$700 Billion Bailout

[Cknolls]

We already have a government run pension plan that sucks, why not a government run health care plan that falls woefully short... Oh wait, we have that too.

 

Nope. The government still falls short of the private sector in both of those areas, dispite the shortfalls in those areas.

\

 

[StrangeSox]

Stop on that thought for just a second. Go back to say 10 years ago, when steel was a record low prices, and gas prices were still cheap. The auto companies were making money hand over first at the time. I can not believe for one nano-second that if the management of ANY of the big three companies had gone to the UAW and said "we want you to take huge concessions, so that we can quit making our hugely profitable product lines, and instead replace them with much smaller, less in demand, and less profitable product lines.", that the autoworkers would not have shutdown the entire company with strike and refused to sign the deal. Its easy to say that management signed the contract, but common sense tells you that they had NO WAY to force labor to sign any contract that involved the sorts of givebacks that we are talking about here. Its a pie in the sky theory that holds no water.

 

Now go back a couple steps to when they first agreed to those contracts, before it would have been "givebacks" or concessions. They never had to sign those. I'm not absolving the UAW of blame, either.

 

These are just thoughts bouncing around my head, not factual claims.

Edited December 10, 2008 by StrangeSox

[southsider2k5]

Now go back a couple steps to when they first agreed to those contracts, before it would have been "givebacks" or concessions. They never had to sign those. I'm not absolving the UAW of blame, either.

 

These are just thoughts bouncing around my head, not factual claims.

 

 

How far back are you looking to go? Most of the benefits came in the 1950's and 1960's before anyone knew what a Honda or Toyota was. The UAW dates back to 1937 and was a "concession" for Henry Ford to recognize in 1941 after plenty of violent strikes.

[Balta1701]

I swear, I need to find a way to bring a major American company to its knees. It's the most profitable thing out there you can do right now.

American International Group Inc., the insurer whose bonuses and perks are under fire from U.S. lawmakers, offered cash awards to another 38 executives in a retention program with payments of as much as $4 million.

 

The incentives range from $92,500 to $4 million for employees earning salaries between $160,000 and $1 million, Chief Executive Officer Edward Liddy said in a letter dated Dec. 5 to Representative Elijah Cummings. The New York-based insurer had previously disclosed that 130 managers would get the awards and that one executive would get $3 million.

[kapkomet]

I swear, I need to find a way to bring a major American company to its knees. It's the most profitable thing out there you can do right now.

Who runs the company?

 

I know that ya'll will never, ever understand this... and I'm not condoning (exactly) what AIG is doing, but you have to give these people incentive to stay.

 

Although, the market is not exactly what it was even six months ago, don't I know that well. They can't bail to another job quite as easy.

 

 

 

 

[Balta1701]

Who runs the company?

 

I know that ya'll will never, ever understand this... and I'm not condoning (exactly) what AIG is doing, but you have to give these people incentive to stay.

 

Although, the market is not exactly what it was even six months ago, don't I know that well. They can't bail to another job quite as easy.

Let me make this perfectly clear....I have no interest in giving the SAME PEOPLE who brought the company down incentive to stay.

[Balta1701]

Back on to the auto industry bailout matter...here's a different way of looking at the worker compensation issue.

To the Big Three’s defenders, meanwhile, the number has become proof positive that autoworkers are being unfairly blamed for Detroit’s decline. “We’ve heard this garbage about 73 bucks an hour,” Senator Bob Casey, a Pennsylvania Democrat, said last week. “It’s a total lie. I think some people have perpetrated that deliberately, in a calculated way, to mislead the American people about what we’re doing here.”

 

So what is the reality behind the number? Detroit’s defenders are right that the number is basically wrong. Big Three workers aren’t making anything close to $73 an hour (which would translate to about $150,000 a year).

 

But the defenders are not right to suggest, as many have, that Detroit has solved its wage problem. General Motors, Ford and Chrysler workers make significantly more than their counterparts at Toyota, Honda and Nissan plants in this country. Last year’s concessions by the United Automobile Workers, which mostly apply to new workers, will not change that anytime soon.

 

And yet the main problem facing Detroit, overwhelmingly, is not the pay gap. That’s unfortunate because fixing the pay gap would be fairly straightforward.

 

The real problem is that many people don’t want to buy the cars that Detroit makes. Fixing this problem won’t be nearly so easy.

 

The success of any bailout is probably going to come down to Washington’s willingness to acknowledge as much.

