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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Speaking of legacy costs, how come the only ox being gored is the one in the private sector? Most states are deep in the red and they have no way to keep paying out for retirees. We all know the federal government is in the same boat, but no one is saying jettison the government retiree.
Our position on this is completely hypocritical.
This problem has become extremely difficult with the bailout of the Financial Industry. Previously, the Government’s responsibility was to pay for services that provided for the government like, police, fire, water, health safety and national defense. We started that stupid Iraq war so now we are in a situation where many are saying well you screwed up there, or you help there, so you should continue to deviate from your core responsibilities and assume national responsibility for everyone and everyone's personal decisions. Where does it stop is not longer even an intelligent question. It's like asking how deep is a hole. I guess as deep as you want it to be.
If it's okay for a business to abrogate its responsibilities to retirees when it's going broke why isn't it the same thing happening to government pensioners? There's a double standard here. We pour money into the hole that is AIG, but talk about putting money into the auto industry and you're called an idiot.
We hate the thought of someone with a high school education doing hard work making a good living forgetting the fact he is actually producing something tangible, but think nothing of paying college graduates who produce nothing tangible even higher wages for work that is less physically demanding, if not mentally.
My peer group is comprised of retired military, mostly officers. Everything they get as a retiree they squawk about how they earned it. Well, the same can be said for someone turning a wrench at GM or flying a plane at Delta. Government retirees think it's okay for the taxpayer to do without as long as they get their pension and medical coverage.
I'm in a union and I don't think there's a bit of difference between union and nonunion workers when it comes to work ethic. There are individuals who are very industrious and those who are very lazy. The lazy ones have better job security than their nonunion counterparts, but go ask business owners and you'll find agreement many Americans have a lousy work ethic. Go overseas and you'll hear the same thing about the Spanish, the English, the French, the Russians, the Mexicans, the Somalis.
As to the quality of American cars they are as good as anything the Japanese or Germans make. Their value doesn't hold because of their poor quality, but because the Big 3 overproduce. Toyota does't flood the market with its cars while you can't swing a dead cat without hitting a Lincoln (a very expensive and very nice car).
If we're going to bail out AIG why shouldn't we bail out the Big 3? We've poured 150 billion dollars into AIG and it hasn't made a difference. We have no more assurances they will regain solvency or pay us back. And what exactly does AIG produce? ZERO
AIG is Mafia, always was and now we know!
"I'm in a union and I don't think there's a bit of difference between union and nonunion workers when it comes to work ethic'
then your local su.cks
I'm in a union and travel all over the country, working with both union and non union crews and at least in my line of work there is a huge difference in the quality, dedication and training of the two...
I agree with you when it comes to training which has an impact on productivity and ultimately quality, but lazy people as well as productive people are everywhere.
Because until fundemental changes are made in Detroit you will be throwing cash down the toilet. $80. per hr labor cost vs. $47. you do the math, but this is payback to the UAW for democratic votes. Watch, this will happen, and I will be physically ill.
That 80 dollars per hour isn't what's paid to current workers, but includes the salaries of management, the pensions of retirees, and medical insurance.
I wonder if GM's and other auto makers' cash burn rate isn't tied more to their financing arm than to a decline in auto sales. I suspect they bought alot of CDOs along with CDSs and now everytime there is a reduction in their credit rating they are scrambling to pay the bills.
The problem is not quality, the problem is flexibility.
I work in an industry with a heavy union presence, but at a company without one. The unions are great at keeping things going, but when you need to change something, you hit problems. If an engineer can't actually touch a tool, you need a room full of people waiting on each other to fix a simple problem, after dealing with the scheduling to get them all there.
What will it take to get the message across to the auto makers? Since the VERY first time I went out to buy a new car I have been disappointed with the quality of the American made cars. I was buying my first new car in the 80's; I was treated like sh*t at the Ford dealership and after I drove the Escort, I quickly moved on. I ended up buying Japanese that time - the cars were better; they offered more features as standard; the dealership treated me like a customer rather than an annoyance. The fuel efficiency drum has been being beat for at least a quarter of a century, but the American manufacturers have not stepped up to the plate to remind the American Consumer what great American ingenuity is. I'm sorry, but I have a very hard time mustering any sympathy for the people in this industry.
