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The Big Three Bailout


hausdok
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Oh, sorry. It says:

You probably thought it was smart to buy a foreign import of superior quality, with better mileage and resale value. Maybe you even thought that years of market share loss might prod us into rethinking our process and redesigning our products with better quality in mind. But you forgot one thing; We spend a shitload of money on lobbyists. So, now you're out $25 billion plus the cost of your Subaru. Maybe next time you'll buy American like a real man. Either way, we're cool.
At the bottom of the panel it says, "We're The Big Three. We Don't Need to Compete."

OT - OF!!!

M.

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At the risk of getting even closer to politics, I would point out that it's not as simple as who has cars of better quality. The fact is that there is no across-the-board superiority of Japanese cars anymore. Individual models any given domestic manufacturer compete well. Admittedly, there are still some less than stellar offerings, but the Japanese have had a few bloody noses from quality lapses in the past few years also. I will publicly thank the Japanese manufacturers for building better cars and forcing American manufacturers to do likewise. If not for their pressure, we'd still be driving the crap Detroit produced in the 70's and 80's. Yuck.

Keep in mind that a lot of those Japanese (and Korean) cars are built in the USA, with designers and engineers -- of whatever nationality -- who were to a large extent educated here.

The real issue here is the ability to compete on a level playing field, and that means union labor issues. The average hourly rate, including benefits, of a big three worker is over $73 an hour. Union, of course. Japanese cars built in the USA do it for about $45 an hour. Non union. $45 still sounds generous to me for manufacturing work.

That makes it impossible to go on competing under the current labor contracts.

I'll agree that unions were needed at the time they came into play. However, in my opinion, they wield too much control now.

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The "American" Cars are as good or better than many "Foreign" cars but there is also the issue of perception. The residual value of many of the cars offered by American companies is often lower than comparable cars offered by the foreign companies and that in combination with the higher labor costs results in an added cost of ownership.

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Originally posted by Steven Hockstein

The "American" Cars are as good or better than many "Foreign" cars but there is also the issue of perception. The residual value of many of the cars offered by American companies is often lower than comparable cars offered by the foreign companies and that in combination with the higher labor costs results in an added cost of ownership.

Very true that perception vs. reality is an issue. But most (if not all) of those cost of ownership calculations work off of MSRP; they don't take into account the fact that deeper discounts or rebates lower the initial purchase price of the US branded cars. But then again, those same discounts/rebates hurt the profit margin of the manufacturers.

It's a mess. I'm not a fan of a bailout based on what I've seen , but if done, any bailout needs to come with very strong strings.

I doubt that'll happen. That's the part that scares me.

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Originally posted by AHI in AR

The real issue here is the ability to compete on a level playing field, and that means union labor issues. The average hourly rate, including benefits, of a big three worker is over $73 an hour. Union, of course. Japanese cars built in the USA do it for about $45 an hour. Non union. $45 still sounds generous to me for manufacturing work.

Debunking the Myth

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It can't continue status quo. If all the bailout is, is an extension of the same, I'm against it.

I think the bailout should be guarenteeing the pensions of the workers and for warentees.

It is imperative that the labor cost is competitive with the imports.

From that point on, I feel the restructuring should be financed by private investment.

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Originally posted by kurt

Explain why we should be guaranteeing the pension plan for the retirees.

I would like a pension plan if they're handing them out.

IF there is going to be a bailout, I think those poeple deserve it. Listen, I would love a pension too, but in my life me decisions brought me to where I am and the "condition" of my pension. There are a number of people that have put in many years, should you now tell a retiree, "Sorry, go eat dogfood?"

If they did, wouldn't the taxpayer be paying for them anyway?

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Two choices:

1. Fix the problems, stop the bleeding. This choice is hard because it'll reduce benefits packages for workers and retirees. The retiree burden is drowning the big three in debt and the UAW keeps adding water.

I'm going to work as long as I'm able. I'd feel terribly guilty depending on the next generation to support me. When I cant work, I'll live off my assets. We've saddled our successors with debt that's almost insurmountable. It's unconscionable.

The big three all have plants in South America that are largely automated and incorporate suppliers, the suppliers inventory and work force, sub contractors etc. all under one roof to eliminate shipping expenses, delays and inventory shortages. The UAW simply won't allow this scenario and this scenario is exactly what it's going to take to compete.

Another problem is the short term profit mentality that yielded Hummers, Navigators and some really cool and fast Cadillacs that were small enough but got mileage numbers like Hummers and Navigators. There were short term profits in these vehicles but just like the seventies, US auto makers have ignored the sensible car market. And, just like the seventies they were caught with their pants down when gas was up.

