Let Detroit Go Bankrupt

reply to post by nyk537

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nyk, yep. Even though as an Obama Supporter I didn't like Romney during the Primaries, he would have been a much better Republican candidate for pres or vice pres than what we saw.

At least he would have campaigned on fiscal conservatism instead of fear, uncertainty, and doubt of his opponent.

There's all those jobs vacated when the illegal humans (a.k.a. Mexicans) were scared off.

Sorry, dup. (I didn't do it)

[edit on 19-11-2008 by Divinorumus]

reply to post by Divinorumus

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Not withstandiong the somewhat objectionable characterization in your post, there is a massive difference between the low-pay, unskilled jobs to which you are referring and the extremely lucrative union jobs that will be lost (along with their retirement and health benefits). Unions have their place, but besides the short-sighted-fat-and-happy ignorance that got the Big-3 where they are today the union contracts and related pensions is what has stuck a fork in these guys.

reply to post by jtma508

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Now if there were only a way to keep the unions afloat so they can continue to devour businesses, as opposed to business devouring labor pools.


Ahh... finally the shoe is on the other foot.

This is long . . . so it continues in a second post below this one . . .

This may or may not be the right forum for this diatribe, but in my pea little brain, it all ties in with what’s happening in terms of bankrupting the automotive industry.
The first thing that needs to be said is that all this talk about how ‘stupid’ the management teams are at Chrysler, General Motors and Ford needs to stop as there is a litany of things that have gone into the propagation of this mess.
Honestly, the problems in the industry are not because they are crappy companies, rather they’ve been lead into the inevitable trap of greed-fed growth with an expectation of blind consumer loyalty, cost notwithstanding.
This is a recipe that took decades to perfect, but he final proof . . . the pudding . . . so to speak is undeniable in that the industry cannot continue on its present course.
Not so long ago, the annual volume of car sales in the US was somewhere between 17 and 18 million units per year. That will drop to about ten million this year. What industry can absorb a 40 percent drop in sales? While that answer is pretty clear, what cause that decline is not an easily answered question.
One can only postulate but if the US has 300 million people and the average family is approximately 3.17 people, one can extrapolate that to 100,000,000 households in the US. If everyone replaced their vehicle with a new car every year, annual vehicle sales would also be 100,000,000. But government figures show that in 2001, the average vehicle ages was approximately nine years leaving you with an annual vehicle sales figure of 11 million units per year.
Realistically, we’re pretty close to that figure as it stands. If you factor in the extrinsic economic factors, sales figures ought reasonably to be somewhat lower as consumers are holding on to what little cash they have, if any. Add to that the credit woes and those who do want to buy, really can’t.
Throw in the price of fuel, add a product mix that does not lend itself to efficiency and you’ve got a recipe for disaster.
Using those figures, we’ve almost doubled the required output in recent years which results in saturation of both the new and used car markets. You’ve got to add into the mix the fact that there is an ever increasing presence of competitors . . . you’ve got Toyota, Nissan, Honda, Volkswagen, Mercedes, BMW, Hyundai, Kia, Mazda, all rather successfully vying for their share of a shrinking market. There’s a handful of upstarts further vying for their niche through ultra low cost ‘disposable’ vehicles growing in popularity in countries such as India, China and the like.
In short, production requirements have diminished dramatically therefore it is only logical that people be laid off and production facilities are mothballed.
That’s a big problem for the big three considering that even when these plants are idled, workers are still being paid based on things such as the ‘jobs bank’ and ‘supplemental unemployment benefits’. That’s just the tip of the iceberg. The big three still have their management costs to consider, along with additional cost they continue to incur such as taxes on facilities, utilities on mothballed plants, interest payments on existing debt, health, welfare and pension benefit costs that continue to accrue during periods of layoff, depreciation and the like.
So, if they’re not producing cars, not selling cars and doing nothing to cover the basic expenses, they’re going to bleed money.
And that they are . . . GM’s balance sheet is roughly $2 billion further in the red each month, with Ford showing a monthly cash leak of approximately $1 billion based on the fact they showed an overall operating loss of $2.98 billion in the third quarter of 2008. Chrysler, a privately owned interest, claims to have lost approximately $3 billion in the third quarter of this year.
Whatever the figures, it looks worse than bleak. Face facts . . . the North American industry is operating at a loss of $4 billion per month. Again, no industry can survive those losses long term.
It appears that regardless of government backed ‘rescue’ or ‘bailout’ efforts, unless the economic landscape changes quickly, all three will eventually run out of operating funds well before any upturn in our economy currently anticipated by some bobblehead in the Fed to be fourteen months from now.
That, in a nutshell, means bankruptcy yet all three honchos of the Shrinking Three refuse to accept that suggestion.
So, how do you change that landscape? Cut costs and/or increase revenue.
The same executive triumvirate who refuse to utter the ‘b’ word claim they’ve already cut costs, trimmed fat, sold assets and slashed pretty much everywhere to hoard whatever cash possible. I the next breath, they claim that their efforts are not working.
Thus the beggar’s banquet on Capital Hill which will not solve any problems rather it just buys the automotive companies more time to find a fix to the industry’s ills which basically boil down to the fact that the costs of production are too high and the sales are too low.
Currently, there really isn’t much they can do about sales. The economy in general is in the crapper and, as stated before, that isn’t expected to change for more than a year. The only other option is to cut costs.
The Union’s have already said ‘no more concessions’, despite the remaining legacy costs that add approximately $2,000 to each vehicle and the well-paid members of the UAW bargaining units.
GM has already ‘sourced’ work to third world countries to the point that the supply sector has been decimated. There really is little to no way they’re going to cut a lot of cost there voluntarily. Many suppliers across North America are in the same boat . . . they’re struggling to survive. All of the big three are continually shrinking their North American supply base in favour of offshore interests with whom those suppliers cannot compete due to wages, benefits, government legislation, taxes and so on.
Also in that supply sector, you’ve got interests such as steel companies that have felt the ravages of the economy for decades, and have faced industry-wide shrinking due to the influx of similarly low priced steel from off shore.

