Those companies don’t use union labor? Hmmm… I don’t think that’s true.
The only difference between those companies’ US-based labor costs and those of the big three is that they don’t have to pay pensions and health care on workers who assembled cars for them in the last six decades. The same problems will catch up with them soon enough if they maintain large US workforces and if the US government doesn’t do something about those pension and health care costs. Keep in mind this is a MAJOR reason why foreign car companies can eat Detroit alive-- because every other industrialized country has government-run health care and pension benefits which reduce labor costs immensely. And, yes, that’s true even after the somewhat increased tax burden because the overhead of a state run system is so much lower, which is why the US government pays far more per capita for what health care it does provide than the vast majority of countries that provide universal coverage.
No, I would not like to see a merger. Competition is healthy and generally provides a better mix of products. I think GM and Ford will tough it out. Chrysler might be another matter because they are owned by folks that don’t really care about building cars.
Everyone can agree that there have been product issues and management issues. The current situation though due to the a massive failure of the government to regulate, and the behavior of Wall Street, has caused severe stress way beyond what they deserve. Allowing large and normally successful businesses to fail does no one any good and puts additional stress on a weakened economy. Whether you love them or hate them or love the overseas competitors or hate them, we should all be in favor of the big boys staying in business with minimum plant closings and job losses.
It is really in everyone’s best interest whether you are a neo-con and believe in helping no one or a flaming liberal and want to provide unlimited funding. The practical matter for the US and global economy is that we need to prevent these failures at this time for the good of the entire population.
Honda and Toyota are not union shops, and they pay very good wages and benefits. The two main differences are 1)the lean operating mode of the non-US companies, which employ far fewer people (both salaried and hourly) to achieve the same results, and 2) the so-called legacy costs of supporting a very large number of retired persons with healthcare. The pensions of these people are vested, and already paid for. However with each early retirement there is a huge lumpsum of cash. All this is currently costing Ford and GM about $4000 per car!!!
The first reason is the main reason why Korean and Japanese companies “eat the Big three alive”. It’s also the reason why European companies, which have the same problems as US (high wages& benefits, inefficient manuafcturing procvesses)are not a threat to US companies. The new Hyundai Genesis is every bit as luxurious as the BMW 5 series, but cost $38,000 less!!
In other words, if the US Big Three all declared bankruptcy, and defaulted on their commitments, the new buyer of the assets could actually turn a profit.
It’s very ironic that Ford and GM quality now has so much improved that their cars are worth buying. But then, in the thirties many compnies that made good cars went under.
I would agree that if Ford and GM can restructure themselves with government loan guarantees, we all win. But that would mean for GM to streamline itself along Toyota lines, which only sell Toyota, Lexus, and Scion brands, for about 16+ models in total.
GM has far too many models and divisions. Thus the Saturn, Pontiac, Hummer , GMC division are redundant. Ford does not really need the Mercury division. More plant closures and dealer consolidations are in order. No one seems to miss Plymouths and Olsmobiles these days.
The question in my mind is can the current GM and Ford management properly restructure the companies? To my mind they’ve already proven unable to. Therefore, I submit that our tax dollars should not be used to guarantee loans to help them through the tough times they’ve created for themselves…at least not without some serious contractual obligations…which puts us in the car business…which we don’t belong in.
Let the marketplace solve the problem. Loan guarantees will only allow them to continue their current practices. Further loss of market share will force them to eliminate the redundancy, trim the fixed overhead, and change the way they respond to the market.
The financial community considers them a risky investment. So should we.
I agree with your assessment of the present Big Three management teams. Ford brought in Mulally from Boeing to make some radical changes, the way Lee Iacocca restructured Chrysler in the past. I hope he has the fortitude to make the cuts and changes needed. Ford product quality has much improved and would not hesitate to buy a Fusion. GM’s chairman is a nice guy, but I don’t think he’s up to the task to restructure this behemoth.
However, like IBM a few years back, the companies have to virtually reinvent themselves. And massive model and plant reductions are a must; GM is still behaving like they had 50% of the market, instead of 25%. Sharing technology development for fuel economy and emissions makes sense to spread the costs.
Since the finacial markets are so mesedup, government help. WITH MANY STRINGS ATTACHED, makes sense to help with the restructuring.
Chrysler has no future on its own, it needs to be bought by someone. Perhaps TATA of India can do somehting with it.
