General Motors

[SuBe]

I've been thinking about what the government should do about the failing automobile industry since a bailout plan was first proposed a week or so ago. I have decided that I am opposed to any government bailout of the United States automobile industry.

I am frankly tired of people in this country complaining about there being a lack of American-made goods and services available nationwide. Well, the automobile industry-- specifically, Ford, GM, Chrysler-- has been a staple of American-made innovation for over a century now. It has been through many economic ups and downs since then, from the Great Depression to World War II to the oil crisis of the 1970s to today's economic crisis. Yet, for all its triumphs, it has never been able to adapt to change. Hybrid vehicles were being produced by Toyota and Honda eight years ago, and where were the American automobile companies? Too busy focusing on how much they can milk from the general public by offering more Dodge Durangos and Chevy Tahoes than affordable, fuel-efficient sedans and compact cars. Toyota and Honda began producing fuel efficient SUVs and crossover vehicles, and where were the American automobile companies? Too busy worrying about the government raising CAFE standards and trying to work around them instead of releasing innovative vehicles people WANTED to buy.

Such is the case with most sectors of our economy... American producers are too busy stuck in the past, while foreign producers have been offering affordable, top-of-the-line products for some time now...

If we pour hundreds of billions of dollars into the automobile industry, how can we possibly expect these trends to automatically reverse? How can we as taxpayers expect American automobile manufacturers to start offering better products when they have frequently stalled in the past? No amount of money can make up for failed policies and lackluster innovation; all it does is buy American car manufacturers more time to fail, instead of forcing them to face reality now.

I agree 100% Jman. It's GM's failed policies that got them there, whether it be because of them not standing up to Unions, them not being innovative, or them not saving for a rainy day, it is them that made the mistake, and them that must change, or die.

It's not up to the American Taxpayer to bail them out, they caused this mess, they should clean it up.

 

[The Guard]

I think, at this point, this goes beyond Democrat and Republican. And it goes beyond blaming CEOS. Fact is, once again, unless something is done, a lot of people are going to suffer.

 

[SuBe]

I think, at this point, this goes beyond Democrat and Republican. And it goes beyond blaming CEOS. Fact is, once again, unless something is done, a lot of people are going to suffer.

But, the question is, how do you fix it. Do you just throw Tax payer money at it, and hope that the Same people that messed it up, can fix it. Or, do you let the Market work the way it's always worked? They made the mistakes, do you wan't to pay for it?

Do we reward the losing team during the Super Bowl? Do we give extra credit to student for getting failing grades? Do we give raises to people that do a bad job? It's the same thing, but larger. Yes, people could lose jobs, yes, people could be hurting for a little while, but that's what happens in a Free Market.

Anyway, couldn't GM file for Chapter 11, and be done with it? Isn't that why we have Bankruptcy Courts?

 

[Anita18]

Anyway, couldn't GM file for Chapter 11, and be done with it? Isn't that why we have Bankruptcy Courts?

It's really the only way to sever ties with the union, but they might not be able to make up much ground before they have to file with Chapter 7, which means they'd be gone for good.

People don't want to buy cars from companies who file for bankruptcy. A car is a long-term purchase - they want to be assured that their warranties are valid and that they'd be able to get service on their car from a dealer. That's not guaranteed by a bankrupt company.

They're definitely in between a rock and a hard place.

 

[Franklin Richards]

Well if they don't want to file Ch. 11 they could do what the NHL did a few years back and renegotiate. I couldn't believe the Player's Assoc. lowered their salaries.

 

[NHawk19]

I agree 100% Jman. It's GM's failed policies that got them there, whether it be because of them not standing up to Unions, them not being innovative, or them not saving for a rainy day, it is them that made the mistake, and them that must change, or die.

It's not up to the American Taxpayer to bail them out, they caused this mess, they should clean it up.

Problem is they are one of the largest employers both direct and indirect in the US. Not only do they directly employ people but they also purchase large amounts of goods and services, everything from electronics to construction.

If they dont get bailed out thousands of tax payers loose their jobs through no fault of their own. Construction on retro fitting of plants, and new plants are halted.

Yes GM needs to attone for their mis-steps but at what cost to everyone. If the gov moves in they need to cut CEO & executive pay stop bonus', increase tariffs on foriegn goods, stop the exportation of jobs to Mexico & Canada, renegotiate with Unions, and step up quality.

The American people then need realize that Americans who keep the economy moving are working there and buy that and other US made goods.

 

[SuBe]

Problem is they are one of the largest employers both direct and indirect in the US. Not only do they directly employ people but they also purchase large amounts of goods and services, everything from electronics to construction.

If they dont get bailed out thousands of tax payers loose their jobs through no fault of their own. Construction on retro fitting of plants, and new plants are halted.

