What do I mean by that? Automobile manufacturers want US (that’s you and me) to bail them out with our tax dollars. Well, to hell with ‘em. Yep. Let ‘em sink. Buh-bye!
Harsh? I don’t care.
1. If bad management is responsible for your problems, them fire their asses and get some good management in. By the way, filing bankruptcy would mean that the bankruptcy court would probably force them to hire new management . . . good.
2. If you sold your soul to the autoworker’s union and they have a strangle hold on you – tough. You should have told the union to kiss your ass and hired the millions of out of work people who would have happily done the job for less money and been willing to work harder to boot, I am guessing.
3. If you are so out of touch that you don’t understand that you should have been more responsive to the market and attentive to the environment, then you deserve to fail. Remember, these automakers are partially to blame for the fact that we are so dependent on foreign oil! Stop making Hummers, Stupid! Stop producing cars that get 8 miles to the gallon! How are you serving the American people well by doing that?
I travel all over the world. I see SMALL cars wherever I go. The Mini Cooper has been available in the UK since 1961. We got it five years ago. Why? Because American gas-guzzling manufacturers kept it out! The Smart Car has been around for years. We are just now seeing these delivered in the United States for the same reason: the Big 3 kept it out. Mercedes has the cutest little bitty car that has been available in Europe – the Mercedes 130 and the 150. They get great mileage. Can you buy them here? Nope. And India has the Tata. A car that gets 54 mpg and cost $2500 RETAIL. India??? Aren’t we as capable as they are? I would think the answer would be yes. So why don’t we have a $2500 car that gets 54 mpg? Those good ol’ American automakers that want us to bail their asses out don’t want to make them, that’s why. Besides the cost would be too high, they would argue. And whose fault is that?
By the way, we (you and me) are guilty too in this whole mess. We should have been tougher on them and demanded more from them. Instead, we bought our Hummers and Tahoes and Escalades and begged for them to be heavier and bigger. We were stupid. A few years ago, the government even encouraged us by giving us tax breaks for driving an SUV for business. I took advantage of that tax break and bought a car just heavy enough to qualify. I’m sorry. I wish I had not done that. Now, my wife drives a Mini Cooper and I drive a Dodge Dakota (the small one) pickup. Could I drive whatever I want? Of course I could. But I don’t need to impress anyone so who the hell cares? Besides, I get a kick out of pulling up in front of a fancy restaurant and making them valet my pickup!
Bottom line: No bailout for Detroit. I know people will lose jobs. Sorry. Maybe those autoworkers shouldn’t have been so greedy. (GM says that the average base pay is $40 per hour) Learn to run your business smarter like the rest of us have to in order to survive. If you have stupid management, fire them. Try responding to the marketplace with products that we can afford and that we would love to be able to buy. Products that are good for the economy and good for the environment and that might reduce our dependence on foreign oil. Be more responsible and maybe I might be more willing to lend you a buck or two! And if they all went out of business (and they won’t!) . . . don’t we have enough USED cars to survive for a while? Or couldn’t we just drive the cars we have for a year on two longer?
Thanks for reading! Larry
The unions have been a big part of the problem. Have you heard about the jobs bank? Union members get paid for not working! Brilliant!
Larry,
I have to call out a couple of points here. One of the biggest issues in the whole mess is the US safety and insurance regs are so complex and burdensome it takes about 2-3 years to retrofit a car design to bring it to the US. GM has many models in other parts of the world that cant get here fast enough due to these rules and these are cars that meet European rules. Remember the GEO Metro? 40+MPG and we had to kill it due to new Fed safety rules, now its one of the hottest used cars on the market.
Second, the whole time that we were selling the giant SUVs, we also had a lineup of small, fuel efficient cars that we could barely give away. Customer memories can be short and fickle.
No argument about needing to run the business smarter but if the big three go out completely it will be nothing but bad for any of us. Keep in mind that many of the best and brightest grads get hired into these companies and the imports arent going take that over.
