IBD: No givebacks, no bailout

posted at 6:11 pm on November 18, 2008 by Ed Morrissey

When would anyone expect Investors Business Daily to agree with Robert Reich?  On the issue of auto-industry bailouts, IBD commends Bill Clinton’s Commerce Secretary.  If Congress passes a bailout, which IBD adamantly opposes, it should get treated like Chapter 11 — and force the automakers and the unions to completely restructure to regain their competitive posture and repay the loans:

Credit this idea to Robert Reich, the former Clinton administration official. We’ve had lots of disagreements with Reich in the past, and no doubt will in the future. But on this he’s right: If a bailout is to be given, the Big Three and their unions must thoroughly revamp their businesses, almost as if it were a bankruptcy. Call it a Chapter 11 Bailout.

Above all, the companies’ poisonous contracts with the United Auto Workers union have to be torn up. The problem is that the UAW, under President Ron Gettelfinger, remains adamant: No givebacks. This is financial lunacy.

Thanks in part to managerial incompetence, but mostly due to pricey union contracts, it costs American carmakers too much to build cars here; they can’t compete. When you fold in health care, pensions, hourly pay, vacations and the rest, average total compensation for a Big Three autoworker is $73.21 an hour, according to data cited by University of Michigan economist Mark Perry.

Toyota, Honda and Nissan pay a still-generous $44.20 an hour in total compensation — a cost edge of nearly 40%. Is it any wonder that Ford, GM and Chrysler can’t compete? Or that, after paying their workers, they never have enough cash left to retool?

Today the total market capitalization of the Big Three has fallen to about $7 billion. Is it better for the owners of those companies to suffer a total loss or for taxpayers to lose $25 billion? The answer is obvious. As such, the only case for a bailout is if it would force major changes on the industry. That won’t happen with current management in place or with giveaway union contracts that make the companies unviable.

These are the reasons why the bailout won’t help anyway.  The problem the Big Three face has nothing to do with an inability to get loans, but with a fundamentally flawed business model that ensures that they cannot compete.  They spend too much to produce cars that cost more without any extra added value to the consumer.  Buyers select cars with better value and lower price instead.

Until GM, Ford, and Chrysler fix that problem, they won’t succeed regardless of how much they can borrow from Washington.  Until unions realize that they have created an untenable position, they will put the jobs of their members at continued risk.  Either they will have to become niche manufacturers, producing only high-quality, expensive cars that outperform the less-expensive competition, or they have to figure out a way to lower unit cost while improving quality on lower-cost products.

This isn’t exactly brain surgery.  Markets exist to weed out the inefficient and overpriced.  The Big Three and their shareholders should have made adjustments years ago to reduce costs and improve quality.  Instead, everyone kicked the can down the road, coasting on a booming economy.  When times got tough, it became too late to improve.

Management needs to change, and the unions need to adapt.  Taxpayers should not subsidize failure out of some notion that private enterprises cannot be allowed to fail.  A good Chapter 11 reorganization is what Detroit needs, and a bailout will only delay the inevitable — and toss taxpayer money down the drain in the meantime.

There shouldn’t be any bailout at all, but one seems inevitable in 2009, with or without the Republicans.  But if Congress wants to invest in the automakers, then they had better demand a Chapter 11 reorganization as the price for it.

Update: Commerce Secretary, not Treasury.  My apologies for the error.


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Look, I hate the idea of bailouts, but sometimes you just gotta eat a shit sandwich.

rokemronnie on November 18, 2008 at 8:08 PM

You hate the idea of bailouts ?!?!?! and you are calling ME disingenuous?

Just one last question…do people tell you that you have a great sense of humor?

Just wonderin’

Red State State of Mind on November 18, 2008 at 8:17 PM

Red State State of Mind on November 18, 2008 at 8:12 PM

I ain’t gonna argue with you at all.

I just want a shot at one bailout. Just one. They were, the “Detroit Three” working on things, I wouldn’t steer you wrong on that, but man, it will be Hell if they go under and if they go bankrupt. For years. Still thousands will be laid off.

Just plain Hell. So much here is tied into them.

Even as a conservative, I wanna give them one shot.

Scoreboard44 on November 18, 2008 at 8:17 PM

Millions actually. The area will be a crime ridden dessert.

Scoreboard44 on November 18, 2008 at 8:18 PM

or one of those areas that are devastated type thingy’s.

Scoreboard44 on November 18, 2008 at 8:19 PM

You allow foreign manufacturers to buy American companies you lose magnets that can be used for weapon systems.

AKA China.

Scoreboard44 on November 18, 2008 at 8:13 PM

If American companies want to purchase the plants and start their own auto company that would be fine too. A condition would be no higher management transfers and no UAW. The workers keep their jobs and the fools can hit the road collecting beer cans for a living.

sharrukin on November 18, 2008 at 8:19 PM

Rokemronnie,You finally show yourself,I get 80% of my tax dollars back,in services(theoretically)But you want my state to bail out your state because of some egregious error that is the fault of us? Let Michigan rot,The UAW rot,the big3 rot,It’s time to suck it up,no profit NO BUSINESS!!! get a clue,
Bob

Bobnormal on November 18, 2008 at 8:21 PM

sharrukin on November 18, 2008 at 8:19 PM

Who has the money for that right now. What Company? Who?
Russia? China? Japan?

Everyone seems to be in the same boat.

I’m talking about now. Now.

Scoreboard44 on November 18, 2008 at 8:22 PM

Scoreboard44, don’t bother. They don’t care. Their dad bought a bad Chevy 20 years ago so all American cars are crap, because, after all, they build cars today the same way they did in the 1980s. Dealerships that sell American cars treat you like crap (never mind that many if not most dealers own stores for a variety of brands, foreign and domestic – Roger Penske and Rick Hendricks must send all their bad employees to the Chevy stores).

Meanwhile, they buy $300 television sets that can’t be repaired and buy a new iPod to replace the old one that broke and is too expensive to fix out of warranty so they rationalize the purchase ’cause it plays videos and comes in cool new stylish colors, instead of realizing they just paid a bi-annual membership in the Steve Jobs Fan Club.

