“Does anybody know whether Barack Obama knows how to change a tire? “
Similar thoughts from Krauthammer;
Obama owns GM, and I don’t know about you, Bret, but I’m deeply reassured that the largest company in America is owned by a guy with the vast private sector experience of Barack Obama.
His speech today, as always, was eloquent, and it appeared clear, but it really is not. It’s not exactly clear what he is aiming at.
As I understand it, I think, though, the plan here is to send GM into Chapter 11, either a real Chapter 11 or a disguised one in 60 days, and to send Chrysler over to Fiat or the wolves, whichever will take it.
With GM, the reason that I suspect it is going to end up in Chapter 11 is because he would not have offered the guarantee on warranties otherwise. The reason people are worried about a Chapter 11 is, that the argument is if that happens, people will not have confidence in the company, and the sales will dissolve.
But you have got to ask yourself as a constitutional aside where in Articles II of the constitution is the president allowed to unilaterally guarantee auto warranties? I mean, tomorrow it will end up — we started with bank deposits, money markets, auto warranties, and tomorrow it’s toasters.
But if you have Democrats in power, nobody asks about the constitutional questions.
ET:
From Hoover’s Business Intelligence:
Employees 2008 (total – blue and white collar):
GM – 243,000
Toyota -316,000
Now, I’ll admit that GM is supporting a lot of people through the so-called “jobs bank”, and I’ve said that the after-effects of the 1970 UAW contract is the major problem facing all of the old Big 3. But I’ll say it again: the thing that made GM give in to that contract was the threat of anti-trust, and that wasn’t the unions’ fault – it was people like the fatuous John Kenneth Galbraith (who as a Canadian, should have known better!) who were insisting that GM should be broken up.
GM has long been subject to threats and penalties under anti-trust. Pierre duPont, of the eponymous chemical firm, was selected as president of GM in 1915, and helped lead the firm into its former spot as the #1 automaker in the world, was forced to resign in 1957 (along with other members of the duPont family on the board), and the duPont firm was forced to divest itself of its huge (23%) stake of GM in 1961. Presidential loser and scrambled egghead Estes Kefauver led a number of anti-trust “investigations” targeting the US steel and automotive industries in the 1950’s. In the 60’s, the US DOJ filed an antitrust action against GM for monopoly actions in their diesel locomotive division. In 1962, GM was brought to court for limiting distribution; in 1966, it lost the case, and was enjoined from refusing sales to discount auto houses.
Given that history, it’s no wonder GM was scared of another antitrust case if it had tried to break the UAW. It’s hard to blame the union for getting every thing it could get in the circumstances; as I noted earlier, the US auto industry seemed supreme and invulnerable to challenge. I don’t support the armed strikebreaking activities used in the US in the early 20th century, but I equally don’t support the unarmed thuggery unions now exhibit on picket lines while gutless police and politicians look on. Again, I blame government, not the unions, for the problems.
Oh, and just for the icing on the cake: in 2007, GM and Chrysler looked at merging, a move that might have helped both companies survive. But the talks didn’t go anywhere because of, to a large part, threats of – you guessed it – antitrust actions.
I don’t really know if Americans will “wake up” — maybe a vast majority of them already have, but are afraid to do something about it; everybody feels as though they have too much to loose perhaps.
I really am beginning to doubt that the Republicans will sweep the ’10 or ’12 elections, or, even if they did, that it would help much.
As for America turning fascist — the heart of the people themselves, no, a thousand times no — a vast, overwhelming majority of Americans would never willingly support fascism/totalitarianism.. But the keyword is “willingly”; Americans are completely susceptible into being conned into fascism, because they could never fathom such a thing happening here or they themselves accepting it. We’ve been on the road to fascism since FDR, and maybe that road is merely coming to the final stages of completion with Obama. There’s a line from Norman Mailer’s “The Naked and the Dead”: “American is going to absorb that [facist] dream…When you’ve created power, materials, armies, they don’t wither away of theri won accord…Your men of power in America…are becoming conscious of their real aims for the first time in our history.” That line really has been sticking in my mind a lot lately — not a fan of Mailer persay, but I thin there’s some truth to this.
Interesting perspective, KevinB
bear – my point with the unions with regard to your comment about the failure to fix problems is that the profits aren’t returned to the research and development staff to fix those problems. The money goes to maintain the regular workers.
kevinb – I don’t see that monopolies enable industries to deal with over-employment, unproductive workers and high benefits costs.
I certainly don’t support monopolies as they are economically unhealthy; therefore, I support the anti-trust laws.
Essentially you are saying, if I understand you correctly, that a monopoly enables an industry to reject or counter a union. I don’t see that at all.
A union can bring a monopoly to its knees by its strikes and its ‘work to rule’ and so on and it can do this faster and easier than in a competitive environment when both workers and consumers can move to another producer.
