Are UAW Union Bosses Abusing Their Positions for Pay?

[CaptainQuasar]

Yep! Look at the logistics. Japan has manufacturing know-how, engineering, and a LONG view of business profitability. Why should they import all the raw materials needed to build cars, build them in Japan, and ship them to the US? It's far more efficient for them to build them here and sell them here.

Or build them in Mexico... or in Canada...

I am skeptical that there's really that much cost savings in avoiding the shipping, especially from somewhere like China or Brazil where they're going to have most of the raw materials available domestically. All sorts of freight is shipped across the Pacific Ocean that I would think is worth less, pound for pound, than an automobile, yet it's still being manufactured in China or SEA.

Another thing is that some of the stuff I've come across while Googling says that one of the reasons why Japan and other countries have done so much foreign direct investment in building auto plants here in the U.S. in the last couple of decades was on the theory that it would defuse any tendencies on the part of the U.S. government to enact protectionist policies that would favor the U.S. auto industry. (The kind of policies I've been talking about that Japan, China, Brazil, etc. have to protect their own domestic auto industries within their own countries.) If the U.S. auto industry is gone, that of course is no longer a concern.

(But baywax, I really don't think that sentimentality about the way the world economy worked 50 years ago is a good argument to prevent the auto industry from collapsing, it needs to have tangible value.)

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[turbo]

All sorts of freight is shipped across the Pacific Ocean that I would think is worth less, pound for pound, than an automobile, yet it's still being manufactured in China or SEA.

Transport costs for steel, copper, coal, fuel oil, and finished cars are VERY high compared to the transport costs of memory chips, plush toys, clothing, etc. In-US manufacture is very attractive for that reason alone. What is a cargo container filled with memory chips worth? How many cars could you buy with that?

 

[edward]

Citreons have cameras that track your road position and vibrate the steering wheel if you drift out of your lane.
Mercedes have radar that check the position of the vehicle in front and automatically adjusts your speed to keep a safe distance.

On Fords the doors will rattle to let you know that the bolts are loose. Sorry I couldn't resist that. Actually the quality of Many Ford models has improved greatly in recent years.

According to Consumer Reports the quality of the Ford Fusion and Ford Flex rate very high.

 

[CaptainQuasar]

Transport costs for steel, copper, coal, fuel oil, and finished cars are VERY high compared to the transport costs of memory chips, plush toys, clothing, etc. In-US manufacture is very attractive for that reason alone. What is a cargo container filled with memory chips worth? How many cars could you buy with that?

Depending on the sort of memory chips it might not be all that different, I should think. A ton of plush toys is worth less than a ton of car, I would expect - and the car is less bulky, which is also a factor in transportation costs.

If the cost of transportation is so high, how did any foreign car manufacturer - especially the economy cars that Japan and Korea made their name in initially - ever gain a foothold in the U.S. market during the decades before they'd built plants here? And again, why do states and municipalities have to do things like the quarter of a billion dollars of incentives (in 1994 dollars) given to Mercedez-Benz to locate a single plant in Tuscaloosa, Alabama? A plant that manufactures SUVs, by the way. ($150 million in direct incentives documented http://books.google.com/books?id=BK...ercedes-Benz+plant+in+Tuscaloosa"&lr=&pgis=1", the additional $100 million involved constructing roads and provisioning utilities and things.)

This certainty that the net change in the economy from losing all domestic auto manufacturing companies would be minimal seems unwarranted.

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[mgb_phys]

Ocean freight is very cheap, it is cheaper to ship a finished car from Japan to the port in LA than it is to truck a car from Detroit to a dealer in Florida.
If you are arguing for demostic manufature to reduce shipping costs you would need a plant in each state.

 

[turbo]

Ocean freight is very cheap, it is cheaper to ship a finished car from Japan to the port in LA than it is to truck a car from Detroit to a dealer in Florida.
If you are arguing for demostic manufature to reduce shipping costs you would need a plant in each state.

Freight for finished products is just a part of the equation. How about freight for all of the raw materials (of which Japan has NONE)? How about the holding costs to build inventory to be shipped, pay for the handling and shipping, pay for the unloading and separation at US ports, and pay for the distribution of the vehicles to centers from which US dealerships can draw their inventory? There are a LOT of costs that could be eliminated if the Japanese car-makers could expand their influence in the US market. Their insistence on the economies of "just-in-time" supply and production alone could revolutionize the US auto industry.

