Now here's a contentious proposal: Let GM go Bankrupt
 

Let GM Go Bankrupt

Not without merit, in my view.

I agree. GM has had over 35 years notice that it needed to produce fuel efficient vehicles. Now we're supposed to believe that it's a surprise that nobody wants a gas guzzler? :eek:

It's not just fuel efficiency that troubles them, IMHO. Their cars have been beaten out by Toyotas and Hondas, and both of those are manufactured in North America. Why? Because they're much more reliable = better engineered.

GM is only part of the problem, Chrysler and Ford are in no better shape.

I'm not particularly fond of any of the three, but we will bail them out. Got to. Together with the related businesses that depend on the auto makers, we're talking about 3 million jobs. With the economy poised to fall into depression, we cannot take a hit like that. And, they are a substantial part of our manufacturing sector. As one presidential candidate put it, America cannot prosper selling pizzas to each other.

I really, really hope we don't just throw money at them, but suspect that's exactly what's going to happen.

I think mostly they are assembled in the US, from parts manufactured elsewhere aren't they? GM/Ford/Chrysler use a huge amount of parts from abroad, too.

Chapter 11 is one option, but that throws their future to a judge. Not sure Congress will take a chance on losing control of the auto maker's future. All three have already taken huge hits on the stock prices and dumped a huge number of workers.

My last American car was a Ford Crown Vic I picked up barely used... 8k miles. Used a quart of oil every thousand miles from the day I got it and was on its third transmission when I sold it, with less than 100k miles. Currently six years into a Toyota Camry... yet to have the first repair (except tires and batteries). Never even took it back to the dealer for an adjustment. So, no sympathy from me.

Such a difficult question. From a pure capitalism point of view, not bailing out is the way. The problem is that people's lives are involved. People and families who may not have another job to go to. But bailing them out (and by "them" I mean any of the companies/banks we've been bailing out lately) carries the risk that we're throwing good money after bad, backing up debt with more debt, which was the root of the problem to begin with.

NovaScotian raises a good point. The skills of American workers cannot be questioned, since the Japanese cars they build here are as reliable as those built overseas. That's not the problem. The problem is with management. And, we can't ignore the pension and union obligations that the Big Three are saddled with.

I guess in the end everybody's going to have to give a little, since you can't drop all the blame in one corner, but the amount each side needs to give is such a large gray area that they're all gonna fight about it and get real bitter, just like with the election.

Styrafome makes a good point about pension and union obligations the "big" three are saddled with relative to others. Perhaps the government ought to consider taking on the pension obligations and extending those to an earlier age -- full stop. In the long run bailing out a faltering industry is a short-term fix to a long-term problem that doesn't go away after the bailout.

I agree...however
 

I agree with you Nova Scotian, however if GM goes bankrupt it would hurt the Canadian economy due to unemployment. American car manufacturers have been far too slack for the better part of the 20th century and have thus fallen behind Japanese and European car manufacturers. With a boost from the US Government they can make a resurgeance!

I don't think pensions are the problem. I think lack of pensions are the problem. More specifically, I think that businesses have been looking to make profits by cutting compensation to their employees. That's a short term profit maker that guarantees failures of the type we're seeing because it assumes that consumers don't come from the ranks of employees.

It's not contentious at all.
GM is not a company vital to the infrastructure of the country, like say, the airlines.
If this is a capitalist economy, we need to allow the market to decide the fate of it's players.

Many companies have failed over the years, many peoples' lives have been disrupted.
The government never stepped in to prop up those failing businesses. And it should not have.

My understanding is that pensions are a huge part of the problem. I'll consider myself lucky if I get my IRA to provide me retirement payments of the size being paid out annually to a retired worker by a "traditional" US industrial pension. They can't afford to pay each retiree tens of thousands of dollars a year for 20 to 30 years and remain competitive. Mid-20th-century workers got a great and possibly unsustainable pension deal, better than any workers before or since. That's why I put "traditional" in quotes.

If pensions should stay, then somebody's going to have to pass a law to make foreign automakers building in the US to pay the same pensions or else the playing field will never be level. And you can't make the government pay the pensions, they already have the same unsustainability problem with Social Security.

"That vision thing..."
 

That’s an excellent and very reassuring point.
Which suggest that it is, at least in part, that vision thing.

Let me ask the simple question: What would the management required to turn the Big Three around look like? Assume for the moment that the burden of earlier-incurred pension plans is somehow relieved. What would today’s visionary leadership decisions look like for the automakers, and how soon might we see an effect?

Next question, especially to the engineers in the crowd: What would you have GM and the others do now, and at what pace?

Do they for instance own good technology that has yet to be implemented? Or is there interesting R&D that is almost ready to bear fruit? If so, what. What drastic engineering/design reprioritising, if any, needs to be done immediately?

-- ArcticStones

I don't know from mechanical stuff or American auto makers, but the above seems an interesting general point with applicability elsewhere. I would like to ask the engineers and the management folks a question of my own: what precisely is the GM management doing wrong that causes American workers -- who can make Japanese cars just fine -- to make GM cars very badly? At what level is this happening -- foreman, plant manager, CEO, Board? And how did it get that way?