 

Let’s start with the numbers. The $73-an-hour figure comes from the car companies themselves. As part of their public relations strategy during labor negotiations, the companies put out various charts and reports explaining what they paid their workers. Wall Street analysts have done similar calculations.

 

The calculations show, accurately enough, that for every hour a unionized worker puts in, one of the Big Three really does spend about $73 on compensation. So the number isn’t made up. But it is the combination of three very different categories.

 

The first category is simply cash payments, which is what many people imagine when they hear the word “compensation.” It includes wages, overtime and vacation pay, and comes to about $40 an hour. (The numbers vary a bit by company and year. That’s why $73 is sometimes $70 or $77.)

 

The second category is fringe benefits, like health insurance and pensions. These benefits have real value, even if they don’t show up on a weekly paycheck. At the Big Three, the benefits amount to $15 an hour or so.

 

Add the two together, and you get the true hourly compensation of Detroit’s unionized work force: roughly $55 an hour. It’s a little more than twice as much as the typical American worker makes, benefits included. The more relevant comparison, though, is probably to Honda’s or Toyota’s (nonunionized) workers. They make in the neighborhood of $45 an hour, and most of the gap stems from their less generous benefits.

 

The third category is the cost of benefits for retirees. These are essentially fixed costs that have no relation to how many vehicles the companies make. But they are a real cost, so the companies add them into the mix — dividing those costs by the total hours of the current work force, to get a figure of $15 or so — and end up at roughly $70 an hour.

 

The crucial point, though, is this $15 isn’t mainly a reflection of how generous the retiree benefits are. It’s a reflection of how many retirees there are. The Big Three built up a huge pool of retirees long before Honda and Toyota opened plants in this country. You’d never know this by looking at the graphic behind Wolf Blitzer on CNN last week, contrasting the “$73/hour” pay of Detroit’s workers with the “up to $48/hour” pay of workers at the Japanese companies.

 

These retirees make up arguably Detroit’s best case for a bailout. The Big Three and the U.A.W. had the bad luck of helping to create the middle class in a country where individual companies — as opposed to all of society — must shoulder much of the burden of paying for retirement.

 

So here’s a little experiment. Imagine that a Congressional bailout effectively pays for $10 an hour of the retiree benefits. That’s roughly the gap between the Big Three’s retiree costs and those of the Japanese-owned plants in this country. Imagine, also, that the U.A.W. agrees to reduce pay and benefits for current workers to $45 an hour — the same as at Honda and Toyota.

 

Do you know how much that would reduce the cost of producing a Big Three vehicle? Only about $800.

 

That’s because labor costs, for all the attention they have been receiving, make up only about 10 percent of the cost of making a vehicle. An extra $800 per vehicle would certainly help Detroit, but the Big Three already often sell their cars for about $2,500 less than equivalent cars from Japanese companies, analysts at the International Motor Vehicle Program say. Even so, many Americans no longer want to own the cars being made by General Motors, Ford and Chrysler.

I'd be interested in hearing a response to the key bolded statement there if someone else has different data. If I take a comparably equipped vehicle from the big 3 and compare it to a Toyota/Honda/Nissan, having wages be the main issue would imply that the Japanese companies were able to produce substantially better prices. When I was car shopping, I found it to be the opposite, and bought the Japanese car anyway. Anyone else have an alternate POV?

[kapkomet]

Let me make this perfectly clear....I have no interest in giving the SAME PEOPLE who brought the company down incentive to stay.

At the very top, I agree. The middle management is a totally different thing.

 

[Balta1701]

At the very top, I agree. The middle management is a totally different thing.

Trouble with that statement is...at least a decent chunk of the middle management is in some fashion also going to have been involved in the activities in the CDS market that brought the company to its knees.

[kapkomet]

Trouble with that statement is...at least a decent chunk of the middle management is in some fashion also going to have been involved in the activities in the CDS market that brought the company to its knees.

Yea, and they were doing what they were told.

 

It's not a black and white thing in this case. I always tend to side on the side of the workers below the very top because a lot of times, they're powerless to stop what's going on.

 

Believe me, I just lived the part about "powerless to stop what's going on"... if I would have just clicked my heels and saluted to the b****es, I would have been fine.

 

 

 

[mr_genius]

looks like this corrupt UAW bailout is going to fall through.

[Balta1701]

looks like this corrupt UAW bailout is going to fall through.

Well, I guess we'll get to see if the depression predictions were right then.

[Chet Lemon]

Unsurprisingly, no member of the U.S. House from Michigan voted against the bailout.

[kapkomet]

- Read the small print, too...

