Thoughts on GM from a GM Family
All four of my grandparents were lifelong General Motors employees and my father worked there when he was young. Accordingly, its recent collapse has been a topic of conversation in my family. Today, its market cap fell to 1.88 billion dollars. That means that the relatively small company I work for, IAC, could buy GM with the extra cash sitting in its bank account. Insane.
Here's the email conversation I had with my father today, in case you're interested hearing a somewhat inside perspective.
Me: My take: take it to bankruptcy, pay the creditors, reorganize. No point in throwing money at something that's broken.
Dad: Not as easy as it sounds. The late great USA. Dems owe the unions for votes. Reorganization has already been implemented. Legacy costs and union benefits costs are astronomical for Ford and GM. Toyota pays about $47/hr per employee, GM about $80/hr in salary for people WORKING NOW. Health care and retirement benefits are killers for US auto plants, not Jap plants because they are too new for retirees. Which Democrat is willing to tell the unions their negotiated contract is void? Not Obama. He's too smart for that.
Me: Well, he's got a smart team of economic advisers assembled. Hopefully people like Warren Buffet and Larry Summers can explain the reality of the situation in clear terms. GM is a health care charity. It needs to turn back into a business.
Dad: Your point that GM is a health care charity is exactly correct. When companies are businesses they do well and make money and everybody thrives. When I was a kid all my health care costs were provided by GM, never a nickel out of my parents' pocket. GM was referred to as Generous Motors. Our country lived in the immediate post-war era which is almost incomprehensible to people today. No foreign competition (it's hard to make stuff when someone is dropping atom bombs on you). Our country had a surplus of everything. A 4-year old car was usually in the junk yard or sold to used car dealers from the South. They called it planned obsolescence. All natural resources imaginable.
So the unions said we want more and we really don't want to work and you can't really fire us or we will strike and you will be out of business. I know -- I was there on the production line turning out crap as a member of the union. So the companies treated the unions the way the drug dealer treats a high priced lawyer - merely a cost of doing business. All were happy for a while.
But as you know that scene did not last forever. But both parties lived in never never land and pretended that all would be OK forever.The government did not help matters either.
So here we are today watching the birth and death of a country and its industrial might. Maybe we are all to blame and just can't see it. Maybe we became too successful and greedy and lazy. Of all the millions of people you know, do you know of anyone who works in an auto plant or in any capacity where they actually make something? Selling insurance and stock to each other doesn't count.
The joke in Russia used to be, "We pretend to work and you pretend to pay us." Maybe our joke should be, "We pretend we WANT to work and you pretend to WANT to pay us."
A health care charity indeed.
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I realize this has been said, but they're losing the money and the loyalty because we don't see brand loyalty anymore-- we see what gets us the best product for our money. If I liked driving GM or Ford cars then I'd go for it, but I feel safer in my Hyundai which has survived three accidents and 11 years and is still kicking than in my friend's Ford Focus which cost slightly more, doesn't have as good gas mileage, and keeps having to go to the shop. Maybe if we saw more innovation in their products, we wouldn't be trying to put this on the Unions (for whom my mother used to organize, and who saw plenty of Union workers that deserved the pay they got).
I'm sorry, but it isn't because of the unions and the high costs of keeping them in benefits. It's because they didn't innovate and because they still won't build a quality product to match Nissan, Toyota and Honda.
Boeing always has really good benefits, and they know how to suck it up and innovate to stay alive, and how to build a quality product. They also know how to sell off portions of the company they no longer want, like the Boeing Wichita plant that was sold to Canada's Spirit Aviation. I'll always be annoyed with them for that since my dad and one uncle are Boeing retired.
Agreed. And health care costs take up more of our GDP, 15%, than any other country, and for poor ranking in the CIA Worldbook, in the 30s for mortality, behind Saudi Arabis.
The health care industry are the same corporate welfare babies as banking, energy, etc. Other countries have better health care for less, cars running on compressed air, and don't give blood money to companies like Halliburton, Blackwater, who get paid more than our brave men and women.
As the industry sits now, many of us simply will not buy an American car.
the leadership of these companies despite years of warnings has chosen instead of innovation and quality, to spend their money fighting fuel economy standards, emission standards and alternative fuel mandates.
the result has been a fleet of cars no one wants. Giving them a huge influx of cash will not make people want these cars.
the leadership of these companies has proven to be incapable of heading the writing on the walls.
