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 am a diehard democrat who once voted for Reagan because I thought he would bust the economy wrecking unions. Ha! I don't think anyone can blame the dems for this situation. Who "out sourced" all the manufacturing jobs?
BUSH
you voted for Reagan -- you are forgiven, but please don't vote for any more republican presidential candidates
........
Well, unless you're one of that 5% spitting all overyourselves about how hard working you are, and that someones taking all your money and blah blah blah.
Taxes are your fee for the priviledge of earning huge amounts of money off us consumers in the United States of America.
You wanna keep your tax money instead? ok, then we wont go to your restaraunts, call your Plumbing agencies, buy your electronics, buy your clothes, gifts, we'll drop cable, we'll stop surfing the net at home, we'll quit going to the movies, buying your popcorn and pop, we'll quit doing everything that makes youre stupid cashflow happen.... No more oil changes at your quicklubes and dealerships, we'll just change our own...No more carwashes at your carwash. No more buying snacks at the gasstations, just gas. No more tanning, no more fancy hair dos and nail salons, no more going to the malls. no more nothing.
then you can be happy as a lark, gloating about how hard workign you are and keeping your tax money.... assuming you still have a business thats making any. You can also fire all those people you pay $7 and hour to make you your money, and you can be happy that now they wont get a cut of your 3% higher taxes either. And you can be sure those lazy NOw-Unemployed persons wont get anything now that you fired them all. What a great world you live in.
yep, I always look at it this way: I pay taxes in my wonderful country because it's kinda like paying rent to live in a nice place. I'm just glad that we have a new landlord now, maybe he'll fix the place up a little and quit spending his earnings on overseas adventures. It's a little run down, but it's still home and I like it!
Reasons why GM and other American car companies can't complete.
1. The qualify of Japanese cars is far better. They last longer, get much better mileage, require fewer reqpairs. In my life I've owned Ford, Dodge, Chrysler, Kia, Nissan, Toyota. The Kia, Nissan and Toyota were all base models, yet far better vehicles. My husband's 1995 Toyota truck is still on the road, being driven by a newphew.
2. Terrible gas mileage. Why didn't American car companies stop making gas guzzling trucks and SUVs years ago? Now they're in trouble and can't figure out why nobody wants to buy their product.
My 2008 Corolla gets 40 MPG. What does the typical Ford or GM vehicle get?
3. Labor costs in America include healthcare. Most other industrialized countries have some form of national healthcare, so the companies are not paying the costs directly. Makes a big difference.
Perhaps the only way American car companies will learn anything is through the bankruptcy process. It's time to stop bailing out FAILING American businesses.
That's exactly right, indy100. If the American auto makers had put as much energy into improving their products as they did in fighting more efficient fuel standards the last thirty years, they would be competitive with Toyota and Honda and wouldn't be sitting on a mountain of unsold Yukons and Hummers and Expedtions.
But we also have to recognize that the fact that we're the only first-world coutnry without some kind of national health insurance does put an unfair burden on corporations that pay employees' and retirees' health insurance costs.
Chapter 11 provides cover and negates the union contracts which translates into every car's price being reduced by a minimum of $2K. Other companies have managed to come out of a Chapter 11 and thrive. Why should the American taxpayer continue shovelling money into auto companies which refuse to run their businesses in an economically feasible manner? Take cover under Chapter 11, fire all of the management and replace them with forward thinking types who know what competition means! The auto industry may provide one in ten jobs in this country but the price has simply been a method for disaster.
The US gives no public health care nor pension to speak of, then complains about the cost to industry of providing it privately. Preached free trade when the Asians didn't have access to capital and efficient production resources, now protests when more efficient producers eat it alive.
America must either:
1. accept a lower standard of living and resume competitive production (per Adam Smith),
2. adopt protectionism and provide European standard social services, or
3. collapse.
