Crash of US carmakers risks three million jobs

[BankruptPinoy]

http://www.guardian.co.uk/business/2008/nov/16/automotive-us-joblosses

[allavdj]

So what happens when the fed bails them out? This "grim" time line gets pushed down the road a year or so? Unless they start making cars that directly compete with Honda, Toyota, Hyundai, etc, and overhaul the wages and benefits, nothing will change and they will still be teetering on bankruptcy in a year or so.

The "Big 3" must be able to compete with the foreign automakers and right now, it's simply not possible. Most of the profit off each car goes directly to wages and benefits (pensions included). As long as they maintain this business model, it's nothing more than using a bucket to scoop water out of the titanic.

[HRx]

Massive layoffs, bankruptcy etc is what they will need to do.

[BankruptPinoy]

Toyota and GM decided to have a canoe race on the Missouri River.

Both teams practiced long and hard to reach their peak performance before the race.

BUT on the big day, the Japanese won by a mile.

The Americans, very discouraged and depressed, decided to investigate the reason for the crushing defeat. A management team made up of senior management was formed to investigate and recommend appropriate action.

Their conclusion was the Japanese had 8 people rowing and 1 person steering, while the American team had 8 people steering and 1 person rowing. So American management hired a consulting company referred to them by the US Government and paid them a large amount of money for a second opinion.

The consultants advised that too many people were steering the boat, while not enough people were rowing. To prevent another loss to the Japanese, the rowing team's management structure was totally reorganized into 3 steering supervisors, 1 area steering superintendents, 1 publicity manager, 1 HR diversity coordinator, 1 union rep, and a rower.

They also implemented a new performance system that would give the 1 person rowing the boat greater incentive to work harder. It was called the "Rowing Team Quality First Program", with a lunch and a free company pen for the rower. There was discussion of getting new paddles, canoes, and other equipment, extra vacation days for practices and performance-tied bonuses but that decision was held up in committee.

BUT the next year the Japanese won by two miles.

Humiliated, the American management laid off the rower for poor performance, halted development of a new canoe, sold the paddles, and canceled all capital investments for new equipment.

The money from all sales and all forecasted moneys saved from further competition was distributed to the Senior Executives as bonuses and the next year's racing team was out-sourced to India.

The End.

http://www.rense.com/general84/canoe.htm

[laurannm]

LOL Great post, and talk about a perfect analogy

[AngelinaCatHub]

Pinoy, that joke hits right on.

It is my opinion if you feed ford-gm-chrys a fish, they will split it up and eat for a day. Let them learn the lesson of finding their own fish, or starve, we have done nothing but waste our fish. 'Hub

[Dirk Squarejaw]

UPDATE:

GM, Ford, Chrysler Depart From Congress Empty-Handed (Update1)

By John Hughes and Jeff Green

Nov. 20 (Bloomberg) -- U.S. lawmakers deadlocked on a plan to bail out the Big Three automakers, leaving General Motors Corp. facing the prospect it could run out of cash before a new Congress can come to the rescue next year.

Democratic congressional leaders disagreed with Republicans and President George W. Bush's administration over how to provide $25 billion in aid to GM, Ford Motor Co. and Chrysler LLC. Only two days remain in a lame-duck session for lawmakers to resurrect a compromise.

Senate Majority Leader Harry Reid, a Nevada Democrat, suggested yesterday the situation was dire and refused to set aside time today to debate a compromise proposed by Senator Kit Bond, a Missouri Republican. Reid said Bond's plan hasn't been put in writing and the House of Representatives is about to adjourn.

``We have to face reality,'' he said. ``The reality is that we tried a number of different approaches.''

Bond and fellow Republican George Voinovich of Ohio insisted they weren't giving up on their proposal to speed up and broaden access to $25 billion already approved for fuel- efficient vehicle development that was a compromise.

``We've made great progress,'' Bond said. ``We are down to the point now where wording challenges are about the only remaining things to deal with.''

Plunging Shares

GM's German-traded shares fell 7.9 percent to the equivalent of $2.57 as of 11:09 a.m. in Frankfurt. GM has plunged 89 percent this year in New York trading. Ford shares rose 3.2 percent in Germany. The stock has declined 81 percent this year in the U.S.

A Democratic plan to help the automakers with funds from the recently approved $700 billion bank-rescue package stalled in the face of Republican opposition and a Bush veto threat. It may be revived next year after President-elect Barack Obama takes office in January and Democrats install a strengthened majority in both houses.

