Bailout Nation 2: General Motors

[TheNiche]

Better idea !!! Take the $25 to $35 billion that they want, and simply have the Govt. BUY $25 to $35 billion in Big 3 product, an even split among the big 3. The Govt. can then pick through what it needs for their fleets, and the rest can be used in a lottery of sorts for we the taxpayers. You have to actually pay taxes in order to benefit from the lottery. If you win the car lottery, you will pay a flat tax only on the car. It would still be a loan to the big 3 though, and they would have to pay back the money over a 10 year period.

They couldn't deliver on such a large order without making huge outlays of cash (which they don't have) in order to increase production. They'd be bankrupt by then.

[kylejack]

These cars are not wanted. The only way to save GM is to start buying tens of billions of dollars worth of their cars and burying them in the desert. GM's doomed, let's stop pretending that a loan is going to bridge the gap between what GM makes and what the public wants.

[memebag]

I don't want to buy domestic cars with the money I keep or the money I pay in taxes.

What would it cost the US govt to just buy Honda and Toyota? Maybe that would be a better use of our bailout money. Then they would be "American" car companies and I'd be happy buying domestic.

[TheNiche]

I don't want to buy domestic cars with the money I keep or the money I pay in taxes.

What would it cost the US govt to just buy Honda and Toyota? Maybe that would be a better use of our bailout money. Then they would be "American" car companies and I'd be happy buying domestic.

NO! They'd ruin them. Then there won't be any good car companies!

[memebag]

NO! They'd ruin them. Then there won't be any good car companies!

We'd leave them exactly as they are, just change their designation from "foreign" to "domestic". Then I could be one of the America-lovers and not a filthy America-hater and still drive a decent car for a reasonable price.

[marmer]

These cars are not wanted. The only way to save GM is to start buying tens of billions of dollars worth of their cars and burying them in the desert. GM's doomed, let's stop pretending that a loan is going to bridge the gap between what GM makes and what the public wants.

Really? The public doesn't want Malibus, Solstices, GTOs, CTSs, Enclaves, Lucernes, Avalanches, Silverados, or Tahoe Hybrids? Enthusiasts turn up their noses at the Corvette, and no one is eagerly awaiting the Camaro or the Volt? Economy car buyers spurn the Cobalt and HHR, and certainly no businesses want Chevy or GMC vans, work trucks, or truck bodies? And who in their right mind would buy a Hummer? Where on earth do you drive that you don't see lots of those every day?

I want to take this discussion away from finance, about which I know little, and bring it back to cars, about which I am much better informed. I'll start by agreeing up front that until about 2005, GM had little in its product portfolio except trucks that wasn't junk. Thanks to Rick Wagoner, Bob Lutz, and a whole bunch of young, dedicated engineers, GM finally figured out that they needed better products, with no excuses. Of course, it takes several years for new designs to make it to market, and we are only now seeing the fruits of that, with the redesigned Malibu, the new CTS, and the new Silverado pickup being the best examples. Almost every new GM car of the last two years, with more in the pipeline, is competitive with its foreign competition in every way, INCLUDING interior quality and fuel economy, two areas where Detroit has typically lagged.

You could take the previous paragraph, change the names to "Alan Mulally," "Fusion," "Focus," and "Flex" and it would mostly be true about Ford, too. I'm sorry to say that I have no such optimism about Chrysler. I don't see any products that are going to save them, and I certainly don't see inspired leadership in current management. Shame, too. The big rear-drive Hemi cars had a lot of pizzazz, but their day is over. The Caliber could have been a segment changer if they hadn't cheaped out its interior. Same with the Town and Country minivan. The Challenger is beautiful on paper but it doesn't really make sense as an everyday car for anyone. Sad, too, because in previous generations Chrysler was informally considered to be Detroit's engineering leader.

[editor]

That is a myth. Worse, it is a myth known by the reporters who continue spouting it.

http://mediamatters.org/columns/200811250012

The $70 is the sum total of ALL labor costs, divided by hours worked by CURRENT workers. It includes base pay, benefits, healthcare and pensions for current workers AND retired workers. Base pay for a line worker is about $28.

Read my post again. It wasn't a reporter, it was a UAW spokesman. I even backed up the DVR to make sure who it was. Further, Media Matters doesn't exactly have a perfect track record of neutrality.

Any theories why the UAW would reiterate this supposed "myth?"

