The deal would extend $13.4 billion in loans to General Motors Corp. and Chrysler LLC in December and January, with another $4 billion likely available in February. It also would provide the government with non-voting warrants, although the exact amount was unclear immediately. Ford Motor Co. has said it doesn't need short-term assistance.
But there's a poison pill
The deal is contingent on the companies' showing that they are financially viable by March 31. If they aren't, the loans will be called and all funds must be returned.
There is no way that the auto companies will be financially viable by March 31st. They haven't been financially viable for 25 years.
I've been thinking a lot over the last few days about the quarrel between liberals and libertarians over the bailout. I will now attempt a fair rendition of how I think liberals think about this; if I fail, forgive me and explain my error.
The liberals who want to save the UAW think of it this way: Detroit is in trouble because of some combination of economic downturn and unfair competition from southern plants or abroad. There are a number of different ways to get back to profitability, but conservatives, who are ideologically opposed to unions, are only interested in making sure that the union bears as much of the cost as humanly possible, or in killing off the Big Three altogether so that the UAW will be destroyed.
I think this is mistaken, though if you don't follow the auto business, it's not necessarily obvious how this is mistaken.
I will now attempt what I think is a fair rendition of Detroit's history over the last fifty years. In the early 1950s, for various reasons Detroit developed a cozy three-way oligopoly. The UAW developed a cozy monopoly on supplying labor service to that oligopoly. In some ways, the UAW helped sustain that oligopoly. If you're a big company whose quality suffers, you have problems. But if you have a union making sure that labor quality cannot vary across the industry, you don't need to worry that your competitors will make a better car. Detroit competed on styling and power, not reliability or price.
During those years of oligopoly, the Big Three's first loyalty (after their loyalty to management) was loyalty to the union. The worst thing that could happen to a Big Three manager was a strike. Making a car that is reliable is only partly a matter of engineering; it's mostly a matter of extremely tight control over the assembly process. That tight control is necessarily less pleasing to the workers than looser rules. The unions could severely hurt a company with a strike. Whereas the customers? The customers could only go to another company where the same union was negotiating the same loose work rules.
(Yes, yes, I know that Toyota does it differently, with group responsibility. But Toyota's system was developed in the absence of a strong union; the adversarial model that the UAW had developed along, however historically necessary, made the Toyota example completely unworkable in a Detroit plant.)
After the unions, for the Big Three, the government was the next most worrisome constituent, followed by the dealers, then the suppliers. The customers were somewhere down there with the mayor of Youngstown, Ohio, in emotional importance to Detroit managers. It's not that the managers in Detroit had anything against their customers, and I've no doubt that they had lots of meetings in which moving testimonials to the gosh-darned swellness of Chevy or Buick or Mercury buyers. But the buyers had little power to punish them, and their other constituencies could make their lives miserable.
This showed in a lot of things: yes, the luscious deals they negotiated with their unions, and the gold plated benefits promised on the theory that Americans would continue to buy their cars no matter what; but also their engineering, and management's willingness to ship cars with known defects, and so forth.
Two things changed. First, foreign automakers began to compete in the US; David Halberstam's The Reckoning, though I believe it is out of print, remains the best discussion of this process. And oil prices shot up, which severely hurt the demand for cars--especially the larger models on which Detroit had historically made all its profits.
Detroit should have reacted, I'm sure, by making smaller cars. But smaller cars were harder to make for Detroit. Buyers thought of them as a non-premium product, which meant they wouldn't pay for the lucrative options packages. And because they used fewer materials, the labor component became a relatively larger part of their cost. Labor was where Detroit was least competitive. According to the automotive analysts I've seen, Detroit still loses money on small cars like the Ford Focus, which are sold at a loss to help make Corporate Average Fuel Efficiency numbers come out.
Detroit needed to do a lot of things in the 1970s. It needed to get better engineering, it needed to get control of its assembly process, and yes, it needed to lower labor costs. But it did none of these things. By the early 1990s, Detroit wasn't even trying very hard to make a profit on cars. Detroit was making profits on light trucks, where the higher sticker price made it easier to hide labor costs (and which foreign companies were not, anyway, very good at making). It's worth noting that Detroit's focus on light trucks was not merely a management decision; it was what the powerful unions wanted, because they knew the math as well as management. Light truck plants were better for the UAW than more Ford Focus capability.
But perhaps more importantly, Detroit turned from making money on cars to making money on financing. Detroit didn't make a big profit by selling you a Ford Taurus. It made money on financing your Ford Taurus; often, the car was sold at a loss in order to get the finance business. The Big Three were banks manufacturing cars as a loss leader.
That's why they could afford to pay their workers above market wages. They were not trying to make a profit on the manufacturing process. The UAW wages and benefits were not compatible with profitability in the auto business five years ago. Or ten years ago. Or fifteen years ago. The UAW is not being asked to bear the pain of returning the company to profitability in a tough market. The UAW is being asked to get their wages back to where they would have been in the first place if they hadn't been subsidized by the now-unprofitable financing arms. Detroit has spent decades buying labor peace with increasingly desperate ploys that have finally run aground.
It doesn't really matter who should have changed their ways twenty five years ago; most of those people are retired or dead now, and there's no just reason that either management or labor should pay for their sins. Nonetheless, both will, because there's no one left.
It is probably true, as Bob Casey cries, that UAW costs are only 10% of Detroit's costs. But like executive compensation, and bond obligations, those costs are 10% with room to cut. Detroit has no room to cut the cost of the steel in its cars, because steel is bought on the open market. Ditto glass, and so forth. Aside from squeezing suppliers still further, Detroit has only three places they can claw back significant savings: bondholders, dealers, and labor.
The bondholders can, and will, take a haircut. But it is not really particularly just to drive their loss up to 100%, rather than the 70 or 80% they are now facing, in order to keep making unprofitable cars at premium wages--and if you make it clear that the government will intervene to confiscate their money and hand it to the workers, Detroit will face even higher borrowing costs in the future. In a capital intensive industry, that is death.
Leave aside that you would be taking money from those who lent in good faith, violating a past agreed obligation, in order to satisfy a newly created future obligation to provide the UAW jobs.
The dealers will take some sort of a haircut, too; a lot of them are going to go out of business. (And check out some of the nasty surprises Detroit has recently handed its already struggling dealers in order to conserve its cash.) But dealers are not quite as useless as is generally supposed by people who fancy that we should all order our cars the way we order computers from Dell. I'm not saying such a thing is impossible--franchise laws have made it impossible to attempt that business model. But that business model is not as flawless as it seemed back when I was a newly minted MBA.,
As I now understand it, thanks to the helpful folks at McKinsey who explained it to me a while back, dealers are a way of handling the fact that auto manufacturing plants break even only at very high capacity usage; you cannot profitably make only 50 cars in a 500 car plant if demand is slow this week, because of your fixed costs (including labor!) Dealers take non custom inventory and craft deals that make it attractive to their local buyers. In other words, they haggle. We hate it--but if we didn't have it, our cars might either have fewer features, or be a lot more expensive, because of the scale problems.
They also provide capital for selling cars. Dealers have their own independent credit lines, which they use to buy cars, advertise, and so forth. Dealers may be parasites on the body public 95% of the time, but right now, they're probably helping keep the Big Three out of bankruptcy by carrying unsold inventory, not pushing them deeper into it.
Nonetheless, the consensus is that Detroit needs to trim dealers, to whom it also extends a great deal of credit, and consolidate operations. But even if we got rid of the franchise laws, getting rid of the dealers wouldn't get Detroit all the way.
Detroit could lean on its suppliers, of course, but that just pushes the bankruptcy--and the UAW job losses--back one level. Supplying Ford is not exactly a license to print money these days. And the rest of its components are bought on the open market.
What about management? I hear you cry. Management's salaries can (and are) being cut, for the same reason that labor's may be: they're not set in a perfectly competitive market. But they're not a big part of Detroit's overall cash problem. With a burn rate of $4 billion a month above revenues, getting all of Rick Wagoner's cash back, and making him buy his own coffee to boot, will run the company for about a minute.
Most of the rest of management is boring, middle class folks who are not magnificently remunerated: purchasing managers and payroll supervisors, sales executives and engineers. Their salaries will be cut, and a lot of them will lose their jobs. But a fair number of them make less than the UAW, and there are a lot fewer of them.
The really miserable thing is that even a total bankruptcy may not be enough. Wipe out the shareholders, cut the bondholders to the bone, shuck the gold-plated medical benefits, toss out the UAW contracts, close the dealers--and we still may be left with companies that cannot make a profit without a now-defunct financing business based on ever-growing loans to ever-poorer credit risks. The Big Three, with the help of the UAW and all their other partners, has spent 25 years building a reputation for poor reliability and ugly cars. Brands matter. Once destroyed, they're very hard to repair in the best of times. These are not, quite, the best of times, are they?
All the quibbling about whether people will buy a car from a bankrupt manufacturer seems to me to be largely beside the point. If people think the companies can't make it, they will act as if they're bankrupt, whether we use the "B" word or call it "Splendiferous Corporate Reorganization and Restructuring For Most Excellent People's Automotive Concerns". And right now, they've got very good reason to think that the Big Three can't make it.
You say, "Detroit is in trouble because of some combination of economic downturn and unfair competition from southern plants or abroad."
Then you note, " it's not necessarily obvious how this is mistaken."
It is mistaken very simply because the word "unfair" is used. Take that out and you have a true statement. There, that wasn't hard, was it?
Blah blah blah. Labor compensation is not the reason the automakers are in trouble. GM was the most profitable company in the world in 1999, with much higher labor costs than they've had the last few years. Why? They sold twice as many cars and trucks in 1999 as they did this year.
The Ford F150 was the top selling car in 2006, at about 800,000 units. Its still the top selling car, but at 500,000 units.
Meanwhile, the camry sold 410,000 units vs 440,000 in 2006, and the accord has sold 350,000 this year compared to 354,000 in 2006.
And I challange you to find anyone a management position who makes less than a line worker. That statement is just full of it.
Detroit has been squeezing it's suppliers for a long time. That's why they seemed to do alright during the 2000 recession.
I'm a liberal, but I don't know why this has to be ideological. You spend most of your time bashing the UAW, which deserves its knocks, but you actually hit the truth toward the end by saying, "Wipe out the shareholders, cut the bondholders to the bone, shuck the gold-plated medical benefits, toss out the UAW contracts, close the dealers--and we still may be left with companies that cannot make a profit." As you say, this was a collaborative effort between management and UAW. They all participated in making a crappy, overpriced car.
And yet their disastrous situation *right now* is not their fault. If they're *right now* on the verge of bankruptcy, it's less because their cars are crap than that no one is buying cars. It's like telling someone with a treatable cancer they have to die because they didn't go to the gym everyday and were at risk of a heart attack years in the future. So, cure the cancer *then* force the person to go to the gym.
The Big Three should be allowed to continue to shrink and maybe (like Chrysler) go bankrupt down the line. But not now, and not because the economy tanked. That's not their fault.
Apologies for embracing what was already a bit of a digression, but might not auto companies be able to sell their cars like Dell sells computers if consumers could be trained to wait a bit longer for delivery? Perhaps this could be accomplished by offering low- or no-cost leases while the auto was being manufactured to the buyer's specifications? Sales of just-in-time autos could be supplemented by s-l-o-w dutch auctions to shed returned or canceled orders.
In some ways, the UAW helped sustain that oligopoly.
Yes, and in an important way you don't mention. Namely--when contract time rolled around, the weakest of the companies would be cut some slack from the pattern in order to allow it to catch back up.
GM was the most profitable company in the world in 1999, with much higher labor costs than they've had the last few years. Why?
Why? Because gas prices were very low, consumers were in love with pickups and SUVs (and, to a lesser extent minivans), and, crucially, the Japanese had not gained the expertise and capacity to produce these big vehicles that were particular to the North American market (the Canadians loved them even more than Americans). Look at when the Japanese got their first truly full-sized minivans and pickups -- it's been pretty recent.
But this was a brief last moment in the sun -- you'll notice that by 2004, even with low gas prices and a decent economy, the D3 were no longer profitable -- because the Japanese had become strong in these formerly exclusive Detroit niches.
Jim wrote: Blah blah blah. Labor compensation is not the reason the automakers are in trouble. GM was the most profitable company in the world in 1999, with much higher labor costs than they've had the last few years. Why? They sold twice as many cars and trucks in 1999 as they did this year.
1999, right in the middle of the tech bubble economy? That's not a good baseline.
At any rate, the argument for labor costs is that the Big Three have traditionally avoided excessive losses due to higher labor costs by reducing the overall quality, fit, and finish of their vehicle offerings. In fact, one of my acquaintances was a design engineer for an industry parts supplier for ten years, and he could relate examples of specific components designed for identical application in similar vehicles that were built to better quality and durability standards for foreign marques versus domestic, per the specifications provided by the manufacturer.
The examples you cite of '06 vs. '08 Camry and Accord sales are somewhat specious, since car buyers spent the entire summer selling season downsizing their vehicle purchases in response to $4/gallon gasoline. The fact that both manufacturers nearly matched their '06 sales figures on both models ought to tell you something.
Meanwhile, the Ford F150 has been the top selling full-size truck in the US for many years, and is well known to be Ford's primary breadwinner. The fact that they sold 300,000 less this year (with Tundras populating the roads like rabbits, natch) is about as evil as omens come.
And there was a lot of demand for trucks and suv's due to the housing push.
I say with considerable confidence that in March, Ms. McArdle's president will be giving the auto companies more of my money. Thanks!
I'm surprised that an MBA (liber-servative or otehrwise) can't put together a cogent analysis of Detroit's woes without unduly blaming the UAW.
The UAW's contract is NOT THEIR FAULT, it is the FAULT OF MGMT who agreed to it. The very first tenet of business success, at least for me, is that NOTHING goes on forever. Planning as such only ensures failure.
k1
ryanculver.blogspot.com
I thought the domestics were doomed the moment I read of Toyota breaking ground on their Tundra plant in San Antonio, many years ago. The financial panic just accelerated the process. The Silverado, panic or not, was destined to go the way of the Impala; a money loser for the manufacturer, or at least much, much, less profitable.
Once again, you fail entirely to list the explosion in health-care costs since 2000 as a reason for the Big 3's troubles. As much as any decision made by GM or Ford over the last three decades, irrational increases in health insurance are killing the car companies. Our health-care "system" is a disaster. It's killing businesses across this country.
You also ignore the decision to invade Iraq and it's direct corollary to the explosion in the price of oil / the price at the pump. From $25 a barrel months before the war to $145 at it's peak this
year; thanks to the dim-witted decision to launch a pre-meditated unprovoked war on Iraq.
Finally, the mortgage backed securities fraud perpetrated by your classmates at business school have nuked the general economy. Off subject, but I think their taxpayer funded bonuses should have gone to pay for their executions by firing squad.
Blame quality / management / unions / liberals / whatever you like. I blame bad leadership, bad journalism and Wall Street hacks. Time will tell who's right.
Thanks for this article.
I had been thinking basically since the beginning of the auto-bailout saga that these companies should be allowed to fail. Mostly this was because I intuited that they were destined for failure anyway. You have helped me understand many of the reasons why.
The key for me was this:
"you cannot profitably make only 50 cars in a 500 car plant if demand is slow this week"
If, instead of a Big 3, we had a Diverse 18, wouldn't it be straightforward to say "let the bottom 6 fail, and help out the top 12 who really are profitable except for the disastrous present situation" ?
Instead Ford will probably end up buying GM and Chrysler under the theory that bigger is better. We need better enforcement of anti-trust and a return to competition, for sure.
And I'm of the opinion that letting them fail and dealing with a really awful year of people without jobs will probably turn around MUCH faster than this half-assed bridge loan that just delays and prolongs the fail into next year.
Why is it the government's job to stop the economy from reacting to years of abuse? Shouldn't we take our licks (lord knows we've earned them) and change our behavior? I don't see how the Fed printing magic trillions is going to do anything other than spread the pain and prolong the fail.
Detroit is doomed for the reasons Megan enumerated. The questions is how much tax payer money is going to get pissed away before Washington realizes it and pulls the plug.
y81 - how much of your tax dollars are going to Detroit for this bailout?
How can I be sure that my tax dollars haven't already been spent on you? Or weren't spent on at some point when you weren't paying taxes perhaps college, high school, etc?
This hyperbole of middle and even upper middle class persons opining on "their tax dollars" as if the overwhelming majority of their tax dollars aren't consumed by them is humorous.
k1
Well, we can go along with the crazy libertarian approach and screw the workers, or we can do the sane thing and pass commonsense laws mandating quality caps on imported cars.
Toyota's and Honda's QA is the culprit here. OK, ban it. Give their workers a break and let ours keep their jobs. Everybody wins.
McNamara: I hope that was a joke, because other words that some scary protectionist,non-competitive, anti-consumer talk coming straight out your pie hole.
Otherwise known as "communism."
Oh dear.
If I'm not mistaken, you can walk into any dealer in the country, go through the catalog & order just the car you want, w/ whichever options, features, color etc. your heart desires. You may be able to do this on-line as well.
Only problem now is you'd have to pay the full list price, as opposed to cars dealers have on their lots that they own & want to move.
Could one of you super-macho, manly, competitive types tell me where the line between "fair" & "unfair" competition is? Should, for example, UPS drives puncture the tires of any FedEx truck they see? How about assassinating executives of the competition? Fair? Or not? Frankly, I think the country would be better served if the competition between corporations was more like the competition between Mafia families. Don't you?
