December 12, 2008

The auto failout.

Who's to blame? Corker and Gettelfinger finger each other.


Henry said...

Who's to blame?

My question: Who gets the credit?

Bob said...

Well both in the sense that either could have folded. But its the UAW that is betting that the next Congress will approve the bailout prior to GM or Chrysler running out of money.

John Stodder said...

Bush and Paulson are about to bail out the bailout and I'm about to have an episode of late-onset BDS. Now I know how the anti-war people must have felt in 2003. You can't do that! It's unprecedented! It's illegal! It's insane! You should be impeached!

The UAW obviously knew Bush would do something like this, so of course they had no incentive to make any kind of deal at all with Corker. What a colossal mistake!

Once written, twice... said...

The spreading economic fall out will rest solely with congressional Republicans. Even the Bush Administration made it clear that it would be a mistake to not take action. Americans will look at the situation and say "even with their conservative Republican president pushing for saving domestic auto companies these nimrod Republicans in congress could not do the right thing!"

Now I realize that the wingnuts now claim that Bush is really a lefty. Good luck with that.

David said...

UAW was playing chicken with Bush, and Bush was the chicken. Now UAW will get the bailout approved by a more friendly Congress, and it will have less teeth. This is not necessarily good for the UAW members in the long run, but much of what they have done has not been good for their members in the long run.

My favorite weasels in this are the 13 Senators who did not vote last night. Ok, Ted Kennedy is really sick but where were the rest of them?

AllenS said...

I guess the question is this: in what year of his presidency will Obama have to bail them out again?

The Drill SGT said...

AllenS said...
I guess the question is this: in what year of his presidency will Obama have to bail them out again?

January 2011.

Just after mid-term elections, though all the signs will be there by Jun 2010.

Lem said...

Who's to blame?

Prochoice people choosing to buy foreing cars?

Auto workers with cradle to the grave benefits?

there's blame a plenty to go around.

Jacob said...

"Corker and Gettelfinger finger each other"
Uh, ewww

The Drill SGT said...

But we also recognized that this would take time to work out and implement” using programs like buyouts and early retirement offers to bring in new workers at lower rates.

The UAW still doesn't get it. These firms will go bankrupt. sooner or later and all those contracts will be void. read the quoted section. All the UAW has agred to is to continue to accept their uncompetitive salaries till they get buyouts (e.g. more benefits). And of course, they have accepted that new workers will earn less.

They are literally killing their own golden goose and expecting that Uncle Sam will pay and pay and pay.

Crimso said...

Well, between the two, we damned well know who was more responsible for getting us to the point of needing a bailout.

Wince said...

Is it a mistake for Bush to take a small, relatively speaking, portion of money otherwise spent on the financial "rescue package" and direct it to the auto industry?

Except to the extent in locks in a future course of action, which I think it doesn't, it moves the issue on to the next administration and congress where ultimate success or failure is likely reside anyway.

Between now and then, all of the participants get to show the tax payers more about their plans and intentions while things stablize.

Bush and the Republicans, meanwhile, avoid backdated blame for total "inaction," which they might face even if it's the long-term government "rescue" that fails later on.

ricpic said...

Hooray for Senator Sheldon and the other Republican senators who wouldn't go along with the UAW bailout. Shame on Bush for his part in turning us into a socialist sinkhole.

Robert Cook said...

"Crimso said...
Well...we damned well know who was more responsible for getting us to the point of needing a bailout.

12:35 PM"

Yep, we do: GM, Ford, and Chrylser management.

That is who you meant, right?

Richard Dolan said...

The difference between how the economics and the politics will play out is interesting. There is no good economic reason to bail out the Big 3. In their different ways, all agree that each is a failed firm. The argument that the taxpayer has to rescue them to 'save jobs' is also odd. After all, the demand for cars isn't going to disappear. Instead, it's just the failed firms (along with their union) that made some of those cars that will go if they can't be successfully restructured, to be replaced by other firms (new entrants or expansion by current competitors with, perhaps, no union) who will employ workers to make them.

