News Are UAW Union Bosses Abusing Their Positions for Pay?

[turbo]

I think turbo's response on that is reasonable. It's also not worth the added cost of shipping the vehicles when they can be manufactured in the US. If anything, there's an incentive to do more manufacturing in the US if we have a lot of auto-workers unemployed so the Japanese companies can pick and choose the best employees...or the cheapest...whichever works for them.

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. Remember that on-hand inventory is a drain on business, and when cars are being stockpiled at Japanese ports, loaded onto transport ships, taking a long, slow trip to the US, waiting for off-loading, and distribution... Well, you get the idea. Add in the lack of flexibility at the dealer level when the supply-chain is so long, and you'll see that the foreign car-makers would be anxious to site more manufacturing right here, as long as their output does not exceed demand. Siting plants here cuts an enormous amount of overhead compared to foreign production/stockpiling/shipping.

 

[Moonbear]

I can certainly see your point of view, but I do have a problem with where we are going to spend the money.

Will the big financial institutions see the errors in their ways now that they will be receiving federal money. For the most part they can't even account for how or where they lost so much money.

I see that as the same, or similar, problem. I don't think bailing out the financial institutions was a good idea either. If anybody should be aware of the risks they were taking, it's financial institutions.

The cost and logistics of retraining and relocating that many people is overwhelming. Many people who work in the auto supply industry producing; seats, wheels, windows, door handles and tires, etc have already been through factory closings one or more times.

And that's why I'd rather see the money go toward that. It'll be tough for them to do that on their own, so if you're going to give someone a leg-up, that seems like a place to do it. That pattern of factory closings is part of the problem, but rather than the companies recognizing it as a harbinger of failure, they just reshuffle workers around or layoff more employees without making any substantial changes.

Though, there should still be an after-market parts industry for some time to maintain parts to repair vehicles already owned, or bought up as companies sell off inventory cheap.

Another possibility is to offer some tax incentives to start-up companies if they move into locations where these plants would be closing. In the case of Detroit and Dearborn, that would certainly help slow the bleeding. The economy in MI is already so bad that it'll be very hard to sell houses to anyone there for the workers to move. So, the more jobs that can be brought back to the area via incentives for opening businesses there, the better. Or move them all into road construction and start paving the dirt roads up there...you'd be amazed how many dirt roads still exist in MI. Yes, anything we do is going to cost money to the tax-payers, but I'd rather the money spent actually benefit the labor force rather than toss money at a bunch of corporate fat cats to be squandered away again and just delay dealing with the same problem in a few years.

 

[mgb_phys]

If you want a real world view of what happens when domestic auto industries go bust you need simply look at the UK, once the world's major car manufacturer and now nowhere.

It ignored foreign competition beause who could take those silly little Japanese cars seriously.
Then it got bailed out / nationalised beause it was essential to keep those jobs.
Then it didn't matter about design or build quality because you could sell them as built in Britain and claim it would be un-patriotic to buy anything else.
Finally you give the remaining rump to a defence company for free as a hidden subsidy and they sell it to the Chinese.
Can't see anybody repeating those mistakes!

 

[baywax]

I do think that the govt should have let some of the other large banks fail. Since most of the money in them is insured, I don't think it would have been as bad as people feared.

Will the time come when the insurance companies insuring the banks fail?

Letting the big three fail would be like trashing the Lincoln Monument. America was built on the freedom that cars brought to its citizens. The world is a freer place because of the efforts of Dodge Fargo etc... look at the contribution they put into the 2nd ww. Letting these institutions fail would be like ignoring the needs and potentials of a veteran.

 

[mgb_phys]

America was built on the freedom that cars brought to its citizens.

If you insist on the car companies being US owned presumably they would be happy to only buy US steel and the steel companies would be happy to only use US mined ore and only use US built ships to carry it. Pretty soon you could have an economy that would be the envy of the soviet union.

look at the contribution they put into the 2nd ww. Letting these institutions fail would be like ignoring the needs and potentials of a veteran.

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

 

[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.