GM Chief Executive Officer Richard Wagoner said automakers would like action before Obama takes over because a global credit crunch that has slammed sales in the U.S. is spreading to global auto markets.

GM, the biggest U.S. automaker, said Nov. 7 it may run short of the $11 billion minimum cash it needs to pay its bills each month by the end of this year and will fall ``significantly'' short of that level by the middle of next year.

Cash Augmentation
The Detroit automaker burned through $6.9 billion in cash in the third quarter and had $16.2 billion on Sept. 30. Wagoner said yesterday he expects the automaker to slow its cash use to the $3.6 billion a quarter rate of the first half of this year.

``We're continuing to do everything we can to augment our cash position,'' Wagoner said in an interview yesterday after eight hours of testimony split between the U.S. House and Senate over two days.

``We've been stretched to do stuff that we thought was very difficult and painful to do already this year,'' he said. ``People are thinking every day of new ideas.''

Wagoner, Ford CEO Alan Mulally and Chrysler CEO Robert Nardelli left the Capitol after two days of appeals for help were rejected.

The companies are seeking aid as industry-wide sales have plummeted to a 17-year low. GM this month said it lost $4.2 billion in the third quarter and almost $73 billion since the end of 2004.

One Chance for Aid

Senate Republican leader Mitch McConnell of Kentucky urged lawmakers to let automakers shift the previously approved loans intended to promote fuel efficiency for day-to-day operations instead.

``It is the only proposal now being considered that has a chance of actually becoming law,'' he said.

White House spokeswoman Dana Perino endorsed the Bond- Voinovich plan yesterday. ``If the Congress fails to act, the most logical interpretation would be that they don't agree that an additional $25 billion needs to be given to the auto industry,'' she said.

Reid responded that the White House has authority to funnel the financial-rescue money to car companies without congressional action.

``No one should be overly concerned if we are unable to reach agreement,'' Reid said in a statement. ``It will still be up to the White House and the Treasury Department to take the steps that I believe are necessary.''

Environmental Initiatives

``There will be a great deal of resistance in the House'' to redirecting the fuel-efficiency loans without previously approved environmental safeguards, said House Financial Services Chairman Barney Frank, a Massachusetts Democrat.

Wagoner wouldn't rule out shifting the previously approved funds to keep his company afloat. ``It could work,'' he said.

Representatives including Democrats Gary Ackerman of New York and Bradley Sherman of California criticized the auto chiefs for taking private jets to Washington to plead their case.

``Couldn't you all have downgraded to first class?'' Ackerman said. Added Sherman, ``I don't know how I go back to my constituents and say the auto industry has changed.'' The auto chiefs didn't talk about their jet use in response.

Representative Peter Roskam, an Illinois Republican, challenged Wagoner and Mulally to forgo pay for a year, saying he understood Nardelli was agreeable to the idea.

Wagoner said he had ``no position'' on that. Mulally said, ``I think I'm OK where I am.''

Jets and Salaries

The GM CEO got $14.4 million in compensation in 2007, including a salary of $1.56 million. Mulally received $21.7 million for 2007, including $2 million in salary.

Wagoner said he recognizes the government will play a greater role in telling the automakers how to run their business in the future, if aid is approved.

``Certainly at minimum they are going to want to look at your future plans and how are you delivering against those future plans as steward for the taxpayers,'' he said.

``In a certain way, being able to lay out the business issues as we see them, in some sort of setting where confidential data can be shared, I think people would understand our business and maybe that in the end would be helpful.''

The Canadian divisions of all three automakers have asked for loans or loan guarantees from that country's government, the Globe and Mail reported. Chrysler is seeking C$1 billion ($797 million) in aid, the newspaper said, citing people familiar with the discussions.

`Back at the Trough'

U.S. federal aid for the Big Three would remove much of the urgency for tough restructuring decisions, said Representative Michele Bachmann, a Minnesota Republican.

``It's easy to predict that you will be back at the taxpayers' trough in no time at the rate that money is being burned in Detroit,'' she said.

Carmakers are cutting production to cope with declining demand, including a 33 percent reduction in North American output by Ford this quarter. GM said today it's suspending production of cars and trucks in Thailand for a month and cutting 8 percent of the workforce there because of falling demand in Asia.

Wagoner said the trip to Washington taught him that Detroit's plight isn't translating well outside the Midwest.

``What I learned, I think we get out and tell our story pretty well, and then something like this happens and you say `Well geesh' it's like nobody knows what we did,'' Wagoner said in the interview. ``Well, then, it has to start with us. We have to do a better job, a more regular job, of keeping people update, listening to their concerns, trying to respond to them.''