continued

continued from previous post

Then you’ve got the folks who develop and build the onboard computers, the radios . . . stuff like that. I’ll give you a quick guess on where that stuff comes from . . . I’m not even sure we have the infrastructure to build that stuff here.
The Big Three are not going to see any reductions in their overhead costs either, nor will they be getting rate cuts on things like interest, utilities, taxes and the like. Don’t forget things like shipping costs, storage, inventory costs . . . all stuff that can’t be arbitrarily reduced.
So, where do they get the savings? Quite frankly, who the hell knows . . . but the only areas from which they, in reality, can draw is wages and benefits pretty much across the board . . .not only within their own houses, but through the supply sector as well. The pain will be felt by members of the UAW, the Steel Workers, transportation unions . . . whatever they cut in terms of wages and benefits realistically has to be done across the board to share the pain and maximize the gain. No stone unturned, so to speak . . . from designers right through to dealers and all stops in between.
No more corporate jets, no more basketball at the GM Arena . . . no more nothing . . . again, the cuts have to be made to survive . . . nothing is sacred.
Face facts. We’re talking about an across the board restructuring here folks, not just those who work directly for the Big Three.
Bankruptcy will do that . . . as it allows the rules to be rewritten . . . for the sector to rebuild in all of it’s multi-million strong employment.
Forget about the focus on Ford, General Motors and Chrysler, we are at a crossroads in our existence here . . . all of us. We have enjoyed a grand standard of living for a considerable amount of time and that is coming to a close as it is cheaper, easier, faster and more efficient to have most of what we’ve traditionally done on this soil done elsewhere because the standards of living in almost every other nation in the world pales in comparison to what we’ve got. Take a look around you . . . a serious close look.
In terms of surviving . . . in getting by . . . in meeting what we need (as opposed to want) on an every day basis, there really isn’t much missing. That’s how a good chunk of the world exists.
So, in facing all of this economic upheaval, we’re faced with three choices . . . bring the other’s standards of living and expectations up to our level such that the playing field is similar around the globe . . . bring our standards of living and expectations down to their level such that the playing field is similar around the globe . . . or eliminate the competition, so to speak.
By bankrupting our system . . . which is what we’ll be effectively doing through the elimination of the automotive sector . . . we bring ourselves down to the expectations of our competition . . . and the world cannot afford to bring the rest of the world to our standard which, by the way, is pretty much a faux standard anyway as it is built predominantly on credit. The last choice is to bomb our competition all to hell . . . eliminate the standard that doesn’t fit.
The honest bold truth of the matter is that the latter is the easiest, but it will pretty much ensure the extinction of the human race.
Bankruptcy or bombs.
Scary, isn’t it.
As fatalistic as this sounds, we’re in it deep and it is becoming clearer by the day that the only real answer to this is to redesign our way of life and hope that the groundwork we lay today brings a great future for our children and grandchildren as the other choice seems to seal their fate.

I say let them fall because the UAW isn't willing to make any concessions to keep their jobs. Back in 1977 at my 5 year high school reunion I talked with a former classmate that worked for Chrysler straight out of high school and was making $18 an hour while I was making not quite $5/hr with a college degree. Now they make on average $27 an hour with outstanding benefits.

The U.A.W. is a huge part of the problem and is unwilling to be part of the solution. Let them fail. I think a new auto manufacturing industry will rise out of the ashes.

