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Automotive News & Views Do You Favor A Government Loan To The Detroit 3?
3958 messages, Last post on Oct 02, 2009 at 4:52 PM
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Replying to: tpe (Dec 05, 2008 4:53 pm) Very good observation. I think that is what Obama has in mind. His stimulus package is asking for $136 billion to start immediately repairing roads and bridges around the USA. He claims each billion spent will put 40,000 people back to work. Just $34 billion would employ 1.360,000 people. Far more than the Big 3 represents. Those workers will stimulate the buying of whatever cars are left. Problem solved. May the best products come out on top for all of US. |
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Replying to: tpe (Dec 05, 2008 4:53 pm)
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Replying to: chikoo (Dec 05, 2008 2:49 pm)  He seemed like one of those people who buys the flag, not the vehicle. That's his choice, but one must remember how many of these American car companies came to be: through bankruptcies, mergers, and acquisitions. Anyone remember Packard? Hudson? American Motors/AMC? They never got bailed out. They failed or got bought. Even if, for example, Chrysler went bankrupt, there's still the matter of the Viper, and the Caravan. Hey, VW might buy Chrysler to secure their minivan source, since they're selling a version of it now. And there's plenty of people who wouldn't want to see the Viper go away...potential buyers of whom some are rich enough to be potential buyers for the design and rights. Same story with GM and the 'Vette. Can you imagine a car nut, like, say, Jay Leno allowing one of those famous names to die off? GM or Chrysler going BK would be rough, but not the end of the world like some would want us to think. And yes, I always insist on separating Ford out, because Ford is in a VERY different financial and market position from the other two these days. |
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Replying to: joel0622 (Dec 05, 2008 2:56 pm) Yes, the "Buying American Cars, What Does It Mean?" forum has been going on for a number of years now.  Since the profit margins on vehicles are well under 10% (0% at the D3), that means most of the car costs stay in the country of assembly/sale. For example: Sales price - $10,000 (just for round numbers) Profit to automaker in home country - no more than $1000, likely much less Money to dealer, transport truck company, paint shop, parts shops, assembly plant, parts suppliers located in the USA - $6000 Money to outside the country for non-US made parts (lets say $3000). Note that all cars, both Detroit badged and others, have many parts from outside the US - transmissions, fuel injection parts, spark plugs, radios, etc. The differences in parts sourcing between US and foreign nameplates is not all that great anymore. When we talk about "My country" let's make sure we are talking about U.S jobs and are not using "My country" as camouflage for "UAW". |
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Replying to: berri (Dec 05, 2008 4:33 pm) All 3 are not going to go out of business the same day. Ford can last at least a year longer than GM. The company that currently owns Chrysler, can either fund them, or sell them. not to mention many auto parts vendors going under. If a vendor is dependant on only GM for it's income, that was a bad business decision. In fact, high unemployment is going to impact most every US business soon if things don't start improving. We are in deep do-do as demonstrated by even oil prices crashing down. GM will need to cut jobs, with or without a bailout. They are simply building way more cars than they can sell (at a profit). Discounting cars to the point of loosing money on each one, just to get rid of them, will not work anymore. They have no more money to waste. At least I hope they don't get more. You say "Impact every business soon". Well, are we going to bailout every company that has financial trouble? Where do you draw the line? |
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Replying to: berri (Dec 05, 2008 4:33 pm) I doubt the difference is as great as you think. Even if they get the loans there are going to be massive job losses. If they don't get the loans and one or more go under, the best parts are going to survive in a consolidated or purchased company. And the US will continue to buy as many cars as it needs, regardless of the fate of individual companies. |
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Replying to: berri (Dec 05, 2008 5:07 pm) My best case scenario for 2011 is this: 1. Ford survives. 2. Chrysler is gone. 3. GM is forced to make massive cuts and changes (more than their current plan). They replace Wagoner, get rid of their high cost structure, strip down to 40% of current size, and the new management REALLY gets going on competitive new products. We have a smaller but viable auto industry again and can grow in a competitive environment with excellent products. My worst-case scenario is as follows: 1. Congress gives $34B bridge loans. GM makes token incremental efforts to restructure. Wagoner stays. UAW makes token moves to suspend (not eliminate) jobs bank. 2. Chrysler muddles along for another year before going belly up. 3. GM continues to lose market share, Wagoner comes back to the trough at least two more times, to the tune of almost $100B total. 4. GMs market share continues to drop, even in an economic recovery. GM continues to make reactive incremental cuts. By 2011, GM is either dying or actually finally goes BK after draining the taxpayers of $100B. Becuase of GMs mediocre continued presence, Ford is badly strained because of the weakened competitor in GM that has been artificially kept on life-support for 3 years too long.
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Replying to: tlong (Dec 05, 2008 6:09 pm) |
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Have owned many US & foreign cars & trucks and can't agree with those who would bury GM, Chrysler & Ford. And I'm disgusted with the behavior of our showboating politicians jerking around these easy targets after they've given away tons more of OUR cash to far less deserving financial companies. One of their major competitive disadvantages is that the superior UAW negotiated benefits must be paid out of the profits from each car sold. Nobody else has benefits like UAW workers and retirees - not even gov't workers & retirees. I say the Big 3 have done the right thing for their employees. All the other non-union automakers, among others, are passing along these health benefits to the taxpayers for their employees and retirees lacking such gold-plated coverage. That's a subsidy of sorts. I guess my point is that GM, Ford and Chrysler employees cost taxpayers nothing, because their employer has done right by them. They are even paid during layoffs - where else does that happen? Everybody else who is laid off gets paid unemployment - at the public expense. While I would love to have such benefits, I certainly don't jealously criticize companies that provide them to their employees. These few companies happen to be doing the right thing - both to their employees and to the taxpayer who saves the cost of paying those benefits. I know people who work full time who still qualify for food stamps and gov't health programs - that's a subsidy to that irresponsible employer. A bridge loan, with lots of conditions (especially on corporate perks, pay and parachutes) seems appropriate. When the economy improves, there will be plenty of demand for those trucks. I'd rather see my tax dollars used to help companies that make something than companies that sell paper. |
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Replying to: morin2 (Dec 05, 2008 6:58 pm) Call me cynical - I probably am - but what you see as "the right thing", I view as a calculated attempt to buy labor peace & then stick us, the consumers, with the bill. Rather than stand up to the UAW, Big 3 management took the path of least resistance: give the union what it wanted & then build the settlement cost into the price of new cars. Both management & labor pegged the rest of us as a bunch of passive suckers who would meekly pay whatever they decided to charge us. After all, what choice did we have? What were we going to do about it - buy imports? Much to their surprise - and eventual chagrin - that's exactly what we did. They - big 3 management & labor - badly miscalculated, & now they're running to the government for help. They couldn't win us over in the showrooms, so now they're asking the government to hold us down while they pick our pockets. It's too bad that management didn't do the right thing for customers & shareholders 30 or 40 years ago by walking away from the negotiating table & telling labor, "Go ahead & strike. We'll wait you out." Customers, shareholders & employees would all be better off today if management had shown some courage. I'm angry at the UAW, but I'm far angrier with management. |
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