 

[CaptainQuasar]

Japan doesn't have anything but places like China, India, Brazil, and Europeans have it all! Japan is the exception.

Another factor - even figuring that 100% of cars sold domestically would still be produced by foreign auto makers who took over or built plants here, that doesn't count all of the commerce from the Big 3 exporting cars to other countries around the world. If I worked http://tse.export.gov/MapFrameset.a...znywzs45bflbx045rqhh0545-2008-11-16-21-29-18" properly the total value of all non-railway vehicles and parts exported from the U.S. by all companies is a hundred billion dollars for 2007. The Big 3 will only be part of that, of course, but I would think a significant part.

Also, are you saying that U.S. manufacturers don't use JIT? I don't think that's true.

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[turbo]

Also, are you saying that U.S. manufacturers don't use JIT? I don't think that's true.

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US manufacturers use JIT to control inventories and overhead, but when you've got companies like GM assembling trucks in Canada using suspension elements made in Germany, engines made in Mexico, wiring harnesses assembled in Guatemala, etc, JIT turns into a fiction. Honda started building the Accord for the US market, in the US, with US labor, US suppliers, and the highest percentage of US-built parts of any other passenger car. I think they did OK. I'd rather see them and their like-minded compatriots take over the remnants of the big 3 instead of throwing $25 billion at them.

 

[Art]

Depending on the sort of memory chips it might not be all that different, I should think. A ton of plush toys is worth less than a ton of car, I would expect - and the car is less bulky, which is also a factor in transportation costs.

For sea freight the weight of the shipment is entirely irrelevant, you pay by container. I'd imagine you would get 2 or maybe 3 fully built mid size vehicles per container at a cost of around $2,500 per container for a Japan to USA shipment.

If sales volumes are high it makes sense for the Japanese to ship to the US in piece part format and assemble in the USA as that way they can far better utilize the cubic capacity of each container.

 

[Art]

US manufacturers use JIT to control inventories and overhead, but when you've got companies like GM assembling trucks in Canada using suspension elements made in Germany, engines made in Mexico, wiring harnesses assembled in Guatemala, etc, JIT turns into a fiction. Honda started building the Accord for the US market, in the US, with US labor, US suppliers, and the highest percentage of US-built parts of any other passenger car. I think they did OK. I'd rather see them and their like-minded compatriots take over the remnants of the big 3 instead of throwing $25 billion at them.

In the car industry JIT in relation to the supply base is indeed largely a work of fiction.

Producers have leadtimes and so build to forecast. They then ship to a hub where the purchasing company calls off product as required. On paper the purchasing company has very little inventory as parts are not invoiced until they are shipped from the hub but the suppliers have taken on all of this pipeline inventory which used to be on the books of the customer so the nett difference is typically small. Obviously having a local supply base reduces pipeline inventory and so is a worthy aspiration if justified by costs.

A troubling aspect of this is it hides obsolescence from the buying company's books. Even though the purchasing company does not show the pipeline inventory on it's accounts it still most often has a legal obligation to take all of this stock at some time even if design changes or demand changes have rendered the stock obsolete.

In defense of JIT it does show genuine benefits at the end of the production chain where final assembly and configuration can be tailored to exactly match actual customer orders.

 

[nuby]

What do you think will happen to the automotive industry if the bailout doesn't occur, and the big three have to file for chap. 11?

 

[mgb_phys]

Nothing - the oil price has dropped to $50 so gas is headed back to $2.
The car makers can forget about efficency and go back to selling SUVs (until next time).
The bank bailout will solve all the other problems in the economy and allow people to continue buying $25K 2nd cars.

They will file chapter11 and continue as before - most US airlines have been in chapter 11 since it was invented, it doesn;t stop you paying executive $M bonuses.

 

[baywax]

GM and Ford that might not want to bring that up.

Oh, were they rooting for the other team?

 

[baywax]

(But baywax, I really don't think that sentimentality about the way the world economy worked 50 years ago is a good argument to prevent the auto industry from collapsing, it needs to have tangible value.)

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I know it sounds sentimental and emotional to figure the American Auto Industry in with the founding fathers and the headless horseman etc... but, I see them as the founders of a large percentage of American freedom. And an American build car, anywhere in the world, serves as a symbol of that freedom.

Then again, a bi-plane or tri-plane serves as a symbol of the freedom offered by the first flying machines, and they're not exactly still on the assembly line.

The big three could stay big if they have a chance to lead the way with electric/battery operated vehicle technology. So far Mattel has one up on them.

