers up in whatever way they could. A nasty little secret that no one wants to tell you is that it is the engineers and designers agreed to take pay cuts and pay more for their healthcare 3 years ago and then agreed to take pay cuts and pay for even more of their healthcare just last year. Many of them also moved to far away plants and offices to keep the company going and in the process lost money on their homes, making it hard for them to afford a similar house.

 

You make it sound as if every person currently employed by the Big3 is a no skills, lazy, worthless employee who is more concerned about how to spend their mid 6 figure salary than building a good car. That simply is not the case. I can tell you for a fact that my father as a Ford engineer at the high end of the pay scale never grossed more than $100,000 a year including his profit sharing and most of the time averaged about $80,000 a year working 70 hours a week to improve the quality of Ford's bumpers and interior plastic parts. He worked for Ford in the early 90's when times were very good. He and most of his fellow engineers were the sole provider for their families in an area where fairly decent houses cost in the high 190s, so it wasn't like anyone was on easy street financially. To this day there are engineers working at Ford that are still grossing 80 grand a year with no profit sharing and paying about half of their insurance cost out of pocket. They are still working 70 hours a week and are now working to make parts for the initial test run of world class cars from Europe that may help return Ford to profitability.

 

Hate the UAW all you want and trash them with every word you have, but please don't lump every person who works for the Big3 in with the UAW. It just isn't the case that all Big3 employees are like that.

 

As you all know I am no Big3 fan. I think they screwed up royally over the past 20 if not 30 years and that they virtually gave away the car market to the Japanese starting in the 90's. But you have to remember that those decisions were not made by the engineers and designers but by the CEOs and CFOs, and that the poor quality of American Cars is not because of their designs and engineering, but because of the cheap parts (fault there lies with the accountants that run GM, Ford and Chrysler) and poor quality labor (UAW). If anyone here has a mindset that the Big3 should be punished, I'm fine with that, but make sure that the right people are punished, the management and the UAW. It isn't right to put so many people who have essentially done nothing but worked their heart out to win a game that was governed by rules that ensured failure out of work.

 

I'm no fan of a bail out, but it will happen. I only hope that someone somewhere who makes a difference is able to write the terms and conditions of the loans in such a way that GM, Ford and Chrysler can do what they need to for long term survival.

 

BTW, who ever wrote the figures you found concerning pay was incorrect. The average UAW worker earns about $35 per hour which equates to $79 per hour when you include benefits. In recent years, there has not been overtime, so their salaries, while still way too high for what they do are no where near what you estimate. Toyota pays its workers about $24 per hour on average which is about $47 per hour with benefits.

Edited by the99contour

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99:

 

The engineers, administrative staff, and other non-union employees of the Big Three cannot be separated from the consequences of what the union has done to them. In reality, it is quite likely that most of them voted for the same political culture which caused the union to flourish. They also may have had union members in their families as well, and therefore were satisfied with the way they were benefitting from their exhorbitant compensation packages. There are no innocent parties. The social decay caused by socialist policies never fails to surface. And it always has the same effect. Only absolutely free markets can produce universal prosperity. As soon as an entitlement mentality takes over and gives power to unions, our economy gets twisted in the wrong direction. Our chickens are truly coming home to roost.

 

About the only President Obama can fix this is to go completely 180% off of his stated economic and social agena and get the government out of the way of the economy in every possible way. That isn't going to happen. He will socialize everything, thinking that the government knows better than the governed how to run their lives. They're always wrong.

Edited by Larry Roll

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99:

 

The engineers, administrative staff, and other non-union employees of the Big Three cannot be separated from the consequences of what the union has done to them. In reality, it is quite likely that most of them voted for the same political culture which caused the union to flourish. They also may have had union members in their families as well, and therefore were satisfied with the way they were benefitting from their exhorbitant compensation packages. There are no innocent parties. The social decay caused by socialist policies never fails to surface. And it always has the same effect. Only absolutely free markets can produce universal prosperity. As soon as an entitlement mentality takes over and gives power to unions, our economy gets twisted in the wrong direction. Our chickens are truly coming home to roost.

