Hmmmm, go easy on this bailout. It seems that our government is going to have to follow suit just to compete (they say economically, I'm suspecting that its more to do with votes if they don't follow suit):
quote: While Ontario sources have suggested Ottawa contribute $4 billion in auto relief, McGuinty declined to name a specific price other than to say there should be "proportionality" with the U.S.
"The Bush administration has already come to the table with $25 billion in support and that's before the global economic crisis hit. Yesterday, Australia announced over $2 billion in support for its auto sector. There's a proposal before the European Union to the tune of some 40 billion euros," he said.
It wouldn't even be so obnoxious if it wasn't for the fact that the bailout is mostly for the American branch firms that screwed up by building only larger vehicles rather than Toyota or Honda. I wouldn't buy a car OR invest from these guys. And now both our governments are. Oy.
quote:Canada's prime minister said Monday he is open to providing aid to North America's struggling auto sector and will watch closely what the U.S. government does.
Prime Minister Stephen Harper said he was prepared to look at options that would help the auto sector. General Motors Corp., Chrysler and Ford Motor Co. all have large operations in Canada.
[ December 19, 2008, 10:16 AM: Message edited by: Mucus ]
Posted by Lyrhawn (Member # 7039) on :
I guess it would depend on the structure of the "bailout" and whether or not it was an actual bailout and not loans. Bailout to me is a poor catchall term for any government intervention. If they secure loan interest loans for Ford and GM, that would go a long way towards helping them, and they're very likely to get paid back. No one calls it a bailout when companies borrow money from banks, I don't know this would be any different. If they were getting no strings attached free money, then I'd be okay with the term.
But if the auto industry collapses, millions of jobs and tens of billions of dollars (in tax revenue) will be lost. Seems to me like it makes more sense to help them out now rather than watch in horror as they collapse because we refused to help out of a misguided principle. Some of what is going on isn't their fault. It's not like they are still blindly selling only SUVs and are eschewing smaller cars. They've discontinued larger car lines, downsized the factories that make them and ramped up smaller car production. They both have very good selling smaller brands with some truly great stuff in the pipeline that could lead to a real resurgence in American autos, but if they never get there, it will have been for nothing.
Posted by Mucus (Member # 9735) on :
The terms are pretty sweet:
quote: The $25 billion bailout loan to the automakers was signed by President Bush yesterday, and would allow the car producers to borrow money at about half the going market rate. (Nice terms if you can get them). The government already approved the $25 billion of loans to help the auto makers and their suppliers build more fuel-efficient vehicles in 2007 as part of an energy bill. The automakers — Chrysler, Ford Motor and General Motors — will not have to repay the loans for five years.
That to me is a bailout, the firms would collapse within a year without them and to prevent it they're getting loans far below market rate. The difference between the market rate and their rate is essentially free money.
I would also note that there is no chance of as you put it "the auto industry [collapsing]", there is no equivalent of subprime loans which were spread out among all the automakers. Rather, there is only a general downturn in sales. As a result, while there has been a drop in sales industry-wide, Honda and Toyota are still in the black for the year (whereas the American automakers are far into the red).
Thus, there is no risk of the auto industry collapsing, just these American firms. Foreign automakers are more than ready to take up the slack and are still expanding manufacturing operations in the US.
Posted by Lyrhawn (Member # 7039) on :
You're talking about the world auto industry as a whole, I was referring to the American auto industry specifically. From the point of view of the consumer, I'm sure it's all well and good that foreign competition can come in and take over the market entirely, but from the point of view of the government, there are a lot of other factors to weigh in terms of lost jobs, lost manufacturing capacity, loss of tax revenue, and really the further devastation such a shock would cause to an already damaged economy. The ripple effects could be highly disruptive.
I'm not sure how "sweet" the terms are of that particular deal. Much of the money is specifically earmarked for certain purposes, like research for MPG standards, which handicaps them to a certain degree. And while they are getting loans at far under market rates, it declines to mention that those market rates are ridiculously high. Ford I think I remember reading was paying something like 30% interest rate on multimillion dollar loans.
The deal reported in your link is a month and a half old, and from all the talk I hear now, never actually went into effect. Democrats in Congress are talking about loans as a part of a new stimulus package, but to date they haven't gotten any funds from that deal worked out.
Posted by Mucus (Member # 9735) on :
I'm not talking about the world auto industry as a whole. I'm talking about the North American auto industry, but I'm including not just American-owned firms but firms with significant manufacturing and sales based in North America.
From the POV of the government, the total number of manufacturing jobs and manufacturing capacity should remain the same unless Japan starts replacing lost American capacity with imports directly from Japan. This is contrary to their current plans which is to expand here.
What would change is that the management would be based out of Japan rather than the states, but I'm not particularly upset about that because there are few ripple effects from them. In fact, I don't know why the Canadian government is so gung-ho on the idea (who cares whether we send money to Japan or the States?), but thats a side issue.
Market rates are not ridiculously high, they're simply *realistically* high. The market has judged (rightly) that loans to these auto companies are a high risk and thus demand a higher interest rate to compensate for the risk. Hell, I know *I* wouldn't invest in Ford for anything less than a 30% interest rate.
However, it is heartening to know that the deal has not gone in effect yet.
Posted by Lyrhawn (Member # 7039) on :
Even if such a transition were inevitable, and I'm not convinced that it is, there would still be enormous upheaval in the years it would take to changeover from an American to a Euro/Japanese dominated system. It would take years for Japan to ramp up production to the levels you're talking about for an actual transition to total foreign control. They can't just magically produce millions of new cars. They'd have to build dozens of new factories, and if the parts suppliers go out of business between now and then, they'd have to set up an expanded infrastructure for parts suppliers as well, to say nothing of the dealers who would also go out of business, etc etc.
I have no problem with the government stepping in to help the American auto industry, so long as the terms are right. If they still don't have their crap together in a decade, then I'd consider something else. I don't think they get nearly enough credit for the changes they've made in the last few years, and the increase in the quality of their products, while foreign automakers get far too much credit and not enough criticism.
Posted by Mucus (Member # 9735) on :
I don't think the levels of manufacturing are as bad as you depict. Consider:
quote: Car sales are sinking, and there is no sign of a turnaround. In October, U.S. light vehicle sales (passenger cars and light trucks, such as sport utility vehicles and pickups) fell to an annualized rate of 10 million units. Sales will probably fall to fewer than 14 million for all of 2008.
It is hard to predict what will happen next year, but it is possible that annual sales will drop to 12 million or less. For reference, in 1999, the last great year for the industry--in both profits and sales--U.S. unit sales hit 16.9 million.
The sales side of the business is gloomy indeed, but what is making things worse is what is happening with U.S. production capacity. At the start of the last model year, we counted 20 million in car/truck assembly capacity in North America. This includes Canada and Mexico, but many of those vehicles come to the U.S.
Of the 20 million, the three Detroit companies had the capacity to build 12 million vehicles; the foreign companies, the "transplants," as we used to call them, 8 million units. This is just local production capacity. Last year, 2007, imports accounted for 23% of U.S. sales.
Just do the math, even at current projected sales levels (which may be too optimistic) there are only 14 million cars in sales. Imports shave that to 10.78 million cars that need to be manufactured in North America. There are already 8 million cars worth of capacity for the foreign firms. Thats a difference of only 2.78 million cars.
That means that foreign firms only need to expand operation by 35% assuming that US car operations go to 0. Of course that won't happen, there will be restructuring, if the price is low enough, there will be *some* buyer for the US capacity (if not a new player, then the foreign firms which need to boost capacity).
The problem doesn't sound all that daunting, especially since the estimates seem to be trending downwards rather than upwards.
Don't get me wrong, there will be lots of short-term upheaval, but the problem doesn't seem to be on the production end.
