The destruction of GM and Ford - To save or not to save them!

C M Edwards · 2005-05-10 10:10:11

GM and Ford (why aren't we equally hard on Chrysler?) need to pull up their socks, that's all.

Perhaps they already are.

Current US bankruptcy law (even with recent restrictive changes) still provides protection against debts too large to pay. GM and Ford are apparently in this situation. However, that law also often requires that large companies, in exchange for receiving bankruptcy protection, restructure themselves into corporations that will not immediately fall back into the same economic traps.

Deliberate reduction of capacity prior to declaring bankruptcy may both strengthen their case (by increasing the ratio of debt interest to yearly income) and ease implementation of the restructuring plan that they must submit to the court.

Bankruptcy also gives the companies license to renegotiate union contracts.

The lawyers and accounting departments at these firms were not dozing peacefully at the time this plan was proposed.

My guess is: GM and Ford are planning to claim bankruptcy protection within the next year, and are preparing themselves now. This plan for reducing production - without selling it off - is clearly a precursor to ease their court ordered restructuring.

Martian Republic · 2005-05-10 18:09:38

GM and Ford (why aren't we equally hard on Chrysler?) need to pull up their socks, that's all.
Perhaps they already are.
Current US bankruptcy law (even with recent restrictive changes) still provides protection against debts too large to pay. GM and Ford are apparently in this situation. However, that law also often requires that large companies, in exchange for receiving bankruptcy protection, restructure themselves into corporations that will not immediately fall back into the same economic traps.
Deliberate reduction of capacity prior to declaring bankruptcy may both strengthen their case (by increasing the ratio of debt interest to yearly income) and ease implementation of the restructuring plan that they must submit to the court.
Bankruptcy also gives the companies license to renegotiate union contracts.
The lawyers and accounting departments at these firms were not dozing peacefully at the time this plan was proposed.
My guess is: GM and Ford are planning to claim bankruptcy protection within the next year, and are preparing themselves now. This plan for reducing production - without selling it off - is clearly a precursor to ease their court ordered restructuring.

You bring up the idea of reducing capacity for building cars. Ok, there is an over capacity in the car building business of America of somewhere in the order of 30% to maybe 50% percent. Which means that we would have to idle between 30% to 50% of all the capacity in all the Car factories in North America. Or shut down 30% to 50% of all the car factories in North America.

Do we want to do that?

Even if we do that, it still not going to solve GM or Ford problem and nor will it stop the collapse of the US Economy either. This strategy, may or may not slow down the collapse, but it will do absolutely nothing to stop either the economic problems of the United States or GM or Ford.

Are there any other solutions out there to solve our problem?

Larry,

MarsDog · 2005-05-10 19:49:32

Or as some of my co-workers have said, "buy American, buy Toyota."

At the collapse, USSR was just a military shell, unable to produce or control its empire.

First in the world is the US military.

Perhaps, to stave off collapse of the global empire, Japan, Taiwan, Iraq, India, South Korea, South America etc. could pay US, for protection ?

Martian Republic · 2005-05-10 20:59:07

The questions you raise are all over the map. Why are Japanese and Korean automobile factories doing so well in the U.S. and Canada? Why is it necessary for the U.S. to go it alone in space? Why don't any of you pick up on the clean air aspects of hybrid gas/electric cars, instead of harping on "dissapointing" fuel economy? GM and Ford (why aren't we equally hard on Chrysler?) need to pull up their socks, that's all.

No, I'm not really all over the map. The same problem that affecting GM and Ford is also affecting the air lines, Boeing and Lockeed too. We have system wide collapse going on inside the United States and not just an industry wide collapse of the auto industries and not an isolated case. For example, the air lines go into bankruptcy re-organization and get down sized and in a few years they go through bankruptcy and down sized again. This may happen three or four times before they down size out of existence. All the major air lines inside the United States are in trouble. The only air line that seems to have avoided the problem for right now is Southwest Air lines, but as the other carrier go out of business, it will then be Southwest Air lines turn to take those hits. As those air lines go out of business or get down size, because there losing customers, there not buying air planes which Boeing manufactures. So Boeing is losing tens of billions of dollars in air planes sale, because those air lines aren't buying air planes anymore. Every business that has a factory base for making there money is running into those same economic hard times.

If someone would have told your that both GM and Ford would have this kind of performance twenty years ago, you would have told them that they were crazy and that they live in fantasy land or there tell some fairy tale or something.