After all, the TTC, the Toronto Transit Corporation union holds ALL Toronto citizens hostage when it goes on strike; there’s no alternative to the TTC and therefore, the union’s power is supreme.
You say it’s hard to blame the union for getting everything it could get. I find it very easy to blame the union for changing the FOCUS of, and the PURPOSE of an industry, from the product to the worker. An industry is not supposed to exist to pay its workers; an industry is supposed to exist to manufacture products to sell.
The unions have, every one of them, and every time, refocused the purpose of an industry, of a corporation, of a government bureaucracy from making goods, from manufacturing products, from providing services….to ONE focus – the expanding comfort and well-being of the employees of that industry, that corporation, that bureaucracy.
I think it will not be long b4 people will be longing for the days when “unions” were all they had to complain about.
The real issue is that the US has a bonified sociopath for a leader and to make matters worse he is a fascist with socialist plans for that country. Never trust a leader who does not place his hand over his heart when the national anthem is being played…better yet, do not elect a president who is not a US born citizen.
Lou Dobbs is gaining my respect. He is on CNN, but he actually questions Obama’s actions-huge surprise coming from CNN. So far I have been impressed…I said so far, time will tell.
The US needs our prayers. Russia and China have recently stated they want a global currency.
ET, just so you understand the scheme a wee bit better. The Parts Distribution Centres are NOT unionized. Did you know that? Most people ASSUME that all blue collar GM people are union. That sir, is just ONE of the MANY things people don’t know. I’ve dealt with GM for over 20 years and what I know you could fit in a thimble. What YOU know won’t even begin to fill a pin head.
So heres a recap…
1. The unions are costly
2. GM Fleet is so chickenshit of the big leasco’s they cave into ridiculous & expensive concessions.
3. GM Fleet would kill it’s first born to claim highest sales.
4. The engineers are stubborn and don’t admit to mistakes.
5. GM Sales pisses cash away by offering idiotic 0% financing.
6. While we’re on the entitlement kick, heres another issue; in 1984 the standard warranty for all GM products EXCEPT fleet was 12 months / 20,000 km. Now, there’s a BASE warranty of 36/60,000 + 8 years for converters & PCM’s + 5/160,000 km (I think) on parts of the drivetrain. If you think the Union costs money, just think of the warranty liabilty that’s incurred just to say “Best warranty in the business”
I’ll say it again. The elephant doesn’t want to change, it wants US to change.
I worked for GM for 40 years as a salary employee.
Wagonner should have gone years ago. Every time he opened his mouth, Wall Steet sold the stock. Obama made the right decision for all the wrong reasons.
A big problem with GM has always been it’s muti-layered management. Hard decisions are always subverted, changed, or ignored by each layer looking after themselves. It is only in the last couple of years that GM trimmed out the fat.
Philosophically, GM has always been a very conservative company, not willing to take many risks. When you sell 50% of the full size pickup, for example, you don’t like to upset the customer base with radical changes. People expect a Silverado to be a Silverado, just like F-150 owners expect a F-150. When you build a new Ram or Tundra, you can take risks because the probability of attracting new customers is far greater than upsetting your previous owners.
Structurally, GM was hampered with the wrong products at the wrong time, and an inability to change quickly. Dropping a product line and bringing a new one on takes at least two years and if the public taste changes within that decision loop, you always have wrong product for sale.
During the 80’s and 90’s, truck demand was growing at a fast pace. In 1980, 2 cars sold for every truck. By 1995, car and truck sales were even. Yet GM, remaining conservative and safe, never got beyond a 60%/40% car/truck mix. In point of fact, GM could never build enough trucks to satisfy public demand, and ended up with too many cars nobody wanted.
The demand for trucks was still outpacing cars in 2007. Then a couple of things happened. in early 2008 gas prices jumped, and people stopped buying big vehicles (SUVs). Then the summer of 2008, the housing bubble burst and homeowners and contractors stopped buying trucks (Pickups). Then in fall 2008 the banking bubble burst and folks stopped buying cars and trucks, period. Here is a challenge: stop building half of your production without hurting anyone, oh, and in the process, try not to trim the Ontario GDP by more than 30%.
Wagonner should have gone years ago. But Obama Motors will be a regulatory disaster. He can back all the warranties he wants, but his new Green designers, his new Union production managers, and his carbon trading sales department will kill the new car business dead, Toyota and Honda included.
Welcome to the new Cuba.
KevinB
your “angle” sheds new lite on the problem, but ET is absolutely correct on her position re; unions. I had one of the big3 as a customer, known people in management of 2 of the big3, and know many workers in all of the big3, and productivity , output per wage dollar spent, is out of whack big time. You have to do the analysis differently than what has been done to date by damn near everyone. This also applies to “quality”, as you don’t destroy and then rebuild reputations overnite, so when people talk quality comparisons, do so over the last 10 -15 years, and the true picture will become clear!!