I would totally agree with Megan, if she hadn't support the bank bailout. But this bailout has far more merit than it did. If your gonna do bailouts, do bailouts. The fact that this bailout is so ridiculous to her just doesn't make sense given that she support a bank bailout that couldn't plausibly help the economy. How is more cash in banks sitting on a shit load of cash going to make them want to lend to more credit risky people and businesses or make people and businesses want to borrow at higher interest rates? WTF?
If your[sic] gonna do bailouts, do bailouts.
Huh? So we're now obligated to hand out money to anyone who asks, disregarding the vast differences between different industries?
The relationship between the "Big" 3 and the UAW kinda reminds me of the relationship between the Democrats and Republicans -- fight, put up a good show, but never get anywhere. And NEVER give the customer any other choices.
The only difference is size. And autos have physical assets.
M. Bouffant:
"Could one of you super-macho, manly, competitive types tell me where the line between "fair" & "unfair" competition is? Should, for example, UPS drives puncture the tires of any FedEx truck they see? How about assassinating executives of the competition? Fair? Or not? Frankly, I think the country would be better served if the competition between corporations was more like the competition between Mafia families. Don't you?"
------I love how the liberal gasbag M. Bouffant equates "lower prices" with murder, extortion, and vandalism.
I thin it would be better if admission to Berkeley and Harvard and all universities were based on competition like competition between Mafia families. Then maybe these drunk hippies wouldn't post such mindless crap here.
Doesn't surprise me that liberals think Bush is a war criminal, Iraq would be better off with Saddam in power, and Europe only hates us because of Bush. After all, when you have the brilliant logic M. Bouffant displays above, it all makes sense.
Oh, and the Soviet Union just got a bad rap. Stalin rules!
I'm curious where the "ugly car's" comment keeps coming from. I've heard that toyata makes boring cars and Ford makes crappy cars etc. but you're the only person I know that consistently calls the big 3 product "ugly". Given the huge range of what they make (part of the problem) this seems an odd characterization.
I just don't understand how the liberal progressives plan to attain their goals, that is how do the unions maintain their structure and still keep their employers viable. I don't care who you blame. The fact is they are where they are.
Tom Friedman loves his mythical iCar and others think they need cutting edge technology to be green pioneers, but both of those options are pure speculation and very risky with little details.
Don't just bemoan us free marketeers, what are your solutions? Walk us through your plan.
Given these fundamentals of the Detroit auto industry, it has the potential to become a very reliable money drain or sink, on the scale of Iraq. Obama may pour trillions of dollars into Detroit, much as Bush has poured trillions into Iraq, convinced that all that money will have an impact. And Obama may turn out to be as wrong as Bush: after he shovels incredible amounts of federal money to Detroit, the fundamentals of the Big Three will be the same as they have been for decades.
Politically, is there any argument that this isn't a pretty smart punt? Come March 31, Obama will almost certainly be faced with more requests for money from automakers who just blew 17 billion dollars and have nothing to show for it. What can he do?
If he provides more funding, he'll be accused (rightly) of throwing worse money after bad money. If he calls the loans and forces GM and Chrysler into chapter 11, he will be accused (wrongly, in my opinion) of allowing them to fail irresponsibly. Neither of these options seems remotely desirable, but I really don't see Obama letting GM and Chrysler fail (even if he should).
Maybe he will act before March 31? Gettelfinger said today that he believes the new administration and congess will remove the Corker-esque loan terms when they take office next year. Paying more money out of TARP would be a fairly visible act, but including Detroit in an already-massive spending bill might soften the blow. Might Detroit see some help in the massive "stimulus" bill on its way down the pike?
Overall a fair assessment (surprisingly). But I have yet to hear any glibertarian address the two issues I've been mulling over in my mind and this board:
1. How is this bailout not justified given how terrible the loss of 3 million jobs would be AT THIS POINT IN OUR ECONOMIC PERIL
2. Why is this money a scandal given how much money we've thrown at financial institutions to pay retention bonuses?
Until I hear somebody answer these questions with some substance I'll just stand back in awe of the ugly class warfare being waged against unions. Because really that's the only logic one could have for ignoring these two points and still yelling full throated against a bailout of the Big 3.
Nobody thinks this money will make the Big 3 competitive. Nobody thinks the UAW doesn't need a wage cut (nobody who's thought on this issue at any length anyway). But you'd have to be suicidal to preach market theology in light of what we are ALL facing as a nation. You'd have to be a hypocritical moron to not also condemn the money we threw at organizations like BOA in which we know we haven't received any tangible benefit and never ever ever EVER will.
Megan,
I would agree that the Big 3 has a brand problem when it comes to small and mid-sized cars, but I think that there will always be a market for pick-ups and some SUVs regardless of gas prices (or those vehicles will be all hybrid based on gas prices). No one thinks that GM or Ford has a brand problem on pick ups.
If I were Wagoner, I would focus Chevy on trucks, Cadillac on luxury, Buick on sedans, make Saturn all hybrid (thereby branding it as the green division) and kill Pontiac, GMC and Saab.
I'm a liberal and the only reason I see to have done this is to keep the holiday shopping season from being an utter disaster. This is basically negative stimulus (ie avoiding exacerbating the downturn). Anyone who thinks this is or should be anything other than an explicit kicking the can down the road needs to explain the path to solvency. That said, tonight on Washington Week, John Harwood made clear the strings on this deal (I assume that would be the notional March 31st deadline) are as good as the words of this administration, which even if it were going to be in power at that point wouldn't be all that reassuring. So that can be pretty much ignored. If Obama goes in for any UAW coddling in the new year, he'll have to answer for it. But I have a feeing it'll be rolled into the larger stimulus, Megan's take on which, and the ensuing debates here, I look forward to with anticipation. Happy New Year all!
I'm a liberal and the only reason I see to have done this is to keep the holiday shopping season from being an utter disaster. This is basically negative stimulus (ie avoiding exacerbating the downturn). Anyone who thinks this is or should be anything other than an explicit kicking the can down the road needs to explain the path to solvency. That said, tonight on Washington Week, John Harwood made clear the strings on this deal (I assume that would be the notional March 31st deadline) are as good as the words of this administration, which even if it were going to be in power at that point wouldn't be all that reassuring. So that can be pretty much ignored. If Obama goes in for any UAW coddling in the new year, he'll have to answer for it. But I have a feeing it'll be rolled into the larger stimulus, Megan's take on which, and the ensuing debates here, I look forward to with anticipation. Happy New Year all!
St Nick on a stick, BF, you provoke easily!
I was discussing competition, not "lower prices." Is that what you meant by "competition?" Maybe if Richard Shelby & his ilk weren't so busy giving the treasury to the Kraut & Japanese corporate entities there could be some "fair competition," but busting unions is worth spending taxpayer money on as far as the Senators are concerned. Who are we to complain?
Double post not my doing, I swear!
It's not hard to bust unions when they bring themselves down.
I'm still trying to figure out how the southern senators gave the treasury to the Germans and Japanese.
Mike M,
To answer your questions,
(1) It would be nowhere close to 3 million jobs lost. That is the kind of absurd number that is thrown around by people trying to stampede a bailout before anyone can look at the situation. Kind of like the give us $700B or the bunny dies of a couple months back. Once the companies go under and reorganize, they may cut tens of thousands of jobs, but the point is that until they get rid of the money losing product lines, plants, dealerships, etc, they can't get back to being in the black. Bailing them out and delaying that just drags the mess out.
The people losing the jobs need to go do something else and in this economy it will be rough but unemployment insurance exists for a reason and Congress will extend it as long as necessary. Having a pool of labor available will help the next generation of small businesses to get going and drag the economy back. Keeping them locked in money losing jobs denies investment capital to these businesses one one end since we are spending it on the D3 instead and it denies them workers on the other end since they are still on the line cranking out money losing cars. Better to let failing businesses fail.
(2) The arguments for the $700B bailout were not particularly persuasive except for the idea that fundamentally sound companies were going to be forced under by an inability to get loans if credit really seized up. Still not worth $700B but at least it was an argument. GM is far from fundamentally sound.
Detroit was making profits on light trucks, where the higher sticker price made it easier to hide labor costs (and which foreign companies were not, anyway, very good at making). It's worth noting that Detroit's focus on light trucks was not merely a management decision; it was what the powerful unions wanted, because they knew the math as well as management. Light truck plants were better for the UAW than more Ford Focus capability.
Not to mention that the Big Three were (and still are) protected by a tariff on light trucks and SUVs.
I think Nathan makes a good point.
I am simply mind-boggled out how the skyrocketing costs of healthcare is not a central point of discussion. If Detroit removed healthcare costs of the UAW (current and retired) off their books and onto government, then the wages would be close enough that they would easily compete.
This is what happens in Europe and Japan, and look what happens they can concentrate on making better products. US cars like the focus or opal are very profitable, just abroad. Why should any company have to waste its resources on unrelated issues? They should concentrate on making the products they know the best they can, not negotiating arcane group plans. Let business do business. Let government spread the unknown risks and costs of healthcare to all of us.
Its a simple solution that levels the playing field...
Dismiss it as socialism, but it makes economic sense and sets the stage for future market competitiveness without screwing us. We the taxpayers will end up paying the healthcare costs if Detroit dies. Sure would make more sense to keep the tax base in tack, not to mention consumer demand, or a manufacturing capacity.
"The people losing the jobs need to go do something else and in this economy it will be rough but unemployment insurance exists for a reason and Congress will extend it as long as necessary"
Yeah, I'm sorry but this sentence just encapsulates the whole term glibertarianism. Its not so much that what you say doesn't have merit, its that you just ignore the effect that leaving these people high and dry will have on real lives. If govt aid isn't directed towards the most needy, what's the point? If my tax dollars are going to be used to prop up a useless business (and make no mistake, this is not something I want) then I'd much rather they benefit people like auto workers rather than Wharton MBA's who discovered a loophole to exploit in the financial markets.
Also, can somebody address the real effect that leaving millions (we can quibble on exact numbers, but they are large) of consumers without liquid funds will have on our present economy? Will that not ripple outside of Detroit?
Its not the taxpayers' fault either. So, why does the taxpayer have to take the hit. It also wasn;t Circuit City's fault that the economy tanked and pushed them into bankruptcy. So, should they and their employees get a bailout. It wasn't the tens of thousands of low-level bank employees' fault that economy tanked but they still lost their jobs. Treat the Big Three like the banks. Lets some fail, let tens of thousands lose their jobs, and bailout the ones that have a chance (Ford).
I keep reading comments to the effect "But we were promised" and "its not my fault!" and "its not fair!" It sounds so damn childish. Life isn't always fair. Its not fair to people who lose their jobs at Circuit City, Bank of America, or an auto maker but only the UAW members are entitled whiners who offer the same kinds of arguments as a five year-old.
"I think Nathan makes a good point.
I am simply mind-boggled out how the skyrocketing costs of healthcare is not a central point of discussion."
That's only because you are uninformed. The issue isn't health care costs per se, it's the gold-plated health insurance the D-3 gave the UAW workers and retirees (e.g., workers don't pay any part of the premiums, no co-pays, etc.). Providing rational health insurance benefits hasn't kept Toyota, Honda, BMW, and other foreign manufacturers from profitably building cars in the U.S.
America hates it's factory workers. Disrespects them. Holds them in contempt. They are nothing. Less than nothing. Scum. Dumb. Lazy. Uncompetitive. Losers. Should I go on? At any rate they should be paid enough to be just above the poverty rate.
Let me put it this way. Megan would literally rather die than do production work in a factory. To have people know she worked in one would be an extreme humiliation.
No aspiring business manager and hopefully executive has preferred to work in manufacturing in America for 40 years. For 30 years fewer and fewer Americans aspire to be engineers. Of those who do mechanical engineering is the last choice.
Manufacturing modern complex durable goods like cars is a very difficult task to do at all. Much less profitably. To do so requires talent and cooperation up and down the management chain and extending onto the shop floor. American culture does not reward such cooperation. Besides which nobody there is particularly proud of what they do. They know they are looked down upon.
For 50 years the educated and the elites have shouted loudly in every forum imaginable that the workers are overpaid. Remember to keep in mind that the elites don't really like what they do or who they are.
Manufacturing could not and did not give the return on investment that any other type of business has for a generation. If during the last ten year especially those return were phony, a lie, matters not. That was the reality leading up to this climax of failure. Recently something like 80% of Ivy League grads in recent years wanted to get into finance.
America can't produce anymore. Has lost the desire to. Has lost the talent to. There's your history.
Would it be cynical to suggest that Bush is trying to keep the Big 2.5 alive just long enough for Obama to take the blame for their demise?
Let me put it this way. Megan would literally rather die than do production work in a factory.
I'm pretty sure that if a thug put a gun to her head and credibly threatened to shoot her if she didn't get out on the factory floor and start earning UAW wages, Megan would go with the latter option.
MikeM,
FYI, I am conservative not libertarian. If I thought GM could come back, I would grudgingly support the bailout but it isn't even close. People lose jobs all the time. There is nothing sacred about auto workers that they get to avoid it. For all the talk about disparate treatment of financial sector vs D3, a hell of a lot more people are getting laid off by the banks.
If you want to minimize the pain, minimize the recession. That is done by getting small businesses going, not by starving them of capital on one end and workers on the other. Preventing creative destruction just leads to stagnation or possibly stagflation.
Prolefeed, Bush can't win on this. There isn't enough time to do a bankruptcy-lite option before he leaves office and if denying them funds actually led to bankruptcy before O arrives (which I doubt), he would be accused of denying Obama a chance to save them. A bridge loan is his only real choice if he believes they can't make it to February.
Why should any company have to waste its resources on unrelated issues? They should concentrate on making the products they know the best they can, not negotiating arcane group plans.
I agree that our system of employer-provided health insurance is exceptionally awful. It almost completely eliminates market pricing signals, it means you're doubly screwed if you lose your job, and it prevents labor mobility by trapping many into working for the benefits. On the other hand, I disagree that the only alternative is a government-run system. We're perfectly capable of buying their own insurance for cars and homes; there's no need for health insurance to be any different. (Yes, some people are uninsurable due to preexisting conditions; we can either subsidize their policies or add them to Medicare).
If my tax dollars are going to be used to prop up a useless business (and make no mistake, this is not something I want) then I'd much rather they benefit people like auto workers
So why not help the displaced workers directly? Why the sudden infatuation with corporate welfare?
Megan: The liberals who want to save the UAW think of it this way: Detroit is in trouble because of some combination of economic downturn and unfair competition from southern plants or abroad.
Oh, I think most liberals are willing to admit that management is also partly responsible for this debacle.
Mike M: How is this bailout not justified given how terrible the loss of 3 million jobs would be ...
None of the conceivable outcomes -- Chapter 7 bankruptcy, Chap. 11, government-managed restructuring, divine intervention causing the Big 3 to double their productivity, etc. -- does not include a substantial number of jobs lost. And none in which the net loss approaches 3 million. I haven't a clue which outcome would have the fewest auto industry jobs lost, but I doubt the range within which the various options fall is more than a tenth of that.
The 'Big' 3 are going to downsize, possibly a lot. Other auto companies will pick up some of the demand, possibly expanding, while buying parts from the same companies that are supplying the Big 3.
Shadrach: I am simply mind-boggled out how the skyrocketing costs of healthcare is not a central point of discussion. If Detroit removed healthcare costs of the UAW (current and retired) off their books and onto government, then the wages would be close enough that they would easily compete.
Shadrach is falling into the all-too-common error of thinking that health care is something other than a part of workers' total compensation, which the workers have chosen to take in kind rather than in cash. Yes, if the government (i.e. the taxpayers) subsidized auto workers' salaries, it'd allow them to work for less pay from the companies. Whether the government took over the cost of health care, or housing, or food.
Mike wrote: 2. Why is this money a scandal given how much money we've thrown at financial institutions to pay retention bonuses?
Say what?
Lehman was allowed to fail. AIG was all but outright nationalized by the Fed, with existing stakeholders taking a bath and existing managmeent shown the door, and the Fed positioned itself so that it can sell the pieces off later at a potential profit. In other sectors, banks are arranging layoffs; e.g. Bank of America announced that it will be cutting 35,000 workers.
When the Big Three management confronts the fact that the proper terms of bailout require a pound of their own flesh, and the UAW confronts the fact that the proper terms of bailout are an unconditional elimination of excesses like the Jobs Pool and a significant reduction in both the total workforce and the combined wage/benefit packages each worker is entitled to receive, then we can talk in terms of equivalency.
Until then, they're simply swinging at a taxpayer pinata. Wake me when they get tired of that, and start talking about a fundamental overhaul of an unsound business model.
"is that NOTHING goes on forever. Planning as such only ensures failure. "
Ah, but if you understand business you also understand that in a lot of cases when something lasts for 30 years you can practically treat it like it will go on for ever.
I am enthralled by this kabuki dance going on in front of Congress and in the media. The UAW and its utopian-delusional apologists still insist that it's unfair for them to take less money, even as their host companies die. This is like refusing chemo to treat a cancer, with the prognosis around 50/50, because "it's unfair." Or more to the point, like refusing the chemo and then insisting that God cure it Himself. They're being accused of playing a zero-sum game that has gradually destroyed the American auto industry, and their response to these charges is to play a zero-sum game that will destroy the American auto industry.
As for the 3 million jobs (or as union evangelists call them, "10% of American jobs," which is wrong by almost 20 million) that will supposedly be lost, it's another head-banging-against-the-desk moment that illustrates the economic illiteracy in this country. These people will undergo churn and hardship, but they will not "lose" their jobs in the long term because the demise of GM and Chrysler does not effect demand - you know, that thing that controls whether or not you have a job - one iota. Americans may very well stop buying cars, but that's a symptom of what's going on in Manhattan, not Detroit.
