Welcome to WebmasterWorld Guest from 220.127.116.11
There are already reports of futures markets bottoming out, and the day has yet to begin.
>>the inability of the UAW to accept lower wages has cost A LOT of people their jobs.
I'd like to stress that this is *not* a political issue, it's a matter of plain and simple economics and survival. Looking realistically at the big picture, smack in the middle of the thing is the labor union issue. Being practical, the auto industry is based in Michigan, but does include facilities in other states in the picture - so that across the board wage and benefit provisions should probably be figured accordingly.
In Michigan, both in the northern MI peninsula and in good neighborhoods in the southern Greater Metro area, you can rent (not buy) a nice 3-bedroom house with a decent lot (a house-not an apartment) for around $900 or so a month.
In California, in the SF Bay area (check out rental ads at sfgate.com) it'll cost a minimum of $3,500+ for renting a house (or even a condo). In the apt complex I live at in So. Calif. you'd have to pay $1395 or $1495 a month for a one bedroom apartment - and that's low for the area (a safe middle class neighborhood - you can even walk out on the street or take your trash out and not get mugged).
According to Federal HUD (Dept. of Housing & Urban Development) guidelines for reasonable and appropriate housing-to-income ratio, the appropriate percentage of income to spend on housing is 30%. $900 a month in Michigan (hqs and hub of the auto industry), figuring it to be an example figure of $900 a month to rent a home, equates to a monthly income of $3K. That isn't even close to current or recent reality.
The unions and bargaining agents on both sides of the labor-management table need to take geographical economic situations into account in their negotiations and realistically re-examine goals.
This isn't a political issue, it's common sense and survival that's at stake. Plus, the opinions of the average Joe-wage-earner come into play.
the inability of the UAW to accept lower wages
IMHO the inability of the UAW to move away from their Job Banks program, for one thing, is a neurotically serious problem. I'm a very pro-union person, but I can't see the sense of resisting Joe-average-citizen's unwillingness - and yours and mine - to pay laid-off auto workers for not raising hogs [www-users.cs.umn.edu].
Some of my friends with union factory jobs were making much higher salaries than I was when I got out of college with a computer science degree. I thought it was crazy then and it seems like things haven't changed much, at least as far as the auto industry goes.
[edited by: Jane_Doe at 10:17 pm (utc) on Dec. 12, 2008]
the people with union factor jobs often had obscenely high wages, often for basically unskilled labor type jobs you could learn in a day
Or at least make the salaries more in line with their value to the company.
I mean this to apply to the other end of the spectrum as well- get rid of the execs that are grossly overpaid for what they do.
Yes, that is also an important part of the equation. A friend (and many others) just got laid off from a company where the CEO commutes to work on a private jet where he lives in another state. The fuel costs on that jet alone could have helped out many families to buy basic necessities like food and health insurance.
I would rather my tax dollars (and my childrenís and future grandchildrenís tax dollars) be spent to save the jobs of factory workers than spent to save the jobs of the banking executives.
I also think the unions have a very valid point and I donít blame them one bit for protecting their interests. The US has already lost too many middle class jobs for people that work with their hands.
Itís almost disgraceful that the leaders of this country are willing to sacrifice an entire industry and cost the nation nearly one million real jobs while handing the very industry that crated this mess an open checkbook.
At seven companies, executive pension obligations are now over a billion dollars: General Electric ($3.5 billion), AT&T ($1.8 billion), GM ($1.4 billion), Exxon Mobil ($1.3 billion), IBM ($1.3 billion), Bank of America ($1.1 billion) and Pfizer ($1.1 billion).
Executive perqs are at least as big a problem as rank and file wages - quite likely more so. Reminds of the company (US Steel if memory serves me right) that had to use a cross shaped floor plan (rather than square) for the new headquarters in order to have enough corner offices for all their VP's.
Then, take into account hidden subsidies provided by other industrialized nations provided for their manufacturing base - things like National health care - and the "excessive" wages earned by the rank and file are perhaps not so excessive.
Those that would force the automakers into bankruptcy reorganization would do so to break the Unions by negating their contracts. Truth be known, base pay for autoworkers are competitive in all US plants, whether UAW or not. It is the benefits (retirement, health care, etc.) that start pinching the Big 3. Of course, they have been around 100 years and have a huge legacy work force collecting retirement.
Not an easy situation to fix. Socializing the industry will hardly work, yet simple handouts to execs will do nothing to end the perqs.
Too much greed...
On the other hand: The japanese and european car makers can probably thank their governments for the stricter environmental regulations in the past. The investments they were forced to make in the past to make cars more efficent now pay off. The result is, they are now competetive and will probably be able to survive the economic crisis. The car makers that were succesful in lobbying against higher environmental standards, because "it would hurt their competitvness" are now struggeling for survival. Somehow ironic.
A) It was already priced in the market, as it was known for a few days that it would most likely not pass, and the market had been going down most of the week.
B) Bush announced that they were going to use the TARP funds to cover the automakers until a long term solution is found.
What im woried about is people like Madoff, supposed pillars of the financial world, former chair of NASDAQ, and now up on charges on running a $50 billion dollar PONZI scheme.