The short-term dislocations will be horrific, but one way or another, failure on such a colossal scale will extract its inevitable, unavoidable price. There's no fairy god mother who can just make it all better by waiving her magic wand, not even Nancy and her stalwarts in the House. And the idea that the solution to what ails the Big 3 -- what turned them into failed firms in the first place -- is a 'car czar' answerable to politicians, who in turn insist that the companies turn out PC/green cars with limited market appeal, is just not serious.

How the politics will play out is anyone's guess. Generic polls show that large majorities are against the bail out. But politicians have gotten quite good at peddling the notion of a free lunch. It's never really free, of course. But with huge piles of taxpayer dollars being shoveled all over the place and no tax increases to pay for any of it being proposed, the politicians are doing their best to make it seem that way. And the worst is yet to come -- the federal bail outs for the insolvent state and local pension plans. Politicians who are willing to bail out Cerberus to pacify the UAW, aren't likely to say no to state and local gov'ts when the come crying about being unable to pay retired teachers, police, etc. And even if they were, there will be even more powerful unions to get them to think twice.

Perhaps even Obama is starting to regret what he's gotten himself into, and not just because he's getting his first taste of DC's scandalmania.

Happy Holidays.

rcocean said...

Support for the Wall Street Bailout combined with killing the Big 3 bailout will destroy the Republican party among union members and the working class.

McCain lost all of the industrial Midwest - including Indiana - and the R's trying to make sure they lose these states again in 2012.

BTW, it'd be nice to know how much of GM's operating costs and expenses (approximately $180 billion) are due to UAW production workers.

Henry said...

Every thread on the auto bailout turns into an argument about who's to blame.

I don't get it. What difference does it make? Who cares?

Because you know who isn't to blame? American taxpayers.

So the bailout that failed had strings attached. The workers were supposed to make concessions. Management was supposed to accept oversight. The businesses were supposed to focus on new technologies.

You know what would happen if GM and Chrysler went bankrupt? The workers would be forced to make concessions. Management would be forced to accept oversight. The businesses would be forced to shed unprofitable product lines and focus on new technologies.

There is no reason whatsoever for the government to be involved.

Crimso said...

"That is who you meant, right?"

Obviously, since what I wrote was "between the two." Let me spell it out for you: the two in question are Corker and Gettlefinger.

It's a giant shit sandwich, and they all have to take a bite. "They,", not "we." I have no problem whatsoever with seeing the management of the Big 3 out of jobs. Nobody else does either. But if it means a union worker loses their job, then it's a tragedy! Hell, we've seen the lengths resorted to to prevent union workers from (gasp!) losing their jobs. When I lose mine (which just might happen, even though I'm tenured, which some might argue as being akin to the sort of protections unions offer), will you be as outraged? Will my university even be considered for a bailout?

DaLawGiver said...

A few years ago here in San Antonio the local government gave Toyota about a 150 million dollar tax break if they would build us a Tundra truck factory. Texas is a right to work state, union membership isn't mandated. It created lots of higher paying jobs, nobody complains about their Toyota benefits or retirement plans and consequently we have hardly been touched by the current economic crisis. Our housing market is one of the best in the country and it rarely snows here.

Stop the bailout madness. Enough is enough.

MadisonMan said...

Jacob, exactly.

Like that's a visual that I needed, Professor!

jayne_cobb said...

2 things:

1) Did anyone else read his name as gentlefinger at first? (Which sounds like either a porn star or a Bond villain now that I think of it)

2) The Dems control both houses of Congress, the media is on their side, and Bush (who's as lame a duck as they come) supports them on this.

For the those who favor the Dems, can you stop trying to put all your failures on the Reps. Your party couldn't get the legislation passed, even though they picked up a number of Reps.

For those who favor the Reps., it looks like the next two years may not be as bad as you think if this is the kind of leadership the Dems. have. (granted that assumes the Reps. end up with competent leadership, which is nowhere near a sure thing)

Darcy said...

Absolutely right, Henry!

I'm Full of Soup said...


Your point (who is to blame?) was the theme of a South Park episode last night. The most common answer given was Bush. Heh.

Then they finally realized it was more important to fix the disaster than to assign blame.

The Drill SGT said...