[barracuda]

Ford actually surpassed Toyota in quality rankings last year.

http://www.msnbc.msn.com/id/19073071/

It's really just an image problem at this point. I didn't really think much of Ford in the past, but this changed my opinion. Their restructuring seem to be accomplishing what Congress is asking GM and Chrysler to do. The real problem for Ford is the image left behind from the junk they made in the 80's. Anyway, this is an interesting profile of Ford and their CEO that come from Boeing.

http://www.usatoday.com/money/autos/2008-1...p=DailyBriefing

[TJones]

Marmer, 'Cuda, I couldn't agree more. There is absolutely nothing wrong with American Cars. Perhaps if the uneducated found out that most of their beloved Japanese product was being produced here in the states, they might have a different thought. Honda Accords are made HERE by Americans, Nissan Titans are made HERE by Americans, Toyota Tundras are made HERE by Americans, but WITHOUT a UAW. They seem to build quality products and are still making a profit. The Silverado beat out Nissan and Toyota, in overall fit, finish and reliability. I would still take a Titan over both though.

[RedScare]

Some of us 'uneducated' actually know where our foreign cars (or trucks) are built. My Tundra has the 'Made in Indiana' label inside the door. The intelligent among us would gather from this seeming incongruity that the problem lies in differing styles of management between the foreign manufacturers and the US ones. But, if it makes some feel better to blame every f'up GM makes in the quality of their manufacturing and design processes on the UAW, then go right ahead. I will continue to place the blame squarely on their Harvard educated management and their University of Michigan engineers and designers. If there really is nothing wrong with American vehicles, then there is nothing wrong with the UAW workers that built them.

Try to wrap your head around that.

[TJones]

Red, it boils down to the fact that the Big 3 can't make a profit with the hand they have been dealt by the UAW. Everytime the UAW wants more, it is either give in, or we walk out. Lord help you if you try to cross the picket line also. Detroit can't hire scabs, because the scabs with a UAW card will beat the crap out of them. UAW is a mob, not a union. So sure, the Harvard execs that shook the UAW's hand to make that deal are just as much to blame. I have said form the beginning to reorganize, that requires rolling a few heads at the top. I won't blame the designs of the last 5 years though, nothing wrong with them, and what is coming up in the next 2 to 3 will be VERY exciting. I just hope we get to see it. Save yourselves Big 3, file BK !!!

[marmer]

Some of us 'uneducated' actually know where our foreign cars (or trucks) are built. My Tundra has the 'Made in Indiana' label inside the door. The intelligent among us would gather from this seeming incongruity that the problem lies in differing styles of management between the foreign manufacturers and the US ones. But, if it makes some feel better to blame every f'up GM makes in the quality of their manufacturing and design processes on the UAW, then go right ahead. I will continue to place the blame squarely on their Harvard educated management and their University of Michigan engineers and designers. If there really is nothing wrong with American vehicles, then there is nothing wrong with the UAW workers that built them.

Try to wrap your head around that.

Sure, Japanese (and German) makers have been building vehicles here for years. Almost all of the plants were built with substantial tax incentives and other "enticements" from state and local governments. It saves the foreign makers a lot of vehicle transportation and supply costs. I think the problem is not quite so simple as poor management or UAW corruption, though. People keep forgetting that the worst domestic cars of a few years ago were designed when Detroit still had their crippling pension and health care obligations. That meant that a cost-cutting mentality was very much part of the design process back then. That, plus the fact that trucks were for a long time a big profit leader for them, meant that the driving dynamics, interior materials, and marketing of automobiles got comparatively short shrift. The Japanese makers got their auto act together first and then started to play in the truck market after they had convincingly obliterated any trace of a perception of domestic auto quality by concentrating on those three elements. It didn't help that Detroit profoundly underestimated the rapid quality and value improvements of Japanese cars. The Japanese, however, have made the same mistake by underestimating the rapid improvement of Korean cars. Remember what a joke Hyundai and Kia were at one time?

Oh, and even though I am highly critical of Detroit between 1980 and 2005 or so, let's not forget that they had some game-changing successes during that time. Many of them came from Chrysler:

The modern minivan -- call it the Dodge Caravan

The modern SUV -- call it the Ford Explorer

The original Ford Taurus, which set the whole world on its ear at the time

The original Dodge Intrepid, ditto

The original Oldsmobile Aurora, which was a terrific car that deserved better than GM could give it.

The first convertible in a decade, the Chrysler LeBaron, which was cute and affordable

The Dodge Ram pickup, where the Hemi and the Cummins diesel came out to play (and work)

The 5.0 liter Mustang, which brought V8 snort back to the masses.

