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Bail Outs For Auto Industry?


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Bruce I think thats a false premise that the auto industry is putting out there to encourage a bailout. I think this because if GM fails someone else will fill the void because demand for cars will not go away. Either GM will restructure and come back stronger or the Japs will have to expand to meet it.

I do agree it will be a bitch in the shortrun for many people.

I wouldn't mind a 10 year provision that says cars have to be assembled here to be sold here to encourage that investment.

I havent really noodled this last comment out is just shooting from the hip.

Bob

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A real problem here that is not being addressed, but is aat the crux of the situation is "SALES".  The true problem is a cash flow problem with the companies.  This ties directly to fixed overhead.  The plant and equipment cost of running these plants is enormous. Even if the companies had the same cost structure as Toyota, Honda..., if htere sales go away, or shrink considerably, there is no money to pay bills.  The burn rate is quite high, with no revenue to replace it.

We can debate if it is too high, which it is, and this thread constantly addresses that issue.  Cost of a UAW employee versus competion, but the real issue and the need for cash is to pay bills, whci is not happening, because consumers have shut down or cannot get credit to buy.  This was the point by all particpants yesterday.

In addition, I expect, and I think the auto makers are aware, futre sales will be less, so the plants will be geared toward lower production runs, which should mean lower employee count, whcih in turn should bring total expense down, short of physical plant and equipment.

I was impressed by the comment of the professor from Maryland yesterday, stating the consumer will probably hang on to cars longer, maintain them, hence then eed for less prodcution.  Think about it, we as consumers are use to having a pick of EVERYTHING and waiting fr nothing.  Unfortunately, the automakers responded to our wishes and demands, and created this inventory, which is sitting out htere, waiting to be bought.  The automakers were "betting on the come".  Well, credit tightens to 0 (not a bad thing) and no sales, the rest is not hard to figure out.  

I do not think this is much different than the housing issue.  Huge inventory, no demand, but bills to pay.   The difference, home builders dont have huge plant and equipment, just inventory.  We got used to having it all, and the producers of these goods were more than happy to build it for us, assuming it would be bought.  Until the it all ended!  

Unfortunately, in the automakers case, their employees keep wanting to get paid (no blame here) and have made huge promises to people in the past, for which they need to keep the "machine" going, which reuqires huge amounts of cash inflows, which have all but gone away.  NOW WE HAVE A PROBLEM.

I was personally impressed that the BIG 3 leaders seem to be aware of this issue in the future.  If they are true to their word (credibility issue here I agree), they have these issues addressed in the future.  Herin lies the problem, can they wait for the future fixes that come in the next year or 2, (cost controls, retooling,cheaper employees...) to make them more competitive.  They say they will be, but will we believe them, and do they have the time to survive???

ONLY THE SHADOW KNOWS!

So to conclude my ramble, I think in some ways, the automakers while responsible, were only responding to our WANTS, more than our needs.  I think there is some responsibility that lies with us as the consumer as well.  Cheap money, instant gratification, and production runs to satisfy our whims, the AMERICAN WAY!

I find this an amazing situation, one that will unfold in front of our eyes, and will be interested to see the outcome.  I just hope we al learn from this and are better people for it in the future!

Lets all go buy a car and make the world a better place!

Happy Thanksgiving to all!  

Fuess

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Agreed on all counts Bob.

This is only a beginning suggestion, not a complete plan and in the perfect world and maybe I'm being blind to even suggest this could work....

Give them the Bailout BUT, and that's a big BUT....

1)ALL personnel take cuts from Mngmt all the way down to the rank and file on the line. UAW negotiates a reasonable 75 or 85% contract and Mngmt agrees to same on their side. It would instill more trust on both sides and show that both sides are willing to work together to save jobs and the industry, reduce overall cost including vehicle cost and make them more competitive.

2) NO GOLDEN PARACHUTES OR BONUS'!!!!

3)Knock off the d@m^ "every year" model changes that result in extremely costly retools of assembly lines every single year! This alone would result in MILLIONS of dollars PER PLANT of savings in construction cost and I also believe, the consistency year in and year out of making the same ol, same ol would result in a higher quality product, rather than taking half a year for everyone to figure out all of the new tooling they are working with.