Consumers are not rational actors.

rokemronnie on November 18, 2008 at 8:22 PM

Scoreboard44 on November 18, 2008 at 8:11 PM

They are given a shot in bankruptcy. In addition, half of the current $50 billion was to help them retool to handle the enviro rules that have already been passed. The laws waiting down the pipe will be much, much worse, as BHO himself is looking forward to bankrupting the coal industry and causing all of us to have skyrocketing electricity prices to force us to be good global warming tools.

The same people, generally, complaining about the great need to keep the industry running as it is are the ones who worked to elect the person who has promised to kill US industry. My patience and tolerance has been, pretty much, exhausted because of this – not that I would support any bailout, anyway.

progressoverpeace on November 18, 2008 at 8:23 PM

Still thousands will be laid off.

Millions.

rokemronnie on November 18, 2008 at 8:23 PM

Let Michigan rot,The UAW rot,the big3 rot,It’s time to suck it up,no profit NO BUSINESS!!! get a clue,
Bob

Bobnormal on November 18, 2008 at 8:21 PM

That’s cold man. We have Families here. We have people here. Cold. I live here. I love my State. I can’t guarantee who runs it.

Scoreboard44 on November 18, 2008 at 8:26 PM

Scoreboard44 on November 18, 2008 at 8:03 PM

I hear you Scoreboard. We live a little farther upstate, but not far enough to avoid the impact. Still, I find it hard to support the bailout. The Big 3 are dinosaurs and have been on their way to extinction for years now.

I looks pretty certain that no bailout will be forthcoming before Jan 20. With GM set to run out of cash by the end of the year, bankruptcy is likely to catch up with GM before Obama can intervene. We need to prepare for the worst.

Dee2008 on November 18, 2008 at 8:26 PM

A condition would be no higher management transfers and no UAW.

It’s one thing to prop up business with government money but there’s a word for telling that business how to manage itself, nationalization.

And you call yourselves conservatives.

rokemronnie on November 18, 2008 at 8:26 PM

sharrukin on November 18, 2008 at 8:19 PM

Who has the money for that right now. What Company? Who?
Russia? China? Japan?

Everyone seems to be in the same boat.

I’m talking about now. Now.

Scoreboard44 on November 18, 2008 at 8:22 PM

You might be surprised!

General Motors Corp., the world’s biggest carmaker, opened a $300 million factory in Russia as it looks to compensate for slumping sales in western Europe and North America.

sharrukin on November 18, 2008 at 8:27 PM

Let Michigan rot,The UAW rot,the big3 rot,It’s time to suck it up,no profit NO BUSINESS!!! get a clue,
Bob

Bobnormal on November 18, 2008 at 8:21 PM

Nice.

Dee2008 on November 18, 2008 at 8:27 PM

rokemronnie on November 18, 2008 at 8:22 PM

it sucks man.
We are on edge here in Oakland County. I don’t know what’s gonna happen.

Just sucks.

Scoreboard44 on November 18, 2008 at 8:28 PM

I get 80% of my tax dollars back,in services(theoretically)

What state do you live in?

Washington has been screwing over Michigan since the 1970s, transferring our wealth to the sunbelt. It’d be nice to get some of that money back. I’d prefer it in the form of military bases and plants, but I’ll take it as a bailout package.

rokemronnie on November 18, 2008 at 8:29 PM

sharrukin on November 18, 2008 at 8:27 PM

The current russian stock market I believe according to Hot Air has halted for now and Putin’s money machine has stopped.

I believe that may have happened before the current economic collapse. But I am not sure.

it will be the same there. One big empty plant.

Scoreboard44 on November 18, 2008 at 8:31 PM

Dee2008 on November 18, 2008 at 8:26 PM

It’s bad down here.

It could get really bad.

Scoreboard44 on November 18, 2008 at 8:32 PM

A condition would be no higher management transfers and no UAW.

It’s one thing to prop up business with government money but there’s a word for telling that business how to manage itself, nationalization.

And you call yourselves conservatives.

rokemronnie on November 18, 2008 at 8:26 PM

Telling incompetents to hit the road is absolutely essential to keeping a competent workforce or management team. If those bozos knew what they were doing they would be in the same situation as Honda and Toyota who aren’t asking for government money.

Failure must be allowed to fail, and success allowed to succeed. Its called capitalism.

sharrukin on November 18, 2008 at 8:32 PM

Okay. Brain dead.

I gotta leave.

Really. Love you all and good night. Stick together.

And maybe I have the Pistons too.

If only I could afford a ticket.

Scoreboard44 on November 18, 2008 at 8:34 PM

General Motors Corp., the world’s biggest carmaker, opened a $300 million factory in Russia as it looks to compensate for slumping sales in western Europe and North America.

That factory was planned long before the current liquidity crisis.

Am I reading Alice In Wonderland or a Superman Bizzaro comic book?

No problem with our industrial base controlled by the Japanese, Koreans and Chinese. The profits they take out of this country aren’t an issue. But if American companies have profitable ventures in fast growing foreign markets like Russia, China, India and Latin America (GM is well positioned in all those markets, Ford less so but nicely positioned in parts of Asia like Thailand and Latin America), well then they are bad, bad, bad.

Maybe we should tell Coca Cola to stop shipping syrup to all those foreign bottling plants too.

rokemronnie on November 18, 2008 at 8:35 PM

Scoreboard44, I am very sympathetic to the things you are saying. However, the UAW alone could immediately help out these companies by CEASING TO EXIST and let the auto workers make a market wage. I’m guessing, in your neck of the woods, maybe start at $12-$14 an hour and top out around $30 an hour for an assembly line worker. With the same kind of crappy or nonexistent benefits available to unskilled and semi-skilled laborers in the rest of the country.

But, please, do NOT ask me to take a dime out of my pocket to prop up this ridiculous house of cards created by the UAW. Just not going to happen. The U.S. could nationalize all 3 of them for a fraction of what they’re asking for in bailout money.

califcon on November 18, 2008 at 8:36 PM

Millions actually. The area will be a crime ridden dessert.