I have observed, in both the two countries of which I have been a national, that the worst enemy of quality control is national self-admiration. If the Rutabagans go round saying that Rutabagan cars, justice, potatoes or whatever are the best cars, justice or potatoes in the world, apparently because the ability to produce the best is encoded in Rutabagan genes, and so does not need to be created or maintained, then the result will be that Rutabagan cars, justice and potatoes are crap. The next stage is, of course, to accuse anyone who points this out of being anti-Rutabagan.

Composition of the vehicle fleet / Responsible investors
 

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Let me chip in one small point: The last time I visited California, I was shocked at the composition of the vehicle fleet. Here were SUVs that stood higher than I do – and not just a few of them. Preposterous vehicles!

I wondered if this was a post-9/11 syndrome. I am sure the above-mentioned vehicles satisfy some deep-rooted psychological need: to sit safer and higher than your neighbour, "protected" by "a lot of car". But I cannot for the life of me imagine that they are well-suited for family needs of pocketbooks as gas prices (will) tend mercilessly upwards.

I am sure there are contexts where the oversized SUVs, and Hummers and huge pickup trucks with monstrous tires may be appropriate. But this was not the outbacks of Wyoming, and astonishingly many of the pickup trucks looked to have been little used for the purpose for which they might have been built.

A modest proposal: Wouldn’t it make sense to have sales taxes correlated directly to mileage?

Association of Responsible Investors
Perhaps what the USA really needs night now is an Association of Responsible Investors. People with money who feel they must do their best to contribute to lifting America out of the quicksand, and not just seek "the greatest return"; people of responsibility and long-term vision; people willing to make noise to lead the pack on Wall Street.

Mind you, I’m not suggesting that they be selfless... ;)

They could start by grabbing the steering wheel of GM, a controlling share of which surely can be bought at a super bargain today – with or without Chapter 11.

Do I need to mention that, until a few months ago, GM was the largest manufacturer of vehicles in the world. (Toyota moved into first by a percentage point.)

The problems facing US automakers are legion:
--Heavy obligations to their workers for not just retirement, but for health care, too. All of which goes into the price of their vehicles. Blame the unions?

--The US employer based system of health care adds a tremendous cost to each car they make. A cost that has skyrocketed over the past decade.

--The financial crisis has resulted in a 30 percent drop in US sales and that is pretty much across the board for all manufacturers both foreign and domestic. Not many companies could survive a hit like that.

--Sharp increases in gas prices have resulted in a substantially changed demand for the vehicles they were tooled to provide.

--GM (and other US automakers) were in the process of changing/retooling, but got caught by the recession and reduced buyer optimism for the future.

The point I am trying to make is that GM does make good vehicles, though certainly the QC could be better. They've gotten caught in the middle of changed demand and an economic crisis. They will be a viable manufacturer in the future.... this is a temporary condition.

Obviously, some realignment is going to be necessary.

I'm sure a major part of the problem is the very culture of the company.

An American company's first and primary goal is raising shareholder profits. Even if that means lowering costs by buying cheaper materials, skimping here and there, etc. They foster this atmosphere of doing whatever it takes to save money and raise profits.

Japanese companies are more prone to put the quality of the product above all else (within reason naturally) and tend to foster a pride of workmanship among the workers.

I simply do not understand this "blame the employee" attitude, which crying about pensions really is. If you work for a legitimate company, you should make at least enough money to live on, and enough to retire on. If that isn't the case, the company is cheating you, no matter what your position in the company. If a job is worth doing, it's worth paying a living wage.

Blaming the employee is the root of the economic problems we're facing! The attitude that the companies will be just fine if they can only find a way to eliminate the expense of actually paying their workers is short sighted, and morally reprehensible.

Let me respond to AEH and ArtcticStones with some stories:

1. I know a man (an engineer and son of a friend) who was one of many VPs of one of the big 3. Several years ago, he was sent to Japan to study their auto industry and spent several years there. He came back bristling with ideas for improving designs, quality control; the whole schtick. After two years back in Detroit, trying in vain to implement even one of these changes, he finally quit in frustration at the impossibility of implementing any change in a huge frozen bureaucracy and is now president of another company with different products.
2. I know a PhD engineer who works for the research center of one of the big 3. Many years ago, when guarantees began to escalate from one to two then five years, he (then a junior) was asked to evaluate the cost of increasing the life of the exhaust system from one to five years. The answer was substantially less than a dollar per car -- it required an increase of the thickness of the walls of the tubing, nothing more. At the usual markup of cost of goods sold to final price of five, that would have added less than $5 to the price of the car. Why hadn't they done that before their competition drove them to it? My wife drove a Honda Accord for 8 years (on salty Nova Scotia streets and roads) without ever replacing any part of its exhaust system.
3. People drive pickup trucks because they're cheap. I owned one (a small Mazda) for several years using it as a truck only occasionally to move my then unmarried daughters from one home to another. I bought it because my wife and I were about to renovate our kitchen and I did all the work myself. Cheap vehicle meant better kitchen, plus I could avoid delivery fees. It was invaluable for lugging away the old kitchen stuff too. My brother in law drives a small 4-wheel drive Toyota pickup because it is very reliable, and because he's a golfer (and a do it yourselfer) and leaves his clubs under a lockable tonneau in the back. He too moves daughters around.