No argument Craig – that the Federal Safety regulations are part of the problem. But that could be fixed – and the 2 – 3 years to retrofit has come and gone. Nearly 50 years on the Mini – and the Mercedes 150 has been around for years. These are only two examples. As you pointed out, American manufacturers have been making more fuel efficient cars for years in other countries. But American LOVED their gas-guzzlers. And the government got involved way too late on the foreign oil issue.
I am not saying that the Big 3 should go out completely but a major overhaul is needed. If that means bankruptcy, so be it. And the Best and Brightest grads can work elsewhere – after all, they are the best and the brightest.
We CAN NOT rely on the government to save failing industries. No matter who they are. Next in line will be Insurance companies, then the airlines industry and then someone else. The industry that won’t get hurt? Pharmaceuticals! Why? We would rather take a pill to get well, than take a walk and eat well to stay healthy!
Jeff: from NPR reporter Frank Langfitt:
http://www.npr.org/templates/story/story.php?storyId=5185887
The Jobs Bank was set up by mutual agreement between U.S. automakers and the United Auto Workers union to protect workers from layoffs. Begun in the mid-1980s, the program is being tapped by thousands of workers. Many of those receiving checks do community service work or take courses. Others sit around, watching movies or doing crossword puzzles — all while making $26 an hour or more.
The Big Three automakers agreed to the system to protect union workers from outsourcing and technology. But with Ford and General Motors losing money in North America — and contract negotiations due in 2007 — the future of the unique program is uncertain.
In an interview with The Detroit News, General Motors CEO Rick Wagoner says his company can’t sustain the price of the program, which he says runs to $400 million annually.
Union officials say the companies should simply put those drawing checks from the Jobs Bank to work. But with carmakers looking to lay off thousands of workers, executives at Ford and G.M. say that’s not likely to happen.
This morning GM reported staggering losses but equally important the amount of cash they have on hand to operate their business. GM reported having burned through $6.9B (B as in Billion) last quarter and have approx $17B of cash on hand. The $400MM referenced as the annual cost for the “jobs bank” workers would essentially buy the company one additional week of life based on their current cash burn rate (are you getting dejavu does it feel like we’re back in the tech bubble days “Cash Burn”) giving productive assembly line/administrative workers one additional week of work as a NON bankrupt company.
This small amount $400MM may seen trivial as compared to the revenue and current expense base of GM but when combined with the tens of thousands of similar decisions a company like GM could make to “get them through” this bad economy perhaps they could actually make it without having to file for bankruptcy or get financial help from US vis-a-vis the federal checkbook.
If current management focused on tough extraordinary cost cutting actions and war like tactics to deal with the unions, and their liberal leaning politico, then perhaps GM would be able to make a run at saving the company. But Larry has again hit the nail on the head in this and other writings, this won’t happen because American companies (and Americans) are used to being overpaid, under producing, and producing inferior products. Union smoonions, you can blame the unions if you’d like but American society has to bear a part of this burden for creating an entitlement society which has been accepted and adopted by almost every American. We might not all be in the handout line but we either support it philosophically, fiscally, or to through our American work ethic. There are exceptions of course which is why we read Larry’s no BS writing but overall the majority of Americans have contributed to this entitlement society.
Rather than initiate discussions and deliver ultimatums to “Polosi” and her crew in congress maybe the automakers would be better served to direct these ultimatums to the UAW and their members who would benefit more than anyone by saving these companies from extinction. But then that would cause to much discomfort and create some animosity within the “working relationships” between these industry players. I agree with Larry let this industry deal with this issue themselves. If not then the airlines, the John Deere’s and the truckers and many other industries are just a step or two from also getting in the Government handout line.
The biggest problem with unions is the not the pay rates or the automakers’ Jobs Bank, it’s the non-productive work rules written into the contracts. The airline industry and other heavily unionized industries share the same problem.
Union contracts require an uber specialization that requires too much labor per unit of output. Union work rules forbid cross functionality and multiple skill-sets that would give a manufacturer, airline, etc. the flexibility to fully utilize its workforce.