The Chevy Impala SS, the last hurrah for the big rear-drive V8 sedan, now a major collectible.

Of course, not all of them were as reliable as the Japanese competition (where there was Japanese competition) but all of them were desirable, well-designed vehicles and huge successes.

[TheNiche]

Sure, Japanese (and German) makers have been building vehicles here for years. Almost all of the plants were built with substantial tax incentives and other "enticements" from state and local governments. It saves the foreign makers a lot of vehicle transportation and supply costs.

Those incentives are available for any firm that opens a plant of that scale. In that respect, it is a level playing field.

[Jeebus]

I'm just glad we have Honda here in America.

[memebag]

The modern minivan -- call it the Dodge Caravan

The modern SUV -- call it the Ford Explorer

The original Ford Taurus, which set the whole world on its ear at the time

The original Dodge Intrepid, ditto

The original Oldsmobile Aurora, which was a terrific car that deserved better than GM could give it.

The first convertible in a decade, the Chrysler LeBaron, which was cute and affordable

The Dodge Ram pickup, where the Hemi and the Cummins diesel came out to play (and work)

The 5.0 liter Mustang, which brought V8 snort back to the masses.

The Chevy Impala SS, the last hurrah for the big rear-drive V8 sedan, now a major collectible.

But those are all horribly ugly cars, and I don't see any that get decent mileage. This is your best defense of Detroit? Sad.

[jm1fd]

But those are all horribly ugly cars, and I don't see any that get decent mileage. This is your best defense of Detroit? Sad.

Oh yeah...those Intrepids and Caravans and Impalas got horrendous mileage.

1993 Intrepid v6 18 city 26 highway

1993 Honda Accord 4-cyl 19 city 26 highway

Huh? Bigger engine, bigger car but the same mileage as a little bitty 4-cyl Honda?!?!

Must be an anomaly. Your crap-on-the-domestics festival will surely be saved by the minivans!

1999 Caravan v6 17 city 24 highway

1999 Honda Odyssey v6 16 city 23 highway

Errr...nope.

1994 Impala SS 15 city 24 highway

1994 Lexus SC 400 16 city 22 highway (The only Japanese v8 sedan I could think of)

Finally. See! One MPG less in the city! One MPG!!!! Read it and weep you domestic loving SOBs!!! GM was DOOMED by that 1 mile per gallon...DOOOOOOOOMED! Clearly, the facts show that GM and Chrysler were OBVIOUSLY not putting out products with competitive fuel economy numbers. No wonder they're going under.

[RedScare]

Read my post again. It wasn't a reporter, it was a UAW spokesman. I even backed up the DVR to make sure who it was. Further, Media Matters doesn't exactly have a perfect track record of neutrality.

Any theories why the UAW would reiterate this supposed "myth?"

From TJones:

Red, it boils down to the fact that the Big 3 can't make a profit with the hand they have been dealt by the UAW. Everytime the UAW wants more, it is either give in, or we walk out.

I didn't realize that Media Matters was known for their bias against Big 3 CEOs. Be that as it may, let's try again, shall we? How about Forbes?

http://www.forbes.com/home/2008/12/04/detr..._1205union.html

Here's a few fun facts...

The union has made some major concessions. Two biggies last year: The UAW agreed to cap the cost of retiree health care through creation of an independent trust fund and agreed to cut wages in half, to $14 an hour, for new hires in non-assembly jobs (20% of the workforce). More concessions came this week when the union agreed to end a controversial "jobs bank" program, which pays workers even when there are no vehicles to build. The union also said it would allow car makers to extend their scheduled payments to the health care trust fund.

So, new hires get $14 an hour, HALF of the veterans. That means they make $28 an hour.

Detroit's current average labor cost is about $71 per hour, compared to $47 an hour at Toyota, which has no unions. But it's misleading to suggest that Detroit autoworkers are paid $71 an hour. About $17 of that is the cost of health care insurance for retirees. General Motors (nyse: GM - news - people ) has 442,000 retirees in North America, four times as many current employees. Toyota has only 371 retirees in the U.S.; Honda has 2,400.

I don't know about you guys, but I don't figure the money my employer pays toward retirees when figuring my pay rate. Maybe y'all do. That would explain why so many people claim to make more money than me.

What do autoworkers really make? Detroit's hourly workers earn $28 an hour, or $57,000 a year. (Toyota workers make $25.) Benefits and payroll taxes bring the total cost per worker up to $54 an hour, versus $47 at Toyota. Under a breakthrough labor contract in 2007, new hires in non-assembly jobs will be paid only $14 an hour and will receive less generous benefits, which will narrow that remaining gap considerably.

