Saving the US Auto Industry

[TheMercenary]

I think it has been a secret of the car industry here for years. They, US car makers, have been making cars over there that get 30-50 miles per gallon. It's bullshit. I think the UAW has something to do with it because the engines are made over there.

[SteveDallas]

Originally Posted by xoxoxoBruce

Truly, a Renaissance man.

[Griff]

Originally Posted by TheMercenary

I think it has been a secret of the car industry here for years. They, US car makers, have been making cars over there that get 30-50 miles per gallon. It's bullshit. I think the UAW has something to do with it because the engines are made over there.

Years ago my Uncle had one of those little VW pickups with a diesel engine 50plus mpg and ran forever.

[xoxoxoBruce]

Oh boy, more of Merc's conspiracy theories.

To expand on what Griff said, ultra low sulpher diesel became law in Europe in 2005, available here in 2006, and law here in 2007, except for non-stationary/off-road/maritime use. So up until last year they couldn't use the emission controls US law requires on diesels now.

Oh, and their vehicles are lighter as they don't have to meet US crash standards.

[tw]

Originally Posted by Griff

Years ago my Uncle had one of those little VW pickups with a diesel engine 50plus mpg and ran forever.

I was so disappointed. My 1990s Honda Civic never got better than 49 MPG on consecutive tanks of gasoline.

Meanwhile, what every post forgot to mention. Europeans cars were being designed by people who innovate. Mercedes had performed massive innovation in diesels to make more use of the fuel and significantly lower emissions. Meanwhile, that bus or truck you are following? That is the best innovation from any accountant. How to make a diesel pollute less? Yes, low sulfur fuel is necessary (and we have burned most of that already). But the solution to less emissions is to burn more of that fuel into energy. Lower pollution also means more horsepower and better MPG - when you get your facts from those who do the work - not from MBA trained management.

The solution is not diesels (even though diesels do adapt better to changing loads). The solution is directly traceable to auto companies who did ZERO innovation except when required by government regulation.

Let's see. The Europeans did diesel innovation. Japanese did gasoline innovation (ie hybrids). Americans did what? GM still makes engines without overhead cams (1970 innovation), still makes cars with sub-70 hp/liter engines (1980 innovation), and no hybrids (1990 innovation that even the US government paid for - see the Ford Prodigy and GM Precept - 1999 American hybrids quashed by communists such as Rick Wagoner).

Oh. GM spent $1billion on hydrogen fueled vehicles when anyone with basic high school science or some college training in thermodynamics knows a hydrogen fueled vehicle always was a myth. And according to that Washington Post article, GM is still wasting money on hydrogen fueled vehicles.

Just more examples of a communist bean counter (ie Rick Wagoner) throwing money at problems like a grenade because he does not even drive a car.

[tw]

"Drove my Chevy to the levee, but the levee was dry." So I could not even abandon it in the river. Just another way my GM product costs more money.

[tw]

Originally Posted by Brianna

You're obviously right, bruce. Some GM people did work. ok: 9 out of 10 gamed the system.

Brianna is correct in that she only saw one part. I saw what happened when those same workers ended up in a GM plant where the workers had control of their jobs.

Because GM workers were considered so dumb, massive layers of management told them everything they could and could not do including going to the bathroom. GM assembly plants created the workers they wanted - as Brianna demonstrates and as William Edward Deming said why it happens.

Because GM workers had to take charge of their work - work like an independent contractor - the UAW and GM negotiated a special condition for this GM plant. If the assembly line worker did not like working without communist control, then he could apply for a transfer to any other GM plant.

Reality, only one person did not like having control of his work - took the free transfer. Once those employees with bad attitudes could be in control of their own job, then those employees were very productive.