If Americans had sufficient patriotism to sacrifice and Buy American (in preference to better, cheaper Asian products), there would be a fourth choice. But that prospect is a ridiculous fantasy.
Your fantasy is about to become a reality. When Pres Obama gets in office he will have to pay some bills of the left and that will not be as painless to middle income folks as many think. The pie is only so big. People talk about riding ourselves from dependence on foreign oil. We may find ourselves in a Chinese debtor’s court to pay for all of these “no pay as you go” programs. Some dreams may just become a nightmare if we aren't already in one.
I can't get over Dad's comment: "No foreign competition (it's hard to make stuff when someone is dropping atom bombs on you). " They were making stuff just fine until we bombed them, most notably war planes and ships. You know, the same ones that launched an unprovoked attack on Pear Harbor. Not to mention the atrocities they were commiting in China. As far as competing w/ foreign manufactures, UAW has played a major role in the demise of American auto manufacturing, along with tariffs put on American goods as opposed to what other countries charge to bring ours in.
They may not have bombed Pearl Harbor if you hadn't embargoed their oil supply.
Oh that's classic! We may not have embargoed their oil supply if they weren't committing war-crimes (and even inventing new ones) in China and Korea.
Must go the bankruptcy route! I agree! A bail out is not going to be sustainable for more than a year or two. The UAW has been an issue for years and the current economy is just making it harder to run from.
Unions were great back when it was commonplace for corporations to abuse and exploit laborers.
Now they need to make serious concessions and come to grips that the American dream is not the same today as it once was, due to of course republican presidents and congresspeople showing far more concern with helping other countries Dump goods on our market for free while they help them raise taxes and tarriffs on our products to the point of nonsensicle to buy.
Yes Poor people and Middle class workers are NOT to blame for the bad policies of those in charge, and the squandering of investment capital, the policies of paying out Trillions to shareholders instead of holding onto profits, and a "100%return on investment NOW!" mindset of those shareholders, owners and big holding companies.
"When companies are businesses they do well and make money and everybody thrives." So that would explain the Financial SCANDAL happening on WallStreet right?
they are charities?
Charities to the Top execs and poor choices of Extravagant bonuses, perks, and junkets... thats who.
If you want a business to thrive, dont let the rich make decisions on where the money goes. If you want a business to fold, keep allowing rich people to siphon off all the profits for their poorly planned mini empires, and then dissolve the businesses in bankruptcy at a cost to the taxpayer.
It's still commonplace for corporations to abuse and exploit workers.
Will a bailout force the Big 3 to produce better cars that consumers want to buy? Will it eliminate the legacy costs that make the cars overpriced before the first part is put on the assembly line? With the Wall Street, AIG, etc bailouts and no guarantee that any of it will work and little evidence that it is so far (and the supposed Czar of all this, Hank Paulson, flip flopping on his own plan), this or the next administration better think long and hard before throwing any more of our money at a problem that no one is sure how to solve.
Yes, it will be bad, very bad for the economy if the Big 3 go under. But Government cannot continue to give huge sums with little or no strings to the same geniuses who ruined these companies in the first place. The lesson here is that if you're a mom and pop business that employs 25 people and you get into economic trouble, tough. But if you're big enough you're allowed to screw up in spectacular fashion and the taxpayers will come to your rescue so you can continue to screw up. Until the next bailout.
Unfortunately they need to do domething about their legacy and current emplyee costs.
I used to gave 100% paid healthcare. As the costs have risen my employer has required that I acccept part of the cost myself - I now pay apprximately 15% of my health care premiums. So does everyone else I know. Its no longer a free lunch, and the union labor is just going to have to accept it if they want to keep their jobs. What happens if GM goes belly up? There's no more pensions, no more healthcare, no nothing. They better get straight if they want to survive.