So what's the problem with the big 3's cars? In a nutshell, they have horrible frequency of repair records compared to their Japanese competitors. With the suburbanization of North American society, an unreliable car is a disaster.

Much of Japan's success is owed to an American... Edward Deming:
http://www.mftrou.com/edwards-deming.html

From CWT:
We actually agree on this point. But I am afraid what we are looking at is international competition putting pressure on US living standards coupled with things like employers matching Soc Security payments, employers paying health care, employers paying for unemployment insurance, employers paying for workers compensation (on job injuries), and on and on.... and it all ends up in the cost of the final product. We compete at a disadvantage because of this.

UAW workers are compensated quite well. Substantially higher than comparable skills in other industries, particularly those which are not unionized. (I think Japanese workers are better compensated, though.) I think some adjustments might be appropriate.

GM makes very good small trucks at very competitive prices. Maybe not better than Japan's trucks, but they are close.

Back to the OP... there is a strong case to be made that the US must maintain the auto industry and manufacturing base for national security purposes. I am generally one who supports free trade, but at the same time I believe national security depends entirely on the US being self sufficient in some key areas, such as heavy manufacturing and farming. We need at least these two to defend and feed ourselves. I would also add energy to the list, though we are obviously falling short on that one.

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A few years ago I interviewed a Toyota executive. I recognise many of the ideas as those of Edward Deming -- particularly the concepts of kaizen and hansei. Deming built upon noble concepts. I was not aware that the Toyota Production System owed so much to this American!

One small point: My observation was about monstrous pickup truck, not the practical vehicles that (thankfully) still abound. :)

So we're to throw the baby out with the bath water then? We all have to compete, so nobody gets to retire???

Wouldn't it be better to level the playing field by tipping the tax burden in favor of employers who do pay into retirement programs? Heck, that could help governments provide for the employees who don't get retirement programs.

Well, here's one guys take on the issue:

"OK, I'm glad we got hosed at the pump"
http://news.cnet.com/8301-10787_3-10...html?tag=mncol

It sounds like a distinction needs to be made here between pensions and retirement programs. They are not the same thing.

A pension is when a company pension fund pays you a big check every month for several decades after you stopped working. That's a recipe for unsustainability unless you can guarantee that there will always be growing profits and more employees paying into the system. (When there aren't, or declining, the math can't be sustained, like a plane stalling out of the sky, or a pyramid scheme.)

A retirement plan does not have to be a pension. It can be an IRA, an SEP, or the 401K that so many companies do fund. The difference is that with one of these, the company is not involved in the final payout. The money goes into the worker's personal retirement account and it's the responsibility to the worker to manage and tend it until and after retirement, at which time it pays out to them just like a pension, except that it is not free money being drained out of the company on a constant basis.

The fact that a non-pension is out of the hands of the company is why so many companies have gotten the heck away from the pension business. It removes a burdensome cost of doing business and a whole layer of administration, yet the worker still gets paid at retirement. Plus it gives the intelligent worker more control over their investments (though it also gives the short-sighted or non-financially-savvy worker the opportunity to completely de-fund their own retirement).

So the lack of a pension does not mean a company is evil. A pension is, in fact, no longer the standard. I'd be shocked if there is a single successful high-tech company (Apple, Google, Intel, Amazon...) offering a pension. Yet they probably offer employer-matched 401Ks. Which are a good deal if you max out the employer match, because that's practically free money you can invest with (free and also pre-tax income). I'll bet those Japanese auto companies also offer employer-matched 401Ks, which puts them at a competitive advantage yet still allows workers to retire.

The point is, let's not talk like pensions represent all employer-funded retirement accounts, because they don't, and they don't need to.

I don't believe I was. I responded to more than retirement programs: Employers would have us believe that they're paying all the costs, when they're really finding new ways to pass them on to not only the consumer, but the tax payer as well. I'm convinced that we would not have anything close to the problems we face if employers, especially large ones, behaved responsibly.

Because corporations haven't been held responsible for their actions, we have a need for governments to step in to take care of the messes they've made (ie, Superfund Sites), the healthcare they've failed to provide, the retirement funding they've ignored, the predatory lending practices they've encouraged, the wasteful energy policies they've pursued (ie, selling, ok pushing gas guzzlers instead of fuel efficient vehicles), and the list goes on.

These are all issues that in the US, so-called conservatives think the government shouldn't get involved in, but the fact is that the market has had decades to work on all of these and it has failed, causing the crisis we're in. All that's left now is the whining from the right wing as new regulations are enacted.

hunh. if I remember correctly, we bailed out GM back in the 70's (or was it the 80's?). how many do-overs do they get, exactly? if this were a small company (<100 employees or so) it would have died the first time, everyone would have moved on to new jobs, and the niche would have been filled by more savvy businesses by now.

I think it would be a much better expenditure of public funds to bail out the workers and let this bloated whale pass on. we could guarantee the retirement plans, protect the out-of work employees, subsidize new industrial development, and still save money compared to keeping this thing afloat.

Just because you and I think employees should have fair wages, health care, and some form of adequate retirement does not mean that some workers are not over compensated.... and got that way through their union bargaining during good times. (More power to them all the way up to the point it puts the company out of business. I think unions are a good thing, but they have to avoid shooting themselves in the foot with their demands.)

