Thursday, November 13, 2008

Don't bailout the auto industry

TIME reported The latest wave of bad news came out of Detroit Friday morning as both GM and Ford reported heavy losses for the third quarter of 2008. Ford lost $2.75 billion, pretax, from operations; GM fared even worse, losing $4.2 billion, excluding a one-time gain.
So we exclude gains to make it look like they lost more, so they get a bigger bailout.
Both companies are also burning through cash at an alarming rate — Ford used up $7.7 billion during the third quarter and GM burned through $6.9 billion. Concerns intensified about GM's ability to stay afloat.
Let them go through the clensing of Chapter 11. The reason they are losing so much money is they have given into the demands of the labor unions for ridiculously high benefits (health care and other). It makes their cars too expensive to compete. Go through Chapter 11, get the courts to cancel the contracts, and maybe the unions will not be so greedy.
The losses added yet another note of urgency to auto industry leaders' discussions with Washington, which were in the spotlight on Thursday when the chief executives of GM, Ford and Chrysler met with House speaker Nancy Pelosi and Senate majority leader Harry Reid on how to increase the size of Washington's aid package to the Big Three. Though details are still being worked out, the push is for an additional $25 billion in federal loan guarantees for Detroit in addition to the $25 billion already promised to assist the industry's shift to green technology.
There should ne NO bailout for the Big 3 Automakers.
And now the City of Detroit has its hand out too. Stop the bailouts.

9 comments:

adam hartung said...

Ford's problems are only somewhat the economy. Their biggest problem has been Lock-in to old concepts of their market, and a horribly locked in maanagement, leaving them vulnerable to market shifts that started in the 1980s and are now driving all the profit out of their old business model. Read more at http://www.thephoenixprinciple.com

Anonymous said...

I think that if the union workers are not willing to take a pay cut to save their companies then to hell with them. I mean its rediculous that they have guys on assembly line making 60 dollars an hour with no college degree and the problems with the auto industry come down to the high salaries the workers get paid causing the price of autos going so high I heard a figure that the 25 billion would only help them make payroll well I for one say enough is enough if they aren't willing to help them selves then to hell with them let the big 3 move operations where labor is more affordable and let the union auto workers dream of the good old days where their greed ruined their industry and left them all unemployed

wilson said...

All those with family members or friends who work on the line in an assembly plant raise their hands. As someone who has watched three people in my family toil their lives away on incredibly long shifts of extremely physically demanding work I can't believe people think this is because of the Unions. Unions have been the backbone of American Industry for decades and they are only thing left making sure workers earn a fair wage and have health insurance. The execs at these companys gave themselves millions of dollars in bonuses, just like the banks that WE bailed out, and refused to put money into fuel efficient vehicles. That is our problem. Stop blaming the Unions and the workers who helped BUILD AMERICA. The focus needs to be on the upper levels of these companies. One executive's yearly pay + bonuses = thousands of unionized workers pay. THINK ABOUT THAT. If someone wants to come and watch what my 50 year old mother does for a living, 8-10 hours a day and then still blame this problem on high Union wages......I'll be here, waiting in Detroit to give you the grand tour.

Anonymous said...

Unions served their purpose back in the day but they are no longer feasible in today's global economy where competition comes from all over the world. Executives do make too much money, but they have much greater responsibility and more education (presumably) than the assembly line workers. Therefore, they should make more money than the assembly line workers. Now, salaries are one thing for them. Bonuses and golden parachutes need to be tied to long term performance, not short term stock gains and near-sightedness. If workers still need to unionize to avoid serious, serious abuse (a.k.a China-type of environments), they need to give up the benefits that are often better than any other industry for employees that have earned higher education degrees. Pensions are a thing of the past and healthcare is only partially subsidized by most companies. Health benefits end with employment in most industries, but not the auto industry. The car companies need to be allowed to declare Chpt 11 and reorganize to make it more competitive, or the jobs that these workers have will be gone along with their jobs regardless of wages and benefits. Blame both unions and short-sighted, stubborn mgmt.

Don Singleton said...

I agree wholeheartedly with what Anonymous said.

wilson said...

It is that kind of thinking right there that has decimated the work force in America and abroad. Can you honestly sit there and say that people who work for 35 years at a company don't deserve a pension and health care benefits. Not only are unions "feasible" in todays society, they are the only thing left to watch out for workers' rights. This is not a one-sided situation, we all know that, but for people to be made to believe that the blame for this lays squarely in the laps of the workers because they don't want their health insurance cut is INSANE. I clearly won't be able to change your minds on this because the media has driven the point to far home it seems. The end result is most likely going to be an incredible loss of jobs in the auto industry and a non union retooling. I will however start shifting some of the blame from the executives shoulders and start laying it on the complacency people like you who will just bend over and take the fact that companies will no longer provide health insurance, but still fly private jets. That you can work for the same company for 30 or more year, and not recieve a pension. And lastly that these things are somehow the fault of the lowly worker as far down the line, literally, as you can be. Believe what you wish as far as how this whole thing has come to pass but I can assure you that if you look at the history of unionized labor, you will see how it positively affects a companies growth. Labor unions take money out of the coffers of the boys and girls at the top. They don't like it, and they will fight it with lies bullshit allegations. I weep for this country and it's residents. The American dream has atlast become a nightmare.

Don Singleton said...

They are entitled to a pension, and the rest of us that are retired live just fine on Medicare.

But the extremely generous health benefits the current and retired auto workers get, much better than any other employees, plus the "job bank" concept where the auto companies have to pay employees laid off because a plant was closed, causes the Big 3 much greater expenses than non union auto workers, so their cars are too high priced.

Yes the execs pay themselves too much as well.

But Chapter 11 will stop both problems. And a bailout will not.

wilson said...

Again we run into a situation where someone who is getting what ALL workers in America should get is being made to seem greedy when as you say "the rest of us that are retired live just fine on Medicare." Really. Really. If that is the case, I'll send my mother to live with you after she loses her job tomorrow........can she bring some friends?

Don Singleton said...

The unions getting what they are getting is what is causing their companies to be close to bankruptcy, at which time they will get nothing.

If all companies were providing what the Big 3 are providing, there would be a lot more bankruptcies.

Do you really prefer the chance of nothing, to live high on the hog for a while, or would you rather have less, and be sure you keep getting it.