Actually, no Megan, the suppliers are rather lower ranking than the customers. Back in the early 1980s, Robert Lutz figured out the parts suppliers were facing a monospony, and exploited it. The Big Three then started walking into parts suppliers and saying, "Okay, I know we've got a contract for which you were the low bid by 10%. But you're going to charge us 15% less than the contract price. Oh, sure, if you don't agree, we have to pay you that rate for the rest of the contract . . . but there will be no renewal of the contract, and no other contracts."
And that general approach is still in place.
And I challange you to find anyone a management position who makes less than a line worker
Okay. Every classified, level six manager at GM, Ford, and Chrysler on the one hand, and every 20-year-veteran UAW line worker on the other hand. And we'll count that purely in matters of take-home pay; if we went into the benefit packages, which were slashed for the white-collar workers and retirees in the 1990s but not for the UAW . . .
Seriously, you don't have any idea what you're talking about.
Yeah, there are people at the unclassified level who make a hell of a lot more. They're also a small minority of management positions, much less all GM positions.
You don't understand conservatives, Megan. It's not about destroying unions. It's about destroying ineffective and inefficient businesses. Both AIG and GM needs to go Chap 11.
Even if you pretend the bailout will work, what happens when we pass cap and trade? We aren't going to drill for any more oil are we? Energy prices are going up 35-40% after we green up under the big O. In the new environment of Washington imposed costs, manufacturing is not going to be an option. Maybe GM can trade carbon credits, then they won't need the UAW.
My last car was an Olds Cutlass. 280k and still ran like a bat outta hell. I have a Chevy now, 78k no problems, starts at 4:30 am in Chicago's winter.
Megan McC doesn't know what she's talking about.
Megan captures the issue very well. I spoke with my wife about replacing her Honda (her second in a row after experiencing Ford and GM "quality") with a new Ford, given their refusal to take money seized from taxpayers and provided without our consent in a special loan.
To me, there is an important ideological aspect to this. Coming from many generations of Ford owners, I've owned three F-250 superduties since 1999 (keeping many a UAW employee well paid). My great grandfather and his father invented the original lubrication system used on the Model T. Ford is part of our family heritage, and their decision to reject corporate welfare for now was one I wanted to support.
My wife simply said "Why would we buy a risky car when Honda is always reliable?" She's right. The UAW was so self-absorbed that they forgot who puts the food on their plates. They're worse than an arrogant welfare recipient. They demand without considering from whom they demand and whether that demand is appropriate. Why sure you want all of those wonderful benefits, but who is going to pay them and why should they?
UAW employees, like most progressives, see economics in a strange vacuum, where money magically continues in perpetuity from some mystical source. The customer or taxpayer (unremarkably the same now) is that source, and should you have a proposition that provides them with insignificant value for what you ask, resorting to force to seize that which you then demand is unsustainable. Rejecting cars with a poor value offering was a first step. Rejecting taxes seized without equity is the next.
My 2009 Ford Escape runs beautifully. All the gadgets, knobs, windows and doors perform flawlessly
with the feel of precision. It's a 4 cylinder but it has plenty of power. I think the Detroit 3 can make a great car, but they stayed on the gas guzzler bandwagon too long. And they make too many models. One advantage the foreign automakers in the Southern States is they are new and have no retirees to pay. Have you noticed that the benefits paid by these foreign automakers is never mentioned in the current debate? Do they pay any benefits at all?
Color me unimpressed. A car you've had for, what, three months still works? I've had a Carola since 2001, and all the gadgets, knobs, windows and doors perform flawlessly with the feel of precision. How do you think your Ford will hold up after seven years?
Most profitable in the world based on what? ROI? I find that difficult to believe. In any case, the question I have is how much money did they make on, you know, vehicles as opposed to loans and credit cards?
Health care costs, schmealth care costs. I don't even pretend to have a solution, but I suspect this: as long as your average sniffle curing pill pusher makes close to $300,000, packs of predatory medical malpractice plaintiffs' lawyers roam the land, and the co-pay for a doctor visit everytime Billy has a sore throat is $15, costs will be out of control. And there are three powerful constituent groups that, respectively, demand the retention of the status quo regarding those three things: the AMA, the ABA/ATLA, and the insured.
The bottom line is that no developed country on the planet (and those are the only ones who've even tried) has mastered health care. Either costs are out of control and rising, or the service provided pretty much sucks and is getting worse, or both.
Oh Bother. How about what it's really like in union world? My father was sick to death of unions by the 70's and he was a card carrying skilled trades, so was my father in-law, both union guys from the late 40's. They both saw the corruption and the ridiculous work rules. My husband was UAW, in fact he helped bring the UAW into his plant back in the early 70's..UAW held up what the D3 made as the big carrot, is that what they got? Not even close. They did get pay raises every contract, please see union dues. The guys would say how about some benefit increases??? Nope you really need wage increases. After 20 years his retirement was a whopping 350.00 a month, heath insurance?? Marginal. Take home pay, pretty darn good..please see union dues. He has now been working for a non-union shop for 15 years, better pay, better retirement, 3 choices in heath care. Won't even go into some of the stuff the UAW tried to pull when the prior place was closing, hubby already ad a new job so as able to tell them to stuff it.
So what is going on the labor market here?? Hubby is probably going to crack 80K this year and yes we are in flyover country and yes a fair chunk is OT..Why? Because they need skilled trades guys and no one can pass the blasted test and the test is pretty darn easy. Friend of mine just went to work for a Honda supplier, they pay a bonus every week for just showing up on time, or showing up at all,6 months you get an extra 500.00. Few even get the weekly bonus.
However going back to unions. Hubby has always said that the only company that has a union wants a union, the D3 proves this is spades. Some of the plants in hubbies group (different divisions) have unions and they (workers) hate it, benefits are not near as good as the non-union shops.
Oh and the blurb that Toyota doesn't have the labor burden is because they don't have as many retirees is bunk. Companies in this day and age do NOT provide health insurance after you retire and believe me the UAW shop hubby worked for prior didn't either.
The UAW as it sits in Detroit is a dinosaur, but hey it is a dinosaur that has been happily perpetuated by the big 3.
Rant off
I agree with the premise. And I know cars are a bigger investment. But a clever marketing campaign, combined of course, with a way more realistic business model, could work.
Anyone remember when you couldn't buy a PBR? (beer) but they became trendy. For cars lets use the VW bug. It make take time, but it can always come back.
No the dealers are not leaches in some cases and right now I am waiting for two of the three to go. We are looking to pick up empty shops and showrooms to fix what is on the road.We will make a fortune fixin' cars without the bs from motown.Parts are easy, the suppliers will sell to NAPA etc and the runner will deliver parts in real time.
Ford can close up shop for a year or two, keep a few good people on and come out with the new Ford/VW bugett and H powered car.
Corvet can be built in Mexico.All of the old plants can be lofted for yuppies/libs and or made into middle class section 8 housing.
Meanwhile the talent will do a John Gault.
Merry Christmas.
I think her article is 100% on. And, regardless of the reasoning contained within, I can simply use me and the majority of my associates (all highly educated scientists/engineers) for prognosticate the future. We have foreign cars because they are better. Period. I'm not planning on getting another GM car - ever. So, analyze all you want. Our $$ are going into a sink hole.
"My 2009 Ford Escape runs beautifully. All the gadgets, knobs, windows and doors perform flawlessly with the feel of precision"
Muggins, MY 2008 Escape is due to go back for it's thrid warranty trip since July, this time to have the transmission torn apart. The gadgets, knobs, and windows work great. It's the huge "THUMP" every time I take off from a stop light that bothers me.
Oh, and I didn't much like the time the clutch pedal came unhooked from the clutch linkage 25 miles from home, either.
@CAL - I fundamentally disagree with the concept that organizations that allowed the CDO market to explode to 62 TRILLION dollars of essentially worthless paper are "sound". When you consider that much of the taxpayer money went to paying bonuses rage my rage meter becomes floored.
But nobody wants to talk about that. Or if they do they offer lame excuses meant to suggest that people working at these institutions are either not to blame or are somehow less culpable than the UAW. Its classism, pure and simple. If people are happy to make that argument, fine. But don't pretend its something its not.
One wonders how the UAW retirees can even look at themselves in the mirror. They're now the nation's laughingstock as the most entitled welfare queens we've ever seen. So much for "union pride"!
Toyota's and Honda's QA is the culprit here. OK, ban it. Give their workers a break and let ours keep their jobs. Everybody wins.
Harrison Bergeron ftw ;)
And good call on _The Reckoning_, they should definitely reprint it if one or more of the big 3 go down, it's really mandatory reading to have any sort of informed opinion on this subject. Ironically, by the time I got to read it, it was Nissan that was in the dumper before Ghosn, and Ford was crowing loudly with its F-truck profits..
Only one previous poster mentions the obvious, everybody has a car! Most have a fairly new one and they're still making payments. Drive by any high school parking lot. The domestic market has contracted dramatically, even foreign manufacturers have much lower sales figures. There is a production over capacity that means some manufacturers will go out of business, plants will close, and people will lose their jobs. Unless we import battalions of wealthy pedestrians. Maybe all of Switzerland.
Martin - you feel the UAW are laughingstocks? I would think MBA's who used all their knowledge about markets to bring the world economy to its knees are coming out of this looking far worse. I mean thanks to these geniuses the US has now essentially abandoned market principles and has dedicated taxpayer funds to the tune of $700 billion to clean up their mess.
Then again, that would suggest these people have a conscience. Or that people understand the role their chicanery, ignorance and greed played in all this. I remain unconvinced that any of this is the case.
At least one could plausibly argue the UAW was just looking after their own interests and didn't really understand the market implications of their actions. What excuse does the financial sector have?
"My 2009 Ford Escape runs beautifully. All the gadgets, knobs, windows and doors perform flawlessly with the feel of precision"
We bought a new Chrysler in the mid 90s. We kept it a long time, drove it way over 100K miles and never had a major problem. It was fine. So when it came time to replace it, we bought...a Toyota.
Why? The Toyota offered both more power and better fuel economy and had better reliability ratings and expected resale value. And Toyota makes the best (only) engine and transmission and all the advanced safety features available on the lower level models (not so Chrysler).
It's not enough for Detroit cars to be 'not bad' or 'pretty decent' or 'better than you might expect' -- they need to be class leading. They need to match the transplants on quality, reliability, features, and price. Actually, they need to do better than that--they need to beat the transplants by a wide enough margin to make up for their sub-par reputations, lower resale values, and the risk that the company (or at least the local dealer) will vanish.
That's a tall order even in a good economy.
Mike M,
Many people are laughingstocks for a variety of reasons, but not everyone has become a welfare queen. When the MBAs send a spokesperson to repeatedly pout to the press that it's would be unfair for the taxpayers not to pay their lavish pensions, I'll reconsider. But for now, yeah, consensus around here (i.e. not Michigan) is that the finance people are at least taking their lumps.
Maybe I missed this in the comments (I really don't want to read them all) and perhaps someone can help me.
I keep reading that the union contracts were the fault of the management that approved them. I'm not sure I buy this. Don't the unions have an obligation to structure an equitable deal or at least be reasonable, rather than wringing out every last dime they can? Surely they must have realized they had a viable stake in the survival of the company. Aren't they now living with the consequences of unreasonable demands? I'm not a union guy, so I am honestly asking, wouldn't the unions have had their own projections? What did those projections show for generous wage, health and retirement benefits and work rules that would hurt a firms ability to compete?
As I remember from the evening news (not a good source I know, but at the time it was all there was) the management was threatened with pretty dire consequences it they didn't agree to each round of union demands. Are we really now faulting the management for not bringing on strikes that could have been crippling? I think to blame this completely on the management implies that the management made no objections or counter proposals. I think both management and the unions would be at fault for an unsustainable contract.
Re: Detroit competed on styling and power, not reliability or price.
I'm not sure that's entirely true. I recall seeing an old magazine ad from c. 1970 for the Ford Maverick. Splashed at the top was the price: $1999. Seems to me that Ford was indeed competing on price there. (By the way, have we really had a tenfold or so increase in inflation since 1970?)
Re: But the buyers had little power to punish them,
One name: the Edsel. Buyers could indeed punish a car company that produced a product they did not want to buy. Do you think Ford didn't take a bath on that fiasco? How much did it cost to design and produce a car that people refused to buy?
Re: But perhaps more importantly, Detroit turned from making money on cars to making money on financing.
That of course describes America as a whole during my adult life.
Re: That's why they could afford to pay their workers above market wages.
Here is where I differ with you: I see unions as a natural part of the market too. They were not created by Beelzebub nor imposed on us by little green men from Planet Zoz. They evolved naturally from the functioning of the market itself and they are legitimately part of it. Moreover UAW wages and benefits were negotiated freely by both parties-- not forced at the point of a gun. They too are a product of the market as the market actually exists in real time. They may be unsustainable, but that does not make them unnatural. Markets no more guarantee profitability than biology guarantees health.
It has been said that Detroit has been hit by the "perfect storm." So has everyone else. But Detroit, among carmakers, was not cutting it before the perfect storm. Good companies build themselves to take advantage of the good times and be able to weather the inevitable bad times. Detroit and the UAW seemed to have a pact that during the good times they would simply take the money and run. Get as much as you can and give as little as possible back in return. And they are paying a horrible price.
And now as we start working our way through a "rescue", the head of the UAW has suggested (even in light of the massive "haircut" that bondholders will take) that the UAW is being singled out when it is asked to take a pay cut. The UAW has ceaselessly reminded us that this "rescue" is not a handout, but a loan. Fair enough. In lieu of a pay cut, how about having the UAW take a portion of its wages in the form of new GM bonds. This would certainly test the proposition that this rescue is merely a "loan".
And it would be consistent with the way American workers supported their country during WWII. Even during a period of substantial privation, American workers took their meager pay and invested in War Bonds. There is currently a lot of talk about "Buy American" from the UAW -- at the same time that they are suggesting that it is good for the country to "invest" in Detroit. Let them show us the way.
Excellent piece Megan; one nit I would pick though it that the captive finance arms of the Detroit three in recent years didn't really make money on auto finance either - the auto financing was provided at artificially low rates to prop up sales; in fact many commercial banks scaled back or exited auto lending because the margins were so low due to the captives' offerings.
You are of course correct that the Detroit three have to a large extent been banks in drag, with finance arms coining money that supported the losses on the auto side of the business, but the finance profits were made away from auto lending, most notably in mortgage lending, though also in other (equally non-auto-related) financial businesses. So the Detroit three have been hit with a double-whammy of plummeting demand for their money-losing cars, as well as the total collapse of their (largely mortgage-driven) financial services profits.
I keep reading that the union contracts were the fault of the management that approved them. I'm not sure I buy this.
The problem is that the UAW had a monopoly on Big 3 labor. When contract renewal time came up, they picked on and only one of the three companies (generally the strongest) as the target company. If the target company fought the union's demands and took a long, painful strike, then the other two companies would be raking in the cash and grabbing up the market share. So for the one company in the hot seat to take a strike had a huge downside. On the other hand, if the target company met the union demands, the same demands would be imposed on the other two, so no competitive disadvantage would result (until the transplants showed up).
The UAW's labor monopoly gave it the ability to create an incentive structure for the D3 that was highly tilted toward giving the union what it demanded.
I've had a Carola since 2001, and all the gadgets, knobs, windows and doors perform flawlessly with the feel of precision. How do you think your Ford will hold up after seven years?
Well, Eric, I had a Ford subcompact for 14 years and over 280,000 miles. It finally had to head off into the sunset due to an oil leak, but I can accept that at 280,000 miles.
My present car is a high horsepower Chevy. I've had it for 13 years and, interestingly enough, over 280,000 miles. And it's still running great. Yeah, I've had to make repairs in recent years, but far far less than what car payments would cost.
These snooty generalizations about domestic vehicles are really quite amusing.
The current problems with the auto makers -- and the much larger problems with government employees -- have got me thinking about retirement benefits.
Many, but not all, of Detroit's problems seem to stem from the fact that managers 20 years ago decided to make their lives easier by making open ended commitments that would come due long after they left office.
High ranking government officials have done the same thing, leaving us with enormous numbers of government workers who are entitled to retire at 55 with full health insurance forever and inflation adjusted defined benefit pensions.
It seems to me that we would benefit from a law that forbid all organizations, both public and private, from making any future commitment that they could not fully prepare for at the moment of the commitment. In other words, it would be fine to guarantee workers the benefits of $500 invested in an S&P500 index fund but not okay to guarantee comprehensive health insurance 50 years from now.
Do you know of any country with such laws? Has any research been done on how they might affect the U.S.?
These snooty generalizations about domestic vehicles are really quite amusing.
What's amazing is to label it "snooty" when people relay their experiences with crappy American cars. Remember, folks, true salt-of-the-earth Americans keeps silent about what a rip-off their Detroit car was! Everyone else is just an east coast, latte-sipping, Prius-driving snob.
I was happy to find your post, GM Goes Down in which anony-mouse and I sparred on safety and I gave a link to safety data. I'm thinking I can use it as I'm looking to buy a vehicle. That 2002 Buick my daughter bought, never been to the dealership for anything. Reliability is frightening. It's fun to drive. The best part, the contempt you get from other drivers. But the 9-5 Saab 2001 I temporarily inherited, total headache. GM made the Buick for repeat customers. Will spare you a story about their destroying Buicks with a defect to avoid a bad rep. Doncha know a new advertising slogan would do it:
Buick. The new Volkswagen. They're Ugly.
They're made by the enemy. Support your foreign brewery. Buy American. Don't let the world go to chardonnay.