While allowing these companies to fail would be a huge economic hit, it is one we can take. What we can not take is bailing out banks, bad companies and corrupt industries and securing no mandate for change in the behavior that brought them to the brink in the first place.
My family is not GM, but Ford, and I have two brothers and a sister that currently work at plants in Cleveland and KC. My father retired from Ford as did three uncles, an aunt and two cousins. I worked there in the mid 70's and walked the picket line during a strike.
The workers on the floor have always had good work ethics and pride in workmanship. the problem is in the parking lots. Go by any auto plant and count how many foreign makes are out there. Recently, my sister-in-law went to purchase a new car and told my brother that she wanted to buy a Toyota. He told her to find a divorce lawyer while she was at it, because that would end the marriage. She didn't buy Ford, but they settled on a GM product. At least it was American.
Yeah, I know Toyota, Honda and a few others have assembly plants here in the US, but the profits go over-seas. People need to buy American cars and trucks and the companies need to stand behind their product.
Unions are going to have to change the way they do things, perhaps acting more like the old guilds to both protect their members AND make the business they work for stronger, but I am worried at anti-union demonization. We need a new approach willing to question all parts of the auto industry but not ready to throw any one part, especially unions, under the bus.
GM should make a loud call for national health care insurance as part of its bailout. A GM that simply wants some cash and the right to pay workers $10/hour without health care is a non-starter.
They can not compete until we have national health care. No other country in the world puts these costs on the backs of business. We also need import tariffs to protect our economy. Big problems, simple answers.
Exactly!
There is enough blame to go around. Yes, some aspects of unions are bad, but overall they have increased living standards for millions of people over the last generation. Those people sent their kids to college and that led to an even stronger middle class. For years i was anti union but as I got older and saw what the raw capitalism of the last few decades has done, I rethought my position. I do not want to live in Wal Mart's America. The union workers only produced what the company designed and developed. So there is blame there too. And the consumer is complicit in this scenario too -- who bought all those large SUVs?
I firmly believe that Asian autos are no better than Americans. There has been a perceived difference in quality over the last generation. Were Us autos inferior early on? Yes, but the quality gap has been closed for many years. I truly believe it a case of believing something so it's so. I've owned any number of GM cars and I've never had any serious issues, and it's not unusual to get 200k miles on a vehicle if it's properly maintained. Every year I spend a day at the Auto Show, and seeing all the brands an models side by side there is little difference.
The US auto industry must survive, too much depends on it.
We've owned both American and Japanese cars. We've only bought one American car in the last 20 years - if you care about gas mileage, design and safety and don't care about size, Japanese cars make sense.
We always test drive American cars when we go to buy a new one (roughly every 6 years or so), but we've generally wound up with Japanese cars. The first two cars we owned were American. The first one (a '79 Dodge Aspen) was a complete piece of crap. It spent an enormous amount of time being repaired. The second one (an '86 Chevy Cavalier wagon) was a better car but always had rust problems. The Subaru and Hondas we've owned since then have been much more reliable.
This is supposed to be a "free market economy." Consumers are free to make the choices appropriate for them. Since American car companies have not been willing to sell us the cars we want to buy, we'll keep buying Hondas.
American cars are too high in price and don't get the mileage that's on the sticker. Over the years, the American automakers have fought against seat belts, making cars safer, price, everything. Can't they make a small car for under $5,000 that gets 60 miles to a gallon? All I see their ever making are large SUVs that use lots of gas and always seem to park in compact parking places. I don't blame the unions as much as I blame corporate greed but I do say that we do need healthcare in this country and that would help the auto industry.
Dodge Dynasty is widely considered to be the worst car of all time from a reliability/quality standpoint.
Worker democracy and influence is a fine thing, but union dictatorship is not. Auto workers have been on the dole for a long time, why else would an automobile put the average worker into debt for 5-7 years. Much of our economy is overpaid, overcharged, and over-leveraged.
There's probably a lot of smart people inside motown who'll do better work for a smaller behemoth created on the bones of today's auto companies.