Archaic overtime laws driven by the unions also play a role. $40 per hour is $83,200 per year, but overtime costs can drive that figure up to $108,160 if an overtime workload factor of 20% at 1.5 times base pay is used (and that’s probably low). At a plant with 5,000 workers, that’s $124.8 million in additional annual labor capital – ridiculous!
Larry,
You are right on the money; but I find this ironic coming from a liberal Democrat as yourself. These guys you just help get elected will not only bail out the Big 3 (soon to be big 2) automakers; they are going to make it easier for unions and their thugs to organize. It will be interesting to see where this country is in 6 months….
Yes, the Unions definitely need an overhaul. Nobody should actually expect to be paid for outright laziness.
But the car manufacturers have to start using their brains, for once. They’re always trying to improve the vehicles that are already out there – but they seem to ignore the gas mileage problem. If they simply maximize the fuel efficiency on their popular models – they’d do a whole lot better. Heck, we pay enough for their vehicles as it is – we may as well get our money’s worth.
Here’s a business idea I once mentioned to someone: start a company that hybridizes the vehicles folks already own, including Hummers and sports cars.
This has been a long time coming. Unions as an institution represent another good idea that has been taken too far and is now just a means of exploitation. $40/hr to work on an assembly line? Seriously? Getting paid not to work? Boo-hoo. Is it any wonder that new car prices have skyrocketed ahead of average yearly incomes for Americans?
I’m with Larry – let em fall, take their lumps, and LEARN from it.
I’ve seen this happen on a smaller scale in my own tiny hometown in Kansas – a Union bled a local warehouse company dry until they were forced to close their doors. They never reopened, either. All those Union members that were loving their over-inflated wages didn’t have any recourse after the business was bankrupted, and neither should these big corporations. The sad part is that most of them still will not face what happened. They’ll point the finger somewhere else.
You go Larry. I was so surprised to find out that Big Auto wasn’t really keeping the economic cars at bay, that they didn’t really have an alternative that they were keeping under the wraps until they HAD to start making them. I thought since the 70s that they were paying alternative fuel engine inventors to go away. Ha! Did I get fooled.
UAW and their pensioners can go suck it. Want to know why our cars cost so much, yesterday I saw a video of 4 UAW works assembling one car. One guy tightened a screw, another on the other side installed a part, back on the rear end another guy was installing one something & then on the other side it took another guy to screw a screw. Now these 4 guys are only 4 of many that touch our cars as they go through the assembly line. Each one of them has one job & one only. BS. I run a law office with two attorneys, I do everything, including the books. alone. The UAW does not want their pampered babies to multi-task. They have held us by the you know what’s for too long now. Take your cars and cram them.
I say let them fail, reorganize and so what. UAW workers get a life. You don’t deserve $30 an hour and all your perks. FYI, I drive a Corvette & have been a Chevy owner for life, but I can live without your car. No bail out for big auto!
Saw Larry on Cavuto’s Fox News Network show today. Especially loved the national exposure for, quote, “bah-bye”, and “. . . introduced a new Hummer!!??”
What are the chances, do you think, of reaching our federal representatives and suggesting a “carrot-stick” approach. To wit:
Here’s the money. You’ll receive it based on your ability to renegotiate all union contracts, subject to review by a non-partisan “civilian business” committee with a deadline. And, an immediate cessation of all advertising for any vehicle with a Consumer Reports mile per gallon rating less that 30 mpg. (We did it with cigarettes)
At least it would divert this train wreck slightly.
Thank you Larry,
I saw you on fox news………………bravo!
I have felt this way for years that the greedy disgruntled unions are the root to many of our national problems. Three of our most truobles sectors in this country are: The big 3 auto makers, the airline industry, and the public education system.
All of these sectors have union fingers tightly wrapped around their necks.
The irony is that these greedy disgruntled bloodsuckers will ultimately cause their own demise once they have sucked every ounce of “blood” from their employers.