Ricky,
What about the fact that the auto manufacturers refused to improve fuel efficiency for decades out of deference to their oil buddies in the good 'ole boys CEO club? After gas prices rose to $4/gallon, how did they feel about their good buddies then?
Why didn't GM management think strategically for the long-term? I suppose they didn't expect big oil's greed to stab them in the back.
- Tom
I agree, but I also remember that any attempts at fuel efficient cars were mainly rejected by the consumers, too. They were a hard sell to all of us (except for that brief period in the '70s). I agree with Ricky's dad, that this belongs somewhat on the shoulders of all of us. However, the executives in charge turned a blind eye to the future and only lived for the present, as far as R&D goes.
The problem is that the demise of GM, Ford, etc. not only affects the thousands of workers in their companies. What about everyone else in those towns: the retailers, the movie theatres, the restaraunts? Also, how will America ever achieve energy independence without a strong automotive industry ourselves? I, (like McCain) don't fully understand these economic issues. They are very complicated, and better left to smarter people than me. But, I do know that just letting the American auto industry die a natural death isn't good for anyone -- even though I'm sick & tired of bailing out coporate morons who are only worried about their individual golden parachutes.
A Much Better Bailout Plan
For years now, the Big Three automakers have been uncompetitive, largely because they fund employees’ and retirees’ healthcare through private insurance, whereas workers in all other industrialized nations are covered by cost-effective national healthcare plans. Even the foreign manufacturers here undercut Detroit by recruiting a younger, healthier workforce.
Now that SUVs and light trucks sales have tanked, the Big Three are facing certain bankruptcy and need a bailout, possibly for loans to fund the $51 billion they owe to the VEBAs they promised to set up for their retirees’ healthcare. However, the VEBAs will purchase health insurance through private, for-profit providers, which skim off up to 30% from the top, as compared to Medicare, with only a 3% overhead. It would be far better for Congress to allow the UAW workers and retirees to be the first to enroll in a program based on the Conyers-Kucinich Bill (H.R. 676), an expanded Medicare with no premiums, no deductibles, no co-pays, and no hassles. Like Social Security, the H.R. 676 program would be funded by a payroll tax of 4.5% from employers and 3.3% from employees.
Will this save money for Detroit? You bet. If we’re going to bail out the Big Three, let’s do it in a way that solves a real problem that is strangling U.S. manufacturing: the burden of private health insurance. For more details, visit www.health
GM's management DID THINK strategically ! They have known for many years that because of the terrible union agreements made in the early 90's, they must sell the highly profitable SUV's.
The fact that GM is selling gas guzzlers has nothing to do with their problems. They can't make enough cash per vehicle selling small cars...so, they build SUV's which, in the recent past, had lots more profit built in.
In 2006, Toyota tried to grab a bigger share (where the money is) of the big truck/SUV market, by expanding their Tundra and Sequoia. After this summers energy crunch, they were forced to temporarily close their brand new Texas plant.
The only solution, if you want to replace the big SUV with a smaller car, is for GM's operating
costs to be on the same playing field as Toyota. The union deals must be broken.
Here's the problem...
The Big 3 automakers and other businesses are saddled with insanely high health care costs for both current employees and retirees, which drastically reduces their competitiveness in a global market where their competition doesn't pay such health care costs.
Why such companies have any policy other than the unwavering advocacy of government-run single-payer health care is well beyond me.
Remember, we actually only have a big TWO right now, but I agree with your health care point.
Maybe its because they might want to see a doctor when they become ill.
I lived in Germany for 3 years and my German neighbor's daughter was dying of cancer. She never had to wait for anything. In fact, her doctor came over several times a day to check on her. If you think single payer health care is bad, then why are all those Americans living in France so happy with it?