[edit on 11/19/2008 by sad_eyed_lady]

I hate to say it, but I think a big part of their problem is that the unions have made it so cushy for the workers that the company was helped to be bankrupt. I am all for reasonable pay and benefits, but sometimes it got ridiculous.
Yes they outsourced a lot, and most cars are brought into the country. But I think the stipulations should be that they got to keep more jobs and manufacturing here, but able to decrease some of the employment costs.

Let Detroit go bankrupt? "Yes we can."


It's somewhat suggestive that the auto manufacturers need to keep their heads above water long enough for Obama to fulfill some bedroom promise to them and the Unions. I suppose he could play dumb and say his hands were tied if they do have to file before that. I doubt the timing is in the favor of those who prefer these stones sink.

What's the time factor on this if GM files at the end of December?

GM apparently would have to sell off it's GM stake to China first. Just how much of GM's parts are already made and shipped from there?

Can GM file bankruptcy based only on it's proifits and assets in the U.S.?

A recent documentary had shown that a Chinese man bought a Aveo at the same price we do here. How is that possible? I think that was a lie.

It would than also appear that GM has been surviving beyond it's means on credit also.

[edit on 19-11-2008 by aleon1018]

Sounds like you have sour grapes because your former classmate was doing better with less education than you.

How's this... I make $162 an hour and don't have any education past Highschool, AND, I own my own business.


Not sure who would pay for college when it doesn't really prepare you for a good job. ONly thing that does is being in the workforce and starting your own biz.

reply to post by nyk537

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Nearly 100 years ago, FORD started the mechanized auto industry. Business was BOOMING! Now Detriot can't even sell their cars.

It's funny, two bombs dropped on Japan opened the door for their products to dominate our roads. From that negative karma, Japan and China have silently waged an econmoic war and are kicking America's ass! "You think we forget bout Nagasaki and Hiroshima huh??... don't be fooled Mr. Anola Gay... In 50 years, we will bomb you and your automotive garbage to smithereens with our superior tech...

reply to post by HunkaHunka

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I'm happy for anybody that can make a good living. Here is what I'm trying to get at:

snippet from:
www.brokeruniverse.com...

Economists in Michigan, the long-time home of the auto industry, say they don’t support the proposed multi-billion dollar bailout of Big Three automakers Chrysler, GM and Ford.

One reason why, they say, is the ultra-high labor costs for union workers employed by the Big Three. It costs over $73 per hour on average to employ a union auto worker, according to University of Michigan at Flint economist Mark J. Perry.

He explained that in 2006, widely available industry and Labor Department statistics placed the average labor cost for UAW-represented workers at the former DaimlerChrysler at $75.86 per hour. For Ford it was $70.51, he said, and for General Motors it was $73.26.

“That includes the hourly pay, plus the benefits they’re receiving and all the other costs to General Motors, Ford and Chrysler, including legacy costs – retirement costs, pensions, and so on – so it’s looking at the total labor costs per hour worked for workers,” Perry said."


Is it right to tax the average worker to bailout workers whose labor cost is over $73 an hour?

Call it sour grapes if you want. You don't know my mindset. I consider it justice. When it comes to protecting the little I have in my pocket I don't feel like propping up a failing business model when they (UAW) are not will to give any to resolve the problem that they brought on themselves. Giving someone $18 an hour for manual labor back in 1977 exemplifies why they are going down now. That is what I was trying to say.

See . . . to me and maybe to only me, this is the problem that we're faced with . . . It is not intended to be a slap at you or what you make. I'm clearly unaware of your profession and how hard you work every day, but to boast about what you earn smacks of . . . well . . . conceit and greed.

I have difficulty with things like athlete's making millions of dollars a year, executives making millions of dollars a year.

What does one do to make themselves worth $162 per each hour they work?

What could anyone do to be worth that much . . . I've seen dozens of posts chiding auto workers for making $70 an hour (fully fringed, of course), and this gets 'trotted out'.

At some point, you may find yourself in a similar predicament as those in the automotive sector . . . priced out of existence as there will eventually be somebody out there who is willing to do whatever it is you do, probably for a lot less.

reply to post by nyk537

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Businesses don't save arbitrarily. They save only if they know it will bring in profit somewhere down the road. The optimal savings of any business is zero. That's the goal. Any business should be doing good enough so that they don't need to store any sort of fund in case of disaster. Otherwise, if they had relied on such a fund, they wouldn't even be in business or at least close to bankruptcy, and thus don't deserve to be in business at all. And, those savings would mean inefficiency, as all its resources aren't being used. They could be employing more workers, raising profits, for example.

The motor companies are just poor businesses. Plain and simple. They employ millions of people, sure, but those people aren't really contributing much to society. They COULD be, if the companies actually knew what they were doing. The argument that economic recession is causing this is moot. It was only a catalyst to the industry's quicker demise. It was inevitable, ever since we hit peak oil. You don't produce inefficient vehicles when the price of gas is obviously rising in the long run. The economic crisis only expedited consumer's concerns for gas consumption. All this would have happened perhaps thirty years from now, if we hadn't experienced the recent economic crisis.