After that... he!! I don't know but I think this would be a good starting point....

1. Certainly

2. Agreed

3. Most yearly model changes are not cosmetic but are incremental improvements to the product. Trucks have a longer body style run than cars. Trucks were running eight years or so before the major change. Cars tend to be three or so. Because the Japanese refresh that often the domestics have to do it to, or are left with outdated looking product. Line rerates from 60 jobs per hour to 55 jph, to match supply with demand, can cost millions of dollars alone because you are changing the work on an entire plant floor.

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Breakfast Boy
Agreed on all counts Bob.

This is only a beginning suggestion, not a complete plan and in the perfect world and maybe I'm being blind to even suggest this could work....

Give them the Bailout BUT, and that's a big BUT....

1)ALL personnel take cuts from Mngmt all the way down to the rank and file on the line. UAW negotiates a reasonable 75 or 85% contract and Mngmt agrees to same on their side. It would instill more trust on both sides and show that both sides are willing to work together to save jobs and the industry, reduce overall cost including vehicle cost and make them more competitive.

2) NO GOLDEN PARACHUTES OR BONUS'!!!!

3)Knock off the d@m^ "every year" model changes that result in extremely costly retools of assembly lines every single year! This alone would result in MILLIONS of dollars PER PLANT of savings in construction cost and I also believe, the consistency year in and year out of making the same ol, same ol would result in a higher quality product, rather than taking half a year for everyone to figure out all of the new tooling they are working with.

After that... he!! I don't know but I think this would be a good starting point....

1. Certainly

2. Agreed

3. Most yearly model changes are not cosmetic but are incremental improvements to the product. Trucks have a longer body style run than cars. Trucks were running eight years or so before the major change. Cars tend to be three or so. Because the Japanese refresh that often the domestics have to do it to, or are left with outdated looking product. Line rerates from 60 jobs per hour to 55 jph, to match supply with demand, can cost millions of dollars alone because you are changing the work on an entire plant floor.

I absolutely agree with Nick.  As a union member, I am willing to take a pay cut.  While I would never agree to a 50% cut, I would consider 25% or so to keep my job.  But I want to see higher mgt. take big pay cuts too.  And my past experience tells me that's harder than getting UJers to agree on a pheasant load.  Some of you guys can blame the union all you want.  That's your opinion and I will agree the union is in small part to blame also.  But the big 3 have been mis-managed by the big boys for a long time and something has to change there before there is any hope at all.

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frugal pointer

I am curious to know how we have survived all these years when car makers go under?  How have we lived without Auburn (1900-1936), DeSoto (1928-1961), Hudson (1909-1957), International Harvester (1907-1975), Nash (1917-1957), Packard (1899-1958), REO (1905-1975), Studebaker (1902-1966), and Willys (one form or another 1916-1963)?

Just to name a few of the more popular companies that have folded.  There were hundreds of independants in the early 1900's, these are the ones that "made it".  I would presume some of the larger companies, whose business practices are now in question, forced the little guy out or bought them up.  If we lose GM, won't someone fill the niche?

I grew cranberries for several years.  I had a contract with the BIG company, "crave the wave" you know?  I left them and went to a smaller handler for personal service.  The BIG company (its alledged) hoarded fruit in their freezers for years to control the market.   Fruit dropped from a high of $80 per barrel (100 lbs) to under $20 when production topped demand.   Companies folded, families sold land to get by, some went to the wayside.   The market corrected itself after several years, climbing up to the $65 range now.  Folks will make a living again.  

I bring this up because its something I know that involved me.  Just like the GM issues will involve some on this board.  Its oversimplified but how is it any different?  FP

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As a union member, I am willing to take a pay cut.  While I would never agree to a 50% cut, I would consider 25% or so to keep my job.  But I want to see higher mgt. take big pay cuts too.  

Here's your problem - most of managment can find another white collar type job within 12 months.  Your factory closes, it's unlikely you'll ever find as good a job locally.  Most of the managment salary packages are competitive across a series of industries while blue collar autoworker salaries are above the salary of similar jobs by a very wide margin.  Also, should white collar salary be cut - the "top performers" will find jobs elsewhere leaving the company with the under achievers and the 5 to 10 years to retirement types.