Posted by fugu13 (Member # 2859) on :
A bailout would be a horrible idea. The only thing that might beat US automobile companies into having some semblance of a working business model is bankruptcy.
That is, the collapse of the automobile manufacturers would only be the collapse of their financial structure. They'd continue to make cars, and be restructured in cooperation with their creditors and a bankruptcy court. And they're in a lot of very damaging, very stupid contracts, so that's a very good thing.
The way to help businesses that have been badly handled for quite some time in spite of (or rather, in large part because of) favorable gov't assistance is to allow the business the use of our Chapter 11 bankruptcy statutes. It isn't like there can't be US automobile manufacturers that pay decent wages and produce cars profitably. Several foreign companies have demonstrated that handily.
Posted by Samprimary (Member # 8561) on :
quote:It wouldn't even be so obnoxious if it wasn't for the fact that the bailout is mostly for the American branch firms that screwed up by building only larger vehicles rather than Toyota or Honda.
It has much more to do with the fact that american automakers are circumstantially screwed.
They can't be profitable due to legacy costs like pensions.
They also have to provide healthcare, something that foreign automakers usually have covered.
Posted by fugu13 (Member # 2859) on :
Samp: foreign auto company branches in the US don't have healthcare covered.
Pension costs are definitely a factor, though even significantly reducing them wouldn't be enough to make US automobile manufacturers profitable. Pensions would no doubt be one thing restructured in a bankruptcy. Other things would include the numerous competing brands many auto makers have (which are held in place by complicated franchising contracts) that compete against each other, grossly duplicating marketing dollars and the like.
Posted by Mucus (Member # 9735) on :
Samp: That quote actually describes the situation for American firms in Canada, hence "American branch firms." Healthcare isn't a factor.
Posted by King of Men (Member # 6684) on :
quote:Originally posted by Lyrhawn: Even if such a transition were inevitable, and I'm not convinced that it is, there would still be enormous upheaval in the years it would take to changeover from an American to a Euro/Japanese dominated system.
Piffle. The Detroit factories are fine, it's the labour contracts and management that need to go. The Japanese or Europeans would simply buy the factories - at excellent prices - and continue manufacturing where the Americans left off, retooling only enough to make their own brands instead of the ugly overpriced clunkers. Two years, tops. Besides which, there are any number of cars sitting about on dealer lots at the moment, unsold; the world can certainly afford a two-year 30% decline in car manufactures, we've got too many as it is.
Posted by Tresopax (Member # 1063) on :
I disagree with a bailout. Bailing out the financial industry was neccessary in order to clear up a logjam that would have seriously damaged the whole nation's economy. It wasn't done to prevent layoffs for finance workers. There is no equivalent threat from an auto industry collapse.
Posted by The Pixiest (Member # 1863) on :
Corporate welfare is as bad as any other kind.
In fact, it might even be worse. It keeps businesses that SHOULD fail alive. It rewards bad planning and stupid decisions. In otherwords it gets in the way of the market's Invisible Hand.
Better, leaner, companies will arise out of this. Companies better able to compete.
Or we'll just all buy Japanese cars. That's fine too.
Posted by Blayne Bradley (Member # 8565) on :
indeed, let the Auto industry die, its unprofitable, Laissez-faire has failed the Japanese example of a "Prussian General Staff" for managing its economy should be followed.
Posted by King of Men (Member # 6684) on :
Oh dear. The whole point of laissez-faire is that it allows industries to die. The destruction of American auto-making is no more a failure of laissez-faire (not that the US has this in any meaningful sense anyway) than changes in evolutionary theory since Darwin are a failure of science.
Posted by Blayne Bradley (Member # 8565) on :
well laissez faire prevents any interventions, especially interventions to allow the euthanasia of dying industries and the convenient reallocation of resources.
Why should 30,000 auto workers go out of work? Can't they with maybe 6 months of training just as good for fabrication or something else or services?
Militerize the workforce! Give every worker an ID, when a business lays people off they get "transferred" to work somewhere else.
Posted by King of Men (Member # 6684) on :
When was the last time a government intervened to 'euthanise' an industry? Any industry? As for your 6 months of training, just what is preventing this from happening anyway? Surely the workers know better than some government bureaucrat what they would like to retrain for, or have the aptitude for!
Posted by Blayne Bradley (Member # 8565) on :
Japan has an pangovernment agency organization (or did this was written in the 80's) that had executive and near total control over the japanese economy and its Zaibatsu's, according to Paul Kennedy the Japanese transition from "lower grade" manufacturing to "higher grade" manufacturing was accomplished through this method of reallocating of resources, retraining workers, outsourcing lower grade industries overseas, and intentionally killing off unproductive businesses and industries when they were deterimental to the economy.
Posted by King of Men (Member # 6684) on :
Pity they didn't kill their banks at the start of the nineties, then. But anyway, just what is your bitch here? The auto industry will go bust (assuming no bailout) in a perfectly laissez-faire way. Workers will then find new jobs and be retrained. I don't see where the government is needed for this. If anything the government has been propping up the corpse for the past 30 years, and needs to get out of that business, fast.
Besides, as we all know, under laissez-faire your cappies can build railroads much faster because they spend less money on it. Speaking of which, how is the anti-Georgian alliance going?
Posted by Blayne Bradley (Member # 8565) on :
Italy is nearly convinced to join our cause, he doesn't like Georgia but is upset that we let him get so strong in the first place by letting him go Mongol. And half wants to half ally with Fasq to ruin the game and start over with less short sighted conversion practices.
Posted by Unicorn Feelings (Member # 11784) on :
quote:Originally posted by Samprimary:
quote:It wouldn't even be so obnoxious if it wasn't for the fact that the bailout is mostly for the American branch firms that screwed up by building only larger vehicles rather than Toyota or Honda.
It has much more to do with the fact that american automakers are circumstantially screwed.
They can't be profitable due to legacy costs like pensions.
They also have to provide healthcare, something that foreign automakers usually have covered.
Sam, which page of the Republican handbook are you on?
Been to Texas much? The SUV's here are massive, ever seen the high end escalades? Ever seen the Armada? Remember the first 2 Hummers? Ever seen the big chevy trucks with the hemis?
Health care and pensions played a role, but no where near as large as the American Auto industry having to be ripped from the HUGE vehicle with 4 lcd screens model.
SUV's were there most 'profitable' because they were able to charge people an arm and a leg and two of their kids ears for all the vanity extras.
Blaming the worker is so july 2001.
Are we just going to keep giving the car companies more and more money til they are profitable? That. Sounds. Weird.
Let them fail. The new ones can rise, someday.
Posted by Unicorn Feelings (Member # 11784) on :
quote:Originally posted by Blayne Bradley:
Militerize the workforce! Give every worker an ID, when a business lays people off they get "transferred" to work somewhere else.
Now boarding for Iraq and Afghanistan! Except for the 9.5-10 females 16 to 35, some of them will get 'special' training in Dubai.
I don't like Nancy Pelosi. I wish she'd step down and find another line of work, and she can take Barney Frank with her.
Posted by King of Men (Member # 6684) on :
quote:Originally posted by Blayne Bradley: Italy is nearly convinced to join our cause, he doesn't like Georgia but is upset that we let him get so strong in the first place by letting him go Mongol. And half wants to half ally with Fasq to ruin the game and start over with less short sighted conversion practices.
Well, he's got a point, that's why I resigned, but at this point I think he needs to get over it and play the game as it lies. Georgia is hardly invincible; with Italy on-side we can in principle bring it up to 18 WE and watch it break apart from rebellion. Independent Persia anyone?
Posted by fugu13 (Member # 2859) on :
BB: and shortly after what you're reading was written, Japan's economy began one of the longest and most painful economic downturns since WW2. One that won't be anywhere near matched by the current crisis.
Japan's system was very bad, and it failed horribly.