No, it doesn't. It's also beside the point. Some is a long way from all, or even most.

I think unions are merely a necessary evil. Their purpose in a truly Free market would be to counter balance corporations, which are also a necessary evil.

Interesting read re: retirement, pensions, economy
 

Interesting read - snippet:

“This relation between the number of people who aren’t of working age and the number of people who are is captured in the dependency ratio. In Ireland during the sixties, when contraception was illegal, there were ten people who were too old or too young to work for every fourteen people in a position to earn a paycheck. That meant that the country was spending a large percentage of its resources on caring for the young and the old. Last year, Ireland’s dependency ratio hit an all-time low: for every ten dependents, it had twenty-two people of working age. That change coincides precisely with the country’s extraordinary economic surge.”

http://www.newyorker.com/archive/200...urrentPage=all

@trident68: Extremely interesting read -- No good deed goes unpunished!

Wow, awesome link. That story explains why I said what I said: Sure, it's a good idea to have employers contribute to retirement and health care, but it's inherently risky - for both the company and the employee - to have the administration happen at the company level, to have the quality of your plan be dependent on your Enron or AIG employer. We need an innovative hybrid between employer-administered plans and full-blown socialism, because either extreme is excessively faulty by nature.

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Here is another article on the fate of GM.

Good read, ArcticStones; it expresses my point of view. Feeding money into GM delays the inevitable restructuring they will simply have to do at some point.

The lower wages go, the worse things get.
 

If by restructuring, you mean firing all of top management, then yes, that's necessary, but that won't happen. Instead, they'll force workers into getting less pay. That's exactly the problem our economy is having! It's why we've had people borrowing beyond their means for years. They've been hoping that their wages would rise as corporate profits soared. It didn't happen, and now few people can afford to buy GM's expensive SUVs. Management failed to recognize what was happening, so they don't have inexpensive, fuel efficient cars to sell. Their solution? Blame the workers, force their wages down even more, and make things worse.

You know, that attitude isn't just the US and isn't just this century. I remember in the UK in the 1980s, we heard that management didn't manage well enough because they weren't paid enough, while workers didn't work hard enough because they were in insufficient fear for their jobs. Apparently they were two different species that needed to be motivated differently. If chickens are coming home to roost here, it's thirty years' worth.

A tasty bit from a piece by Friedman in the OP-EDs of the NYTimes. How to fix a flat

And at the very end:

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Oooh, I like that.

To qualify for a Taxpayers’ Investment, surely it is reasonable to demand that GM’s current top management first put on the table an Innovation Plan. This plan must contain at least the following elements:

1) A realistic assessment of why they have failed to innovate – at least in the right direction.
2) An admission that current top management has failed, and must take the consequences:
3) i.e. firing themselves.

and:

4) A promise that they & future top managers personally will use all their private liquid funds to invest in GM... (great incentive!)
5) ...and that this will happen on precisely the same terms as for Taxpayers’ Investment.

may I also suggest:

6) The middle and high level managers who left GM because of deep frustration at the incompetence/inflexibility of their superiors be headhunted, re-hired and promoted...
7) ...while the causes of said frustrations, if not fired, be demoted.

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My take from that is that all of upper management at all (banks too) of these companies that need bailouts should be fired.

Personally, I would put a special Social Security tax of 100% on everything these guys make over minimum wage for the rest of their lives. Yes, that would mean that if they make $1 more than minimum wage, they pay $1 in tax and the fools who paid them have to pay the same! Sure, I am angry about this, but I'm sure that when I cool off I'll still feel the same way.

I heard an interesting idea today (can't find it right now but hopefully I can find the link again) regarding "solving" this problem.

Effective (nearly) immediately, the gov't should refresh its fleet of cars. And each vehicle must be environmentally sound (electric, solar, hybrid, etc).

This will help spur the Big 3 to produce environmentally conscious vehicles and allow them to ramp up their R&D. Perhaps the gov't could either loan them some money for this or invest in specialized companies that are jointly owned?

A flaw in this plan is that non-Big 3 would want in on this as well...

Just a thought...

An interesting take on this: http://www.usnews.com/blogs/flowchar...enefit-gm.html

After watching the Big 3 CEOs testify to the Senate yesterday and part of the testimony today to the House, I've come to agree with the bankruptcy solution. Giving $25B to these guys in addition to the already passed $25B (for development of energy efficient vehicles) won't solve their long term problems. Their costs will still be higher than their competitors.

Unfortunately, bankruptcy is going to mean leaving the retirees and UAW workers holding the bag and at risk of taking a huge beating. This makes bankruptcy an absolutely horrible solution, but the only one that has a chance of maintaining the industry and all the associated jobs in tact. Got to be done; best alternative on the table for the time being.

But if the government is going to put any money into it, shouldn't it be into those retirement pensions so workers are not left holding the bag?

Apparently the Big 3 can build cars as cheap as the Japanese except for the fact they have all these legacy costs from previous commitments to their workers. Union has made major concessions and wages will be competitive with the Japanese, but not till 2010... leaving the Big 3 at a huge competitive disadvantage until then. Even after 2010, the retiree costs will prevent them producing at the same costs as the Japanese.