Scoreboard44 on November 18, 2008 at 8:18 PM

Scoreboard, I’d bet most folks here would want to find a way to help the individual families that will be affected. I just don’t think the ‘bailout’ is really a ‘bailout’ in the sense it won’t bail out the water of a sinking ship and save it (which is where I think the expession bail out comes from, bailing water from inside a ship that has sprung a leak). Many people don’t believe that another 25 or 50 Billion will help, only delay, their collapse. That’s why so many people are suggesting Chapter 11 as the best road to travel.

I agree with many people here, that the “chickens are coming home to roost” for the decades of mis-management, Union intransigence, and over regulation by the Federal Government. If this bailout occurs, and next Spring they start to tank, what do you think the Federal Govt should do then?

Red State State of Mind on November 18, 2008 at 8:38 PM

Nowadays, postal workers think they can do whatever they want with the mail, and they do.

progressoverpeace on November 18, 2008 at 8:13 PM

I don’t know what experiences you’ve had to come to that conclusion but my own perception is that they simply don’t give a damn if mail is delivered or not.

The place I’m renting right now has one of those communal boxes for delivering mail. The master lock wasn’t working so the mail person simply stopped delivering mail. No notice to anybody just stopped delivery. It so happened, I was expecting an important package that never arrived and only showed up (at the originator) months later. Since this package never arrived, I engaged the “postmaster” at the local office and the bastard lied to me. When it was clear he was a liar and I called him on it, he asked me what I wanted him to do about the fact that his organization had lost a package and couldn’t even tell me what happened to it (it was registered). I guess he didn’t appreciate my suggestion he needed to start doing his job because that became a dead end. It literally took my persistance and the regional USPS office for anybody to deal with the underlying problem- a broken mailbox and no alternative.

THREE MONTHS LATER the problem was finally fixed but only because I became a pain the the rear of all involved and wouldn’t let up. I’m still very bitter.

highhopes on November 18, 2008 at 8:39 PM

rokemronnie on November 18, 2008 at 8:35 PM

That was a week ago. It is a problem when you wax poetic about American companies, and American workers, and American Unions, while the sleazes asking for the bailout are busy spending money shipping those same jobs overseas.

Why don’t they ask the Russia, Brazil, or Mexico for a bailout?

sharrukin on November 18, 2008 at 8:40 PM

We are on edge here in Oakland County. I don’t know what’s gonna happen.

I was paying my phone bill in a strip mall in Southfield, about 1/2 mile north of 696 on Greenfield Rd (ironically or not, about 10 or 15 miles due north of the Ford headquarters). The shopping center is maybe 10 years old, maybe. In the past it was fully leased with a variety of stores. I noticed that virtually all the storefronts are empty with a literal handful of tenants. The kosher pizza shop is still open, but it’s in the middle of an orthodox neighborhood and that’s a bit of a captive market. The Dot & Etta’s shrimp shack location next door closed down a while ago. I know the pizza place must be hurting because their main competitor is selling pies at about 60% their normal price. Besides the pizza shop, there’s a doctor’s office, an Aaron’s rent-to-own, and a Salvation Army store. Eventually there will be just the Salvation Army.

rokemronnie on November 18, 2008 at 8:42 PM

It’s bad down here.

It could get really bad.

Scoreboard44 on November 18, 2008 at 8:32 PM

I believe you. The City of Detroit is already in terrible shape after Kilpatrick’s shenanigans. My son (lives near St. Clair Shores) tells me that they actually have volunteer citizen patrols in the city because there aren’t enough police. Detroit is so close to the edge already.

We’re in the Saginaw/Flint area, so have already seen the effects of layoffs and downsizing. These towns are nearly dead already. It’s hard to see how they could get worse, but I’m sure they can.

The one bright spot is our incompetent governor only has 2 more years. And if we’re lucky, maybe Obama will give her something else to do and she’ll leave early. We in Michigan find it really easy to see how an Obama presidency can ruin this country. We’ve seen plans like his implemented in our state and we know how the story ends.

Dee2008 on November 18, 2008 at 8:43 PM

That was a week ago. It is a problem when you wax poetic about American companies, and American workers, and American Unions, while the sleazes asking for the bailout are busy spending money shipping those same jobs overseas.

They’re not shipping jobs overseas, they’re shipping profits back here. Is Hyundai shipping Korean jobs to Alabama because of their assembly plant there? The new GM plant in Russia is to serve the growing Russian car market (or it was growing before the credit meltdown). Since Isaac Singer figured out that it’s cheaper to build in local markets rather than export, that’s how companies work. Ford and GM have had plants in Europe since before WWII. As wages rise in low cost countries, local labor costs become less and less of an issue.

rokemronnie on November 18, 2008 at 8:45 PM

I agree with many people here, that the “chickens are coming home to roost” for the decades of mis-management, Union intransigence, and over regulation by the Federal Government. If this bailout occurs, and next Spring they start to tank, what do you think the Federal Govt should do then?

How do you feel about FEMA’s National Flood Insurance Program, where we rebuild homes sited on flood plains? Or, for the matter, rebuilding sub-sea level New Orleans?

rokemronnie on November 18, 2008 at 8:49 PM

“Until unions realize that they have created an untenable position, they will put the jobs of their members at continued risk. …
This isn’t exactly brain surgery”

Except to the unions.

Typically liberal crapola. They ruin a good thing, and what’s their solution……more of the same.

notagool on November 18, 2008 at 8:51 PM

Washington has been screwing over Michigan since the 1970s, transferring our wealth to the sunbelt. It’d be nice to get some of that money back. I’d prefer it in the form of military bases and plants, but I’ll take it as a bailout package.

rokemronnie on November 18, 2008 at 8:29 PM

WHOA! What BS, and before you claim I “don’t understand” please know that I am a Michigan resident. Blame Granholm and her predecessors for partying like it’s 1959 instead of coming up with some legitimate plan for the MI workforce that doesn’t involve assembly lines and unionized labor. Granholm and the Dems chase smokestacks not opportunity. If it doesn’t involve assembly lines, unions, and semi-skilled labor the state hasn’t been interested.

Further, know that I am a resident of Western MI which has been treated as an ATM to prop up the welfare queens of Detroit. You bitch about revenue heading south but the truth is that it never has extended west to Lake Michigan because of all the whiners along Lake Erie and all the communists in Ann Arbor. The state has never given West Michigan a fair share of the state budget when it comes to infrastructure projects because the votes and union influence are all over in the “dead zone” of Detroit, Flint, and Saginaw.