It's just about the same case with teachers, on;y teachers just work nine months a year. The teachers want to throw the auto workers under the bus because they are too high paid, they only work 10 to 12 hours a day , often under harsh physical conditions such as repetitive motion and standing and exposure to extreme heat and chemicals. I am tired of hearing teachers complain about their working conditions and how poorly paid they are. That may be in some parts of the country, but around here the teachers want 70-80 thousand at the top of their step system, maybe 90, for 9 months work, no midnight shift , no weekends, 6-7 hours a day. They drive foreign cars and lip off about "factory rats", but they expect these big salaries in communities where the highest of pay may be $40,000 and typically maybe $30,000, if you're lucky. They aren't the worst of it, you have all your other public employees that are about the same way, retire early with 80% pay, but that aint the worst of it , you have CEO's making forty or fifty times what the man on the line is making plus perks and stock. It aint right. The automakers are in need of reform, but when the Democrats wanted to raise the CAFE standards it was the Republicans, along with legislators from auto states, who blocked it.
Well, majorteddy, I am not sure where in America you are living, but most teachers do NOT collect the $70k/$80k salaries you think they earn. According to a few trusted and standard educational resources.
Digest of Education Statistics 2007 report:
Average total public school teacher income = $47,700
Average total private school teacher income = $34,700
American Federation of Teachers:
"The [AFT] report asserts that, to make teacher pay competitive with pay in other professions by the end of the decade, teachers need a 30 percent raise—an additional investment in our children’s future of almost $15 billion per year. "
While auto industry folks have been given high salaries for years, teacher salaries have always remained ridiculously low. Many teachers work more than 9 months. They may not teach summer school classes, but most of them are working a second job during the summer to make ends meet. This has been the norm for nearly 20 years. And darling, you obviously have had no experience teaching a room of 25 seventh graders---or ever managed more than 5 children of any grade level. It is hard work and more taxing than most know.
We will never improve our children's education and hence improve our beloved country if we continue to show such disregard for the important work of our teachers by underpaying them. Why is it you are having such trouble making this connection?
Sit up straight and pay attention!!
Until GM stands for Great Mileage, they can just kiss their company GOODBYE.
I'm inclined to agree. I love my Jeep Cherokee but, at 17 mpg, I'm prone to buying Japanese or Korean for my next car. The Big 3 make good cars but they sure as hell aren't competitive.
If GM made what the nation needed and what people wanted rather than convincing us to by their cr*p, they might be worth saving. But the are using their employees as hostages and extorting taxpayers.
Give them money, but fire all the executives and board of directors. Merge GM and Ford into one company and use the spare capacity to crank out greener technologies as part of a retraining and retooling effort.
Remember, we seen good money chase bad in the airline industry. They are next up in line (again). We have to stop rewarding bad management.
Well said. Let them reorganize under Chapter 11 protection, with a pragmatic conservator, and re-negotiate any and all contracts. Infuse cash if they agree to switch production to fuel-efficient vehicles that will be more competitive in the world market. Tell stockholders their paper is almost worthless anyway, so suck it up and wait it out. I believe a much stronger auto industry could emerge from the ashes.
Come on! Who was buying all those gas guzzling SUVs and Trucks? Martians?
Maybe it's time to grow up and stop blaming advertizing for CONVICING us to buy American Gas Guzzlers.
This entire debacle is OUR fault - the MARKET.
You see - we (THE MARKET) have known for some time that oil is a finite resource. We knew that with most of it controlled by people who don't really like us that we were living on borrowed time. Sure, we heard about alternative fuels and electric cars and hybrids and bicycles and all that - but that was for granola eaters - not for US!
So this being a SUPPLY and DEMAND economy, we demanded fuel guzzling cars, trucks and SUVs. So Detroit happily supplied them to us. Bob Segar and Travis Tritt made commercials singing about our big autos - even Led Zeppelin did a Cadillac Commercial!
And the banks were more than happy to give us Zero Down, low interest loans for these behemoths because - after all - the market DEMANDED IT.
