Death of the American Automobile Industry

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I'm going to have to disagree on that point liff. For a reference I would cite "Atlas Shrugged" by Ayn Rand. It's long, it's verbose, and at some times it gets a bit preachy, but it makes some excellent points and it's a highly impacting novel. The main being you get what you earn. If you try the whole collective thing you're doomed to failure. There'll always be a contingent of people that'll realize they can do little to nothing and still get "their share" when working through a collective. While I agree with the Utopian societal concept it just won't work when reality bites.
 
fatbloke,

FUD? No. Observation and discussion. My comment here would be - name one thing that a Union does that cannot be done by the employees themselves, or the courts. The employees can leave one company and go work for another if they are not being compensated fairly. May be hard for them, but when a company loses qualified staff, they take notice. The courts will ensure there is protection for the employees should the company be breaking any labor laws. So what is left? What role do the Unions perform that cannot be acheived by a fair and open market, supported by a just legal system?

Right here in Wisconsin, there is a GM plant that is closing because they are moving their manufacturing to another State where it is cheaper. The Automobile Manufacturer's Union is not blocking this move. Rather, they see that the welfare of the entire company will suffer if the move does not occur. If the entire company suffers, it could go out of business. If this happens, all of the workers will be without work, and the Union will die. Therefore, in an act of self-preservation supported by the fact that there will be no net loss of employees, the Union is letting it happen. The hypocrisy comes in the Union's reaction when management makes the decision to move overseas to acheive the same result, i.e. the company not going out of business. The Union opposes this vehemently. What's the difference? Answer - If the jobs go overseas, the Union has fewer members and will eventually become extinct.

What is the lesson I take from this? Any group, be it management or the Union, will make a decision as long as it benefits them. Nobody will do any more than they have to, want to, or need to unless they get something out of it. That is human nature. Now I agree that the ideal situation for our society is socialism, where all people earn the same, receive the same, and pay the same. A Utopia will exist when this occurs. Unfortunately, this will only happen when the science fiction of 'I, Robot' is made a reality and all of the work is being done by robots. Being paid the same as everyone else sounds great, unless you are the one crawling around inside a septic tank whilest someone else is teaching a supermodel how to Jet-Ski. Fair distribution of work for equal pay? Hardly. And as for the fair distribution of wealth, every person wants more than someone else. Our egos demand that we have a bigger house, faster car, more expensive Rolex. If we are all made to have the same as everyone else no matter how hard we work, we lose the desire to do more than the next guy, and our lives and economy stagnate. The collapse of the Soviet Union was caused by economic pressures, not idealistic ones. As Sandman states:

Sandman said:
There'll always be a contingent of people that'll realize they can do little to nothing and still get "their share" when working through a collective. While I agree with the Utopian societal concept it just won't work when reality bites.

It is therefore up to the global businesses of this world to provide a service or product that people want, and to provide it as cheaply as possible without exploiting the workers. But, "exploitation" is a very delicate subject since the other side of that coin is "competition". For a company to succeed, it must find a way to cut costs, or convince the buyer that it is worth paying more for the product. Ferrari or Rolls Royce will always be able to charge a mint for their vehicles since the name brand recognition is so valuable that they have no incentive to manufacture a "common man's" car. They still have to be careful not to price themselves out of the wealthy person's market though. Toyota, Fiat, and Ford on the other hand must reduce their costs or die, since we the consumers are unwilling to spend more than we can afford. This means that the large companies must cut costs where they can. Since one of the biggest costs is transportation, it does make sense to move to the natural resources. But then there is the resultant cost of transporting the finished product to the consumer. Do these cancel each other out? To some degree. One of the natural resources a company has to pay for is labor. If a company can 'mine' the human resource cheaper in one location than another, they simply must since it is an absolute that their competitors will. If this location is in another country, what social or geopolitical reason could there be that would incentivize the company to remain patriotic in the face of economic pressures to build their product cheaper than the next? Hanging the biggest flag on the outside of an empty factory acheives nothing.