Henry and Richard have it about right.

after these 3 failed firms fail, will:

1. will the same number of cars, more or less be bought in the US as before? Long term? Yes!

2. Will the same number of cars more or less be built in the US? Yes, if the same cost and political factors that made foreign firms move here in the first place continue

3. So Toyota and Honda, and VW will incrase production across the border states and perhaps Michigan. Likely they can get a good deal on Michigan plants

4. Will that 100 per4cent increase in Toyota production require more US parts? yep. So if those GM parts makers can meet the toyota quality standards, they will have work. If not, the toyota parts makers will increase market share.

5. what will happen? The UAW will close down. I cant imagine that after destroying the US auto industry, that would encourage the non-union plants to take on UAW representation.

6. Gross Point will have a lot of empy houses, because the bankruptcies will hit white collar auto workers harder than blue collar ones ultimately. blue collar workers can get work in toyota plants. ex-GM accountants, not as much.

garage mahal said...

Keep blaming the workers that had nothing to do with the design or marketing Drill Sgt. That's going to be a big winner for ya. It can't be the hundreds of thousands of lost jobs the past few months coupled with banks collapsing and no credit to be had had an effect on US car sales.

veni vidi vici said...

What's with Michigan, anyway? During my childhood and as late as about 4 years ago when I last visited, I noticed that (a) the roads and highways (at least in Detroit metro) still suck worse than just about anywhere, (b) the Detroit "international" airport looks like a circa 1950 government building that was abandoned and left to rot around 1965, and (c) because Detroit, if not the entire state, appears to be in some sort of receivership, it has apparently been chronically unable to offer the kind of incentives necessary to keep the auto industry in-state. Or is that last part due to the UAW's stranglehold on state government not allowing the state to incentivize non-union auto plants to situate there?

I don't know. There's a state that needs restructuring if there's gonna be an auto industry restructuring, though; otherwise what appear to be onerous state regulations may tip the bias in favor of liquidation.

And if you think it isn't already a steaming turdhole, check out, one of the best sites on the web. Maybe it's no longer steaming, but Detroit remains pretty much the turdhole of the apocalypse.

"I'll buy that for a dollar!" (raucous laughter)

Ralph L said...

The businesses would be forced to shed unprofitable product lines and focus on new technologies
Which are unprofitable. Because of CAFE (and the oil bubble), GM is spending massive money to develop green cars on which they will lose money, so they can sell profitable, old technology trucks and SUVs. There's plenty of blame to spread.

Henry said...

Ralph, don't assume the "new technologies" means some GM hybrid engine.

New technologies may mean innovative manufacturing automation or supply chain management.

The difference between a government rescue plan and bankruptcy is that with bankruptcy, the "new technology" part of the deal isn't rigged to fail.

kjbe said...

Exactly, garage. Remember, the auto bailout (I thought it was a bridge loan) all exists in a vacuum, without the caveat that we're in the midst of a credit crisis and that the UAW already agreed to concessions which will factor in next year.

Toyota backed the plan because their supply web is tied up with the Big 3's. Also, GM's announced that it's Spring Hill plant will be shutting down until February.

TARP money or Chapter 11 or I don't know what, but political gaming is stupid. Corker should have brought something to the table. Others did.

Sprezzatura said...
This comment has been removed by the author.
Sprezzatura said...

Even Corker himself doesn't think his "give a date" requirement is that important.

Near the end of his long press conference (right before his staff gave him the hook) Corker said that it would be acceptable to him if the Bush administration, on it's own, used TARP to put together a package just like the failed one, except w/o the "date."

In that last comment he also tried to give perspective to the proportionality of costs associated with workers. He noted that that the workers salaries are a relatively small (about 10%) of the auto manufacturers' costs.

Wonder why he got the hook?

The first leaks about the administration using the TARP if the vote failed came from R Senate offices. The White House was giving them this heads-up yesterday, before the vote.

This act would completely take the pressure off of these R senators.

And, this means that it would be possible for Rs to push for poison pill, one sided, political conditions. Then they could vote no, but they would not need to suffer the implications of nothing happening.

They would be the strong saviors of conservatives, such as those who read Althouse.

But, those conservatives are too smart to buy this hook, line, and sinker. Aren't they? Any of them?