And now, our big honking cars are in the driveway - tanks empty. Or perhaps, the repo man has them.
And it's all someone else's fault.
Maybe we bail out Detroit because it's our fault they are in this mess.
And maybe we realize that just because the market WANTS something that doesn't mean it's in the best interest of the country, the economy or humanity.
GM killed the Electric Car. Now taxpayers are supposed to pay for them to invent it all over again? I say we put the money into the real innovators who have been putting their energy into the future and are already working on plug-in hybrids and put the auto workers to work in those plants. I know one opened in Indiana less than a year ago. The technology is there and there is enough power at night in the current grid to power 80% of the US fleets - without building any new power plants. See this link: http://mov
GM has an electric car now, the Chevy Volt, but at $41K who is going to be able to afford it?
Few people, unless economies of scale kick in. Elsewhere on Huffpost, Mark Cuban says "Entrepreneurs will lead us out of this mess." I take that to mean "new initiatives", "new strategies", and so on. Perhaps take the essence of the Chevy Volt and pare it down into a simpler and more affordable machine - which is what Henry Ford did with the Model T:
"I will build a car for the great multitude. It will be large enough for the family, but small enough for the individual to run and care for. It will be constructed of the best materials, by the best men to be hired, after the simplest designs that modern engineering can devise. But it will be low in price that no man making a good salary will be unable to own one - and enjoy with his family the blessing of hours of pleasure in God's great open spaces."
I have no axe to grind with regard to GM, but yes - renew. Renewal is the only way forward. Reuse expertise by all means (by which I mean cherish people and their skills), but don't attempt to keep failing industries afloat. We need to put as much energy into finding those routes forward as did the great entrepreneurs of the past.
If the Big Three built quality and efficient cars Americans would prefer to buy them, even at a slightly higher price.
The auto unions certainly contribute to significant competitive disadvantages for American versus Japanese assembly plants. But American corporations bear the greater responsibility for their demise. Anecdotally, but very persuasive to me, is that I have owned six Japannese cars (1 Nissan, 2 Hondas and 2 Toyotas). I drove three of them past 190,000 miles and none had a significant repair. Nada.
Compared to the eleven GM cars I've owned. Two had to have transmissions replaced before 110,000 miles and two had the cylinder head crack requiring replacements. Virtually all had their hardware and trim disintegrate before 100,000 miles. And all got terrible mpg compared to the Japanese cars. My siblings owned Ford cars with similar histories. Probably everyone I know can tell the same story.
It might be painful, economically and to the American ego, but I thnk they should be subject to bankruptcy reorgainzation or sale before we bail them out.
Did anyone read and assimilate the info in the article? How would selling smaller cars translate into good economic sense when the big 3 pay almost twice as much per hour of work? One point of contention with the article, I know MANY Americans who still 'make' things unfortunately, you won't find these products at your local Chinese Wal-Mart where you drive your Japanese Toyota.
I agree. I try to buy American whenever possible. I figure if, God forbid, these American company bashers loose their jobs, I hope their Toyota is big enough for them to sleep in.
Agreed. Let them go belly up and sell their equipment and factories to new companies that can build better cars. There are a lot of small carmakers in the US trying to move up. Where's the bailout money for them? They're making the cars we need to get the country off of foreign oil.
It's not in the national interest to keep producing Escalades, Lincoln Navigators, Hummers and Buick land yachts.
My math was off in the above comments. I've should have written that I've owned six foreign nameplates (one VW bug) and five Japanese cars.
Back in 1he 1990's I did some fire training at a big 3 plant - and later at a Japanese auto plant.
The big 3 plant was in a contract year so both union and management were posturing creating un-necessary tension. At the non-union Japanese plant our course was during retooling for model changes. At lunch time the plant manager was in the cafeteria have lunch with the maintenance guys - everbody wore the same coveralls. My trainees told me that unless he was tied up at a meeting the boss usually ate with the troops.
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