2. This choice is easy. Shut it down.

Finally, until a few years ago I fixed cars for a living. I fixed anything that rolled through the doors.

American designed automatics fail at a rate of 10:1 over Asian imports.

Dissimilar metal issues like head gasket failures or intake gasket failures are almost unique to American design .

Ignition system failures occur 4x more frequently in domestic product.

Air conditioning systems in Asian cars normally last the life of the vehicle w/o service.

GM and Chrysler both used their own 4 cylinder engines each with its own catastrophic issue for close to 20 model years without ever addressing the issue because it occurred outside the warranty period.

Ford created three generations of vehicles that were almost undiagnosable and a few of them spontaneously jumped into gear or caught on fire.

I owned an auto parts store as well and served the retail/ wholesale trade for 23 years. My registration demographic was 48% Asian (counting cross labeled vehicles like Mazda /Ford and Toyota/Chevy) yet import sales accounted for less than 25% of revenue.

Quality comparisons are done, usually, based on the first year of ownership. The true test comes as vehicles near the 100,000 mile mark which is the mark most domestic vehicles start to fail. The ford Taurus ranked #1 as the best vehicle for years but that ranking was for first year ownership. At 90,000 miles, almost like clockwork work the Taurus needed a radiator and about half the car needed to be in boxes to install said unit for a 5x what it would cost on just about any other vehicle.

Anyway, believe me, we're not there yet. It's not just perception that sets us apart from the Asian imports.

Sorry, I think O'Handley took over my keyboard

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Yes. That pretty much sums up what I think.

Anyone's ever worked in an auto factory (Oldsmobile, graveyard shift in the pit installing shocks) knows just how idiotic it is. The ideas our boys come up with is new versions of muscle cars. And, Chrysler is now led by the moron that took Home Depot to the bottom.

So, because someone decided to drink the koolaid, and they managed to get to 30 and out, they now "deserve" a pension paid by me?

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Toyota builds a lot of its cars in Kentucky, just up the road from me. FWIW, We're still driving a 17-year-old Toyota Camry wagon that has no meaningful issues. Replacing the odd failed part (EGR valve, etc. is next) is cheap compared to a stinkin' car payment. I've replaced a radiator, two door handles, two window regulators and a power steering rack. About 135,000 miles on that one.

Oh, and our 9-year-old Toyota van is working fine, too. However, it did have a water leak that dumped water in the driver's-side floorboard. Cost $900 to fix that. And there was the $300 for the replacement of the liftgate handle. And the $600 for the new alternator and battery. About 120,000 miles on that one.

I have no sympathy for the Big Three. As my daddy would've said, "They did it to their own selves."

WJ

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Like Chad, I spent a little time as a professional mechanic. Sure it was 33 years ago but even then I'd noticed a big difference in the quality of automobiles. I went to work for a Chrysler/Toyota dealer in 1969. I was so young that they wouldn't let me work on the big American cars and relegated me to work on the Toyotas. At first I resented it. Then I began to see the subtle differences in quality and the way they were put together compared to American cars and I began to develop a healthy respect for them. From then on, until I went into the military in 1975, I worked on Toyotas with occasional short returns to the construction trade whenever my drinking would land me out of a job until another Toyota dealer would hire me on. I worked for about half a dozen Toyota dealers during that period and saw a constant progression in quality.

In 1971, I bought a Toyota Crown - one of only about 600 of that model imported into the US before Toyota stopped importing that model (They didn't re-import large cars again until the came out with the Avalon). American's didn't buy the crown; for them, it was a wannabe big car and didn't have enough doodads and couldn't compete with the large Chevy, Pontiac, Buick, Ford, Chrysler sedans. Compact car owners didn't want it because it was too big. I drove that vehicle for more than 17 years and never had any major problems with it - in fact, I've never had any major problems with any of my vehicles; guess that's the benefit of being an ex-wrencher. Sort of like that Subaru commercial, I drove it into a Japanese used auto parts place one day and parked it. The proprietor was happy to have it - he'd never seen it but every once in a while had call for parts that he couldn't fill - now he could. My point is that the Americans consumers had spurned a car that in Japan was a mainstay of the Japanese market in favor of American bling; Crowns never went out of production and continued to be sold all over the world - if you've ever been to Hong Kong or Japan, you've probably ridden in one when you hailed an airport taxi. After that Crown, I owned a Toyota Supra for 11 years - again, no problems; well, that is until a careless idiot ran into me from behind and totaled the car. After that, I was forced by circumstance of owning a franchise to purchase a Dodge Caravan; American cars had gotten better but still weren't anywhere near as good as the Toyota's I'd been working on in the 70's. I drove American vans for work from 1996 until 2003 and I wasn't impressed. In 2003 I bought a Subaru Baja. For the next two years I beat the crap out of that little car/truck and it never even hiccuped; when they came out with a turbo-charged model I turned it back in and upgraded. I've continued to beat the tar out of that little car/truck for the last 3-1/2 years and it's been 100% reliable. All it desires is oil and filter changes and the occasional tuneup; no wonder Toyota owns a 40% share of Subaru.

