The bailout and Detroit
It’s hard to grow up in Detroit and speak out against the auto industry. Half the families in my neighborhood depended on the Big 3 to put food on the table. The problem started in the ‘70’s though. People in Detroit blamed Japan for making things more difficult in the auto market. They could not see that the folks on the line, who would often drink their lunches, were hurting quality and consumers were simply getting smart about this.
I remember working at a benefits fair inside one of the auto plants. It was dinner time and no one was around for the fair. I asked one gentleman, who happened to be walking around looking at the vendors tables, where everyone was at? “Just go to any of the local bars,” he responded, “and you will find everyone there.”
The industry has no doubt changed in recent years. What I recall happened in the late eighties. The competition with the Japanese automakers, and a strong retooling of minds and machines, has brought Detroit to a position of building better quality vehicles. Adapting to the current market still presents a challenge to the American automakers. When gas prices spiked, who was building the biggest SUV’s?
The truth about Detroit and the automakers
While some of this will tick off my old friends back in the Detroit area, the truth is that the high union wages, over-the-top benefits and lifelong pensions have made Detroit uncompetitive with its slimmer competitors. It would be a shame to see Michigan’s unemployment rate rise above its current 10%, but something has to change.
This is the perspective of many in Congress right now. The writing is on the wall, and members of Congress can see that there are problems that have gone unaddressed. There are fundamentals that need change. The bailout has to be connected with ideas that will improve America. There can be no backroom deals; the terms of loans have to be available to everyone.
There could be some opportunity for the bailout and its noble purpose. If the government can generate a profit from loans or investments or improve a faltering industry, then something has been achieved.
November 23rd, 2008 at 4:04 pm
The auto industry has been supported by the local, provinical and federal government for as long as living memory in for of reduced taxes, training subsidiation, industrial incentives, tax relief and trade agreements such as the Auto pact.
As a result they are worst example of the socialist/ free enterprise combination where the profits go to the company and the risk goes to the tax payer.
Its like having a 40 year son living at home. He truly does not understand financial risk as he can always count on Mom and Dad to feed him.
As a result, the executives have not been running a real company. They are like the spoiled prices of the past. The auto companies got into trouble years ago and they became weaker and weaker as time went as management were not able to get the company out of the long term liabilites that they negociated .
To think that the CEO of Ford at $22,000,000 a year is “comfortable with his salary” instead of “ashamed” of the amount he was paid to drive the company to edge of bankruptcy is what is wrong with the business world today.
The other example of what is wrong is the big three’s “rubber room”. 15,000 employes reporting for work each day and paid to do absolutly nothing. No other industry has one.
The media sensationalism back by the auto lobby give a frighten absolute worst case senario of chapter 11. One station reported that the local auto insurance agent would be out of business. How absurd!. People will not give up their cars, they just may delay buying a new one.
There will be some closures, but these will be long over due. GM will continue to make cars that people are willing to buy, Their exisitng cars will still need to be insured, accidents will continue to happen. Cars will continue to be repaired and serviced, funeral parlors will continue to bury the carnage. Parts stores will flurish as older cars need more repairs and so on.
But what will not survive is the $22,000,000 plus benefits and the related super pensions that go with it. That is the main reason for the executive visits to Ottawa and Washington. They really are not bothered by closing a plant and putting 10,000 people on the street. They have done it before and got a big bonus for it.
Most important though, the rubber room will close . An the practice of payment a person for 8 hours but requiring them to work only 6 hours.
Layoffs based on sienority means get rid of the new skills and preseve the old obsolete skills. Companies my be run from the top down but they only grow from the bottom up.
When I did a tour of deep sea driling plafform shipyard in Singapore, I learned that it was not the fact that they paid welders from Bangladesh $12.00 a day that surprised me. The reason they could compete against other countries was that the welder worked the full 8 hours. They did not leave the rig to get coffee or for lunch. They could turn the project around much quicker than others.
I am certainly not recommending the $12.00 per hour. But when one learns that the autoworkers work 6 hours for 8 hours pay, you start to understand what is wrong.
A month ago I was camping with a “retired ship builder out of Seattle. He blamed the closing of the shipyard because of the young people would expected a computerize machine and could not make a part by hand. When I asked him how old was the machinery he was using when he left, he said from 40 to 60 years old. When I asked him if he thought that when Japan built a new shipyard that they went out to find 60 year machines?
The practice of many public service companies of the driver reporting to work at 8:00 and then imediately driving to the nearest coffee shop.
We have to become more productive. Not work harder but smarter. But work.
along with all of the similar unpractical practices that have no room in today’s very competitive gl
January 29th, 2009 at 1:18 am
One way that would shock and awe the financial industry is if all that bailout money went to the AMERICAN PEOPLE to put back in to the economy. That would flip the script on Corporate America and make them pay attention like never before. Right now, the money is being dispensed to THEM and we have to wait for it to trickle down to us, which they are taking their sweet time hoarding the money.
BUT, if the government were to disperse that money to every American household, that money wouldn’t trickle into the economy, it would flood the economy and have the banks and businesses clamoring for US to spend it with them and here’s how:
1) We would rush to pay off all of our bills, so therefore, the credit card companies have an influx of money to issue NEW credit and invest. Now with a huge segment of the American population free from credit card debt, the credit card companies will have to provide some incentive to keep us because there are so many credit card banks and companies to choose from.
2) Some Americans being debt free would catch up on their mortgage, therefore providing an influx of the money into banks and financial institutions who can now refinance and help struggling homeowners who are facing foreclosure, as well as offer NEW LOANS to homebuyers to take some of the foreclosures off their books and put them back on the market where they will then generate taxes again, to the delight of the city.
3) Some Americans being free from credit card debt and caught up on their mortgage may need a new car, therefore car dealers will probably see more business and sales will pick up quite a bit.
4) Airlines will see more people starting to fly again since people will have more passive income.
5) Retailers will benefit because people are likely to shop a bit more now that their bills are paid.
In general the economy will thrive a lot sooner if this money were put into the hands of the AMERICAN PEOPLE (after all it IS our money to begin with) and NOT Corporate America. ANY THOUGHTS ON MY IDEA??
February 6th, 2009 at 3:39 am
Dear all, no offence, but i persnoally feel, before seeking a bailout, would it not be in order, that the company seeking a financial package / bailout from the public money, in the first place cut down all its flambount expenditures, like business class tickets, 5/7 star hotel stays, super luxury cars, etc to its top executives, CEO’s, directors / promotors, etc.
vivekbrjain@gmail.com