What I want from DC isn’t plants but assistance in using Michigan’s awesome workforce (in terms of education and ability) to grow an economy that doesn’t rely on plants and labor organizations. Your comments are part of the problem, not the solution.

highhopes on November 18, 2008 at 8:51 PM

rokemronnie on November 18, 2008 at 8:45 PM

When you are asking country A to pony up free cash to save jobs, its kinda scummy to be spending cash providing jobs to country B.

Why is it such a terrible thing to have American workers employed at an American auto plant in Detroit even if the owner is Honda?

Why does it have to have the Ford or GM label?

Why does it have to have the UAW?

Aren’t jobs for Americans the point here? If that isn’t the point then what is?

sharrukin on November 18, 2008 at 8:53 PM

“How do you feel about FEMA’s National Flood Insurance Program, where we rebuild homes sited on flood plains? Or, for the matter, rebuilding sub-sea level New Orleans?

rokemronnie”

It’s an example of the reason the U.S. is finished as a dominant force in the world.

We’ve become a nation of dunces.

notagool on November 18, 2008 at 8:53 PM

That was a week ago. It is a problem when you wax poetic about American companies, and American workers, and American Unions, while the sleazes asking for the bailout are busy spending money shipping those same jobs overseas.

Nobody is waxing poetic. I can give you chapter and verse on the ills of the Detroit 3. The only car companies in the world that I have anywhere close to 100% respect for are Honda and Lotus.

Still, the consequences of an implosion of the Detroit 3 would be so disastrous to the US manufacturing base that though I’m not a fan of bailouts we may not have a choice.

Ch 11 would normally be the best way to go but surveys indicate that 80% of consumers would not buy a car from a firm in bankruptcy, even a gov’t backed structured filing.

rokemronnie on November 18, 2008 at 8:54 PM

Of all of the newspapers out there, I believe IBD has THE BEST, most common sense editorial positions!

Star20 on November 18, 2008 at 9:00 PM

That’s cold man. We have Families here. We have people here. Cold. I live here. I love my State. I can’t guarantee who runs it.

Scoreboard44 on November 18, 2008 at 8:26 PM

I love Michigan too. I hate it that the UAW and MEA have so much sway idiots like Granholm are in charge instead of serious people.

That being said, a bailout as has been presented is the wrong solution because it only makes those families more dependent on organized labor and the government to make a living. Automobile manufacturing, as it once was, is over despite Michigan’s attempts at maintaining the status quo of 1959. Granholm has spent eight years chasing smokestacks instead of developing new economic engines.

The Obama government will not let those millions of mostly Democrat votes in Michigan go hungry or cold. Far too much invested in keeping them happy ignorant Democrats and fulfilling the promises made to the UAW to get rid of any pretense of fair votes on whether to unionize down in Kentucky and Alabama.

Nevertheless, you are wrong on demanding Michigan doesn’t change its dynamic and economy to the point where manufacturing no longer is all that big a deal. My idea of a good deal for all parties is a fundamental change in the power the UAW has over the business end of auto manufacturing in America. The UAW and thier hired politicians including Levin, Stabenow, and Granholm will never ever allow the kind of concessions necessary to move forward (at least not until the threat of complete collapse).

If we are to bail out the auto industry, it won’t occur until the UAW is willing to be a collaborative partner and that means serious concessions about labor costs. My guess is that we are months away from that point. Until then any money spent bailing out auto manufacturers is wasted. Screw them all until they really want to talk!

highhopes on November 18, 2008 at 9:05 PM

How do you feel about FEMA’s National Flood Insurance Program, where we rebuild homes sited on flood plains?

If the cost of the Insurance is decided by the Free market and adequately funds that insurance , I am Ok with it. I’d like to see Federal and Local Government out of the business of Flood Insurance unless they do it as a break even enterprise when there are no for-profit companies willing to do it. Our Congressman has a great saying…If you can find it in the Yellow Pages, you don’t need Government to do it.

Or, for the matter, rebuilding sub-sea level New Orleans?

I’d like to see NO re-built on stilts or pilings, sort of a ‘Venice’ look, but my answer on the re-building would be similar to your first question. We should all have access to insurance that protects us from dangerous hazards, but should be obliged to pay the going rate for that insurance, which would access risk and the cost of re-building. Whenever Government subsidizes anything, they skew the natural market indicators and forces.

I studied “Location theory” in College (a long time ago). One thing I remember is how industry and people make choices to be where they are. A free and open market will constantly evolve and indutries wil grow, shrink, or fade away. People will immigrate, emmigrate, migrate. I lived in Houston during the bad Oil times in the 80′s, and I lived in Toledo in 89-90, so I’ve seen first hand how communities and industries can suffer and deteriorate if they can’t or won’t adapt to changing market conditions or aren’t allowed to by Government.

In Washington, DC, there is a neighborhood called Foggy Bottom which was originally a ‘foggy, muddy bottom’ near the River, and only poor immigrants lived there. Now it’s high priced real estate. Every parcel of land will find it’s best use if the market is allowed to function freely and without manipulation. The Rust Belt has suffered greatly, and will continue to suffer greatly, for many reasons mentioned here.

rokemronnie on November 18, 2008 at 8:49 PM

Red State State of Mind on November 18, 2008 at 9:07 PM

I love my American made cars, have owned a bunch because I am married to a car loving man. That being said, no to bail out. I wonder what Union official salaries are? Do they make less of the workers go on strike? Unions certainly have had their purpose in our history but now they are a business in unto themselves. And I would venture to say they don’t run theirs any better than the folks the negotiate with. And if people don’t think we can survive without the big three, I will just jump in my Rambler and come talk to them about it.

Cindy Munford on November 18, 2008 at 9:09 PM

First thing GM sould do is sell some of their European Divisions. I heard that they are already selling their stake in Suzuki. Daewoo could be another candidate. However,their foreign divisions are probably the only money makers; that is the case with Ford, especially since Ford dropped Jaguar, er excuse me, Jag-you-er. A smaller GM might work, They ended Oldsmobile, why not Pontiac? I have often wondered why Ford still has a Mercury Division. Mercury has always been an upscale Ford, nothing really special. The same is true for GM, all those cars and except for Cadillac, they are all Chevrolets deep down under the sheetmetal. Fancy doodads notwithstanding.

