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

[cwtnospam]

Quote: Originally Posted by aehurst And their trucks are a slam dunk in the US market.

They'd better not count on that. Trucks have sold disproportionately compared to their utility, and as incomes drop people will want economy more than the convenience of having a truck for those rare occasions when they have to haul something. After all, it's cheaper to pay a little extra for delivery than owning a truck.

[aehurst]

Quote: Originally Posted by cwtnospam They'd better not count on that. Trucks have sold disproportionately compared to their utility, and as incomes drop people will want economy more than the convenience of having a truck for those rare occasions when they have to haul something. After all, it's cheaper to pay a little extra for delivery than owning a truck.

Admit the facts CWT. Of the top 20 vehicles sold last month big 3 sold 82,893 pickups... Japanese 8,648.

As I posted earlier, the big 3 elected to not compete in the small, high mpg market. Obviously, that turned out to be a management error. But, that doesn't mean they cannot compete in the future if they choose to invest in that market segment and make an effort to compete.... i.e. Chevy Malibu and Ford Focus.

[cwtnospam]

The fact is that the market is changing, and counting on vehicles selling the way they did in the past is part of why Detroit is in trouble.

[tw]

Quote: Originally Posted by aehurst Admit the facts CWT. Of the top 20 vehicles sold last month big 3 sold 82,893 pickups... Japanese 8,648. As I posted earlier, the big 3 elected to not compete in the small, high mpg market. Obviously, that turned out to be a management error. But, that doesn't mean they cannot compete in the future if they choose to invest in that market segment and make an effort to compete.... i.e. Chevy Malibu and Ford Focus.

certainly for the past 20 years (and maybe since the 50's, truth be told) detroit has focussed on selling 'ego' cars: Cadillacs and LTDs, muscle cars of all sorts, SUVs, hummers and full-sized pickups. you should go back and look at the ads for Dodge trucks from a few years before 9/11 (where their entire market strategy was variations on 'my truck can beat up your truck') through a few years after (where they got into this almost mystical military thing (with thunder, flashing headlights, and some drill sergeant yelling at you while the truck bore down on the camera in slow motion). wherever detroit has entered into the economy car market (the Malibus, Focusses, Probes, and etc.), it's always been with a up-sell spin (you can have this, of course, but a person of your status would really want to be driving one of those...).

well, they have three months to rework things - let's see what they come up with, and hope it means a change in strategy rather than massive layoffs so they can keep doing what they've been doing without the overhead of employees.

[aehurst]

Quote: Originally Posted by tw certainly for the past 20 years (and maybe since the 50's, truth be told) detroit has focussed on selling 'ego' cars: Cadillacs and LTDs, muscle cars of all sorts, SUVs, hummers and full-sized pickups. you should go back and look at the ads for Dodge trucks from a few years before 9/11 (where their entire market strategy was variations on 'my truck can beat up your truck') through a few years after (where they got into this almost mystical military thing (with thunder, flashing headlights, and some drill sergeant yelling at you while the truck bore down on the camera in slow motion). wherever detroit has entered into the economy car market (the Malibus, Focusses, Probes, and etc.), it's always been with a up-sell spin (you can have this, of course, but a person of your status would really want to be driving one of those...).

Totally agree.

Quote: well, they have three months to rework things - let's see what they come up with, and hope it means a change in strategy rather than massive layoffs so they can keep doing what they've been doing without the overhead of employees

Significant change is needed, but I don't think anybody actually believes this can be done in 3 months.

Asking the workers to be paid a wage/benefits that is at least comparable to the competition is a key component of the restructuring. Without the adjustments, the workers will be unemployed and on the street by the end of next year. It is a hard choice, but it's not "..... doing without the overhead of employees."

[tw]

Quote: Originally Posted by aehurst Significant change is needed, but I don't think anybody actually believes this can be done in 3 months. Asking the workers to be paid a wage/benefits that is at least comparable to the competition is a key component of the restructuring. Without the adjustments, the workers will be unemployed and on the street by the end of next year. It is a hard choice, but it's not "..... doing without the overhead of employees."

well, yeah, but 3 months is enough time for them to to get their act together. it's like dieting - takes a while to see results, but you can tell fairly quickly whether or not someone's serious about the attempt.

I'm not so sure, however, that worker/wage/benefits adjustments are the key to success here. worker/wage/benefits costs are easy to point to, but the real issue isn't cost in the absolute, but cost relative to performance. in any industry like this there are people employed in management capacities for design, advertising, distribution, legal matters, oversight, leadership, and etc.; they exist in smaller numbers than production workers, but get (dis?)proportionately larger salaries and benefits. it's like the infamous Nike thing, where Michael Jordan's salary for commercial sponsorship was greater than the combined salaries of all Nike's south-east asian production-line workers. now (in a weird and twisted way) it's natural for us to say that MJ's 30 second spots were worth more to Nike than all the workers who actually made the shoes, and I'm sure (if pressed) Nike would have closed a factory or two before getting a less expensive spokes-person, but logically I'm not sure that makes sense. for instance, I'd be willing to bet that Toyota and Hyundai spend far less on advertising than Ford or GM, but in certain markets T and H demolish detroit in sales, mostly because they produce damned good cars.