Yes GM needs to attone for their mis-steps but at what cost to everyone. If the gov moves in they need to cut CEO & executive pay stop bonus', increase tariffs on foriegn goods, stop the exportation of jobs to Mexico & Canada, renegotiate with Unions, and step up quality.

The American people then need realize that Americans who keep the economy moving are working there and buy that and other US made goods.

The Post Office is laying off 40,000 Federal Employees, do the Tax Payers need to bail out the Federal Government so they don't lay off the Postal Workers? The Mail system is an essential part of everyday commerce, it directly or indirectly affects everyone in this country. Should the Tax Payers throw away bilions of dollars to help these 40,000 people?

 

[BlackLantern]

I'm bouncing around on different political websites and such and things are not looking good for an auto bailout...if it does get passed, it's going to be by a very narrow margin....Washington is fearing creating a climate of corporate welfare (more so than we already have)

 

[The Senator]

Problem is they are one of the largest employers both direct and indirect in the US. Not only do they directly employ people but they also purchase large amounts of goods and services, everything from electronics to construction.

If they dont get bailed out thousands of tax payers loose their jobs through no fault of their own. Construction on retro fitting of plants, and new plants are halted.

Yes GM needs to attone for their mis-steps but at what cost to everyone. If the gov moves in they need to cut CEO & executive pay stop bonus', increase tariffs on foriegn goods, stop the exportation of jobs to Mexico & Canada, renegotiate with Unions, and step up quality.

The American people then need realize that Americans who keep the economy moving are working there and buy that and other US made goods.

Tough. These corporations should have thought about these possible repercussions during the thousands upon thousands of business meetings they have had in the past decade to discuss the direction of the organizations they work for. The automobile industry may employ thousands of people, the automobile industry may buy a lot of commodities... but guess what? Nothing erases the fact that they made downright awful decisions to get them where they are today. And pouring hundreds of billions of dollars into a possible-- not likely or guaranteed, mind you-- a possible resurrection of that industry does not erase all the problems they currently face. That money will not reshape the American automobile industry overnight, it might not even save it in the end.

The only thing we will accomplish is throwing away taxpayer's money into a cause not worth fighting for. Tell me-- do you think it is wise to invest in a company which is continuing to use outdated business models? Do you think it is wise to invest in a company which has taken years to release an innovative product? Why should we invest our money into an industry which has been around way past its prime? These companies should declare bankruptcy and figure out where to go from there. Hire consultants, or fire everyone on the executive board and bring in new people with new ideas and ambitions, to truly fix the problems. Don't rely on a lifeboat made of money to save your industry-- especially when most of that money will end up in the pockets of CEOs and higher-ups.

 

[SuBe]

Tough. These corporations should have thought about these possible repercussions during the thousands upon thousands of business meetings they have had in the past decade to discuss the direction of the organizations they work for. The automobile industry may employ thousands of people, the automobile industry may buy a lot of commodities... but guess what? Nothing erases the fact that they made downright awful decisions to get them where they are today. And pouring hundreds of billions of dollars into a possible-- not likely or guaranteed, mind you-- a possible resurrection of that industry does not erase all the problems they currently face. That money will not reshape the American automobile industry overnight, it might not even save it in the end.

The only thing we will accomplish is throwing away taxpayer's money into a cause not worth fighting for. Tell me-- do you think it is wise to invest in a company which is continuing to use outdated business models? Do you think it is wise to invest in a company which has taken years to release an innovative product? Why should we invest our money into an industry which has been around way past its prime? These companies should declare bankruptcy and figure out where to go from there. Hire consultants, or fire everyone on the executive board and bring in new people with new ideas and ambitions, to truly fix the problems. Don't rely on a lifeboat made of money to save your industry-- especially when most of that money will end up in the pockets of CEOs and higher-ups.

Dammit Jman, stop talking so much sense!

I agree again. These companies made their decisions, and they have to live with them.

 

[dnno1]

Now you are blaming it on the market and poor timing. It's always the market fault when you make bad decisions.

It's not now. I always was.

I love how you leave out the cost difference of a EV1 to Prius, because the difference there apparently did not play a role in the post-2000 cycles. What was it again 20-30k'ish to a 80-90k'ish difference -- inflation not accounted for? The overhead most likely had a role in this big difference but the Union is totally not at fault there right

That's because it is irrelevant. The EV1 was going for about $34K (MSRP), but no one actually purchased one. They were all offered on a leasing program through GM. That means that the monthly payment for the car was less half of what it would have cost through a conventionally financed purchase. In addition, the average price of a foreign import was about $31K and there were high end SUV's going for more than that.

Let's pretend they cost the same, you also neglect the material and component used by Toyota which are superior in most circumstances. In general (I am sure there are exceptions) they were more reliable and fuel efficient when it came to your average American car. Maybe the consumers didn't care for this right?