The days of “badge engineering” must end.

Pelayo on November 18, 2008 at 9:10 PM

Why does GM, make Chevrolet Trucks, and also GMC Trucks?

Pelayo on November 18, 2008 at 9:18 PM

GM = Chevrolet, Pontiac, Oldsmobile (? anymore), Buick,GM and Cadillac. Is that all? I’d say they a spread a bit thin.

Cindy Munford on November 18, 2008 at 9:27 PM

Let the unions bail out the auto industry.

mr.blacksheep on November 18, 2008 at 9:39 PM

The UAW will not do anything other than fig leaf changes because they know the Democrats will prop their empolyers up with taxpayers dollars in order to keep the union vote in the midwest. Toyota voters probably vote Republican. They will get nothing. Fortunately, they don’t need anything because they have adapted over the years.

KW64 on November 18, 2008 at 9:44 PM

Cindy Munford, GM also makes Hummers and Saturn in the US.
I would really like to know how Saturn sales are doing.

In Europe GM owns all or part of Opel, Holden, Saab, Vauxhall, and Wuling (whatever that is). Speaking of Vauxhall, In 1959 my brother bought a Vauxhall from the local Pontiac dealer. My father was a good friend of the service manager who told my father that Vauxhalls were outselling Pontiacs. A few years later GM stopped importing Vauxhall.

Pelayo on November 18, 2008 at 9:49 PM

Union Workers who barely have the educational and skill qualifications to work at a 7-11 are paid an average of $52.00/hour.

That’s obscene.

I hope ALL of the Big Three suffer the consequences of their poor management and the EXCESSES of The Unions!

grtflmark on November 18, 2008 at 9:51 PM

Clarification – Holden is an Australian Company and Wuling is a Chinese venture.

Pelayo on November 18, 2008 at 9:54 PM

I know this may sound horrible but the best thing that could happen for Detroit, one of my favorite cities, would be GM, Ford etc going into bankruptcy. Putting aside the details, Detroit would finally hit rock bottom. Only then will someone come forward and lead the area in a new direction. They will have to, where as now they just keep hoping.

I had the absolute great fortune of going to the University of Detroit from 1966-70. Stayed on Fairfield until 1973. From the Grande Ballroom, Motown, to working at Dodge Gear and Axle and on Penn Central laying track to put myself through school it was Detroit at its zenith. Even the riots couldn’t diminish its greatness. It was at the time the most powerful spot on the planet. It was shock and awe! Between Ann Arbor and Detroit the world was shaped and changed.

But the management at GM, more than any other, led to this great city and surrounding area collapsing. It’s over. Kill it and be done with it and move on. Otherwise every house will sell for $1.

Chapter 11 is the city’s only hope.

patrick neid on November 18, 2008 at 10:01 PM

I am a Catholic school teacher in a northern Detroit suburb. My husband is a chiropractor in a southern Detroit suburb. We are already in bankruptcy court due to lack of business(no one has a job or health care insurance). If Chrysler goes under, I am out of a job too. People don’t seem to understand the ramifications of the big three going under. This isn’t about Detroit. This is about all the industries that support American car companies. My entire community are mainly white collar auto company workers or people who work for auto parts companies. What is going to happen to us?

mathscience41 on November 18, 2008 at 10:08 PM

Telling incompetents to hit the road is absolutely essential to keeping a competent workforce or management team. If those bozos knew what they were doing they would be in the same situation as Honda and Toyota who aren’t asking for government money.

Failure must be allowed to fail, and success allowed to succeed. Its called capitalism.

sharrukin on November 18, 2008 at 8:32 PM

Kevin in Southern Illinois on November 18, 2008 at 10:13 PM

You might be surprised!

General Motors Corp., the world’s biggest carmaker, opened a $300 million factory in Russia as it looks to compensate for slumping sales in western Europe and North America.

sharrukin on November 18, 2008 at 8:27 PM

One Senator tonight specifically mentioned that plant and it’s projected profitability along with other foreign soil operations. The exec admitted to “different operating conditions.” Hmmm. lower taxes and labor costs possibly?

riverrat10k on November 18, 2008 at 10:19 PM

Working for Toyota in Sounthern Indiana.We are feeling the pinch too although not as bad as being a global company globally we are still making a profit. This has been due to lean manufacturing techniques which are hard to implement in uaw facilites. I work in Logistics shipping vehicles and putting option parts on after the base models come from factory. I am expected to know how to do 100% of the jobs and can be expectedto bwe moved 4 or 5 times a day as demand dictates. This would neverwork for the UAW until they went back to sqare one.

Since the slowdown we have been sending Associates into Princeton to do work for the community. We supply the manpower and the city buys supplies. Google this if you want to see it.

Kevin in Southern Illinois on November 18, 2008 at 10:20 PM

My firm just decided this month to take away 8 years of our pension. Unless you have back up plans, those are facts of life. It should not be a fact of life that I have to save someone else’s pension.

nemo239 on November 18, 2008 at 10:32 PM

Pelayo on November 18, 2008 at 9:49 PM

Forgot about those. Anyway I think it is safe to say they have a few places they could cut. I don’t really want to see them disappear but I think a reorganization is the ticket.

Cindy Munford on November 18, 2008 at 10:35 PM

I very much feel for the poor folks in Detroit and Michigan who have been lulled into complacency about the health of the domestic auto industry. But I also feel bad for the people in every other manufacturing industry whose towns and cities were beaten down by globalization and competitive capitalism. How many towns lost a steel mill, or a textile plant, and had to deal with the consequences? Dozens and dozens. They had no bailout, and they had to swallow hard and face the abyss. And their political and business leaders had to adapt for the future. The world has moved way, way past 1955-style industrial arrangements; only in Detroit could people still believe that this system was feasible.

It will be bad before it gets better. But if there is a silver lining in the grey cloud created by Detroit and Michigan’s pending collapse – it’s this: never again will the people of America want anything to do with a union, the organization whose entire purpose is to skew a company’s competitive balance by demanding short-sighted, short-term employee benefits again and again with little to no regard for the big-picture future of their employer.