I don't have any confidence in the ability of the big 3 to learn from their mistakes; the number of American car manufacturers that's gone belly-up over the past 100 years is pretty long and nobody was standing around to bail them out. Daimler bought Chrysler and spent a number of years trying to make them profitable but in the end couldn't continue to tolerate the UAW so they unloaded them. Those UAW workers have been making a whole lot more than their contemporaries - if they didn't have enough sense to salt some of it away for a day like today, I have no sympathy for them.

There isn't any segment of the population that's been more severely affected by this mess than we have. While the newspapers spew doom and gloom about real estate and continue to predict that the value of real estate will continue to drop for another 14 months, consumers are sitting on their thumbs afraid to buy because they don't want the house to be worth less than they've paid for it in another year. Then there is the 4.5% interest rate the newspapers keep predicting is coming; rather than fuel sales of homes, it's got some consumers who can afford to buy sitting around saying to themselves, "Gee, maybe if I wait another month or two I can save myself a bundle on interest." Meanwhile, home inspectors are going belly-up for lack of work; should we now go hat in hand to Washington and demand they bail us out too? The way nature is supposed to work it's survival of the fittest. When you go around constantly rescuing the weak just before they are about to be eaten, they don't get any stronger, they just live a little longer until eventually, one day when the rescuer isn't paying attention, the stronger species takes advantage and eats the weak one. That's the way it is in the industrial/financial world too - by dumping money on those guys we'll just be prolonging the inevitable.

ONE TEAM - ONE FIGHT!!!

Mike

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It's not about the big three as much as it is about the guy that owns the diner around the corner from the bearing, aluminum, transmission, or whatever factory in anytown usa who now, can't make his bills because the fifteen or twenty guys per shift that he used to feed,are laid off.

The big three will make it. The suppliers may not.

Maybe they should ask for a loan from that self serving idiot that booked every room in a Washington hotel @ 1mil per room so the homeless and less fortunate can attend the inaugural.

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Ford CEO: $28M for 4 months work

Former Boeing exec got $18.5 million bonus, almost $9 million in stock and options and base salary at annual $2 million rate, according to proxy.

April 5 2007: 6:31 PM EDT

NEW YORK (CNNMoney.com) -- Struggling Ford Motor Co., which posted a record $12.7 billion net loss in 2006, gave its new CEO Alan Mulally $28 million for four months on the job, according to the company's proxy statement filed with the Securities and Exchange Commission Thursday.

I'm not sure it's just the hourly workers.

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I don't know much about money; but, as ridiculous as those salaries and incentives are (I mean, who really needs $28 million dollars for any job?), I bet the total of all money paid to all of the CEO's is only a scratch on the butt of a tick on the butt of a dog compared to the amount of money that it takes to fund and maintain the pension funds and fat paychecks, benefits and bonuses that all of the assembly line drones demand to keep them working.

There are non-auto-worker blue collar workers who slave their whole lives to send their kids to college and then they retire with nothing in the bank and only what social security can pay them. Their kids go off to college, work their butts off to earn a degree from Yale or Harvard, or whatever, and then when they enter the job market they are paid less than an unskilled/uneducated UAW assembly line drone.

Unions strangled the US steel industry the same way back in the day. Did you see the auto industry paying in money to help bail out the American steel industry back in the 70's when it floundered? Hell no!

I don't feel sorry for them at all.

I read yesterday about how AIG is paying huge "retention" incentives to it's executives now which are only Christmas bonuses in disguise. Instead of complaining about how AIG is abusing the money we gave them, the public should demand that the government call in the entire amount of AIG's loan immediately or seize their assets and auction them off lock stock and barrel. Maybe if they did that, this corporate greed would abate.

I knew I shouldn't have posted this one; it just gets me worked up and irate.

ONE TEAM - ONE FIGHT!!!

Mike

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The banks that we bailed out have managed to disperse over $2 billion in bonuses. When they were questioned about it, they said the bonus money "was money they already had; it didn't include any bailout money".