Posted by Samprimary (Member # 8561) on :
quote:Sam, which page of the Republican handbook are you on?
Oh man, you nailed me. I'm totally a doctrinal Republican. How did you know?
The legacy costs are really helping kill GM, whether or not I believe in pensions and plentiful guaranteed health coverage!
WAIT. I don't know if I'm for that. I better check
~*THE HANDBOOK*~
Posted by Blayne Bradley (Member # 8565) on :
quote:Originally posted by fugu13: BB: and shortly after what you're reading was written, Japan's economy began one of the longest and most painful economic downturns since WW2. One that won't be anywhere near matched by the current crisis.
Japan's system was very bad, and it failed horribly.
Its in a recession yes, but who are you to say its worse then whats happening in the US? Japan's system allowed it to enjoy the most spectacular GDP growth rate in the developing world and to be for a time the worlds largest creditor nation.
Posted by fugu13 (Member # 2859) on :
The details of Japan's system had very little to do with Japan's growth. They were in the right place at the right time with a well educated workforce that had industrial expertise and another country greatly interested in improving their economy. Additionally, they had a savings mentality, which contributed significantly to internal investment, and was a substantial part of their growth (and turned into a substantial part of their bust, surprise).
And it isn't just a recession, Japan had nearly two decades of serious economic troubles, and just when it seemed they might be climbing out of them starting a few years ago, this happens.
Not to mention that a lot of the improvement has yet to increase quality of life much. The only reason their employment rate looks so good is because they count people in non-contractual, part-time work as fully employed, and because the gov't "creates jobs" in the construction sector by doing useless road improvement projects.
Two decades of of a stagnant to dismal economy isn't a sign of a system that works.
Posted by Unicorn Feelings (Member # 11784) on :
So, the big push seems to be, if there is a bailout, all the employees will have to take a cut in pay and benefits.
Why is America SO willing to cut an employee's wage and benefits, but if you mess with executive's benefits, it is socialism?
Posted by fugu13 (Member # 2859) on :
If it will make you feel better, I think the Big Three should probably have paid their executives a lot less, and I'm fine with the bankruptcy court modifying their contracts to reduce bonuses and the like, too.
Posted by Unicorn Feelings (Member # 11784) on :
If modifying their pay and benefits is what has to be done, then it has to be done.
Posted by Lyrhawn (Member # 7039) on :
To be fair, the Big Three aren't over and above what any other Fortune 500 company pays their CEOs. I think they ALL make too much money, but the Big Three aren't especially heinous, and Mulally at Ford actually turned the company around when they fired Ford from the CEO spot, so heck, maybe he actually deserves it. Maybe not. Maybe Wagoner did the best he could with what he had, and maybe not. In the end it wasn't CEO pay that got them where they are. It's a drop in the bucket.
But then, I think if any of them slip into bankruptcy, it won't be an issue, since they'll quickly cease to exist as anything but a tiny shadow of what they once were, if that.
Posted by Juxtapose (Member # 8837) on :
My rep (Jim McDermott, D-WA) was on NPR today. He talked about banning bonuses for employees making over $200k a year as a condition for the bailout. He seemed quite adamant that he would not vote for it otherwise (there were other strings attached that he was equally insistent upon).
Posted by Lyrhawn (Member # 7039) on :
I'm in favor of some of the strings being bandied about. Automatically firing the CEOs of all of the big three is a poor idea I think. It seems like one of those things they want to do because it looks good, rather than being a really good look into the decisions made. I also think they're ignoring what the Big Three HAVE done in the last couple years to change. They didn't just go willy nilly into the mess they're currently in, they were already in transition before this current financial crisis hit, and it's that crisis that has them in a bind.
Many of the criticisms you most often hear tossed at them aren't really fair. Quality problems? Consumer reports has Ford as equal to any asian carmaker, and GM is almost there with huge improvements of its own. Not enough hybrids? GM sells more hybrid models than Toyota or Honda, and Ford's Escape hybrid is the second best selling hybrid in the country despite the fact that these aren't particularly profitable cars and are less than 3% of the car market. Not enough small cars? Ford is a small car leader in Europe and elsewhere overseas. I'm not as familiar with GM's small cars, but they have some nice ones too. They've never brought them to America because before very recently, small cars weren't where the money was. They don't cost much less than larger cars to make, but are sold for far less, and SUVs were BOOMING in the 90's and early 00's. But faced with changing times, they've moved up small car production, plan to bring small cars from Europe to America, and have cut larger vehicles from development and from their sales lineup. They've also made big deals with the UAW to cut huge costs in healthcare, retirement and pension benefits to former employees that most asian companies don't have to deal with at all.
That doesn't look to me like a Big Three that is still plodding through the same course as they were in the 90's. Not acknowledging the changes they made and saying their whole system sucks and they haven't tried to change says to me that the people saying that shouldn't be in charge of the terms of the deal, since they clearly don't understand some of what has been going on recently.
I also think that allowing any single company for the Big Three to go into bankruptcy could be a death blow to the industry as a whole, with ripple effects that hurt even foreign automakers in terms of domestic production of foreign cars and local auto suppliers that will go out of business.
Posted by King of Men (Member # 6684) on :
quote:I also think that allowing any single company for the Big Three to go into bankruptcy could be a death blow to the industry as a whole, with ripple effects that hurt even foreign automakers in terms of domestic production of foreign cars and local auto suppliers that will go out of business.
Ok, but so what? You say this like it's a bad thing. Why shouldn't our capacity to produce cars readjust to fit our capacity for using them?
Posted by Darth_Mauve (Member # 4709) on :
Dan_raven's #1 rule of politics, which is forgotten only at your peril.
quote:People can not be created nor destroyed without resulting to sex or death.
Where does this fit here?
quote:Workers will then find new jobs and be retrained.
Big deal, after all they are only Union workers, over paid, lazy, useless, semi-socialists who are a drain on the economy. I'm sure if they really tried they could find new jobs with new training in a few months.
Do you realize how many there are?
300,000.
Then add all the parts manufacturers who supply the auto industry. They can't just sell to the Japanese/European companies. Those companies already have suppliers.
We are talking about millions of people entering the job market.
And what can they train for? Computer jobs? Those have gone to India. Other manufacturing jobs? Those have gone to China.
How about in the new green-tech industries. Turn our car plants into wind-mill and nuclear reactor factories. Retooling and retraining for these high-tech jobs should be easy.
But many of those car people are in their 40s, 50s, 60s. Who is going to pay to train them and only get a few years worth of work out of them?
And how many can these new industries digest before they are full?
And how will those millions eat, and pay their mortgages, and pay for their kids education and buy Orson Scott Card books and magazines?
Who pays to move 20,000 workers from Detroit with all its problems, to Tennessee which gives out tax abatements to the foreign car companies? Its cheaper for Toyota to build a large new plant in the middle of Georgia and hire a bunch of teenagers to train, than it would be to transport, train, and relocate the masses in Michigan. Add some TIFF from the state and there is no going back.
So all these workers, these people who are written off in the above debate with the simple phrase, "can get new jobs" are expected to disappear from the picture.
They won't.
But they don't seem to be important. What everyone from President Bush to the nightly news commentator is busy doing is seeking economic justice.
Find fault.
Make them pay.
Then, somehow, everything will be right in the world.
This brings up Dan_Raven's #2 Rule of Politics. "True Justice is pure and divine. Human justice is relative and destructive."
or
"All laying blame does is excuse you from having to do anything about the problem."
Who's fault is this mess? UAW? CEO? SUV Owners? The Oil Companies? The Mortgage Companies? Greedy middle men? Who cares.
Don't bother me with fault or blame. Fix the problem.
Posted by Lyrhawn (Member # 7039) on :
quote:Originally posted by King of Men:
quote:I also think that allowing any single company for the Big Three to go into bankruptcy could be a death blow to the industry as a whole, with ripple effects that hurt even foreign automakers in terms of domestic production of foreign cars and local auto suppliers that will go out of business.
