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What happens when the big 3 are gone?


volfrahm

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Should the big three sink, there isn't likely to be anyone who will take their places and assume a similar scale; it just requires too much capital.

Not unlike the banking and telecom/IT industries, it will be the ones on the lower rungs of the ladder who will see a drastic reduction in their livelihood. The CEOs will either retire early and still live like kings or become part of the Obama administration in some form. Less likely is a possible merger of the three.

I hope you like European, Japanese and Chinese cars. Those will be all you have left to choose from.

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For the non-automotive inclined, that would be Ford, General motors and Chrysler?

3 million jobs they reckon (over all associated industries).....but I'd expect at least part of them to be absorbed by expansion of other automotive manufacturing in the USA - albeit not as well paid/feather-bedded, and cetainly not all of them.

Again how socialist ....(as in Govt bailing out failed businesses....) is the US prepared to be???

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The big three were badly run in terms of model development, pricing strategy, and labour relations. Mulally appears to have some idea what to do at Ford. GM I would give a fail grade to. Cerebrus are patheic at Chrysler and you have to wonder at their smarts in taking Chrysler on. Daimler must be laughing themselves silly.

A for what will happen - Chrysler will die and the other two will go on. Either through Chapter 11 or bailouts.

Capitalism - what an advert for crap management these three have been. Also in its way it shows how allowing companies to get too big too "fail" is not actually very good idea for society. When there are lots of firms, be it banking or cars, then decisions are varied and this gives more scope for different results. Seems that Group think in three companies lead to the same result/faults across the industry.

Interesting case is the E7 by Carbon Motors. Touted around this month it is a custom police car. Ford have the majority of the market with the Crown Victoria and you can see that frustrated Ford employees got no traction in offering a new product through Ford and left and set up their own company. Another words Ford was not interested in evolving the product until such a gap in the market existed that someone else stepped in. Sound familiar?

I hope all could be saved but that ain't going to happen.

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There seems to be a rule in history that entities grow to the point that they can no longer effectively survive, and then they atrophy, deflate and/or are destroyed by forces they cannot control.

When I see all the small businesses that over the years have been killed off due to a monopoly-encouraging economic model lovingly fostered by the richest folks in America, I get nauseated to my core by this.

It used to be said that the business of America is business but in fact the business of America has been the enrichment of a few at the expense of the rest of us. The failure of the auto industry is symptomatic of the way these people create wealth-creating corporate monstrosities and then they abandon them and run off with their riches, bonuses and perks, leaving the workers and country holding the dinner tab.

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When I see all the small businesses that over the years have been killed off due to a monopoly-encouraging economic model lovingly fostered by the richest folks in America, I get nauseated to my core by this.

It used to be said that the business of America is business but in fact the business of America has been the enrichment of a few at the expense of the rest of us. The failure of the auto industry is symptomatic of the way these people create wealth-creating corporate monstrosities and then they abandon them and run off with their riches, bonuses and perks, leaving the workers and country holding the dinner tab.

That's the Marxist spin. The real truth is the people running off with riches and destroying these three companies are the regular union workers with their job pools, 90% layoff pay, and $105,000 severance packages. The destruction of these wealth creating corporate entities is directly attributable to their inability to downsize their workforce in a weak economy and thereby cut costs and capacity to remain in the black. This is what happens when unionized labor sucks a corporation dry to the bone. It's silly to point to the CEO's corporate jets, when the cost must be dwarfed by pension and healthcare liabilities owed to the union labor force.

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I've been surprised at how the US automobile industry has gone against the global trend of developing smaller and more fuel-efficient cars. In my opinion it's a case of a whole industry failing to catch a global tendency. When increasing groups of customers are starting to buy imports someone should've been asking questions.

USA has always been a proud car manufacturer/developer and so it will in the future. The laws of market dictate this, plus there's a century of knowhow involved. I think this will be healthy for the industry. It's about that time to lift the rug and do some in-house cleaning.

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Similar in some ways to the collapse of the British motorcycling industry in the 70's...

http://www.ianchadwick.com/motorcycles/britbikes/overview.html

I've been surprised at how the US automobile industry has gone against the global trend of developing smaller and more fuel-efficient cars. In my opinion it's a case of a whole industry failing to catch a global tendency. When increasing groups of customers are starting to buy imports someone should've been asking questions.

USA has always been a proud car manufacturer/developer and so it will in the future. The laws of market dictate this, plus there's a century of knowhow involved. I think this will be healthy for the industry. It's about that time to lift the rug and do some in-house cleaning.

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I've been surprised at how the US automobile industry has gone against the global trend of developing smaller and more fuel-efficient cars. In my opinion it's a case of a whole industry failing to catch a global tendency. When increasing groups of customers are starting to buy imports someone should've been asking questions.

USA has always been a proud car manufacturer/developer and so it will in the future. The laws of market dictate this, plus there's a century of knowhow involved. I think this will be healthy for the industry. It's about that time to lift the rug and do some in-house cleaning.

The WSJ narrative is that CAFE standards brought down the big three by forcing them to produce small cars that nobody wanted at a loss.

