The Case AGAINST Bailing Out GM/Chrysler

[Duffman]

Originally Posted by MazdaMatt

I think i'd better drop out of this conversation before i get banned... i'm pretty thick-headed about hating unions. Day's pay for a day's work, I say. I shouldn't have to regret going to university for 5 years for a computer engineering degree because a couple of my highschool buddies didn't finish so they could go join the union and make absurd money for dead-simple mindles work. I wonder if they still have jobs...

I agree with you Matt, we don’t allow companies to collude against the market and we don’t allow companies to use coercion against the employees, yet somehow it is alright if unions do it. The laws need updating.

[Matt Herring]

Unions aside...The Big 3 made some very poor business decisions. Now, they are paying the price for those decisions. We are in a huge mess now and it is going to take some very severe measures to right the ship. Unfortunately, the prevailing trend is to bail out everyone...automakers, banks, wall street, mortgage companies, homeowners...the list will total trillions (that's alot more than millions and billions) of dollars.

My advice...save your money...stay liquid...prepare for the worst.

[RH77]

Originally Posted by captainslug

They have been LOSING MONEY for years now because of a horribly outdated business model and product line. It is their own fault that they cannot keep up with the market.

First, awesome avatar...

I agree with this, but the Union model may have run rampant in recent decades. I'm not disputing the existence of Unions, but rather some disparity between Union position's hourly wage compared to other skilled labor. Nevertheless, GM likely invited this kind of reflex in recent years with outsourcing, antiquated top-level thinking, and just the pure lack of taking a calculated risk.

Case in point #1: Pontiac Aztek. They relied on focus groups, all of which liked the vehicle. Unfortunately, they didn't represent wide public opinion.

Case in point #2: Last Generation Chevy Caprice. The average buyer was either a fleet buyer or in older populations. The radical redesign with the bulbous rear-end turned off many buyers. They needed to transition something like with a combination of some squared angles and rounded euro-styling. The butt got smaller, but the damage was done.

Case in point #3: Cadillac Cimmaron. Luxury car buyers in the early 80's couldn't care less about fuel economy, let alone a re-badged Cavalier. Lincoln town car sales skyrocketed.

Case in point #4: The "Quad-4". Proof that they couldn't compete with Asian 4-cylinder performance and, most importantly, reliability. Head gaskets blown at 70K miles in many Olds and Chevy models. This only strengthened distrust in reliability.

Case in point #5: Everyone knows someone that knows someone that works at the plant. You didn't dare buy anything else or blaspheme resulted. Welp, it didn't and Toyota, Honda, et al took over.

I can keep going, but you get the picture...

-Rick

[jamesqf]

Originally Posted by Duffman

People are willing to pay $30,000+ on larger cars because they percieve they are getting more...

Checked the MSRP on a Lotus lately? (Lotus, BTW, had the highest CAFE rating of any company that sells in the US last year?) Or Porsche, Ferrari, the two-seater BMW & Mercedes models? Or even the Corvette?

As for the unions and wages, I have to agree that the unions have to bear a large share of the blame for fostering an adversarial, short-sighted "I've got my $35/hr regardless, so screw the greedy management and their company" attitude. Seems any sensible negotiator would have demanded profit-sharing instead, in order to give the workers an immediate stake in the company's success.

[Otto]

OTOH, with a bailout, the gummit would have an ownership position, with which it could can the bad management, improve the product, and save a lot of Americans their jobs. Otherwise, those auto workers go on the dole and their skillsets are lost forever.

What if the bailout said, in effect, that newer/better/more efficient vehicles were job one?

What if some of the bailout money were prioritized for new technology development, such as the ever-illusive long distance battery?

What if some of the bailout money said, in effect, all new vehicles must be made per Hucho guidelines?

[Matt Herring]

Otto -

I'd love to see those guidelines be in place should a bailout occur but what most everyday citizens don't realize is that almost half of the money given to these companies would go to covering employee costs and not for research/development/technology. The money that funded the recent financial industry bailout is also landing in bank acquisitions (banks buying banks) and not exclusively in the hands of consumers for loans (that the banks claimed they could no longer contribute because of the credit crunch).

Previously posted in this thread regarding GM and their employee retirement benefits packages..

Thomas: Unions the reason Big 3 automakers teetering | CARS AND SOCIALISM

When a private company is given government/taxpayer money it's a recipe for destruction. Some call it socialism. It will happen...and 5, 10, 20 years from now we'll find out just how corrupt this whole deal is.

[trebuchet03]

Originally Posted by Duffman

People are willing to pay $30,000+ on larger cars because they percieve they are getting more, but there isnt 2x the amount of materials over the $15,000 car, so that is where the profit is.

I disagree....

People were willing to pay $30K for what they perceived was bigger. But that's the problem now, people aren't doing that anymore. The shift was quite obvious months ago when gas prices were squeezing people - now, job security is a problem...

Unions... deserves its own thread

[Duffman]

Originally Posted by trebuchet03

I disagree....

People were willing to pay $30K for what they perceived was bigger. But that's the problem now, people aren't doing that anymore. The shift was quite obvious months ago when gas prices were squeezing people - now, job security is a problem...

Unions... deserves its own thread

We are seeing a shock to the market, your statement will not hold in the long run.

[SuperTrooper]

Obama may want to appoint a Car Czar:

Obama wants auto industry reformer - Carrie Budoff Brown - Politico.com

"President-elect Barack Obama wants a high-profile point person to oversee reforms in the ailing auto industry, according to members of Obama’s transition team.

Specifics about the proposal remain unclear. But the transition team says Obama suggested to President Bush on Monday that aid to the auto industry could be coupled with the appointment of “someone in charge of the auto issue who would have the authority” to push for reforms. The details came from a more extended readout of the White House meeting provided Tuesday.

The person would assist in efforts to create an “economically viable auto industry,” a transition aide said – a move that could alleviate concerns about protecting taxpayer interests if more money is directed to assist automakers."

[some_other_dave]

Originally Posted by jamesqf

Checked the MSRP on a Lotus lately? (Lotus, BTW, had the highest CAFE rating of any company that sells in the US last year?) Or Porsche, Ferrari, the two-seater BMW & Mercedes models? Or even the Corvette?

That's a very different, and relatively small, market... None of those are daily-driver family-hauler grocery-getters (a very few very small families aside). They are intended specifically for one purpose, which is in many ways antithetical to our purposes here on this forum: GOING FAST.

When you talk about the bulk of auto sales in this country, the bigger cars are "perceived" as being worth more. For example, look at the Accord versus the Civic, the Fusion versus the Focus, the Camry versus the Corolla, and so on. If it costs the manufacturer the same amount to build each (say to within 10%, for a total SWAG) but the larger car sells for 30% more, there is more profit in each of the larger vehicles sold.

Luxury vehicles usually cost fractionally more to build than standard ones, but can sell for much, much more. (That's one of the reasons that luxury SUVs were so common; they cost <25% more to build than a regular truck-thing, and they retailed for double or more! Lots of profit!!)


What does this mean in context of this discussion? I'm not really sure...

-soD