 

[Vanadium 50]

I think one needs to look at the winners and losers here.

Yes, the Big Three executives will be winners in a bailout, as their compensation will (justifiably) be higher if they can keep their respective companies out on bankruptcy.

The bigger winner will be UAW, though. A Ford or GM under Chapter 11 reopens every element of that contract, and it all has to be approved by a judge. Nobody thinks that the UAW will get a better deal under Chapter 11, and the only question is how much worse it will be. (This is going to be a headache for the President-elect. The FDR coalition of the modern Democratic Party was the left, the unions, and the south. Since Reagan, the south has gone, and this decision has labor and the left taking opposite positions.)

It's worth pointing out that the market cap of GM is about $10B less than their cash reserves. So the company is worth quite a bit less than nothing. The reason somebody else doesn't sweep down and buy GM at fire-sale prices is that the company will be worth at least $10B more if it declares bankruptcy. That's how damaging the labor contracts are to the bottom line. Put another way, why buy GM today when it will be worth more in a year or two after it goes bankrupt?

Lesser winners will be people buying a new car in 2009. That's just supply and demand. So long as the Big Three take a $2000 or more hit on every car they sell, other manufacturers have intense downward price pressure.

 

[Ivan Seeking]

CHICAGO - Nearly three-quarters of Americans wouldn't buy a car from a bankrupt company, according to a recent survey.

In a nationwide survey by the Cincinnati-based research firm Directions Research Inc. published Friday, only 26 percent of respondents said they would purchase or lease a new car from a manufacturer that had declared bankruptcy. [continued]

http://www.msnbc.msn.com/id/10616931/

Here is another consideration. Are we done with wars yet? What happens if we go to war with China, for example, but have no industrial base left to manufacture weapons? What do we do then; buy the parts from China?

 

[Vanadium 50]

What happens if we go to war with China, for example, but have no industrial base left to manufacture weapons? What do we do then; buy the parts from China?

That's why trade is good for peace.

(Peace: n. the period of cheating between two periods of fighting)

 

[Ivan Seeking]

Modern wars are won in good part by the manufacturing base. China will have one and we won't. From a historical perspective, this is not good.

Are we really done with wars? Are the Chinese acting like there will be no more wars?

 

[jal]

The bail out will destroy the "big 3"

If the bail out money is the first to get paid back then there will be nothing for, bank loans, suppliers, bonds, preferred share,pension funds, common shares, etc.
There are not enough assets to guarrantee the bail out package.

If the bail out money is the last to get paid back. It will never get paid back and the money is going to go to the most persistent bank loan, pension fund, and supplier.

Please explain the "food chain" with or without a bail out.
jal

 

[jal]

I have just listened to the live hearing of "the big 3 auto bail out hearing" at CNN live.
The bail out is for another 25B. It is for an extra 25B on top of the 25B for re-tooling.
The news medias are missleading us into thinking that it is only for 25B aid.
jal

 

[harborsparrow]

I grew up in Tennessee. My father and uncles mostly made their livings working for companies that made car parts for American manufacturers. One built carburetors. The other was a small tool and die shop that got tons of business from Michigan. So if the U. S. auto industry dies down or out, all these jobs will go too. To me, that is unimaginably bad. Furthermore, people with older American cars may no longer be able to get parts for them. Bad and worse. When I look at $50 billion as a fraction of $700 billion, I'm for the bailout despite the past recalcitance of these companies. Conditions could surely be legislated requiring them to build smaller, fuel-efficient vehicles. Congressional failure to make such laws is as appalling to me as the companies' mismanagement over the years, resisting every change for safety, labor rights or the environment. Still, I'm for the bailout, for now. And I fear what's going to happen if it doesn't occur.

 

[jal]

I keep repeating ...
The bail out will destroy the "big 3"
If the bail out money is the first to get paid back then there will be nothing for, bank loans, suppliers, bonds, preferred share,pension funds, common shares, etc.
There are not enough assets to guarrantee the bail out package.

If the bail out money is the last to get paid back. It will never get paid back and the money is going to go to the most persistent bank loan, pension fund, and supplier.

Please explain the "food chain" with or without a bail out.
-------

Listen to the hearings ...
jal

 

[harborsparrow]

jal,

can you please expand on this a little? I'm trying to understand your statement but I really don't.

I keep repeating ...
The bail out will destroy the "big 3"
If the bail out money is the first to get paid back then there will be nothing for, bank loans, suppliers, bonds, preferred share,pension funds, common shares, etc.
There are not enough assets to guarrantee the bail out package.