Maybe some UAW spokesman did say they make $72 an hour. But, if he did, Mr. Gettelfinger should fire him immediately, as the spokesman does not even know what contracts his own employer has negotiated.

EDIT: Here's an AP story that came out 90 minutes ago, that claims that GM workers actually make LESS per hour than Toyota workers.

http://news.yahoo.com/s/ap/20081212/ap_on_...kers_pay_glance

[crunchtastic]

Funny about bringing up fuel economy. I bet GM rues the day it let Geo go. Remember the Metro? Over 40 MPG. City.

Despite having great sales worldwide with the badge, GM scrapped it because they pulled more profit off of the young SUV market stateside. I love a great muscle car. But you know what? I don't need to overpay for horsepower I don't use. This is the sad result of believing marketing. We all pay more-- for less efficiency-- because we 'need' the 'power' to hopscotch some dude on 50 mph freeway traffic? You need 240 HP to drive your freaking Maxima to the office? A sad commentary, I think. The car buying public needs to eat some of the blame for all this, for playing the game.

[memebag]

Oh yeah...those Intrepids and Caravans and Impalas got horrendous mileage.

1993 Intrepid v6 18 city 26 highway

1993 Honda Accord 4-cyl 19 city 26 highway

Huh? Bigger engine, bigger car but the same mileage as a little bitty 4-cyl Honda?!?!

Must be an anomaly. Your crap-on-the-domestics festival will surely be saved by the minivans!

1999 Caravan v6 17 city 24 highway

1999 Honda Odyssey v6 16 city 23 highway

Errr...nope.

1994 Impala SS 15 city 24 highway

1994 Lexus SC 400 16 city 22 highway (The only Japanese v8 sedan I could think of)

Finally. See! One MPG less in the city! One MPG!!!! Read it and weep you domestic loving SOBs!!! GM was DOOMED by that 1 mile per gallon...DOOOOOOOOMED! Clearly, the facts show that GM and Chrysler were OBVIOUSLY not putting out products with competitive fuel economy numbers. No wonder they're going under.

You think that's decent mileage? Do you work for one of the Big 3?

[marmer]

But those are all horribly ugly cars, and I don't see any that get decent mileage. This is your best defense of Detroit? Sad.

No, my _best_ defense of Detroit is the cars they are building _now_. That list was just the list of hits that sprang immediately to mind during Detroit's worst years of the late twentieth century. By the standards of the day most of them were quite competitive in reliability, fuel economy, and fit and finish. First-generation Chrysler minivans in particular were by far the most fuel-efficient people-movers of their day. None of them would be so today, but that's because Detroit is buiilding better cars now. This was also about the time that Chrysler, in response to reliability concerns, instituted the industry's first 7 year/70,000 mile warranty.

Ugly? Must be in the eyes of the beholder. I personally see several design classics in that list, unlike the jellybean cars that were coming from Japan at that time. And, rightly or wrongly, no one was really using fuel economy as a choice factor back then.

[marmer]

Those incentives are available for any firm that opens a plant of that scale. In that respect, it is a level playing field.

You are right, of course. But doesn't it have the effect of subsidizing new plants for Detroit's competitors, since Detroit is not opening new plants?

[marmer]

You think that's decent mileage? Do you work for one of the Big 3?

By the standards of 1995 that is perfectly decent mileage. By 2003 the big Japanese names all wanted to play in the truck sandbox, with the Land Cruiser, Sequoia, Tundra, Titan, and Pathfinder and their Lexus/Infiniti cousins, plus the Honda Ridgeline and Pilot. No big fuel economy winners there among that crowd. And, of course the Lexus V8s and the big Nissan V6 (a GREAT engine, by the way.) My second favorite layman's misconception about the auto industry is that Japanese cars automatically equal good fuel economy. That comes right after the one about all American cars being junk.

[marmer]

Funny about bringing up fuel economy. I bet GM rues the day it let Geo go. Remember the Metro? Over 40 MPG. City.

Despite having great sales worldwide with the badge, GM scrapped it because they pulled more profit off of the young SUV market stateside. I love a great muscle car. But you know what? I don't need to overpay for horsepower I don't use. This is the sad result of believing marketing. We all pay more-- for less efficiency-- because we 'need' the 'power' to hopscotch some dude on 50 mph freeway traffic? You need 240 HP to drive your freaking Maxima to the office? A sad commentary, I think. The car buying public needs to eat some of the blame for all this, for playing the game.