The real argument is whether or not new industries could take form out of a failed auto industry. The government isn't willing to spend their time divesting resources from the auto industry to create new ones, because of well, the cost of retraining potentially millions of people, and the pressure from unions, which basically provide Congress with a considerable lot of its funds and votes.

It's the interests of nations which prevent a true capitalist society from forming. We don't seem to be able to tolerate the redistribution of wealth and capital to foreign corporations, even if they are capable of producing better products (i.e. Toyota) and providing a more fair wage for its workers. We always put the interest of our own corporations first, and sometimes that means letting the world economies fail, and then, putting our own people out of work. Kind of defeats the purpose, eh? Yeah, short term planning, without foresight, usually does. As it stands, workers in the auto industry are overpaid for the value of its product. Now if 100% of our production was allocated towards electric vehicles, then auto workers, at the pay level they are getting today, would be receiving a fair wage. In fact, they would deserve enough more. It's just that the production of gas guzzling cars shouldn't merit the pay that workers are currently receiving, because that product is of low valuable to society.

What really makes me boil is that at the beginning of the twentieth century, and all throughout, we had no problem basically infiltrating and abducting foreign markets, especially China at the turn of the century, which basically prevented them from producing their own products. This kind of sent all of Asia into conflict and civil strife and provided for all the animosities between Japan and China all the way into World War II.

God damn. When will the Capitalists realize that we created Communism? We deprived China of its capital, and that's where the extremism came from, not from the lunatics Marx and Engels.

The whole world is evolving. And we are sitting here complacent with the "fact" we are the most advanced nation in the world. That will quickly not be the case. We can keep giving concessions to poor business, but that will only lead the inevitable buy-out of every single American corporation by foreign entities. That will induce war, there is no doubt.

[edit on 19-11-2008 by cognoscente]

Volkswagen de Mexico Surpasses 2007 Production Mark

Go figure . . .

More importantly, look who is leading the pack in the number of cars produced in Mexico . . . and they wonder why people in the US want them to go work the gherkin somewhere else.

Like I said before . . . level the playing field or we're doomed.

reply to post by sad_eyed_lady

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Better check your facts, new UAW workers are starting at $15/hr, this was begun in an attempt to save Detroit. Didn't work. It wasn't the union folks, it was greed that did it. They are somewhat better now but American made cars were garbage. They built them to fall apart so you would buy another sooner. The Japanese came on the scene and just blew the Americans away. A damn Honda went to 300,000 miles and still ran well, while an American car was a mess shortly over 100,000 miles.

It was a nice gamble by the Americans and could have and would have been really lucritive for Detroit but for one thing, competition, and that's what the American Way and Capitalism is supposed to be about. They made it better and we lost out.

I promise that if China buys it they will not go bankrupt... They will how ever get the unions out of there and re-structure it to become a stream line production masterpiece that will be very close to Toyota and Honda. GM should have taken the consulting tips from Japan 20 years ago when they offered it to the big three on how to make the production plants more stream line. You don't see Toyotas workers in the American plants complaining about money or working conditions or health insurance...? And if they can operate so can the American manufacturing plants as well.

It's long past time to destroy the American Auto companies.

They make inferior products, their unions are absolutely crazy, and they will never be able to reform.

Let them go under, and out of the ashes, a new automotive empire will grow. One with reasonable labor costs, some emphasis on quality and perhaps with the level of saleability that the Japanese enjoy.

The unions will have to go, regardless. They are driving American costs so high that we can not compete. They believe that unskilled work should pay better than people earn with college degrees. Bull sh*t! They shouldn't make more than $20 an hour, plus benefits.

But they won't give an inch, so bankruptcy will be the only way to break them.

Greed is good...greed is good....greed is good. $75.00+ per hr for doing not much, the best insurance there is and still cry if you have to spend a dime for co-pay drugs, lay off pay 90% of your base, pension, etc, etc.

I hope some you was thinking ahead....and saved some of those big dollars.

A majority of you union workers with your garage full of toys...motorcycles, snow mobiles, boats, campers, etc, etc to full to keep your big cars in.

Well, I'm waiting for your garage sale at 5 cents on the dollar...

Now, now don't cry, the gravy train is over. If your bosses get the bail, it's just a band-aid, the company is still going bust.

The tier 2 & 3 company's are the ones that are in for a fallout burn, it's to bad for them but that's life in the fast lane.

Right at x-mas time....wow, what timing. The unemployment lines are gonna be long....long.....long.
One more thing......if China buys you guys get ready for a HUGE pay cut and maybe you'll get SOME benny's....maybe, and almost slave labor, you WILL work your beer gut off.