You are mixing apples with oranges, but we will pretend anyway. The GM EV1 was a zero emission vehicle that ran totally on electricity. It operated on an equivalent cost of about 60 cents a gallon (more than half the price of what it would have cost to operate a Toyota Prius at $1.47/gallon). Which car was superior again?

Now you are trying to get into a chicken and egg argument of whether the consumers bought more gas guzzlers therefore GM calibrated to their tastes or GM made more gas guzzlers and consumers went with the selection. Forget this chicken and egg argument and notice how Toyota and Honda were doing pretty well despite not having a large selection of gas guzzlers (they had some) compared to their American counterpart. Guess who is doing better now, guess who isn't asking for a bailout?

No, I am not. More than likely, GM sold all of it's vehicles that it produced, but not at the same price. They usually reduce their prices in order to clear out inventory. Since demand was low, they obviously sold too many cars under price. That has nothing to do with chickens or eggs. Toyota and Honda did better because they had a larger market share. Keep in mind they sold gas guzzling SUV's and luxury vehicles as well. These two might have done well recently, but they will be hurting pretty soon. Japan is in a recession as well as Europe and North America. It is only a matter of time until the start to feel the pinch.

Please dnno1, it's abundantly clear you think the big three are nearly faultless and their current circumstances compared to the plethora of Japanese and European car companies were all flukish luck. By all means you can keep thinking that way, but most if not all your arguments are not very persuasive. I didn't become a fiscal conservative overnight.

No, it is more that there needs to be an automobile industry in America for national security reason. If we were in a serious position where the rest of the world had an embargo on us we wouldn't have cars to buy if there were not GM, Ford, or Chrysler. It would be both foolish and unconstitutional to let them fail.

 

[Addendum]

It's not unconstitutional nor will it weaken national security

 

[BlackLantern]

I think dnno is seriously overstating GMs importance outside the state of Michigan

 

[dnno1]

It's not unconstitutional nor will it weaken national security

Yes, it is. Failure by the government to protect the people is unconstitutional. Millions of people will lose their jobs and the general welfare will be damaged. If the government does not act in this instance they would have failed to do their constitutional duties.

 

[dnno1]

I think dnno is seriously overstating GMs importance outside the state of Michigan

You are seriously underestimating the importance of the automobile industry here in America.

 

[Paradoxium]

It's not now. I always was.

That's because it is irrelevant. The EV1 was going for about $34K (MSRP), but no one actually purchased one. They were all offered on a leasing program through GM. That means that the monthly payment for the car was less half of what it would have cost through a conventionally financed purchase. In addition, the average price of a foreign import was about $31K and there were high end SUV's going for more than that.

You are mixing apples with oranges, but we will pretend anyway. The GM EV1 was a zero emission vehicle that ran totally on electricity. It operated on an equivalent cost of about 60 cents a gallon (more than half the price of what it would have cost to operate a Toyota Prius at $1.47/gallon). Which car was superior again?

No, I am not. More than likely, GM sold all of it's vehicles that it produced, but not at the same price. They usually reduce their prices in order to clear out inventory. Since demand was low, they obviously sold too many cars under price. That has nothing to do with chickens or eggs. Toyota and Honda did better because they had a larger market share. Keep in mind they sold gas guzzling SUV's and luxury vehicles as well. These two might have done well recently, but they will be hurting pretty soon. Japan is in a recession as well as Europe and North America. It is only a matter of time until the start to feel the pinch.

No, it is more that there needs to be an automobile industry in America for national security reason. If we were in a serious position where the rest of the world had an embargo on us we wouldn't have cars to buy if there were not GM, Ford, or Chrysler. It would be both foolish and unconstitutional to let them fail.

There is a lot I want to answer but I don't have all the time so I will try to get to the main points. The EV1 was not killed, it was DEAD on arrival, the whole 450 car recall sure as hell didn't help it. And it WAS $80,0000, the number you have (30k) was for the first generation model which had problems. $80k sure as hell didn't help.

It's price and flaws that killed it along with poor timing. They also didn't have to cut the R&D on that line, in fact I recall Wagoner regretting that decision. Oops more management ineptitude.

You can keep laying the blame on the market and timing, but the nature of the market is its high turbulance and being able to prognosticate trends and adapt to it. The incapacity to do so is no excuse, I would know because I do something similar, if I **** up I don't gain a single dime - in fact I go into the negative (my own savings). If I can ride trends I can reap profits. Very simple on a abstract level, extremely complicated when you put to action.

Now on the ridiculous assertion of constitutionality, since when were bailouts constitutional anyways? Ignoring this, America is a gigantic debitor nation, and you want to increase this with a bailout? To top it off you concerned with embargoes and yet you want to do this? How about an actual one? Like the decoupling of creditors to America? Last I recall the Chinese and Saudi were not too hot on lending more money to America. IIRC, China already slammed the door on that (was it temporary or not I don't remember). And you want to take out even more money to bailout the automakers? Oh that is just a fantastic idea, expediting the decoupling of creditors to America with more bailouts is going to really help prevent embargoes.