In conclusion - we all know what the right thing to do is. We all know that capitalism is the only motivational force that will eventually lift the 3rd World countries up to the same level of wealth and comfort that we enjoy in our developed nations. We also know that greed is an inherent principal of capitalism. It is therefore up to us to moderate our greed so as not to destroy ourselves or others, whilst at the same time allowing the gears of progress to slowly drive our economy, and the economies of the 3rd World, such that all people can acquire that which they not only need, but want.

"America's abundance was created not by public sacrifices to 'the common good,' but by the productive genius of free men who pursued their own personal interests and the making of their own private fortunes. They did not starve the people to pay for America's industrialization. They gave the people better jobs, higher wages and cheaper goods with every new machine they invented, with every scientific discovery or technological advance -- and thus the whole country was moving forward and profiting, not suffering, every step of the way." [Ayn Rand]

Angus - my 2 cents worth (which is the only change I expect to see should a certain party win this November ;) )
 
liff said:
If labor says, "Pay us more or we will stop working." How in anyones mind is that statement not Extortion?

Its not extortion:

Extortion, outwresting, or exaction is a criminal offense, which occurs, when a person unlawfully obtains either money, property or services from a person, entity, or institution, through coercion.

Demanding better wages is legal, so its not extortion. Its how the labor market works. If I won't work for $10/hour but my roommates will then I'll have to look somewhere else and they will be hired. Its why certain people work their asses off for less than minimum wage while others live off of wellfair. When unions artificially set those wages then there is an inefficiency. The money isnt being allocated effictively within the economy.
 
Angus,

You are truly a prophet! :notworthy:

[RANT]
No sooner do you point out the generally poor performance of American automakers than they go in the tank. That's not bad enough. The chiefs of the big three fly in (on their private jets) to sit before congress looking like Moe, Larry, and Curly asking for $25 BILLION to bail them out of the mess that their poor choices have created. So they get shot down and have to go back to get $9 Billion worth of lobbyist to come back and ask for $34 BILLION of the tax-payers dollars, of which they are certain to get at least half.

Utterly unbelievable! What Chutzpah! The government decides to give out $700 BILLION :eek: to the banks, and these guys are lining up like pigs at a trough to get their snouts in. So you make a car that I don't choose to buy, then you come back to have the government take my money (essentially at gunpoint) to give it to you. I feel quite confident that if they could just jettison the car-making and close all the plants, and take the $34 Billion each year, they'd be just thrilled to do it - wouldn't have to be bothered by those pesky meetings and would have more time for golf - Woo, Woo, Woo, Nyuk, Nyuk, Nyuk!

What the heck is a working tax-payer to do?
[/RANT]

Now Angus, since my retirement account has been wiped out, perhaps I can make a little back by short selling the next incompetent industry that's due to flop. What are you reading in the tea leaves? Who's next?
 
Oh, I wish I had that skill. Superbowl is coming up!!

This was not a real hard one to predict. The car companies got themselves into big trouble 30 years ago, when nobody could compete against them and times were good, by making deals with the devil (UAW). Now, times are hard, and the union shackles are killing the industry. The foreign car companies explosion was proof of how the old way of doing business here in the States was just not going to work. Detroit did not listen. Sad.

So what is next? Back to the airlines. Oil prices have dropped dramatically again, but expect them to go up over the next few months/years. Airline ridership will drop as more people try to cut unnecessary expenses, pushing the industry closer to bankruptcy again (perhaps Detroit should be forced to follow the airlines example?).

As for a boom industry, BEER. Hard times push more people to look for something to cheer them up. This tends to result in an increase in drinking, and the cheapest alcoholic beverage is still beer. So if you are looking for an industry to invest in.....