I just did a little, informal survey at work, and nobody I talked to would buy a new GM or Chrysler vehicle now. Who will be the customer base for these clowns?
I wonder if people actually consider reliability when comaparing Toyota, GM and Dodge? When I’ve read consumer reports and lemon aid guide the Big 3’s vehicles are usually far less reliable, probably meaning much more warranty repairs. Warranty repairs have to come out of somebody’s pocket. Personally I buy Japanese for the reliability.
Bear, talking about the elephant not deviating from its course.
I’ve noticed something over the last few years. Everybody is nostalgic for American muscle cars. They are going for million dollar prices at auction.
Ford jumped on this hard, and released the new Mustang. Which is a real Mustang looks like one, goes like one. Too expensive for kids to buy though.
Chrysler woke up and smelled the coffee, releasing the 300, the new Charger (which I’m sorry, ain’t no Dodge Charger) and -finally- the new Challenger. Which by all accounts doesn’t suck, but its really not as cool as a real Challenger. For my money the ’70 Challenger is the very definition of cool. All too expensive for kids to buy as well.
Where’s GM? New Camaro costs $40K++, not released yet. Missed the boat, big time.
But the truth is, they -all- missed the boat. There is a thriving industry producing brand new 1969 Camaro bodies, Hemi Cudas, Chargers, Mustangs, Challengers, re-creating all these Detroit muscle cars, and the Big Three are -not- in it anywhere. All produced in China on new tooling. You can have a brand new 1969 Camaro, ‘Cuda or whatever with the upgrades of your choice like suspension, aluminum engine, roll cage, brakes etc. for a price pretty competitive with a full dressed factory unit from the dealership. Or you can go nuts and spend $100k, fat wallets are always at risk in the car biz.
The Big Three could re-release their previous hits with minimal engineering upgrades and sell all they could make. Every gear head and magazine writer in the WORLD has been screaming this at them for nearly twenty years. Who’s making that money now? Chicoms.
And -that- is why GM is begging for scraps from The Messiah. They are IDIOTS.
In MSN finance… Obama has decided bankruptcy is best for GM. I wish this IDIOT would stop making anouncements in the evening AFTER the markets have closed!
(Wagoner was not fired he was asked to step down)
Hmmm… I was asked to step down from a job once many years ago. Thought it meant I was fired. Didn’t know I had a choice in the matter.
Posted by: dj at March 31, 2009 9:23 PM
> In MSN finance… Obama has decided
> bankruptcy is best for GM.
Sorry folks, Obama is right. GM is bleeding billions every quarter. Sad to say, the best option for GM US chapter 11 and hope to rise anew from the ashes. The only way GM and Chrysler can continue “as is” is by having the US and Canada keep throwing money at them. That is obviously *NOT* acceptable.
To have a hope of surviving, GM must chop off major segments of its dealer network as well as some product lines. You may not be aware of this, but thanks to extensive lobbying of US state legislatures by car-dealer associations, it’s a helluva lot more difficult to “fire” a franchise than it is to fire even a UAW autoworker. There are 50 sets of laws GM has to deal with. In some states, it is flat out impossible to “fire” a franchise. They simply get their lawyer to send GM a letter demanding a pile of cash compensation. A million is the starting point. Example… in 2000, Oldsmobile was selling like 1% of US auto sales, and GM decided to shut down the brand. It took a billion dollars, and four years to settle with the dealers. That was in “good times” when they could switch some dealers to their other brands, and there weren’t that many dealerships to begin with. Today, it would be horribly expensive to shut down Hummer, Saturn, and Pontiac. Those contracts can only be broken by Chapter 11.
I preface with “I don’t like unions but” I’ve told more than one person (from a weird sort of sarcastic point of view)…
We have it all wrong here, we don’t need to get the unions out of GM, we need to get the Unions INTO Toyota!
The 1st time I said that, everyone just roared. The only thing is, once full pension load kicks in at Towyota we won’t need to install the union. The train wreck has left the station and in another 20 years we will see the carnage.
John, having been on the receiving side of GM decisions, trust me the dealer net was trying to warn you guys 20 years ago.
ET, excellent posts as usual. One more point, late last year when GM‘s problems were becoming news, there were some stories on what GM supposedly owed the union, something like 12 billion. This was to have been due sometime this spring, March or April, can’t recall. I think it was something to do with the union’s contracts and their management of pensions and health care, stuff like that. Or has this already been resolved with the previous bailout?
Wagner was not fired because GM would have been on the hook for severance and pension worth over $20 million.
If the company declares bankruptcy, all pensions and severance would/could be gone in the flick of a pen.
Cheaper to keep Wagner at this point.