Management Side on November 18, 2008 at 10:35 PM

Once there was a four year old little boy who spent most of his days at his bedroom window watching a house being built next door. He was inraptured with all the sawing, hammering, and watching them raise walls and install plumbing. One day he sassed his mother with a dirty word that he learned while watching them buid the house. He knew he was due a spanking with a limb from the bushes outside. His mother told him to go outside and get a switch because he was going to get spanked. He said to his mother, “Hell no I’m not getting a switch, that’s the damned electrician’s job.”

Pelayo on November 18, 2008 at 10:39 PM

I am in my mid 40′s and have never had a job that offered any sort of defined benefits plan.

This situation underscores the dangers of a dependency mindset and subsequent malinvestment of personal resources.

riverrat10k on November 18, 2008 at 10:43 PM

mathscience41 on November 18, 2008 at 10:08 PM

You don’t by any chance teach math or scienc? The Baltimore area always has a need for math and/or science teachers. Your spouse may also be able to find work here. I also hear North Carolina is great and growing.

Laura in Maryland on November 18, 2008 at 10:46 PM

. How many towns lost a steel mill, or a textile plant, and had to deal with the consequences? Dozens and dozens. They had no bailout, and they had to swallow hard and face the abyss. And their political and business leaders had to adapt for the future. The world has moved way, way past 1955-style industrial arrangements; only in Detroit could people still believe that this system was feasible.

No, only outside of Detroit do people think we can build F-22s without a viable manufacturing base. The country let it’s industrial base wither and hollow out so we could buy cheap shit from China. The baby boomers, my generation, thought we were too good to work in factories, and the children of the baby boomers went to college in huge numbers, not that more than a fraction of them were really capable of true college level work, but the curricula were politicized and dumbed down and everybody thought they’d have a nice office job without having to get their hands dirty or make anything. It’s not just manual or industrial labor they look down upon. We have a shortage of US born and trained engineers because while earlier generations may have thought a guy like John A. Roebling was a role model, nowadays it’s celebritards and politicians. I wouldn’t be surprised if we graduate more lawyers than engineers.

People in the car industry know better than most how technology yields greater productivity and greater productivity means less human labor involved.

Still, while less than 3% of Americans are farmers, until now (as I look at an orange imported from South Africa), nobody has been foolish enough to say we don’t need agriculture anymore just because so few Americans earn their living at it.

We haven’t had any kind of coherent national industrial policy since the 1950s at least. Instead of figuring out how we can embrace technology and productivity improvements and still make our own shoes, we let our shoemaking industry die. The same with steel, toys, consumer electronics, and on and on. The list sadly is almost endless.

A healthy country needs industry and manufacturing. We’ve already had weapons programs delayed because machine tool companies went out of business or were acquired by the Chinese.

rokemronnie on November 18, 2008 at 10:57 PM

“When would anyone expect Investors Business Daily to agree with Robert Reich?”

In fairness, I would never have expected this to occur either, but mostly because I’ve never heard of Robert Reich.

Kevin M on November 18, 2008 at 11:02 PM

Union Workers who barely have the educational and skill qualifications to work at a 7-11 are paid an average of $52.00/hour.

That’s obscene.

No class bias here, nope, move it along.

How dare those stupid uneducated folks have the audacity to want to earn a good living!

What’s obscene is how you think you are better than folks who work with their hands. Can you weld? Operate a knee mill or a turret lathe? Program a CNC machining center?

Do you think you are better than millwrights and machinists? Do you have any idea how skilled that labor is? The auto industry isn’t just high school dropouts tightening bolts. To build, operate and maintain industrial facilities takes intelligence, skill and not a small amount math ability.

You can disparage your fellow Americans and make jokes about how building a hamburger takes as much skill as building a car. Most of the people who disparage industrial or construction workers couldn’t do half the things they know how to do.

rokemronnie on November 18, 2008 at 11:04 PM

We haven’t had any kind of coherent national industrial policy since the 1950s at least. Instead of figuring out how we can embrace technology and productivity improvements and still make our own shoes, we let our shoemaking industry die. The same with steel, toys, consumer electronics, and on and on. The list sadly is almost endless.

A healthy country needs industry and manufacturing. We’ve already had weapons programs delayed because machine tool companies went out of business or were acquired by the Chinese.

rokemronnie on November 18, 2008 at 10:57 PM

Agree with that and I think we need a policy that gives a home team advantage for domestic industry. Other nations routinely do this and it is the height of foolishness not to do so for the US. It becomes a problem though when that advantage becomes too large and domestic industries are allowed to atrophy through lack of competition.

Free trade is not the panacea it is made out to be. A total service industry isn’t going to cut it.

sharrukin on November 18, 2008 at 11:04 PM

“Hell no I’m not getting a switch, that’s the damned electrician’s job.”

Pelayo

Pelayo,

You’re good at making jokes but can you frame a wall? Plumb a house? Rough in the electrical system in new construction? How about something fairly simple like replace roof shingles?

rokemronnie on November 18, 2008 at 11:07 PM

WHOA! What BS, and before you claim I “don’t understand” please know that I am a Michigan resident. Blame Granholm and her predecessors for partying like it’s 1959 instead of coming up with some legitimate plan for the MI workforce that doesn’t involve assembly lines and unionized labor.

Actually, during the Engler administration Michigan added 800,000 new jobs.

If you don’t believe me that the industrial midwest has been economically raped by Washington to the benefit of the sunbelt you can see the figures for yourself:

Federal Taxes Paid vs. Federal Spending Received by State, 1981-2005

If any part of Michigan gets screwed over by money’s flowing to Detroit it’s the UP, though state Sen. Mack was pretty good at bringing home the pork.