***Disclaimer - I am not in investment analyst. I am an engineer. So if you follow my Mead addled advice and lose money by investing unwisely, I deny all responsibility. Of course, if you make a ton of money, my fee is 10% ;D ***

Angus
 
Well Angus, you're partly correct. However, if it wasn't for the GM CEO making $8.7 MILLION, ANNUALLY, with a 4.5 MILLION ANNUAL retirement package and the Board of Directors EACH making more than $5 MILLION a year, for shuffling papers and making gas hogs INSTEAD of what Americans REALLY wanted: a fast, futuristic car line that runs on water or electric or whatever, they wouldn't NEED our money!
Seeing as they are working WITH the gas and oil companies, sharing stocks and profits, it's only appropriate that they continue to make cars that run on gas and pertroleum products. Even beautiful smoggy LA whose toxic atmosphere peels paint has a Governor who drives a Hummer.
The original $700 Billion bail out was SUPPOSED to be for the housing market and insurance companies who got busted ripping off millions of Americans shamelessly and now every greedy son of a bitch who has screwed Americans over for decades had piss poor prior planning and they're losing their asses AGAIN and WE have to bail THOSE *ssholes too? Give me a break! Where is OUR voice as to HOW, WHERE and WHEN that money is supposed to be spent?? Just like a friggin' kosher tax!!
Let them go bankrupt! Many WILL lose jobs but only so long as it takes for someone to buy out GM and start making more fuel-efficient/enviro friendly cars.
Just my non-PC .02 perspective.

:occasion14:

DD
 
Now Angus, since my retirement account has been wiped out, perhaps I can make a little back by short selling the next incompetent industry that's due to flop. What are you reading in the tea leaves? Who's next?

Well, it should not be too difficult Medsen. If any of the domestics should fail, the other two will be gone shortly afterwards because the tier-one suppliers will NOT be able to stay in business should they lose one of the Detroit 3. Come to think of it, the plants that Honda, Toyota, Nissan, and Daimler have here in the U.S. will have to cease operating as well as they will lose those same tier-one suppliers.

Here in Michgan, even hospitals have started to lay-off staff as a result of greatly diminshed revenue because of the massive unemployment here in this deeply recession ravaged state - perhaps the medical industry will be next? That is what I'm reading in the tea leaves.

Once all is said and done, and there are another 2.5-3 million people (for starters) on the unemployment ranks, the number of industries to collapse will be many. So choose your industry and start short-selling because although the fall-out will be an economic catastrophe, there will be opportunities to capitilize !!!

- GL63
 
There are valid points to be made on all sides of this discussion, but the automakers not making the cars we want is a red herring. Walk out into any parking lot here in Texas and you will see most of the vehicles are trucks and SUV's. The Ford F-150 pickup is the most popular vehicle by sales in decades. The immediate problem is a credit crunch: The financial markets literally seized up and no one is getting credit to do anything much less buy a car. One of the things automakers (all of them, not just the Big Three) suffer from is nimbleness: The time it takes to retool an assembly line is pretty long. The sole exception I know of is Nissan with a new, showcase plant in Ohio or Indiana, where they can retool in weeks rather than months. Toyota opened a Tundra truck plant here in San Antonio a couple of years ago. They had to idle the plant for three months recently and still have only brought back up one of two assembly lines. I have not heard anything about them retooling that one to build Prius's, but that might be moot with gas below two bucks a gallon.

As far as unions and such, I am pretty much in an industry devoid of them (Information Technology), but I would give serious thought to joining one. Not sure you can fault the unions for trying to get everything they can for their members when executive compensation is outrageous (already mentioned in other posts) having risen versus their "lowly" employees from maybe 20:1 to 200:1 since WW2. It is one thing for someone like me a white-collar professional with portable skills to "vote with my feet" and leave because I don't like what is going on in my workplace. It is an entirely other thing for a blue-collar factory worker maybe holding down two or three jobs just to keep his family fed.
 
Outrageous salaries for the top execs of all companies is a problem. No doubt about that. There is a ton of blame to dish out on all sides of the issue.

The problem I personally have with unions is that they cannot be handily disposed of should their actions hurt the company. A CEO of any company can be kicked out if he/she are losing money/business, albeit with a golden parachute. Unions, on the other hand, cannot be kicked out unless the workers decide to do so, which is extremely unlikely. They use blackmail (i.e. strikes) to force their will upon a company, even if doing so will only result in bankruptcy. They are usually inflexible, obstinate, and greedy for their own little cabal of execs.