The driving force behind the automakers problems are the ultra left with its emphasis on the environment above people or civilization.They love it when the big three go broke, because they love no growth-no cars-no big homes,no happiness except sitting in the forest and living on acorns.
the big three spend 100 billion /yr on r&d t meet cafe stds. which are essentially a guilt trip for liberals.Despite two or more decades of cafe stds the average mpg of all miles driven in the US has risen from 20.6 in 1980 to 20.7 in 2007.what that tells us is that despite selling the cars for thousands less than they cost to make the high mileage tiny cars are driven only on short trips to the local starbucks. who in his right mind would drive one of those things up to the lake place or on the main hiways?
.the loan should be made contingent on congress dropping all cafe stds and let the big three make the cars people want.With no cafe stds the big three would be making money growing and adding jobs and paying taxes.
We conservatives should not be attacking unions, and the unions should not be attacking repubs.we each have a common cause here and the environmental left has managed to fool us into ignoring the real problem and going after each other.Get rid of govt directions as to what cars can be made and the problem goes away.
Martin - I'm sorry but you lost me on the (frankly tired) welfare queen analogy. Are you suggesting the auto workers are doing nothing? Last I heard, these were WAGES they were negotiating. They're going in and making cars. Crappy cars, cars nobody wants to be sure, but its a job. To imply they're lazy or somehow not earnings the money they're getting (even if we think the wage is too high) is just plain wrong.
What does the financial sector create? Besides chaos? What are they doing to earn the money they got? Please don't let the fact that they received about 5 times as much cash as Detroit will cloud your answer.
I understand that all accounts of auto quality and reliability are, at best, apocryphal, but I will fire away anyway. I have owned 23 cars in the last 41 years including 9 Detroit products. The nine Detroit products that I have owned have generally been the worst of the lot. The four Chevys I owned were, by light years, the worst cars I ever owned. I owned a 1996 Ford Explorer that gave me about 140,000 reliable miles. But by the time I gave it away I hated it with every fiber of my being. While reliable, every time I drove it I had to deal with stuff like I lighter which had slipped through the dash, mirrors that stopped working, seat adjusters that broke off and a myriad of plastic stuff that simply fell apart. For whatever reason, I have liked every foreign make car I ever owned as much the last day I owned as the first.
I have been a car lover all of my life. But as I have gotten older, durability and value have become more and more important. Not just reliability, but durability -- that quality which is characterized by a car which retains its "new" feel. In this period where Detroit bondholders are taking "haircuts", I have repeatedly taken "haircuts" when I have sought to dispose of my Detroit dream cars. As much as I hear about how much the quality of Detroit cars has improved, the ultimate measure of quality to me can be determined by looking at the "residual" value of various makes and models. Kelley's blue book rated the top ten manufacturers in 2008 with regard to residual value after 5 years. Not a single Detroit nameplate made that list. Even for 2008 model year cars, the top imports have an approximate 45% residual value to 33% residual value advantage over Detroit.
I will probably buy one or two more cars in my lifetime. When I do, I will look for a car that pleases me esthetically and which I believe will be reliable and durable. The best way which I know of to determine whether I will like the car when it is 10 years old is to look and see how well similar cars retain their residual value. In addition to the foreign makes which have consistently delivered on every count, I may look at Fords. But any consideration of a Detroit product would entail a massive triumph of hope over experience.
That would be the GM owned Saab Automotive, GM having owned more than half of Saab Automotive since 1990. Nothing like the magic GM touch, eh?
WRT bondholders McArdle writes:
"Leave aside that you would be taking money from those who lent in good faith, violating a past agreed obligation, in order to satisfy a newly created future obligation to provide the UAW jobs."
But this is true of retirees also. Presumably they accepted lower wages in exchange for better retirement benefits. That's every bit as much a loan as buying a bond.
Do you have any evidence for this? What I have heard was that the company was turning itself around, in fact, had enacted a lot of reforms of the sort recommended here. So let's see those numbers, or a cite about those numbers.
Byomtov,
Whatever the relative strength of the claims between retirees and bondholders, a bankruptcy judge gets to decide with a whole lot of case law to back him up. The government shoving them out of the way to be first in line is not the way it is supposed to work.
An assertion with no facts or support of the facts given. But it's well known - or should be - that other automakers are heavily subsidized in the southern states:
Now, if you wish, you can reply with a list of subsidies that the Big Three have gotten up north, you can tote up the numbers however you please to show that the sweeteners cancel out, or that Detroit gets more, or whatever.
But to argue that foreign automakers get no subsidies, that they do it all by sheer pluck and entrepeneurship is, at best, denialism.
Politically, this was a slick maneuver by Bush, even though I think it a mistake to give the automakers money without a bankruptcy declaration.
Come March, the Obama Administration will undo this deal, remove the strings on the money, and supply a continuing supply of funds to the automakers. This will eventually become a line item in each subsequent budget year at about $20-40 billion per annum. In addition, I suspect the politicos will mandate smaller and even less profitable autos from their state manufacturers, but since profits won't matter any longer, no one with an IQ under 110 will notice to endless losses.
What is it with all the "GM will go away if..." comments? Bankruptcy does not mean that the companies vaporize into thin air. It just means that the debtholders take over the company and restructure, generally at the expense of the common shareholders.
Of course, a lot of people will lose their jobs, but not 3,000,000. One of GM's largest suppliers (Delphi) has been operating in bankruptcy for years. The UAW is still a powerful political constituency, and the upper midwest is swing state country. This is a politically-driven "bankruptcy that shall not be called bankruptcy."
But to argue that foreign automakers get no subsidies, that they do it all by sheer pluck and entrepeneurship is, at best, denialism.
All big corporations get state and local tax breaks for opening or expanding facilities--doesn't matter whether it's autos or pharmaceuticals, foreign owned or domestic.
So raising the issue of tax breaks that the transplants get for new plants is disingenuous--tax breaks for facilities are standard-operating-procedure for corporations in the U.S., and so it explains exactly nothing about why Toyota and Honda have been out competing GM and Ford.
Re: The captive finance arms of the Detroit three in recent years didn't really make money on auto finance either
GMAC became a major player in the mortgage market-- and is near bankruptcy partly as a result.
Re: What's amazing is to label it "snooty" when people relay their experiences with crappy American cars.
I don't doubt some people have had trouble with "American" cars*. But I don't think you can generalize "some people having problems" to "all people having problems" and thereby conclude that all "American" cars are crap.
I've owned three (new) "American" cars and one new "Japanese" car. One of the three "American" cars I just didn't like after I'd owned it a while-- nothing to do with its performance or quality, I just didn't like it. The other cars all did just fine by by me-- no unreasonable and expensive repairs until they hit the senility phase of the auto lifespan, and then shame on me for pouring money into them when I should have gotten rid of them.
* Quotes used here to draw attention to the fact that "American" and "Japanese" refer only to where the car company is headquartered. Parts and final assembly may be done anywhere. My "Japanese" car was in fact assembled in Canada.
Reading all of the ridiculous comments here, blaming the health care system instead of a system where auto workers are paid not to work, saying the union is not responsible for its contract, management is, etc makes me smile.
I'm gonna enjoy watching the UAW die.
Now not only are they fighting their reputation for turning out shoddy products, but they have to fight all of the political badwill they are presently generating. Do you have any idea how many consumers who oppose this bailout are gonna boycott the Big 3?
And the very notion that they can come up with a plan for viability in the next 90 days is a hoot. They haven't been able to do it for 30 years, what makes anyone think they can do it by March?
So you guys keep on fabricating excuses for the Big 3 so you can justify more corporate welfare. I'm gonna sit back and laugh while Detroit disintegrates over the next 12 months.
The only question left is how many taxpayer dollars Dear Leader will waste before realizing he cannot change the inevitable.
I, otoh, thought that they're being cut to make the product more competitive. How this is done internally is of no concern to me. And this is the first time I've seen this argument btw; it sounds like yet one more after-the-conclusion justification.
If this is truly about making a business viable, about reasonable shared sacrifices, then all labor costs should be reduced. The management. The engineers. The marketers. The line workers. The secretaries and other administrative and support personnel. I'm curious as to just what proportion of the labor costs going into any given unit can be attributed to just the UAW. If it turns out that the UAW contributes, say, 10% of the cost of the car, but everyone else contributes 40%, I would imagine that most people would think it unfair to harp on the costs of the former. And dishonest as all get-out to boot.
This is completely innumerate. If company A gets $10 billion in breaks but company B gets only $10 million, then all things being equal, company A has a huge competitive advantage over company B. To argue that they are on an equal footing is, I repeat, innumeracy. At best. Now, if you want, you can argue that what both companies get is actually comparable in magnitude, and you can produce your facts and figures to show this. But the argument that foreign automakers are not subsidized, just merely heroic, is entirely without merit.
So, we can this conversation right now, if you wish. Tell me again that what you wrote above, that the size of the incentives makes absolutely no difference, and that it is enough to declare that 'they all do it.' Then I'll know to stop wasting my time with any further replies.
test
From SOV:
And, of course, being the hypocrite that he is, he "fails" to cite evidence for the assertion that "the company was turning itself around".
However, since you didn't post it yourself, SOV, here is the relevant part of GM's balance sheet for the past three years. It will look even worse when GM files the 2008 numbers. This company must be restructured to eliminate non-core cash drains. This include interest payments and retiree healthcare which can only be eliminated in bankruptcy proceedings.
Numbers in parentheses are negative
PERIOD ENDING 31-Dec-07 31-Dec-06 31-Dec-05
Stockholders' Equity
Misc Stocks Options Warrants
Redeemable Preferred Stock
Preferred Stock
Common Stock 943,000 943,000 943,000
Retained Earnings (39,392,000) 406,000 3,880,000
Treasury Stock
Capital Surplus 15,319,000 15,336,000 15,285,000
Other Stockholder Equity (13,964,000) (22,126,000) (5,511,000)
Total Stockholder Equity (37,094,000) (5,441,000) 14,597,000
Net Tangible Assets ($38,160,000) ($6,559,000) $10,258,000
Absolute cross-eyed badger spit.
I will now attempt what I think is a fair rendition of Detroit's history over the last fifty years.
I don't think you have any idea what you're talking about.
You have no idea what proportion of GM's costs are a function of white-collar and management compensation. None whatsoever. You're speculating; and what's worse is that you have no awareness of the difference between speculation and knowledge.
Your speculation about the relative priority of GM's interest groups in the 1950s is also absolutely unsupported by any evidence whatsoever.
It's been pointed out in about seven different blog posts since this crisis started that 90% of the difference in labor costs between Toyota and GM are retirement benefits, which has little to do with labor relations and more to do with the fact that Toyota hasn't been here long enough to have retirees.
And you tie it all together with some nutty, absolutely unsupported and self-contradictory blather about how the reason GM made large cars in the 90s was because of unions. Not because american customers wanted to buy large vehicles, and did so in large quantities. And not because there was less competition in those markets for reasons that had nothing to do with unions, but because Japanese and Korean automakers were focusing on small cars because a) that's what they already knew how to make well for their domestic audiences who liked them and b) they cost less to ship overseas.
This post is not an iota better than the rest of the blowhard conservative trash talk. The logic is basically the same - as follows:
1) GM is in trouble.
2) GM has unions.
3) this must be because of unions.
It's dumber than cement, and pretty dissapointing, coming from you. Reminds me why I stopped bothering to read you.
GM employs about 164,000 to 169,000 people in the United States and Canada (the uncertainty is due to the inability to get a number for Mexico to back out of the North American total, but I would guess it is less than the 19,000 Canada has alone) and has 73,000 UAW members working for the company (I don't know if this includes Canadian UAW or not, but I doubt it- the UAW website seemed to indicate this number applied to the United States alone). In addition, the UAW claims to have 5 times that number of living retirees and widows/widowers as members that are connected with GM alone.
glasnost,
Do Toyota's retirees get extra healthcare and retirement benefits outside of 401Ks? If they don't (and I am open to evidence), then it won't matter how long the transplants have been here- they won't be accumulating liabilities for such benefits the way GM, Ford, and Chrysler have.
There is no way that the auto companies will be financially viable by March 31st. They haven't been financially viable for 25 years.
No time to read thru the thread at the moment, but surely the provision is that they'll have to provide a plausible plan to reach financial viability by 3/31/09 -- in other words that's the deadline for presenting a plan -- not for reaching financial viability itself. The plan will no dout be rather speculative in nature -- but if it makes reasonably stringent cuts I'm okay with giving them more cash at that time especially if it buys us another six months or so. By the end of 2009 I expect the worst will be over with with respect to this recession, and if either firm eventually does want more money after that, it will be economically non-reckless -- as well as politically non-risky (public patience will have long since been worn out) to let either or both go under.
Now, if you want, you can argue that what both companies get is actually comparable in magnitude, and you can produce your facts and figures to show this. But the argument that foreign automakers are not subsidized, just merely heroic, is entirely without merit.
Do you have any evidence that the transplants are consistently provided greater tax breaks to open a plant of a given size than GM, Ford, and Chrysler? It's the defenders of the Big 3 and UAW that are trotting out the argument that tax breaks to Toyota, et al explain the advantage of the transplants. So the burden of proof is on those making that argument, not me.
Now it probably IS the case that the transplants have received far more in breaks *total* than the D3 recently -- but that's because they're growing companies that are opening new plants regularly as opposed to shrinking companies that open new plants much less often (though the D3 have been opening some new plants -- yes, with tax breaks -- even as they've shut down old ones).
But all that means is that there are advantages in being a successful growing company rather than a failing shrinking one. In addition to finding it harder to take advantage of local and state tax breaks for new facilities, a shrinking company is stuck with various kinds of overhead and fixed costs suited to the larger entity it used to be.
But, again, that dynamic has nothing at all to do with autos vs other industries or domestic vs foreign-owned. (Or, northern vs southern or union vs non-union for that matter). The greater ability to take advantage of tax breaks are just one of many ways in which success builds on itself (and failure the same in the other direction).
We can go quick, and we can go slow, but this won't be over until we restructure one bodacious shitload of debt. This includes:
Debt owed to retirees by state, local, federal govt.'s, and private insurers.
Debt owed to bankers; mortgage debt, corporate debt, credit card debt, student loans, and auto loans.
Debt owed to other nations, 500 billion to China alone.
Newly accumulating debt; Fiscal stimulus debt, baby boom new retirement debt, baby boom health care debt, bailout debt.
You'll know its over when having brains, balls, and breaking a sweat are the only ways to make money again. Until then, pack a lunch, it's going to be a rough ride.
Bill Woods, You're point is well taken - but I am fairly certain the union would probably agree to an across the board wage cut if the families of the UAW were guaranteed health care.
Fred - I respectfully disagree. It is the burdens of the legacy costs, particularly health care that are handicapping their ability to do business. The foreign manufactures do not yet have these costs because their workers are much younger, and therefore healthier. It is why I as a healthy 30 year old can get a good plan for pretty cheap but my parents are paying 10k plus a year for the same plan. (Yes it also helps that doctors are a little cheaper in the south). These problems will hit those manufacturers in 25 years too. Unless they are smart and screw their retired workers.
The simple fact is that Health Care costs are crippling all of our businesses (and gov). The big three are just canaries in the coal mine and as the baby boomers retire... Its basic math to realize that if a non performing cost of business rises 10% to 15% a year for twenty plus years - well you're going to have a problem. Health care is very complicated and has nothing to do with business. It was an accidental development in US business during the brief post war period when cash was tight and workers sparse.
Business should do what it is good at- business. Workers should operate in the most efficient manner as well, and go where skills are needed, not hang out because of healthcare.
The government is the only entity that can spread the costs and the unknown risks to everybody in the society. Hell, smart companies like Walmart already do this. And taxpayers end up footing the bill for their employees health care costs. We will end up doing the same thing for the UAW if the jobs disappear. Like I said earlier it would be nice to keep the tax base, and keep people working.
The sad fact is that the so-called "gold plated" standard of health care used to be "the standard", now only union protected or state workers qualify for that standard. And those plans get more expensive becuase they have to offset 50 million uninsured who still god forbid get sick.
On a side note, its very easy to pick apart individual companies on a micro level, but who is paying attention to the macro. If workers can't afford to buy products because wages get driven too low, then consumer demand will continue to drop and the economy will get smaller.
Henry Ford was right, and this country grew great because workers could afford to purchase the products they built. I suppose we can have an economy where we all dine on the table scraps of CEOS, but how much can they really buy?
Dear Atlantic,
You keep publishing this brain-dead piece of shit and I've quit buying your magazine or coming to your website.
Coincidence? I think NOT.
Raționalitate is right. The reason the Big Three pushed SUVs (and the reason they were so profitable) was the 25% tariff imposed on light trucks. Until the Japanese set up truck production facilities in the United States (which they have since done), the Big Three were able to revert to their oligopoly status. Those days are gone, which is why Detroit was hurting long before the credit crunch. The current recession is just the nail in their coffins, not the cause of their demise.
Ms. McCardle addresses an issue I have wondered about for a while: was GM's actual strategy selling cars at a loss in order to make money on the financing of the cars? This actually sounds somewhat plausible. I wonder where I could actually find a source for such information. Ah, right, this is the Asymmetrical Information blog; no sources needed.
Has anyone seen a graph measuring the number of MBA degrees conferred compared with the median real wage in the US (with time as the horizontal axis)?
Not all liberals favor bailing out Detorit, but Ms. McArdle knows that. That said, she's too kind about people's motives for a bailout.
I've thought since the 80's that Honda (at least) should basically be regarded like any other American car company: they hire Americans (not just at the shop floor but in engineering and management), they design for Americans (better, it seems, than Detroit can -- the Acura marque, btw, is strictly American), they build here: my Honda is a larger percent American-made than my neighbor's Suburban.