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Fuess brings up a good point, sales are unlikely to return to prior levels thus fewer units to spread the fixed costs.  In my first post on this topic I mentioned that I thought people were going to hold cars longer thus a reduction in volume of sales.  

To me this implies a radical shift in the sales channel.  I believe the "family" owned dealerships are on their way out to be replaced by the Carmaxes and Auto Nations which will be located in central location servicing a region.

It also means a reduction in head count at the Big 3.  I understand that most union shops work on a "last hired first fired" basis.  Thus the over paid workers will be kept and the low cost new hires will be shown the door.  Hmmm, and tax payer money is going to be used for this?

I still haven't made my mind up on the bail out.

Dave

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It also means a reduction in head count at the Big 3.  I understand that most union shops work on a "last hired first fired" basis.  Thus the over paid workers will be kept and the low cost new hires will be shown the door.  Hmmm, and tax payer money is going to be used for this?

I assume part of the grand plan, along with the leverage of desperation/chap 11 filing will be used to move from a LIFO to FIFO for the employees.  Along with other voluntary retiremnt packages, will help bring the employee costs in line with competion.  

This was my interpretation of the comments about costs radically changing within a year or 2 from the the 3 CEO yesterday.  I think it was "alluded" this would happen, but given the stage, it would too difficult to blast that on the airways on public TV.

In "normal" times, such shifting of employment would not be tolerated, but sometimes it takes this type of situation to stomach the ultimate effect.

Somewhat like being told you have cancer.  You can cut off the leg and save the body, or......

The page turns...

Fuess

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Look at it this way how many times will we need to bail them out because once you open the door it is hard to get it shut again.  

We have bailed out Chyrsler once already and they are now back at the Government trough.

Someone needs to stand up and say you got into this mess you get out of it.  If we bail them out now and it goes south again what then? Sometime you have to cull the herd and now is one of those times.

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calgaryrookie

I don't want too appear to adamant here or sure of myself, as I recognize I'm no expert on the subject, but...

There are more than just the big three that build cars in the US and Canada (the two countries are very integrated auto-wise). How are Toyota and Honda doing? I'd be interested to know whether the entire industry is badly ailing or whether it's more perhaps just bad management by the big three. If the latter I'd be much less interested in helping them.

Secondly, what would be so bad about letting one go bankrupt? I could be wrong, but bankruptcy doesn't necessarily mean that the factories will just sit there empty with everyone losing their jobs. I would think that other investors would come in, offer the investors (who should be taking the hit) pennies on the dollar for their stock, or simply buy facilities, and then re-open some of the plants. People are still buying cars afterall. My company picked up some former Enron pieces and many of the employees there are still working for us, at good wages.

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Honda just announced a new civic plant in Indiana yesterday which will have 2300 jobs  and more later as they add capacity. They must not be doing badly.

This plant will make regular 4 cyclinder civics and Natural gas powered ones in the near future.

Honda link

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Honda just announced a new civic plant in Indiana yesterday which will have 2300 jobs  and more later as they add capacity. They must not be doing badly.

This plant will make regular 4 cyclinder civics and Natural gas powered ones in the near future.

I think this is the existing plant that, while new (less than a year old) is already up and running (or walking at least). I think their news conf was regarding the first car off the line.

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heres what the web site says

The new plant in Greensburg, Indiana will employ 2,000 associates when the plant reaches full production capacity. Mass production began on October 9, 2008.

SO yes thats correct its just been ironing out production bugs until recently, but it still is an indication they are investing in plants and have a healthy future

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Auto aid plan heads for defeat as Big Three teeter

By JULIE HIRSCHFELD DAVIS, Associated Press Writer Julie Hirschfeld Davis, Associated Press Writer

1 hr 48 mins ago

WASHINGTON – A Democratic Congress, unwilling or unable to approve a $25 billion bailout for Detroit's Big Three, appears ready to punt the automakers' fate to a lame-duck Republican president.