Look, there is no single group that I think we can blame the current auto crisis on. They are all to blame, corporate on down. And their lack of foresight may very well lead to many other industries and communities suffering, if not the entire country. They do cater to the needs of America with respect to SUVs and Pickups. But they must have known that the future would demand more economical and fuel efficient cars. Ford knew, since they build the Mondeo (deja vu, all over again). They just did not make the moves to set themselves up for the inevitable increase in gas prices here in the States. And the Unions, once the crunch hit, have done nothing to help cut the crippling costs in an attempt to stave off collapse. Continuing to pay people who no longer work for the company is ridiculous.

Something has to give. Let's hope somebody can talk sense into both sides before they hurt the whole country.

Angus
 
Outrageous salaries for the top execs of all companies is a problem. No doubt about that.

Actually, I'd argue the specifics of this a bit. Apparently, there used to be a law that forbid sitting on a corporate board if you were a CEO of another company, and vice versa. Something like 20ish years ago, that law was repealed/expired/whatever. So now, CEO A is a board member of CEO B's company, and CEO B is a board member of CEO A. So they do a lot of back scratching, voting each other unwarranted compensation.

It's not that CEO salaries are high, they should be high, it's that there are no controls in place to make sure that honest people are making honest votes regarding that high salary.

In my opinion, I say we let them all go bankrupt. When the day is done, it's not the responsibility of the government or the taxpayers to keep businesses in operation. There is no issue of critical services that will be lost, as with the airlines. If I need a new car, I'll still be able to get a new car.

These companies have flushed trillions of dollars worth of capital down the drain in the last 20 years. Literally destroyed it. Gone. Obliterated. I say there punishment should be that the same thing happen to them. This is the way of the Free Market, and in the long run it is good.
 
They do cater to the needs of America with respect to SUVs and Pickups. But they must have known that the future would demand more economical and fuel efficient cars.

I think most Americans are too quick to point the finger at someone else for their lot in life...You make a valid point when you say they cater to Americans with respect to SUV's and Pickups...The problem is not the industry it is the consumer...just like in elections...we the people are who determine the market.

Over the past several years as gas prices have risen...SUV and Pickup sales have gone up when they should have gone down...it wasn't until gas prices went up to $4/gallon that people really started to feel the crunch...and sales slowed.

Example...I purchased a Honda Insight in 2001 that has averaged over 54MPG for the life of the vehicle...the purchase was a conscience decision to help reduce the demand for fuel until alternative sources were more readily available…in 2006 Honda stopped production due to slumping sales, note that gas prices at the time were averaging $3/gallon nationwide...why weren’t people buying the cars…STATUS!

Every soccer mom wants to drive the latest greatest “Biggest” SUV currently available…and since times were good financially (110% home mortgages, deferred payments, debt consolidation loans, and 60-72 month auto loans) people didn’t want to look too far into the future…pair that with an “It’s all about ME mentality” and the results are our current economic state.

I learned at an early age to not live beyond my means (thanks to my Grand Parents)…No bankers forced anyone to purchase a home they could not afford, no automobile CEO used gunpoint to sell SUVs and other gas hogs…It's not the Auto Industry CEOs job to look into the future to determine what we need...they are expected to make sure they are producing what we want.

When WE THE PEOPLE decide to make a change…change will happen.

Unfortunately, many will suffer as a result of the choices THEY made.

Please forgive me for breaking my rule of not discussing politics and the economy on forums…But that felt good.

Now I think I’ll drink some Mead! It's 5 o'clock somewhere :cool:
 
It's not the Auto Industry CEOs job to look into the future to determine what we need... they are expected to make sure they are producing what we want.

Absolutely true. And they didn't do this job, and so they should be allowed to go out of business.
 
This is the way of the Free Market, and in the long run it is good.