That's a pretty flippant answer to a tough question. We are talking of MILLIONS of people, most not union workers. I come across many people who are so anti union that they would like to see people thrown into poverty and loose their home just because they are perceived to be getting paid too much. By who's standard are they over paid?
Yes, older employees wages are higher, there is now a 2 tier wage system in place, new employees are get $14.40/hr. Tell me are you going to get a smart, talented, worker for that price? Would you work and raise a family, buy a home, and a car on that wage? I don't think so. Historically workers were paid the prevailing wage - is that wrong? Do you expect to get paid what others in your industry are making? I think so.
For some reason many people want to spite a person who has worked for decades in a factory, and it is hard work, and at age 40 or 50 expect them to suddenly take a 50% wage cut. How is that person supposed to rearrange their life in a down housing market and a non-existent job market?
The Big 2 1/2 have been making tough choices over the last decade, look at the number of jobs lost and factories closed. Unlike Wall Street they have been making the effort as have the unions. Apparently just not the effort you think they should make.
Auto workers are an example of the disappearing working middle class. You can argue about about thewage rate but you can't say that they were on the dole. Most people using these arguments haven't worked a physical day in their lives or are jealous of the efforts of the Unions to give respect and self worth to working Americans and Canadians.
The same 4 models for 20+ years: Civic, Accord, Corolla, Camry. Yes other less popular models for some variance and bling, but the entire resources of 2 huge multinationals pin point focused on keeping those 4 models at the top of the dependability pyramid consistently.
What does GM have to show for it? Design flatulence, model after model burned down, dropped, resurrected: (same with Ford and Chrysler but I don't know the models)
Vega, Chevette, Celebrity, Monza, Nova, Malibu, Impala, Caprice, Beretta, Monte Carlo, Citation, Lumina, Cavalier, Camaro, Corsica, Cobalt. Enough to make a person dizzy while all that time the no brainer Civic, Accord, Corolla, Camry no-brainer models staidly standing by to draw off the buyers year after year. This situation is no surprise to anyone who lived through the late 70's early 80's.
BMW 3/5/6/7 series
VW Rabbit,Gol
Volvo 6/7/8 Series
Mazda 3,323,GLC/
Nissan Altima/Sen
The list goes on. These are companies who evolve the same models (OK they tweak the name) and improve with each generation.
You know what I think? I think Capitalism is a WONDERFUL THING, until people get greedy. Even Humpty Dumpty had a great fall. And guess what? They couldn't put him back together either.
When, pray tell, do people NOT get greedy in a capitalistic system? Greed is the most basic of human tendencies, and when you add that to the mix of capitalism, expect trouble every time.
It seems that everyone is conveniently ignoring one fact. The American automobile industry is competing with foreign imports, and the import duties are insufficient to give Americans a level playing field.
Compare your union wages to the folks down the street from me at the Thailand Toyota assembly plant where the average pay is 250 baht (about $8) a day.
And it's not just the automobile industry, but every other industry where the playing field isn't level. Those workers in Mexico for example make 8 dollars an hour. Their companies aren't bound by OSHA or by the EPA. They don't provide medical care or retirements.
No one in this country, white collar or blue, can compete when the chips are stacked so heavily.
Toyota, Honda, Kia all make cars here in the US not subject to tariffs. I can not for the life of me figure out why anyone would want government healthcare. Have any of you ever been to the DMV, or God forbid tried to help your elderly mother with a Social Security problem, or the worst of horrors dealing with the IRS. How could anyone think the government could run healthcare. Please, I will read every post sent all night long looking for an answer. Do any of you truly believe a government healthcare system would be better than we have now?
The question is not if government would be good or bad. The answer is bad.
The question is if they would be better or worse then the insurance companies that most americals get healthcare from. If you compare medicare or the VA to commercial insurace, the government has a lot more of its money going into health, and a lot less into paperwork.
I actually experienced government healthcare in the UK, and I think it was better, and the doctors of much higher quality, (ie. interested in the care of the patient and not how to extract the most dollars from the patient), than here in the United States. The US is the joke of the world when it comes to health care, except of course if you are a millionaire (even they may not be able to afford healthcare in the future).
People who joined the unions thought they were entitled to job security and good wages on a high school education, thinking they were all set. The Big 3 management thought they could sell junk gas hog SUVs forever, and everything is wonderful. Me? I am college educated but I don't expect any job security.