Larry,

dicktice · 2005-05-11 08:14:52

I can't allow you to turn my questions into end scenarios for you to slaver over in your apocalyptic view of our future. You pointedly ignored the Japanese and Korean automobile factories' ongoing success in the U.S. and Canada. Airlines need only to reroute, based upon Global and local satellite-based positioning systems. Railroads need only follow the European passenger friendly inter-city travel examples. The new car-replacement market, following citys' legislation against all vehicles that engine-idle in traffic, will sustain the new-car automobile industry for at least a generation. Boeing, Lockheed, etc. will continue in business, as well as Airbus Industries, until we decide to go back to ocean liner transportation across the oceans. For every moan from now on, how about coming up with a solution suggestion or two? Doom and gloom scenarios traditionally come from old timers like me, but your recent pronouncements make me feel like a spring chicken!

C M Edwards · 2005-05-11 15:29:47

Even if we do that, it still not going to solve GM or Ford problem and nor will it stop the collapse of the US Economy either. This strategy, may or may not slow down the collapse, but it will do absolutely nothing to stop either the economic problems of the United States or GM or Ford.

The very fact that Ford & GM are attempting it suggests that they hope it might solve some of their problems, and I suspect that it will. They still have sufficient resources to meet overseas competition if they can just get the unions to ease off the trigger and rid themselves of some of that crushing debt. Bankruptcy could do that for them.

Maneuvers like this are how companies get through hard times.

Another rule of thumb for surviving financial difficulties like this is: Do not try to "save" the economy all by yourself. Conservation frees up funding faster than new development can generate it, and that remains a true and useful fact whether it boosts the local economy or not. If you truly want GM and Ford around ten years from now, it should please you to see them looking after their own interests - and ignoring yours.

We are right to worry about an economic downturn in the States, and not just because of GM & Ford's troubles. The price of goods is beginning to rise to meet recent increases in fuel costs. The US Federal Reserve's efforts are reaching their limits - interest rates have been cut so much that our economy now has an inverted interest curve. That means that long term interest rates were cut so low that it now costs more, in total, to borrow money over short terms than it does for loan terms of years or decades. This chases away short term investors, and usually precedes an economic recession.

For those interested in damage control for space travel, try promoting diversity. Diversity in a business often insures that something makes enough money to stay solvent, even during a downturn.

MarsDog · 2005-05-11 17:51:46

http://www.parapundit.com/archives/002567.html]Toyota Opts For Robots As Japan Rejects Unskilled Immigrants

"We aim to reduce production costs to the levels in China,"

I cannot see any hope for the adversarial Union and
Management production methods of Ford and General Motors.

Turn several factories into historical theme parks, for Japanese tourists ?

Martian Republic · 2005-05-11 23:48:34

Here is an update on GM and what going to happen to GM in the not too distant future.

http://www.rense.com/general65/gm.htm]h … l65/gm.htm

Larry,

MarsDog · 2005-05-12 13:37:53

The wealth and efficiency of US centered Global Financial Empire is increasing. Financially inefficient operations are let to die, so that the money can be used, somewhere else, more efficiently.

Whose interests are promoted ?

http://www.alan-greenspan.com/] Greenspan, who remained friends with Rand until her death in 1982, was greatly influenced by her philosophy of Objectivism, or the pursuit of economic self-interest to the exclusion of the interests of society as a whole.

Money interests of the owners of the Global Empire, over the US voting worker ?

Martian Republic · 2005-05-12 20:26:16

The wealth and efficiency of US centered Global Financial Empire is increasing. Financially inefficient operations are let to die, so that the money can be used, somewhere else, more efficiently.
Whose interests are promoted ?
http://www.alan-greenspan.com/] Greenspan, who remained friends with Rand until her death in 1982, was greatly influenced by her philosophy of Objectivism, or the pursuit of economic self-interest to the exclusion of the interests of society as a whole.
Money interests of the owners of the Global Empire, over the US voting worker ?

Actually what is increasing is worthless paper, but the physical economy is collapsing. There about four hundred trillion dollars of it and it about ready to deflate like a big bubble that goes "POP"! When that bubble does pop, it will blow out the entire economy. If these policies to dismantle GM continue, when you do start looking to see who can build something or rebuild the US Economy with physical goods and service, there won't be anybody around that can do it. But, you will have trillion of dollars of worthless paper though. So eat that trillion dollars if you can or try and fly that worthless paper to the moon in a rocket ship made of paper if you can.

Money is not wealth. It just a medium of exchange between goods and services and should never be anything more than that. It for expediting the trading process between goods and services that we would like to have in a trading system. That is why you should never sacrifice factories for short term paper wealth which only has value if you have those factories that produce something that you want to trade with for something else you want to have. If you have no way to produce anything, then your paper is worthless. If I have a limited amount of food and there not enough for both of us, I'm not going to sell it to you for thousand of dollars or for millions dollars or for billions of dollars or even trillion of dollars. The food would not be for sell at any price, even if you had billions of dollars worth of Gold either. I will keep that food for myself to eat and you can starve to death.