Maybe if Chrysler would have failed Ford and Chevy might have taken a long hard look and diversified their product line. The big 3 have long history of giving up on one market or another. Back in the 1970?s it was the compact car market, nobody bought small cars and they really didn?t make much of a profit so why bother building them let Honda, Toyota, etc build them. Well there was a gas crunch and the price of fuel went way up and suddenly nobody wanted the big boats the big three were caught with their pants down and Chrysler had to be bailed out or go out of business, now fast forward 25 or 30 years, and what do we have. Toyota, Honda, etc make SUV?s and small cars too, they developed new small cars that people want to drive, at the same time Ford, Chevy, and Chrysler build HUGE SUV?s and all but forgot the small car market, and suddenly there was a gas crunch and the price of gas went up and suddenly nobody wants the SUV and they want small cars again and the big three have their pants down again. There isn?t any real reason why they couldn?t have developed a 50 MPG car that?s fun to drive. VW, Mini Cooper have cars that get over 50 MPG, Honda, Toyota have cars that get over 40 MPG, notice not one Ford, Chevy, or Chrysler.
We shouldn?t be bailing out any private company. That whole nonsense of too big to fail is a load of BS. Think about it, if I tell you that no matter what we won?t let your company go bust, why would you show any restraint? You would take risks that no one in their right mind would take and if it works out you?re a hero, and if it doesn?t well the government will ?loan? you a pile money and you get to keep your job your salary.
Look at the home mortgage mess, there were paper in 1999 that said the sub-prime mortgages could cause a problem in the future. I knew there was a housing bubble five years ago; I knew four years ago that a lot of the paper being written was almost worthless. That information wasn?t that hard to find it was widely reported, but apparently CEO?s don?t read the papers.
Government regulations and bailouts will never be substitute for good management. Let them fail and maybe the other will learn a lesson.
If you look at the facts, it looks more like Cerebrus (the company that bought Chrysler) is just out to make a buck by selling the company, regardless of what happens to it or its workers. Right now, Chrysler has more cash stashed away (despite paper losses) than any of the other big three, and while their bottom line is suffering horribly, they’re pared down to a fairly lean state and likely could be more competitive if someone gave a s#it about them at this point. It’s got to be hard to muster up the energy and enthusiasm to battle the market with the sword of Damocles hanging over your head. It’s a coin toss as to which option is worse. If GM buys Chrysler, surely it will cease to exist, much like AMC did when Chrysler assimilated them. Many plants will close, thousands will be out of work, including of course their support staff, corporate workers, IT depts., etc. This may breathe life back into GM and Ford however–one less competitor.
I’ve always been a Mopar fan, and they’ve proven to be the comeback king–I’m rooting for their survival.
There are many issues here, but I suspect we may come out of this with the big two. But two that will be, for a while anyway, more sensitive to the market and less aggressive about trying to drive the market rather than letting the market drive them.
Only time will tell.
In my opinion government intervention is not called for nor is it likely to be useful.
On the other hand some government intervention in general corporate management (let's eliminate the golden parachutes and replace it with say a five or ten year payout of reasonable amounts based on how well the company does for the next five or ten years. What is happening far too often is the CEO is driven to show high profits this year with little or no thought of the future. Stock holders tend to think the same way as they want profit this year and they will just sell the stock if they think the company has been bleed as far as it can.
Unfortunately, it’s how most businesses operates.
The workers have an obligation to the company/CEO, the CEO has an obligation to the shareholders and the consumers.
also, more and more people are bailing out on the stock market because it was dropping like a rock. Part of that reason was some people panicked and started selling their stocks at huge losses, thus causing the market to fall even further, which caused more panic, etc. Most people that invest in the stock market should be in it for the long haul, not the short term.
Hmm, maybe I heard wrong then. I’m one of those that doesn’t want a union in the plant I work in. I think they’ve pretty much outlived their usefulness about 40~50 years ago. Honda is pretty wonky on their hiring system as well, from what I’ve heard. There’s been several temps who’ve been there a year or more, then they turn around and hire someone full time off the street. http://www.uaw.org/solidarity/01/1201/union06.html
It stinks … but we’ll probably need a nationalized automaker just to ensure we can manufacture military transports, etc. on U.S. soil. What’s the alternative? Hope BMW will re-tool for us?
May I suggest that you think about why you don’t want to join a union. Probably because of some slacker story. Yes? Well, join the union and then work to make what it should be.
You did realize that your anecdote supports joining a union, didn’t you?
If you like edgy stying, you have got to be pulling for Chrysler.
I just saw the new challenger…omg.
Now go look at some import. gmwas gag me with a spoon