It is astonishing how blind some people can be to reality. This view ignores e.g. that a lot of these smalls cars were imports developed for markets in Asia and Europe, where they were doing quite well (e.g. Ford Focus, or the smaller Chevys, which are Korean cars). CAFE is a crap system, but it certainly is not responsible for sinking these three companies.

It is of no surprise to me that the big three are in the state they are in, but rather that they managed to keep going for so long.

All the best

Andreas

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http://www.heritage.org/Research/Economy/wm2135.cfm

For a heavy view

I get several Auto reviews daily - for US, Europe and China and so for the last three years or so have been reading the nitty gritty.

Personally I think that poor management is the reason for the collapse of the Detroit 3. Group think amongst the executives and complete lunacy from Cerebrus are just indicative of the poor quality. Mulally in for Ford is the only one who seems to hae some savvy - but given Ford has mortgaged itself to the hilt it was going to be tough.

The workers are a large part of the problem but that is down to management letting them get away with it. Management has also failed on technology and foreseeing the future and planning for it. However it is the economic side that makes you weep. Granting up to seven year loans on vehicles is unwise.

The other real screw-up is the discounted sales to the rental companies which knocks the bottom out of the market for private owners trying to sell second-hand. Latterly they all three realised this but it was then too late to think they could save themselves simply by cutting out the rental sales which I suspect were barely if at all profitable.

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That's the Marxist spin. The real truth is the people running off with riches and destroying these three companies are the regular union workers with their job pools, 90% layoff pay, and $105,000 severance packages. The destruction of these wealth creating corporate entities is directly attributable to their inability to downsize their workforce in a weak economy and thereby cut costs and capacity to remain in the black. This is what happens when unionized labor sucks a corporation dry to the bone. It's silly to point to the CEO's corporate jets, when the cost must be dwarfed by pension and healthcare liabilities owed to the union labor force.

good point! I heard on the radio (if true) that the GM union autoworkers pay and benefits equal around $80/hour?!

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That's the Marxist spin. The real truth is the people running off with riches and destroying these three companies are the regular union workers with their job pools, 90% layoff pay, and $105,000 severance packages. The destruction of these wealth creating corporate entities is directly attributable to their inability to downsize their workforce in a weak economy and thereby cut costs and capacity to remain in the black. This is what happens when unionized labor sucks a corporation dry to the bone. It's silly to point to the CEO's corporate jets, when the cost must be dwarfed by pension and healthcare liabilities owed to the union labor force.

Runyan,

Where do you get the 90% layoff pay stat (do you mean the GM Job Bank) or the 105,000 severance package? And do you mean to say that the "big 3" do not owe its retired/current workers a pension or health care?

I can find this quote

The UAW agreed to deep wage cuts and other concessions. Wages were cut by a third and pensions were frozen. The union negotiated lump sum payments of up to $105,000 over three years to workers to help offset the effects of the concessions. Early retirement cash incentives, and lump-sum “buyouts” were also offered to cut the number of workers at American Axle.

Also another quote about the "inability to downsize"

Now that the UAW has ratified a concessionary agreement ending the strike that started February 26th, American Axle says 2,000 U.S. jobs manufacturing jobs are being lost. Some of that production is moving to Mexico. Most of the job cuts are coming from buyouts and early retirement incentives negotiated by the UAW, but there will be some involuntary layoffs, too.

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More bad news for the car industry:

http://www.nytimes.com/2008/11/21/us/politics/21dingell.html?_r=1&hp

All the best

Andreas

Obviously they don't get the same preferential treatment as the German auto industry does, which is good for them, even if I disagree with the underlying theme here.

Hopefully German auto makers will not need more dough from the state and EU for survival as well, and not just specifically designed and relaxed environmental standards. How come way too many problems on environmental issues seem to originate from Germany, Poland and Russia? <Insert an eerie analogy here, perhaps dating back to the previous century, and I'm not talking about the German Greenpeace, btw.>

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Runyan,

Where do you get the 90% layoff pay stat (do you mean the GM Job Bank) or the 105,000 severance package? And do you mean to say that the "big 3" do not owe its retired/current workers a pension or health care?

This was discussed during the Senate hearing on Tuesday. I'm not making up the figures.

As for what is 'owed' and not 'owed', that's just idealistic talk when the reality is the companies must borrow money or die. It's nice to say that workers need to be taken care of, but what if the cost is too high and the money to pay simply isn't there? Then you are in the realm of hard choices.

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That's the Marxist spin. The real truth is the people running off with riches and destroying these three companies are the regular union workers with their job pools, 90% layoff pay, and $105,000 severance packages. The destruction of these wealth creating corporate entities is directly attributable to their inability to downsize their workforce in a weak economy and thereby cut costs and capacity to remain in the black. This is what happens when unionized labor sucks a corporation dry to the bone. It's silly to point to the CEO's corporate jets, when the cost must be dwarfed by pension and healthcare liabilities owed to the union labor force.

You want Marxist spin? I'll give you Marxist spin.

Let's look at the generic US automotive corporation. On the one hand you have the people in management which would be happy to off-shore almost all production and jobs, as that's how to make cars more cheaply. You manufacture the components abroad where you don't have to worry about unions or safety standards, and then import the stuff into the US and assemble it, and no import tax. It makes great economic sense.