The other part of the money system is the right to generate credit, which should only be used to generate physical wealth and needed infrastructure so you can generate more physical wealth at a higher rate of return in the future.

Larry,

Martian Republic · 2005-05-15 12:13:26

Here are several leaders of the United Auto Workers or the UAW. There primarily regional leaders and the top level leaders of the UAW. These leaders are like over the state of Michigan, Ohio and a small section of Texas. There on the web cast below, discussing the collapse of GM and Ford with Harley Schlanger and it importance to the United States. They go over the tool principle of a productive economy and what makes a productive economy. It about an hour and a half long, but it worth listening to.

http://asx.ljcentral.net/wms/eir/tls/20 … _en_hi.asx

http://asx.ljcentral.net/wms/eir/tls/20 … _en_lo.asx

For anybody that doesn’t know the difference between generating paper and calling that the economy vs. having a physical economy, then listening to this may help you figure out what the difference is.

Larry,

MarsDog · 2005-05-15 23:49:04

Listening to the UAW position;

Yes, GM and Ford could retool to produce military hardware, tanks rockets etc.
But is that a financial positive for the Empire ?

As for Union pensions;
better government sponsored for all, rather than for an exclusive elite.
United Auto Workers lobbied for special status, not the benefit of all.
They should not expect universal support for their special status.

Dumping starting motors to influence legistlators may inconvenience and irritate;
But the lawmakers know where the votes are coming from.

End for Ford, GM, United Auto Workers Union is not the end of US industrials.
It is a step in freedom to choose efficiency.
The Union had the freedom to promote its failure.

Martian Republic · 2005-05-16 18:43:18

Listening to the UAW position;
Yes, GM and Ford could retool to produce military hardware, tanks rockets etc.
But is that a financial positive for the Empire ?
As for Union pensions;
better government sponsored for all, rather than for an exclusive elite.
United Auto Workers lobbied for special status, not the benefit of all.
They should not expect universal support for their special status.
Dumping starting motors to influence legistlators may inconvenience and irritate;
But the lawmakers know where the votes are coming from.
End for Ford, GM, United Auto Workers Union is not the end of US industrials.
It is a step in freedom to choose efficiency.
The Union had the freedom to promote its failure.

I actually even wonder if you even lessened to it and if you lessened to it, did you actually hear what they were saying.

You seem to equate efficiency with cheap prices. But, if you can't buy the product, because you don't have a job.

Then who really cares about cheap prices?

Or who cares about your idea of efficiency based on cheap prices?

It all come down to working for twenty dollars hour on making auto mobiles and thirty dollars an hour for overtime and have a budget to buy an auto mobile with the money you make.

Or either being unemployed and trying to buy a cheap automobile with the money you don’t have.

Or making eight dollars an hour part and trying to buy a cheap automobile with the money you don’t have enough of.

Even if buy a cheaper automobile is your goal or as you put it, it more efficient:

Then who would really care if your idea of efficiency get met or not met?

If the American people can’t have a living wage to live on, then they will rebel rather than choose to die, because they have insufficient funds to live on. The American people should not just sit by and die so that they can honor your idea of what efficiency is in the market place. Beside, your preaching the distruction of the United States as a nation, which will happen, your also are preaching genocide too. These policies that you endorse will kill people on a large scale. There is no other possible outcome with these policies, but mass starvation. Because, the only way that you can enforce those kinds policies that will cause mass starvation inside the United States that you endorse will ultimately be at gun point. In the not too distant future, the United States will look a lot like Iraq, where we are losing an average of three or four solder a day. You will basically have to find an army of maybe a million men or more to enforce your idea of efficiency and be prepared to lose about ten or fifteen solder or more a day in do it.

It is because of these polices that you endorse, you would by yourself sabotage any serious colonization program in space that would come along if you were in charge of that program. You would make the same mistake over and over again and never figure out where you went wrong, because it outside your ability to understand what make a real economy happen and how to make it happen in space. Talking to you, is like talking to a wall. You can’t seem to get it through you head, it more important to have job, than to be able to buy something cheaper.

Larry,

MarsDog · 2005-05-16 21:39:17

If the American people can't have a living wage to live on, then they will rebel rather than choose to die, because they have insufficient funds to live on.

Empires are built on inequality; Romans had their slaves, so did the Turks.

Black slaves picked cotton, now the Mexican immigrants are on the bottom.

==================

United Auto Workers and company managers, need cheap labor, outside of the Union, so their money can buy more. Will the voters earning minimal wages cast their votes for a GM and Ford bailout ?