Ok, but so what? You say this like it's a bad thing. Why shouldn't our capacity to produce cars readjust to fit our capacity for using them?
It's in the process of doing so right now. Their capacity to produce SHOULD readjust to meet our capacity to consume, and it's a process that is currently playing out, but Ford for example is doing just fine, whereas GM could be bankrupt in months. If GM falls, all three of the Big three could fall because of ripple effects. So should Ford, a company which actually has turned itself around, fail because a whole different company wasn't so quick on the uptake? Besides, going from millions of cars to zero cars isn't readjustment, it's overkill.
But regardless of anything involving fairness, there are other considerations. The failure of the Big Three would be a massive, massive burden on the Federal government. Doesn't it make more sense to loan them a little now, to be paid back later, rather than let them fail and pay out billions more just to stand on principle?
This is an ounce of prevention situation.
Posted by kmbboots (Member # 8576) on :
What Darth Mauve said.
Posted by King of Men (Member # 6684) on :
quote:We are talking about millions of people entering the job market.
Well? This happens every six months or so, recession or boom. People go into and out of the labour market all the time; when unemployment doesn't change from one month to the next, that actually means that roughly 100k people lost their jobs, and a different 100k found new ones.
quote:So should Ford, a company which actually has turned itself around, fail because a whole different company wasn't so quick on the uptake?
No, but why do you think this will happen? 'Ripple effects' sounds like magic thinking to me; what is the exact mechanism? Besides this, if they're in such a position that reducing the amount of competition they've got can kill them off, then I don't see how you can call them recovered.
Posted by Lyrhawn (Member # 7039) on :
Because if GM falls, then their parts suppliers likely will as well, and if those parts suppliers, and THEIR suppliers all go out of business, then Ford has no parts to build their cars with, and they suffer as well. It's not about reducing competition, it's about the destruction of the means with which they build their cars. It has nothing to do with competition, it's an entirely different mechanism. And I wouldn't say they are totally recovered, but if things continued at the current status quo, I think they are well on their way towards recovery. Pulling the rug out from under them like that would doom any company, not just an automanufacturer, and it has nothing to do with supply and demand or competition for that particular company.
It's the speed with which it's happening that's the problem, not the eventual outcome.
quote:Well? This happens every six months or so, recession or boom. People go into and out of the labour market all the time; when unemployment doesn't change from one month to the next, that actually means that roughly 100k people lost their jobs, and a different 100k found new ones.
When was the last time 2 million people all entered the labor market at the same time in the US? And how well did that turn out in the short term? A lot of them actually will find jobs if Obama's green revolution takes off, and Michigan is well positioned in that instance, but if that doesn't materialize, then you have a large middle aged workforce with no other skills in a very tough, very skilled market.
Posted by Samprimary (Member # 8561) on :
ughh I have no idea whether or not detroit is a hopeless cause.
if SUV's hadn't have been so profitable they would have been in this position a number of years ago and it might have been milder overall. who knows! a bailout might re-energize them, or it might perpetuate the circumstances, allowing legacy costs/UAW to make the companies fundamentally unable to compete profitably.
or bankruptcy might be the only not-silly option! and that might either restructure the company to profitability, or enhance the Death Curve and expedite detroit's demise!
there might be no way to deal with this that is not extremely painful in the long run!
fantastic!
Posted by Unicorn Feelings (Member # 11784) on :
What bugs me is, the Auto industry is begging for $25 Billion.
Yet, Bush and the Politicians BEGGED us for $700 billion and they don't even MAKE anything.
Posted by Mucus (Member # 9735) on :
quote:Originally posted by Darth_Mauve: Do you realize how many there are?
300,000.
Citigroup laid off 52,000 employees yesterday. They've been bailed out. A bailout is no guarantee that all 300,000, if your numbers are correct, will be saved.
quote:And how will those millions eat, and pay their mortgages, and pay for their kids education and buy Orson Scott Card books and magazines?
How the heck did people laid off during the dot-com crash eat, pay mortgages, and pay for their children's education?
Where was the bailout then? I certainly know people that could have used it.
Your argument would be compelling if GM was the ministry of EI or welfare, but GM is a company and its role is to make cars and make money doing it. It failed. Its time for new and better companies to take its place.
quote:Originally posted by Lyrhawn: ... So should Ford, a company which actually has turned itself around, fail because a whole different company wasn't so quick on the uptake? Besides, going from millions of cars to zero cars isn't readjustment, it's overkill.
What is this "should" and what role does it play in a free market? If a company, even Ford, fails to anticipate the future and puts in place policies that kill it, and other companies that have anticipated the problem replace it, thats what happens. "Should" doesn't really enter into it.
The only reason the term is even on the table is because the US government is busy with its new socialist policies.
Besides, you're also arguing against a straw man. The choice isn't between between millions and cars and zero. As I've already pointed out, the math works out so that non-American owned factories in the US already have the capacity to produce the majority of car demand in the States, especially when combined with imports.
All we're really talking about is the fraction of the market still under the control of American-owned automakers and it is dubious that under bankruptcy proceedings and restructuring that all of that would really "to zero."
I may also point out that by some estimates, the bailout will only delay the collapse of GM by a year. This isn't a choice between thousands of jobs and no jobs, this is a choice between taking a chance that we may be able to save some fraction of American-owned automaking jobs and possibly have the exactly same problem a year down the road, and simply letting them collapse and restructure themselves which may or may not lead to more jobs in the long run.
Posted by The Rabbit (Member # 671) on :
quote:This brings up Dan_Raven's #2 Rule of Politics. "True Justice is pure and divine. Human justice is relative and destructive."
or
"All laying blame does is excuse you from having to do anything about the problem."
Who's fault is this mess? UAW? CEO? SUV Owners? The Oil Companies? The Mortgage Companies? Greedy middle men? Who cares.
Don't bother me with fault or blame. Fix the problem.
Posted by Unicorn Feelings (Member # 11784) on :
[/QUOTE]
The only reason the term is even on the table is because the US government is busy with its new socialist policies.
[/QB][/QUOTE]
Bailing out Corporations isn't socialism.
Or, because Barack Obama is President Elect, EVERYTHING is now socialism? How do you people think. Explain.
How is a $700 Billion dollar Bank Bailout and $25 Billion dollar Auto Corporation Bailout Socialism?
It's Corporatism.
Posted by King of Men (Member # 6684) on :
quote:When was the last time 2 million people all entered the labor market at the same time in the US?
That would be 2001, the dotcom crash. Worked out fairly well, really.
quote:Because if GM falls, then their parts suppliers likely will as well, and if those parts suppliers, and THEIR suppliers all go out of business, then Ford has no parts to build their cars with, and they suffer as well.
Ridiculous. There are lots of car-parts suppliers; they won't all go out of business at the same time. The ones that survive the first few months will be in a better position to bargain with Ford. Really, now, this is the sort of adjustment that free markets are genuinely good at. They've got their flaws, but this is not one of them. Step back and let the market sort itself out.
Posted by Mucus (Member # 9735) on :
"you people"?
Posted by TomDavidson (Member # 124) on :
quote: Where was the bailout then? I certainly know people that could have used it.
There actually WAS one, in a way. Unemployment insurance was extended twice, at a fair amount of federal expense. (Good thing, too, since it took me nine months to find work.)
Posted by Lyrhawn (Member # 7039) on :
quote:Originally posted by Samprimary: ughh I have no idea whether or not detroit is a hopeless cause.
if SUV's hadn't have been so profitable they would have been in this position a number of years ago and it might have been milder overall. who knows! a bailout might re-energize them, or it might perpetuate the circumstances, allowing legacy costs/UAW to make the companies fundamentally unable to compete profitably.
or bankruptcy might be the only not-silly option! and that might either restructure the company to profitability, or enhance the Death Curve and expedite detroit's demise!
there might be no way to deal with this that is not extremely painful in the long run!
fantastic!