I mean, so sense cutting back on the fat in your burger if you're going to indulge in fries, regardless...

what I really think detroit (and a lot of other American commercial sectors) need is market forces in upper management. as it stands, once you get over a certain level in any corporate hierarchy, your personal income, status, and reputation are teflon; you can do whatever dumb crap you feel like, and your worst-case scenario is a golden parachute and a cushy job when some other firm snaps you up. make it so that there are real, personal, biting penalties for screwing up when you run a corporation, and corporations (and the people who run them) will get a whole lot leaner, meaner, and (I think) more ethical.

[cwtnospam]

Quote: Originally Posted by tw ... make it so that there are real, personal, biting penalties for screwing up when you run a corporation, and corporations (and the people who run them) will get a whole lot leaner, meaner, and (I think) more ethical.

This would be a good idea to apply to all corporations, but through regulation. It's obvious that the corporations aren't going to do it voluntarily.

[aehurst]

Don't really disagree with anything you said, TW. Labor costs are just one of a host of problems the Big 3 has to fix. Absent a jump in worker productivity, however, labor costs as well as all other costs have to brought under control or there is no chance for success. The Big 3's current mess is not labor's fault, but cost efficient labor (cost per unit of output) is a key to a competitive future.

Neither, as you point out, does getting all costs under control equal success. They need to build better cars across the board. They need to build cars for the future. They need to improve quality assurance programs. They need to restructure their dealerships and stop the nonsense of competing with themselves with multiple lines of essentially the same vehicles. They need to shut down excess capacity. They need to re-negotiate their debt structure.

Competing with the Japanese is a tall order... they are extremely efficient and produce excellent vehicles. Expecting the Big 3 to compete with them with a labor cost disadvantage going in is a huge leap in faith.

Bottom line here, I think, is the UAW (and Big 3) is coming face to face with international markets. If they are going to compete with labor world wide, then they are going to have to become more efficient or the US is going to have develop better trade agreements. Anything else is long run failure. Same applies to Toyota & Honda operations in the US.

[NovaScotian]

The issue is not market share, it's profit. The big 3 lose money. The others don't.

[aehurst]

And, thank you Canada for chipping in on the bail out loans.... which by the way DO include caps on executive compensation. I am assuming these loans only went to big 3 operations in Canada.

[NovaScotian]

Quote: Originally Posted by aehurst And, thank you Canada for chipping in on the bail out loans.... which by the way DO include caps on executive compensation. I am assuming these loans only went to big 3 operations in Canada.

Indeed. They include hefty limitations on executive compensation, slash all bonuses, require that the burden on workers be moderated although they will have to contribute to the solutions, require regular financial reports, require permission to spend more than $125M on any one initiative, and of course, are entirely focused on that segment of the auto industry that resides in Southern Ontario between Toronto and Detroit.

[tw]

Quote: Originally Posted by aehurst And, thank you Canada for chipping in on the bail out loans.... which by the way DO include caps on executive compensation. I am assuming these loans only went to big 3 operations in Canada.

maybe Canada can bail out the US while they're at it. I mean, after all the stuff we've done for you guys; like... uhhhhh... Niagra falls?

[NovaScotian]

The population of Canada is 33,390,141 as of 2007. The population of the US in the same year was 301,139,947, i.e., almost exactly 9 to 1. It's not easy to give unemployment comparisons because the two countries estimate (and seasonally adjust) them differently, but our manufacturing industries have been losing jobs nearly as fast as yours have. Car sales are down, but not catastrophically so; dealers are not getting fat, but they're not failing either. Our banks' exposure to toxic mortgages is minimal; we have much stricter rules about that, and legislation is in the pipe to limit their ability to increase interest rates on credit cards too fast.

In other words, the economy of Canada is in a mild recession, but not in a crisis. The big 3 bailout was engineered to a) prevent monstrous job losses in Ontario (1/3 the population of Canada) and b) to prevent the big 3 from closing down the entire sector as part of their response to the US crisis.

[fazstp]

Apparently our (Aus.) car dealers are having problems getting loans to replenish their showroom stock. A couple of troubled lenders have pulled out of that sector and left them hanging.

[NovaScotian]

I think that will inevitably happen here too as credit tightens. What's saving them now are large inventories.

[Jasen]

Quote: Originally Posted by NovaScotian The issue is not market share, it's profit. The big 3 lose money. The others don't.

Yes. This is where my point was leading. The blame can't be laid on customer loyalty or being out-competed. They're still beating most foreign companies in terms of per unit sales--yet they're crashing. There are multiple issues creating this, but lack of sales against competitors is not one of those issues.

Bad management, blindingly sticking to failing business models, unyielding relations with labor organizations, etc.

[cwtnospam]

Let's not forget lavish executive pay. Corporate jet anyone? ... And I doubt the CEO's were the only hiighly over paid execs.

[edalzell]

Are you saying that Toyota, BMW, Subaru, etc didn't have jets and highly-paid execs?

[aehurst]

The imports are piling up at the ports, they are not selling either. Not likely any of them will show a profit for the 4th quarter. Their buyers can't get credit either.

[cwtnospam]

American execs are infamous for their excessive pay and perks compared to others.

Foreign cars are becoming victims of the domestic problems and our solution to them: Cutting worker pay is a recipy for disaster when the basic problem is that workers don't have enough money!