Martian Republic · 2005-05-17 07:45:11

If the American people can't have a living wage to live on, then they will rebel rather than choose to die, because they have insufficient funds to live on.
Empires are built on inequality; Romans had their slaves, so did the Turks.
Black slaves picked cotton, now the Mexican immigrants are on the bottom.
==================
United Auto Workers and company managers, need cheap labor, outside of the Union, so their money can buy more. Will the voters earning minimal wages cast their votes for a GM and Ford bailout ?

What your suggesting is a recipe for mass murder through starvation and the reduction of 80% of the US population who will be forced into slave labor with no healthcare and/or in shanty towns across America with no sewers or running water or electricity either. That those 80% of the American Population will have absolutely no hope to elevate themselves out of this poverty, nor will there children have that option either. This is the kind of America that you suggest that we embrace. But unless I miss my guess, most of the people on this board will be in that lower 80% of the American population that will get marginalized when your idea of Empire comes to pass.

I'm old enough that I remember an American where over 80% was doing very well and there were policies that would have help the remaining 20% or given them the option to elevate themselves out of poverty and into the middle class. You defend elimination the middle class America and further oppressing the poor in America which represent 80% of our population and you see nothing wrong with that. You try and act like your defending the minimum wage person from high prices, because of those unions manufactured goods and services. But, where are those minimum wage job at, any way? There at restaurants, hotel, grocery store and department stores, etc. But, who will be the people who will have the money to go to those restaurants, hotel, department stores or car dealership? It will obviously be somebody that has some extra money to spend so they can eat out, go on vacation, or buy something they need or want like a car. So you wipe out those union jobs and the high wages that go with them, you also wipe out most of those minimum wage jobs too, because they represent majority of the people that are going to be using those goods and services. Beside, if there are manufacturing with union wages, you can work your way up from a minimum wage job to a better life in the future. But, if there is no jobs and there no possibility of getting a job, let alone for you to get a good job, then there no hope at all for you.

Larry,

C M Edwards · 2005-05-17 07:59:07

Empires are built on inequality; Romans had their slaves, so did the Turks.
Black slaves picked cotton, now the Mexican immigrants are on the bottom.

Thanks Marsdog. Knowing what ultimately happened to the Romans, the Ottomans, and the Antebellum US, I'm sure I'll sleep well tonight.

PS: I should point out that the best analogy in US history for our present day Mexican immigrants isn't the black slaves, but rather the Irish immigrants of the same period. It was often pointed out that the Northern US states where slavery was outlawed never needed any slaves. They had the Irish.

Those who do not remember their history are doomed to repeat it.

Cobra Commander · 2005-05-17 12:39:11

Some good points and a bunch of crap all around.

A few things to bear in mind:

GM and Ford are in serious trouble for two major reasons. They have too high an obligation to pay health and retirement benefits and they have artificially high wages, both make them woefully uncompetitive and both are due largely to the UAW. Sure, the Union guys are just looking out for themselves and trying to provide the best life they can for themselves and their families. I can't fault them for that. But they are destroying the American automative industry and it won't survive unless it breaks the Union.

GM in particular has a peculiar inability to market cars that people actually want. Their R&D department tries to get by on the cheap and it results in half-assed product with limited appeal. It almost seems as though they're trying to get us to buy Japanese. The GTO and G6 being only the most recent examples. Further, their production is just too high for their market share, again due largely to contractual obligations with the UAW.

On a farther reaching note, we're on the cusp of a manufacturing revolution. Masses of line workers will soon pass from merely inefficient to utterly obsolete and counter-productive. People are going to lose manufacturing jobs. The cost of manufactured goods is going to go down. The inexorable march of technology can't be halted now, we have to adapt. Embrace the future and profit by it, we can't maintain the outdated forms of the past.

GM and Ford may implode in the process. Unfortunate, but that' s the way it goes. Times change, those that don't change with them perish. If GM adapts, more power to them. If not, government subsidies to save ailing dinosaurs aren't the answer.

Whatever the case, a change in the makeup of the market doesn't mean all the doom and gloom soupline scenarios will come to pass. Industries die all the time, people lose jobs and get different jobs. A few will be hurt as always happens and I feel sorry for those who counted on their full GM pension, but for the vast majority it'll work out. Relax, it's not the end of the world.

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#26 2005-05-10 10:10:11

Re: The destruction of GM and Ford - To save or not to save them!

#27 2005-05-10 18:09:38

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#30 2005-05-11 08:14:52

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#31 2005-05-11 15:29:47

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#34 2005-05-12 13:37:53

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#35 2005-05-12 20:26:16

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#36 2005-05-15 12:13:26

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#37 2005-05-15 23:49:04

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#38 2005-05-16 18:43:18

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#39 2005-05-16 21:39:17

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