If the bail out money is the last to get paid back. It will never get paid back and the money is going to go to the most persistent bank loan, pension fund, and supplier.

Please explain the "food chain" with or without a bail out.
-------

Listen to the hearings ...
jal

 

[mgb_phys]

When I look at $50 billion as a fraction of $700 billion,

There is a difference between promising to underwrite $700bn of debt and handing over $25Bn to a public company. Although the headlines has been bailout of Wall St firms - it isn't being given to the firms. It is guaranteeing loans in the same way that it guarantees savings.

Conditions could surely be legislated requiring them to build smaller, fuel-efficient vehicles.

The argument will then be that if they are forced to build vehicles nobody wants then they will lose even more money and need a bigger bailout.

companies' mismanagement over the years, resisting every change for safety, labor rights or the environment.

And the proposal is to give the same management money to continue as before?

And I fear what's going to happen if it doesn't occur.

There will also be consequences if it does occur.
Since this looks a lot like illegal state aid there will be tarrifs and import bans on amercian cars abroad.
Will it be extended to foreign makers in the US or will they be forced to shut down in the face of government subsidised cars from the state collective car industry?
Will there be any requirements forcing the american companies to use US steel and US components - since US tax money is being used to rescue them?

Which other industries get the same treatment?
Airlines, cell phones, Hollywood, Linens 'n; things?

 

[jal]

I do not know "the food chain" of where the money goes or will go.

I keep hearing weird things like
... 96% employment pay and benefit for two years if laid off.
... One million ex workers must receive their medical and pensions at their same level.
... The projection of recovery of the auto sales are for "back to normal 2010". This is a dream and missleading.

Only, with a collapse/bankrupcies can there be a restructuring that can make the auto industry viable once again.

 

[baywax]

A bail out would keep the union trades people happy. And like Ivan says, it would ensure a manufacturing/assembly line operational and accessible in the event of aggressions from across the pond(s). I can't believe anyone would consider weakening the economy and the country's ability to respond to aggression. Canada is still considering the bail out to American assembly and manufacturers in Canada. But it is being shaken by this "oh, look, we can trash the Union contracts if we don't bail them out". This does not take into account the fact that non-union workers will either be unskilled or disgruntled by a cut in their benefits and pay. I didn't think it was possible but you might see an even crappier Ford on the road after all of this (or about 100 million Chinese tanks)

 

[edward]

I grew up in Tennessee. My father and uncles mostly made their livings working for companies that made car parts for American manufacturers. One built carburetors. The other was a small tool and die shop that got tons of business from Michigan. So if the U. S. auto industry dies down or out, all these jobs will go too. To me, that is unimaginably bad. Furthermore, people with older American cars may no longer be able to get parts for them. Bad and worse. When I look at $50 billion as a fraction of $700 billion, I'm for the bailout despite the past recalcitance of these companies. Conditions could surely be legislated requiring them to build smaller, fuel-efficient vehicles. Congressional failure to make such laws is as appalling to me as the companies' mismanagement over the years, resisting every change for safety, labor rights or the environment. Still, I'm for the bailout, for now. And I fear what's going to happen if it doesn't occur.

I tend to be biased in favor of the bail out for the same reasons. I grew up in Indiana and still have a lot of family in Indiana and Ohio employed by the auto support industry.

My nephew is a systems analyst for Timken Bearing in Ohio. They have already had a lot of lay offs and are down to a 4 day work week. Other family members work in; auto glass production, alloy wheel production and sheet metal production.

People don't tend to see the big picture of just how many jobs will be lost. It will be in the millions.

 

[Ivan Seeking]

People don't tend to see the big picture of just how many jobs will be lost. It will be in the millions.

And beyond that, the economy is fragile enough right now. The Republicans have been spouting-off about the notion of raising taxes on rich people during an economic downturn. But they don't have a problem with losing approximately 3 million jobs [by most estimates] when we are struggling to avoid a global depression?

I fail to see the logic here.

 

[nuby]

http://cosmos.bcst.yahoo.com/up/player/popup/?rn=3906861&cl=10744205&ch=4226713&src=news

Lol. GM execs spend 20g on private jet to go ask for 25billion in Washington. What idiots...

 

[jal]

http://www.nytimes.com/2008/11/19/opinion/19romney.html?_r=1&hp&oref=slogin
Let Detroit Go Bankrupt
Published: November 18, 2008

IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.