Go see Michael Moore's movie Sicko or even better talk to some Canadians, French, Brits, Danes, Swedes, Norwegians about their systems.
On CNBC yesterday Maria interviewed a gentleman who owned a company supplying parts to the auto industry. He pointed out foreign companies like Toyota are heavily subsidized by their governments and those factories sprouting up all over the South where the wages are half of what they are up North had much of their construction paid for by state governments meaning you the taxpayer.
Republicans will only be happy when 90 percent of us are making 10 dollars an hour. Then they'll gripe about America's 3rd world status and how in the good old days people could actually buy things.
I come from a Detroit union autoworker family, too, and so does my husband. I'm sick to death of hearing how the unions destroyed Detroit. With all due respect to the author's father, HIS union is not today's union. They've already made massive concessions, and for what? So that the Big Three Fat Cats can load their wallets even more.
The Big Three enter into contracts with the unions and expect laborers to make concessions when times are bad, but when times are good, they don't want to give an inch. A health care package and a retirement package are part of the contract, and I recommend you look at the author's father's contract as compared to the contract of the union member of today. Today's union member is not going to retire at the same rate of pay, nor is he/she going to get the same health care benefits. Wages have been cut drastically, too. There are no more single-breadwinner families like there were when we were young.
If you don't believe me, just look at the middle class today--that is, if you can find it. We need good American wages in order to buy good American goods. It's all relative. If wages remain low, all we can afford are cheap Chinese goods.
Yeah, seriously. We need to hear from people who are in unions today. My father's union had to give major concessions. New employees will start for less, will never earn as much, get even worse medical coverage than my father, and virtually nothing in the way of pension or retirement benefits. And he's in an industry that provides materials to automakers.
I work at the same factory (non-union, non-production) and I can see from my vantage point how the company's leadership is causing it to falter. Can we stop coddling these so-called business leaders who demonstrate nothing but incompetence and greed? This "privatized profits, socialized losses" policy is going to kill the US economy and it'll take everything else we've built for the past 230 years with it.
How about an investigative panel made up of top level non partisan (if that creature exist) economists and management experts. Let them look and the efficiency of the auto manuf determine if the problem appears to be ties to the oil companies, poor management or the type and cost of the workforce past and present. It is terrible to realize that the country that produced the automobile can not compete with foreign car manuf. How many on this site drive American cars rather than foreign cars? I own a Chevy truck and a Buick sedan. This does not make me patriotic, just someone who buys based on my ability to pay and my needs. Then maybe we can put to rest what the real truth is behind the American Auto Industry’s inability or unwillingness to run a successful business and what the reasons are for this pathetic situation. We are finding out the depth of the Americian greed on the part of Management and it's workforce.
I agree.A retied UAW worker. we have given a lot of concessions in the last 3 contracts People we need to put the blame whereit is needed on GWB. he has raped this country. UAW workers earn every cent they make. Unless your have worked on a assembly your really cant say UAW workers are lazy.We need our health care because the job breaks you down. PEOPLE WE NEED JOBS. If the big three goes down we could lose 10,000,000 jobs The economy will never recover until all people who have lost there jobs go back to work. Talking about green cars fine, but most of us will not be able to afford them.
For most of the resons mentioned I don't want to bail out the Auto Industry
BIG BUTT for a slightly different reason.
I don't trust them and will never buy another Ford, GM or Chryslar. REALLY NEVER
If there are enough like me then it won't do any good to bail them out!
And thats why we are in the hole. BUY AMERICAN. You dont see many american cars overseas. So do you think that is fair
The problem with GM and a lot of these automakers is drinking too much of their own kool-aid. How about making something that works and is efficient and selling what people want to buy versus telling us what we want to buy through billion dollar ad campaigns? Bailing them out now is like continuing to throw money at a broken 5 gallon flush toilet when everyone wants a new 1 gallon model.
On NPR this AM I hear the perfect analogy...