John Stodder said...

Support for the Wall Street Bailout combined with killing the Big 3 bailout will destroy the Republican party among union members and the working class.

You really think other union members are bleeding for the UAW guys?

Busting the air traffic controllers didn't hurt Reagan among the Reagan Democrats, many of whom were union members.

You're also ignoring the polls. Nobody likes the auto bailout. Not union members. Not Democrats. Not Midwesterners.

Folks used the polls to argue for withdrawing from Iraq. Why do you get to discount them now?

Like Henry suggested, this bailout delays but does not avert what's coming, especially because the bailout essentially preserves the dysfunctional status quo with respect to the issues that have put the companies in this situation.

And as to how many times Obama will have to go back for more bailout money for the big 3? I think quarterly until the pain finally makes him stop.

It's not about blame or partisanship. To think these firms can be saved without the UAW taking a major hit is magical thinking. To think these firms can be saved without essentially overthrowing the mindless CAFE policy is magical thinking.

I'm all for a cleaner environment and high mileage cars. There is one way to do that: Set a floor for gasoline prices. That'll get you CAFE industry-wide. The only reason that isn't what we do now is politicians don't want to be associated with raising fuel prices. They love CAFE because the increased costs to consumers are hidden in the price of the vehicles, which they can then blame Detroit for. CAFE has been the political equivalent of a free lunch for politicians who want to appease everyone on all sides of the environmental issue. Now the bill has come in and of course the politicians are running for cover.

DBrooks17 said...

gargemahal--"It can't be the hundreds of thousands of lost jobs the past few months coupled with banks collapsing and no credit to be had had an effect on US car sales."

Tell us how this is the economy's fault--
In 2007, Toyota sold 9.37 million vehicles.
In 2007, General Motors sold 9.37 million vehicles.
In 2007, Toyota made $17.1 billion.
In 2007, General Motors lost $38.7 billion.

Bob W. said...

DR Brooks, Where did you get your sales stats, I haven't seen those before.

Bush is looking to make Congressional reluctance on the bailout academic, as he is likely to use the 700 billion slush fund shortly. . .

Speaking of the Bailout, Barney Frank gave an interview where he called the Auto Bailout exactly what it is: welfare.

You cannot fault his honesty. . .

John Stodder said...

This guy, perhaps wishfully, thinks Bush and Paulson aren't necessarily going to use the TARP funds to bail out GM and Chrysler:

Gettelfinger's position on this matter is truly absurd. Wage cuts only applied to new hires, and only implemented in the next contract? It's up to the taxpayers to keep them afloat til then?

I realize I'm going to be seen as a rightwinger on this issue, but I want to ask the left side a serious question. Accepting that you are correct, both sides agreed to these labor contracts and therefore blaming the UAW is at least half unfair, how did those contracts become the taxpayers' problem?

If I make a contract with somebody and then can't pay them, we'll have to work it out, perhaps via me going bankrupt. The one thing that wouldn't have occurred to me til now is that I could go and ask you to make good on my busted contract. And if you refused, I could accuse you of trying to get revenge on the guy I owed money to.

The guy I owed money to might be a victim, but it might have been a good idea for him to check my creditworthiness. Unions don't do that. In negotiations, it's assumed you should get what you can while you can, regardless of whether the company can stay in business on those terms. Fine, but then accept the downside risk of such a position. Don't come to me as if I was a party to this negotiation and demand to be paid by me.

That position does not make me illiberal, I don't think. It is simply unfair to demand payment from taxpayers if your company can't pay you.

If anyone can explain why taxpayers should pay GM's bills, I'm ready to listen.

Darcy said...

That's a great perspective, John Stodder. Thanks!

I also believe that there are victims here on the labor side.* But this is exactly the right way to view it. It is not the taxpayer's fault - why make them victim's too.

*I remember when I worked as a non-union employee for a union company who employed Teamsters. The union urged the members to strike in order to force the wages/benefits the companies (there were several in a group contract) refused to pay. I knew these workers very well and was friends with them.