Before calling it quits for the year, the Senate plans to approve a seven-week extension of unemployment insurance benefits that would cost around $6 billion.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aLUZJiyD5ipM&refer=home

[allavdj]

``We've been stretched to do stuff that we thought was very difficult and painful to do already this year,'' he said. ``People are thinking every day of new ideas.''

Well golly gee wiz, what a tragedy, they are having to think...what a concept.

[BKOnce]

Conclusion, why US loses:

1. Ineffective management. (Two many layers of mgt)

2. Inefficiency/costly processes. (Redundant processes, material wasted, slow/missing/slack quality control, etc.)

3. Accounting Fraud. (Cook the book, tax evasions, mis-management, etc.)

4. Inferior quality products.

5. Financial Abuse (Big/unneccesary bonuses, insider stock trading, off-shore accounts handling, bad mortgage investments, etc.)


It's no wonder 7-wonder!

[Dirk Squarejaw]

I grew up in a GM family with both parents working for Delco-Remy. I appreciate the fact that they had good paying jobs and were able to give me the upbringing and opportunities that I had. However......

My dad has even said himself that they were grossly overpaid for what they did. Both worked on the assembly line most of their years with my dad spending some time in a lab or office setting, but was still hourly. Most years they pulled in $35k-50k each depending on overtime. I know that at least one year, my dad pulled in $105k when he was working at a new plant that went in and was working 12 and 18-hr days most of the year. On top of the pay, the benefits were always great too.

In the area, we had many other manufacturers inlcuding RCA among others that paid nowhere near what GM did. As a "professional", I have just started making $50k/year and that is with a part-time 2nd job.

So you have thousands of overpaid hourly workers plus all the management that is paid rediculous amounts and the "HAY GUYZ!! LETS BUILD LOTS OF TRUCKS & SUV'S! THEY ARE AWESUM!!!!111one"-mentallity and it was a formula for disaster from the get-go. It just took many years of inferior products with poor fuel economy and a marketing strategy that was years behind the curve with no outlook for consumer reactions to fuel price spikes.

The other day I was on my favorite motorcycle forum and they were discussing the fact that Honda's '09 motorcycle lineup was boring and that they weren't "following trends". One member made a great point. Honda in both its automobiles and bikes have always been fairly conservative. Sometimes Honda is a trendsetter with products like its original CB750 or the original Civic, but rarely do they ever jump onto the bandwagon after it has started and if they do, they do it the Honda way. Trucks....well, they have the Ridgeline and its not a "workhorse" by any stretch of the imagination and the mileage isn't too horrible. SUV's? Yeah, but the CR-V is more economical than many of GM/Ford/Chryslers cars and the Pilot still isn't anything like some lumbering, gas-slurping Suburban. This conservative approach has left them in a good position and unlike the Big 3, Honda is getting ready to open a brand new plant.

I really don't want the Big 3 to die off, but they need some major restructuring and GM needs to slim its offerings down and get rid of so many similar products. Do they really need GMC? Yeah, they may be trimmed a little better inside than the Chevys, but are they really necessary? 3 or 4 versions of the same minivan with different nameplates (badge engineering)?

[Mi Bankruptcy]

Hmm.. I put myself through college worked my way up in business. I make 45K ($21.63/hr). My dad was a Janitor at one of the GM plants and worked on the line since he was 18. When he retired 7 or 8 years ago. He was making $27.00/hr (56K). My father is very intelligent and probably would went far in business. This doesn't include all the real estate he invested in and sold prior to retirement. My dad begged GM to let him retire early and offered to pay them to do it. They refused

The fact.. GM employees are way overpaid and the union hurts them adjusting internally. However, what is not being mentioned is that GM has slowly been moving their workforce to temp hires they can pay $15.00. They also negotiated to have the UNION manage the health care benefits.. I will guarantee the union will start making GM employees pay more when the realize the cost. Great benefits free legal attorneys etc...

Just think when my dad offered to get me into G.M I turned down the application and gave it to my friend who had just got married and had a young kid.. They got the job with no education or experience making $27.00 Happy for my friend.. but mm I glad I took the hard road.

[itneverends]

Honda, was pushed toward the medium duty truck market, but they declined and stayed with what they knew. And Honda has been building the very impressive Fit at 34mpg for a couple years now and was ready as soon as gas shot up..."