And then they will collect unemployment for as long as possible.
thanks for listening,
kevlarhed
Yo Larry
I heard you were on FOX today again….sweet!
Keep it up, the more you get on tv….the worse the economy gets…the more industries get bailouts from the Govt…..the bigger you will get.
(I don’t like a down economy but hey we need to keep rolling)
These bailouts are a complete JOKE. The sooner we let these idiots go out of business the sooner we can recover and the stronger we will be.
Yes it will hurt for a while, but we need to cut losses.
Mortgage mess gets bigger each week, people still think they can use mortgage like an ATM…new fannie freddie plan just delays fixing the problem.
Mortgage modication is going to be huge industry in the next 24 months.
I lost some money today in leads I bought and I was not able to close them to hire me…..Can I get a govt. bailout for that money I lost?…..Ha Ha
Paul
I’m a Liberal Democrat, descended from Liberal Democrats who fought for unions in the mines and factories just so they could SURVIVE, not to get rich in a cushy job. They were dealing with a different work world – no safety regulations, horrible conditions, 12-hour days for almost no money, and children in factories and mines. They did what they set out to do and now they are no longer necessary. Unfortunately, the unionists are the only people who don’t see this.
First of all at least one of the big American Auto name must be preserved.
It is national security issue. But bailout does not mean that the current
useless management need to stay. They should be kicked out and taken
of by government if taxpayer are going to pay in the order of $ 25 – $ 50
billion. The US company temporay government control should build
cars for tomorrow and ahead of any other manufacturer in the world.
Secondly practicing law is not same as assembling a vehicle. A simple
monotonous quick routine is what makes the car assembly efficient.
One should not be too focused pointing fingers at $ 40 per hour rate for the
workers when those executives drawing income in the range of
millions proved to be equally incompetant.
There was one stupid question I heard on TV, that why people are not
buying Toyota hybrid in hoardes, if the US market is supposed to leaning towards fuel efficient cars ? Tell them that give people a safe , US built car with 100 mpg under $ 20,000 and see how folks will line up for it.
Great article. It is not only Europe but other countries as well that don’t use much of SUVs. I have lived and visited several times Saudi Arabian (yes, the country with most oil) city of Jeddah (commercial capital of Saudi arabia) and there I have less percentage of SUVs than I saw here in small sized cities while gas is approximately 45 cents a gallon in Saudi. It is not because the Saudis are very environmental friendly. It is just because they don’t see a need to buy a big SUV just because their little ones need to go to soccer practice. Even the saudis would be surprised to listen to all the excuses we american use to buy gas guzzler (I have two children, I need to take them to school, I go camping every year etc.)
I would like to disagree with the opinion that Union are driving up the costs and therefore the big 3 are not able to make money. I have observed that the cars produced by these big 3 are usually lower in prices to their Japanese counterpartsand they are doing fine. But still people are more likely to buy japanese and pay more. The problem is that american cars are crappy, have low mpg and are pretty much junk after 100 K miles (some exception are there) while Japanese cars(Honda, toyota, nissan) runs pretty well after 100 – 150k or more. Blaming union compensation for this mess is just scapegoating.
What is needed to be done is that they should come in terms with the situation of market and start making cars which people want. They are still making the same kinds of cars they used to make in 70’s and 80’s and are kind of forcing their product on the public. They should start investing in making fuel efficient cars which run for a long time. They need to change their model to provide these cars. So they need to invest in technology and R&D.
I know I’m late to this party but I want to say a few things anyway:
1. I will keep buying large cars until semis, large pickup trucks, and white-tailed deer aren’t an ever-present threat to kill me on the roads. Mini Coopers are okay for our metropolitan areas but would be death on the big highways or out here in the country where I live.
2. Change GM management. All the union salaries in the world don’t account for the losses GM is sustaining as the cumulative effect of its greedy, arrogant management decisions. And sell that darn CEO’s private jet first, please. I don’t know any union members, but I know for sure they don’t have any private jets.
3. For god’s sake, please make new cars a set (fair) price instead of this horrible haggle that fosters crookedness.