Anyway, the union didn't tell their members that there was no strike fund left due to the truckers strike that had just concluded until they struck! They were on strike for 3 months and got nothing more than originally offered. And 3 months without pay had horrible consequences for many of them.

The UAW organization and its members are two different things.

The Drill SGT said...

garage mahal said...
Keep blaming the workers that had nothing to do with the design or marketing Drill Sgt.

Dad was a union guy for 40 years. I was a Teamster once.

I blame management and the union. They have jointly run an American Flagship industry into the ground. Our politicans with CAFE have helped. Over the last 10 years, I understand GM has lost 200-300 billion? They lost nearly 40 billion last year and that was a good year. this year? got to be more. so the 10 billion they want is a 90 day bailout at most.

actual bankrupty or a quasi-bankruptcy that voids those contracts, fires senior mgt, sheds those pensions is the only thing that will have a chance of changing that environment.

garage mahal said...

If anyone can explain why taxpayers should pay GM's bills, I'm ready to listen.

They are asking for a loan, to be paid back. Again, I ask, why should we pay AIG and Citi 10 times more than the Big 3 want and not get paid back? Why aren't we asking them to restructure their entire workforce's compensation? Why aren't they on capitol hill?

Bender R said...

Can one of you lawyers answer a question or two?

Is there a provision in Chapter 11 for a creditor to force GM and Chrysler into involuntary bankruptcy? Or maybe a shareholder? Can't we find somebody to do what needs to be done but management refuses to do?

John Stodder said...

Nobel prizewinning economist Joseph Stiglitz, not a man of the laissez-faire persuasion, has a very convincing argument against the bailout that should discomfort some of his ideological soulmates.

Who is really being bailed out by the government, he asks, if bankruptcy is avoided. Shareholders and bondholders!

Read the whole thing.

The Drill SGT said...

garage mahal said...
They are asking for a loan, to be paid back.

Exactly. However, it is clear to everybody that they can't possibly ever pay it back. If there was a good chance of paying it back, they could get a loan. The fact is they have already borrowed hundreds of billions, and shrunk their capitialization to nearly zero. all those billions are gone, with nothing much changed. why will 10 or 40 or a hundred more suddenly change things is a bad economy when the first 300 billion didnt reinvent them in a good economy?

spending more money on the same crowd and expectly a different outcome is lunacy

Unknown said...

Why aren't we asking them to restructure their entire workforce's compensation?

Because we have good reason to believe that, even without such a restructuring, they'll be long-term profitable when the economy recovers. In contrast, GM hasn't made a profit in years.

Titusisverytired said...

Who's Senator Sheldon Ricpic?

I don't like unions. They seem so tired. I could never work anywhere that has a union. I work in HR and would never want to deal with union demands.

I do feel bad for the employees though but it does look like Bush is going to bail them out-for now.

I don't like American cars either. I just don't like how they look. I have never purchased an American car and my parents would never not purchase an American car. American cars are so domestic.

Titusisverytired said...

I prefer working in an creative, exciting, cutting edge technology company that is impacting peoples lives.

Even though I work in HR knowing that I work in a Biotech company is exciting.

My company has life saving biotech products for rare unmet medical diseases. Some of the patient populations we serve are only 1000 worldwide. That's pretty cool. Also, Biotech pays well and the employees are fabulous which is incredibly important.

Joe said...
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garage mahal said...

Drill Sgt
Chrysler repaid their loan 7 years early and paid interest to the taxpayers, there is precedent.

Because we have good reason to believe that, even without such a restructuring, they'll be long-term profitable when the economy recovers

Uh huh.

Unknown said...

Clarification: they've made a profit here or there in a given quarter. Here are their annual numbers:

2007: -$38.7B
2006: -$2.0B
2005: -$10.4B
2004: +$2.7B
2003: +$3.5B
2002: +$1.7B
2001: +$601M

Doesn't it seem reasonable to expect them to demonstrate how they're going to return to 2003 numbers? It's not like 2005-2007 were bad for everyone. Toyota, for instance, made $17B in FY08, 14B in FY07, 12B in FY06...

Uh huh.

How many of those financials were losing money hand over fist in 2007, 2006, and 2005?

Titusisverytired said...