Caught in the middle of a who-blinks-first standoff are countless manufacturing firms and auto dealers — and millions of Americans' jobs.

For now, with the plan headed for a roadblock in the Senate, lawmakers in both parties are engaged in a high-stakes game of chicken, positioning to blame each other for the failure.

"The Congress need do nothing" during its postelection session this week, Sen. Harry Reid, D-Nev., the majority leader, said Wednesday, although he also said he still hoped lawmakers could strike an elusive deal to carve $25 billion in new auto industry loans out of the $700 billion Wall Street rescue fund.

But it's really up to President George W. Bush's team to act, he said.

"If we can't do it here legislatively, I would hope that the secretary of Treasury would listen loud and clear, because they could take this into their own hands and do what I think is appropriate," the Democratic leader said.

Not our responsibility, countered the White House.

"If Congress leaves for a two-month vacation without having addressed this important issue ... then the Congress will bear responsibility for anything that happens in the next couple of months during their long vacation," said Dana Perino, the White House press secretary.

She said there was "no appetite" in the administration for using the financial industry bailout money to help auto companies.

The White House and congressional Republicans instead called on Democrats to sign on to a GOP plan to divert a $25 billion loan program created by Congress in September — designed to help the companies develop more fuel-efficient vehicles — to meet the auto giants' immediate financial needs.

GOP Sens. Kit Bond of Missouri and George V. Voinovich of Ohio were at work on that measure Wednesday, toiling to placate skeptical Democrats by including a guarantee that the fuel-efficiency loan fund would ultimately be replenished.

"It is the only proposal now being considered that has a chance of actually becoming law," said Republican leader Mitch McConnell of Kentucky.

But there was little sign that Democratic leaders would go along. They are vehemently opposed to letting the car companies tap that money — set aside to help switch to vehicles that burn less gasoline — for short-term cash-flow needs.

All of which leaves the Big Three bracing for a bleak winter without government help. General Motors Corp. has said it could collapse within weeks, and there are indications that Chrysler LLC might not be far behind.

GM CEO Rick Wagoner told a House committee Wednesday that the downfall of his industry could lead to a loss of 3 million jobs within the first year and ripple through communities around the nation.

In sometimes contentious testimony, Wagoner was pressed on when GM would run out of money if the loans weren't extended.

He wouldn't say precisely, but disclosed that the company now was burning through "$5 billion each month."

Still, with the $25 billion emergency package, "we think we have a good shot to make it through this," Wagoner said.

Many lawmakers in both parties, however, are now openly discussing whether bankruptcy might be a better option for auto firms they regard as lumbering industrial dinosaurs that have done too little to adjust their products and work forces for the 21st century.

The carmakers argue that bankruptcy would devastate their companies, but proponents say it would give them a chance to reorganize and emerge stronger and more competitive.

It's unclear, though, whether Democrats controlling Congress are willing to risk being blamed for letting one of the Big Three — symbols of the nation's once-mighty manufacturing sector — go under.

Bailout-shy lawmakers got an earful from jittery constituents last month when the House let an early version of the Wall Street rescue fail, sending the Dow Jones industrials tumbling and erasing more than a trillion dollars in retirement savings and other investments. Congress took a deep breath and reconsidered, passing the plan a few days later.

Faced with a similar collapse in the auto industry, the Bush administration might yet decide to use its authority under the $700 billion financial industry bailout to help the auto companies, or the Federal Reserve could step in — though both have steadfastly refused to do so.

If not, lawmakers have left themselves a contingency plan: Come back to Washington in December for yet another postelection session where they might be able to strike the deal that now seems beyond reach.

Democratic leaders are planning to gather for an economic conference the week of Dec. 8, noted House Majority Leader Steny H. Hoyer, D-Md.

"That is available," Hoyer said this week. "The year has not ended."

___

Associated Press Writer Sam Hananel contributed to this report.

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No bail out, in any form to save that which is dead.

i fully support an inflow of cash to those who show promise in creating new companies in the aftermath of the collapse.

We are headed into some interesting times.  I see many sports teams failing  I see many other industries failing as well....but in the end all will be better after WWIII is over.

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