I wonder if they marked the bills with a magic marker so they could tell the difference?

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Regarding the issue of domestic vs. Japanese quality, I have a few observations.

Chad: I agree with a lot of what you posted, but I have to add this for your consideration: People buying parts to do their own repairs typically aren't working on newer cars; they're doing it because economic necessity forces it on them. Generally speaking, that means they're driving older cars. We all agree that older big 3 cars were largely crap. On the other hand, there are a few tight SOB's like me that make an occasional trip the the parts store simply because we generally don't want to pay someone to do what we can easily do ourselves. Never mind that I've run into some idiot "mechanics" over the years who knew less than I did. Like the one who insisted that a sticking brake caliper on the right side would make the car pull to the left.

To determine the REAL quality of current vehicles, you'd have to see what repairs are necessary a few years from now. It's kinda like when someone asks me who makes the best water heater, or A/C, or furnace now. I let them know that I can answer that in twenty years or so.

My car experience in the last dozen years or so is like this:

1997 F-150 with 109K on the odometer--replaced both power window motors within the last year. ($120 in parts and a day's labor total.) Also replaced the Pittman arm about 4 years ago due to a squeak. ($200 P&L for a professional repair. I was busy then and feeling relatively wealthy.) Other than those items, I've had zero cost for repairs. Not a single other repair trip except for the recalled cruise control wiring harness. Obviously, I am not including regular maintenance items like hoses, shocks, or the serpentine belt.

2001 Mazda Tribute--

This is a rebadged Ford Escape. The powertrain is Mazda, which Ford currently owns a good chunk of. 124K on the ticker and aside from a worn out set of end link bushings (a wear item), there is only one problem that I've ever had: a temperamental idle air control. Ironically, although I know the issue is simply mileage related, the one item that isn't regular wear is Japanese made. Oh yeah, I almost forgot...the brake booster seems to have a slight leak in the diaphragm or similar issue since it slowly consumes brake fluid but doesn't leave any spots on the garage floor.

1992 Dodge Caravan. Sold with about 77K on the odometer. No real problems that I recall. And I would recall anything over $100. (Remember, I'm cheap.)

2000 Chrysler Town and Country minivan: We kept this until it had 121K on the odometer. I replaced the tensioner for the serpentine belt when it started squeaking. I didn't wait for it to fail and leave my wife stranded. I forget the cost exactly, but I seem to recall $50 or less for the part and less than hour formy labor. There was also a recall for the cruise control or some similar item which we didn't pay for.

2006 Mustang GT: 33K on my "baby" until May 20 of this year when a 19 year old driver sending a text message nearly rear ended the car in front of her on I-40. No, that wasn't me; I was the unfortunate one in the lane to her left. When she realized that she was about to rear end a Lincoln, she locked up her brakes and skidded into me sideways, knocking me into the concrete barrier, rolling my car and totaling it. I, of course, was along for that unpleasant ride. (If any of you don't wear seat belts, WHY THE HELL NOT?) Anyway, in its relatively brief life that car made zero trips to the dealer, and I didn't repair anything myself. (Side note: with a manual trans and carefully considered shifting patterns, I still could get 21-22 MPG in mostly city driving. And I didn't baby it -- if I didn't want to accelerate hard at times, I wouldn't have bought the GT. Get rid of a lot of wasteful automatic sludgeboxes, learn when to shift, and we can all get better mileage.)

1989 Ford Bronco II 4X4. My favorite longevity story. I drove this old girl until she hit 200k. And I USED the 4WD functions, splashing through hub-deep water and clambering up rock-strewn hillsides. Vibration alone should have killed it, but it remained remarkably solid. Original engine and trans. Only replaced the water pump (once) intake gasket set (once) and valve cover gaskets (once) at differing points.

I would point out that my brother in law's Chevy Silverado of similar vintage was on transmission number 3 at 90K in year #4 when he finally wised up and sold it. And his truck was strictly a long-distance gentleman's commuter--never any hauling or towing.

Anyway, at 200K, there wasn't really anything wrong with my Bronco II, I had just set that as an arbitrary point at which to part with it. I sold it to my best friend who gave it to his 16 year old son. (Against my advice, I would point out, due to rollover issues.) Nevertheless, said 16 Y.O. boy was convinced that if he tore the vehicle up he'd get a newer one. God knows he's tried, but it hasn't happened yet...and he got it 4 years ago. Since then, according to my bud, it has only required a new radiator, new starter, new rear hatch lock/handle and new rollers for the window regulators.