I work in the "creative class". We are the movers and shakers of this country.

And I can definitely move it and shake it.

Shake a bowww bowww.

Unknown said...

2007 Pre-tax income:

Goldman Sachs: $45.6B
Morgan Stanley: $23.1B
Merrill Lynch: -$6.1B
Lehman Brothers: $19.3B
Bear Stearns: $2.2B

Sprezzatura said...


Speaking of Joe; this is really long, and Stiglitz is joined by others, but it's informative, and it can be played in the background so the time isn't totally lost.

Joe said...

One thing lost in all the arguments is that the biggest problem with the UAW isn't wages, but work restrictions and the lack of flexibility companies have to move workers around. The UAW not only dictates which exact jobs a worker will do, but HOW workers will do them. Often these restrictions get so silly it's stunning--like workers who are allowed to unload trucks, but not load them.

JohnAnnArbor said...

All our Democratic friends in favor of a bailout:

Go to an American car dealership, and buy a car.

Don't want to give up your beloved Civic/Corolla/VW/whatever?

Then you're part of the problem.

JohnAnnArbor said...

Joe's right. I posted this in an earlier car thread:
A guy I knew worked in a UAW plant as a lark one summer while in college. There was a suggestion box. He quickly saw that a particular process that took ten workers could be done, with minor modifications, in less time by four. He dropped that idea into the suggestion box.

The next day, he was grabbed by the collar by the union steward, who then tore the note up in front of his face. "We don't do that here."

Then, of course, there are the work rules. Machine breaks. Needs to be shut off to be fixed. Only a union electrician can do the complex procedure needed to shut it off (that is, flip a single switch). Wait for electrician to bother to show up. For hours, if need be, while no work happens. If an assembly person flips the switch? GRIEVANCE! If a manager flips the switch? GRIEVANCE!

The union, of course, has a simple solution for that problem: hire a union electrical guy for each machine and have them sit around all day, flipping the switch if need be.

You think I'm kidding. I wish I were.

Japanese-owned plants generally have a single job description. They can move their workers around as needed for maximum efficiency. No union "hey, he's doing my work" crap.

Unknown said...

AIG net income

2007: $6.2B
2006: $14.0B
2005: $10.4B
2004: $9.8B

I don't know, it just seems to me these guys have a better track record of avoiding running up their credit card bills.

Unknown said...

I worked for GM back in the 80's; at AC Spark Plug to be exact, back when they were doing some of the bidding for the Saturn project. People have been grousing about these union rules for decades! It was going to bite them on the ass eventually.

Sprezzatura said...

We can all read Kaus for ourselves.

At least y'all could link.

AllenS said...

I own four tractors. Two John Deeres and two International Harvesters. IH went out of business. So did a lot of other implement manufacturers and dealers. So it goes.

John Stodder said...

They are asking for a loan, to be paid back.

You really think they'll be able to do that? You really have confidence that they'll stay solvent without making the major structural changes the UAW and management are resisting? And, can I borrow some money from you for the big poker tournament. I swear, I'm great at poker!

Again, I ask, why should we pay AIG and Citi 10 times more than the Big 3 want and not get paid back?

Two answers: First, we shouldn't have done that. But the argument for it was at least somewhat compelling. The Great Depression was partly the result of a drastic loss of liquidity in the credit markets, to a point where barter was making a comeback. By "helping" these stupid Wall Street pricks, the argument was we were really helping all of America still have the ability to get credit.

Why aren't we asking them to restructure their entire workforce's compensation?

Because their labor costs aren't a significant factor in why they were approaching insolvency. Most of their money was tied up on equities, and they were deeply overleveraged. And IIRC correctly, massive layoffs have ensued, at least at Citi.

Plus, you can't possibly argue that AIG and Citi spent 30 years digging themselves into a hole. The current generation of management on Wall Street was obnoxiously arrogant and deeply misguided, but they are guilty more of following a herd mentality regarding the sustainability of derivatives, vs. Detroit, which was being told they were pursuing an unsustainable competitive model since the mid-1970s -- as proven by the fact that much of the auto industry is healthy, globally. Both have to be changed. It's not either/or or who deserves more blame. They are different cases.