Chevy has a modern-day Geo Metro in the Aveo; like all Geo's it's a badge-engineered Asian import. IIRC the Metro was a three-cylinder Suzuki Swift. The sad truth is that the Metro got its spectacular fuel economy from being very light and having a tiny engine. Modern crash standards, air bags, etc. mean that the featherweight microcars of the 80's are gone for good, and with them the opportunity to get by with a small gasoline engine. The torque of diesels is what makes them the engine of choice in the non-hybrid fuel-economy sweepstakes of today.

[jm1fd]

You think that's decent mileage? Do you work for one of the Big 3?

I think you're deriding domestic products for having poor gas mileage even though comparable import products from the same time period had gas mileage worse than or at best equal to said domestics.

[crunchtastic]

Chevy has a modern-day Geo Metro in the Aveo; like all Geo's it's a badge-engineered Asian import. IIRC the Metro was a three-cylinder Suzuki Swift. The sad truth is that the Metro got its spectacular fuel economy from being very light and having a tiny engine. Modern crash standards, air bags, etc. mean that the featherweight microcars of the 80's are gone for good, and with them the opportunity to get by with a small gasoline engine. The torque of diesels is what makes them the engine of choice in the non-hybrid fuel-economy sweepstakes of today.

I don't understand why the sad truth is a small engine and a light body. IMO that's exactly more of the cars we need. Make them with a deisel engine. Why does everthing have to be some godamned big? You can engineer safety for small and light. You can also engineer space for small and light. I can fit as much inside my 4 cylinder Scion Box as I could in the bed of my Nissan truck (with lid).

[memebag]

I think you're deriding domestic products for having poor gas mileage even though comparable import products from the same time period had gas mileage worse than or at best equal to said domestics.

And I think you're ignoring my point by comparing domestic cars to imports with lousy mileage.

[Deut28Thirteen]

Whats worng with the so called leaders in DC, do they want Detroit to fail? They voted it down. Hope Bush uses some of that 700 billion to help the big three out.

[BryanS]

What a complete disgrace. I have to give credit to Bush and Obama. And the House. The Senate... YOU IDIOTS! I hope you're happy. All this talk about the UAW was complete crap. Why? There was a NYT article that actually explained the $73/hour salary. If you ran the domestics, like the foreign car companies, you'd save a whopping $800/car. No unionized labor, nothing. Never mind that those domestic vehicles are already being sold at $2500 below the imports! And that $73/hr... includes all kinds of non base labor costs (benefits, etc.).

[barracuda]

I don't understand why the sad truth is a small engine and a light body. IMO that's exactly more of the cars we need. Make them with a deisel engine. Why does everthing have to be some godamned big? You can engineer safety for small and light. You can also engineer space for small and light. I can fit as much inside my 4 cylinder Scion Box as I could in the bed of my Nissan truck (with lid).

One thing that really surprised me when I first moved to Texas was the preponderance of large pickups and SUVs on the roads. This is especially true in the suburbs and rural areas (like, say, Brazoria county). Nowhere in the country have I witnessed a greater proportion of the driving public using these huge vehicles to barrel their way down to their super mega Walmart to fill their oversized 3000+ square feet homes with imported chinese products.

Now, I have nothing against people with legitimate needs for large vehicles, but it seems that the vast majority drive them just because they can. And I think a lot of them do it partly out of fear for their safety. Some people don't feel safe driving a small economy car when there are tank-like SUVs driving super aggressively down the freeway.

[RedScare]

One thing that really surprised me when I first moved to Texas was the preponderance of large pickups and SUVs on the roads. This is especially true in the suburbs and rural areas (like, say, Brazoria county). Nowhere in the country have I witnessed a greater proportion of the driving public using these huge vehicles to barrel their way down to their super mega Walmart to fill their oversized 3000+ square feet homes with imported chinese products.

Now, I have nothing against people with legitimate needs for large vehicles, but it seems that the vast majority drive them just because they can. And I think a lot of them do it partly out of fear for their safety. Some people don't feel safe driving a small economy car when there are tank-like SUVs driving super aggressively down the freeway.

Well, maybe all those suburbanites in their SUVs and pickups are feeling a bit guilty for driving such oversized and wasteful vehicles, and to make up for it, they have instructed their Republican Senators to strike down any aid to the manufacturers of their favorite vehicles.

Only thing that makes sense.