The pension point is just very poor management and accounting on the part of the auto firms. They should have calculated their potential liability to each employee, whilst they were employed, and ensured they set aside and invested funds to cover that liability at that time. Instead they just closed their eyes and hoped money would fall from the sky (err, government?) at some point in the future.
The long term solution will come only when so many jobs have moved overseas that the cost of living rebalances and means that Asian car manufacturers have just the same overheads as US car manufacturers. That is; Asian countries benefiting from cheap labour cannot possible last in the long term.
What I'm worried about is people like Madoff...
But, in regards to the Big Three, I would be for the loans if someone could explain how it is going to do any good.
It is very difficult to get a handle on this situation--so much is being written about it, it is like trying to drink from a firehose.
But, I would recommend this one article: No answers, but some food for thought:
From the article:
So hereís a little experiment. Imagine that a Congressional bailout effectively pays for $10 an hour of the retiree benefits. Thatís roughly the gap between the Big Threeís 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 ó 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.
Thatís 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.
They have already failed. We have to let them finish the process if we hope for them to become successful again.
its getting to the point where the baby boomers are getting pushed out of their positions and a new breed of leaders is coming around...
these execs got greedy becuase they were running the systems for so long...
[edited by: lawman at 11:14 pm (utc) on Dec. 15, 2008]
ll of these old farts, who have been in these positions for the past 20 years or so, who grew up on old school principles in life, need to be flushed...
Did you see the Saturday Night Live skit about the auto execs? It was hysterical.
It had the three of them trying to car pool together to get back to Washington for the second round of hearings, but they had trouble because their American cars kept breaking down along the way. At one point they ended up in St. Louis because the car's navigational system wasn't working, so they had to replace it with one from Radio Shack.
If you can find it still on Youtube, it is really witty.
geographical economic situations
That's what struck me immediately about the deal the UAW was being asked to accept. The Japanese automakers opened plants up in impoverished areas of Appalachia and the Deep South. (And hey, that's great.) The cost of living there is a lot lower than in the midwest.
Steep paycuts to the UAW workers would certainly mean many would not be able to afford their mortgages, adding to the foreclosure crisis.
They were referring to the fact that the US has squandered its infrastructure, industrial base, educatonal system and even food production through years of neglect (sometimes willful).
On a similar note, a couple months ago I had a conversation with a University of Texas professor who observed that the US has managed to export much of its food and textile industry, and is seeing the housing industry collapse. She went on to point out that food, clothing and shelter are the primary needs to support life and asked the rhetorical question of when the US was going to wake up and see what was going on.
With the Fed setting the overnight rate at .25% one has to wonder when they will be paying people to borrow $'s (i.e. a negative interest rate).
All in all a rather bleak picture...
one has to wonder when they will be paying people to borrow $'s
Although, when you think about it, -1% for a savings account compared to -40% for the stock market sounds like a pretty decent ROI, comparably. :)
Which is a good thing. A Bankruptcy would set off a chain reaction of bankruptcies and eventually would have touched us all.
I normally dislike the government using tax dollars to help private/publically owned businesses but these circumstances are extraordinary.
I normally dislike the government using tax dollars to help private/publically owned businesses but these circumstances are extraordinary.
Right, it's not just the car makers but all the supporting industries, too, like the parts suppliers, dealerships and raw material providers.
A friend thought of a good point. During World War II he said the car factories were what they used to churn out tanks, military trucks, etc. So if we lost the American car industry and there was another war of World War II proportions, where would the defense heavy equipment come from? You can't just build factories like that overnight.
I personally think this is too fine of a commercial issue for the gov't to be involved in. Yes, there would be pain if they stayed out of it but they should be managing the economy in general terms - not specifics. The fact is, nobody's bailing out my business, the auto industry shouldnt' get a pass either just because some combination of managers/employees/shareholders have been soaking it up for years without accountability. Let them be accountable now. And if built your business around a business like the auto industry, tough cookies. Are we going to get bailed out if Google quits sending us traffic to our sites?
I also like the idea of a managed bankruptcy. Let them fall because they're poorly managed builders of garbage but if they must slow the fall, then do it through bankruptcy - let the company die. Open up the industry to competitors rather than trying to prop up century old antiquated businesses. I mean, how many decades has it been since we've seen an actual new north american car manufacturer? 1920?
And the whole structure of having hundreds or thousands of tiny suppliers? It sounds very inefficient to me and seems to be part of the current problem.
IMHO it's a good decision with sensible conditions. It's not only a matter of preventing further economic catastrophe, but the industry has, at times, a crucial role to play in national defense.
It can not be compared to other bankruptcies, like the airlines are usually the ones people point to. Who goes back to an airline 3 years after you take a $300 flight and asks for parts support or warranty?
Also, who would be foolish enough to buy a car from a company that is in bankruptcy? There is no way you can expect to have spare parts available or a warrantied honored. It would have been a death sentence for all the North American car companies.
p.s. these companies are presently heavily involved in the Defense industry, so its more than a hypothetical that its a national security risk
Realistically, the only way the car makers can survive is if they shed workers and cut salaries. So near-term bankruptcy or long-term restructuring- the result is going to be the same: thousands of workers are going to be out of their jobs.