The Big Three made out pretty good after the last negotiating round with the UAW which allowed them to hire in new workers at much much lower rates, and combined with the buyouts of older workers has allowed them to cut down on labor costs. Combine that with the VEBA and you have billions in savings already realized just in the last couple years, but it's something that was structured to give them even greater benefits long term. That and plant closings are really bringing down their costs.
There's a serious concern from many that they won't be able to restructure in Chapter 11 the way that most people in this thread are assuming, and that based on the credit market, they'll be forced into Chapter 7, where all their assets will be liquidated. Besides, no one buys from a bankrupt autodealer. If the current credit crunch hadn't come along, they likely would have been able to squeek by long enough to allow some of the cost savings measures they've put in place in the last couple years to kick in. GM was planning on making it to 2010 when they'd get increased savings from those measures, and two or three new car models are set to come out, including the Chevy Volt, which they've invested heavily in and expect big returns from. The Volt by the way is exactly the car that everyone has been telling them to build for a decade or more, and even the Asian automakers refuse to do it. Ford has a couple great cars down the road too, in the Verve and the next generation Focus (the current generation is the best selling American car), to say nothing of a well feted Chevy Malibu.
I think a loan with strings attached is a worthwhile investment for the government. If they don't, and the Big Three fail, they'll end up losing more money anyway. It's worth a try. In that vein, it's worked before, with Chrysler, and the loans were paid back.
And I'll admit flat out that I'm saying this as someone with half a dozen family members working for the Big Three, and another dozen or so friends, and as someone who works in the area who'd like to keep my job. People forget what KoM apparently thinks are voodoo ripple effects, but when you put thousands of people out of work in a single location, local businesses suffer, and we're already suffering here in Michigan worse than anyone else in the nation. When that many people lose their jobs, unemployment rolls swell, forcing billions of dollars out of the government, to say nothing of the extreme strain, if not disastrously so that this would put on the government who'd be on the line for all the lost pensions. But that much income being lost in a state that is already in the trouble we're in would hurt even more, and a lot of people who have absolutely nothing to do with the auto industry will lose their jobs when an already fraying state economy fractures a little more. Given the loss in tax revenue, the state will have to cut back even more, and the governor has already cut billions in wasteful spending. There's nothing left to cut except correctional facilities, essential services, and education, which means either less cops on the streets, more criminals being let out, and/or higher tuition costs (or teachers being laid off) for students. I'm not saying Michigan's pity party should sadface the nation into giving GM and Chrysler the loans they want, I'm saying they did most of the things that people are bitching at them to do still and don't get the credit for it, and that loaning them the money now is far more worth it in the long run than letting them fail and picking up the tab for it. That's the economic angle, but there's maybe a hint of a moral angle, and certainly a political one.
Why not just take us out back and shoot us?
Posted by Sterling (Member # 8096) on :
Anecdotally, my father stayed with American cars until very recently; after his latest Cheverolet started giving him grief after a relatively short time of ownership, he threw in the towel.
It is worth noting that, according to JD Powers, reliability of the Ford and Chevy brands has been increasing, and now ranks higher than Mazda, Subaru, and Mitsubishi... But they still aren't as high as Honda or Toyota.
I think there's been a certain problem for a while that the demand for new cars has been artificially high. A new car is a luxury, one that many people now recognize as such. And while there have been improvements, significant new technology and the long-awaited enhancements in fuel economy aren't things that come up on a year-by-year basis.
Honestly, I also think that what's been manufactured has been short-sighted; it's hard to feel a lot of pity for the SUV glut. I really think the demand for those vehicles was as much a matter of marketing as any real need or niche to be filled.
But I don't think letting the Big Three disintegrate would be good for the economy. And I have to disagree with comparing it to the Internet Bubble. It's the difference between laying off a lot of college graduates, many of whom are on their first job anyway, and laying off long-employed tradesmen who don't necessarily have advanced degrees and may have lifestyles (including families and mortgages) that simply don't absorb employment shocks.
Posted by Lyrhawn (Member # 7039) on :
quote:It is worth noting that, according to JD Powers, reliability of the Ford and Chevy brands has been increasing, and now ranks higher than Mazda, Subaru, and Mitsubishi... But they still aren't as high as Honda or Toyota.
Technically that isn't true. Ford ranks on par with Honda and Toyota when it comes to defects per however many thousands of vehicles sold. This comes in part from Ford bringing their quality up dramatically from the 90's, and slightly from the number of defects in Honda and Toyota's cars actually rising somewhat, but that's not much of a surprise when you consider the increase in their volume. Consumer reports has them equal, and JD Powers has Cadillac, Chevrolet, Ford, GMC, Mercury, Pontiac and Lincoln as high as or higher than Acura, Audi, BMW, Honda, Nissan, Scion, Volkswagen and Volvo. In addition, Power rated the Chevrolet Malibu the highest-quality midsize sedan. And the Malibu and Ford Fusion scored better than the Honda Accord and Toyota Camry.
Quality for Ford and some of GM's brands just isn't the issue it used to be.
Posted by fugu13 (Member # 2859) on :
What evidence is there that no one will buy from a bankrupt car dealer?
Also, there's little doubt that at least two of the big three would be able to restructure on Chapter 11, at least more than they'd be able to restructure without entering chapter 11.
And it isn't like there's any choice other than entering bankruptcy, long term, unless a miracle of automobile consumption increases happens and the dealer networks suddenly decide that they'd like to undergo a substantial rebranding to a smaller number of brands, almost certainly involving large number of dealer closings. The automobile manufacturers are geared up to produce too many cars and sell them in too many different ways, and they're contractually prevented from reducing in order to deal with reductions in demand. They will enter bankruptcy, the only question is when.
Posted by Sterling (Member # 8096) on :
The study I looked at didn't mention defects, but rather "problems per 100 vehichles after 3 years of ownership." (shrug) It is true- you can see the report here - though it does date back from 2006, and we may be using different standards of measure.
Posted by Lyrhawn (Member # 7039) on :
Ah, we're looking at two different things. I'm looking at 2008 vs. 2005 in your report, and I'm also looking at Initial Quality as opposed to Vehicle Dependability. I'll have to go and look at the 2005 vs. 2008 numbers for both to see where things are.
Posted by Sterling (Member # 8096) on :
If you run across a more recent vehicle dependability report, I'd be curious to see it.
Posted by Lyrhawn (Member # 7039) on :
Looks like mixed results, with big gains bringing them about equal to Honda in Initial Quality but still despite more big gains (for Ford) lagging in Dependability, though I'd note that Ford's VDR now is where Honda's was in 2005, and no one was calling Honda's garbage three years ago.
If I get the chance tomorrow I'll go looking for Consumer Reports studies.
Posted by AvidReader (Member # 6007) on :
I'm completely with fugu. When your business model is to produce more of an item than anyone could possibly use, I have no idea how you could ever turn a profit. That the business model has lasted this long is something of a miracle.
It is interesting to see Ford ranked on par with some of the German brands. (I loved the 20 year old Audi we had. She was a solid little car.) However, my issue tends to be lifespan. I know when I get a used Honda that I'll get it to couple hundred thousand miles. MSNBC seems to think that 150,000 is the average lifespan. DoT seems to think 200,000 is normal for any new car with proper maintenance.
The problem with saying "Ford's doing it now" is that Toyota and Honda have decades of reputation to build on, and Ford has decades of reputation to work against. That's tricky PR stuff there. Also, anyone buying a used car (and our number will only go up in the recession) need the brands that were reliable ten years ago. Ford's improvements won't matter to me for another decade when their good stuff is down to my price range.