WHat you've seen lately is a bunch of Democrats, Granholm in particular, coming right out and saying that Republican opposition to the bailout is motivated by the presence of "foreign" automakers' plants in their states and quite literally saying that those people aren't acting like Americans, and are acting against Americans' interest in thrall to their foreign masters.
Now, you think Freddie and all those _sensitive souls_ so _offended_ when Sarah Palin or the like suggests that they are somehow not the most red-blooded Americans, are going to object? Because I don't. Jingoism is just fine when it's about trade -- and that's what's behind a lot of the save-Detroit nonsense.
Trademarked dave, nice self-refuting comment there. Or do you only come to the Atlantic's site to say that you don't come to the Atlantic's site?
We'll all miss your incisive wit and compelling logic.
Lets be clear about something. Honda is not an American car company. It does not matter how many cars are being made in North America. When Honda (and/or Toyota) start to request government money for assistance- they will be requesting that money from the Japanese people.
This economy better start to get better quickly or they will be asking for that money within a year.
Consecutive 30% monthly sales declines will do that.
I'm late and last so nobody's going to read this. But for the record:
GM and Ford (at least) do make cars that are cutting edge in their categories and that the public wants to buy. There called trucks and SUVs. If GM and Ford were allowed to make what they want and are good at--these, and anything else the believe they can profitably make--everything would be fine. Problem is, they can't just make what they want and are good at. CAFE standards require that they make so many small cars every year. And the truth is, neither GM nor Ford (nor Chyrsler, for that matter) can profitably make small cars in UAW factories.
Every failure falls from this. The bad reputation for quality and poor resale value, for example, result from the fact that the small cars are sold almost entirely on price. The number of small cars GM and Ford they must sell is driven by the number of big cars they can sell and their required corporate average fuel efficiency, which is what CAFE stands for. Thus, the companies lower the price through price cuts, rebates and low interest rates until the requisite number sells. Quality is sacrificed because it doesn't much matter to price-only buyers and reduces the loss on each car sold. For the same reason, the companies push fleet sales, even though those kill their cars resale value.
A couple years ago, all the government needed to do to save Ford and GM was eliminate CAFE. Now more immediate measures need to be taken. But these won't work as long as GM and Ford are required to build small cars in UAW factories.
General Motors sells more cars than any other company in America. Its trucks are great. The new Malibu is great. I'd take American Style over the Japanese any day.
My goodness there's a lot of b.s. being thrown around here. Most of it's from Mike M (as usual).
When Honda (and/or Toyota) start to request government money for assistance- they will be requesting that money from the Japanese people.
Really? Then would you care to explain why the Canadian government just announced billions in aid to the Detroit automakers? Why is Germany planning to provide aid to GM (Opel) and Sweden to GM (Saab) and Ford (Volvo)?
The Big 3 are the last remaining bastion of consumer durable goods manufacture in the US. All the rest is gone. It's gone because our elites; economic, intellectual, political all wanted it gone.
They wanted it gone because they disrespected manufacturing. The number one example of course the hatred of the auto workers. It was easy to hate them when you hate what they do.
It's true that the Big 3 had a long history of missteps rooted in management inertia that lead to lagging designs. That management in the 60s and beyond was driven by marketing. The actual nuts and bolts of making cars was an afterthought. These managements were put in place because that is what our elites demanded. They don't give a flying ---- about making things, That's dirty and icky, done by low class icky people who are paid too much. Besides, there just isn't enough profit in manufacturing. Investment in capital equipment in US manufacturing since the day WWII ended, could always be and often was denied by cost accountants as simply not worth it.
American machine tool makers were world leaders, until after WWII. Then those manufacturers stopped inesting in their own design and production. There is no American machine tool manufacturing any more. It is pretty much gone.
It is a lie, a self serving lie, that this was all because our wages were too high. It lies deeper. From top to bottom our manufacturing corporations were beset by poor morale and motivation that sprang from the disrespect in the job they did. A disrespect that started with our elites.
When morale is low, when self respect is low, then the results will be bad.
In fact American cars now are good to great depending on the model and in some cases right at the top of their segments. No matter, hoary old myths about the junk from Detroit now serves a political purpose and score settling vendetta of the right, and the Confederacy in league with foreign brands. (Just wait till they start cutting wages down there. I'm thinking wooden shoes)
Already millions of pages have been written by ideologs explaining why the end is here. Always it's the fault of their fellow Americans. The ones they hate. How convenient. The same ones they have been disrespecting for two generations. Where where all the words pre 08 about the rot in the financial system? Hahahahaaaaaaaaa
Having watched the Japanese auto industry emerge up close almost from day one, there are two main reasons the Japanese prevailed and the US auto companies failed: Walter Deming and better engineering across the board. Deming, an efficiency and quality control freak, helped make the US auto market preeminent pre WWII. Post WWII American auto companies felt they didn't need him, such was pent up demand, because they could sell anything they produced. Mr. Deming took his act to Japan where they deified him, installing engineering and quality control as the twin driving forces of their companies. And guess what? It still is so. Engineers run those companies and as a consequence they have better components in the cars, better resale value, and happier customers. Pretty simple, no? It also helps that the Japanese have company specific unions rather than the industry wide model represented by UAW. Obviously much the better way to go.
Having watched the Japanese auto industry emerge up close almost from day one, there are two main reasons the Japanese prevailed and the US auto companies failed: Walter Deming and better engineering across the board. Deming, an efficiency and quality control freak, helped make the US auto market preeminent pre WWII. Post WWII American auto companies felt they didn't need him, such was pent up demand, because they could sell anything they produced. Mr. Deming took his act to Japan where they deified him, installing engineering and quality control as the twin driving forces of their companies. And guess what? It still is so. Engineers run those companies and as a consequence they have better components in the cars, better resale value, and happier customers. Pretty simple, no? It also helps that the Japanese have company specific unions rather than the industry wide model represented by UAW. Obviously much the better way to go.
A few random comments in response to other random comments:
1. The Foreign auto manufacturers' US operations will not acquire D3-like legacy costs in the future because they use defined-contribution retirement plans rather than defined-benefit ones (the D3 use the latter). Notice that not all companies that have been around a long time face crippling legacy costs. Those costs are solely a consequence of generous defined-benefits negotiated in past contracts between thed D3 and UAW.
2. Manufacturing is not disappearing in this country. Manufacturing employment is declining, but manufacturing output continues to rise. The U.S. is far more productive in its manufacturing today than it was even 10 years ago. And it's flat-out funny to read people complaining that (a) America doesn't manufacture anything anymore, and simultaneously that (b) we have foreign manufacturers setting up shops to produce in America.
3. The claim that Henry Ford's ideal--workers able to buy the goods--is diseappearing is BS. The workers at Toyota can afford to buy Toyotas (and some even buy GMC pickups!), the workers at Indiana's Subaru plant can afford to buy Subarus (although when I drive by there I see a lot of D3 nameplates in the employee parking lot!), etc. Those manufacturers are not paying starvation wages or anything near to it--they're paying solid middle-class wages.
4. The great irony of unions is that management hates them, but rarely figures out how easy it would be to avoid having them in their companies. The book "Good to Great" tells the story of NuCor steel, a non-unionized plant where union organizers occasionally come in to talk to the workers about organizing. The managers actually have to force their employees to be respectful to the union organizers, because the employees don't want anything to do with them. But that's because the company treats them really well, including helping pay for their kids' college education. Bad management brings unions on itself, and then suffers the consequences.
One of the facts lost in assertions is that the importation of foreign manufacturers has resulted in UAW job losses is that far more UAW jobs have been lost to automation than to these foreign companies. (and it is automation, eliminating many tedious and hazardous jobs, more than OSHA that has improved workplace safety) It is probably correct to assume that, in the absence of foreign competition, Detroit would not have moved to employ automation to the extent that it has. Before workers anywhere suggest that the principal cause of manufacturing job losses in America is foreign competition, they should consider the impact of automation. Of course we can expect that if the UAW succeeded in obtaining the absolute monopoly on automaking labor in this country that they would dig the Luddites out of the closet and move back away from automation.
The UAW while difficult to deal with is hardly the cause of the financial problems of Detroit. In case it escaped notice Toyota had the first annual loss in history and Honda is having difficulties as well.
The steep rise of gas to $4 a gallon, massive layoffs in the economy and a squeeze on credit because of the fraud in the financial markets are more compelling problems than the Unions. It is a myth that the UAW is the bad guy. If the price of cars were dropped $3,000 by magically changing the union contracts, doing away with all benefits and eliminating all management, the cars would still not sell.
The economy has been delivered a one two bunch by a Congress and President that were a sleep at the switch and now want to place the blame on the workers who for decades made the companies successful.
Detroit sold every SUV and truck they could produce because that is what the majority of consumers wanted. The "Green" cry is more a myth than an expression of what the public wants to drive.
The problems of $4 a gallon gas and now tight credit and 2 million people who don't have jobs would have occurred if the UAW was not a factor. Just ask Toyota or Honday or look at the sales numbers for BMW.
Brian, if you've got a publicly traded company headquartered in Tokyo, with manufacturing facilities in the United States and large numbers of American shareholders, why is that by definition a Japanese company? And was Chrysler still a US company when it was owned by Daimler Benz?
Slocum's right. Isn't GM as much Canadian, Mexican and German as it is American?
Well, I guess this is where I have to talk down to you - again. No. The burden of proof is on _you_ and yours. You have continually made claims without the slightest shred of support about how horrible the UAW is, how they're largely responsible for dragging GM down, etc.
Well.
Why don't you, you know, actually support those claims? The only thing I've done is point out that you haven't done so, haven't even made the most cursory attempt to do so. Now, if you want us to accept your assertions that's its all on these people, why don't you do some research? Why don't you show how much more of a subsidy GM is given in Michigan as opposed to Toyota in Alabama?
I'll keep saying this until it sinks in, but as an educator, it's kinda what I have to do: use your head, and follow the usual rules. I am under no obligation to disprove your claims. None.
You are.
Note that this has nothing to do with your claims per se, and everything to do with how you try to pass off your work onto someone else. It is shoddy, dishonest, and lazy. Just stop it.
Translation: yes, companies located in the South do get bigger subsidies. And yet this Slocum will still say - again without the slightest bit of evidence - that it just doesn't matter.
Note that not only is his mind unalterable on the subject(in which case, why is he even bothering to post), he also, if I am not mistaken, has railed against 'taxpayer-funded bailouts'. But somehow, it's okay if taxpayers in Alabama subsidize Toyota.
I think we're done here.
GM was the most profitable company in the world in 1999?
That's hard to believe, considering GM wasn't even the most profitable CAR company in the world.
http://www.businessweek.com/archives/1999/b3616071.arc.htm
Too much moron-speak to read past that comment...
I suspect that this is the crucial difference. If you want a well-engineered car, you let the engineers have their head, and you let them make the big decisions. If you want to squeeze the largest amount of profit from the smallest amount of added value, let the MBA types, the accountants and bean counters call the shots.
After the financial shakeout has passed, I would hope one of the professional types whose mere mention conjures up ineptitude and mendacity is the MBA managerial type. We need a lot fewer MBAs, and a lot more engineers. People who actually have real expertise, instead of the imaginary kind.
@SoV
After the financial shakeout has passed, I would hope one of the professional types whose mere mention conjures up ineptitude and mendacity is the MBA managerial type. We need a lot fewer MBAs, and a lot more engineers. People who actually have real expertise, instead of the imaginary kind.
Holy shit....
We agree about something...
I think I should stop reading and go to bed now.
glasnot,
You are a dumbass.
"which has little to do with labor relations and more to do with the fact that Toyota hasn't been here long enough to have retirees."
It doesn't matter how many retirees Toyota has, their employees have 401k and as such their retirements are between them and their 401ks.
They will never have any "legacy" costs.
SoV,
"...he also, if I am not mistaken, has railed against 'taxpayer-funded bailouts'. But somehow, it's okay if taxpayers in Alabama subsidize Toyota."
There's a fundamental difference between a tax incentive and a government bailout like the one sought by the D2. The former is used to entice a business to locate in a particular area because the long term benefits vastly outweigh the tax reduction. The latter is a temporary rescue of failed organizations whose long term benefits are questionable at best.
It's the difference between a hotel manager lowering the price of a room for a repeat paying customer to compete for his business as opposed to letting a homeless person stay in a room with hopes he may some day get on his feet and eventually pay to frequent the establishment.
All of the tax incentives I have found are in the mid hundreds of millions of dollars range. Nothing close to the $17 billion (with a 'b') that the D2 are getting.
http://www.goodjobsfirst.org/corporate_subsidy/automobile_assembly_plants.cfm
And no, I don't blame the UAW entirely for the destruction of the D3. But certainly they've played a part and deserve what the managers, stockholders, and debtors get as well. To say they were innocent bystanders just along for the ride is sheer lunacy.
I'm still trying to figure out what is the domestic protectionists plan to make the D3 solvent while still maintaining the higher union benefits. So far, I haven't seen one. They just rail for the subsidies saying the transplants haven't been playing nice in their sandbox. Just how do you expect to pull this rabbit out of your hat? What plan will you unveil in March 09 that will solve all the D3 problems?
Isn't it time we start talking about these companies in the past-tense?
The Big Three are not "in trouble."
The Big Three "have failed."
They are bleeding money like stuck pigs, nobody wants to invest in them and no lender is interested in backing them. Nobody has shown a "bailout" plan that will actually make any of them healthy again. The BEST that the government can hope to do is prop up the corpses. The cost of maintaining these zombie corporations is astronomical and not worth it.
Even if all the detroit factories were to shut down, roughly the same number of cars would still get built in America, using roughly the same number of workers. Car demand may fluctuate in the short term, but it's rather inelastic in the long term. Everybody who has a job that isn't across their street from their home needs a car, and needs to replace that car every few years.
And while I have nothing but fondness for the American line worker, I don't give a shit about the ethnicity of the CEO who signs their paychecks. Let the Big 3 go away and make way for companies who know how to make profits on cars.
The burden of proof is on _you_ and yours. You have continually made claims without the slightest shred of support about how horrible the UAW is, how they're largely responsible for dragging GM down, etc.
I am under no obligation to disprove your claims. None.
You really have no idea how this works, do you. Or should I give you the benefit of the doubt and assume you're dishonest rather than stupid?
One last time -- I've made no claims about subsidies to new plants (or new investments in existing plants) being a factor either way, but YOU have done so. I think subsidies are one of many, many irrelevant factors about which I have no burden of proof. For example, in addition to differences in subsidies being irrelevant, I also think differences in, say, heating costs between northern and southern plants are irrelevant. I don't have a burden to go out and prove that. Only you are making claims that subsidies are an important factor, so only you have a burden of proof here.
Your silly dancing around suggests to me that you have ZERO actual data regarding differences in subsidies being a material factor.
Translation: yes, companies located in the South do get bigger subsidies. And yet this Slocum will still say - again without the slightest bit of evidence - that it just doesn't matter.
No -- no translation is required. All companies opening big new plants (promising lots of new jobs) in ANY industry in ANY state get subsidies. As a consequence, successful growing companies opening more new plants get more new plant subsidies than failing shrinking companies. North vs South has nothing to do with it.
On the other hand, companies with existing plants have already amortized the costs of construction years ago, so they should have a big cost advantage over companies having to spend the money to build new plants (because the subsidies never cover anywhere close to the whole cost of the new plant). All things being equal, if I have a plant long ago bought and paid for, I should have a cost advantage over a company that has to build and pay for a new plant to compete with me. But as we know, all things are not even close to equal, and the transplants are have been kicking Detroit butt for decades despite the disadvantage of having to invest huge sums to acquire land and build plants from scratch.
Are you saying these sorts of subsidies do not effect the bottom line? That's really, really hard to believe.
"Already millions of pages have been written by ideologs explaining why the end is here. Always it's the fault of their fellow Americans. The ones they hate. How convenient. The same ones they have been disrespecting for two generations. Where where all the words pre 08 about the rot in the financial system? Hahahahaaaaaaaaa"
Hey, look, Rapier is reprising Heath Ledger's (sp?) role as the Joker! Same rambling, bile-filed, accusatory psychobabble, punctuated by wild cackling.
Mockery is really all Rapier's data-starved posts deserve. It is a wonder to me that the red mist of self-righteous indignation obscuring his vision does not totally preclude posting.
A decade ago, I read one of those vanity-house published books purporting to "reveal" the true, hidden history of Jewish bankers, Trilateral Commissions, and Roschilds. Rapier's stuff sounds very familiar...
"Are you saying these sorts of subsidies do not effect the bottom line? That's really, really hard to believe."
Of course it affects the bottom line, but it's not determinant as an existential factor. If the tax breaks weren't given, they'd still have a viable enterprise. They would probably have just located at a different site. If the federal host doesn't give the D2 parasites in Michigan some money, they're toast.
There's another aspect to this that's unfair to the transplants. If AL, TN, SC, or some other state wants to give breaks to foreign auto companies, that's their business. MI and OH have the option to match if they want. However, to say that Alabamans, Tennesseans, and the like should pay their part for the welfare of MI and OH through federal taxes is fundamentally wrong. They are being punished for their success.
"I'm late and last so nobody's going to read this. But for the record:"
For the record, I read it, and it was a good comment. As I've pointed out previously, the combination of CAFE standards, excess capacity, and unsustainable labor costs have hamstrung the D-3. They can and do, as you point out, make and sell competitive cars.
You do know about search functions, cut & paste, I trust?