As big an 800 pound gorilla as the auto industry is in Michigan, the state has, or rather used to have a fairly diversified economy. It’s not just the industrial plants of SEMI that have suffered due to a lack of a national industrial policy. It’s the closed pharma plants of what used to be Parke Davis in Kazoo. It’s Whirlpool in Benton Harbor (that west enough for you? any farther west and you’d be wet).

rokemronnie on November 18, 2008 at 11:21 PM

rokemronnie on November 18, 2008 at 11:07 PM

How much is UAW paying you to spew here? No one is making fun of blue collar workers. Plenty of people who work hard for a living resent have their tax dollars taken to subsidize overpaid workers in a different industry. Framers, roofers, and some plumbers and electricians don’t make close to what UAW people do, and they don’t have the gimme benefits. Try telling a guy who is busting his butt to keep food on the table that his taxes are going to help keep thousands in jobs that start at over $60,000/year (according to Time).

Laura in Maryland on November 18, 2008 at 11:21 PM

rokemronnie on November 18, 2008 at 11:07 PM
How much is UAW paying you to spew here? No one is making fun of blue collar workers. Plenty of people who work hard for a living resent have having their tax dollars taken to subsidize overpaid workers in a different industry. Framers, roofers, and some plumbers and electricians don’t make close to what UAW people do, and they don’t have the gimme benefits. Try telling a guy who is busting his butt to keep food on the table that his taxes are going to help keep thousands in jobs that start at over $60,000/year (according to Time).

Laura in Maryland on November 18, 2008 at 11:21 PM

Sorry, I fixed it (blind fury makes it hard to proofread).

Laura in Maryland on November 18, 2008 at 11:23 PM

They ended Oldsmobile, why not Pontiac? I have often wondered why Ford still has a Mercury Division. Mercury has always been an upscale Ford, nothing really special. The same is true for GM, all those cars and except for Cadillac, they are all Chevrolets deep down under the sheetmetal. Fancy doodads notwithstanding.

Because of strong state franchise laws, it would cost a small fortune to close Pontiac and Buick. The current credit crunch has a silver lining in that many dealers are closing shop and GM has way too many dealers. Toyota has something like 1200 or 1500 dealers in the US. Chevy alone has over 4000. Closing Oldsmobile cost about a billion dollars to pay off the dealers. Before the 1960s, Alfred Sloans business model for GM was a brand for every price point. The brands didn’t compete with each other and brand identity was strong and distinctive. Even though GM was platform sharing back in the 1960s, the sheetmetal was different as were the engines, some suspension parts and interiors. For a while, Chevy, Olds, Pontiac and I think even Buick each had their own small block 350CI V8s. When GM tried to rationalize production in the late 1970s and early 80s, they got sued because people were upset about having a “Chevy” engine in their Oldsmobile, notwithstanding the fact that the SBC is arguably the most successful engine in automotive history.

Ironically, GM sabotaged Sloans business model first with the Corvette, which cost more than Buicks and as much as some Cadillac and took away the performance crown from GM’s halo brand, Cadillac. The small block Chevy V8 mentioned above made V8 power available to middle class buyers, removing some cachet from Buick and Caddy. Finally, the muscle car era ended up with each division having its own performance car, which didn’t do much for Pontiac’s role as the performance brand. I mean the Hurst Olds, the Olds 442 and Buick GS are cool vintage cars and not your average SS Chevelle, but in the market they competed with each other, just like the Barracuda and Challenger on the Mopar side of the street.

A lot of the brand dilution came as a result of pressure from dealers. Not recognizing the value of a brand identity, they insisted on having product for every market segment, yielding abominations like the Caddy Cimmaron.

Believe me, if I want to catalog the sins of the Detroit 3 and the UAW I can do it in spades. The first car I bought myself was British, a Lotus (still have it, in pieces) and I’ve always preferred smaller, well handling cars.

rokemronnie on November 18, 2008 at 11:36 PM

How much is UAW paying you to spew here?

You don’t read very well, do you? Read the thread.

I just think that it’s possible to look at the pros and cons of issues from more than one side. Go ahead and scream about unions and how they are terrible if that makes you feel better. But regardless of how one feels about organized labor and incompetent executives, removing competitive pressure from companies with a 55% market share will mean prices will go up, standard equipment will go down, and the pace of innovation will slow. That’s just basic supply & demand and how markets work.

I’m plenty critical of the UAW, though I don’t think their wage and benefit package are a problem going forward because of the contracts renegotiated last year. Unfortunately, the real savings on those contracts don’t start until 2010. It’s their work rules that hamper the companies from effectively using their labor. A lot of those work rules are covered under local contracts, not the main contract, and they’ll take take to revise. The engine plant in Dundee, Michigan is a JV of Chrysler, Daimler and Hyundai, a UAW facility and they have just two job classifications.

No one is making fun of blue collar workers.

Sure they are. They call them lazy, incompetent, greedy, and that people with that level of education shouldn’t be able to make that much money. Pure class and intellectual bias.

Plenty of people who work hard for a living resent have their tax dollars taken to subsidize overpaid workers in a different industry.

Laura in Maryland

You mean like how tax dollars have been taken from Michigan to subsidize Maryland? From 1981 to 2005, Michigan averaged $0.81 in in-state Federal spending for every dollar it sent to Washington. It was a net drain of ~$200 billion. Maryland, on the other hand, gets back $1.25 for every dollar it sends to Washington. Maryland’s net gain was about $190 billion over that period. Maryland contains some of the wealthiest counties in the country because of its proximity to DC. I think 12 of 15 of the wealthiest counties are in the DC area.

In terms of per capita federal spending, Maryland has never been out of the top 5 since 1981 and in 2005 (the last year I can find figures for) ranked 3rd. Michigan has never been out of the bottom 10 states and currently is ranked 43rd.

So if you want to argue about whose taxes are used to subsidize whom, you’d be better off not mentioning you live in Maryland.

rokemronnie on November 19, 2008 at 12:01 AM

rokemronnie on November 19, 2008 at 12:01 AM

Could you please list your sources for all of this “information”.

Laura in Maryland on November 19, 2008 at 12:49 AM

Too bad Citroen hasn’t been sold in the US for many years now. Their cars and trucks get plenty of mileage, and you could probably get your money’s worth with them. But with any luck, maybe now they’ll come back to selling in the US, and you can buy them after all.