[tw]

Originally Posted by Brianna

According to Forbes:
Labor cost per hour, wages and benefits for hourly workers, 2006.
Ford: $70.51 ($141,020 per year)
GM: $73.26 ($146,520 per year)
Chrysler: $75.86 ($151,720 per year)
Toyota, Honda, Nissan (in U.S.): $48.00 ($96,000 per year)

A highest paid union worker was making somewhere between $70,000 and under $100,000 annually (stated by him and his peers). Why? He would take all overtime he could get - about 80 hours per week. Once a union worker is offered overtime, he goes to the bottom of a list. Since GM had so much overtime work and since so many workers were turning down overtime, then this GM employee got plenty of overtime.

I don't know where those Forbes numbers come from. It probably included money GM is supposed to put in pension and medical benefit funds (and did not), health insurance, etc. The numbers imply that is salary without overtime. Numbers probably include all costs including those that GM was not funding (which explains another myth called 'legacy costs').

Meanwhile, unions have made so many concessions that new union employees are now paid $14 per hour. GM is successfully lowering the American standards of living.

Before those concessions, Japanese workers were sometimes paid more than American auto workers - a number that varied with currency values, etc. Why do Japanese products routinely cost so much less to build? All previous posts forget to add more important facts.

How much labor goes into a car. For an expensive and unprofitable vehicle - maybe 40 man hours? Do the math for a $20,000 car. Why does everyone forget that labor is not the major car cost? Because some want to blame the unions rather than first see GM's real problem.

How much labor in the profitable cars? Last estimates were 26 man-hours for the entire vehicle.

Massive vehicle expenses include design, number of parts - even that the car is so anti-American as to need wheel alignment. No wonder GM does everything to dump warranty repair costs onto dealers who in turn must do anything possible to deny a warranty repair. All cost increases directly traceable to bean counter top management. Same costs that Iacocca in Chrysler and Petersen in Ford fixed to go from record losses to record profits in but years. Excessive costs were not the unions. Excessive costs directly traceable to stifled innovation.

So anti-American is GM management as to require two extra pistons in each engine. So many more parts that - well blame the unions so that a Cellar majority did not calculate the horsepower per liter number for and did not know what makes the GM car cost so much.

What was the horsepower per liter for that new Chevy Cobalt that was recently touted as the new GM?

GM cars are so badly designed as (rumored) to cost more to build than to sell. Sales so bad that 25% of all sales are to employee and supplier families at reduced prices. What the Economist suggested should be called socialism. Massive losses masked by $5000 per vehicle profits on SUV - vehicles with minimal engineering and 1968 technology engines. Last number I saw when GM was claiming profits - GM's average profit per vehicle was only $200.

Why does a Honda or Toyota cost less to build? Routine: when employees do the designs and make changes, then products cost less. Now there is no need for massive layers of management. I would see this in the GM plant where union workers loved what they did - because they made things work. They had control of their job - unlike those in assembly plants.

At one point, I had to get something fixed. The engineer had to get permission from management who would deny it due to technical ignorance. So I found a union worker, who threw a disparaging arm salute at the direction of a mythical boss, and then went off to solve the problem - now. How did I get things accomplished in GM? Find a union employee who knew what was involved.

In that GM plant, an employee (probably) setup the machine improperly. When I got there, another employee had just corrected the problem. I asked him why he entered a room full of HCl gas. He said he held his breath and solved the problem before the problem became massive. Wacky? Well he knew what was necessary to protect the production line. In other plants, the union guys probably would have walked away since they had no control over their job and would wait to be told what to do.

Later I got dragged into a meeting called by the plant manager. Maybe 50 people in that meeting - except a guy who made the original connection and a guy who fixed the problem. Even in a productive GM plant where inspired union employees would solve problems - still the plant manager was only interested in having a meeting. Imagine how much worse it is in GM assembly plants.

A meeting resulted in nothing - just wild speculation and no conclusions. But because she was an MBA, then the meeting had solved everything. Nobody knew why that failure happened. But she did what any bean counter dummy would do - have a meeting - CYA.

I talked to those who created(?) and solved the problem. I knew what happened. And I knew the problem was solved only because union guys were empowered. They loved working at a job where they could take charge - not in an assembly plant where everyone had to wait for an MBA to tell them even when to go to the bathroom.