 

About the only President Obama can fix this is to go completely 180% off of his stated economic and social agena and get the government out of the way of the economy in every possible way. That isn't going to happen. He will socialize everything, thinking that the government knows better than the governed how to run their lives. They're always wrong.

Since you don't live in Metro Detroit and haven't been immersed in its car culture, you have no way of knowing what you are surmising about the salaried employees at the Big3.

 

The Engineers and Designers at GM and Ford look at the UAW as a concrete anchor tied around the neck of their employer and wish for all the world that they could be told to pack their lazy selves up and get the hell out, even if they had UAW in the family. While you assert that the non-union employees approve of Rick Wagoner or in Ford's case Jack the Knife and Alex Trotman's political culture of giving it away to the union and letting accountants run the company, that isn't true either. No one listened to the engineers and designers when they said that what they were building was the wrong thing to build, greed took over and threw common sense out the window. If you want to see who the greedy parties were, look at the top management and the UAW, not the designers and engineers who gave up salary and benefits without being forced to help ensure the long term viability of GM and Ford. Their reward for this sacrifice: less pay, expensive healthcare and a failing company to work for.

 

The lucky ones got out. They simply aren't the no talent, lazy and apathetic people you make them out to be. Several of them now work for highly successful companies which supply parts to the automotive industry. They continue to work hard to build parts for other manufacturers including Toyota, Honda and Nissan. You are aware that Visteon, formerly the Ford Parts Group, formerly Ford Motor Company is a major supplier to Nissan's Infiniti vehicle line. Delphi, formerly part of the GM Parts Group is a major supplier of infotainment systems to many car brands, including Toyota and Honda. Other large 1st tier suppliers like JCI have many former Ford and GM designeers and engineers working for them and they are by far and a way the most successful automotive plastics parts supplier in North America.

 

Where I will agree with you is that the culture of corporate and individual greed got us in the mess we are in today. The answer to this problem is to let people deal with the problems they have created. Maybe that way they will learn the price of greed and it won't rear its ugly head for another couple of decades.

Edited by the99contour

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Obama will bail them out.

Let's hear it for the government!!

Let's hear it for unions!!

 

I really hope that you aren't serious.

 

Obama will bail them out for political gain, which will garner him no respect on my part. What would make me respect him as a president is if he made the hard decision to not bail them out because even though that is not politically profitable, it is the right thing to do. If Bush had done any of that, we wouldn't have so many screwed up things like No Child Left Behind.

 

Our government as of late has disproved the theory I have always held about our governmental system: The founding fathers were such geniuses that they created a system of government that could flourish even with the most inept leadership. With Congress in the mess that it is in and 8 years of Bush, we are starting to look like the British government before Margret Thatcher and her hard liners were put in power.

 

Unions have been the downfall of Ford, GM and Chrysler and are a continual hassle to automotive industry. In Ford of Europe the management spends upwards of 60% of their time dealing with labor disputes with the union. Toyota and Honda who do not build cars or have unionized parts plants spend less than 10% of their time with labor disputes. All that time spent is time not spent on ensuring that a good product is being made. Also, the costs that surround a union are huge. Do you realize that the average UAW worker retires a 53 years old and some of them are paid upwards of $60,000 a year plus full medical benefits until they die? Do you know how expensive funding that kind of thing is? I'll tell you: GM makes $3,084 less on every car it sells than Toyota does on a comparable model. This lower profit is a direct result of the pensions and healthcare costs GM pays for its retirees.

 

All of the plans put before Congress lately that even mention the words loan or bailout have been highly socialist. I think that the founding fathers would be disgusted with the way their CAPITALIST DEMOCRACY is quickly turning into a socialist nanny-state.