I would hope a judge would protect those benefits to the maximum extent possible, but the reality is they are going to have to be cut. That is, the 25B is not enough to cover these costs into the future.... leaving the Big 3 exactly where they are now two or three years down the road. It's a cost of doing business their competitors don't bear.

I've come to the conclusion that any company seeking a bail out should get as much as they can show they need, but the CEO and board of directors should have to accept that they will pay 100% tax on everything they make over, or outside of (no tax shelters allowed), minimum wage for the rest of their lives, payable retroactively for the last five years. The only way to stop a tsunami of bailout requests is to make this punitive.

Who thinks Toyota, Honda and Nissan vehicles are cheaper than their GM counterparts? Prices seem to have been nearly the same for a long time.

On the other hand, private jets aren't cheap.

The market forces the competitive price, with the difference being that the Japanese can make a profit at that price, and the Big 3 cannot absent supplementing their income with sales of large SUVs which has higher mark ups. Toyota's profit on a vehicle averages only $1300... very, very thin profit margin.

Two other factors to consider. GM is making money in the foreign markets, it's only their US production that is losing money (because of labor costs). And, lest we all forget, Chrysler is a foreign owned company... e.g. no different that Toyota and Honda. Would we bail out Honda and wouldn't that all be like competing with ourselves?

If the Big 3 would be competitive by 2010, then I think I might be leaning toward a bailout. But, they won't be.

GM is a foreign company too. Their stocks are bought and sold world wide, and much of their production is outside the US. Blaming US workers is just a smoke screen designed to divert attention from awful management.

What's worse is the message this sends to companies and their employees alike: US workers need to accept lower wages. That of course will lower consumer buying power, which is 70% of GDP. The result will be worse problems than we have now.

This might be a good place to air an idea.

Once upon a time, managers of a company making a widget were engineers who understood the widget. Then we got this MBA schtick and the doctrine that a person who can manage, can manage anything.

So perhaps -- I don't know, just wondering -- these GM types used to be managing a Twinkies factory or something, don't really understand cars and don't listen to people who do (but don't have a MBA). If this is not the case, I beg their pardon.

I knew a "Managers can manage anything" type once. He had been very decently competent at his non-managemental job, but then decided he was a Natural Born Manager. And a lousy one he turned out to be (cf. the Peter Principle). He once spent 20 minutes explaining to me why he didn't have time to do something that would have taken him 20 seconds. Everyone quit on him.

Can we create a Nobel Prize for workplace sociology and give the first one to Scott Adams?

This is part of globalization, and it's the same reason why IT resists the Mac. With globalization, it's not important what system is better. What's important is that you can interchange them.

By turning everything into a commodity, corporations gain a huge advantage over both labor and consumers. Labor loses because they can be replaced by pennies per hour labor in some poverty stricken country. Consumers lose because they don't have real choices in the market; they have to buy the same crap that everyone else is selling, so corporations only have to compete via marketing.

One thing I really like about Apple is their willingness to upset this paradigm. They do it with the Mac OS, the iPod, and now the iPhone, and all three have angered the established players, not because of their success, but because they don't play the globalization/commoditization game. It makes them the outsider in business though, and I think it's the main reason they have very little support in the enterprise.

This is not about cheap foreign labor.... again, GM is paying $20 an hour in labor costs MORE than Toyota is paying US WORKERS. (This changes in 2010 following a re-negotiation of the UAW contract, after which labor costs will be comparable but with a slight edge to the Japanese.)

There is an old joke (or more likely a true story) about the CEO interviewing prospective accountants by asking what 2+2 is and hiring the one who answered "What do you want it to be?" I don't trust top management to begin with, and when I see a suit tell Congress that this is not about their products, I lose whatever trust I might have had in them.

Maybe I'm missing something. If you can link to a vehicle GM sells that gets better than 40 mpg city and highway, then that would go a long way towards convincing me that labor has something to do with GMs problems.

Until they do provide such a vehicle, the reason GM can't make the same profit margin on smaller cars is that they aren't providing value in that segment of the market. It is not, nor has it ever been, enough to simply make a small car. The value in a small car is in its efficiency, and that is something GM executives know nothing about.

I would certainly agree that labor costs is only one of the Big 3's problems.

I would agree that labor costs are the least of their problems.

The primary problem is that fewer and fewer people want to buy their cars. Why? Because for the most part they're crap. That's not labor's fault; they put together what they're given -- it's a design decision.

In the too little, too late category: GM has 20 models in the 2009 line up that will get over 30 mpg (highway I presume). The Big 3 produce 70 percent of the vehicles sold in the US. GM is the second larger producer of vehicles in the world and only a tad behind #1 Toyota. Somebody thinks they're not all crap.

They are behind in the fuel efficient/green vehicle production. Who cares, gas is under $2 a gallon.:)

I drive a Toyota, but it was my second choice. Couldn't get a deal on the Pontiac Grand Prix GTP I really wanted because the dealer wanted to make way too much on it... yet another problem the Big 3 will have to deal with.

:eek: Sudden case of amnesia?

Gas will be under $2 gallon just long enough for most people to forget how quickly it went beyond $4 a gallon. Fortunately for everyone except the Big 3, it seems the gas ploy doesn't seem to be working this time.