You have made many, many references to how unions have destroyed GM (and in fact, you've railed against all unions in general, so far as I can ascertain.) You have made no effort to actually post proof.
Let's look at what I bolded up there, shall we? No, I did not claim that it was those unfair subsidies that did for the UAW, and never have. Again, something you've never bothered to prove. I did note that if you want to make this case, you need to show that other factors weren't responsible for the decline of GM - and pointed out that automakers in the south do enjoy subsidies, and have you accounted for them.
Your response? A totally childish demand that I do your homework for you.
Slocum, we need a lot less people like you, people who simply will not use their noggin in preference of their prejudices. In fact, it's precisely people like you that got us into this mess in the first place.
You can take the last word, if you like; suffice it to say that I find your performance contemptible. And it's not your positions that are so objectionable, no, you don't get to say it's because obviously, SoV is a leftist, and he can't handle the truth. No, it's your reasoning that is up for inspection - and dismissal[1].
[1]On a calc final I gave last week, I had several students claim that since a function f evaluated at a point a was less than zero, and at a point b, the function was greater than zero, there must be be some point between a and b, x_0 such that the function evaluated at this point must be zero, ie, x_0 is a root of f. That's not true, and I wrote as a comment 'what about continuity?'
If any of them had disputed their grade by saying, per Slocum, that it was up to me to prove that the function wasn't continuous, not on them to show that it was, I'd be just as dismissive. No, this is not about ideology. It's about how it's being defended.
Please. Don't refer to them as 'parasites'. And no, it has not been determined whether or not subsidies were the make or break. One of the reasons I've been harping on this point is because the people who are so ready to heap cartloads of blame on the UAW haven't bothered to do even basic research about the existence of these subsidies. Upon being informed that they exist, all I get back in terms of any sort of analysis is, 'oh, those subsidies could not have made a difference. So I'm not even going to bother to check.' (and this has been one of the reasonable responses.)
This is another reason why I commented about those subsidies. You're making an artificial distinction between different groups of taxpayers. Why should the taxpayers of Alabama or Tennessee have to foot the bill for Toyota? Why is it okay for them to subsidize a foreign automaker, but not okay for USians in general to subsidize GM? Or did you think that taxpayers in Alabama are uniformly happy with this arrangement? If you don't think they are, then I don't see how you can advance this argument without some sort of refinement. And of course, the initial reason that this topic attracted my attention was the hypocrisy. Apparently a son of the South can get up in the senate and say with a straight face that they're as a matter of principle against the taxpayers subsidizing the auto industry. Well, no, they're not. They have no problem with forcing the good people of their state to subsidize auto industry.
It's hardly a matter of 'principle'.
UAW workers are the best workers in the world! So if they all lose their jobs, they will all get new jobs right away.
I say close down the Big 3, tear down the factories, plow up the parking lots and plant biofuels and windmills!
There are 20 million illegal aliens working and holding jobs in America.
So I say, send them home. Lets say "Thank you Omar", or "Thank you Hussein but its time for you to go home" to Araby or Africa or South America or China.
Let a Real American hold an American job because that is the American way.
American Jobs for Real Americans!
SoV,
As wonderfully glib as that riposte is, it seems that you equate giving money and tax breaks (perhaps functionally the same, but they have very different incentives). While both do in fact affect a company's bottom line (thanks for that tautological insight), one is intended as carrot to attract healthy business (which even Detroit is using, unless you missed the Michigan ad blitz of the last several years), while bailouts are giving money to distressed players.
In your view, is a dollar given from the government to a company through tax revenues equivalent to a dollar not taxed? Before you answer (with that oh-so-biting wit) keep in mind that tax breaks do not help companies that cannot turn a profit, while bailouts seem entirely opposed to helping those that can. (Glibness aside, TARP and the Fed are interesting bailouts because they are trying to prevent companies from reaching the point at which they no longer can turn a profit--or, giving money to folks who aren't publicly panicking just yet.)
Ideology aside, how can you not find anything odd about giving between $13.4 billion and $17.4 billion (just for starters, of course) to one company with a market cap of $2.74 billion, and a privately held company which is such a bad investment that its owner won't pony up a cent? For the money we just shelled out, we could buy the Big 3 almost three times. Also consider that GM has a cash burn loss rate of $4 billion a month...almost double the worth of the company.
For the money we are putting into it, we could have forced them into bankruptcy court and guaranteed debtor in possession loans several times over.
But instead, we get to pay an order of magnitude (assuming the suggested $125 billion that Congress keeps throwing around comes to pass, without mentioning the $26 billion already promised to the Big 3 that no one wants to mention) more than the worth of the Big 3 for...what? A fear of 3 million jobs disappearing (which is never sourced, but can be found here http://www.cargroup.org/documents/FINALDetroitThreeContractionImpact_3__000.pdf)?
When the assumptions for that number are an instant and complete shutdown of all operations of the Big 3 at the same time, with every supplier dealing with the Big 3 (regardless of other contracts) completely shutting down at the same instant, thus destroying transplant productivity as well...can you honestly tell me 3 million is a reasonable estimate?
Though, to give you a comparison the financial industry (which is so popular here) it is responsible for 3 million jobs, just on its own (http://www.eeoc.gov/stats/reports/finance/index.html). Well, it did until jobs started to get cut from the financial sector by tens of thousands every month.
I don't care who has to pay the most in Detroit. I just want to see a ton of money get sent down the tubes as a vast "job retention program" (and can someone please offer an argument other than "This isn't the time to have people lose their jobs" or similar things about it not being the Big 3's fault). No matter what happens this industry is gonna cost the government a lot of money--but I have a sneaky suspicion that it would cost less in the long-term to pay unemployment insurance than to bailout to the tune of $125 billion and then pay unemployment insurance (pure supposition, of course).
Oh, and SoV, please excuse the active prodding in the beginning of my post...explicitly declaring that you are talking down to someone annoys me. Especially when your argument is equally broad, and your support is just as flimsy--unless I missed some citations.
And to the assorted people calling class warfare...I do like how your defense of the UAW is that managers and bankers don't produce anything of value. As someone who's looking toward an MBA in the intermediate future, I am glad to know I am only a leech on society who does not provide any usual function. Would that I belonged to such an august group as manufacturing workers...then I could be a good person. Oh, but here I am being jealous of classes again--my face is red.
I'll just add that I agree with Tara. The issue is no longer "How can we save the Detroit 3?" The Detroit 3 are dead. The question is "When will people come to their senses and realize that the D3 are dead?"
What are you talking about? I'm saying that one can't blame the UAW for the 'failure' of the Big 3 unless all other factors are eliminated first. Pointing out that subsidies - of any form - affect the bottom line is hardly controversial. Particularly if one adopts the typical conservative claim that levying taxes on business is one way to make them less profitable, that in fact, taxes on a company can make it go from being profitable to being unprofitable.
Remember, being consistent is a good thing.
You seem to more about the argument I am making than I do. Could you tell me just what you think my argument is?
And frankly, I could not care less about your 'prodding'. Except to note that it was off-point and illogical. Nothing personal.
SoV,
"And no, it has not been determined whether or not subsidies were the make or break."
Did you not even bother to read my citation?
"Commentators much made of the fact that when Toyota chose San Antonio, Texas in 2003 as the location for an $800 million assembly plant, the company had not selected the site with the most generous subsidy package. In another example of the fact that subsidies are not the most important factor in investment decisions, Toyota highlighted criteria such as access to the large Texas market for the pickup trucks that would be built at the plant. This is not to say that Toyota passed up all government assistance. The company received a package valued at $133 million, including $47 million in tax phase-ins and waived fees."
I work for a large railroad who serves many plants like these and am familiar with similar potential green field enterprises. The truth is there are a number of factors that come into play: wages, education of the work force, transporation networks, tax incentives. Usually these companies have two to four potential sites that are given close scrutiny before the final decision is made. In no instance was it a go-no go situation based on tax incentives, but rather a decision to simply maximize return on the investment.
I'll refrain from the 'parasite' metaphores, but that doesn't change what it is.
"The people losing the jobs need to go do something else and in this economy it will be rough but unemployment insurance exists for a reason and Congress will extend it as long as necessary."
How very glib.
I have been out of work since the end of September...and I have yet to find anyone willing to take on a half crippled aircraft mechanic, but hey! The invisible hand of the market is GOD(!), and how dare we question God, right?
I, for one, would be willing to sign on to a little economic socialism at this point if it kept me and family from starving. I hadn't really planned on having to get food stamps at this point in my life, but the 200 dollars worth we get is needed and appreciated.
It is with a sense of disbelief that I read some of this theoretical posturing. Try living the reality, you pompous ass.
Tommer,you have committed a basic logical fallacy. The UAW gets too much money -> the Big 3 will be in trouble. Fine. I don't dispute that. I don't think anyone ever has. But what you're saying is something else: the UAW gets to much money
Here you seem to think that because the most generous subsidy was not chosen, that this could not be a make-or-break key advantage. This simply does not follow. It could be that the decisive advantage kicked in at $200 million. It could be that the decisive advantage occurred at $50 million, in which case, anything over that amount was enough to eventually insure the rout of the competition. I don't know whether this is true or not, or whether the figure would have to be put much higher, say $900 billion. The one thing I do know is that the only way to dismiss any advantage due to subsidies without any further consideration is if those subsidies were zero. And that is simply not the case. Nor is it the case that I have to prove that 'unfair subsidies' are the decisive advantage enjoyed by foreign automakers; I'm not claiming that this is the case, merely that if you want to pin performance issues on the unions, you've got to at least make some effort into determining that there weren't other causative factors of equal or greater significance. And that's not on me to show, that's all on the anti-union types. And I think it's pretty clear at this point that they're into the 'say anything' mode.
Shrug. I really don't understand the point you think you're making here. It certainly doesn't, at least in my understanding, make the point you seem to think it does.
SoV,
Excuse me, I mistook you. I thought you were actually arguing something you found to be plausible. And doing so without sourcing.
Instead, it seems that you have decided to pick an argument (which is elegantly unassailable--because no one here knows every detail about the Big 3, you cannot lay all blame the UAW with complete certainty...not that they deserve it all in the first place) and demand people prove you wrong. This naturally works in your favor because it seems you have picked a very narrow point to make. I'd find it refreshing if it was ultimately something that would move the debate in any direction.
Yes, there are myriad reasons why the Big 3 are screwed. However, I think your argument is entirely too nuanced for an online discussion--you just won't be happy without a long preamble offering every qualification out there before even being willing to discuss labor.
I would note there is a difference between a calculus exam and an industry study--calculus exams (especially when at the point of discussing continuity) simple by design to focus on testing one concept that is chosen at time of design. An industry study takes hundreds of hours and a great deal more information than anyone here has access to (assuming we aren't dealing with any from GAO or similar organizations).
So, with all that being said, a few questions (thanks for ignoring my question earlier):
1. What is your stance on the failure of the Big 3 at large, and your stance on the UAW in particular? (You make an interesting point that no one knows your argument, and if I didn't hit it earlier I'd at least like to know where you stand)
2. Why the very focused arguments about tax breaks--purely to show another possible cause, or some other reason? (Nothing to do with this article I would hope...http://www.salon.com/opinion/feature/2008/12/18/third_reconstruction/index.html)
3. On the subject of tax breaks, how is it inconsistent to argue that offering tax breaks is in an incentive to lure business to your area when economic theory (not conservatism) holds taxes are a loss on the economy? Isn't it the same as arguing higher taxes are an incentive for businesses to look elsewhere?
You've got all the trappings of a nice argument, but it all just sounds like you have picked a nice little place to make your stand and won't even play until someone acknowledges that you are right...however meaningless your point is.
You are correct, the UAW is not entirely to blame for the Big 3's problem. You are also a borderline troll (albeit one with excellent diction) for ignoring any argument that does not begin with an explicit nod to your purely decorative point.
Now, do you have any interest in a discussion on the relative weights of the various factors tearing down the Big 3? Or perhaps even the merits of the various approaches being taken--if you are feeling saucy?
You have made many, many references to how unions have destroyed GM (and in fact, you've railed against all unions in general, so far as I can ascertain.) You have made no effort to actually post proof.
So, you have no evidence that new plant subsidies have provided an important advantage for Toyota, Honda in competition with Detroit. Glad we cleared that up.
In terms of 'proof', it is trivially easy to find the overwhelming evidence that UAW wages and benefits are much higher than the transplants and the work rules are much more restrictive (if they were not, why would Gettlefinger be resisting the requirement that UAW wages, benefits, and work rules achieve parity by the end of 2009)? It's also beyond dispute that the UAW wages and benefits are far richer than the average car-buying American now being asked to subsidize the D3 and UAW -- you don't dispute that either, do you?
How can one prove, mathematically, that high cost labor was the most important factor in the decline of the U.S. auto industry (as opposed to bad management, poor engineering, inbred corporate culture, etc). Of course, you can't prove it conclusively -- it's stupid to think you could.
But there is a lot of evidence to suggest that it's not that Americans can't manage auto companies (GM and Ford have been much more successful everywhere outside North America) and can't design and engineer cars successfully (which they do when working for the Asian companies). We also know that a company that successfully resists UAW demands and takes long strikes in order to get competitive wages can continue to be very successful (Caterpillar).
The UAW monopoly on labor to the D3 along with pattern bargaining and the practice of picking a single strike target was a very successful divide-and-conquer strategy for the UAW. It made it virtually impossible for any one of the D3 to resist union demands vigorously. So by and large the union set the terms -- and here we are.
You can believe, if you choose, that UAW labor, even at the prices Detroit was paying, was an ADVANTAGE for the D3 and it was only the colossal misfortune of working for companies run by morons that caused the UAW workforce to shrink by 2/3. You may choose to believe that the D3 management and engineering was SO BAD that it frittered away the great advantage it had in the expert, cost-effective, flexible UAW labor. Given the impossibility of mathematical proofs in the area, I suppose, you may choose to believe any fantasy you like.
"I'm saying that one can't blame the UAW for the 'failure' of the Big 3 unless all other factors are eliminated first." -- Scent of Violets
While a reasonable person can hold (for now) the views you do, this particular statement deserves highlighting and a gentle shaming. It puts forth an unreasonable standard of proof for public policy debates such as this.
We can examine the factors at play here, look at available data, and then make some reasonable preliminary judgements based on that available data. We may observe, for example, that labor costs for the B3 are higher than those for other, non-UAW, American auto manufacturing plants and start discussing this topic using a perfectly reasonable working hypothesis that (1) the UAW workers are not so much more productive than non-UAW workers that the extra pay is coming from higher productivity, and (2) the resulting premium UAW payscale tends to negatively impact the ability of the B3 to compete against firms with non-UAW payscales. After all, that is what I would typically expect to see in any situation similar to this, whether groceries, software or cars are being sold. As more data develops, we can modify the hypothesis or scrap it entirely in light of new information.
At this point, taking the next step and assigning relative levels of "blame" (a word that really doesn't belong in this debate, but whatever) to management, workers, gnomes in Northern Michigan, etc. is something that can be endlessly debated. As such, people do need to be somewhat humble about the matter when putting forth theories.
What is not reasonable, though, is saying, "nope, no way, no how, can we blame the UAW for the 'failure' of the Big 3 unless all other factors are eliminated first".
I dare you to apply that test to every suggested factor potentially to blame for the B3 failure. Suddenly we live in a world where failure is occuring before our eyes, but no factor is to blame because all other factors cannot be eliminated first.
Management to blame? Nope, because you haven't eliminated the UAW as a factor. UAW to blame? Nope, you have not eliminated management. The down market? Nope, show me how the UAW and management is not to blame first!
The standard of proof you require for the one fact you want desperately to believe in pretty much precludes you ever having to change your mind, since the standard is 100% certainty. For facts you don't find as convenient or useful, though, well, apparently those get no such protection. Not exactly an open-minded way of looking at things.
Oh, and on that note, this made me smile: "Remember, being consistent is a good thing."
Two quotes say it better than I could.
"A foolish consistency is the hobgoblin of little minds."--Emerson
"When the facts change, I change my mind. What do you do, sir?-- J.M. Keynes (reply to a criticism during the Great Depression of having changed his position on monetary policy)
Re: but unemployment insurance exists for a reason
Unemployment insurance is woefully inadequete. It does not pay COBRA payments (which it certainly should!) and its payments have been eroded by inflation over the decades to sub-poverty level. Originally UI was supposed to provide 2/3 of a worker's wages. However there is a monthly payment cap, which has not been changed in years and it is now ludicrously low (c. 1200 a month). That needs to be doubled at the least. Also, Unemployment payments should persist for however long it takes a person to find a new job, not be cut off at some arbitrary point.
"Also, Unemployment payments should persist for however long it takes a person to find a new job, not be cut off at some arbitrary point."
If I lost my job, it seems you feel I should get 2/3 while I look for a new job, even if my skills are now worth less due to economic changes? No time limit.
You see, I hope, the perverse incentive you are creating? I would likely not take *any* job, so long as I can make 2/3 my old wage while having no job.
Mr S.O.Violets,
1. You have made an excellent case for giving the UAW $3 billion to match the $3 billion given by different states to foreign automakers.
2. You have proven that the management of the Detroit 3 is incompetent. I assume "management" includes everyone on salary who is not a member if the UAW. There is no way that bailout money should be handed over to current management. Therefore give the $3 billion to the UAW.
3. The Detroit 3 reputation for quality is known through out the world, unfortunately, so there is no where that D3 cars can compete. This reputation was created by non-UAW employees who runined these companies in spite of the high quality potential that resides within each UAW member yearning to be freed.