While I agree with Dan (the workers won't just go away so the market can fix itself), it may be too little, too late to save American cars. Though with the Asian car makers doing so much of their manufacturing here, it's possible we could just shift the workers from one brand to another. Same factory, same workforce, different body style on the conveyor belt.
Rather than just throwing money at a problem that could stay wobbley for a decade, I'd rather see the companies get a chance to really change up how they're operating. How often does a chance come to completely restructure come along? With the right attitude, Chapter 11 could be a beautiful thing for Ford.
GM's position is tougher. Everyone in that situation might be better off if the government just helped them sell their assets to other manufacturers and transition the GM employees to new contracts. Yes, that means a pay cut. The up side is that if everyone's getting roughly the same pay cut, the local ecomony should quickly drop to the same proportion. Maybe the government could send economists the help smooth that transition out. As long as the cost of living drops as well, that doesn't have to hurt.
Posted by DarkKnight (Member # 7536) on :
quote: Though with the Asian car makers doing so much of their manufacturing here, it's possible we could just shift the workers from one brand to another. Same factory, same workforce, different body style on the conveyor belt.
If it was the same workforce then there would be the same union...and that is going to be a major sticking point
Posted by King of Men (Member # 6684) on :
quote:People forget what KoM apparently thinks are voodoo ripple effects, but when you put thousands of people out of work in a single location, local businesses suffer, and we're already suffering here in Michigan worse than anyone else in the nation.
Two points. First, I was objecting to ripple effects from one car company to another. Not from car companies to their suppliers and whatnot.
Second, I live in the Midwest too. But I don't see where that gives me a god-given right to have other people prop up the local economy for my benefit. Suffering, pff. Go to Africa and tell them your economy is suffering. Tell it to the Vietnamese. Or closer to home, how about a bailout for New England, whose industries collapsed seventy years ago and never recovered? The Midwest's economy has been living on borrowed time, and capital, for twenty years. Suck it up and take it like a man.
Posted by AvidReader (Member # 6007) on :
quote: If it was the same workforce then there would be the same union...and that is going to be a major sticking point.
Why would the new company have to bring the union on? Couldn't they just hire all the workers without it?
In a perfect world, they'd buy enough of GM to have access to their personnel records, hire the good workers, and cut the dead weight at the same time.
Posted by Mucus (Member # 9735) on :
quote: Details on the auto sector bridge loans were released by the White House Friday morning, reports Action Economics. The plan includes include $17.4 billion in TARP funds, with $4 billion of that contingent on a second drawdown of the TARP and the balance given in December and January to GM and Chrysler, which are expected to agree to terms today. The loans can be recalled if the companies are not viable by March 31, 2009.
Limits to executive pay and jet perks will be put in place and warrants will be required in exchange to the government for non-voting stock, which would be senior to other debt outstanding. The government can also block any corporate transactions over $100 million and no new dividends can be declared under the plan, while compliance with Federal fuel efficiency and emissions regulations will be mandated.
Interesting move, it seems that the administration has tied the release of a portion of the auto bailout funds to TARP. This means that Congress must approve the second 350 billion dollar potion of TARP for the automakers to get the full amount (anytime before Obama's inauguration anyways).
TARP was of course intended just to buy up financial assets from the banks. Since then it as seen an expansion to nationalizing the actual banks, buying up credit card debt, and now partially nationalizing automakers.
Interesting.
Posted by Lyrhawn (Member # 7039) on :
Not a big deal. The money they're getting here will be enough to get them to Obama's inauguration. The next portion of the TARP funds, if they're approved at all, will be with a lot more strings than the first. And any additional auto funds will be passed in a different manner with the new Congress and under President Obama.
If you think this is crazy though, wait until Obama's first 100 days. It'll make this spending look like child's play if the speculation is even close to being right.
Posted by Samprimary (Member # 8561) on :
Whenever I read reports on vehicle dependability I could just laugh my butt off when the charts reach Land Rover.
Posted by BlueWizard (Member # 9389) on :
I have mixed feelings about the whole thing. On one hand, I think they should go bankrupt (Chapter 11); the airlines are doing it all the time. THEN we can negotiate loans for them, once they have presented a restructuring plan.
I further think that as a condition of the loans, whatever management asks of labor, the management and executive branch should be willing to more than equal. If they ask for a 20% cut in pay and benefits, then the executive branch should be willing to take a 25% cut in EACH form of compensation.
Typically, when the executive branch appears to take a pay cut, it is really more of a shuffling of money. Taking it out of the right hand pocket and putting it in the left. None of that. It must be real cuts in all forms of compensation, and NO executive or managerial bonuses with out genuine increased performance. Why should we pay them big money to fail?
I'm sure management wants big cuts from labor, but I have not doubt that they are unwilling to make the same cuts to their own pay.
If they ask labor to accept the wages equal to American Toyota and other American-Japanese labor force, then I think they should accept executive compensation equivalent to those in the same Japanese companies. Which I'm under the impression is substantially low than the US companies.
At any rate, I think if the ask for sacrifice, then they should be willing to sacrifice even more themselves. Seems only fair.
steve/bluewizard
Posted by Lyrhawn (Member # 7039) on :
quote:once they have presented a restructuring plan.
They're already in the middle of one.
quote:I'm sure management wants big cuts from labor, but I have not doubt that they are unwilling to make the same cuts to their own pay.
If they ask labor to accept the wages equal to American Toyota and other American-Japanese labor force, then I think they should accept executive compensation equivalent to those in the same Japanese companies. Which I'm under the impression is substantially low than the US companies.
Once the VEBA agreement kicks in, and the latest round of contract negotiations that took place before this mess started also kick in, with all benefits taken into account, workers at the Big Three will only make a couple dollars more per hour than the transplant workers when all benefits are taken into account.
Posted by Mucus (Member # 9735) on :
quote:Originally posted by BlueWizard: ... At any rate, I think if the ask for sacrifice, then they should be willing to sacrifice even more themselves. Seems only fair.
Buffet has a similar idea and goes even further
quote:The government should insist top executives at Ford Motor Co., General Motors Corp. and Chrysler LLC invest a significant percentage of their own net worths in the Detroit-based companies, Buffett said, ensuring both executives and taxpayers would share in any profits or losses. ... Buffett said the government should be able to drive a deal like one of the ones he makes when Berkshire buys businesses, because automakers appear on the brink of bankruptcy.
Buffett said he'd tell the auto executives, "'We'll give you more upside (than bankruptcy), but you're going to lose if we lose.'"
Its an interesting idea. After all, they are asking taxpayers to invest in what the market has judged to be one of the worst investment deals ever (GM bond interest rates up to 56%) but they still insist that taxpayers will be repaid.
If thats true, they should be prepared to put their own money on the line right alongside the rest of us to secure a bailout. (And if they don't, thats yet another red flag that this is a really bad idea)
Posted by Samprimary (Member # 8561) on :
We need to hook buffett into a machine that makes him immortal, and then hook that machine into the management of our markets, and have his undying body seated upon a throne in an oracular temple that us plebeians can go to when we seek aid from the Great One
Posted by Mucus (Member # 9735) on :
quote:It is both eye-opening and depressing to look at our banking crisis from China. It is eye-opening because it is hard to avoid the conclusion that the U.S. and China are becoming two countries, one system.
How so? Easy, in the wake of our massive bank bailout, one can now look at China and America and say: “Well, China has a big-state-owned banking sector, next to a private one, and America now has a big state-owned banking sector next to a private one. China has big state-owned industries, alongside private ones, and once Washington bails out Detroit, America will have a big state-owned industry next to private ones.”
Yes, an exaggeration to be sure, but the truth is the differences are starting to blur. For two decades, a parade of U.S. officials came to China and lectured Beijing on the necessity of privatizing its banks, said Qu Hongbin, the chief economist for China at HSBC. “So, slowly we did that, and now, all of a sudden, we see everybody else nationalizing their banks.”