My wife drives a 5-year old Honda Accord (never had a problem), her third in 20 years after two bad experiences with GM cars. After owning two Plymouths that gave me grief in the 70's, I've owned a Toyota, a Datsun, a Mazda truck, a Honda CRV, and now (because I tow a boat) a Honda Pilot (5 years old). Neither of us have any had any trouble with these cars and in every case we've kept them for years. We've never looked back, so it's not a new problem for the big 3.

I've owned GMs going back to '54, my first car. Never had an engine or transmission problem, though earlier models were prone to rust. I loved the '60 & '65 Super Sport and the Corvair Monzas..... but don't get me started on the Fords.

My first new car was a Plymouth, then I had a Dodge, and they convinced me to try Toyota. My next new car will be all electric, get over 200 miles per charge, and have easily swappable batteries for longer trips, as well as the capability to recharge over time via solar panels. Oh, and it won't cost more than a new car today. If US wages drop more, it will have to cost less.

While I'm waiting for that, I'll keep my Toyota running or replace it with a used one. If GM can produce what I'm looking for, I'm willing to give them another shot, but they'd better be the first.

if the UK government were clever...... (which they are not) they would capitalize on this whole situation and push millions into the 'green british car industry' (just as the old british car industry has died a death)
We have amazing engineers, technology and production capabilities at the exact same moment in time when the general public are crying out for green/energy efficient cars... AND the traditional combustion car industry is on its knees..

The UK could get back to doing what it does best.... innovate!

If a UK company with UK government backing produced a cheap, good looking, hydrogen powered car... it could sell in the tens of millions.... even be the next 'mini'

just my 2 pence...

As for Ford, GM and Chrysler.... they only have themselves to blame... they have been making terrible cars for ever.... Ford and Vauxhall (UK arm of GM) have been very undesirable since the mid 90's in the UK, and Chrysler's have never taken off in the UK... no matter how cheap the sell them!

Yet another analysis of Ford, GM, and Chrysler: 6 Myths About GM, Ford, and Chrysler in US News & World Report

My sense of this is that if we build cars that use half as much gas, the price of gas will double. OPEC will maintain their cash flow as long as we are dependent on them for energy. We need a near complete break with oil.... a big enough break to put OPEC out of the driver's seat.

After the beating AIG took in the press, I would have really thought the CEOs would have been savvy enough not to fly their private jets in to beg for money and get themselves embarrassed. I was wrong; their egos have no bounds.

The US produces about 5 million barrels of oil per day and imports 2 mbd from Canada and about 6 mbd from OPEC (See: EIA Petroleum Basic Data). They consume nearly 10 mbd of gasoline and 20 mbd of Crude. There's a long way to go to make the US transportation industry independent of OPEC oil.

I don't think so. If we make a real effort to conserve oil and begin to convert to alternative sources, then increasing prices would only speed up the process, and that's not what OPEC would want. I believe that oil is low now because they want us to fall back into our old habits. Once we do, prices can rise again, just as they have many times over the last 35 years.
Hubris and stupidity. It reminds me of the great Decider.

They might even have gotten away with it if the three had come in one jet.

.

...And brought the union rep with them and took a taxi from the airport. Wonder how the union rep got there... the union with a private jet would have been even more embarrassing.

I'm beginning to think like CWT.... Time to have them drawn and quartered, then burn the quarters and sprinkle the ashes in the urinals at every beer joint in Detroit.

Obama gonna find a way to help them. Just watch.

I hope that what Obama's gonna do is find a way to soften the blow for pensioners and retirees with extended health insurance. The companies don't concern me, but the people do.

.
Irrelevant point:

I had some worn parts replaced on the starter motor of my Rover 416 Si (1996) today.

The owner of the shop had a 1950’s Studebaker for sale! Heard they ran out business just over 2100 weeks ago. Pity, she was a real beauty!

Nah! While being drawn and quartered is no doubt gruesome, it's over far too quickly to be painful enough for what these people deserve.

Good point. We have let auto makers go out of business before... American Motors, Packard, Willys (original maker of the Jeep).

And the Studebaker Golden Hawk was one of the best looking autos Detroit ever put out.... decades ahead of its time.

We've never let so many American workers hit the streets at one time, unless you count the Depression. I'm for bailing out the company, just not management. I'd like to see management lose their jobs and pay hefty fines for the mess they've caused.

On the other hand, I saw a car show in the news tonight, and people were talking about how a hybrid wasn't important for them because gas is cheap now. I blame people for being stupid as much as I blame CEOs for being greedy dirt bags.

If you're having a historical sadism competition, you might like to consider this. The combination of the drop and the knot that breaks the neck in hanging is an innovation; in the good old days of Jack Ketch you just dangled there slowly strangling, which is a nasty way to go. So your friends had to bribe Jack (he was an entrepreneur who needed to turn a profit) to let them hang onto your legs and so kill you more quickly and mercifully. Now, the gentlemen you have in mind..... wouldn't it be interesting to see whether they have any friends and if so, what they would pay? :D

Yes, but I'm afraid they have enough money to bribe Jack and a few others to do the job. Plus, I'm sure there are ways to keep them alive and in pain for days. ;)

I'm only half-joking about this. I may have some socially liberal tendencies, but generally I think you should get what you deserve, and these guys have earned a world of pain.

From today's news:
Wonder if he's planning on helping the Japanese build more efficient cars?