4. The D3 must be destroyed and obliterated from the face of the Earth. It is wrong to continue to inflict these cars and trucks on the human race because they give UAW workers, the best workers in history, a bad reputation.
5. The UAW should use the $3 billion to employ its members to drive the 20 million illegal workers, the Husseins and the Omars, from our land and fill these 20 million jobs with UAW members paid UAW wages but this time the UAW will force management to maintain hi quality and reasonable profits that do not ruthlessly exploit the downtrodden worker.
Megan is concerned about bailing out the auto industry. She is NOT concerned about this:
http://tinyurl.com/9tvg38
Neither are the majority of the posters in this thread. And they wonder why it's so hard for libertarians to get the respect they deserve.
JonF,
Why do you say such silly things? You, me, and everyone here would gladly accept 2/3 of their salary forever, if it meant we never had to go back to work.
Stan,
Why do you assume I approve of the executve bonuses? Or even the financial bailout in general?
"Why do you say such silly things? You, me, and everyone here would gladly accept 2/3 of their salary forever, if it meant we never had to go back to work."
Uh, right...
Unemployment payments don't work that way. You have to actually be looking for work, and report every week on what jobs you applied for. You cannot refuse ANY job which you can reasonably perform. Employers will actually inform the State Employment commission if you refused work.
In that context, having your payments actually last as long as necessary makes sense.
In my case, I am not claiming unemployment since I am injured, and my Social Security Disability case comes up in February. I am still trying to take computer office software training through Voc Rehab, since I can't fix airplanes anymore...
It's still awfully rough, and I figure my best bet is to hold on for S.S. and finish my long delayed geology/history degree.
I have no idea what that will get me either, except maybe a teaching position somewhere if I go back off of S.S.
*Lovely thought, that... Yer all pissing me off! Get out your pencils and pass down the papers. This is a pop quiz on Alcibiades and his role in the Peloponnesian War. Question one...*
Goldman Sachs gets $10 billion from TARP and pays its employees $11 billion in bonuses. $11 billion in a year where GS stock has plummeted 120 points (down to 80 from 220). In 2006 GS CEO Lloyd Blankfein got a $53.4 million dollar bonus. But the real problem is greedy blue collar workers.
Nice work there.
Unemployment payments don't work that way. You have to actually be looking for work, and report every week on what jobs you applied for. You cannot refuse ANY job which you can reasonably perform. Employers will actually inform the State Employment commission if you refused work.
In that context, having your payments actually last as long as necessary makes sense.
Define "as long as necessary". 6 months? 2 years? A decade? The rest of that person's life, decades from now?
It's not that hard to not find employment if you don't want it. Apply for jobs you're manifestly unqualified for, make unreasonable salary demands, show up for job interviews drunk and/or stoned, be rude and nasty to interviewers, set their desk on fire and put the flames out by pissing on it -- and so on. Or so I've heard. :o)
So, basic economics quiz -- if the government offers a person 2/3rds of their former salary in perpetuity if they manage to go to job interviews week after week and not get job offers, and the person would have a comfortable living at 2/3rds of their former salary, and even if they were motivated to get a job can't find one that pays more than 2/3rds of their old salary -- has the government set up incentives for the person to stay on the dole forever?
I also wonder if any glibertarians are wringing their hands about the $200 billion in loans the hedge fund industry just got access to?
Just to give an idea of what the job market is like in NYC. I was an IT worker laid off last December. For the first 4 months I was trying to get a job that paid as much or almost as much as I was making in my previous position.
I went to a few interviews but did not land a position. Seeing the end of unemployment insurance in the horizon I downgraded my search to helpdesk where I would be taking home less than half my previous salary. That is pretty much where I began my career twelve years ago.
Around August recruiters stopped calling and I have only been to a handful of interviews since. Not for a lack of trying. Just this weekend I applied to three positions.
Awhile ago I began to apply for positions outside of IT. A package handler for UPS and Fed Ex, a cable installer for Time Warner. One IT hiring manager mentioned that for the position he posted on Craigslist, he received over 400 resumes. That gave me an idea of the competition I am facing.
My point is not to try and garner sympathy as I am aware that this is not unusual and alot of people are having difficulty finding work. But if anyone thinks that people who are unemployed are simply putting off work- you are wrong.
Geez,
How come no one is jumping on the claim that the Big 3 don't get "tax incentives". The libertarians should be shouting "Poletown!" from the rafters.
Who needs tax incentives, when Detroit will just give you a whole neighborhood for free?
I cannot for the life of me figure out how Megan came to "write" this article...on virtually every dynamic she is wrong, in other words, she knows nothing about the car business. In the beginning, the domestics built/build cars people are willing to buy. If you want to condemn Detroit, begin with your grandfathers and father, this was not a Stalinist State where you bought what the party forced you to buy. Second, the Japanese auto industry was imported from America, that's right,GM and Willy's Overland set up the first shops during the Korean war as repair facilities. They also established STRONG Unions in all the shops as mandated by MacAuthur, to maintain a democratic and egalitarian spirit. The Unions are STILL strong in Japan to this day. I could go on and on, the point is , put the keyboard away, do some research, and learn about your subject BEFORE you write! This kind of sloppy workmanship is why I read foreign journals!
"You have to actually be looking for work, and report every week on what jobs you applied for. You cannot refuse ANY job which you can reasonably perform."
Have you ever been on unemployment? It would be easy to collect it indefinitely if it were offered indefinitely. First, you don't have to actually "report" on jobs you've applied for every week. You just have to press "1" on your telephone, answering "yes" to a series of recorded questions (e.g., "were you actively looking for work over the last two weeks?"). Technically, I think you need to apply for three jobs during that time period, but I could easily do that online in 10 minutes, and pick three seemingly plausible openings where I'm guaranteed not to get an interview. Any half-smart slacker could do the same thing. If unemployment were available for 5 years, I'm sure I could collect it for 5 years easily.
Unemployment insurance is basically a subsidy for being unemployed.
Fred,
Despite what I said to JonF I'm 100% behind a more generous umemployment assistance system. I think it should pay 50% of your salary up to 50k a year for one year.
Also, I think if you move more than 100 miles from home you should get a $10k (or more) stipend.
Brian brings up an interesting point - he was laid off in NYC which these days may be one of the hardest places to get a job. It's quite possible that he could find a job in Chicago, or Denver or Seattle but he might have to move.
Mike M says: I fundamentally disagree with the concept that organizations that allowed the CDO market to explode to 62 TRILLION dollars of essentially worthless paper are "sound".
Mike, stay away from stuff you do not quite understand. First of all, it's CDS, not CDO market. Furthermore, 'that $62 trillion is notional, and over 95% of it is offset - like being long and short a stock at the same time. Most estimates are that about 2-3% of it is actual exposure.
Instead of raging, read.
I'm sorry, are you arguing that the CDO swap market is not related in any way whatsoever to CDO's? I used to work for one of the largest orginators of commerical mortgage backed securities, please don't try to prove your superiority by quibbling on terms.
And you have not in any way shape or form disproved my assertion. Asshole.
Sounds like you are an expert on this matter Fred. I wonder why?
Unemployment payments don't work that way. You have to actually be looking for work, and report every week on what jobs you applied for. You cannot refuse ANY job which you can reasonably perform. Employers will actually inform the State Employment commission if you refused work.
You must be joking. I have an acquaintance who has been on unemployment for months and months now -- she is not looking for work because the jewelry making class she takes for 3 hours/week is counted as "job retraining".
Yes, Xmas, Poletown doesn't seem to count.
Or the import quotas, which of course were one of the reasons for the Japanese building plants in N. America in the first place.
If healthcare is so important to people, they should go to school and get into the healthcare business. U of M has the best risk management and operations engineering program and one of the best hospitals in the world. Michigan has a history and would make an ideal candidate for managing the nations healtcare.
"You must be joking. I have an acquaintance who has been on unemployment for months and months now -- she is not looking for work because the jewelry making class she takes for 3 hours/week is counted as "job retraining".'
What state is that? North Carolina doesn't give a d@mn about whatever retraining you are taking. I know, because I have dealt with it. You have to report in your job searches every week, and you must accept any offer. If you are faking it, they will figure it out more often than not.
As for "Unemployment insurance is basically a subsidy for being unemployed."
What of it?
People still have to eat and have utilities. You don't make enough on unemployment to really do anything, and good luck trying to make your rent and car payment. It is barely enough to live on for most people, and not even that for many others. Of course, some of you here may actually like the prospect of more homeless people, broken marriages, suicides and 1850's London style poverty and desperation. I get that sense from some of the comments here.
Forgive me if I choose not to share in your lack of humanity.
By and large most people really want to work. I sure as hell would like to. I was proud of making a very good income and doing a necessary and respected service. Getting injured sent me into a good two years of depression as I adjusted to the fact that I could not support my family anymore, as well as having severe physical limitations and having to take large amounts of pain medication every day. I resent the hell out of that. Some people want to gripe about the odd malingerer or someone who is running a scam.
Whatever.
There are an awful lot of us who are fighting like hell to stay above water and keep the lights on and food on the table. I didn't ask to have degenerative disc disease and two back surgeries. It happened. I deal with it, and try to move on. I have no idea why some of you are griping about unemployment benefits, since they are there to help people who have been laid off or displaced from their job somehow. It isn't welfare, although I am in no position to point fingers on that score, since I have to get food stamps. (probably the most humiliating thing I have ever done. I made 27 dollars an hour fixing commercial airline passenger jets, and I am reduced to this??!!)
I used to sound like some of you. I sneered at "welfare queens" and mocked people who were unemployed. I figured they were merely lazy, stupid or incompetent.
I stopped laughing when I was the one standing in line for a hand out. I was crying on my bed when I got home.
Yancey Ward - You nailed it. Nothing further needs to be said.
celticdragon,
Why didn't you have disability insurance?
"Why didn't you have disability insurance?"
Hartford dumped me at the two year mark, even though I supposedly had five years of benefits. It galls me that they will still get a big chunk of my Social Security Disability back payment, consideration of which has taken four years to finally come before a judge.
In any event, I have not found the job market very conducive to badly hurt ex-airline mechanics. I still get calls for aviation contract jobs almost every day...but my next trip to the hospital could be the one that puts me in a wheel chair for good.
ugh.
I have to learn to do something else, since my resume is 15 years of aviation work. Target wouldn't even pick me up Christmas help, fer Pete's sake! So, I'm stuck at Good Will learning office application software, and praying for disability to come through so I can go back to college and finish a degree. (I was accepted as a senior in geology at Guilford College in Greensboro)
*sigh*
What state is that? North Carolina doesn't give a d@mn about whatever retraining you are taking. I know, because I have dealt with it. You have to report in your job searches every week, and you must accept any offer. If you are faking it, they will figure it out more often than not.
It's Pennsylvania. Have you learned your lesson about making broad claims about what unemployment is like?
(probably the most humiliating thing I have ever done. I made 27 dollars an hour fixing commercial airline passenger jets, and I am reduced to this??!!)
How much of that $27/hour did you bother to save for situations just like this?
Have you any words for jmo, Michelle? Or should I just put this one down to a nasty display of tribalism?
celticdragon writes: "I used to sound like some of you. I sneered at "welfare queens" and mocked people who were unemployed. I figured they were merely lazy, stupid or incompetent.
I stopped laughing when I was the one standing in line for a hand out. I was crying on my bed when I got home."
+1
Of course, some of you here may actually like the prospect of more homeless people, broken marriages, suicides and 1850's London style poverty and desperation. I get that sense from some of the comments here.
Forgive me if I choose not to share in your lack of humanity.
Yes, those of us who object to having our earnings forcibly confiscated by the state under threat of imprisonment are lacking in humanity, and take glee in human suffering. We could not possibly have any philosophical basis for objecting to being robbed, and preferring that charity be voluntary, private, and offered willingly.
Whereas those advocating for even more of this forcible confiscation, because after months of living off these stolen earnings they have not chosen to take any of the available jobs out there because those jobs don't pay enough to maintain them in the lifestyle to which they've become accustomed -- they're the moral ones, the exemplars of righteousness.
/sarcasm
Michelle writes: "How much of that $27/hour did you bother to save for situations just like this?"
Nice bunch of folks we have commenting here today... no wonder libertarianism is such a viable political platform. People really enjoy hearing "Fuck you" coming from callow, clueless brats.
prolefeed writes: "Whereas those advocating for even more of this forcible confiscation, because after months of living off these stolen earnings they have not chosen to take any of the available jobs out there because those jobs don't pay enough to maintain them in the lifestyle to which they've become accustomed -- they're the moral ones, the exemplars of righteousness.
/sarcasm"
Clearly they should be left on the streets to starve to death
/fuck_you
Yes, those of us who object to having our earnings forcibly confiscated by the state under threat of imprisonment are lacking in humanity, and take glee in human suffering.
In fact, some of us don't even object to this in general -- I'm happy to see my tax dollars spent to support the people who were truly given the short end of the stick by society -- terrible schools, relentless and inescapable poverty, lack of parental guidance, etc. I find it hilarious that people like Goolsbee work so hard to emphasize that the programs they're proposing aren't welfare -- ICK! -- because I support welfare. I support a true safety net.
What I don't support is the recent hysteria over the fact that the precious middle class might have to cut back! It galls me to see people who have been given plentiful educational and employment opportunities, but who spent every penny they earned due to massive senses of entitlement, e.g. http://www.insideout.org/documentaries/middleclass/ptIII.asp, line up for handouts. It's infuriating. People who want to declare bankruptcy so they can stay in their $640k house aren't looking for a safety net -- they're the overly entitled "welfare queens".
celticdragon's talk about unemployment here is hilarious. As Fred said, he's obviously never been on it.
You press a bunch of buttons on a phone. That's it. You then get your check for something like 6 months, maybe a few weeks more.
The only two people I've ever know who were on unemployment abused it. It's that easy. I knew one person who worked what was essentially a seasonal job that wasn't classified as seasonal. He'd be laid off at the end of every summer and then would collect his unemployment until around the middle-to-end of his college year.
I'm sure you imagine there is a crack squad of detectives and concerned employers, but jesus christ, welcome to reality. No one cares.
As for my other anecdote, I have a friend who worked phone support for a bank until he got a much, much higher paying job with a start-up through a personal connection. After a year or so, the start-up let him go for unspecified performance reasons (As in, he was doing his job as asked but wasn't going above and beyond as tacitly expected by the start-up). Nevertheless, he received unemployment at such a level that it was better for him to keep hitting 1 on the phone instead of going back to his old job at the bank, which was actually offered to him (he asked immediately after his termination, but before he knew what his level of unemployment would be). He collectd his benefits for as long as he could.
So the notion that unemployment can't be abused or isn't abused is quite simply absurd. It happens all the time.
Michelle Antoinette writes:
"What I don't support is the recent hysteria over the fact that the precious middle class might have to cut back!"
Michelle, there's a big difference between "cut[ting] back" and being unemployable and forced to support one's family on food stamps. You seem to be fortunate enough not to know formerly successful, productive people who are now finding themselves in this situation. The people aren't broken, the market is.
Andrew Orlowski put it best: "we shape society to our will, and not to some magical, all-healing invisible hand. Especially when that invisible hand stays in its invisible trouser pocket, jacking off."
Let's not forget the lucrative tax incentive, the depretiation deduction, that artificially drove SUV and truck sales during the late 90s and early 2000s, in addition to cheap gas.
How many self-employed white collar small business owners who had no need for a full-size Ford Excursion bought one anyway, just so they could deduct the full price of the vehicle as a "business expense"?
I think much is lost when we credit the SUV boom to "America's lust for big trucks" when in reality, for many, it was purely a business decision. And one that probably set back the development of profitable fuel-efficient vehicles many years.
"How much of that $27/hour did you bother to save for situations just like this?"
My savings got wiped out after 9/11 when aviation maintenance took a year long holiday. Arguably, I should have tried to go into radiology or some such at that point, since it was a taste of what was to come in aviation.
Much of that 27 an hour goes into your hotel bill and such, since about half of it is per diem. We got hit pretty hard on medical bills (about 30,000 worth) and had to declare bankruptcy around the time that I was injured.
"Yes, those of us who object to having our earnings forcibly confiscated by the state under threat of imprisonment are lacking in humanity, and take glee in human suffering. We could not possibly have any philosophical basis for objecting to being robbed, and preferring that charity be voluntary, private, and offered willingly."
It is also called "pulling your weight".
We actually live in a thing called a "society". This is not anarcho-capitalism like in a Vernor Vinge novel. We do have some shared responsibility for how we all fare, and some people who are lazy do need a kick in the ass and some motivation. But, if you think that charity is sufficient to take care of long term problems when children, health care and basic survival issues are at stake, you are utterly delusional.
You object to paying taxes for social safety nets?
I resent like hell that I am having to accept them, but there it is. I take the help, or watch my family starve, and my kid get taken by DSS since we can't keep the lights on and food in the cupboard. I used to spout a lot of hot air to the effect that ..."pull yerself by your bootstaps, dammit! If you want something bad enough, you will find a way a do it! Get to work!"
I still believe that to some extent, but it doesn't always work that way in the real world. This is where Thomas Hobbes starts screwing up my (small l) libertarian notions. The real world is nasty, hard and vicious, and doesn't really give a d@mn that you have good intentions or believe in freedom , etc. Unless coerced by Leviathan (ie...the State), altruism will not be sufficient to help in time of need, nor protect you from harm.
"For the Lawes of Nature (as Justice, Equity, Modesty, Mercy, and(in summe) doing to others, as wee would be done to) of themselves without the terrour of some Power, to cause them to be observed, are contrary to our naturall Passions, that carry us to Partiality, Pride, Revenge, and the like. And Covenants, without the Sword, are but Words, and of no strength to secure a man at all."