That's correct, and it's exactly why this is a big opportunity. The government should do a bailout that requires the big 3 to work together to develop plug in hybrid technology that they can share, while still building their own models - and requiring that those eventual plug in hybrids will be built in the USA. And the bailout should promise big tax incentives to help provide the market.
Then, the government should roll that bailout into a comprehensive energy independence package that is funded BY A GASOLINE TAX which fluctuates according to the progress Americans make on reducing oil imports. Build a website that we can all look at to chart progress, keep America up to date on how things are going, adjust the gasoline tax up when we're using too much oil and down when we're doing better, and make it a matter of patriotism to break the foreign oil addiction.
Where does it stop? Suppose Coca-Cola went bust. With all of the distributorships and all of the employees, should the government bail them out? No. There are alternatives to Coca-Cola and there are alternatives to the big three. Every big company has employees and all Americans can emphasize with the plight, however, there are not guarantees in life.
Until gas went through the roof those companies were profitable. Americans wanted big vehicles and the Big 3 made them. I don't know how old you are, but if you lived through the boom and bust of the oil patch in the late 70s to early 80s you'd understand how this isn't as easy to solve as you think.
The gas crisis is over (temporarily I know depending on how weak the dollar gets or how fast the global economy reheats). Just like the 80s few will want to tackle the 800 pound gorilla (high fuel efficiency cars). Americans will go back to buying (if they have a job) the gas guzzler and the Big 3 will show that's where the demand is so they need to build them.
This is an opportunity for the government (Meaning the people) to develop a national energy plan and it's going to cost 100s of billions if not several trillion to implement. At this point 50 or even 100 billion to the Big 3 (with strict guidelines on how to use it along with the oversight and benchmarks) is chump change.
We've given AIG 150 billion and there's no guarantee it won't fail and when it does what do we have to show for it? Zip. This administration views AIG as too important. At end of the day unlike the employees of GM no one from AIG can point to something concrete he actually produced.
I'm resident and native Ohioan. For several years in the mid-80s, I lived in Michael Moore's Flint, MI -- for real; it was exactly as depicted in his documentary, "Roger and Me."
Plants were closing, people were losing jobs, families were breaking up, life was miserable. It was one huge depressing area, and my husband's company pulled us out after 3 years. However, and as an example of the distressed market, we were able to purchase a 4 BR, 2.5 bath, family room, gorgeous deck, AND on a golf course to boot -- all this and more for $63,000.
My husband was a middle manager for a company that, at the time, had a better reputation than it does today. Quite a few of his part-timers were full-time, unionized employees of GM and Buick. These guys did not like being told what to do. We received middle of the night phone calls, ADT alarm calls that required my husband to investigate at 3 am, and finally, the straw that broke the camels back? Remember the Tylenol scare? He went to work one morning and there, sitting in the middle of his desk, was the largest bottle of Tylenol that someone could find.
Working for an automaker was a piece of cake and they could get away with just about anything -- and still make $42/hour. The bad attitude spilled over into their part-time jobs. When they were called out for unacceptable behavior, they resorted to intimidation.
Michigan is hurting because it based a large portion of it's economy on the big 3. Michigan is NOT a right to work state so if someone works at one of the big 3 plants they have to join the union. This gave the union too much power and influence and they've gone mad with it. Now if Ford, GM, or Chrysler were to fail the whole state will go further down the tubes. Most people cannot afford to buy their cars if they don't work for them. From what I understand some of the Southern states are right to work states and the unions are not as powerful, allowing those companies to succeed. Anyone who wonders why the big 3 have been sending jobs overseas must have lived with blinders on.
In addition, the top management has lost it's way. They are building cars that are unreliable, expensive to drive, and expensive to maintain. They've also been allowed to finance the cars they sell which, in this economy, is a recipe for disaster. People have been allowed to finance cars they are unable to pay for. Does this sound familiar?
From large corporations to small business health care is a monumental problem. We are now In the 21st century, we can join the rest of the civilized world and have a universal health care system paid for by tax dollars. This will help lower overhead costs to our companies making them more competitive. Further, these systems in other countries cost less per capita taxes than our current private system.