 

[BlackLantern]

You are seriously underestimating the importance of the automobile industry here in America.

I would say take a look at the major American auto makers, whichever company is making the biggest strides towards more efficient vehicles should get some assistance...the other 2 can declare bankruptcy or whatever...

 

[Addendum]

Yes, it is. Failure by the government to protect the people is unconstitutional. Millions of people will lose their jobs and the general welfare will be damaged. If the government does not act in this instance they would have failed to do their constitutional duties.

GM does not employ "millions of people". They employ around 266,000 people. People losing jobs is nothing new.

GM failed as a business because they were losing more money than they were making, and their failure of adjusting to the demands of the consumer and the rise of the cost of gas (even though it's going down now).

Why should anyone reward failure? What proof is there that simply throwing money at a problem will change anything?

 

[Paradoxium]

I think as of right now in order of best to worse financial positions:

Ford > Chrysler > GM

Though all three are not in a great position either ways.

 

[Paradoxium]

I already see dnn01 working on a reply for a good long while, this is going to be huge sighs. I just want to give up now and let whatever happens roll

 

[dnno1]

There is a lot I want to answer but I don't have all the time so I will try to get to the main points. The EV1 was not killed, it was DEAD on arrival, the whole 450 car recall sure as hell didn't help it. And it WAS $80,0000, the number you have (30k) was for the first generation model which had problems. $80k sure as hell didn't help.

There you go again citing opinionated blogs. According to GM the cars were leased and the MSRP ranged from $33,995 to $43,995. I don't see how something could be dead on arrival if it was on the market for 6 years before it was discontinued. Usually dead on arrival would insinuate that it never went to market. That doesn't make sense. The claim is a total misnomer.

It's price and flaws that killed it along with poor timing. They also didn't have to cut the R&D on that line, in fact I recall Wagoner regretting that decision. Oops more management ineptitude.

It was more timing than price or flaws. There wasn't an adequate infrastructure for charging the vehicles to convince the consumer to buy them. Once again the cars were on a lease and were being maintained by GM dealers. The first iteration of the vehicle ran on lead-acid batteries which would not run well in cold weather and limited the areas which the cars could be sold. This was corrected in the second generation of vehicles sold in 1999 (two years after the first generation), which ran on NiMH batteries. All first generation lessees were offered an upgrade to the new battery at no extra charge. They didn't really cut the R&D on alternative fuel vehicles, they just turned their focus on hybrids, just like all of their competitors were doing.

You can keep laying the blame on the market and timing, but the nature of the market is its high turbulance and being able to prognosticate trends and adapt to it. The incapacity to do so is no excuse, I would know because I do something similar, if I **** up I don't gain a single dime - in fact I go into the negative (my own savings). If I can ride trends I can reap profits. Very simple on a abstract level, extremely complicated when you put to action.

So what you are saying is that you really can't blame management because it is a crap shoot anyway. The automobile industry is limited in that it can not adapt to changing trends instantaneously. If a new trend requires a change in design at best it will take them at least 3 years to design and build (more than likely longer).

Now on the ridiculous assertion of constitutionality, since when were bailouts constitutional anyways? Ignoring this, America is a gigantic debitor nation, and you want to increase this with a bailout? To top it off you concerned with embargoes and yet you want to do this? How about an actual one? Like the decoupling of creditors to America? Last I recall the Chinese and Saudi were not too hot on lending more money to America. IIRC, China already slammed the door on that (was it temporary or not I am don't remember). And you want to take out even more money to bailout the automakers? Oh that is just a fantastic idea, expediting the decoupling of creditors to America with more bailouts is going to really help prevent embargoes.

That would fall under Article I Section 8 of the Constitution. The government can legitimately bailout institutions if it serves to promote the general welfare of the country.

 

[BlackLantern]

GM still doesn't employ "millions" of people....it's about 277,000 like someone just mentioned....Ford employs about 85,000 I think....so that's not even half a million....and it wouldn't fall under any kind of breach of the Constitution, regardless of how hard you wish it to be.....maybe GM going under will shock the other 2 American automakers into rethinking how they do business....

 

[BlackLantern]

as for trends, foreign auto makers had the foresight to start designing hybrids and more efficient cars years ago.....maybe the American companies should have done the same thing....why should they get another 3 years when they are already behind??

 

[Franklin Richards]

Michigan needs to worry about their crappy football teams.

 

[dnno1]

I already see dnn01 working on a reply for a good long while, this is going to be huge sighs. I just want to give up now and let whatever happens roll

44 minutes is a good long while?