It’s depressing because China in many ways feels more stable than America today, with a clearer strategy for working through this crisis. And while the two countries are looking more alike, they appear to be on very different historical trajectories. China went crazy in the 1970s, with its Cultural Revolution, and only after the death of Mao and the rise of Deng Xiaoping has it managed to right itself, gradually moving to a market economy.
But while capitalism has saved China, the end of communism seems to have slightly unhinged America. We lost our two biggest ideological competitors — Beijing and Moscow. Everyone needs a competitor. It keeps you disciplined. But once American capitalism no longer had to worry about communism, it seems to have gone crazy. Investment banks and hedge funds were leveraging themselves at crazy levels, paying themselves crazy salaries and, most of all, inventing financial instruments that completely disconnected the ultimate lenders from the original borrowers, and left no one accountable. “The collapse of communism pushed China to the center and [America] to the extreme,” said Ben Simpfendorfer, chief China economist at Royal Bank of Scotland.
A rather apropos column. I rather liked the phrase "two countries, one system."
To be honest, things have gotten a bit odd with Canadians pushing capitalist solutions and Americans pushing socialist solutions. I'm starting to look forward to when things go back to normal.
Posted by AvidReader (Member # 6007) on :
quote: Which is why we don’t just need a financial bailout; we need an ethical bailout.
That's my favorite statement about the recession right there.
Posted by BlueWizard (Member # 9389) on :
"Caterpillar Inc. said it will reduce executive compensation by as much as 50% next year, with smaller cuts for other employees, as the manufacturing giant becomes the latest to cut salaries to cope with slumping demand."
No whining and crying to Congress for a bail-out.
This is what I want to see from the Auto industry as a sign of 'good faith'.
Steve/bluewizard
Posted by Mucus (Member # 9735) on :
By comparison:
quote:In another sign of how seriously Watanabe and his team are taking the current crisis, reports over the weekend say Toyota may cut board member bonuses to zero for the current financial year, saving a further $11 million. While that seems reasonable, given the circumstances, it’s notable that Japanese execs earned far less than counterparts at Detroit rivals during the good times. Last year, Toyota says it paid its 25 most senior executives a combined $33 million in salary and bonuses. Ford paid its CEO Alan Mulally alone over $20 million in 2007 in salary, bonuses and stock options while GM chief Rick Wagoner pocketed $15.7 million
link Posted by Blayne Bradley (Member # 8565) on :
It always seemed my impression that the Zaibatsu's took corporate health to be a symbiotic relationship between the Board and CEO and the company itself, if the Company does well so does the CEO if the company does poorly then it is the CEO that also does poorly and must rectify it.
Posted by BlueWizard (Member # 9389) on :
Absoluetly. Part of the problem is that their is not down side for the executive. If the company tanks, they still get big salaries and bonuses. If the company tanks so badly that they are fired, then they leave with a MASSIVE severance package.
I think while the Auto companies own money to the public, their severance packages should be equal to whatever the wage employees have. In the event of a shutdown, I doubt may wage employees will get more than about 3 months severance. That's what the Exec should get.
Further, is a wage employee can be terminated in such a way as to get no severance package, the same should be applied to the Exec branch. If the screw up badly enough, then they walk away with nothing.
I wage employeed make the equivalent of Japanese (in the USA) workers, then Exec's should accept compensation equivalent to those of USA Japanese execs.
It is time to stop rewarding failure.
On a separate subject, I think Congress should ask for the return of all the bail out money they have given Wall Street until Wall Street accurately and fairly give and accounting of where the money went.
And I certainly don't think we should give them any of the remaining money, until we have a full and fair accounting.
Steve/bluewizard
Posted by Mucus (Member # 9735) on :
The focus on current executive salary, while important is a bit over-prioritized. After all, they've already made tens of millions of dollars and that wealth isn't really on the line. Sure, they might lose next year's salary, but if you have millions in the bank ... well, "what me worry?"
Thats the beauty of the Buffet proposal, making the CEOs of these firms put their existing wealth on the line and putting their money where their mouth is. Its easy to waste other people's money, its harder to waste your own.
Posted by BlueWizard (Member # 9389) on :
Mucus, I agree that taking it one step farther and making the executives liable for the outcome of the company.
That's part of what I was trying to say, that the execs, want all the benefit, but none of the risk. If the company wins, the execs win, if the company loses, the execs win. That doesn't create much incentive for them to win.
Also, a lot of them are only using their current jobs and pay, to create even high paying jobs in the future. They don't care about the company, they care about what precedent working for the company sets, and the precedent determines their future salary. Whether the company tanks of not is irrelevant.
So, much like your propossal, I'm trying to make it VERY VERY relevant to the execs whether the company wins or loses.
If the company fails, then I want the execs to pay for that failure. I want the same thing on Wall Street, if they screw it up, then I want them to pay big time.
While executive pay might not be a huge portion of the overall monetary problem, it is very symbolic. Once again, it is a case of the execs wanting everyone else to yield in one way or another, but not wanting to take any risk themselves. As you are saying and as I am agreeing, I want the risk of failure to be huge for the execs. That's great incentive for them to win.
Steve/bluewizard
Posted by BlackBlade (Member # 8376) on :
quote:Originally posted by Mucus: The focus on current executive salary, while important is a bit over-prioritized. After all, they've already made tens of millions of dollars and that wealth isn't really on the line. Sure, they might lose next year's salary, but if you have millions in the bank ... well, "what me worry?"
I agree with Mucus on this. I feel like CEO salaries are good talking points with marginal substance regarding the real issue, sorta like John McCain talking about earmarks in reference to balancing the budget when earmarks are a very small part of the problem.
CEO salaries definitely need to be scaled back, and perhaps some innovation is in order for that in particular, but I'm more worried about the effect of an 800 billion stimulus package on the economy.
Posted by Lyrhawn (Member # 7039) on :
In what sense?
You're worried that it will have no effect, or you're worried about spending that much money?
Posted by BlackBlade (Member # 8376) on :
quote:Originally posted by Lyrhawn: In what sense?
You're worried that it will have no effect, or you're worried about spending that much money?
I wonder how much of a net effect it will actually have. Will folks act like banks and just sit on the money because things have gotten worse in the meantime? Or will 800 billion dollars suddenly circulating in the economy really provide the pulse they are hoping it will?
Posted by Lyrhawn (Member # 7039) on :
From what I've read, much of the money can't help but stimulate at least something.
For example, I've read some specific projects, road projects, that are all ready to go but lack funding. Funding them will create hundreds of thousands of jobs immediately. That money will get circulated.
For the billions that will go into some sort of income tax reduction to produce immediate benefits, it's hard to say. The personal savings rate of Americans HAS increased recently, for the first time in a long time, but not so much that a large portion of that additional money won't find its way back into the economy.
Only a portion of that money is going to be extra money given to the masses, whereas the rest of it will be used to create new jobs, and someone who just got a job isn't going to put every dime in the bank. They'll go out to eat, and restaurants will put more labor on, and those people will buy more stuff, etc etc. And the long term stuff will make sure that the fire that's started doesn't go out in a year or two, but keeps the economy growing for a long time.
I have no idea how dramatic the effect will be, but I can't imagine it doesn't have any effect, or even a large effect.
Posted by Mucus (Member # 9735) on :
Obviously, the stimulus package will have some effect. I think BlackBlade was more referring to the net effect versus other alternatives. (e.g. Sure, the stimulus package will help the economy, but how cost effective is it?) I would add that there is also the question of whether this is the wisest course of action long term (e.g. This package may work for now, but will this stimulus package simply end up hampering future generations more than it was worth as they are forced to pay for it?)