Launched in early 2008: Ford Focus 24 City/35 Hwy starting at $16.1K

and they have a Fit hybrid in the roll out soon. As a mere $17K and 34mpg for a Honda its a great deal. If the Big 3 get a clue, this is what you should be seeing soon..."

Coming spring 2009: the new Ford Fusion lineup expands to include an all-new hybrid model that offers class-leading fuel economy

Its not like they have to design a whole new car, they just have to get it pass the US standards and start building them here."

http://www.fordvehicles.com/2011fiesta/

[itneverends]

So what happens when the fed bails them out? This "grim" time line gets pushed down the road a year or so? Unless they start making cars that directly compete with Honda, Toyota, Hyundai, etc, and overhaul the wages and benefits, nothing will change and they will still be teetering on bankruptcy in a year or so.

The "Big 3" must be able to compete with the foreign automakers and right now, it's simply not possible. Most of the profit off each car goes directly to wages and benefits (pensions included). As long as they maintain this business model, it's nothing more than using a bucket to scoop water out of the titanic.

So where was all the outrage over government "bailouts" when then southern states gave the foreign manufacturers $10's of million of dollars to come set up their plants in the south? They gave them free land, free infrastructure, free training, and MASSIVE tax breaks. Can you name another industry where our own tax dollars were used to lure foreign competition to compete against our own manufacturers?

It is not the entire reason, but at least SOME of the reason the foreign manufacturers have an advantage at this point is the help that they got from the various state governments to come here and compete against the legacy manufacturers. Why didn't everyone have the same attitude about Toyota, Honda, or MB when the government was handing out the incentives to them?

Senator Shelby from Alabama is the worst, after all they money they spent in that state subsidizing the foreign makers to set up there and compete against our own companies, he now says let the US makers fail if they can to do it with out help?

[Mi Bankruptcy]

Email I received from Michigan's Dem..Senator Levin.

mmediate support is needed to shore up our automotive manufacturing
sector and to preserve the more than 2.5 million jobs directly and
indirectly linked to the U.S. auto industry. This morning, I testified in
front of the House Financial Services Committee to emphasize the need for
Congress to take swift action on behalf of our nation’s automakers.
Standing idly by as the financial crisis decimates our domestic
manufacturing capabilities and pulls our fragile economy further into
recession is unacceptable.

Throughout the world, the dire financial crisis continues to spur
governments to provide assistance to their manufacturing industries, which
are not able to obtain the credit they so vitally need to continue
operations. Both Germany and the European Union are studying the
possibility of providing support for their automotive industries.
Australia has provided more than $4 billion in funding for its vehicle
manufacturers. Automotive manufacturers in China are already voicing their
expectation of financial assistance from their government as well. “The
Chinese government will undoubtedly support us,” says She Cairong, general
manager of JAC Motors, a Chinese automobile manufacturer. This quote
appeared in a New York Times article this morning, highlighting China’s
consideration of a plan to provide assistance to its domestic automobile
companies.

The spotlight is now focused on Congress, which is considering the
possibility of rescuing the industry from an economic downturn not of its
own making. President-elect Obama has called the U.S. auto industry “the
backbone of American manufacturing” and said that the failure of our
domestic automakers would be “a disaster” for our economy. President Bush,
Speaker Pelosi, and both the Majority and Minority Leaders of the Senate
agree that bridge loans for our domestic automakers are necessary at this
time. I will continue to work with my colleagues in the Senate and the
Congressional Leadership to come up with a plan that would provide auto
manufacturers with the bridge loans they need to weather this financial
storm.

You can read the transcript of my testimony before the House
Financial Services Committee by clicking on the following link: [
http://levin.senate.gov/newsroom/release.cfm?id=305099]. During these
difficult times, I am doing everything within my power to convince the
Congress to provide the bridge loans for the domestic auto industry that
the President, the President-elect and the leaders from both houses of
Congress support.
Sincerely,
Carl Levin

If you would prefer not to receive future email updates from me, you can
unsubscribe by clicking here:

http://levin.senate.gov/contact/unsubscribe.htm

[Mi Bankruptcy]

http://levin.senate.gov/newsroom/release.cfm?id=305099]. During these
difficult times, I am doing everything within my power to convince the
Congress to provide the bridge loans for the domestic auto industry that
the President, the President-elect and the leaders from both houses of
Congress support.
Sincerely,
Carl Levin

If you would prefer not to receive future email updates from me, you can
unsubscribe by clicking here:

http://levin.senate.gov/contact/unsubscribe.htm