I saw a sign that used the word "employe". One day, the sign read, "employee". I noted that someone had finally learned how to spell. No. The sign was changed because Roger Smith had resigned two days ago. All signs in GM had to be misspelled because Roger Smith could not spell employee. And all signs changed back when he was gone. Even spelling employe was more important than the product. No wonder union workers get a bad attitude. Some pet dog got treated with more respect. Treat them like dogs. Then their pay must be higher. Then get member of the Cellar to blame union workers rather than Roger Smith or Rick Wagoner.

[tw]

'I support saving any one or all of them' using 'another plan to save them from certain death.' But the poll does not permit clicking both.

[tw]

Camaro concept becomes a reality
Chairman and Chief Executive Rick Wagoner responded to what he called an "overwhelmingly enthusiastic response" by announcing the automaker will begin production of the revived Camaro at the end of 2008, slated to hit dealer lots in the first quarter of 2009. ...

The concept, first driven across the Cobo Center floor by GM Vice Chairman Bob Lutz, pierced ears with a 6.0-liter V8 engine cranking out 400 horsepower, tied to a six-speed manual gearbox.

... while Ford Motor Co. have pledged to join the muscle-car caravan with a 325-horsepower version of the Shelby GT and the Dodge Challenger, respectively. ...

Despite claims that GM is missing the mark with some of its new products, Joe Wiesenfelder, senior editor at Cars.com, said that the company almost has to go this route with the Camaro.

... "On paper, the outgoing Pontiac GTO sounded great, but it was a relative flop.

Deja vue 1970s - same mistakes made by the same companies before bankruptcy finally fixed them.

[classicman]

Why Bankruptcy Is the Best Option for GM

General Motors is a once-great company caught in a web of relationships designed for another era. It should not be fed while still caught, because that will leave it trapped until we get tired of feeding it. Then it will die. The only possibility of saving it is to take the risk of cutting it free. In other words, GM should be allowed to go bankrupt.

After 42 years of eroding U.S. market share (from 53% to 20%) and countless announcements of "change," GM still has eight U.S. brands (Cadillac, Saab, Buick, Pontiac, GMC, Saturn, Chevrolet and Hummer). As for its more successful competitors, Toyota (19% market share) has three, and Honda (11%) has two.

GM has about 7,000 dealers. Toyota has fewer than 1,500. Honda has about 1,000. These fewer and larger dealers are better able to advertise, stock and service the cars they sell. GM knows it needs fewer brands and dealers, but the dealers are protected from termination by state laws. This makes eliminating them and the brands they sell very expensive. It would cost GM billions of dollars and many years to reduce the number of dealers it has to a number near Toyota's.

Foreign-owned manufacturers who build cars with American workers pay wages similar to GM's. But their expenses for benefits are a fraction of GM's. GM is contractually required to support thousands of workers in the UAW's "Jobs Bank" program, which guarantees nearly full wages and benefits for workers who lose their jobs due to automation or plant closure. It supports more retirees than current workers. It owns or leases enormous amounts of property for facilities it's not using and probably will never use again, and is obliged to support revenue bonds for municipalities that issued them to build these facilities. It has other contractual obligations such as health coverage for union retirees. All of these commitments drain its cash every month. Moreover, GM supports myriad suppliers and supports a huge infrastructure of firms and localities that depend on it. Many of them have contractual claims; they all have moral claims. They all want GM to be more or less what it is.

And therein lies the problem: The cost of terminating dealers is only a fraction of what it would cost to rebuild GM to become a company sized and marketed appropriately for its market share. Contracts would have to be bought out. The company would have to shed many of its fixed obligations. Some obligations will be impossible to cut by voluntary agreement. GM will run out of cash and out of time.

GM's solution is to ask the federal government for the cash that will allow it to do all of this piece by piece. However, much of the cash will be thrown at unproductive commitments. And the sense of urgency that would enable GM to make choices painful to its management, its workers, its retirees, its suppliers and its localities will simply not be there if federal money is available. Like AIG, it will be back for more, and at the same time it will be telling us that it's doing a great job under difficult circumstances.