Thomas Hobbes "Leviathan", Chapter XVII
"celticdragon's talk about unemployment here is hilarious. As Fred said, he's obviously never been on it."
Yep. Pretty f*cking hilarious. Let me rip a couple discs out of your back along with most of your left hip, asshat. How about all the nerves in your lower back and hip to boot?
That's what happened to me, idiot. Keep laughing, sh1thead.
Also, the pronoun is "she".
Celitc,
Were you hurt at work? Is this a failure of the workmans compensation system or the disability insurance system?
One of these companies is not like the others.
While GM has to shrink to 1/2 it's size and Chrysler needs to go BK.
Ford quality is on par with the japanese and euro badges. See any JD Power report. They also haven't asked for a bridge loan as they have a stronger cash position.
By the 2011 model year Ford will have one of the strongest lineups of any manufacturer:
best in class Fusion, already rated best in intial quality and with new engines for 2010.
Euro based Focus which is one of the best cars in Europe.
Euro based Fiesta which is already off to a big start in the UK.
Always strong F series for trucks.
Flex, Edge, Explorer for those who need more space and Lincolns for the luxury market.
If we want to argue by personal experience I bought a 2001 Focus since sold to my niece. 210k with no major repairs other then the standard timing belt replacement at 125k.
Yep. Pretty f*cking hilarious. Let me rip a couple discs out of your back along with most of your left hip, asshat. How about all the nerves in your lower back and hip to boot?
I'm not sure why your disability gives you license to make shit up about unemployment insurance. You even said yourself that you weren't applying for it, and thus you likely don't have any personal experience with it. But yet you took it upon yourself to make a bunch of laughably incorrect claims about it.
If you want to complain about your lack of long-term disability insurance or the difficulties of obtaining SSDI, feel free. But if you are going to go out on a limb and talk authoritatively about something you clearly know little about, don't pull out your non sequitor of a disability as an excuse when someone calls you on it.
Using your unfortunate situation as a cudgel to attack people who factually challenge your false assumptions is only going to make them believe you are malingering. Good luck with getting past your SS judge in your hearing with an attitude like that.
1. SoV, as always, is a brainless tool, endless shouting his dogma and ignoring all facts to the contrary. The embodiment of a troll.
2. celticdragon, sympathy for you situation does not mean that we cannot question you. If you wish to argue the points, don't fall back on your handicap to generate a position of unassailability.
3. Anyone who argues that tax breaks=subsidies is an economic lunatic. Ignore them, they think that poor people have a "right" to rich people's money.
4. Sometimes the best thing you can do for someone is to let me fail. Or, as a great money man once said, "I love you too much to give you something for free. I'm giving you something better: the opportunity to go get it yourself."
The Big 3 bailout is a disaster, just as the AIG bailout was a disaster. With The Messiah planning more bailouts and subsidies and pork barrels for his pet liberal projects and victimized groups(that's subsidies, not tax breaks, you morons), only the lazy and inefficient will reap rewards in the next 4 years.
"You even said yourself that you weren't applying for it, and thus you likely don't have any personal experience with it. But yet you took it upon yourself to make a bunch of laughably incorrect claims about it."
I used it after 9/11, and several other times during routine layoffs that happen in aviation. As I noted, that should have been a clue to start looking for another career. I made no incorrect claims. I wrote according to my experience in Georgia and North Carolina, to be specific. Accusing me of malingering is especially amusing here, as I have terminated my W.C. claim on advice from my attorney. I continue to apply for work regardless of the S.S concerns since some money is better than next to nothing, right? (I am eligible for W.C. since I have sufficient wages over the past year. My take would be 218 per week for 54 weeks according to a letter I got last week. By all means, keep telling me I have not gone through this process...)
"Were you hurt at work? Is this a failure of the workmans compensation system or the disability insurance system?"
Yes. I was injured at work while performing maintenance. I cannot disclose particulars because of a binding agreement, but my employer saw fit to deny my workmans comp while several executives were committing federal felonies wrt stock price manipulation and raiding a cool one million from some sort of employee fund.
Nope. I'm not at all bitter.
Deny medical benefits to your employees while committing fraud, insider trading and embezzlement. It's the American way.
" I cannot disclose particulars because of a binding agreement, but my employer saw fit to deny my workmans comp "
Why did you sign the binding agreement - they must have had to offer you a generous settlement. If not perhapse your legal representation was the part of the system that failed.
How did they get you to sign the binding agreement... they must have offered you a cash settlement...
"Good luck with getting past your SS judge in your hearing with an attitude like that. "
I 'm not sure that there will be problem, since I am actually in State Voc Rehab, have had some work since I was dumped by Hartford and I am in a training program now. My actual attitude is a legit concern, I will admit. It is pretty obvious that I am very, very angry. Rage may be a better word. I deeply resent being injured. I despise pain medication, but I have to take large quantities every day. That in of itself was the source of an anonymous complaint made against me while working at AAR in Indianapolis last winter (doing aviation work WAYYYY outside of my limitations. The complaint came to nothing, but it was obvious that I was having a very hard time doing my job, and the shift leads were giving me breaks they didn't extend to others, which is not fair.)
Rage, depression and bitterness are not healthy. I know that, but they are very real feelings I have. I may begin to feel better about the situation if I really see some improvement where I can do work that is actually meaningful and uses my fairly decent intellect.
When I got laid off I knew it would be hard to make the salary I was making in my old job. But I always thought I would have little trouble finding work even if it meant "settling" for a job that paid less.
That was before the bottom fell out of the economy. The suggestion that I may have to move out of NYC rings true to me. I am middle aged and the IT field seems to be looking for kids straight out of college.
Again not to whine, it is just that I use to have a skeptical view of people that claim to need unemployment insurance for more than six months. No longer.
BTW, just an FYI, if you are receiving unemployment insurance you are paying taxes on the benefits you receive. At least in New York.
Well, I don't think anyone is begrudging some form of safety net to the genuinely disabled.
But that's not germaine to the UAW argument, since any disabled would still fall under Medicaid, Medicare, private disability insurance, etc., just as before.
I don't see the argument that says I have to take money I'm paying for my own disability and long term care insurance premiums so some auto worker who makes more than I've ever made in my life can have some cadillac plan, though.
According to North Carolina's FAQ you can even file the initial application for unemployment online. You can recertify online as well. You don't even have to see anyone face-to-face or even talk to a machine on the phone.
http://www.ncesc.com/individual/faqs/faqMain.asp
In Georgia you have to initially apply at a career center, but you can recertify on the phone or internet.
http://www.dol.state.ga.us/js/faq_js.htm#faq_06_02
Like I said, you press numbers on a phone, once a week. That's it. I'm not sure what world you live in, but in the one I occupy there aren't a lot of potential employers trolling unemployment records looking for employees. You're not going to get any job offers if you aren't seriously trying to look for them.
You keep pretending that everyone here is saying a whole variety of things they aren't, and you continually read suggestion and questions as accusations and attacks.
What I actually said was that invoking your disability in an attempt to win arguments is likely to make people think you're malingering. This is only because you are treating your disability as a tactical asset, and such attitudes tend to characterizing malingerers.
You must realize that your scenario here is increasingly becoming convulated and peculiar. This isn't to say that isn't true, but at the very least you must admit that it's highly unusual. Every time someone asks a question or challenges that peculiarity you respond with newly-revealed twist that further differentiate it from the mundane and make it even more murky and less clear-cut than before.
At the very least the criticism here is this: You shouldn't be using your specific, difficult, and rare case to indict an entire and generic system. For a situation as involved as yours it's not surprising you haven't been served well, and we can't even provide a thorough evaluation of that service because you claim that *you* signed a confidential binding agreement.
What conclusion are we supposed to derive? You persist in condemning the entire gamut of social services for how it has failed you and those in your situation, but you say you can't actually tell us what precisely that situation really is. What do you expect us to say?
"Why did you sign the binding agreement - they must have had to offer you a generous settlement. If not perhapse your legal representation was the part of the system that failed."
I took an agreement that was going to get me some money at the moment. We needed it. Half of the agreement went right into medical bills, of course. I could have waited two or three years to go before a judge, and maybe get nothing at all.
*shrug*
Celtic,
You did have an attorney - right?
Celtic,
Also, how did you have medical bills? If you got hurt at work those bills would have been sent directly to your employer....
Brian writes: "I am middle aged and the IT field seems to be looking for kids straight out of college."
... or H1-B holders. Hopefully the one good thing that will come out of this crisis will be an end to our ridiculous immigration policy that only appeals to plutocrats or moon bat liberals.
Glorious,
In Celtic's defense I can offer you one explanation:
The workmans compensation and disability insurance system is set up to deal with fakers and malingerers. To combat this they put up a whole host of obsticals - appoitments with specialists, paperwork, phone calls, faxes, etc. effectivly, being on disability can be nearly a full time job.
The problem comes when the system has to deal with someone who is actually injured. Often that person is depressed and doesn't put up much of a fight - they take that as a sign of faking and malingering, when in actuality it's a sign of a genuine serious injury.
If Celtic was a faker she would have fought tooth and nail for every last dime. Being actually disabled she became depressed and settled too soon and for too little.
In regard to unemployment, sounds to me like we have some posters who have never experienced it and have no ability to think logically if that entails doubting the dogmas of Libertarianism 101.
Here's why people don't and won't just goldbrick indefinitely on unemployment payments.
First off, having your income reduced by a third is a major, major hit. Most people can't reduce their expenses by an equivalent amount. In the short term one can tap savings or credit cards, but over the long haul that's a one way ticket to foreclosures, repos and bankruptcy.
Secondly, most people really do want to better themselves and will work toward that goal if given the chance. If that were not true the capitalist system would not work at all, in fact we'd all still be hunting and gathering, and taking a long nap as soon a we had hunted or gathered enough for tonight's dinner.
Thirdly, it might be fun to be idle rich (shop, party and travel like Paris Hilton!), but being idle poor is no fun at all. In fact, it's boring as hell. My last year in college I was in a position where I did not need to work for a summer, with careful budgeting (meaning no wild spending sprees or expensive vacations). For two weeks it was great-- but after a month I was absolutely stir crazy and I went out and got a job.
Jon,
As someone who milked my post 9/11 9 months of unemployment for all it was worth, may I say that you wildly underestimate the number of people who would do just as I did.
If everyone were as greedy as you it might work. But a great many people put a higher value on leisure than they do on material things.
"Also, how did you have medical bills? If you got hurt at work those bills would have been sent directly to your employer...."
Yes, I had an attorney. He was leaning towards having me fight, but I was also told we could wait for two years or more to go before a judge. I had problems that needed to be dealt with then and there. Also, the bills were only covered up to a certain date by Workers comp (the date they escorted me to the door, took my badge and said I could no longer get light duty. All the surgeries and most of the treatment fell well after that date.
Another issue is that I am a GLBT person (and a Republican, so go figure...)
I was not at all sure I wanted to gamble before a homophobic/transphobic judge in North Carolina, and we have a few of those.
Re: If everyone were as greedy as you it might work. But a great many people put a higher value on leisure than they do on material things.
I like my leisure time too, and I rather resent being called "greedy". I'm not out to be a millionaire after all, I just want to be mildly comfortable and not live hand-to-mouth. If that's "greed" then you have defined it down to the point where most of us are junior Scrooges.
Also, if you were able to "milk" your unemployment then I assume you had some fairly unusual circumstances that enabled you to do OK on just 300 a week or so. A second source of (significant) income, a spouse making far more than you had, no rent (did you live with your parents?), no healthcare needs, something of that sort. Most people are not so lucky. I've never known anyone who was able to make a go of surviving on unemployment; everyone I've known (myself included) who's lost a job, hustled from day one to find a new job before their finances imploded.
Also, if you were able to "milk" your unemployment then I assume you had some fairly unusual circumstances that enabled you to do OK on just 300 a week or so.
That number depends on the state.
"You must realize that your scenario here is increasingly becoming convulated and peculiar. This isn't to say that isn't true, but at the very least you must admit that it's highly unusual. Every time someone asks a question or challenges that peculiarity you respond with newly-revealed twist that further differentiate it from the mundane and make it even more murky and less clear-cut than before."
How so? I didn't actually set out to tell a four year section of my life. I gave details as questions were asked. The fact that I am a GLBT person is the one truly unusual detail, and it was pretty much irrelevant to 99% of what happened.
I got hurt. My company challenged the injury. I sued. I had two painful and expensive surgeries. I settled for less then I would have liked, but I wanted to be practical. I am disabled, and have trouble working. I and my family are getting public assistance to get by. I no longer sneer at people who get public assistance.
Yes, I have a chip on my shoulder about being hurt. I f*cking hate it, and it is a very sharp subject with me. I deal with it. So can you.
Or not.
It really doesn't matter, does it.
JonF,
I was three years out of college and the $512 a week I was getting was $7 more than I took home while I was working. So, with my car recently paid off all I had to worry about was my $500 a month rent. I went on my BF's insurance.
I took a class, went to the gym every day, went to the beach, hung out by the pool, it was delightful. By the end I was so dark and inshape it was insane. Best couple months of my life.
M. Bouffant writes:
Your ideas intrigue me. I'd like to subscribe to your newsletter.
Here's a subsidy no one talks about. Defense. Back in the 80s when I was at the University of Washington I took several of Donald Hellman's classes on international relations. Hellman was an excellent professor, very entertaining and always made office hours for undergraduates like me. Anyways Hellman was an expert on U.S. Japan relations and he kept pointing out that the United States was subsidizing the Japanese and European economies by picking up much of their defense burden.
Now, this might have made sense in the 1940s and 1950s given that Japan and Europe had been destroyed during World War II, but it hardly made any sense in the 1980s when the Japanese economy was booming and the strongest currency in Europe was the Deutschmark and it made even less sense after the Iron Curtain fell.
So why is the United States still spending so much money to defend other countries? OK, I know that having a massive defense establishment makes a lot of right-wing dicks hard (you know, the guys who get all hard about the military but never actually served) but what is it doing for the United States? China is not going to threaten Japan in the same way the Soviet Union did and Russia is not the threat to Europe that the Soviet Union was. So why do we still need bases in Okinawa? Why is NATO, an organization whose purpose was once summarized as "keeping the Russians out, the Germans down and the Americans in" still necessary?
Why is the United States borrowing money from China to keep troops in Japan and South Korea, ostensibly to keep North Korea, a client state China, in line? Absent the right wing erection issue, which could be more cheaply dealt with by a massive airlift of Viagra to the National Review, American Enterprise Institute and the other wretched hives of right-wing scum and villainy, what is our defense establishment really doing for us and why is it a good idea to give other countries a free ride on defense so they can then concentrate their spending elsewhere and economically kick our asses?
Sure, we get a benefit because all of our defense contractors get lots and lots of money to build lots and lots of shiny toys for the boys and girls in uniform to use. But defense contractors are a lousy investment, the market caps of Lockheed Martin, Boeing and Halliburton are fractions of those of Microsoft, Apple or Amgen to name a few large American companies. So who is the American empire benefiting?
"OK, ... but what is it doing for the United States?"
On dollars and cents considerations, maintaining the relatively stable world we live in now via American defense expenditures permits increased trade, which benefits America enormously--probably in excess of our defense costs. Hard to say, though. At a very rough level, I suppose you could calculate defense expenditures as a percent of GDP and compare them to the international trade we enjoy.
Could other nations pay us to operate that defense system? Yeah, but that is only a small step from tribute, danegeld, etc. I do not want to be a nation that demands protection money from client states. I would rather spend the extra money and have the virtue of generosity to accompany our military might.
In addition, the cheapest war is the one prepared for well enough that war never erupted. Of course, that avoided wartime loss is never suffered, and so never wailed over. Meanwhile the expenditure necessary to avoid the wartime loss is present, and usually bemoaned as extravagant by certain types of people.
"China is not going to threaten Japan in the same way the Soviet Union did and Russia is not the threat to Europe that the Soviet Union was."
Chinese troops fought in Korea just a scant few decades ago. American teenagers died on Chinese bayonets trying to keep Korea from falling under Chinese dominion. But why should Korea worry about China if we left?
Nepalese would opine on Chinese expansionist tendencies with greater expertise than you, if they would not be killed or imprisoned for doing so.
Taiwanese probably consider your views naive regarding the Chinese regime. In fact, my guess is all the locals, who live in that neighborhood, would disagree with you regarding the risk Chinese nationalism presents to their safety. I would trust those at-risk people's assessment over your Starbucks'-sited musings.
You seem to assume a static world post Pax Americana, where current China policies towards other nations would continue, whether or not American continues as guarantor against Chinese expansion and dominion in that region. I doubt such a world would result from American withdrawal in that region.
Similarly, you seem to think Russia, a nation with a tradition of imperial expansion, would simply mind its business without America nearby. But as Georgians, Ukrainians, and any number of nearby nations would attest, Russia has no history of leaving its neighbors alone, and a very long and bloody history of enslaving nearby neighbors.
There is plenty of historical evidence suggesting that the current world would not continue if America retreated from its far-flung posts. There is no guarantee that history would repeat itself, of course, but I am unsure what makes us so much different from our ancestors that outcomes would be different this time.
"Making a car that is reliable is only partly a matter of engineering; it's mostly a matter of extremely tight control over the assembly process. That tight control is necessarily less pleasing to the workers than looser rules. "
Makes sense, French cars suck in long-term reliability for exactly these reasons. A Peugeot over 4-5 years just falls apart. OTOH under 4-5, say, at 1-2 years it's probably the best value for money - the most elegant, friendly, comfy and stylish car I've ever drove.