[Balta1701]

Unsurprisingly, no member of the U.S. House from Michigan voted against the bailout.

Just out of curiosity, why is it treated like a bad thing for those folks to act in favor of their constituents, when many of the Republicans who voted against the bailout plan and who will probably kill it in the Senate represent states that have major plants run by the other companies? Mitch McConnel's state I believe has a major Toyota plant IIIRC, for example.

[Chet Lemon]

Just out of curiosity, why is it treated like a bad thing for those folks to act in favor of their constituents, when many of the Republicans who voted against the bailout plan and who will probably kill it in the Senate represent states that have major plants run by the other companies? Mitch McConnel's state I believe has a major Toyota plant IIIRC, for example.

 

Yea, I was quite curious as to how the Republicans from Michigan would vote on this thing. So they are at long odds with their Senate counterparts.

[jasonxctf]

looks like this corrupt UAW bailout is going to fall through.

 

i love how this somehow becomes the workers fault.

 

at the end of the day, us automakers designed and manufactured crappy cars. they didn't listen to what the consumer wanted (see Honda/Toyota) and instead tried to "sell" the public on what they made.

 

there's a huge difference between asking consumers what they want, and building it versus building something and trying to convince consumers its what they need.

 

on a sidenote, anyone here ever see the movie... "Who Killed the Electric Car?"

[StrangeSox]

i love how this somehow becomes the workers fault.

 

at the end of the day, us automakers designed and manufactured crappy cars. they didn't listen to what the consumer wanted (see Honda/Toyota) and instead tried to "sell" the public on what they made.

 

Can't it be both?

 

Why should someone make $40-hr/$80k-yr plus overtime (plus another $35/hr or so in benefits) to screw on a car mirror?

[SoxFan562004]

Being reported that the White House is considering using some of the previous bailout money for the Big 3 since there couldn't be a compromise... which would mean the companies would get it with very little to no supervision

[SoxFan562004]

MSNBC just reported the Treasury said they will not let one of them fail, at least until Congress meets again in January. So the automakers will be getting money with little supervision, you had to figure the UAW knew this would happen and won't make any serious moves until they actually feel they are in real danger.

 

They said that's why the Dow didn't plunge at an insane level because everyone figured that there would be a backstop for now

[Cknolls]

MSNBC just reported the Treasury said they will not let one of them fail, at least until Congress meets again in January. So the automakers will be getting money with little supervision, you had to figure the UAW knew this would happen and won't make any serious moves until they actually feel they are in real danger.

 

They said that's why the Dow didn't plunge at an insane level because everyone figured that there would be a backstop for now

 

Wow. The UAW predicting the stock market. That is impressive. Where do we close today guys?

[SoxFan562004]

Wow. The UAW predicting the stock market. That is impressive. Where do we close today guys?

I didn't mean the stock market, I probably didn't organize my post very well. I meant they probably thought that GM wouldn't allowed to fold in the short term

[Rex Kickass]

Watching a couple things from the UAW presser right now. Gettelfinger makes a huge great point here. VW is getting 500 million in subsidies to build a plant in Tennessee. VW is seeking its own bailout from the German government and will probably get it.

 

When Toyota looks to fight its workers' own efforts to unionize, they argue that the wage and benefits package offered to current Toyota workers exceeds that of the average UAW worker for the big 3. Beyond that, this dispute is solely on the backs of the manufacturing workers who actually produce the cars. There was no same effort to normalize dealership costs, supplier costs, management costs at a parity to Toyota/Nissan/Honda, etc. in this negotiation. The UAW has offered huge concessions over the last 18 months, including taking on the bulk of pension costs, elimination of the job bank etc. To sit there and put the entire weight of the bailout on the people who actually build the cars is unfair.

 

Mark my words, Gettelfinger is right here. This is all about EFCA and card check on the GOP side. The truth is that the bridge loans need to come from Treasury until the new Congress convenes next year and that kind of obstructionism can be more easily overcome.

 

On CNBC just now, one of the analysts just said that the assembly line labor costs per car amount to just $800.

[Rex Kickass]

I think if Treasury announces some of these TARP funds for GM by the end of the trading day, we'll see GM back over 5.

[Cknolls]

I think if Treasury announces some of these TARP funds for GM by the end of the trading day, we'll see GM back over 5.

 

 

Even with 50-100 billion. What is the over/under in months before GM or the other two fail? I'll say 6-12. They're dead. Accept it. $5 is a farse for GM equity. For a trade maybe. Investment? Not even with someone else's money.These companies are worth somewhere in the neighborhood of $-100 billion dollars.