People who think they are entitled to job security are dreaming and cut off from reality. If u look around, it doesn't take a genius to figure out that jobs are sent overseas, and people who try to hang on to the past get left behind (Big 3 and UAW). I say let the dinosaurs die. They had their chance to make gas sippers and quality cars from the first energy crises. What did they do? They went the opposite direction. Now they have to pay the piper for their mistakes. Nothing personal. Just business.
Restucturing the pension and retirement benefits will fall on the shoulders of the taxpayer. We are in a pickle and everyone knows it. GM will shed these obligations or perish and shed them anyway. The assets of the company will be spun off to others to have an opportunity to make a profit at manufacturing cars. The stock is worthless right now and the great debate is really the tremendous liabilities. Letting the dinosoar die and all its encumbrances is necessary and everyone knows it. It's just a matter of selling it politically that counts. While Bush is President, the Dems want to let him bury the auto industry one way or the other. Auto manufacturers are not bankrupt, but Democrats can push bailout now then any position Obama takes after taking office would either moderate a Bush response but move to the center from the full Pelosi bailout that is being pushed to appease the unions. This is all politics folks.
Let them bankrupt
Where is the incentive for ANY publically traded business to plan for the long term?
A lot of people are blaming the autoworkers, it's management that should be blamed, and rightly punished. I think they should break GM up, force out the monolithic corporate culture which has done so much damage and allow the individual makes to have a go. Throwing tons of money at these corporate dinosaurs is only going to delay the day of reckoning with much worse results.
Whoa. Anti-union much?
Think 'Walmart'. Still think unions are unnecessary?
Granted GM et al = stupid/evi
...but also, 'not': why change when profits were so record-high-ish a few years ago? Big trucks and SUVs sold like crazy--and if a carbon-neutral, cheap, gas substitute is discovered, it'll be SUVs time again.
But global warming and peak-oil-pricing are here--and GM should have seen it coming. And they did--but not enough. And change-blocking unions are wrong.
So everyone needs to grow up. We can be positive and fix things or whine and point fingers. Some 'to do' items in keeping with the former:
Keep the heat on GM/etc. and workers--not mindlessly throw money at them.
--Fire loser execs. (nothing sends a message like a [figurative] be-heading or two).
--Incentivize workers to efficiently build quality. Workers: think 'Flint, Mi.' (a la 'Roger and Me').
but also:
--enforce environmental and labor aspects of NAFTA: push foreign producers to be green and fair.
--universal health care; it would clear away a lot of the GM vs. Toyota pay imbalance.
Let's not scape-goat each other. Instead let's make smart, fair adjustments and build a healthy economy.
I support unions. The middle class needs to have a living wage in order for families to have homes or are all middle class families going to live in apartments? Working families also need health care and good working conditions. Do we really want to live like most of Europe and most of Asia? For some the middle class way of life is at stake.
moonwatcher; I agree that middle class families need to make a living wage. I lived in Lansing Mi for quite a while and had many friends who worked in the auto industry. The issue is not should they make a living wage, but what exactly is a "living wage". That's like an average car. It varies depending on the desires and wants of the individual. I agree that Management of the Auto industry sucks and should be replaced. Based on conversations with my friends who were union people and wonderful friends, they had management by the...well let’s say management was taking a knife into a gunfight. It takes good workers and good management. But companies are in business to make profit and the profit was with the gas guzzlers and they had to make "big" profit to pay the total compensation of workers. So what has changed? The main reason they need a bailout is to make payment on retirement benefits that they allowed to go through the roof. I am not a great fan of the generosity of management but if a company requires tax payers to pay the pensions of workers then I say NO.
I'm with you Moonwatcher. We need more organized labor, not less. People in this country forget unions were the rising tide that lifted the wages of all Americans. What's funny is a guy working at Walmart will gripe about union workers making obscene money overlooking the fact of the huge salaries people at the top of Walmart make, money basically taken from him and thousands of others.
Exactly. Why don't we compare what executive management salaries are here compared to companies around the world. Any of them pay their executives 400 times more than their hourly workers? I worked for(past tense) Goodyear Tire and our president of N.A. operations made about 38 million including perks, stock options and oh-a state of the art home security system. 38 million and for what? One bad management decision after another. And that's just ONE top exec.
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