Garage, you've got some wonderful populist talking points, but they aren't even close to a logical argument for the Detroit bailout.

I'm Full of Soup said...

Let's be fair and crunch the numbers a bit.

Assume they will sell 9.7 million cars a year over the next ten years.

Assume further the total "loan" from the taxpayers ends up being $50 Billion.

The cost to payback the loan over ten years is $515 per car. That does not seem like a ginormous burden IMO. However I did not include interest. Are we taxpayers charging them interest? Heh.

John Stodder said...

The cost to payback the loan over ten years is $515 per car. That does not seem like a ginormous burden IMO.

Your thinking depends on your view that GM and Chrysler are credit-worthy. If I borrow $100,000 from you to play in poker tournaments, I can pay you back in five years by merely deducting $20,000 a year from my expected winnings. Except how do you know I'm going to win? How do you know I'm not just going to go bust and refer you to a bankrupty notice when you look for your first payment.

The other problem with the bailout scenario is that without restructuring, consumers are already paying a premium on each car to cover legacy costs, uncompetitive wages and myriad inefficiencies, all of which have a constituency that doesn't want to give it up, such as guaranteeing that some unprofitable plants will not close without a big buyout of all the workers.

Many of these uncompetitive costs would be wrung out in a bankruptcy, but in a bailout, such cost-cutting would be cosmetic at best -- as Gettelfinger illustrated by his "hell, no" to changes in compensation for existing workers, but his allegedly significant concession to lowering wages and benefits for people who haven't been hired yet. So, it's $515 on each car, using your math, on top of several thousand dollars in other Detroit-only premiums, just furthering the cost/value gap between GM and Chrysler and every other manufacturer.

DBrooks17 said...
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paul a'barge said...

Althouse, all of a sudden comments are overflowing with an over abundance of folks describing the auto bailout as some sort of struggle between Bush and the UAW.

Where did all these nimrods come from?

I mean, these people are so off the mark, you have to wonder if they're not all UAW plants.

Joe said...

UAW plants require a Greenskeeper.

vnjagvet said...

If you want to see what happens without a bailout, look to the airline industry.

Most of the air carriers in business in 1970 have disappeared or gone through Chapter 11 to shed both the extraordinarily generous pension obligations to their organized employees as well as the outdated work rules that the Unions imposed. Once that was done, mergers took place to eliminate costly duplication of executive and administrative offices and maintenance facilities. The market forced efficiency.

It is true that flying is not as good an experience for the passenger as it was in 1970. But because of competition, it is a hell of a lot cheaper and just as safe.

Unknown said...

The Corker plan had bondholders eating 70 cents on the dollar. UAW wasn't the only party at the table that would have given up something significant (and far less than 70 percent). They're just the ones who refused.

rcocean said...

"How many of those financials were losing money hand over fist in 2007, 2006, and 2005?"

LoL - wipes tears from his eyes. Starts laughing again.

You guys crack me up. You want to buy some AIG stock?

Pastafarian said...

How did Garage Mahal and AlphaLiberal and L.E. Lee ever become so expert in how to run a car company?

Does their operator's license qualify them? Or that rusted-out '68 Camaro that they're restoring out in their garage (mahal)?

We've seen verifiable numbers that show that GM et al's per-hour labor costs (if we include retirement and insurance) are about $70 per hour, and they have to compete with companies whose labor costs are about $45 per hour.

And you blame design and marketing for their failure? Are you really that stupid, or are you just arguing for argument's sake?

Of course, Honda can afford to put more man-hours into a car; and of course, they'll be able to provide their customers with more car for the same money, even if they make a decent little margin, with better reliability. They can afford to put more time and more engineering into the vehicle. There's only one reason for this asymmetry between Honda and GM: And it's the UAW.

There are instances, in these comments on this blog, where I sometimes feel as though I'm out of my depth, and I refrain from commenting -- when the topic is religion or law, I'll read more than I write.

Garage, Alpha, Lee -- I suggest that you take a breather, and wait until the next post on a topic that you're a little more comfortable with, like American Idol, sleeping at Starbucks, or manual self-gratification.