Avi Green on November 19, 2008 at 1:07 AM

In 1996, I purchased a brand spanking new Ford Thunderbird. In 1998, the paint started peeling off. After months of dealing with lies, “secret recalls”, and all around BS from Ford, they offered to discount the price of a new paint job so much so that I finally gave up and paid the $400 to have it be done and over with. I hated Ford.
Come to find out years later that in an effort to save something like 87 cents per car Ford and GM had eliminated a critical step in the car painting process. After that, my hatred for Ford was solidified in the promise to never purchase another American made vehicle.
Now, 10 years, a VW, Nissan, and a BMW later, I can say I don’t regret Ford and GM having kept their 87 cents: I hope they choke on it. I say let the free market drive the last nail into the coffin of these antiquated failures.

CapitalistPig on November 19, 2008 at 2:50 AM

In 1996, I purchased a brand spanking new Ford Thunderbird. In 1998, the paint started peeling off. After months of dealing with lies, “secret recalls”, and all around BS from Ford, they offered to discount the price of a new paint job so much so that I finally gave up and paid the $400 to have it be done and over with. I hated Ford.

I worked in DuPont’s main paint r&d lab from 1982 to 2002 and we supplied paint to all three of the domestics at the time. The kind of peeling you experienced is usually the result of UV light getting to the primer, which breaks down.

While there are things the car companies can do (like not enough coats of topcoat, which has the UV screener in it) that will cause that problem, none of them would save them 87 cents. The critical steps in the paint process cost a lot more than 87 cents. The paint shop is the most expensive part of the assembly plant so they’re looking to real savings there. Paint can cost hundreds of dollars or more a gallon and so eliminating one coat of color coat, let’s say, would save a lot more than 87 cents.

No disrespect, but the peeling may be true, even the “secret warranty” may be true, and indeed Ford may have tried to cut corners but the “Ford and GM saved 87 cents a car” has the ring of an urban legend. Even Ford’s infamous flaming Pintos saved them $11 a car and that was back in 1971, when $11 made up a little more than 1/2 of 1% of the retail price. 87 cents is such a miniscule part of the cost of making a ’96 Tbird that it might cost them more to implement the savings.

While it’s true that with 15,000 or 20,000 parts that make up a modern car, saving a few pennies on each component can add to real savings, I can’t see that happening with paint.

rokemronnie on November 19, 2008 at 5:02 AM

I would agree to a “loan” with the understanding that,every exec take a 75 % cut in pay and every worker take a 25 % cut as well.
Every one has to give in order to get.
If not, then they can sink.

ColdWarrior57 on November 19, 2008 at 11:52 AM

The Feds need to facilitate the event where GE,and/or Boeing, or another financially healthy American manufacturer, takes control (being in effect the holding company) which will restructure and restock management with the people and business model to allow GM & F (presuming some purchase of C,too)to survive and compete.

Currently the market cap value of GM is “only” $7 Billion.
The industry can be bought, restructured with such a federally guided transaction much cheaper to both the government and the taxpayer. Note a collapse would cost the taxpayer many 10s of Billions; with millions of UAW workers filing for unemployment, lost income tax revenues and the radiating collateral loss of employment and added cost to the economy.

The key points that both Romney and todays IBD editorial make,can be realized in such a deal analogous to the Merrill Lynch deal that was encouraged by the feds and accepted by B of A.

RED.inca on November 19, 2008 at 1:08 PM

I’m not in the car business, but I’ve had a number of friends who are.

From my position, the current situation is unfortunate, because of all the vehicles on the market a surprising number of the ones I’d actually spend my own money on – the Cadillac CTS and CTS-V, the ‘Vette, the Cobalt SS, maybe the Volt – are GM products.

Now, as for unions – rokemronnie is mostly right. Union work rules and job classifications are nearly as big a part of domestic uncompetitiveness as pure dollar cost is. When a Honda or Toyota plant can use their line workforce to change tooling or move equipment but a GM plant can’t, that’s a cost and a ‘friction’ to doing business that the Big-Two-and-Two-Bit-Chrysler incur that no one else does. Can an engineer in a GM facility plug an Ethernet cable into a desktop computer now? A few years ago that was cause for a grievance filing.

It’s all doubly unfortunate because GM, in particular, has been doing a lot right lately – probably two-thirds of the product out there I’d consider buying is GM. They’re just three years late.

IBD and all the business types can chatter all they want about union concessions, but the Dems are in the unions’ pockets and whatever comes out of all this is going to have to have UAW blessing.

JEM on November 19, 2008 at 3:50 PM

…oh, and sure, one can argue that the Big Three should have been pushing back a lot harder on the unions back when they really were the Big Three. If one were to rewrite history, 1972 would have been the right time to start.

But the UAW has a lot of political muscle, and it would have meant a BIG, prolonged fight on multiple fronts to make it happen.

JEM on November 19, 2008 at 3:54 PM

Ch 11 would normally be the best way to go but surveys indicate that 80% of consumers would not buy a car from a firm in bankruptcy, even a gov’t backed structured filing.

rokemronnie

The way they don’t fly bankrupt airlines,lol? The reality is 80% of consumers wouldn’t have a clue if the company they were buying from was in bankruptcy.

By the way, I have a newsflash for you: the big 3 are already bankrupt. And since they lose $1,000 on every car they sale, they aren’t getting out of it any time soon….not even with a bail out.

It’s one thing to prop up business with government money but there’s a word for telling that business how to manage itself, nationalization.

And you call yourselves conservatives.

rokemronnie

You can’t have it both ways. Conservatives aren’t for the bail out period, but, if it is inevitable, you’re damned right we’re going to tell you to stop doing the same stupid sh*t that put you in this rat hole to begin with. You must be an exec of the union or the big 3. With your intellect, you’re clearly qualified to be one of the two.

And for you car workers, I sympathize with your situation, but not much. Why? Because when your union was pushing for these destructive labor contracts that spelled doom for your companies, did you stand up against them? Did you listen to the people who were telling you such measures weren’t sustainable, and negatively affected your company’s competitive ability?

No, you didn’t. You were likely one of the first ones to the picket line. And now you reap what you sow. And the same goes for those who continued to live in state that was being run into the ground by the politicians you elected over and over again. You placed your bets on the same losing horse, and now, you want other struggling folks to bail you out too.

To hell with that.

xblade on November 19, 2008 at 5:40 PM

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