Then there are the workers, you know, the people on the lines, who know all that also know that white collar management is paid better than the blue collars, doesn't get laid off like the blue collars, and isn't particularly tied to one US region or facility, like the blue collars. All the people on the line have, is their ability to organize collectively. Without it, management brings in cheaper labor or offshores production in a heartbeat.

So the unions turn the screws on management for every dime they can, and it's hard to convince a guy making $30 an hour that his demand for a raise to say $33 an hour is unreasonable, when the guy on the other side of the table that is saying unreasonable takes home hundreds if not thousands of dollars an hour, and that's not including executive bonuses and benefits. So unions defend the workers' interests, and that makes perfect economic sense too.

So now, you have a very logical result of a fairly free market model. Management was allowed and indeed encouraged to try and maximize profit for itself, and so were the unions. And what are the most profitable automobiles?....Wait for it....That's right, overpriced automobiles, cars that are sold for more than they are worth, given prevailing market conditions.

Any one want to guess which vehicle, if sold, would make more money for both car company management and workers, a compact or an SUV?

True, SUVs are sort of convenient and there is the macho factor, and the "I'm not driving a station wagon or a van" factor. It's not like SUVs have no value. But if the point is to drive members of the populace from "A" to "B", then the vehicle needed is something efficient.

But the point to the automotive companies was not to maximize the quality of the product produced. Rather, the goal of such companies was and remains maximizing the profit obtained by the companies, and then of course management and the unions fighting over how to divide the income.

So what happens if US car companies face an economy where purchases of cars are going down, and especially of inefficient cars? Yep, you guessed it, it's called a cash flow crunch. Or, the stuff that used to make them money, isn't any more. And now of course alot of people are blaming the car companies for not seeing into the future, when those very same people most of them were happily buying SUVs.

At bottom the American consumer is responsible, it's not as if only American cars are available and if enough American consumers had stopped buying Detroit products ten years ago, Detroit would have got its act together ten years ago. But as it turns out, consumers are only voting with their pocketbooks in sufficient quantities now. We can only hope.

As to what comes next, my guess is that pretty soon one of the companies will go Chapter 11, which will allow the car company to default on its contractural obligations to pay major pensions and high wages; and political obligations to build as much as possible in America, use American parts, and keep profits in America. In other words, fire a lot of people, throw the retirement plans of thousands more who worked for the company for life into the crapper, and then emerge from the process with far more resources available to try and compete the Koreans on price, the Japanese on quality, or the Germans in technology.

And once one of the Big Three, say Chrysler, goes down that route, the other two will follow quickly, as if they do not they sign their own death warrants by ending the profit stream.

As Marx would point out, everything comes down to who controls the means of production. As it is now in the Big Three, control is so divided production sucks. After all these people get thrown out onto the street, management will regain control of the means of production and turn the companies around.

Then the question will be, will management and labor learn their lesson and stop fighting over the Golden Egg, and rather cooperate to make the Golden Egg bigger? That essentially is what has happened in Germany where, even though labor-management relations are often touchy, there generally seems to be a common understanding agreement and continued production is more important than eking out the last negotiating point from the other side.

Perhaps somewhere down the line the Americans will figure out the same thing. Perhaps not.

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Runyan,

I did not mean to imply that you were making up numbers, I just wanted to know where you found that info.

I did find the "up to" 105,000 dollar figure, however it is pointed out that the dollar amount is spread over a 3 year period, and to offset the wages that were cut by a third and pensions that were frozen.

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America, hear this!

Instead of spending taxpayer's money on socializing (aka. "rescuing") automotive industries, think for a second: is that really where you want to invest your pennies? Why not instead socialize your breweries and distilleries? The benefits would be obvious: when everyone got beer and bourbon according to their needs, there wouldn't be a need for cars, because everyone would be too pissed to climb behind the wheel. As a result, your dependency from Arab sheiks would drop to zero and dependency on vodka shakes go to 100%. Result: no more terrorists, everyone would stop being such a wussy, climate change would be averted and the gurls would start looking pretty again.

beauty.jpg

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That's the Marxist spin. The real truth is the people running off with riches and destroying these three companies are the regular union workers with their job pools, 90% layoff pay, and $105,000 severance packages. The destruction of these wealth creating corporate entities is directly attributable to their inability to downsize their workforce in a weak economy and thereby cut costs and capacity to remain in the black. This is what happens when unionized labor sucks a corporation dry to the bone. It's silly to point to the CEO's corporate jets, when the cost must be dwarfed by pension and healthcare liabilities owed to the union labor force.

All of which were agreed to by the corporation and tolerated by general US society for decades, along with the products the whole system supported - to blame the unions alone is bollocks.

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Wait - I thought health and pensions funded by employers was way better than having it sorted by the govt? You can't have it both ways - have the companies 'pay' for it 'cos you don't wanna pay the taxes, then let the coys renege whenever it becomes inconvienient - surely?

BTW, I'm loving the irony. It seems the US is on the fast track to becoming one of the greatest, if worst managed, socialist countrys ever :D

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