Plus, we need to manufacture a product that is truly competitive with asian and european products. If the statement from the article is correct, "Toyota pays about $47/hr per employee, GM about $80/hr ", how does that compute with being competitive. One would think that GM products would be twice as desirable with twice the quality. Wow - these car companies are still living in the 1950's....
Why should our government bail out companies who cannot deal with current market conditions!!!!!!! All of us in this country need a reality check.
Current market conditions? You mean the ones that are only comparable to The Great Depression?
You have got to be kidding, some people are unemployed, but go to Walmart Friday afternoon and see how bad things are. Go to any fast food restaurant for lunch and see the crowds still coming in. This is nothing like the great depression, it could get worse, but we hae an awful long way to go to get there.
The three most unionized industries in this country are auto manufacturing, the airlines and public education. All are failing. If card check is adopted (and secret ballot elections eliminated) union goons will bring the wonders of unionization to many more industries.
union bashing is typical GOP fear mongering.
Reality Check. When I lived in Lansing a life time ago (seems) Bear Bow Company was located in Grayling Mi. The company employed a large percent of the town's population. Some of the workers wanted to unionize the company (divided about half and half). Suddenly it was family member against family member on the issue. The company made it clear that it could not operate under union control. I don’t personally know but from what I was told it was a good company. Those favoring a union persisted until the company closed the operation and moved out of the state where they could operate at a profit consistent with their reason for starting the company. All of the workers, most of whom had lived there all their lives lost their jobs or moved. Wonder who you think won. Not the GOP or the Dems. But I do know who lost. The employees. Companies do not operate so they can reduce unemployment. They operate to make a profit. Yes, there does need to be a balance. But mostly anyone except a union person agrees that the UAW has killed the automobile industry.
YOU ARE SO RIGHT BUSH IS THE BLAME AND THE REP.AND HE IS SITTING ON HIS HANDS DOING NOTHING FOR THE MIDDLE CLASS.BUT HE BAILED OUT THE RICH.IF THEY LOSE THERE JOB IT WONT MATTER.WE LOSE OUR JOB WE ARE FU--KED.
There are a lot of people building electric cars in their driveways these days. Let's loan them some money.
Amen. THIS is the type of investment we need. Get thousands of people working on this... maybe many of those will be viable and a few could be implemented in mass production. Yet it seems we would rather still try to prop up the falling house of cards (with more cards)
1. Bankruptcy to fix the "real" business issues.
2. Rewrite all auto regulations to remove the shackles on the domestic manufacturers. Current regulations forbid Ford from importing their European vehicle that gets 60+ MPG.
WTF? Why would they have to import it? Wouldn't it make more sense to just make 60+ mpg vehicles here, and sell them here?
I take exception with the comment about bringing in the European models into the states. I for one drive a small Toyota (more on that later) and until you have experienced the terror that is driving down the interstate and looking at the bottom of a tractor trailer as it passes you at 70mph you would not want smaller cars on the road. I think the big 3 should start building a 40+ mpg 4 door car that lasts loner than 100k miles for under $15k.
Also, I worked at an auto plant a few years back. I saw a lot of thing in my short time there. Some are Bad attitudes, a Union mindset and People making a lot of money for a job with almost no transferrable skills.
Now back to the Toyota, I drive junk, not so much by choice but by economics. I have found I can take a gamble on a Japanese car with 200k where I am looking with great skepticism at an American made car with 100k. I have had numerous US cars that had to be retired because the transmissions went out and it cost more than the car was worth to fix them. Full size trucks are the exception to that rule, they may not last any longer but they are usually worth fixing and easier to work on for the most part.
I would really like them to build a Ferrari for about 12k too, and as long as we are dreaming I want a pony.
If the US had brought in National Health Care years ago it would have gone a long way in levelling the playing field for American automobile companies competing internationally. Instead the US clung to foolish ideological nonsense that this was socialism or in American context "communism". What a load of tripe! You are now reaping what you sowed with your ideological foolishness.
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