This is contradictory to some of the opinions previously posted here.
How does this affect your thoughts on the bailout of the big three? Can we selectively bailout one or two of them and not the other? Is GM that much worse off than the others? Do they all deserve to deal with their own issues with no bailout whatsoever?

[tw]

Requoted from classicman

It supports more retirees than current workers. ... It has other contractual obligations such as health coverage for union retirees. All of these commitments drain its cash every month.

None of these commitments drain cash IF GM did what once was required. A responsible company has those employee costs funded before an employee retires. When an employee retires, the company pays nothing more - no legacy costs.

Since GM cars were so crappy, GM used pension funds to claim profits. This was acceptable with so many new spread sheet deregulations. New standards that even assumed a pension fund would always have a 10% ROI (even though history says it is always less than 8%). A solution that also assumed GMs pensions would be picked up by the government - see my warnings years ago about PBGC. This meltdown and lying was known so long ago that even I knew about it.

Had GM been required by responsible accounting to fund those pensions, et al, then GM would have faced bankruptcy earlier and solved this with little pain. GM would have fixed their only problem - top management. 85% of all problems are directly traceable to ... Instead Enron accounting was alive and well. No regulations did so much good - right.

GM's problems have been entrenched for 30 years. Since we are foolishly discussing bailouts, then those MBAs are making no plans to restructure. Rick Wagoner said last week that GM has no restructuring plans. Of course not. Government welfare will save GM. Why should they do what is necessary? They are MBAs - ostriches.

Ross Perot defined GM's problem 25 years ago. GM throws money at problems like a grenade. That means solutions are impossible.

Restructuring - eliminate many GM models. Start retooling now for only a few base models, as Toyota, Honda, and VW have long done. for example, only one intermediate frame - not three. IOW, GM must innovate - do what everyone else did more than 20 years ago. It cannot happen until everyone admits GM's only problem - Rick Wagoner and an entrench cadre of MBAs who routinely stifle innovation.

Rick Wagoner has no restructuring plans. $50billion thown into a company now only worth $1.8billion? Only a fool would even consider that. What happens when bean counters were replaced by car guys in 1979/1981? Restructuring was conducted ASAP. GM has no such plans because Rick Wagoner is an MBA waiting for government rescue.

How many of these divisions must be eliminated now - Buick, Saturn, Hummer, Pontiac, or Saab. At least two must go immediately if GM has any hope of being saved.

[classicman]

I vote 3 go - Pontiac, Buick and Saab or Hummer.
I just saw a show on cnbc about this too - they predict one to 2 million jobs lost, no matter what. If we give them the bailout then it just prolongs the inevitable even longer and further wastes money. The UAW is standing firm that they will not negotiate their contracts nor benefits at all. I wish them well with that. They really don't have a choice do they? BTW, one of the men remarked that there was a senator who had brought up this issue the last time they got bailed out... John McCain. He was overwhelmingly criticized for his "negative" opinion.

[footfootfoot]

I don't support welfare whether for poor or rich. But if you give thewelfare to the poor at least they'll spend it and keep the $ in circulation. If you give it to automakers they'll mostly use it for 85% of top management salraies and they won't spend it. They'll invest it and then we'll end up giving them even more money when their investment house of cards gets knocked down.

I'd say just cut right to the chase and distribute Milwaukke's Beast, Ciggies, and scratch-offs directly to the poor.

[monster]

I'm not in favor of taxpayers bailing out private companies, but I don't have an alternative. all i do know is that if the big 3 go under, Michigan dies. Detroit's pretty much dead already, Flint's a zombie (but we knew that), Ypsi's on life support, Ann Arbor is still waiting for a pacemaker after Pfizer pulled out last year, and the rest of the state makes/grows the stuff the inhabitants of the Mound of Venus spend their money on. dead it's not just about those companies -the network of businesses and livelihoods supported by them and their employees is huge and underlies the whole economy of the state. We're doomed, doomed I tell ye!