Edited by the99contour

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Now come on, don't knock unions. Some unions are helpful. Take where I work for instance. We want 4% pay increase, for the next 3 yrs, where we have only been offered 2.5% over the next 3 yrs. Due to union pressure it looks like we are getting the 4%, but with one or two small trade offs. Unions can help a powerless worker from unfair or illegal persecution in the workplace; unions enhance health and safety in the workplace. Unions keep management in check. Our old prime minister john howard tried to basically take all power away from unions through a set of laws called 'workchoices' - basically it ruled out collective bargaining, placing many thousands of workers onto individual contracts, usually at a lower ultimate rate of pay with fewer benefits. Union pressure, and pressure from the opposition (who are now in power) meant that Howard was disposed of, and workchoices is now slowly being broken down.

 

I am all for government helping business, provided it is done fairly. Like, say GM has 20,000 workers in australia, and honda has 2000 in dealerships etc. if GM got $2 billion then honda australia should get $200 million. Whatever money is available to keep people in work should be used via tax cuts, bailouts, extra funding etc. but it should NOT, I repeat NOT be used to bail out companies that made poor decisions - like the big 3.

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Now come on, don't knock unions. Some unions are helpful. Take where I work for instance. We want 4% pay increase, for the next 3 yrs, where we have only been offered 2.5% over the next 3 yrs. Due to union pressure it looks like we are getting the 4%, but with one or two small trade offs. Unions can help a powerless worker from unfair or illegal persecution in the workplace; unions enhance health and safety in the workplace. Unions keep management in check.

 

And that is how unions are supposed to work, but the UAW does not work that way. They are out to take everything they can possibly ring out of GM, Ford and Chrysler. Furthermore, a lot of them are lazy and spend a lot more time on break then doing their jobs, so they are really taking everything they can steal. No UAW worker is powerless or persecuted and they wouldn't be if the union left. The salaried employees like the engineers and designers are treated very well without union protection. Salaried employees are also given more than fair pay raises and profit sharing when times are good, and the unions have no hand in that either.

 

In the US, OSHA rules govern safety and health in the workplace. OSHA rules are federal regulations that every company must comply with, GM and Ford would have to follow them regardless of the UAW's presence or not.

 

The reason there is so much knocking of the UAW is that their reputation can be summed up with two phrases. U Ain't Workin and United Against Work.

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The big three have posted significance losses and will be in line for the government bailout.

I am in the UTU (transportation) union and if not for them, I would be worked like a slave for very little money.

We have no strike possibility, but we do have negotiations and contractual agreements.

I also pay monthly union dues, but my chairman has earned his money working on my behalf.

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The big three have posted significance losses and will be in line for the government bailout.

I am in the UTU (transportation) union and if not for them, I would be worked like a slave for very little money.

We have no strike possibility, but we do have negotiations and contractual agreements.

I also pay monthly union dues, but my chairman has earned his money working on my behalf.

 

Yes, and some unions are still necessary because without them, people would be worked like slaves and forced to work in unsafe conditions.

 

Once again, the UAW is not in this position, no one would work them like slaves or pay them unfairly or make them work in unsafe conditions.

 

They are just out to get all they can take pure and simple. The buggers went on strike in 1998 when GM was launching the new Silverado/Sierra trucks because GM wouldn't pay them an extra $2 an hour when they already made over $30 an hour to do mindless jobs assembling poor quality cars. The strike was devastating to GM, as it delayed shipment of the first Silverados and Sierras by months and people canceled their orders right and left. Did the UAW care? Hell no, because while they were on strike, GM agreed to give them the extra money and they were getting paid 90% of their working wages while they were on strike anyways.

 

What GM and Ford should do is play hardball with the UAW. Tell them how it is and insist that they give up their cushy pensions, extravagant healthcare and ultra premium wages or go Ronald Regan on their collective sorry behinds. Remember when the air traffic controllers' union got snotty and Regan just fired them all? Ford and GM are in a very unique position right now. They have built so many vehicles in the last year that they have a glut of vehicles on hand which are not yet sold. For the first time in a long time, they have more days inventory sitting around then the number of days the UAW can afford to pay the striking workers. If they won't negotiate to save Ford and GM, let them strike, and when their strike pay runs out and they have no money to buy food or pay their mortgage, they'll come crawling back for less money and fewer benefits.

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