I think it's just as important to build cars more efficiently as it is to build more efficient cars.

Guess Obama is going to quickly head down the fiscal policy road... good deal.

That's the problem with Detroit: he doesn't need to help the Japanese. They're way ahead with a car that gets 48 city, 45 highway.
Building cars that have less material will make production more efficient. Build a 5,000+ pound vehicle and you need to buy an awful lot of processed material. It also requires more labor.

Reducing wages on the other hand is just another way of increasing prices, and we sure don't need that.

GM apparently hanging their hat on the new Volt... all electric drive, 40 miles range, and extended range at 100 mpg (with onboard internal combustion engine for recharging batteries on the fly.)

Two problems. Won't be ready till end of 2010 and the projected price is $40k. So, why wouldn't a commuter buy a Korean Kia, save $30k to buy gas with?

The Volt at $40k is not the answer.

Bingo.
Not unless the target demographic is moderately wealthy hippies.

Interesting to see the comments about fuel efficiency and alternative energy. Yes, that is important. However, I recently found myself looking at new cars and fuel efficiency was but one parameter in my decision (and no, I've since lost my job and won't be buying soon).

Top priority for me was reliability - and a glance at Consumer Reports April auto issue shows mainly 'black' and 'do not recommend' for most of the Big 3 cars while Honda/Acura, Toyota/Lexus, and Nissan/Infinity have nearly all 'red' (strong positive) ratings and are 'recommended'

Second priority is comfort, noise and added features - and the Big 3 fare well but are not winning, are not heads-above the others.

Third priority for me is fuel efficiency. Finally, I look at these top 3 priorities and then factor in the price to get an overall feel for 'value'. I have not yet had any of the Big 3 US cars make it to even the top half of my list.

Sorry to be so cynical, but I blame labor costs - both the current per-hour costs of labor as well as cost of retirees. When the cost of a GM employee (including benefits) is $75 per hour and the cost of the US worker at the US Honda facility is $45 (2005/06 numbers, http://www.heritage.org/Press/Misc/ALaChart.cfm then I'm sorry, but you can improve fuel efficiency, change your model lineup, fire all the managers, offer better Warranties - but at the end of the day, you can't be competitive with labor costs being 1.5 to 2 times more than competitors.

A bit of an aside- if anyone reading this thread has not seen the 1989 Michael Moore film 'Roger and Me', it's worth seeing. Though Moore is certainly controversial and many may not be fans of his works, this film is the documentary that got Moore started. It may not be the most objective/balanced film you'll ever see, but it's about GM outsourcing labor to save money and the impact it has on Flint (and Detroit) Michigan.

My point is that 20 years later we're still seeing issues over labor costs, profits, Management, and the competition vs. Japanese cars.

You'd think these problems would have been solved by now?

I think it likely that none of those apply to many car buyers. They are buying something entirely different:

Cadillac = rich and old
Buick = old and comfortable
Pontiac = young, sporty and exciting
Corvette = rich, young, sporty and exciting
Chevrolet = working guy and not ashamed of it
SUV = semi-rich outdoors type (young, active)
Pickup = rugged outdoors, or country/farmer/rancher
Fuel efficient = BORING

Chrysler and Ford not so different. Now, make a family car that gets 50 mpg and goes from 0-60 in 6 seconds and you got yourself a winner.... but only if it looks cool based on the status group you think best fits you.

We have been market segmented.

I think that this is the critical factor that 95% of the US doesn't get yet: fuel efficiency is critical, no matter what segment of the market you're in. Gas is very cheap right now, but that will not last. As we pass peak oil, its price will rise, and the further past the peak we go, the faster the price will rise. The only hope is to conserve. Drilling more will only push us past peak oil sooner and faster.

Who cares if a car is boring. If it is efficient and reliable, you will have more than enough money to be "cool" with something else less important.

Ahem! If we are going to discuss engineering, I propose that we take it in another direction. ;)

One more point: I read somewhere that a couple of these CEOs (Ford’s Alan Mulally and Chrysler’s Bob Nardelli) are fairly recent arrivals and are not responsible for the mess. In fact, the article I read argued that Rick Wagoner had done more than his four predecessors at the helm of GM, including quality improvements, car lineup, more efficient factories, and success in China and elsewhere overseas.

Perhaps someone with better connections and knowledge of the trade can comment the veracity of this.

A crash course in priorities
 

Perhaps what the USA needs is a crash course aimed at realigning consumers’ priorities?

If it had not been for the dire state of the economy and your unemployment rate skyrocketing -- I would have suggested doubling gas prices to European levels.

Ain’t nuthin’ like de-segmentation of the market! :cool:

Not just the USA. In the UK they talk about "Mondeo Man" as if his car tells us what he does, how he talks, what his home looks like and whom he votes for. And the same for other brands. Being a mild Aspie, I don't understand any of this fine social gradation stuff, but I observe that it seems to be how the majority of our horrendously hierarchical species thinks. At such times I wish the planet would get itself an ELE and start over....... (Maybe if the dolphins took over, the computer of the far future would have a logo showing a fish with a bite out of it. The Mackerel.)

I doubt they were hired off the street, and I blame top level management as well as the CEO.