Important to note is that I can't stand squeaks/rattles. I don't want to offend any GM fans out there, but my parents had a couple Cadillacs recently that from day one sounded like they were about to fall apart. I never could understand that unless I took into account the fact that your hearing goes as you age.

But before that was the '78 V-8 Olds Cutlass that had the plastic-geared, crappy transmission in it that was originally designed for 4 cylinder Chevy Vegas. It failed at 54,000 very gentle miles.

My favorite POS story? My dad bought a 1971 Chevy station wagon. New. I secretly suspect that he bought it because the grill looked like a Cadillac. Anyway, 1971 was the first year for the "clamshell" tailgate design where the glass retracted up into the roof and the tailgate descended into the area under the rear cargo floor. It seemed pretty cool. But shortly after purchase, the glass quit working and you had to push it up manually. It was fixed under warranty. Three times. Remember that the warranty then was only a year -- it was fixed 3 TIMES under warranty. After that, we gave up and pushed it up manually. More importantly, at only a couple years' age, the left rear door fell off into traffic on one of the busiest streets in the city. Just driving down the road, minding our own business...and the damn door falls off. As the comedian Ron White said in describing his tire repair at Sears, "it fell the f@#$ off." My dad eventually sold/gave the wagon to a lawn maintenance man for about a fourth of its book value. And that was not really considering that it had about 30,000 miles on it at the time. Given these experiences, I'll admit I have a historical bias against a lot of GM products.

(That said, I would really love to have a new Cadillac CTS-V. Definitely not your father's Caddy.)

The point to this long-winded post? I'm not sure. I simply had too much time to kill since my wife is out with a friend and I've got little to do. If you read all this, you only have yourself to blame!

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Chad: I agree with a lot of what you posted, but I have to add this for your consideration: People buying parts to do their own repairs typically aren't working on newer cars; ....

When I said parts store you thought AutoZone. A "real" parts store doesn't have shiny crap, or fancy show rooms. Instead it has miles of shelving, parts in boxes and drivers and pickers delivering the orders to the professional installer.

American stuff is much better than it used to be, but it ain't there yet.

FTR, I drive a GMC 1500, my wife drives a Subaru Legacy aka "mountain goat". I've never had a new vehicle and to date the most I've ever spent on a vehicle is just under 5 grand.

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Originally posted by AHI in AR

Originally posted by Steven Hockstein

The "American" Cars are as good or better than many "Foreign" cars but there is also the issue of perception. The residual value of many of the cars offered by American companies is often lower than comparable cars offered by the foreign companies and that in combination with the higher labor costs results in an added cost of ownership.

Very true that perception vs. reality is an issue. But most (if not all) of those cost of ownership calculations work off of MSRP; they don't take into account the fact that deeper discounts or rebates lower the initial purchase price of the US branded cars. But then again, those same discounts/rebates hurt the profit margin of the manufacturers.

It's a mess. I'm not a fan of a bailout based on what I've seen , but if done, any bailout needs to come with very strong strings.

I doubt that'll happen. That's the part that scares me.

Kevin,

My personal experiences regarding the cost of ownership are that the times I bought Ford products (a 1998 Windstar minvan, and a 1999 Ford Explorer). I thought they both were reliable and did not need any major work while I owned them. I sold them when they were four years old and they each had around 60K miles on them. I sold them for about 1/4 of what I paid.

After that I bought another Explorer and my wife leased the Honda Oydessy. After four years, My Explorer was worth 1/4 of what I paid and my wife's van still had over 1/2 of the original residual value on the four year contract. It cost me $150 more a month to drive my Explorer than it cost to drive the van. The were both valued the same when new. Again, we did not have any major problems with the vehicles.

My comment regarding residual value is that it seems to me that the public market does not value used American vehicles as high as foregn cars and that adds to the overall cost when compared.

FYI- I now drive a 4-motion Passat and my wife drives a Honda Pilot. The Honda is wonderful, the VW is plagued with electrical problems.

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I agree with Terrence that management is way overpaid. 70 bucks an hour isn't that high, and I think it is demeaning to call them drones.

Why is a small town lawyer worth $200 an hour?

Should not labor be given a right to retire?

What I think I know is that labor did not decide which models and which designs to build in the face of blistering and well managed competition.

I wonder which "too big to fail" will be lined up next with hat in hand, Wal-Mart?

By the way I have a 1978 Chevy C-10 pickup that I bought in 1992 for $1200 and drove as main work/personal vehicle till fall '04. Now is my "farm-utility" gravel and compost hauler. A straight-six, three-on column. When I take it Jiffy lube the kids there don't know how to start it. 20 MPG, they don't make-em like it no more.

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