There are all sorts of secondary effect questions as well. For example: a) How efficiently can a stimulus package of this size be managed and how much will be lost to waste? We've already seen that the previous bailout cost 100 billion in pork right at the beginning to the senate and that oversight over the package has been extremely disappointing. There are bound to be scandals when this is all said and done. Some of this can be blamed on Bush, yes, but I think much of this is also simple human nature. b) How easy will it be to scale back spending down the road? Much of the problem getting to this point was easy access to credit and now we're exacerbating the problem. How easy will that be to correct?
These aren't simple questions to answer and I think that there is some validity to the point that a focus on visible problems like executive compensation or corporate aircraft sometimes overshadows these questions.
Posted by Lyrhawn (Member # 7039) on :
True, much of that is a serious concern.
I'm not as worried about long term growth, because I think Obama at least, if no one else, is seriously eyeing some of that moeny for long term goals (renewable energy if nothing else). And I would think that ripple effects will create a lot more in the long term.
But I seriously worry about some of that too. I expect at some point we'll elect a supposedly REAL conservative to come in and slash the budget like crazy after Obama is done. But then I don't expect, or at least hope, that this spending spree won't last much longer. After awhile the necessity to spend needs to give way to the necessity to pay off debts.
Posted by Mucus (Member # 9735) on :
quote:Originally posted by Lyrhawn: The Volt by the way is exactly the car that everyone has been telling them to build for a decade or more, and even the Asian automakers refuse to do it.
For the record, it turns out that this is actually untrue. It appears that the first plug-in hybrid in the world has already hit the market from a Chinese company, BYD.
Interestingly enough, Warren Buffet has a 9.9% stake in BYD indicating at least a certain level of confidence in the future of the firm.
quote: The questionable quality of Chinese cars has been the butt of many jokes, but it looks as though BYD Auto of Shenzhen, China, might be having the last laugh.
On Monday, BYD Auto began selling the first mass-produced plug-in hybrid car in the world.
Unlike conventional gas-electric hybrids, the F3DM can be charged from a wall outlet. It has a range of about 60 miles on a full battery charge. Its lithium-ion batteries can be fully recharged in as little as seven hours, said BYD, which stands for Build Your Dreams. And the batteries can be 50 percent recharged at a special station in 10 minutes.
The car also has a 1-liter gas engine, which, according to media reports (Treehugger and Autoblog Green), recharges the batteries to extend the range.
For those of you keeping score, BYD Auto has beaten General Motors and Toyota in bringing a plug-in hybrid to market. The Chevrolet Volt goes on sale at the end of 2010. Toyota is planning a plug-in hybrid, also for 2010.
...
According to The Wall Street Journal, Mr. Wang told reporters that the company plans to sell 350,000 total vehicles in 2009, which is nearly twice the number sold in 2008. The company plans to introduce four new vehicles next year, including an electric car.
In September, Warren Buffett bought 9.9 percent of the firm, which may signal BYD’s entrance into the United States market in the near future.
(Also, Toyota is planning for a plug-in hybrid for the same year of release as the Volt)
Pretty cool stuff.
Posted by Lyrhawn (Member # 7039) on :
The Volt still goes a step further than either the plug in Prius or the F3DM. In the case of both Asian cars, they are traditional hybrids with big battery packs that allow you to charge them from a wall outlet and then drive, but when the batteries die, the engine kicks in both to power the battery AND to actually move the car.
The Volt is fully electric. It's an electric car. The engine is just there to charge the battery and at no time actually moves the car.
Toyota until recently downplayed the idea, then announced a half hearted effort with the Prius plug-in, which is equivilant to what almost every other major car company is making. It's an established car with lots of battery packs thrown onto it, and even they are extremely hesitant to use LIONs. Honda has been badmouthing the idea and the technology for months now.
As for BYD? Who knows? They've been making cars for five years. Considering the complexity of the technological shift being attempted, and the total lack of coverage of the process for their R&D from start to finish, I'm not really holding my breath on their car being a smashing success. I hope that it is. I hope that it is for lots of reasons. But it wouldn't surprise me if it was met with a lot of problems.
So, "for the record," I'm still right. That BYD car might be the first PHEV, but the Volt will still be the first EREV. And there are tons of PHEVs planned from different companies that will all be coming out around 2010. Many of them are American.
Posted by Mucus (Member # 9735) on :
To be honest, I think you're splitting hairs a bit. From a consumer POV, the car moves powered by electricity for the first n kilometers, then the engine kicks in. Whether the engine drives the car directly then or whether it charges the battery first seems to be a technicality.
Its certainly not a distinction that "everyone has been telling them to build for a decade or more." I suspect far more people across the world are currently more interested in a PHEV than a EREV, especially at the price difference between the two currently.
In any case, the BYD car is available now and is being sold now. That counts for a lot, after all, who knows if GM will even exist two years from now and who knows if the Volt will end up being vapourware. A bird in hand and all that.
Posted by Lyrhawn (Member # 7039) on :
quote:In any case, the BYD car is available now and is being sold now. That counts for a lot, after all, who knows if GM will even exist two years from now and who knows if the Volt will end up being vapourware. A bird in hand and all that.
That's true. On the other hand, who knows if that BYD car will still be around in a couple years. A new untried technology using a new untried battery configuration on a massive scale with a scant record behind it. I have a feeling it'll sell well enough in China, though maybe their timing wasn't the best given the recent plunge in oil prices. But Americans are leery about buying cars from a company that's been around for 100 years. I have a feeling they'll be even more leery about buying from a company that's been around less than a decade, especially given the general public sentiment towards Chinese made products. They've had a bad couple of PR years recently.
Either way, we're still a couple years away from any sort of battery powered car being on the market in the US, be it from China, Japan, or the United States (or anywhere else).
Posted by Mucus (Member # 9735) on :
quote:Originally posted by Lyrhawn: That's true. On the other hand, who knows if that BYD car will still be around in a couple years.
Kind of a cheap shot since BYD is probably selling way more cars than GM did at five years old. Also, Buffet at least suspects that BYD will be around for as long as his investment is in BYD and he certainly expects some growth. AFAIK, he has no money in GM, luckily. In fact, he obviously believes that the prospects for GM are less than that of Goldman Sachs, GE, and even the makers of Kraft Dinner. So far, it seems that the stock market has a pretty similar view (albeit, much more negative across the board than Buffet's view)
quote: But Americans are leery about ...
Never really said anything about Americans on BYD. Bah. I suspect that some Americans will cling to American cars long after they give up clinging to their guns and religion
I'm talking on a more global scale, after all, replacing 1000 cars in China is just as important for the environment as replacing 1000 American cars, maybe even more so given the scale of the environmental problems there.
Posted by Mucus (Member # 9735) on :
quote:Under the current plan, the US government would cancel most or all of its existing debt in the company and invest in a “new” GM that could emerge from bankruptcy in the autumn, said a person close to the matter.
GM would receive tens of billions of dollars in new government money, probably in stages, to prop up its business at a time when car sales are threatening to be lower than the 10m annual rate at which GM says it can break even.
The person said that the government may keep a slice of debt in the “old” GM assets that are wound down in bankruptcy to retain leverage over the process.
GM, the largest US carmaker, is likely to file for bankruptcy protection even if 100 per cent of bondholders agree to a debt swap proposed by the company and the government, said people close to the company. An agreement looked unlikely on Friday, after a bondholder committee said it would reject the offer.
Huh. Its almost a footnote, but it seems that the majority of the GM bailout which was marketed as an "investment" is about to disappear. Our governments won't be getting much back at all (and in fact will need to put more money in).
Posted by Lyrhawn (Member # 7039) on :
I don't like the sound of that. Why on Earth would it require that much government funding if their debt is reduced to near zero? I know they'd need cash for operating expenses, but they still have an influx of money from the cars they are selling, smaller though the number may be.
![[Hail]](graemlins/hail.gif)
![[Wink]](wink.gif)