That is correct. And all three when questioned about executive pay indicated they had already frozen bonuses and such for themselves as well as other highly paid executives. (Though obviously they are still making huge salaries and have use of the corporate jet.)

In the US, cars still have a lot to do with status... silly as that is, it is fact.

In 1963 I had a VW bug (40hp), in 1980 I had a Ford Pinto (a hand me down, 2nd car). Never again will I own an under powered vehicle that lacks the zip to safely enter the freeway.... and I don't care how much gas I have to buy to avoid that. VW was fun to drive, though

Would you pick a wife with the same criteria?

I think you're confusing current technology with ancient history. From this link:
Bad analogy. Wives are more efficient than vehicles. <--- See what I wrote honey? :)

I own a Camry, but I opted for the V-6.

Not a bad analogy at all. I would hope the selection of a wife would include criteria like: emotional attachment, adds a little zip to your life, a little pride of ownership (wife doesn't do computers:)), and a choice that brings a little pleasure and comfort to your life.

The problem is that while everybody would like a powerful vehicle, nobody can afford one. That's because it isn't a matter of whether or not you can pay for gas now, but whether or not it will be affordable for society to function in the near (< 20 years) future. The decisions we make today profoundly affect that future.

The difference between the 4 and 6 cylinder Camry is more than 10% fuel economy. Imagine what would happen to the price of gas if everyone's mpg went up by 10%! We could burn in 11 years, the same amount of gas we're burning in 10. That's better than getting a year's worth of gas for free, because the gas we'd buy during each of those 11 years would be cheaper than the gas we will buy in the 10 years with lower fuel economy.

It was a joke. ;)

Of course. And I am certainly not the first to equate certain vehicles with "sex appeal."

Reducing an auto purchase to a Vulcan like process kinda misses the point and takes all the fun out of the adventure.

As I have posted earlier, conservation is not a solution. It simply prolongs the inevitable and props up the current system. We will not move to energy efficiency until we have to... conservation pushes that date a few years into the future is all, and extends the reign of the oil cartel.

Have you given up your electric can opener, toaster, ice maker, or electric garage door opener? I'd give those up before I gave in to a car with zero performance.

We will evolve into an energy system with less reliance on oil. We have plenty of coal if we could clean up the emissions. We have plenty of natural gas. Nuclear is clearly a part of our future. A wind farm in Washington DC could prove very productive. Other technologies are on the verge of a break through. We'll be fine; sooner rather than later. I think Obama will move in this direction with government investment and with the added purpose of creating jobs.

Sorry. I didn't mean to imply that it was the solution. It is the only thing that will work as a stop gap between now and when we develop alternative fuels because it will give us more time to develop them. Drilling/burning more/faster will decrease that time.
Yes, yes, no, yes. We can't give up ice, partly because it would make us less efficient. Nobody needs an electric can opener or garage door, and toast usually has butter on it. Most people could do with a lot less of that.
Yes, but evolution can be a long, painful process or a more gradual, easy transition. We determine how long and how painful with every choice we make.

This may be of interest re toxic managers:

http://news.bbc.co.uk/2/hi/health/7745324.stm

I should thank my boss. My blood pressure is generally the lower side of normal and if I get dehydrated I feel quite faint. Maybe the frustration my boss causes is actually good for me if it's keeping my blood pressure elevated :rolleyes: .

More info on costs: http://online.wsj.com/article/SB122809320261867867.html

CEOs to Congress: Give us $25 billion with no strings.

Congress to CEOs: Put some thought into this and tell us how you are going to spend it.

CEOs to Congress: You're right. We need $34 billion.

Looks like the bailout is on track for $15 billion with the usual restrictions. Money coming out of the $25 already appropriated for them to improve vehicle efficiency.

http://news.yahoo.com/s/ap/20081208/...ress_autos_177

Guess this had to be done one way or another... letting a million plus jobs go at this point in time doesn't make a lot of sense.... a time when we're about to spend much bigger bucks to create jobs.

I hope Congress has enough sense to keep out of management. If the Big 3 do exactly what Congress says and still collapses, whose fault is it? Strong oversight to ensure the money is spent exactly as agreed to is, of course, a rational thing to do.

And let the current management run things? These are the same people who've been lobbying Congress to keep mileage standards low. The same people advertising 24 mpg as being good!

My wife describes this predominantly male behavior as "Look, another guy with a 17-foot extension of his penis".

They need more than a bailout
 

I think you’re right. There are, however, several dark clouds on the horizon. A few thoughts:

• Should the recessions deepen, then people simply won’t be spending money on new cars. If so, there ain’t nuthin’ Congress or anyone else can do to save that industry.
  
• In my opinion, even more important that this bailout, is for The Big Three to ally themselves with financial institutions and come up with some veeerry attractive financing offers.
  
• One thought on management: I don’t think the main problem is the current CEOs, so getting rid of them will have negligible effect. What we’re talking about is an entire, anti-innovative culture. The current CEOs, who now understand the gravity of the situation, may well be the right ones to turn things around.

Don't care if Congress requires a change in leadership, but I don't want us to get into the position of running an auto industry. That would make failure our fault. Think it better to keep the lobbyists controlled Congress out of the board room.

If forcing them to give up the executive jets and take salary cuts doesn't get their attention, we should force them to divorce their trophy wives.:)