Actually, one could argue that the current financial market mess is a good example that a totally unfettered Free Market is not good, but that some regulation is needed. For all that we wish high ideals in our fellow man, the simple fact is that human nature makes us largely greedy bastards looking out only for ourselves or those very close to us. The really funny thing is that when you poll people it's not them, but everyone else who is at fault. For example, Congress traditionally has very low approval ratings regardless of which party holds power, but if you ask individuals about their own congress-person, they walk on water. "Can you say cognitive dissonance? I thought you could..." ;D
 
It's not the Auto Industry CEOs job to look into the future to determine what we need...they are expected to make sure they are producing what we want.

Isn't it? I think it is their job to make sure they are not only providing a needed service, but to be looking to the future and determining what the consumer will need and want. Otherwise they will fade into obscurity and irrelevance (anybody bought a Palm Pilot recently?). This is how the foreign companies have taken over as the top selling car manufacturers. They cannot compete with the Chevy F-150, but the Camry is once again the #1 selling car in the US. A CEO, and the entire management staff, should be working hard to grow the company, not just sustain.

As for the consumer being the driving force, that is partially true. But remember that the consumer will be guided by other factors too, and the big one now is the price of oil. Detroit has got to be more agile and willing to change quickly to meet the changing market, or it will go out of business. What that means to the economy, who really knows. but it cannot be good.

Angus
 
I'm loving this discussion -- it is an almost classic example of the blind men describing an elephant. ;D Before anybody takes offense, let me explain what I mean by that....

The troubles of the American auto industry are complex, deep-seated, and long-standing. Everyone here who has posted their opinion of what is "wrong" with the current system is right... but not completely so. In fact, all these reasons, taken together, probably don't comprehensively characterize the entire problem. As a child of a union employee in a union town back when we had a strong steel industry in this country, I saw all too well both the benefits, and the problems, with unions. However, I also saw the raw greed inherent in the corporate steel management of the time virtually decimate our ability to compete in the world steel marketplace. And that was a market that WE first established at the end of the first world war, and GREW throughout the 1950's. We blew it ourselves. Government regulation, well intentioned though it may have been, didn't help matters any. And NOBODY, not the unions nor the steel management nor the government, could stop the migration of our "home grown" industrial capability to overseas venues.

It is tragically funny that our only other homegrown great industrial capability of the early 20th century, automobile manufacture, is currently sliding down an identical slippery slope.

I am only wondering one thing at this point -- which is going to last longer? The vestiges of an auto industry in this country, or this thread talking about the problem! :clock:
 
Actually, one could argue that the current financial market mess is a good example that a totally unfettered Free Market is not good, but that some regulation is needed.

Actually, it isn't neccesarily. A large part of the mess was caused by lost capital to conforming with useless regulations (Sarbanes-Oxley), or nonsense like being required by law to loan to people that were bad risks. Fanny/Freddie are somewhat of an example, but are really more of an example that people involved with economic oversight committees shouldn't be sleeping with CEOs ;D.
 
The reason car sales are in the pits has nothing to do with what they are building...gas is below 1.50/gallon here in Alabama so gas guzzlers aren't a problem...It's the current state of the economy...It's not that people can't buy a new car...It's that most of those who would can't really afford it, so they can't get a loan (now there's a concept)...and the few who's credit is good enough for a loan are waiting for the economy to stabilize.

If Ford or GM were building a vehicle that averaged 50 mpg, they still would have a hard time selling them.

Over the last several years I have been a spokesperson for fuel efficiency and alternative fuel sources, and the majority of the people I meet say the same thing...the only way they'll give up their big SUV or F-150's is if they have no choice...as osluder said "cognitive dissonance"...how about the Escalade Hybrid...it gets an estimated 20-22 mpg...woohoo...the only reason they build it is so that greedy parents can tell their kids that they are doing their part for the Environment.

If our economy were to make a miraculous upswing over the next several months everything would return to business as usual.

Most people live with their heads stuck in the sand oblivious to what is actually going on around them...and the rest of us have to live with their mess.
 
the only way they'll give up their big SUV or F-150's is if they have no choice...

And why should it be any other way? Why would you not do something you want if the negative consequences are minor?

Why should I get a small car if I can, in some fashion, afford a big car? Why is it greedy to want to own a SUV? Because it uses more gas? So what? You use more honey then the average consumer. Are you greedy?