The "food chain" with or without a bail out.

 

[turbo]

Mitt's got it right. Throwing money at the big 3 without forcing them to drastically restructure and trim fat will just make them greedy for more, and perpetuate their errant ways. Big companies can go into bankruptcy, restructure and come out stronger than ever, but it will require steps that the management of these companies don't want to contemplate.

 

[BobG]

http://www.nytimes.com/2008/11/19/opinion/19romney.html?_r=1&hp&oref=slogin
Let Detroit Go Bankrupt
Published: November 18, 2008


The "food chain" with or without a bail out.

The pre-election campaign Mitt is back - at least until the next campaign when he reshapes himself into whatever new mold is in style at the time.

Romney's Detours on Detroit

“I am not willing to accept defeat like that, that those jobs aren’t coming back,” Mr. Romney said on the stump at one point. “I will fight for every good job for Michigan and for America.”

 

[harborsparrow]

The argument will then be that if they are forced to build vehicles nobody wants then they will lose even more money and need a bigger bailout.

And the proposal is to give the same management money to continue as before?

I really cannot agree with you here. I've bought two foreign cars already because 1) they are small and fuel efficient, 2) I wanted a car that didn't break down a lot, and 3) there was no small, fuel-efficient, reliable alternative made in America

The car companies' claims that there is or has been no market for small, fuel-efficient, reliable automobiles is, simply, a lie. If there has been no market, it's only because there has been nothing offered for sale by them. The American companies DO make small, cheap cars but they waste a lot of gasoline, and they are unreliable. This is because legislation requiring fuel efficiency does not exist. Why is that? LACK OF POLITICAL WILL of the American legislators.

In the meantime, perhaps half the American public has quietly moved on to foreign-owned companies who do offer these qualities.

The proposal is, to ensure that the future plans of these companies do place three values at the top of their priorities:

1) fuel efficiency
2) reliability
3) relatively smaller size (helps efficiency)

Americans have always been decent engineers and technologists, and our companies are capable of doing this if they are asked to do so. I think due to the recent rise in gas prices, the legislative will to act is now there.

Letting the companies "die off" out of residual anger at past mistakes may sound good on paper, but the consequences you speak of will not make anyone feel better.

So, I have not been convinced, yet, by any of your arguments to oppose the auto bailout, because I still believe that it will push the world economy into an even deeper hole.

But who can tell for sure? It's all pretty complicated.

When people act like they know for sure, I'm naturally sceptical. Even I, with all my godly powers, do not know for sure. And, I'm willing to admit it. And I am listening to your arguments as much as I am able, not that it matters. If government had ever listened to me, there would be lots of small, reliable, fuel-efficient cars, and I would not have to curse at huge gas-guzzling monstrosities every day.

 

[jreelawg]

I don't see why it has to be all important that America makes cars. It seams most of the worlds cars come from few countries already and many non car making countries do fine.

The issue here is not that America must continue making cars, the issue is that we can't afford to lose so many jobs. Propping up an unsustainable industry is only going to set the stage for future disaster.

I think the economy is now a matter of National Security and needs to be dealt with like one.

It seams a catch 22 because if we let them fail we lose, if we give them bailouts, we lose anyways. What we need is an aggressive takeover of GM's assets to be used in other industries.

In other words, we should be planning how the assets get sold and the government should manage that transition to make sure that it gets done right. Maybe subsidies could go to help retool and transform the factories so that they can provide viable products that we can use like renewable energy technology, mass transit, etc.

Maybe the big three could team up with T Boone. and the demand for american independent energy could replace the need to sell cars.

 

[mgb_phys]

This is because legislation requiring fuel efficiency does not exist. Why is that? LACK OF POLITICAL WILL of the American legislators.

It used to, then the car companies realized that if they handed out a few $ in political contributions it would go away and they would make more than enough money seling SUVs to get the contribution back.

http://upload.wikimedia.org/wikipedia/en/thumb/8/85/CAFEStandard.png/350px-CAFEStandard.png
Of course you can get around the stringent 27mpg requirement by classifying vehicles like the PT Cruiser as a truck and the Hummer as a national park

Another option is tax:
The US uses about 390M gallons/day of gasoline = 156B gallons/year
So simply put 16c a gallon tax on gas give the $25Bn/year to Detriot and hope it will enourage them to make more efficent cars.
Or you could follow the UK - put $4/gallon tax on gas and simply pocket the money!