Alternatively, why don't you just get together and start your own car company? You can hire all of those UAW workers at $30 per hour, with $15 per hour medical, dental, and optical insurance with no co-pay and 100% coverage, save another $20 per hour for their retirement, give them 20 minutes of breaks an hour as they watch the automatic production machinery run, and you can singlehandedly save the American auto industry.

Matt said...

When a million people are suddenly out of work come next week we will know who to blame: REPUBLICANS.
As usual, they are the party that screws things up, which the Democrats have to fix.

Pastafarian said...

Matt -- Alpha, LE Lee, and Garage are on the ground floor of a really sweet deal. See if they'll deal you in, too.

I'm sure that the public will be eager to purchase the cars that the four of you design, built with that efficient UAW labor.

Pastafarian said...

...And if the public is too stupid to buy your cars, then fuck them. They'll pay for them anyway, one way or another; and those cars will be built, buyers or no.

They'll have no choice but to buy them.

As a matter of fact, I'd like to order mine now. I'll take one of the "Rare Clumber" sedans, LX trim level (imitation leather seats, and fake wood trim made from recycled toilet paper, for the sake of Mother Gaia), with the option of the high-performance 80 horsepower 3-cylinder engine with the "flex-fuel" feature (it can run on pure government-subsidized ethanol, horse piss, or distilled essence of smug self-righteousness).

Make mine red. It seems the most appropriate color.

Unknown said...

rcocean---would you rather own GM right now? Look, I owned Bear Stearns so I took my lumps. But the financials as a class are going to be back in the long term. GM couldn't even make money in an irrationally, artificially inflated economy. Laugh all you want but the Big Three are worthless pieces of paper without significant restructuring that they apparently are unwilling to do.

knox said...


I'm with John Stodder. My BDS has now surpassed my MDS. (M=McCain)

The Drill SGT said...

course, Honda can afford to put more man-hours into a car; and of course, they'll be able to provide their customers with more car for the same money, even if they make a decent little margin, with better reliability.

AND THEY HAVE LIKE 1/3 OF THE DEALERS, each doing a higher volume with better service and lower costs

Trooper York said...

Wow they finger each other?

Who wrote that headline? Titus?

John Stodder said...

When a million people are suddenly out of work come next week we will know who to blame

I Heart Talking Points!

You really think a million people are going to be out of work next week because GM and Chrysler are allowed to go into bankruptcy?

Dude, question authority. The people telling you this want your money. It's a lot of money, the money they want. Don't you think they might exaggerate or even lie to get it?

To get to a million, you have to assume bankruptcy of GM and Chrysler immediately shuts their doors, and Ford's even though Ford is breaking even. And that all the suppliers would also have to shut their doors, since they have no one else to sell parts to hondatoyotakianissan.

Bankruptcy does not = closing your doors. Often it is the only route to restoring solvency so you can keep your doors open. If you want to save those million jobs, and moreover save the three companies (or at least two) you want the tough love of bankrupty to be applied now, rather than the kick the ball down the road solution of a bailout.

Unknown said...

Work rules.

BJM said...

The Senate Bill didn't fail, Dems refused to pass it without GOP cover.

Now they punt it to Bush and their hands are clean of the inevitable coerced union concessions.

It's going to be a long two years.

btw-What's with Fing John "Magic Hat" Kerry not voting on such a critical piece of legislation?

Sherfdog said...

1. Where were the boards of directors and did their auditors give the corporations "clean opinions." Shouldn't Congress receive an independent CPA's opinion as of March 31, 2009?

2. Labor rates should be calculated without the "legacy" add-on. After plundering pension accounts for operating cash and ending retiree health benefits, for industry management to put the accounting burden on current labor hours is another ploy to get more wage concessions from the UAW.

3. In the 1970s, one industry commentator told Detroit to visit San Diego and see how much of the auto market the Big Three were losing to foreign manufacturers: about 1/3 at that time. Yet, the industry continued the path set by A.P. Sloan in 1923.

4. I say "break up GM into brand-based profit/loss centers and let competition weed out the weaker ones."

5. To emphasize the industry's arrogance, car dealerships in the Greater Detroit area were not open on weekends or evenings until the 1960's.